Tax Indictment and Plea Round-up

If you thought that federal and state law enforcement officials have more important things to do these days than prosecute tax offenders, think again.  This multi-page post outlines recent cases involving Californians who have paid the price – in jail time, fines and restitution – for defrauding the government out of their share of tax revenue. 

If you have found yourself the subject of a criminal investigation or if you are worried about such problem for under-reporting income, failing to file tax returns, tax crimes resulting from illegal behavior, submitting false tax documents to the government, or failing to report an off-shore account, we can help.  Legal advice is always individual, considering the unique facts and circumstances of each client and shaping legal advice and strategy for the particular client.    We have over thirty years of experience defending clients against the government in criminal tax cases and we want to use this experience in your case. 

The Round-Up:

Undisclosed Offshore Accounts Leads to $6.8 Million Penalty

San Francisco resident Robert E. Greeley agreed to pay $6.8 million is civil penalties for failing to report his interest in and control over two UBS Switzerland bank accounts through the Report of Foreign Bank and Financial Accounts (FBAR) procedures.  In a classic tax evasion scheme, Greeley created two Cayman Island shell corporations and, between 2002 and 2004, dumped over $13 million in assets from these corporations into his Swiss bank accounts.  Greely then failed to disclose to the IRS these multi-million dollar overseas accounts and the interest of $734,000 earned in these accounts from 2003 to 2008. 

You can read the entire August 3, 2011 Department of Justice Press Release about Mr. Greeley here
Mom of 19 Non-Existent Children Indicted For Tax Fraud

In August, 2011, the IRS reported that Norma Coronel of Livermore faced up to 143 years in prison and fines totaling $5.6 million for falsely claiming deductions for 19 non-existing children.  According to the IRS, Coronel stated she gave birth to 19 children all on December 11, 2002, obtained social security numbers for them all, and claimed them as dependents on her tax returns from 2004 to 2007.  Coronel had truthfully only given birth to one boy.  Coronel was arrested in Livermore and remains in custody in Los Angeles where she committed the fraud.     


Audit Reveals $1.2 Million in Unpaid Taxes

Owen Charles, a 77 year old Pleasant Hill resident, was found guilty of tax evasion by a jury after an IRS audit revealed that Charles failed to pay more than $1.2 million in taxes between 2001 and 2003.  According to the United State Department of Justice, not only did Charles fail to pay taxes, interests and penalties on his real property income, but he dug himself a deeper hole when he attempted to remove over $900,000 from of his real estate properties and hide the money in offshore accounts rather than pay the IRS. 


Failure to Report $1.5 Million in Ponzi Scheme Income Leads to Federal Indictment

A 49 year old Vallejo man was indicted by the United State Department of Justice for mail fraud, wire fraud and money laundering after he was caught running a Ponzi scheme that defrauded hundreds of people out of $17 million.  The indictment alleges that Duane Allen Eddings did not declare $1.5 million in income he made from the Ponzi scheme based out of Vallejo.  Eddings faces a maximum of five years in prison and up to a $250,000 fine if convicted of tax evasion.  This case proves that the IRS expects all income, legal or otherwise, reported to them.


$102 Million Bribery Scheme Involves Former County Supervisor and Staff

On May 10, 2011, several former and current San Bernardino County officials were indicted on charges of bribery, filing fraudulent tax returns and failing to file a tax return.  The indictment centered upon a $102 million dollar settlement between a prominent developer, Jeffrey Burum, and the San Bernardino County Board of Supervisors that involved threats, extortion, inducements and bribery in order to secure supervisor’s votes for the settlement.  According to reports, after a substantial sum of the $102 million settlement was paid out to the County, Burum distributed out $100,000 bribery payments to four high-ranking county officials.  The defendants then concealed the bribes with the help of political action committees and did not report the illegal income to the IRS. 

You can read the full news article here


Several Bay Area Residents Convicted in Fraudulent Tax Return Scheme

In August, 2011, IRS Criminal Investigation agents executed search warrants on nine Northern California residents that maintained the bank accounts in a scheme that netted $6.2 million in fraudulent tax funds.  According to reports, the defendants used other people’s identity to file false tax returns and then deposited the refunds connected to these false returns into their personal bank accounts. 

One of the Bay Area defendants, Sparkle Jernigan, 32 of Pittsburg, California admitted to IRS agents that she obtained other peoples’ personal information for the purpose of filing false returns and transmitted this information to others via text messages.  Jerigan was sentenced to 21 months in prison and ordered to pay $31,786 in restitution for her crimes. 


Under-Reporting of Commission Leads to Six Month Prison Sentence

Jack Aaron Nissim of San Rafael was sentenced to six months in prison last month after he admitted he underreported $518,563 in income on his tax returns. 

According to the government, from 2003 through 2007, Nissim omitted a large sum of the Schedule C gross receipts he earned from a company he owned and from another for which he served on the board, and provided false information to his bookkeeper by under-reporting commissions he earned during those taxable years.  In addition to prison time, Nissim agreed to pay restitution of $173,292 to the IRS and $31,153 to the State of California.


Owners of El Balazo Restaurant Plead to Immigration, Social Security and Tax Charges

Husband and wife Mario and Nicole Sandoval, owners of bay area restaurant chain, El Balazo, plead guilty in Federal court this month of underreporting employment taxes, employing illegal aliens and misusing employees’ social security numbers.

The couple admitted to knowingly hiring undocumented aliens in their restaurant, even after a search by Immigration and Customs Enforcement revealed approximately sixty three illegals working at different El Balazo restaurants in the bay area.  They also admitted that they underreported to their accountant the correct wages earned by El Balazo employees which resulted in an understatement of employment taxes to the IRS.  Finally, Nicole Sandoval admitted to providing false social security numbers to the Social Security Administration on behalf of her employees to cover up the fraud.  The couple will be sentenced in December.


Trusted Bookkeeeper Embezzles Thousands from Long-time Client

Ann Ray, 67, of Antioch, plead guilty in July to embezzling millions from her client of 34 years and concealing her illegally-obtained riches from the IRS. 

According to the plea agreement, beginning in 1998 and carrying through May, 2009, Ray embezzled approximately $4,760,000 from her employer who owned several bay area businesses.  Ray did this by writing checks to herself from the companies’ bank accounts, used company credit cards for personal expenditures, and by increasing the amounts of her payroll checks.  She then concealed her embezzlement from the company accountants by falsifying the company records, bank statements and bookkeeping.  Ray plead guilty to six counts of tax evasion in July. 


Health Care Fraud Proves Costly for Physician and His Wife

John Han, 63, a physician from Norwalk, California, and his wife, Sonya Han, 58, were sentenced to five years probation and agreed to pay $2.7 million in restitution after they plead guilty in state court to filing false state income tax returns. 

Los Angeles County Court documents show that from 2001 to 2007, Dr. Han received over $14 million in Medicare and Medi-Cal payments.  Then from 2002 to 2007, the Hans underreported the income on their personal income tax returns by more than $5 million and underreported the income tax returns of the corporation, John S. Han, MD, Inc., by more than $7 million. 


Advisor Steals Millions from Chairman/CEO Client

Former Pleasanton resident, Ranni K. Hillyer Oceana, 57, plead guilty in July to three counts of tax evasion after she embezzled approximately $3,880,800 from her employer and failed to report the funds to the IRS.

According to the government, Hiller Oceana used her signatory authority over the business bank accounts of her client to write checks to vendors who worked on her home, purchase real estate, pay for business expenses and loan others money.  By failing to report these funds on her returns from 2002 to 2004, Hiller Oceana owes the IRS $1,387,294.  She will be sentenced in October.


Business Owner Uses Company Money for Hawaii Vacation, Boat and Dodge Viper

Former owner of Ripp It Earth Movers, Jay Scott Soberling, 53, of Hidden Valley Lake, California, was indicted last month on one count of tax evasion.

According to court documents, Soberling attempted to evade the payment of federal income and employment tax for the years 1995 through 2004 by placing assets in other people’s names, dealing in cash, submitting false information to the IRS, and using funds from a company bank account to pay for personal expenses such as a Hawaii vacation, a boat and a Dodge Viper.  While Soberling was able to save $161,155 in tax payment under this scam, he now faces as much as five years in prison, a fine of $250,000 and restitution.