Beware! The Tax Man cometh…
So let’s put this into perspective. The perpetrator of a Ponzi scheme (as scheme where you steal money from one to partially pay back the return that another ‘who you stole from’ is expecting – and on and on – till you can do it no more) – gets caught. The FBI or US Attorney’s office prosecutes for fraud (more times than not mail or wire fraud). You have no funds to make restitution…you plead guilty and think (before sentencing – cause you know you’re going to jail) that it’s over.
Not so fast!
What about the taxes you owe?
“What taxes?” you might ask. The taxes on the stolen money. REMEMBER – all funds received are taxable unless specifically exempt according to the Internal Revenue Code. So YES. If you stole money you are liable for taxes thereon. And, if you didn’t report the stolen money as taxable – then you’ve committed TAX FRAUD punishable by time in prison.
TAKE THE CASE OF JOHN S. LIPTON
John S. Lipton pleaded guilty in Los Angeles to conspiracy to defraud the United States and tax evasion, the Justice Department and Internal Revenue Service (IRS) announced.
According to the Justice Department:
Lipton and several co-defendants were indicted on charges stemming from the operation of the Genesis Fund, a bogus foreign currency exchange investment fund that operated as a Ponzi scheme from May 1998 to June 2002 and received investments of millions of dollars.
According to a plea agreement, Lipton admitted that he used, and conspired with others to use, foreign trusts, corporations, and bank accounts to receive distributions from the Genesis Fund and did not report these distributions or income to the IRS. Lipton also admitted that he directed the transfer of approximately 19 boxes of Genesis Fund documents that were responsive to a grand jury subpoena to Costa Rica. Lipton also admitted that he did not file any federal individual income tax return from 1989 through 2005.
NOTE: Just because Lipton and other co-conspirators are being tried on Tax Charges doesn’t mean that they are avoiding criminal trial on their fraudulent actions related to the Ponzi Scheme. The government states:
A separate trial on the severed charges related to the Ponzi scheme will be scheduled after the tax fraud trial.
“The government will continue to unravel schemes promoted and used by taxpayers to evade their federal tax obligations,” said John A. DiCicco, Acting Assistant Attorney General of the Justice Department’s Tax Division. “As April 15th approaches, taxpayers should be confident that those who promoted fraudulent tax evasion schemes will be investigated and prosecuted.”
While I wish I could say different…I, too well, understand the implications of theft (via Ponzi Scheme) and tax fraud – as that is what I spent time in Federal prison for. Today – some 24 year later, I speak to groups internationally on choices and consequences – business ethics.
All to often, the fraudster thinks that there is NO IMPLICATION from a tax perspective. How WRONG they often find that they are. More importantly, for those who have committed a fraud, defrauded investors are becoming more aware and turning crooks into the IRS for a criminal investigation. They figure, if they can’t get there money back, at least they can have the benefit of knowing that the IRS Criminal division is fast on the heels of someone who has done them wrong.
Afterall…how many folks do you know that put on the “Other Income” line of their tax return – STOLEN MONEY and pay taxes there on?
YOUR COMMENTS ARE WELCOME!