When a group of people set their minds on defrauding the government, and try really hard to do so, they’ll find a way. But they won’t as easily find a way out of prison. Recently, the U.S. Attorney General’s office exemplified this in a press release about a group of Massachusetts men, who used a payroll company to avoid paying $5.48 million they owed in taxes.
Here’s how it worked: The father and son, who owned the company, opened and hid from the corporate accountant two company bank accounts that they then used to conceal millions of dollars in taxable income. $11 million, to be exact, for which they should have paid about $4 million in related taxes.
Instead they purposefully failed to claim it as taxable income. (“Oh, THIS $11 million rainy day fund? I didn’t realize that’s what the government meant by “taxable income.”) Additionally, the father wrote bonus and dividend checks to himself, his son and their other conspirator, on behalf of the company. He also failed to report these as taxable income, which prevented the government from collecting another $1.7 million in taxes. Separately, he is in even more trouble for stealing $1.8 million from client trust accounts.
No matter how resourceful some criminals may be, those that steal millions from the government get caught eventually. The father pleaded guilty to two counts of conspiracy to defraud the IRS, four counts of making false statements in tax returns, four counts of tax evasion and one count of wire fraud and was sentenced to 366 days in prison, followed by three years of probation, and ordered to pay nearly $2 million in restitution. His son pleaded guilty to two counts of conspiracy to defraud the IRS and four counts of tax evasion and was sentenced to eight months in prison, followed by three years of probation. Their third conspirator pleaded guilty to one count of conspiracy to defraud the IRS and three counts of tax evasion and was sentenced to six months in prison, followed by three years of probation.
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