Paid Tax Preparer Earns Prison Time - Don’t Mess With The IRS! Comments by Ethics Speaker Chuck Gallagher

Lubbock, Texas is known for many things. Now, one of its citizens, Martin Fungai Mandegu brings attention to Lubbock - but in a different way. Martin, it seems, along with Paul Ntahonkiriye and Carl Riley, Jr. were named in September 2007 in a 29 count indictment alleging false claims and conspiracy to defraud the government.

Mandengu was just sentenced to 16 months in federal prison and ordered to pay $100,725 in restitution. Ouch…an active prison sentence and restitution - all for 57 fraudulent returns.

According to the US Attorney’s news release here’s the story:

From October 2004 through April 2005, Paul Emile Ntahonkiriye began operating an income tax return preparation business in Abilene, Texas, by the name of PNT Tax Service (PNT). Beginning in January 2005, Mandengu, Ntahonkiriye and Riley began preparing tax returns through PNT. For the 2005 tax filing season, PNT prepared approximately 100 income tax returns. Approximately 57 of those returns were fraudulent and claimed false income tax refunds.

In preparing the fraudulent returns, Mandengu, Ntahonkiriye, and Riley would tell their clients that in order to get a larger refund, one or two false dependents could be listed on the return as either a nephew or niece, and in some instances the wages earned were increased to increase the earned income tax credit. Using fraudulent dependents and inflated wages created a fraudulent income tax refund to which Mandengu knew that the client was not entitled. Ntahonkiriye would add the names of the false dependants from a list he obtained from Burundi.

Mandengu would not have the clients sign any documents and often would not furnish them with copies of the return or any documents or forms he used in the preparation and filing of theft tax return. Mandengu would prepare the returns and then Ntahonkiriye would electronically file the client’s return with the Internal Revenue Service. The preparation fee for each return varied from approximately $20 to more than $900 and was electronically deposited by HSBC Taxpayer Financial Services, located at New Castle, Delaware, into Mandengu’s savings account at the First Financial Bank, in Abilene, Texas. When the refund was received, an additional fee was requested from some of the clients; often clients did not know about the first fee being deducted.

The total amount of the fraudulent income tax refunds claimed by Mandengu, Ntahonkiriye, and Riley on the false returns was $100,725.

As the 2008 tax season gets well underway, it’s interesting to watch the flurry of tax related cases either come to trial or folks found guilty get sentenced. We operate under a system of voluntary compliance and so this punishment and public notice is designed, not only to punish for violation of the law, but to also alert those who might make unwise choices to consider their choices carefully.

As a business ethics speaker, I know first hand the effect of poor choices and the consequences that follow. While I am not proud of my past, I, too spent time in federal prison for a tax related crime. I learned my lesson. Federal prison is not fun and Mandengu will not find his experience pleasant. Not only is his career in the tax related field over, but he will face issues with being a convicted felon the rest of his life.

Rick Martinez, Special Agent in Charge of Internal Revenue Service, Criminal Investigation for the Dallas Field Office, said, “While most return preparers provide excellent service to their clients, a few unscrupulous tax preparers file false and fraudulent returns to defraud the government, the tax paying public and their own clients. Internal Revenue Service, Criminal Investigation always strives to ensure that attorneys, accountants and other tax practitioners adhere to professional standards and follow the law.”

Every choice has a consequence. Think first about the choices you make. You do reap what you sow. Sow, with your choices wisely and reap a harvest that you can be proud of.

Business ethics speaker, Chuck Gallagher, off for now…

Duke University Sued Over Lacrosse Incident - Greed or Justice?

As has been widely publicized, 38 individuals have sued Duke University, it’s president and a number of other associated organizations and people, who, according to the claim, caused harm as a result of the 2006 incident involving the alleged rape of a stripper.

Duke University set up a permanent web site to discuss the history of the incident and it’s outcome. What is missing today is any comment on the newly filed lawsuit. For the benefit of our readers a portion of the Duke site is quoted so that you might easily have the “Duke” perspective - at least the perspective up until this new phase.

On April 11, 2007, North Carolina Attorney General Roy Cooper stepped before a crowded press conference and spoke the words that ended one of the most publicized legal stories in recent American history. “We believe these three individuals are innocent of these charges,” he said.

Cooper’s long-awaited decision ended a legal ordeal for three Duke University students who had been charged with first-degree sexual offense, kidnapping and, earlier, with rape. The allegations were made by one of two exotic dancers that they and other members of the Duke men’s lacrosse team had hired to perform at an off-campus party in March 2006. Durham District Attorney Mike Nifong stated publicly that a rape had taken place and prosecuted the three students vigorously even as evidence mounted that raised serious questions about the accuser’s credibility and the veracity of the charges.

Cooper took over the case in January 2007 after the state bar association filed ethics charges against Nifong for withholding exculpatory evidence and making inflammatory statements about the case. In dismissing the charges and stating the attack never occurred, Cooper spoke of a “rush to accuse” and said “there were many points in this case where caution would have served justice better than bravado.” In one of the many similar judgments made about how the news media covered the case, columnist David Broder described “a painful exercise in journalistic excess.”

As most know, Mike Nifong has experiences dramatic consequences as a result of his rush to prosecution and judgement. It has been reported that Nifong felt that a win in this case would further his political career. Regardless of the motive, as an ethics speaker, I tell audiences nationwide that - every choice has a consequence. Nifong is in the midst of experiencing the consequences of his choices. But what about the others?

The Duke site goes on to say:

Faced with the case and its larger implications, Duke President Richard H. Brodhead moved to address broader university issues highlighted by the situation, forming a council of advisers and four committees to examine the lacrosse team, the administration’s response to the incident, the student judicial process and Duke’s campus culture. In the weeks and months that followed, the committees issued their findings, all of which Duke made public immediately.

Independent of the legal case, given the standards expected of teams that represent Duke, the university forfeited two lacrosse games in the immediate aftermath of the incident as a response to admitted behaviors by team members, such as underage drinking. Brodhead later suspended the remaining games – not as punishment, but as a necessary action until the legal situation became clearer, based on concerns including the safety of Duke’s players. At the time, the district attorney was saying emphatically that as many as 46 of the players were still under suspicion for the alleged crimes. After the district attorney indicted three of the players, Duke placed on interim suspension the two who had not yet graduated – part of a routine protocol most U.S. universities follow when students are charged with violent felony crimes. Duke later modified the status of the two players to “administrative leave” and, soon after it became clear in court that Nifong’s statements were not credible, invited them to return in good standing, months before Cooper’s decision. In addition, in an effort to create a fresh start for the program, Duke replaced Coach Mike Pressler with an interim coach and, subsequently, with John Danowski, who previously coached the lacrosse team at Hofstra University.

From the beginning of the affair, other observers voiced strong, often harsh, opinions about the players, the district attorney, the university and nearly every other aspect of the story. Initial criticism focused on the players, with protesters assembling outside the house where the party occurred, banging pots and shouting their concerns. As doubts grew about the charges, criticism shifted to Nifong and his team, as well as to some administrators, students, community members and others – including a group of faculty members who published an ad in The Chronicle – who were accused of prejudging the players or of using the case to promote their own agendas. The lacrosse team returned to the field in February 2007 before a cheering crowd that included Brodhead and much of the university’s senior leadership, as well as thousands of students and the largest group of reporters ever to attend a regular-season Duke lacrosse game. The team went on to win the league championship and to reach the national championship final game while also maintaining a strong record in the classroom and the community.

Meanwhile, Duke began responding to the concerns raised by the committee that had examined the campus culture. Approximately one year after the event, Duke’s fund raising hit record levels, applications for student admissions remained near record levels, new media guidelines were in place to enhance the privacy of students and campus life began to return to normal.

On the legal front, in June 2007 a N.C. State Bar disciplinary panel concluded after a trial that DA Nifong had made inflammatory and prejudicial comments about the case, intentionally withheld DNA evidence and lied to court officials. The panel called for his disbarment and Nifong resigned his office.

Also in June, university leaders announced a settlement with David Evans, Collin Finnerty and Reade Seligmann, noting in a statement how “these young men and their families have been the subject of intense scrutiny that has taken a heavy toll” and saying “it is in the best interests of the Duke community to eliminate the possibility of future litigation and move forward.” An accompanying statement from Evans, Finnerty and Seligmann said, “We hope that today’s resolution will begin to bring the Duke family back together again, and we look forward to working with the University to develop and implement initiatives that will prevent similar injustices and ensure that the lessons of the last year are never forgotten.”

Robert K. Steel, the chairman of Duke’s Board of Trustees, summarized Duke’s remarkable “lacrosse story” in a message he sent to the campus community following Cooper’s decision in April. “There is much to learn from the events that we have lived through, and we intend to put this learning to use,” Steel wrote. “Duke is a great university that steps up to challenges and opportunities, and together we will use this moment to make our community stronger.”

All of the above, with the last revision on July 3, 2007 reflects the position of Duke University. However, this new twist begs the question - how far do the consequences spread? And, who has been harmed - and at what cost?

The 38 individuals feel that the issue is more widespread than just the 3 players wrongfully accused and Mike Nifong who, interestingly enough, was not named in the lawsuit. I guess those suing know that Nifong has filed for bankruptcy and there’s nothing to gain by dragging him into the legal wrangle. Should, for example, the players on the 2006 team get some form of compensation for not getting to play?

It will be interesting to read your comments - which are welcome.

Ethics speaker, Chuck Gallagher, signing off…