Gainful employment; waste not; Mr. Plow; and other highlights of recent tax cases.
Wilkes-Barre, Pennsylvania: Madeline Nieves has been sentenced to 15 months in prison for conspiring to defraud the United States.
Nieves previously pleaded guilty to conspiring to evade taxes for both her personal returns and those for a business she operated.
She conspired with others to defraud the IRS from 2018 to 2020 in connection with staffing company Encore Staffing Solutions, which leased temporary employees to manufacturing businesses throughout Pennsylvania and received more than $1.2 million in revenue.
Nieves failed to withhold, report and pay employee wage taxes to the IRS. She also failed to report her personal income from Encore.
The crimes resulted in a tax loss of nearly $160,000, which Nieves was ordered to pay in restitution to the IRS. She also was sentenced to three years of supervised release following her term of imprisonment.
Five others were previously prosecuted in this investigation.
Melrose, Massachusetts: Stephen Schofield has pleaded guilty to a decade-long tax fraud in which he failed to pay employment taxes he had withheld from employees of his two businesses.
Schofield operated and controlled two local businesses and for tax years 2010 through 2020 withheld federal and state employment taxes from employees' wages and issued W-2s to the employees showing that the taxes had been withheld. Schofield did not pay over those taxes to the IRS as required, resulting in a tax loss of some $1,051,000.
Sentencing is Jan. 23. Failure to pay over taxes carries up to five years in prison, three years of supervised release and a fine of $250,000 or twice the gross gain or loss, whichever is greater.
Washington, D.C.: Stephen L. Schechter, a U.S. citizen residing in the Principality of Monaco, has pleaded guilty to tax evasion for concealing from the IRS more than $5.13 million in income derived from a real estate transaction and securities investments in offshore bank accounts.
Schechter was a licensed U.S. investment banker, U.K. corporate finance advisor, and owner and operator of a U.S.-based financial investment advisory firm. In 2002, he formed an entity called Charles Penn Longview in the British Virgin Islands. In June 2004, Schechter opened a Swiss bank account in the name of CPL at what ultimately became known as Piguet Galland & Cie. SA. He and his bank relationship manager concealed Schechter's U.S. citizenship in bank documents. Until it was closed around January 2013, the account generated interest and dividends that Schechter never reported to the IRS.
In June 2011, Schechter sold a Monaco apartment for some 14 million euros, which he deposited into his CPL account at Piguet. He used the sale to purchase $8,856,691 in various securities, on which he earned interest, dividends and capital gains. He never disclosed the income from the sale of the Monaco apartment nor the securities bought from the proceeds.
Schechter later opened another CPL bank account at UBS Monaco SA, closed his account at Piguet, and transferred the balance of some $10.2 million into the new UBS account, further earning undisclosed interest and dividends until 2017. Schechter did not file FBARs reporting his Piguet or UBS Monaco accounts.
Sentencing is March 1. He faces up to five years in prison for tax evasion, as well as a period of supervised release, restitution and monetary penalties.
New Kensington, Pennsylvania: Tax preparer Harvey Smith Jr. has pleaded guilty to preparing false returns for clients.
Smith operated a tax prep business and, in an attempt to inflate refunds, falsely reported that his clients incurred educational expenses and business expenses. He then frequently took his fees, which reached as high as $1,000 per return, from the inflated refunds.
Smith's conduct resulted in a loss to the government totaling some $138,426.
Sentencing is Feb. 5. He faces three years in prison, a fine of $250,000 or twice the gross gain or loss from the offense, or both.
Windsor Mill, Maryland: Store operator Sean Weston has been sentenced to 15 months in prison to be followed by two years of supervised release after pleading guilty to tax evasion and conspiracy to import, transport and sell drug paraphernalia.
From January 2015 through at least July 2019, Weston operated the Northwest Variety Store in Baltimore, where he sold empty gel capsules, colored plastic tops, dust masks, metal strainers, electric weighing scales, razor blades and mannite and quinine, which are used as cutting agents in illicit drugs. He admitted that he purchased from China kilograms of quinine, a prescription medication for the treatment of uncomplicated malaria. Importing quinine for any other use is illegal. Weston concealed his purchases by requesting his foreign supplier label the quinine something else, such as "beta glucan."
For tax years 2016 through 2018, Weston did not file federal income tax returns. In addition to owning the Northwest Variety Store — which had significant profits during that time — Weston was on the payroll of a water treatment facility. To conceal his income from the IRS, Weston dealt substantially in cash.
For example, from 2016 through 2018, he paid $29,835 in cash for the monthly rent of the store and deposited $352,026 in cash into two personal bank accounts. In 2016, Weston made a $25,000 cash down payment for the purchase of a 2013 Bentley Continental GT — worth approximately $117,000 — and signed a credit application stating that his annual income was $180,000. In May 2017, Weston made a $15,000 cash down payment on the lease of a 2014 Bentley Flying Spur, worth more than $139,000. To obtain the lease, Weston had an individual prepare his 2016 return that reflected a purported gross income of $358,984. Weston submitted the return to the car dealership but did not file it with the IRS.
He was also ordered to make restitution to the United States.
Fontana, California: Businessman Filemon Bernal has been sentenced to two years in prison for willfully underreporting the income he received from his plastics recycling business, causing a federal tax loss of nearly $170,000.
Bernal, who previously pleaded guilty to one count of subscribing to a false return and one count of willfully failing to file a return, filed false returns for tax years 2010 to 2014, then failed to file returns during tax years 2015 to 2017. He underreported his gross receipts for Bernal Recycling, his plastics recycling company, then did not file returns at all.
The tax loss to the U.S. totaled $169,974.
He was also ordered to pay $276,549 in restitution to the IRS.
Everett, Massachusetts: Peter Tufts, 55, of Medford, Massachusetts, owner of a local excavation and plowing company, has been sentenced to two years of supervised release and 240 hours of community service in connection with a multiyear scheme to underreport income on his returns and to obtain loans based on false loan applications.
Tufts, who pleaded guilty last summer, owns Tufts Construction and for tax years 2015 through 2021 cashed check payments from customers and did not report the income from those checks in his tax filings, resulting in an income tax loss of more than $465,000. Instead, he used the proceeds of his scheme to fund an off-the-books cash payroll that he used to avoid employment taxes, causing a payroll tax loss of more than $539,000.
While perpetrating his scheme, Tufts also obtained loans from a local community bank and from the SBA based on false loan applications. In his applications and associated loan documents, he lied to the bank and the SBA that he had never declared bankruptcy, owed no back taxes and was not involved in litigation.
Tufts was also ordered to pay a $50,000 fine, forfeit $450,000 and pay restitution of $551,941.
