Just seven days before Wesley Snipes finds out his sentence for failure to file his tax returns, it seems that the government is busy sentencing others, including one of their own. Now, seldom do you find an IRS agent facing the Justice Department, but in this case his actions not only cost him his job, but also his freedom.
HARRY WILLNER – a former Internal Revenue Service (“IRS”) Revenue Agent – was sentenced to a year in jail for carrying out a scheme to obstruct the IRS by fraudulently attempting to sell to other taxpayers, and fraudulently using on his own personal income tax returns, tax losses belonging to a separate company he controlled. You’ve got to know that WILLNER clearly knew better. Surely, he didn’t think that he would get by with such actions?
WILLNER was employed by the IRS as a Revenue Agent assigned to the Large and Mid-Size Business (“LMSB”) Unit of the IRS in the Southern District of New York. WILLNER was also an officer of a corporation known as NIA Advertising, Inc. (“NIA”), which was purportedly in the advertising business. According to certain NIA records, NIA’s address was the same as WILLNER’s home address in New Jersey. WILLNER did not request approval from the IRS to serve as an officer of NIA, as was required by IRS regulations.
This would be a code of business conduct issue. As a point of clarification, I serve as a Senior Sales Executive for a public company. Likewise, I am a speaker – speaking on white collar crime and business ethics nationwide. That is fully disclosed to the company that I work for. I feel that if you have an interest outside of your full time work assignment, it should be fully disclosed.
WILLNER attempted in two principal ways to make fraudulent use of the NOLs purportedly generated by NIA in 2002. First, between 2003 and 2004, WILLNER attempted to, in effect, sell NIA’s NOLs to other taxpayers, which would enable those other taxpayers to use the NOLs to offset the income on their own tax returns and
thereby to fraudulently reduce their tax liabilities. WILLNER proposed to accomplish this fraud by having other taxpayers, who were owed income, direct the fee payment to NIA, which would report it as income. NIA would not pay tax on the payment because the income would be offset by the NOL. WILLNER would then remit the money, less a fee for himself, to the other taxpayer disguised as a loan repayment.
The second aspect of the scheme occurred between March 2002 and March 2006, when WILLNER used NIA’s NOLs to offset his own individual income tax liability by having fee income, earned by WILLNER in his individual capacity as an instructor at two Manhattan-based schools, paid or assigned to NIA. WILLNER
directed the two schools at which he earned off-duty teaching income to issue Form 1099s to NIA. WILLNER thereafter fraudulently reported the fee income on NIA’s corporate income tax returns as receipts of NIA. Because NIA carried the sizeable NOL deduction from 2002 through 2005, the taxability of the
teaching income was offset. As a consequence of this latter scheme, WILLNER evaded a total of approximately $20,957 in United States income taxes.
“I screwed up,” he said. “You can’t imagine how sorry I am. I caused pain and suffering for my family, myself and the organization I worked with for 35 years.”
Well now, Every choice has a consequence. It would appear that WILLNER might have thought he was the smartest guy in the room. But you reap what you sow. I know. I spent time in federal prison for bad choices which included tax fraud. It is not worth it. In WILLNER’S case he has been sentenced to one year in prison, one year of supervised release, a $10,000 fine and is required to pay any taxes, interest and penalties to the IRS.
I suspect as this is written on April 23, 2008 – Wesley Snipes will find himself facing a prison sentence tomorrow. One thing’s for sure, we’ll know in 24 hours.
White Collar Crime Speaker – Chuck Gallagher – signing off…