Papers trail; House of cards; trickle down; and other highlights of recent tax cases.
New York: Richard Gaffey, a.k.a. “Dick Gaffey,” 75, a U.S. citizen and resident of Medfield, Massachusetts, has pleaded guilty to wire fraud, tax fraud, money laundering, aggravated identity theft, and other charges.
Gaffey was charged along with Harald Joachim von der Goltz, Ramses Owens and Dirk Brauer in connection with a decades-long scheme perpetrated by Mossack Fonseca, a Panamanian-based global law firm, and its related entities in the headline Panama Papers case.
Since at least 2000 through 2018, Gaffey conspired to defraud the U.S. by concealing his clients’ assets and investments and the income generated by those from the IRS. He helped taxpayers evade reporting obligations in varied ways, including by hiding the beneficial ownership of his clients’ offshore shell companies and setting up bank accounts for those companies. For one taxpayer, Gaffey advised how to covertly repatriate some $3 million by reporting to the IRS a fictitious company sale that never occurred.
Gaffey was the U.S. accountant for Harald Joachim von der Goltz, who from 2000 until 2017 was a U.S. resident and required to report and pay income tax on worldwide income. Gaffey falsely claimed that von der Goltz’s elderly mother was the sole beneficial owner of the shell companies and bank accounts at issue because, at all relevant times, she was a Guatemalan citizen and resident, and, unlike von der Goltz, not a U.S. taxpayer.
Gaffey pleaded guilty to one count of conspiracy to commit tax evasion and to defraud the U.S., which carries a maximum of five years in prison; one count of wire fraud and one count of money laundering conspiracy, each of which carries a maximum of 20 years; four counts of willful failure to file FINCEN Reports 114, each of which carries a maximum of five years; and one count of aggravated ID theft, a minimum two years in prison.
Sentencing is June 29.
New York: Todd Hansen, 49, of Bakersfield, California, a former executive with an international outdoor advertising company, has been sentenced to four months in prison in connection with a $19.75 million accounting fraud designed to make it appear that his company was meeting performance targets.
Hansen, who previously pleaded guilty, served as president of the company from 2004 until 2009; the company was a subsidiary of a U.K. corporation. Hansen and the company’s finance director directed the controller to make fictitious accounting entries in the company’s books and records to give the appearance that the company was meeting monthly performance targets.
Hansen directed the controller to record higher monthly revenues from either false client billings or rebates on certain goods and services that the company was purportedly receiving from some of its vendors. The false entries resulted in the preparation of financial statements that reflected inflated monthly income amounts.
During a five-year period, the fraudulent entries resulted in a total overstatement of the company’s net income by approximately $19.75 million. Hansen was paid approximately $1.1 million in salary and bonuses over the period. During this same time, he misused tens of thousands of dollars of company funds to pay for expenses and fees that directly benefited him, his family and friends.
Hansen was also sentenced to three years of supervised release, and ordered to pay $231,000 in restitution and forfeit $173,450.90.
Lanett, Alabama: Preparer Gladys Rosalynn McCauley, 43, has been sentenced to 46 months in prison for aiding and assisting in the filing of fraudulent federal income tax returns, according to news reports.
McCauley owned Roz House of Tax, which she opened in 2014 and where news outlets said she collected fees as a percentage of the refunds claimed for clients. To inflate refunds, McCauley claimed clients were entitled to education and child tax credits even though she knew they were not entitled to these credits, reports said, adding that authorities also said McCauley falsely claimed a client had excessive business losses.
The tax loss reportedly exceeded $1.5 million.
Florence, South Carolina: Preparer Donna Faye Shird, 41, was sentenced to 18 months in prison, to be followed by three years of court-ordered supervision, after pleading guilty to
Donna Shird and her codefendant Felicia Shird operated Donna’s Income Tax Service, where from 2012 to 2017 both routinely added fictitious information to clients’ personal returns to inflate federal refunds.
Investigators discovered that clients provided correct tax information to the Shirds with the expectation that the two would accurately prepare and file the returns. Instead, the Shirds falsely claimed deductions, credits, exemptions and other tax benefits to which the taxpayers were not entitled. These benefits included child and dependent care credits, business profits and losses, education credits, residential energy credits and earned income credits. Donna’s attracted more clients based on their reputation for producing large refunds.
Las Vegas: CPA Dustin M. Lewis, 45, of Henderson, Nevada, has pleaded guilty for his role in a bribery scheme involving a federal contract and committing $1.5 million in tax fraud.
Lewis was employed by L.L. Bradford & Co., an accounting firm, and from February 2015 through about February 2016, Lewis and co-conspirator Frederick J. Leavitt, a public official with the U.S. Department of Interior, Bureau of Reclamation, defrauded the U.S.
Leavitt had been assigned to a selection committee for awarding government contracts to perform auditing services for bureau programs. Lewis paid more than $150,000 in bribes to Leavitt. In exchange, Leavitt steered an audit contract to L.L. Bradford. Lewis and Leavitt conspired to file fraudulent tax forms for 2013 on behalf of six business entities that collectively claimed more than $11 million in false and fraudulent business deductions.
Sentencing is April 30. The maximum sentence for honest services fraud conspiracy is 20 years in prison and a $250,000 fine, and the maximum penalty for conspiracy to defraud the United States is five years in prison and a $250,000 fine. Lewis also agreed to pay $704,002 in restitution to the Southern California Public Power Authority and restitution of $220,770 to OneWest Bank.
Leavitt previously pleaded guilty and is awaiting sentencing.
Upper Marlboro, Maryland: Jessica L. Taylor, 37, has been convicted of two counts of filing a false income tax return and sentenced to 18 months in prison, all suspended, and five years of probation.
For several years, Taylor, who was not a registered preparer in Maryland, prepared and filed state income tax returns, for a fee, on behalf of numerous Maryland residents. Many of the returns included false information, which reduced clients’ tax liabilities and inflated refunds.
Taylor is prohibited from acting as a preparer and was ordered to pay $26,000 in restitution to the state.
Bethel Township, Pennsylvania: Accountant Philip Elvin Riehl, 68, has pleaded guilty to conspiracy and fraud charges related to a Ponzi scheme he operated worth some $60 million.
The fraud targeted members of the Mennonite and Amish religious communities, of which Riehl is a member. He fraudulently solicited tens of millions of dollars in investments from his accounting clients and others into an investment program he operated. Riehl then diverted funds from the program to Trickling Springs Creamery, of which he was the majority owner. He also fraudulently solicited direct investments in Trickling Springs.
He misrepresented the safety and security of these investments and the performance of the program, as well as the creamery’s business and financial condition. Trickling Springs announced it was ceasing operations in September 2019 and filed a bankruptcy petition in December of that year. Investor losses are estimated to be around $60 million, making this one of the largest Pennsylvania-based Ponzi schemes ever.
