Crime Watch: September 13, 2013
by Terri Eyden on
Las Vegas Accountant Charged with Defrauding IRS
A couple from Iowa and a Las Vegas accountant were charged September 11 with conspiring to defraud the IRS of more than $700,000 by allegedly using nominee corporations and bank accounts to hide their income and other assets, Nevada's US Attorney Daniel Bogden said.
Darlene Taylor McCord and James Bert McCord of Iowa City, Iowa, and accountant Wendell Leroy Waite were charged with one count of conspiracy to defraud the United States. Waite also was charged with one count of income tax evasion and four counts of aiding in the preparation and filing of false and fraudulent federal tax returns.
The McCords were also charged with four counts of making and subscribing false and fraudulent federal individual and corporate tax returns, one count of making a false financial condition statement, and nine counts of attempting to evade or defeat the payment of their federal taxes, penalties, and interest.
The defendants are scheduled to make initial appearances before a federal magistrate judge in Las Vegas on September 19. If convicted, they face up to five years in prison and $250,000 fines on the conspiracy and tax evasion charges, and up to three years in prison and $250,000 fines on the false or fraudulent tax return charges.
According to the indictment, the McCords owned Nevada corporations TOB Management, Que 1, and HTR Group. Waite was a licensed accountant in Nevada, California, and Utah.
On June 23, 2003, the McCords allegedly owed the IRS roughly $197,420 in personal income taxes and owed an additional IRS penalty of roughly $547,788. From May 2004 through February 2008, the McCords received personal income of more than $2.7 million.
Waite allegedly was associated with the Asset Protection Group, which offered services to individuals who were trying to hide their assets from creditors, including the IRS. These services included the use of nominee corporations, nominee bank checking accounts, and "friendly liens" designed to create the illusion that a person's assets were encumbered by liens.
Beginning in November 2004, the McCords allegedly deposited $2.7 million into an Asset Protection Group bank escrow account and/or into one of their corporate accounts to hide money from the IRS. In February 2005, the Asset Protection Group allegedly referred the McCords to Waite for accounting and tax purposes. Over the next two years, Waite allegedly filed multiple fraudulent federal tax returns for the McCords and their nominee corporations, concealing their true income and assets.
Source: CBS News
PCAOB Sanctions Big 4 Engagement Partner
The Public Company Accounting Oversight Board (PCAOB) has sanctioned a now-former Deloitte & Touche engagement partner for doctoring an audit file in anticipation of a PCAOB inspection.
The PCAOB censured Nathan M. Suddeth, who was an engagement partner and partner-in-charge of Deloitte's Pittsburgh office until August 2012 when the firm removed him from all direct audit responsibility for any public or private client. The PCAOB has barred Suddeth from being associated with any firm that is registered to perform audit work in US capital markets. He can apply for reinstatement in two years.
According to the PCAOB enforcement order, Suddeth was the engagement partner for an audit completed in April 2011, then selected by the PCAOB the following month for a routine inspection. The board says the evening before the scheduled inspection, Suddeth prepared three memos that were not in the original audit file, backdated them to coincide with the audit completion date, and added them to the audit file the next morning before inspectors arrived.
The order says Suddeth's engagement team reminded him during the audit to complete the memos, but he did not do so before the audit was complete. The memos in question include documentation of discussions with the CFO of the company and the general counsel addressing, among other topics, the risks of fraud at the company. The third memo was to address the firm's consideration of and compliance with independence rules.
PCAOB rules do not forbid auditors from adding information to the work papers of an audit after the documentation completion date, but the new documentation must carry an authentic date, the name of the person adding it, and the reason it is being added after the fact, the PCAOB says. The PCAOB says Suddeth violated rules related to audit documentation, audit professional practice, and cooperation with a PCAOB inspection.
A review of Deloitte's inspection report covering 2011 inspections does not immediately connect the violations cited in the Suddeth enforcement order with any audit failures cited by inspectors. A PCAOB spokesman pointed out that not all deficiencies identified in an inspection are included in the public portion of the report. Under inspection rules, audit firms are given twelve months to correct certain deficiencies, after which the board can publish them if they are not addressed adequately.
Source: Compliance Week
IRS Agents Searching the Facility of a Pennsylvania Defense Contractor
A Western Pennsylvania defense contractor with longstanding ties to the late US Representative John Murtha was raided September 10 by federal agents who have investigated kickbacks and other crimes involving convicted contractors and lobbyists linked to Murtha.
IRS investigators raided Concurrent Technologies Corporation (CTC) in Johnstown, according to US Attorney David Hickton. He declined to comment on the underlying investigation.
Murtha, who died in 2010 after decades representing a district based in Johnstown, chaired a powerful House subcommittee that oversaw the Pentagon's budget. Several federal investigations have targeted defense companies that were awarded multimillion-dollar contracts during his tenure, lobbying done on their behalf to be awarded the contracts and donations made to Murtha and other congressional candidates.
CTC has received hundreds of millions dollars' worth of defense contracts since it was founded as Metalworking Technology Inc. in 1987. The company focuses on defense issues but also does environmental, engineering, energy, and other research. It is a nonprofit because most of its research is deemed to be in the public interest, according to its website. Among its projects, CTC recently began working with the US Mint in Philadelphia on ways to produce cheaper pennies.
CTC spokeswoman Mary Bevan confirmed in an e-mail that investigators were at the company's Johnstown facilities but said the company had not been told why.
A watchdog group, the Citizens for Responsibility and Ethics in Washington, has sued the Justice Department seeking information on a variety of investigations into Murtha and defense firms linked to him, including CTC.
Others the group has sought details on include brothers William and Ronald Kuchera, who pleaded guilty in April to a kickback scheme involving an $8.2 million contract obtained by a Murtha earmark for another company the congressman championed, Kuchera Defense Systems Inc. of Windber.
Federal prosecutors said a contractor involved in the scheme, Coherent Systems International Inc., got the earmarked contract after hiring a lobbying firm that employed Murtha's brother. Kuchera and Coherent have been awarded more than $50 million apiece in defense work since 2000, according to FedSpending.org, a website that tracks government money.
The founder of a contractor involved in the scheme, Coherent Systems International Inc., is serving five years' probation.
CTC and its principals have never been charged criminally, although the Justice Department subpoenaed the company's records in 2008 and prosecuted Paul Magliocchetti, a lobbyist who helped CTC and other Murtha-linked businesses get federal contracts.
Magliocchetti was sentenced in 2011 in Virginia to twenty-seven months in federal prison for illegally funneling more than $380,000 in campaign contributions to Murtha and other House members who controlled the Pentagon's budget. Defense contractors hired his firm to influence Murtha and other key lawmakers who earmarked funds for favored companies.
Magliocchetti acknowledged having relatives, friends, and lobbyists write personal checks to support congressional candidates to obscure his influence before reimbursing the donors.
Source: Associated Press
Las Vegas Attorney Paul Wommer Sentenced to over Three Years in Prison for Structuring Bank Deposits and Tax Crimes
Las Vegas attorney Paul Wommer was sentenced to forty-one months in federal prison for making structured bank deposits to hide money from the IRS, evading income taxes, and filing a false tax return, Daniel G. Bogden, US Attorney for the District of Nevada, announced.
Wommer was found guilty in April following a bench trial. Wommer was also sentenced to three years of supervised release and ordered to pay a $7,500 fine and forfeit any proceeds of his crimes. The judge also found that Wommer's testimony at trial was not credible and increased his prison sentence for obstruction of justice. Wommer was permitted to self-report to federal prison by November 20.
According to the court records and evidence introduced at trial, between June 30 and July 15, 2010, Wommer made or assisted in fifteen structured deposits totaling $138,700 for the purpose of evading bank reporting requirements. These deposits were made as part of a pattern of illegal activity involving more than $100,000 during a twelve-month period. During that same time period, Wommer willfully attempted to evade federal income taxes in the amount of $13,020 by concealing and attempting to conceal his assets, by making false statements to the IRS, and by placing funds and property in the names of nominees.
Source: US Attorney's Office - Nevada
Man Claiming He Is the Son of the President of the Congo Pleads Guilty to Defrauding Victims out of $1.6 Million
Blessed Marvelous Herve pleaded guilty in federal court in San Francisco September 6 to wire fraud, US Attorney Melinda Haag announced.
In pleading guilty, Herve admitted that from 2006 through 2012, he devised and executed a scheme to defraud victims out of approximately $1.6 million through a series of false and fraudulent statements, representations, and promises. Herve admitted that he falsely represented to victims that his father was the president of the Congo and a multibillionaire.
Herve falsely represented that the US government had recently seized more than $43 million of his money, and as part of his scheme, he sought the victim's financial assistance in order to prevail in a federal court case to gain access to the funds. Herve admitted to signing four promissory notes in which he promised to pay one victim bonus sums of $500,000 and $1 million in exchange for the victim's financial support of Herve's purported quest to obtain the $43 million that the government had supposedly seized.
Herve also admitted that he falsely represented to victims that because of his federal court case, he was in federal prison from 2009 through 2012. During this time, Herve fraudulently solicited funds from a second victim. Herve promised this victim full repayment of her money plus a bonus of $1 million and a luxury car upon the completion of his federal case and the release of his seized funds. On or about October 2012, Herve solicited and received $47,000 from the second victim. He falsely claimed that he needed the funds to pay the IRS to satisfy the final judgment entered against him, and that this final payment of $47,000 would result in the release of his seized millions.
Herve was charged by criminal complaint and arrested on April 24, 2013. He has been in custody since his arrest. He was indicted by a federal grand jury on May 7, 2013. Herve was charged with one count of wire fraud in violation of 18 U.S.C § 1343, to which he pleaded guilty under a plea agreement.
Herve's sentencing hearing is scheduled for November 22, 2013. The maximum statutory penalty for wire fraud is twenty years in prison and a fine of $250,000. In his plea agreement, Herve agreed to pay restitution to the victims in the amount of approximately $1.7 million. However, any sentence will be imposed by the court only after consideration of the US Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
Source: US Attorney's Office - California
Former IRS Manager Sentenced to Prison
Acting United States Attorney Walt Green announced September 12 that Chief US District Judge Brian A. Jackson sentenced Jeanne L. Gavin of Baton Rouge, Louisiana, to twelve months in prison, twelve months of supervised release following imprisonment, and a fine of $20,000. The sentence results from the defendant's convictions for exceeding authorized access to a government computer, in violation of Title 18, United States Code, Section 1030, and engaging in a criminal conflict of interest, in violation of Title 18, United States Code, Section 205.
The defendant's convictions stem from actions she took while serving as a Supervisory Internal Revenue Agent and group manager in the Baton Rouge office of the IRS. In that role, the defendant supervised approximately ten revenue agents responsible for determining federal tax liability and collecting taxes for individual, partnership, and corporate taxpayers.
The defendant admitted that while working for the IRS, she engaged in a criminal conflict of interest with her IRS employment by owning and operating a private tax and accounting business which generated over $70,000. The defendant further admitted to using her position as an IRS manager to improperly cause subordinates to access IRS databases on over 2,000 occasions for the benefit of her private tax and accounting business.
Source: US Attorney's Office - Louisiana
Financial Advisor Pleads Guilty to Investment Fraud Scheme
A former financial advisor with Bank of America has pleaded guilty to fraud and tax evasion charges for defrauding six persons of over $2 million during 2010 and 2011, announced Daniel G. Bogden, US Attorney for the District of Nevada.
Gary H. Lane of Reno pleaded guilty on September 3 to twelve counts of mail fraud and five counts of attempt to evade or defeat tax. Lane is scheduled to be sentenced on December 16. He faces up to twenty years in prison for each mail fraud count, up to five years in prison on each tax count, and fines of up to $250,000 per count.
According to the indictment, Lane was employed as a financial advisor by Bank of America Investment Services, which later merged with Merrill Lynch, until March 2011. During the course of Lane's employment, he allegedly developed a scheme to entice persons to invest monies with him through the use of an E-Trade account rather than through normal bank procedures.
Lane allegedly looked for investors who were elderly or lacked investing experience and had a desire for high returns and aversion to risk. Lane told the investors that their funds would be invested in US Treasury Bonds, which would pay better than six percent interest and would mature in two years. Lane corroborated the trades by creating false confirmations and distributing them to the victims by mail.
After receiving the monies from the victims, Lane gave them to his spouse, who mailed them to her E-Trade account. The monies were then withdrawn at Lane's direction for his own use or to pay other investors. In actuality, Lane never purchased any US Treasury Bonds with the victims' monies. In fact, there were never any US Treasury Bonds that existed with a rate of return of greater than six percent and a maturity period of less than two years.
Using this scheme, the indictment alleges that Lane defrauded approximately six victims of over $2 million between January 2010 and March 2011. Lane also allegedly filed false and fraudulent individual tax returns for the years 2006 through 2010, substantially understating his income and tax due and owing to the IRS.
Source: US Attorney's Office - Nevada
Massachusetts Businessman Indicted for Tax Crimes
The Justice Department and IRS announced that Richard L. Furnelli, formerly of Holyoke and South Hadley, Massachusetts, was indicted September 12 in Springfield. Furnelli is charged in a nine-count indictment with one count of obstructing the internal revenue laws, four counts of tax evasion, and four counts of failing to file his individual income tax returns.
The indictment alleges that from 1994 to 2009, Furnelli obstructed the IRS' ability to identify his income and compute the income taxes due and owing by using nominee owners to disguise his ownership interests in a network of businesses and assets, including entities operating an adult entertainment venue called the Gold Club.
The indictment also alleges Furnelli earned over $2 million in total income from 2006 to 2009 and evaded his individual income taxes for that time period by, among other things, directing the payment of his income to the nominee entity, RLF Ventures LLC, utilizing a bank account in the name of a nominee in order to deposit his income and pay his personal expenses as well as using cash extensively. The indictment further alleges that Furnelli failed to file his individual income tax returns from 2006 to 2009.
Furnelli faces a maximum punishment of three years in prison for the charge of obstructing the internal revenue laws, five years for each count of evading his individual income taxes, and one year for each count of failing to file his individual income tax returns. He faces a maximum fine of $100,000 on each count of failing to file his income tax returns and $250,000 for each of the other counts.
Source: US Department of Justice