John Nicholas Sheets faces Prison and a $2.4 million fine for Tax Evasion. Business Ethics and the IRS

John Nicholas Sheets, a.k.a. “Nicky,” was sentenced by U.S. District Judge Jane J. Boyle to 40 months in prison and ordered to pay $2,408,662 in back taxes, announced U.S. Attorney James T. Jacks of the Northern District of Texas. Sheets pleaded guilty in March to one count of tax evasion.

As a business ethics and fraud prevention speaker, I can’t begin to tell you how many times, especially with the high profile case of Wesley Snipes, that I’ve warned folks to pay careful attention to the tax man.  Likewise, I can’t tell you how many times I’ve received emails, notes and even a DVD telling me I was crazy – that the tax law is unconstitutional.

Well…I DON’T CARE about the constitutionality of the tax law, facts are, if you don’t pay your taxes – YOU’LL GO TO PRISON.  And, having been there – (not that I’m proud of that – I am not) it (PRISON) is not fun.  Put bluntly, Nicky is not going to have a good time in Club Fed!

According to documents filed, Sheets is a licensed realtor who has worked in North Texas for several years. Since 1996, Sheets and his wife have successfully worked as real estate agents and have established multiple closely-held businesses including Eleanor Mowery Sheets, Inc.; Dallas EMS, LLC; and E-Residential, LLC.

According to court records, Eleanor Mowery Sheets pleaded guilty last month to four counts of failing to pay income taxes. Her sentencing is set for October 12, 2010.

In the filed documents, John Nicholas Sheets stipulates that he has substantial unpaid individual and corporate tax debts from 1997, 1998, 1999, 2001, 2005, 2006, 2007 and 2008 totaling approximately $2.7 million, including penalties and interest.

Now…I can understand a mistake or misapplication or interpretation of tax law – but, Sheets efforts go above and beyond misapplication or misinterpretation to blatant fraud.  Seems that Sheets was more concerned about his lifestyle than he was about the freedom that he had as an American to pursue his American dream.

I don’t know John Nicholas Sheets, but having lived in the Dallas area for some time, I would say that he would have been looked on in his community or circle of friends as an honest, ethical business man.  If I am wrong, I hope someone will kindly share an alternative view (COMMENTS ARE WELCOME).  Assuming that he was well respected, I have ONE QUESTION:  What do you think caused Sheets to stray so far from compliance with the tax law?

According to the US Attorney’s news release:

The documents further state that beginning in 1998, rather than pay his substantial tax debts, Sheets used various business entities to conceal the nature and extent of his assets. Sheets admitted to transacting personal business and paying personal creditors with these funds, rather than paying the Internal Revenue Service (IRS). Using these businesses, Sheets commingled funds to pay approximately $435,988 in mortgage interest to three lenders so that he and his wife could live in a home whose market value exceeded $1.3 million during that period. Sheets also stipulated that he used commingled funds to buy personal items (including an interest in a private airplane and vehicles) and pay numerous personal creditors.

Sheets further admitted that on April 5, 2006, he used a local check-cashing business to conceal the nature of his assets so as to avoid paying federal income taxes. Specifically, he took a $123,000 settlement check to the local check-cashing business to conceal the existence of the funds, and rather than deposit the check into his personal bank account for free, he paid more than $2000 to cash that check. None of the cash he obtained on this date was used to pay the IRS; he used the funds to pay for personal expenses and pay other creditors. The factual resume goes on to state that Sheets negotiated the check in this manner upon the advice, recommendation and suggestion of his attorney at the time.

Sheets wife (pictured above), like her husband, faces a sentence for tax evasion.  The conviction of spouses in tax crimes is becoming more common and a BIG WARNING SIGN should be out to all – that when you sign your return you should know what you’re signing, as evasion issues don’t typically rest with one party in a “married filing jointly” return.

If you know Mr. Sheets or have insight into his motives, please feel free to comment.



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2 Responses to John Nicholas Sheets faces Prison and a $2.4 million fine for Tax Evasion. Business Ethics and the IRS

  1. PJ says:

    Unpaid tax debts since 1997? After more than a decade, maybe the Sheets thought that they can get away with non-compliance with the tax law. Question is – how come it took the IRS this long to catch up with non-payment? Small taxpayers get levies immediately, how can higher income individuals get away with it? Is it possible that the Sheets would have been straightened up if the IRS caught up with their schemes sooner than later?

  2. Paul DAgostino
    I have been paying ss 40 dollars out of my SSD check since April of 2008 and I went to see my local SS office and the man told me that they have no record of that? I do have records and he would not look at the papper work. $65.50 was being taken out of my SSI check from April of 2006/ when I recieved my SSD I was also ordered to take $40.00 out of my check every month. I proved on May 22, 2008 the amount was reduced OMB# 00960-0462 $9,425.39 orderd 5/06/08 and Moneys Have been comming out of my SSD check before this happened and are still being taken out of my check to date. But, now SSA is extracting out of my SSD check124 + 40 =164,00 + 110. 50 for medicare part B= $274.50 and I am being subject to a punisment beond my means. Please help me in this matter. Why would SS take all this money from a disable man or anyone struggling to servive in theese days. Nov.26, 2006 a letter from SSA was sent to me that you would withhold from my ssi check $65.42 from $63.42 and my payment reduced from $654,25 to 588.83 this started in 2007 January. Why do I owe now after paying from 2006, $ 25,353.92. Where are theese numbers comming from after years of owing and paying what I can afford. My SSD Check has been reduced from $1,272.50 to $1,008.32 Please resolve this matter. Thank you. My email is not working please call me.

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