The Human Element

The Human Element

Sometimes I complain (mostly to myself, and sometimes to other people who don’t care) that the IRS customer service employees are like robots. They tend to go by the book even when there presents itself a more common sense and just solution. There is very little emotion or sensitivity for the struggling taxpayer who is burdened by a bank levy or wage garnishment. However, sometimes I am reminded that the flip side can be just as bad: the human response can at times be ugly too. The employees who make up the IRS are actually human beings with all the same passions and foibles as regular folks, and there’s no better reminder than when we hear of IRS agents accepting bribes.

After IRS Agent, Paul Hurley, allegedly saved a medical marijuana dispensary owner a million dollars in an audit, he suggested that, in exchange for the good deed, the owner give him $20,000. As if he thought he was being wire tapped, or as if it is somehow less obviously bribery when no words are used, the IRS agent rubbed his thumb over the top of his index and middle finger in the universal sign for “cash money.” He should have gone with his gut on this one because later, when payment day arrived, the FBI would be watching the whole thing. These kinds of deals almost always end badly for the IRS employee because as much as the IRS doesn’t trust taxpayers with delinquent tax accounts (especially when tied to a medical pot store), taxpayers trust IRS agents even less. As you can imagine, our guy in this story didn’t take long to decide before he was on the phone with the authorities tipping them off. Hurley’s trial begins this week.

The puzzling thing about this story is that Hurley demonstrates a significant amount of remorse in his resignation letter but his attorneys state that he denies soliciting a bribe. In fact, his attorneys say that Hurley was actually being offered a job to assist with the company’s books and the $20k was just up-front payment for this little side job! Even though I am one, I find it incredible what attorneys will say sometimes.

Board of Equalization is not of fan of Denny’s in California’s central valley

Have you been to one of the Denny’s operated by Abdul Halim? He operates three Denny’s restaurants located in Lathrop, Manteca, and Stockton. If you have a craving for a Moons Over My Hammy and live in the California’s central valley, you may soon be out of luck.

California’s Board of Equalization recently publicized its version of a perp walk. Abdul Halim, of Tracy, California will serve 10 years formal probation, perform 3,500 hours of community service, and pay $790,428 in restitution for pleading guilty to two felony and one misdemeanor count of sales tax evasion. The ordered restitution includes the sales tax, penalties, and interest owed to the BOE.

California’s Board of Equalization is charged with the duty of collecting and enforcing payment of California sales tax. BOE Investigators determined that Mr. Halim failed to pay nearly $525,000 in sales tax collected from Denny’s customers between 2007 and 2011.

If you need help fighting the BOE in California’s central valley or in the greater Sacramento area, call our law firm for a free consultation. We may be able to help save your business and keep you from being the next “perp” publicized by the BOE.

Florida Man Charged with Violent Threats against IRS

There are some pretty fierce-sounding gangster names in the history of American white collar crime.  You’ve got your “Greasy Thumb,” your “Pistol Pete,” “The Butcher,” and “Big Tuna,” just to name a few.  I gotta believe that some of these guys imagined their thuggish names in print or revelled in the thought of becoming a household name.  But the latest tax criminal out of South Florida clearly didn’t give his nickname much thought.

“The Squirrel” borrowed an acquaintance’s phone to call the FBI and inform them that a nearby IRS building would “go up in smoke” in two hours.  The police traced the call to the phone’s owner who thought the perp’s name was “The Rabbit,” (obviously not a memorable enough name) but when he was found, he was quick to correct the authorities, telling them that his true moniker was actually The Squirrel (because that’s so much better, right?).  I can imagine him spelling it out for the FBI and making sure they got it right.  Maybe this is just me, but if I’m caught and I’m going to go through the trouble of correcting my thug name, I’m going to come up with something a little better than “Squirrel.”

And, although he did confess to placing that call to the FBI, the lawyer in me sees at least a couple harmless interpretations of the phrase “go up in smoke.”  Maybe he saw a vision of the place burning down and he called to warn them.  Maybe.  By the way, Florida seems to be a gathering place for not just anti-tax folks, but the serious IRS-haters and tax criminals.  I’m still not sure why.

If this article has inspired you to work on your own nickname, you might want to check out this gangsta name generator, although I personally have to question the results as mine came out “La Llorona,” which I think means “the crybaby” (feminine form).  Gangstaname.com generated a more accurate name, I think: “Machete Masta Crab Whacka.”

Founder of Happy's Pizza Chain Convicted of Tax Crimes

Happy Asker, the CEO and founder of a popular Michigan-based pizza chain has been convicted of conspiracy to defraud the United States government and 32 counts of tax crimes, including 28 counts of aiding and assisting the filing of false tax returns.  This pizza chain has over 100 locations and has been around for about 20 years.

Asker headed a “systematic and pervasive tax fraud scheme,” with employees and franchise owners, which involved underreporting gross sales and passing along the unreported income to key employees, franchisees, and Asker himself.  It also appears as though he was not very cooperative during the investigation, purposely misleading IRS Criminal Investigation agents in interviews.

Most of the Happy’s Pizza stores are located in Michigan and Ohio, although there is one store down in El Cajon, CA.  I had never heard of this chain before, so I tried to dig up what I could on the founder with the funny moniker.  There really isn’t much on the web about this guy.  Maybe he wanted it this way.

 

Manteca Tax Cheat Files Lien Against IRS Commissioner

There was a story I saw in the Modesto Bee recently about a Manteca woman who pleaded guilty to defrauding the IRS out of about $313,000.  It is not really your typical refund fraud case in the sense that the more popular strategy involves preparing a series of false refund returns claiming smaller amounts.  All the returns together may add up to a small fortune, but no single refund claim appears right away to be anything out of the ordinary.  The Manteca woman wasn’t patient enough for the “slow drip” method apparently; she went all in.  And she lost big time.

Esther Robertson, 57, faces up to 5 years in federal prison and a fine of $250,000.  It is not mentioned in the Modesto Bee story, but typically the fine is in addition to the restitution aspect of the sentencing, which involves the taxpayer paying back what was stolen.  Robertson will have a lot of time to stress about the possible outcome since her sentencing is not expected until September 2015.

Court papers also indicate that, in February 2009, after the IRS was onto her, they issued a bank levy to try to recoup at least some of what was taken.  Then Robertson did something that I’m not sure I quite understand.  Presumably in an act of retaliation, she filed a lien against the property of the IRS Commissioner!  This certainly shows her contempt for the IRS, or the federal government, or both.

There are a number of questionable websites and online sources that claim to cite legal authority for filing a criminal suit against the IRS for taking one’s property.  I won’t link to any of these sites because I don’t really have a beef with them but, trust me, there are hundreds of them.  These are the same sites that are managed by tax protestors who believe taxation is illegal and the IRS has no legal authority to collect taxes.  My guess is that Robertson found  something online about filing a lien against the Commissioner of the IRS and she thought she would give it a try.  She probably didn’t have much to loose at that point either, knowing that the IRS had discovered her foul play and it was only a matter of time before she would be getting a visit from Criminal Investigations.  For Robertson’s sake, I hope this doesn’t count against her during sentencing.

Billionaire evades prison time for evading millions in taxes.

Back in September 2013, we reported that your Beanie Babies in the attic may become more valuable because Beanie Baby creator, Ty Warner, was facing charges for evading his federal taxes. Last week Judge Charles Kocoras “sentenced” billionaire (with a “B”) Warner to two-years probation and 500 hours of community service for his tax crimes.

The sentence, or lack-there-of, is actually a bit surprising. The government often seeks harsh punishment in high profile cases knowing that punishing the infamous will have a chilling effect on less substantial, but still costly, tax crimes committed by regular citizens. Judge Kocoras rejected such punishment in this case based on Warner’s “good works” in society.

Warner pleaded  guilty to tax evasion and paid a civil penalty of $53.6 million for failing to report$3.2 million in income on a secret Swiss bank account that held as much as $93.6 million in assets. Unfortunately for Warner, he attempted to avoid prosecution and take advantage of one of the government’s many offshore voluntary disclosure amnesty programs, but was denied tax relief. In addition to the civil penalty already paid by Warner, Judge Kocoras fined Warner an additional $100,000.

I was actually looking forward to the tax evasion Beanie Baby. However, now we’ll probably have a reincarnation of the fad, and all its versions, so Warner can pay his fines.

Introducing the tax evasion beanie baby

This week, the creator of the Beanie Baby toy phenomenon, Ty Warner, was charged with tax evasion. The charges allege that Warner committed tax crimes on his 2002 tax return by failing to report $3.2 million in income on a secret Swiss bank account that held as much as $93.6 million in assets. The federal government alleges that Warner falsely reported his 2002 income as $49.1 million, omitting money he made on his UBS account. He amended his 2002 return in 2007, yet it is alleged that he again understated his tax by $885,300.  In 2009, Warner tried to avoid prosecution by taking advantage of the Internal Revenue Service (IRS) amnesty program known as the Offshore Voluntary Disclosure Program. According to Warner’s tax attorney, the IRS denied amnesty to Warner.

Warner is expected to plead guilty as part of a plea agreement and will pay a civil penalty of $53.6 million for failing to file a required Report of Foreign Bank and Financial Accounts (FBAR). Warner is not the first UBS client to be prosecuted for tax crimes. Since 2009, the United States has prosecuted approximately 70 taxpayers, 30 bankers, lawyers and advisers in a crackdown on offshore tax evasion. I wonder if this is the time to sell those Beanie Babies I have in the attic.

IRS Scams: Inside & Out

The IRS makes a lot of money off the American people and certain American people make a lot of money off the IRS.  Some people cheat the system as ordinary citizens from outside the agency.  And some cheat the system by virtue of their insider/employee status.  Tax scams have evolved over time and have adapted to changes in technology.  But what has not changed are the most basic elements of almost all tax scams.  They rely on the fact that nearly everybody in the country has (or potentially could have) some kind of contact or interaction with the IRS.  And they rely on the fact that the IRS is so huge that they can’t always keep very close tabs on their own personnel.

Two recent headlines illustrate my point.

1. Santa Cruz, CA Phone Scam: Scammer targets South Asians and Indians, claims to be an IRS representative, tells victims that there is an open criminal tax investigation against them, and convinces them to wire money.  The strategy is simple: if you contact enough people, somebody is bound to take the bait.

2. Baton Rouge, LA IRS Manager Sentenced for Illegal Tax Business: She operated a tax & accounting business while serving as a supervisory revenue agent and group manager.  She used IRS databases for the benefit of her own business.

The IRS manager has been caught, the phone scammer has not.

Would you rob the IRS to fund your “before I die” fund?

Reading between the lines, it appears that Frank F. Frink of Washington lost his gamble that the government wouldn’t catch up with his tax crimes until after he left this world on a high note and a pocket full of cash.

Although the IRS is usually slow to pick up on tax evasion and other tax crimes, they do eventually usually catch up to criminal and civil tax shenanigans … it’s just a matter of time. Mr. Frink doesn’t have to report to prison until September for his tax crimes, allowing him time to seek treatment for undisclosed medical issues. If he’s still around in September, he will have to serve a one year prison term for his tax crimes.

My assumption that he wanted to leave this world with a pocket full of cash is based on the referenced medical problems and absurdly bold manner in which he robbed the IRS. Frink plead guilty to filing a false, fictitious and fraudulent tax claim on his 2008 tax return and was sentenced earlier this week. According to the U.S. Attorney’s Office, Frink hired a tax preparer to prepare his 2008 return and calculated he was owed a refund of $7,413. This is a pretty substantial refund for most households these days. However, for Frink, it was not enough. So he sought the help of a witless tax preparer to fund his final days; he went to H&R Block.

After his first tax preparer determine that he was owed a federal tax refund of $7,413, Frink went to an H & R Block branch with bogus tax forms showing that more than $1 million had been withheld in taxes. H & R Block then calculated he was therefore owed a tax refund of $827,117. The IRS issued Frink this windfall and didn’t catch the fraud for some time as he wasn’t criminally charged until September 2012, approximately three years later. Even when the IRS began to investigate Frink’s tax crimes, he continued to spend his generous tax refund.

While Frink may be living on borrowed time and took advantage of the IRS, most taxpayers want to resolve their tax headache without the specter of prison time. If you’re fighting the IRS, and don’t have Frink’s exit strategy, our tax law firm offers a free consultation so you may determine if we’re the right tax attorneys to fight the IRS for you.