Hedge funds; Better Dayz behind; the dance is over; and other highlights of recent tax cases.
Houston: Former tax preparer David Wright has been sentenced to three years in prison to be followed by a year of supervised release for fraudulently filing returns from 2014 to 2017.
Wright and his employees prepared and submitted 43 fraudulent returns for 16 clients that used false Schedule C deductions to inflate refunds. The deductions included fake expenses such as advertising, vehicle/transportation, professional services, office/business property costs, maintenance, supplies, travel and utilities.
Wright was also ordered to pay $178,688 in restitution.
Boston: The former president of the State Police Association of Massachusetts (SPAM) and the union's former Massachusetts lobbyist have been convicted of racketeering, fraud, obstruction of justice and tax crimes.
Dana A. Pullman, of Worcester, Massachusetts, and Anne M. Lynch, of Hull, Massachusetts, were convicted of one count of racketeering conspiracy, one count of honest services wire fraud, three counts of wire fraud, one count of obstruction of justice and one count of conspiracy to defraud the IRS. Pullman was convicted of two additional counts of wire fraud and two counts of aiding and assisting the filing of a false return. Lynch was convicted of an additional count of obstruction of justice and four counts of aiding and assisting in the filing of a false return.
SPAM comprises more than 1,500 troopers and sergeants from the Massachusetts State Police and acts as the bargaining agent between its members and the commonwealth. Pullman, a state trooper from 1987 to 2018, was the president of SPAM from 2012 until his resignation in 2018. Lynch's lobbying firm represented SPAM during the same period.
From at least 2012 until Pullman's resignation, the pair turned SPAM into a racketeering enterprise. Among other schemes, Lynch paid Pullman a $20,000 kickback in connection with a settlement between SPAM and the commonwealth. Pullman and Lynch defrauded two different companies that sought to do business with the state police by hiding from the vendors Lynch's paying Pullman to direct vendors to use Lynch's services. They also hid the payments in a manner designed to avoid reporting and paying taxes on that income to the IRS.
The pair attempted to obstruct an investigation by manipulating subpoenaed records; Lynch also lied to investigators. Additionally, Pullman embezzled and misused SPAM funds for personal use by using a debit card tied to a SPAM bank account to pay for thousands of dollars of meals and travel for an individual with whom Pullman was having a romantic relationship.
Aiding and assisting the filing of a false return provides for up to three years in prison, a year of supervised release and fine of $100,000. Racketeering conspiracy and fraud each provide for up to 20 years in prison and three years of supervised release; conspiracy to defraud the U.S. carries up to five years in prison and three years of supervised release; both also carry a fine of $250,000 or twice the gross gain or loss, whichever is greater. Obstruction of justice provides for up to 10 years in prison, three years of supervised release and a $250,000 fine.
Sentencing is March 8.
Bethel, Connecticut: Business owner Timothy P. Draper has been sentenced to eight months in prison for tax evasion.
Draper owns and operates T&M Lawn & Landscape, as well as multiple local residential rental properties. He failed to deposit into his business accounts numerous checks generated from his businesses, resulting in underreporting of some $1.8 million on his returns for 2015, 2016 and 2017. Draper also paid personal expenses out of the business accounts and failed to categorize the payments as income. The underreporting resulted in the underpayment of more than $500,000 in income taxes for the three years.
Draper, who pleaded guilty in April and has paid $1,117,883.11 in back taxes, interest and penalties, was also ordered to pay a $75,000 fine.
Linden, New Jersey: Former tax preparer and financial advisor Terrence LeGall, 69, has pleaded guilty to 12 counts of preparing a false return.
Between 2013 and 2017, LeGall, sole operator of the LeGall Group Inc., prepared numerous returns for his clients in which he included fake charitable contributions, unreimbursed business expenses and business losses that he knew his clients had not incurred. He also acted as a ghost preparer, not identifying himself on the returns as a preparer and filing the returns in a manner that made it look like they had been filed by the taxpayers.
He cost the U.S. Treasury more than $300,000.
Each count of false preparation of an income tax return carries a maximum of three years and a $250,000 fine. LeGall has agreed to pay the government $314,225 in restitution and to file amended returns and pay outstanding taxes that his company owes from 2012 through the present. Sentencing is March 29.
Harrisburg, Pennsylvania: Dary T. Son, owner of a staffing company, has pleaded guilty to failing to collect and pay over federal employment taxes.
From June 2015 through August 2019, Son, owner of DS Agency, failed to collect and pay on behalf of her employees some $591,822.99 in taxes owed to the IRS; she also failed to pay to the IRS an equivalent amount that she owed as their employer.
From 2015 to 2019, DS received and cashed checks from Son Associates for providing workers in the total amount of more than $7.7 million. Dary Son cashed these checks at a local check-cashing business from 2015 to mid-2017. Starting in 2018, Dary Son made trips to a check-cashing business in Philadelphia, where she cashed about $3 million in checks in less than a year.
Several of the workers employed by Dary Son and her family member's companies were generally paid in cash. Dary Son never withheld any federal, Social Security, Medicare, or state taxes from her employees' income, nor did she pay her employer portion of these taxes. She is responsible for $1,183,646.25 in unpaid federal taxes, which she has agreed to pay in restitution.
The maximum for this offense is five years in prison, a term of supervised release following imprisonment and a fine of up to $250,000.
Memphis, Tennessee: Tax preparers Robert L. Pryor, Elaine Pryor and Joshua L. Pryor have been sentenced for preparing and filing false returns.
Robert Pryor owned the prep business Better Dayz Tax Services, where his wife Elaine and his brother Joshua also worked. The three prepared false income tax returns for clients and for themselves, resulting in fraudulent refunds and total lost tax revenue of more than $122,000 over three years.
Each defendant pled guilty to one count of preparing a false tax return. Robert Pryor has been sentenced to 15 months in prison to be followed by a year of supervised release and ordered to pay $57,672 in restitution. Joshua Pryor has been sentenced to three years of probation and ordered to pay $25,064 in restitution. Elaine Pryor was sentenced to six months in prison, to be followed by 18 months of supervised release (six months on home detention) and ordered to pay $57,853.59 in restitution. None may own or operate a tax prep business or engage in prep services during their parole or supervised release.
Paoli, Pennsylvania: Accountant Michael Goldner has been sentenced to 40 months in prison and three years of supervised release for avoiding paying taxes.
He was
Instead of depositing his paychecks into a personal bank account, Goldner cashed the checks and used his employer's business accounts to pay hundreds of thousands of dollars of personal expenses, including rent, a second home, groceries, private school and dance lessons for his child, country club dues and restitution from a prior fraud conviction for which he was on probation.
For 2016 and 2017, he filed returns that failed to report this additional income from his employer. For tax years 2018 and 2019, Goldner failed to file a return altogether.
