A Ferrari, A Bentley and a Federal Indictment - Andrew Maxwell Parker Finds Himself on the Wrong Side of the Law!

Every choice has a consequence! May 2008 will be remembered by 40-year-old Andrew Maxwell Parker, owner of San Antonio Trade Group, Inc., since he was indicted on conspiracy, wire fraud, money laundering, false statements and tax charges. It appears that Parker’s choices may be having unexpected consequences.

Parker’s indictment alleges that from February 2003 to November 2006, Parker schemed to defraud the Export-Import Bank of the United States (Ex-Im Bank) by stealing millions of dollars in loan proceeds from private U.S. lenders to Mexican business owners and causing multi-million dollar losses to Ex-Im Bank who guaranteed or insured those loans based on false applications and support documentation submitted by Parker. The indictment also charges Parker with defrauding lenders in transactions not insured or guaranteed by the Ex-Im Bank.

The indictment further alleges that Parker attempted to evade paying taxes owed in calendar years 2003 and 2004 by disguising account transfers of $588,000 and $816,720.55, respectively. Parker allegedly claimed the money was used to purchase equipment being exported to Mexico when in fact, he used the $588,000 to purchase a house in Dallas, Texas, and the $816,720.55 to purchase two Ferrari automobiles and one Bentley automobile for himself. He also funneled money to relatives, all from nominee accounts. Furthermore, the indictment alleges that he under-reported his actual income on his 2003 and 2004 tax returns.

In all, Parker is charged with conspiracy, nine counts of wire fraud, two counts of use of a false document, 12 counts of money laundering, two counts of tax evasion, and two counts of filing a false income tax return. The indictment also seeks the criminal forfeiture of his San Antonio residence at 407 E. Wildwood Dr. and his 2004 GMC Hummer H2, plus a monetary judgement in the amount of $10 million representing proceeds obtained directly or indirectly as a result of Parker’s alleged scheme.

While an indictment is only a formal accusation of criminal conduct and not evidence of guilt, rarely does the US Attorney’s office lose a case like this. More than likely this will be an open and shut case. The government may not get a conviction on all charges, but they will get a conviction. Considering the recency of the indictment, my guess is that Parker will use his resources to secure legal help in reaching a plea agreement that will minimize his prison time. Although Parker’s lawyer, John Pinckney, said Parker denies the allegations and wants a jury trial. If convicted he will likely spend substantial time in federal prison.

Parker has been the target of the FBI and criminal investigators of the Internal Revenue Service over more than $163 million in loans backed by the Export-Import Bank of the United States. The bank is a little-known federal agency that is supposed to help American companies export their products by backing high-risk loans to foreign businesses that are supposed to buy the products. It works with some private commercial lenders to get the loans and has to pay with taxpayer funds if the borrower defaults. Court records allege millions of dollars of loans handled through Parker defaulted and the bank had to cover them.

“I have been calling for a (Congressional) investigation because there is ample evidence that hundreds of millions of dollars of taxpayer money is simply disappearing from the Export-Import Bank as they appear to be guaranteeing loans to businesses that don’t exist,” said Congressman Jeb Hensarling of Dallas. “A lot of money was provided to companies and they never, ever repaid the loans. The bottom line is this a mess, it deserves a full investigation. I don’t know of the particulars of the case in San Antonio, but it is further evidence of federal program that has run amok and needs accountability and an investigation.”

“It started out as a well-intentioned program… but there is no oversight, like a board of directors in private (banking), to ensure that things aren’t hinky,” said David Williams, vice president of policy for Washington-D.C.-based watchdog Citizens Against Government Waste. “The federal government has been notorious about its lack of oversight. The last thing we need is a corporate welfare program that has no oversight on it.”

Every choice has a consequence. As a white collar crime and business ethics speaker, I speak from first hand experience about the truth about consequences. Reality is - no one escapes the consequences of their choices. While Parker may have looked good for a time and avoided the consequences - he did not avoid the consequences all together. If convicted Parker will find that prison is no fun and likely will be facing many years plus substantial restitution for his conviction. Serving time will prove to be a dramatic change from his prior activities. You do reap what you sow.

If anyone reading has any background on PARKER - feel free to comment as I study the behaviors and backgrounds of those indicted for white collar crime.

White Collar Crime Speaker - Chuck Gallagher - signing off…

THIS JUST IN…another reader provided these links related to Export-Import Bank frauds and sentences. See here and here.

Thanks!!!

Just Pay Me “Cash” - Local Dentist Dr. Brian G. Martinez Pleads Guilty to Tax Evasion!

As a former CPA, I can’t tell how many times I’ve heard clients say that since they received money in cash “it wasn’t taxable.” WRONG! Not only did I correct that impression for my clients, I would not keep them as clients if they insisted on being a part of what is obviously tax fraud.

Now, I went to prison for tax evasion, so I am not lily white. In fact, while I am not proud of my past, I have a unique perspective from which to write and comment. Perhaps my comments will be the foundation that might help others.

According to the US Attorney’s office, a practicing Houston area dentist has pleaded guilty to filing a false income tax return and evading more than $145,000 in federal income taxes between 1999 and 2003. Dr. Brian G. Martinez, 51, a practicing dentist in Houston, pleaded guilty to the federal felony tax charge Thursday, May 1, 2008. At the hearing, Martinez admitted that between Jan. 1, 1999, and April 15, 2004, while engaged in the commercial practice of dentistry, he received payment for services rendered to patients in the form of cash and/or by credit card, check or money order. Although books and records for the practice recording the payments made by patients for services rendered were maintained, not all payments were recorded in the books and records that were disclosed to those who prepared Dr. Martinez’s tax returns for calendar years 1999 through 2003. In some instances, Martinez was handed both cash receipts and checks which he personally cashed, which would not be disclosed, documented or disclosed to the tax return preparers.

COMMENT: The practice of not keeping accurate records is common. In fact, the fact that Dr. Martinez went to the trouble to keep inaccurate records show deliberate intent and, likely will pay against him at his sentencing hearing.

Martinez concealed from his tax preparers a total of $533,048 in revenue or gross receipts received from patients during calendar years 1999 through 2003 – all taxable income – causing materially false income tax returns to be filed with the IRS and evading the payment of a total of $149,253 in income taxes for those tax years.

COMMENT: When cash receipts are concealed the question often arises, what to do with the cash. More times than not, the IRS can recreate accurate income records by looking at lifestyle. Rarely does a person hide the cash. Most of the time they spend it and that’s the one activity that creates the trail for a conviction.

To help with sentencing, Martinez paid restitution - delivering a check in the amount of $149,253 payable to the IRS. Sentencing is set for July 25, 2008. Martinez faces a maximum of five years in prison and a $250,000 fine. Additionally, the court may impose up to three years of court supervision to follow any term of imprisonment imposed. I suspect that Martinez will face 12 months in prison!

Comments are welcome!

White Collar Crime Speaker - Chuck Gallagher - signing off…

Fake IRS Employee - Morgan Mayfaire a/k/a Elizabeth Valdo - Charged with Prepare Fraudulent Tax Returns

So it’s tax season, the time when all are required to file tax returns. You look for someone who can provide the service correctly. You want someone with experience, someone who knows the law. Hum… I guess a n IRS employee would do?

As it turns out, Morgan Mayfaire, a/k/a/ Elizabeth Valido, age 49, of Davie, Florida, was charged with thirty-five counts of making false and fraudulent statements and eight counts impersonating an employee of the United States. Great! Wonder how the folks who had her fill out their returns feel?

If convicted, Morgan Mayfaire faces a maximum term of imprisonment of 3 years and a $100,000 fine on each of the charges of fraud and false statements, and a maximum term of imprisonment of 3 years and a $250,000 fine on each of the charges of impersonating an employee of the United States.

According to the Indictment, Morgan Mayfaire prepared fraudulent tax returns at her residence in Davie, Florida for several clients. The clients paid Mayfaire a tax return preparation fee of 10% of the refund claimed on their federal tax returns. Mayfaire prepared tax returns and amended tax returns on Forms 1040 and 1040X in which she reported false medical expenses, taxes, charitable contributions, and employee business expenses. The false expenses and deductions listed on the returns resulted in approximately $472,904 in tax refunds to her clients.

NOTICE: If you hire a return preparer who charges based on the refund received…watch out. By any ethical standard you can think of - this is wrong and a clear indication that some sort of fraud is likely.

Moreover, according to the charges, Mayfaire falsely represented to her clients that she was an IRS employee, and, as such, knew ways to increase taxpayer deductions on tax returns that others were unfamiliar with. These false representations induced clients to hire her to prepare their tax returns.

While an indictment is not an indication of guilt, I have found as someone who speaks and writes about white collar crime, that most indictments result in a guilty verdict. As evidenced in the Wesley Snipes sentencing hearing, if convicted, this woman will go to jail.

YOUR COMMENTS ARE WELCOME!

Meanwhile, white collar crime speaker, Chuck Gallagher, signing off…

Larry Gordon May Sentenced in Massive Nursing Home Fraud! Gary Trebert and Steven Michael Ewing Sentenced in July ‘08

It was October 2007 and Larry Gordon May plead guilty to his role in a massive nursing home fraud. Today he received his sentence - 4 years in federal prison.

Larry Gordon May, a resident of Texas, became president and a controller of various nursing home entities and staffing/payroll companies without any previous experience or knowledge of licensed nursing home operations or responsibilities.

Ewing and his coconspirators, using the names of sham corporate entities, obtained control of 70 licensed nursing facilities with thousands of patient beds and thousands of employees. In order to acquire control of these facilities, Trebert, Ewing and May used false statements and false and fraudulent documents, including Applications for Nursing Facility License and Medicaid Contracts, Medicare Federal Provider Enrollment applications, ownership documents, IRS Employer Identification Number applications, Health Insurance Benefit Agreements, and Electronic Fund Transfer forms. Their falsifications included falsely identifying relatives as owners, operators, and managers of the nursing homes on the applications; failing to disclose staffing/payroll companies on nursing home applications; failing to disclose Ewing and May as the true owner/operators of nursing homes; and forging names of individuals on filed documents to divert responsibility away from the three defendants. They used the false statements and documents to hide from HHS, state licensing and Medicaid agencies, and the IRS, the true control and management of the nursing facilities, their responsibility for more than $200 million in money derived from the nursing homes, and their responsibility for the nursing facilities’ residents.

May testified at the Ewing trial that during some of the periods covered by the Indictment, he was making $10,000 to $25,000 per month for doing little more than signing documents, including tax returns, and taking tax returns to England to mail back to the IRS in the U.S. More than 150 sham staffing/payroll entities, many with foreign business addresses at drop boxes in England and Austria, were created to file Form 941 employer withholding tax returns with the IRS, preventing the IRS from assessing and attempting to collect more than $34 million of unpaid payroll tax liabilities from Trebert, Ewing and May, and creating the appearance that these sham staffing/payroll entities employed more than 4500 nursing facility employees, when they did not.

At the sentencing hearing May contended, was he merely a bag man — a pawn in a labyrinthine conspiracy conducted by more sophisticated men who wished to defraud the Internal Revenue Service and U.S. Department of Health and Human Services? But, U.S. District Judge Terry Means said, “You’re either gullible or willfully blind.”

While May received a sentence well below the 70 to 87 month range suggested by the sentencing guidelines, he was acknowledged the least of the players in this massive fraud.

Comments: Every choice has a consequence! You cannot avoid the consequences - you do reap what you sow. Larry Gordon May will report to federal prison on June 2nd for an experience that will be life changing. Some who have followed the series of blogs about May, Trebert and Ewing might infer that a sentence below the sentencing guidelines for May is an indication of what is to come for Ewing and Trebert. Wrong! I predict that both will get sentences substantially longer than May. In fact, Trebert’s has been negotiated to 8 years. Ewing elected a jury trial and was found guilty quickly and, I predict, that he’ll get the longer of the sentences for his lack of cooperation.

In February, Trebert pleaded guilty to two counts out of the 29-count indictment. He is scheduled to be sentenced July 14. In March, a jury found Ewing guilty on all 29 counts. He is scheduled to be sentenced July 21.

White collar crime speaker - Chuck Gallagher - signing off…

Wesley Snipes to Prison - Big Win for IRS! Comments by White Collar Crime Speaker Chuck Gallagher

This was a day that famed actor Wesley Snipes did not want to see. This day was life changing for him. Wesley Snipes will never truly be the same as time in prison will change your perspective. I know. I have been there. And while I write and speak about white collar crime and the consequences of the choices we make, I share no joy in what Snipes will be facing.

But, as I say often, Every choice has a consequence and Snipes made some mighty strong and profound choices that he will now pay the price for. Of course, there were those in attendance who supported Snipes much like there were those who attended my sentencing hearing who spoke kindly about me. The reality is - within the sentencing guidelines, regardless of family, small children, or others who feel that you are a “mighty oak” - you reap what you sow.

Snipes obviously came to his senses almost a year ago when he made an offer to plead guilty to one count of failure to file, pay all the taxes due in exchange for not going to prison. The government said NO! The Justice Department must have felt that the Snipes case was a high profile enough case to pursue. But then, they lost the prize they sought - a conviction for tax fraud - which would have guaranteed Snipes time behind bars (not literally, he’ll likely go to a minimum security facility with no bars). Licking their wounds, the government came back with a sentencing request of 36 months in federal prison. They got that! IRS = WIN.

According to published reports in the Orlando Sentinel:

Snipes was not taken into custody today. He most likely will serve his time at a federal prison near his home in New Jersey.

Snipes made a $5 million payment to the treasury on Thursday, but prosecutors called it a grandstanding move.

“it”ll be a fraction of what he owes,” said Assistant U.S. Attorney M. Scotland Morris, who made the argument for the government.

Morris said a rough estimate of Snipes’ outstanding tax liability, with penalties and interest, will exceed $20 million.

“The law is very clear: people must pay their taxes,” Internal Revenue Service Commissioner Douglas Shulman said in a statement released by the U.S. Attorney’s office just moments after the sentence was handed down.”There is no secret formula that eliminates a person’s tax obligations, nor are there any special exceptions. The majority of Americans pay their taxes timely and accurately. Those who willfully violate the law must be held accountable.”

The IRS must be overjoyed at the message that has been sent to the tax protester movement nationwide. Snipes prison sentence makes it clear that something as simple as failure to file can result in dire consequences. Now I must admit that the sentence for most working people would likely have been less had it not been for Snipes forthright stance on protesting the federal tax system.

Kahn, who refused to defend himself in court, was sentenced to 10 years, (what an idiot) while Rosile received 54 months. Both will serve three years of supervised release. Snipes will serve one year of supervised release.

I have said in past blogs and will say again, I don’t care whether you think it is legal or not. If you don’t comply with the tax laws, the consequences will be less than pleasant. Having spent time in federal prison and knowing people who were there for exactly the same reason as Snipes - each one emerge changed. One thing they do is file and pay their taxes. The cost to Snipes is far greater than he could have ever imagined when he started this foolishness.

Costs:

• Payment of taxes
• Payment of Interest
• Payment of Penalties
• Payment of Lawyers (to fight a losing battle) and
• Loss of freedom

The loss of freedom alone is enough. Again, I know, I’ve been there and there is nothing - I MEAN NOTHING - worth losing your freedom. When it’s all said and done, it would be interesting to ask Snipes is the short term monetary savings was worth the cost. I think I know the answer.

Your thoughts are welcome!

Wesley Snipes Sentenced - 36 Months in PRISON - for Failure to File Tax Returns!

On February 1st Wesley Snipes was found not guilty of federal tax fraud and conspiracy charges. However, he was convicted on three counts of failing to file tax returns. Seems like it’s no big deal - huh? Not according to the government. They may has missed a criminal tax fraud conviction, but they did want a piece of Wesley Snipes for the attitude he took in the whole scheme

In their sentencing documentation the government stated the following as they requested Snipes be sentenced to three years in prison and fined $5 million:

For nearly a decade, Snipes has engaged in a campaign of criminal tax conduct combining brazen defiance with insidious concealment. By these means, Snipes has escaped paying more than $15 million in income tax to the Internal Revenue Service (IRS), and has pursued an intended fraudulent harm to the United States Treasury of more than $41 million.

Well, today the government got at least a part of what they were asking for. Wesley Snipes has been sentenced to federal prison.

In the sentencing trial today recently added co-counsel Carmen Hernandez revealed that Snipes, 45, star of more than 50 films, including the Blade vampire trilogy, had offered in August 2007 to plead guilty to one misdemeanor count and to pay his tax debt as long as he was promised no prison time. Seems that the federal government felt that Snipes was a high profile target and they (IRS and Federal prosecutors) felt that they could win this case. In part they did. However, failing to gain a felony conviction for Snipes was a major disappointment. Likely, for that reason, the government sought the maximum sentence possible for Snipes.

Snipes has a star studded cast of characters there to support his plea for no prison. The Orlando Sentinel reports:

Denzel Washington called him a “mighty oak.”

Woody Harrelson declared that he was honored to call the Orlando-born actor “my brother.”

In addition to Brown, another TV judge, Greg Mathis, chimed in with his opinion that Snipes should not go to prison.

All the exhibits that were presented at the sentencing trial are shown here courtesy of the white collar crime blog.

Snipes’ co-defendants, who were convicted on the felony fraud and conspiracy charges, will also be sentenced. Eddie Ray Kahn faces up to 10 years behind bars, while Douglas P. Rosile could be jailed five to six years.

In the end, when the gavel fell, Judge Hodges ruled that Snipes must serve 36 months in federal prison for his conviction for failure to file!

For some six months now I’ve been reporting on the Wesley Snipes case and long ago predicted the outcome that Wesley Snipes would go to jail. Snipes was not your ordinary taxpayer who was misguided and misinformed. Snipes somehow became convinced that he and others were not required to file and pay. While the federal government missed a conviction on tax fraud charges…they got a big win today with a maximum prison sentence for Snipes.

Looks like Snipes missed the Get Out Of Jail Free card!

QUESTIONS:

• DO YOU THINK SNIPES SENTENCE IS FAIR?
• DOES THIS SENTENCE SERVE AS A DETERRENT TO FUTURE TAX PROTESTERS

YOUR COMMENTS ARE WELCOME!

IRS Agents and White Collar Crime - What’s Up? Former Revenue Agent George Tannous Charged With Securities Fraud!

Let me help you states a former IRS agent. Problems with the IRS - I’m there for you!

George Tannous was the man, so thought hundreds of people from around the country. Apparently so did the government, as George Tannous, 51, of Tujunga, was charged in a two-count information that accuses him of conspiracy to commit securities fraud and subscribing to a false tax return. In a plea agreement Tannous agreed to plead guilty to the two felony counts

A former revenue agent with the Internal Revenue Service was charged in relation to a securities fraud scheme that took more than $10 million from hundreds of victims across the country. According to the news release from the US Attorney’s office:

Tannous and three co-conspirators solicited victims to purchase unregistered stock in Bidbay.com, Inc. (also known as Auctiondiner.com, Inc.) and several related shell companies. Tannous was the president of Bidbay. The information alleges that victims were lured by false statements that Bidbay.com and/or the shell companies would soon be acquired by Ebay, Inc. for $20 per share. Ebay never had any intention of acquiring Bidbay.com and, in fact, had filed a trademark infringement lawsuit against Bidbay.com over the use of “bay” in its name.

In an article in auction bytes Ina Steiner reported the following:

BidBay decided to settle with eBay after eBay filed a trademark infringement lawsuit against the smaller auction site last summer. The lawsuit had charged BidBay with copying eBay’s look and feel in the design of its logo and for using the letters “bay” in the BidBay name. Ironically, BidBay owner George Tannous had purchased the domain name “BidBay.com” from an eBay auction. Last month, BidBay redesigned its logo, but apparently that was not enough.

“We can’t fight eBay - it would cost us half a million dollars,” George Tannous, BidBay’s CEO, told AuctionBytes. Tannous said his company has already spent thousands of dollars in legal fees relating to the suit.

Tannous failed to disclose that Bidbay.com and the related shell companies paid sales commissions of more than 50 percent to telemarketers who solicited investors, according to court papers. In 2001, Tannous personally received nearly $3 million in investor funds that he failed to disclose to the IRS, which resulted in more than $800,000 in unpaid taxes.

Wow… George Tannous, former IRS agent who clearly knew better, decided to play with fire and not report income. Now he had to know that would get him in trouble. Big trouble.

According to the information, Tannous failed to disclose to investors that one of his co-conspirators was a convicted felon awaiting sentencing on unrelated fraud charges. That co-conspirator, De Elroy Beeler Jr., was indicted last December by a grand jury (see: http://www.usdoj.gov/usao/cac/pressroom/pr2007/157.html), and he is scheduled to go on trial on May 20.

Every choice has a consequence. Tannous choices will result in a prison sentence. Fortunately for him, he elected to work out a plea agreement which usually results in a shorter prison sentence. Having spent time in federal prison (not something I am proud of), many who cooperate with the government find that an early guilty plea and cooperation will substantially reduce their time behind bars. Today, I speak nationwide on (1) fraud in business, (2) how to avoid fraud in your company and (3) how business ethics can improve your financial performance.

One thing is for sure - You do reap what you sow! Tannous and others will come to learn that soon.

If you know George Tannous and have any comments feel free to jump in! Your comments are welcome!

Wesley Snipes Big Day - Sentencing - He Asks For a Slap on the Wrist!

Even as this is being written, Wesley Snipes is likely in court finding out his sentence for his conviction for failure to file income taxes.

The following are excerpts from his defense team:

• For these misdemeanor convictions, Mr. Snipes respectfully requests that this Court impose a sentence of probation that does not include imprisonment. Such a sentence reasonably provides just punishment, protects the public, promotes respect for the law, affords adequate deterrence and promotes rehabilitation.
• He is contrite, promises that he will never again break the law, and respectfully asks the Court
  to consider not just the jury verdict but also all the good that he has done in his life.
• The Court has a mandate in this case to impose a sentence that is “sufficient, but not greater than necessary” and to be just in its punishment, protect the public, deter others, and provide any needed rehabilitation. A prison sentence which I have predicted is what will deter others. Anything less sends a message that Snipes like behavior is acceptable.
• Imprisoning Mr. Snipes, while his children are at such a critical developmental stage where a father’s love, guidance and nurturance are essential to their development will cause the children irreparable harm. The youngest ones will cry themselves to sleep, not understanding why their father is no longer there to love them. The older ones will internalize the pain and feelings of abandonment, often developing medical problems and doing badly in school. Of all people, I am interested in the effect that incarceration has on families. Yet, when sentenced, I had young children and have found that it is not the responsibility of the court to weigh heavily their sentencing decisions on the effects that one’s behavior has on them when you reap the consequences. If Mr. Snipes was such a family man, he should have obeyed the law and not put his children at risk for his absence.
• In early 2007, singer/actor Marc Anthony agreed to pay approximately $2.5 million in back taxes owed to the federal and state governments after failing to file returns on nearly $15.5 million in income over a five-year period. No criminal charges were ever brought against him.
  
• On October 29, 2005, former Washington, D.C. Mayor Marion Barry pleaded guilty to two misdemeanor tax charges for failing to file tax returns from 1999 through 2004. Despite having a criminal history, he was sentenced to three years of supervised probation and ordered to negotiate a plan to settle his tax debt.
• On July 18, 2005, Norman Whitfield, the co-writer of such songs as Papa Was a Rolling Stone and I Heard it Through the Grapevine, was sentenced to six months home confinement and ordered to pay a $25,000 fine after pleading guilty to one count of felony tax evasion. He had been charged with five counts of willful failure to file and multiple counts of tax evasion. The government had alleged that he owed $956 thousand in back taxes.
  
• Perhaps in one of the most celebrated tax deficiency cases, the Tax Court approved a settlement of a tax debt owed by Willie Nelson, the famed singer. The IRS alleged that Mr. Nelson owed approximately $17 million in back taxes involving deficiencies dating back to 1972. Mr. Nelson settled the debt for $6.5 million.
  
• Concluding comments - A sentence of probation with whatever conditions the Court deems just and proper is “sufficient, but not greater than necessary” to impose just punishment on Wesley Snipes.
  
  As a business ethics and white collar crime speaker, I guess I just learned something. Of all of the reports I’ve done about choices and consequences, it really does seem that the rich and famous get off easier for their inappropriate behavior - as evidenced above. Today, will be a test for the government to see if they can make Snipes an example. Otherwise, he will be another statistic in another defense motion for some other person who feels they, too, should not have to file and pay taxes.

More to come!

IRS Revenue Agent - Harry Willner - Sentenced to Prison for Tax Fraud Scheme!

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…

President and CEO of Pac Equities - Michael Rich - Sentenced to 20 Years in Prison!

Twenty years in federal prison for fraud - by anyone’s standards, that’s painful. But this story goes, in some ways beyond pain. You see…Michael Rich - just sentenced to 20 years in prison is 71 years of age. (Rich

is also known as Richard Forbes Williams and Michael Richard Brown.)

What a way to retire. But the rest of the story is his wife, Phyllis Marks Rich, age 70, was sentenced to 51months for her role as chief operating officer in the fraud.

Phyllis Marks Rich is also known as Phyllis Marks, Phyllis Berg, Phyllis Henning, Phyllis Swetcoy, Phyllis Laff, Phyllis Hurba and Phyllis Johnstone. Gotta admit here I’m confused with all the names. Either there is a multiple personality issue, she’s been married more times that I would care to know, or she loves alias names. Go figure? Either way, Rich was also ordered to pay $13,400,138.79 in restitution to more than 300 victims.

The total fraud according to the US Attorney’s office was substantial. Pac Equities had an office in Bend, Oregon, and purported to manage profitable real estate development projects, including a subdivision in Phoenix, Arizona, a high-density townhouse development in Salem, Oregon, a dairy in Culver, Oregon, a resort complex in Ocean Shores, Washington, commercial buildings in Redmond, Oregon, and an industrial park in LaPine, Oregon. Rich and Pac Equities also purported to make profitable loans. They facilitated these activities by soliciting investors to invest in real estate development projects and loans with the promise of annual returns of 10% or more, which were paid on a monthly basis. They represented that the investments were secured by trust deeds and always had at least 30% in equity, with no more than 70% loan to value ratio. The evidence at trial, however, showed that in selling real estate investment contracts, Rich misrepresented a variety of things about his educational background, his employment history, and the nature and security of the contracts, which caused over 300 people to invest over $18,000,000 with Pac Equities.

Rich and Pac Equities created the facade of a successful business by using investor principal to make monthly payments to investors. They represented that these payments constituted interest earned from profitable investment and loan activity. They used this facade to recruit additional investors and retain existing investors, knowing that the only sources of income for Pac Equities were from a few projects and loans. These amounts were insufficient to meet monthly interest obligations which Pac Equities owed its investors.

“It can be devastating when the financial well-being of an individual falls into the wrong hands through trickery and deceit,” said Kenneth Hines, the IRS Special Agent in Charge for the Pacific Northwest. “The days are numbered for those who peddle false hopes and dreams, and prey on investors for their own personal financial benefit.”

Rich and his company would then use the money received to create a “facade to recruit additional investors and retain existing investors, knowing that the only sources of income for Pac Equities were from a few projects and loans,” the U.S. Attorney’s Office said. “These amounts were insufficient to meet monthly interest obligations that Pac Equities owed its investors.” Basically nothing more than a big Ponzi scheme.

Here’s a question! For those who were swindled: what caused you to make the first investment with the Rich’s? Knowing that more than 300 investors were conned - it would be helpful to others to share your experience.

Earlier this evening I got off the phone with another individual who was conned under a huge Ponzi scheme and the effect to this person is devastating. Not only did he lose his life’s savings planned for his retirement, but the effect has been far reaching as it relates to him mentally and emotionally.

Consider responding to these questions:

1. What about Rich’s investment attracted you?
2. How were you first introduced to Rich and his investment scheme?
3. When did you first find out it was a sham?
4. Did you ever refer others to Rich thinking that you were helping them?
5. What effect has this had on your life?

Know that you can reply without revealing any identifying information.

PLEASE COMMENT!

Chuck Gallagher, business ethics speaker, signing off…