Executive Fraud Blog

Estimated $100 Billion in tax fraud involved in shifting assets offshore

If that is the case then why is this not under investigation? The IRS has recently admitted that they are under constrained resources and have opted for more high profile investigations then tracking those tax shelters that hide assets off shore. The decline in prosecution referrals to the Justice Department has continued over the last 4 years following some of the highest shortly around the tech bust in 1999-2000. The referrals were totaling 3,037 in 2004 and have dropped to 2,720 by 2006, a decrease of 10%.

Critics of the decision to only target higher profile incidences claim that the threat/concern of getting caught wears off when there is a acknowledgement of lower investigations. Proponents of the high profile strategy offer examples of some of the recent success:

Walter Anderson - convicted of $170M due in federal taxes and sentence to 9 years in prison

KPMG - fined $456M for continuing to sell tax shelters to clients after they were told to stop by the federal government.

Iincreasing the number of investigators for the IRS and ensuring that the Justice Department will follow through on the referrals is the only way to ensure that these criminals with be charged for their crimes.

Ignorance is NOT an Excuse for Tax Fraud

Jackson Hewitt is currently under investigation for maintaining a business environment that is conducive to filers committing tax fraud by using fake W-2 forms or taking false deductions. Allegedly employees of the franchise were told to overlook clear signs of fraud for the sake of filing more returns. As the Justice Department has begun sampling the returns filed they have found approximately 31% of Farrukh Sohail's franchises have contained fraudulent information.

A major area of most tax fraud emerges from the over use of the Earned Income Tax Credit that is designed to give large refunds to lower income tax payers. This is a large profit business area for companies such as Jackson Hewitt therefore there is a motivation to increase their return amounts. These franchises have withheld from the government approximately $70 million in tax revenue for the government.

As Internet free filing services become more popular I sense that there may be an increase in fraudulent deductions but more personal liability versus the general tax service such as Jackson Hewitt will file purely based on the information that is being provided to them. With the odds of being selected for an audit hovering around the odds of being struck by lightning, if the government wants to better compliance they must fully automate the system for the average American and make the filing process more intuitive then the current mess of rules.

Current Russian national coach, Gus Hiddink has been jailed for up to six months for tax fraud. The jail sentence for this fraud has also come with a fine of 45,000 euros. Tax fraud totaling 1.4 million euros in past due was alleged back in 2003 and the coach has already been acquitted of tax fraud also back in 2002. Seems like an interesting pattern of cheating the government. Despite a guilty verdict in this case, it is expected that he will appeal the verdict soon.

The former joint chief executives of LeisureNet were on Tuesday found guilty on charges of fraud involving a total of R12-million.

However, Cape High Court acting judge Dirk Uijs found them not guilty on all the other charges they faced, including counts under the Prevention of Organized Crime Act and the Income Tax Act.

He found that the two men -- Peter Gardener and Rod Mitchell -- had unlawfully concealed their 20% interest in a German gym operation, Dalmore, when it was bought out by LeisureNet in 1999.

He said he was not impressed by the two men's explanation that the failure to disclose was an inadvertent mistake.

"In simple terms gentlemen I do not believe your evidence in this regard," Uijs said.

LeisureNet, which operated the Health and Racquet Club, was liquidated in December 2000 with massive debt.

However Uijs said he did not believe this fact alone was enough to justify a conviction on a charge of reckless trading. He said it was the full board of directors, and not just Gardener and Mitchell, who were doing business in the run-up to the collapse.

The matter is expected to be postponed for sentencing procedures and a possible application for confiscation of assets.

Adam J. Levinson, 44, the former manager of CoolerSmart, a water filter company, pleaded guilty last year to wire fraud and tax fraud charges.

He pleaded with Chief District Judge Sue L. Robinson today for leniency, citing mental health issues and his family’s financial situation.

“We’ve already lost all of our net worth. Without my income we’d lose the rest. Please do not send me to jail. Please let me continue to work to support my family,” said a tearful Levinson, who also apologized to his former partners.

Assistant U.S. Attorney Shannon T. Hanson had asked Robison to send Levinson to jail. Federal sentencing guidelines called for two years to two and a half years in prison.

An attorney for Elkay also said that the settlement with Levinson did not make the company whole. Attorney Bob Stauffer said Levinson’s actions caused nearly $6 million in damage.

Personally I don't see how home arrest solves this problem, I guarantee you send him to gen. pop. at any state prison he'll think twice before trying to pull a fast one on anyone ever again!