Bizarre new twists in the Joe Francis tax evasion case

Posted by AccountingWEB on Sep 10 2009 4181 printer friendly

"Girls Gone Wild" video producer, Joe Francis, is about to go to court for tax evasion. If convicted, he faces ten years in prison. But now, practically on the eve of his trial set for October, there’s been an interesting turn of events. For at least a year, Francis has been claiming that his legal troubles relating to tax years 2002, 2003, and 2004 were not his fault, but the fault of errors made by a crooked CPA, Michael Barrett. When Barrett heard those charges, he went straight to the IRS as an informant. He told them that Francis had made false deductions on his tax returns. Barrett also asked the IRS for a large reward in exchange for the information.

Then on September 1, 2009, a lawsuit was filed in the Los Angeles County Superior Court, that presents evidence exposing a complex scheme that could support Francis’s defense. The lawsuit claims that three former employees of Mantra Films (owned by Francis), embezzled millions of dollars from their employer.

The employees included Barrett, who had served as the Chief Financial Officer of Mantra Films, Roman Pelikh, the former Chief Technology Officer, and Will L’Heureux, the former Vice President of Operations. The lawsuit accuses the three of forming a series of shadow companies for the purpose of siphoning off funds from Mantra. The false companies included CPI Telecom, Western PC Professionals, Office Trade Center, and WMR (using the first initials of the three employees involved: William, Michael, Roman).

After forming these companies the trio submitted and approved phony invoices to Mantra and were paid. Pelikh is also accused of having submitted hundreds of thousands of dollars in phony expense reports and receiving reimbursement through payroll. When officials at Mantra filed a complaint with the Santa Monica Police Department, an investigation was launched. The results of the investigation then gave rise to the lawsuit. You can read the full contents of the Mantra Films lawsuit.

No arrests have been made as yet. Barrett, meanwhile, has been hired to serve as vice president of finance and accounting by a security software company, CyberDefender.

As for Francis’s trial which starts next month, he is hoping to dazzle the court with a star-studded list of witnesses. His defense strategy includes testimony from Jennifer Aniston, Vince Vaughn, Orlando Bloom, Jack Nicholson, and Kim Kardashian. Prosecutors have called Francis’s business expenses phony, and the job of the celebrities will be to show the expenses were legitimate in keeping with Francis’s business pursuits.

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Bizarre new twists in the Joe Francis tax evasion case

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Bizarre new twists in the Joe Francis tax evasion case

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