Morally bankrupt; pretend preparer; lack of faith; and other highlights of recent tax cases.
Bentonville, Arkansas: Businessman James Brassart has been sentenced to three years in prison for income tax evasion and causing more than $1.3 million in federal tax loss.
Brassart filed a 2006 individual income tax return that reported adjusted gross income of $1,502,749 and federal taxes due of $486,438. He failed to pay all of the taxes owed and was assessed penalties and interest.
Brassart then took extensive steps to conceal his income and assets, using three nominee corporations to conduct business. Between 2010 and 2016, he also filed four false bankruptcy petitions to discharge his tax debt; he made false statements and filed fraudulent documents in which he concealed his ownership interests in the nominee corporations.
Brassart caused a total federal tax loss of some $1,360,682.
He was also ordered to serve three years of supervised release and to pay some $1,360,682.29 in restitution to the United States.
San Diego: Restaurant chain manager Aleksandar Sreckovic has been sentenced to 30 months in prison for employment tax fraud.
Sreckovic was a manager for San Diego Home Cooking, a restaurant group with more than 110 employees and five restaurants in the area. He had significant control over the finances of the company, including duty to account for and pay federal employment taxes.
In November 2014, he directed an outside payroll company to stop making employment tax payments to the IRS. From the last quarter of 2014 through the last quarter of 2017, he filed no employment tax returns, nor did he pay employment taxes for the company. Instead, he paid other creditors and his own personal expenses.
In total, Sreckovic caused a tax loss of more than $1.5 million.
He was also ordered to serve a year of supervised release and to pay some $2.3 million in restitution to the United States.
Valencia, California: Edgardo Zeta Montalban, 70, who claimed to be a tax preparer, has been sentenced to seven years in prison for defrauding his clients out of more than $4 million.
From 2013 to September 2020, Montalban, who held himself out as an accountant and tax preparer, asked some of his clients to invest in a federal grant program he called “Suppressed IRS Accounts.” Montalban told his clients that if they paid him in cash the federal government would issue them grants many times larger than what they paid.
No such program existed. A co-conspirator made counterfeit Treasury checks payable to the victim clients for tens of millions of dollars, which Montalban used as props to entice the victims to pay him. Montalban explained to the victims that they had to pay him in cash to protect the federal grant program’s secrecy.
After his victims paid him, Montalban made up excuses as to why the Treasury checks had been delayed and tricked the victims into paying him more money, purportedly for expenses to overcome the obstacles to their checks’ issuance.
Prosecutors recommended that Montalban, who pleaded guilty in December, receive a 10-year sentence, but the judge issued the shorter sentence after considering Montalban’s significant health issues. At sentencing, the judge did say that Montalban had “exploited human frailty” and that his conduct was “despicable, cruel and callous.”
Pittsburgh: David Reiter, a former business administrator for a local Presbyterian church who is currently serving five to 10 years in prison on a state charge, has been sentenced to 30 months in prison and ordered to pay $1,407,649 in restitution to the IRS for tax fraud.
Around 2011 and until his termination from employment in 2018, Reiter embezzled a total of $1.2 million in funds from the church. He also failed to pay over employment taxes and filed false personal income tax returns that underreported his personal income.
He will serve the federal sentence concurrently with his state sentence.
Gypsum, Colorado: Resident Trenton Switzer, 40, has pleaded guilty to making and subscribing a false return.
Switzer created a nonprofit corporation in Colorado called the Church of Divine Sovereignty. During the 24 hours that this corporation legally existed, he obtained an Employer Identification Number and opened a bank account in its name. Later, Switzer deposited $250,000 in the account and informed his tax preparer that these deposits were charitable contributions.
After determining that Switzer’s church did not qualify as a charitable organization, the preparer advised Switzer that the payments were not deductible. Switzer still claimed a $250,000 charitable deduction on his 2015 federal return.
Fraud and false statements in a return carry up to three years in prison, a year of supervised release and a fine of up to $250,000. Sentencing is July 7. Switzer has agreed to pay $241,964.71 in restitution plus penalties and interest to the IRS.
Jacksonville, Florida: Preparer Paul Berkins Moise has been found guilty of 14 counts of filing false returns on behalf of unknowing clients and three counts of filing false tax returns on behalf of himself.
Moise owned and operated a local prep business, and between February 2013 and March 2017 he filed returns for his clients in which he grossly inflated deductions for state and local sales taxes, unreimbursed employee expenses and gifts to charity. On one return, he claimed a sales tax deduction of $5,883 for a client who had a gross income of $43,476. For that client to have claimed such a deduction that large, the client would have had to have made taxable purchases totaling $89,926.
Moise also underreported his own income on returns he filed for himself for 2013, 2014 and 2015. Through the three years, he reported a total of some $23,000 in income and actually earned at least some $570,000.
Moise faces a maximum of three years in prison for each count; the U.S. will also seek restitution. Sentencing is Aug. 9.
Gaithersburg, Maryland: Tax preparer Maria Espinal, 53, has been sentenced to 27 months in prison, to be followed by a year of supervised release, for aiding and assisting in filing false returns and for aggravated ID theft.
Espinal owned and operated a prep business and from 2011 through 2017 prepared and filed state and federal returns on behalf of her clients that claimed undeserved refunds. Espinal altered legitimate W-2s in the names of third parties and replaced the third party’s name with her client’s.
In addition, she displayed a sign in her office that read in Spanish, “If you have lost your [identification] number or passport we have these people” and which listed the ID information for several individuals. Espinal used the personal information for one of those individuals to obtain a fraudulent refund on behalf of another client. She also filed a return using another individual’s personal information to generate a fraudulent refund that Espinal deposited into her own bank account.
Espinal, who previously
Auburndale, Massachusetts: Kevin Newman, owner of a landscaping company, has pleaded guilty to tax evasion in connection with underreporting income.
For 2015 through 2019, Newman underreported income and inflated expenses on his personal returns and on those of his company, resulting in a tax loss of more than $384,000.
The charge of tax evasion provides for a sentence of up to five years in prison, up to three years of supervised release and a fine of $250,000 or twice the gross gain or loss, whichever is greater. Sentencing is Aug. 4.
