Supreme Court Rules that Warrants are Required to Search a Suspect's Cell Phone

July 14, 2014, by The McKellar Law Firm, PLLC

In the recent case of Riley v. California, the Supreme Court of the United States unanimously held that search warrants are required to investigate the digital content of a suspect's cell phones. The Court found the term "cell phone" to be misleading and called them mini-computers with the capacity to be used as a telephone. The storage capacity and personal information on a cell phone can be more revealing than a search of someone's purse or house. Cell phones contain many types of personal information such as bank statements, address books, photos, along with the dates of when that information was collected by the phone. The Court found privacy issues to be of the utmost concern because the immense amount and variety of data stored on cell phones reveal far more than searches of other personal property.

CellPhone.jpg

The ruling was based in part on The Court's previous trilogy of rulings in Chimel, Robinson, and Gant, which grant police the right to search a suspect upon arrest. Chimel establishes the legal foundation for searches upon arrest in order to preserve evidence and protect police officers. The Court's ruling in Robinson declared warrantless searches of a suspect reasonable upon arrest. Chadwick limited such searches to "personal property immediately associated with the" suspect. Finally, Gant gives police the right to a warrantless search of a vehicle for evidence of the crime.

Addressing the basis for searches upon arrest, The Court reasoned that the data stored on the cell phone cannot be used as a weapon. However, the Court did grant police the right to see if any weapons were hidden in the cell phone. The Court also discussed the futility of attempting to preserve the digital contents of cell phones while recommending alternative methods to do so. The Court reasoned that a warrantless search of the phone would do little to prevent data encryption and remote wiping.

The Court held that the exigent circumstances exception applies to allow a warrantless search of cell phones in case of a sudden emergency. If the police believe a suspect's cell phone data will be succumb to remote wiping or data encryption, a warrantless search can be justified by the exigent circumstances exception. However, the exigent circumstances exception requires a court to examine whether the emergency justified the warrantless search. Overall, The Court balanced the intrusion of privacy while promoting the government's interest in protecting officers and preserving evidence to hold that a search warrant is required to investigate the digital data on a suspect's cell phone.

Sources
Riley v. California, 573 U.S. ____ (2014).

http://www.washingtonpost.com/news/morning-mix/wp/2014/06/26/the-scary-part-of-the-supreme-courts-cell-phone-ruling/

http://www.pbs.org/mediashift/2014/07/why-the-supreme-court-cellphone-decision-is-a-win-for-press-freedom/

http://www.nytimes.com/2014/06/26/us/supreme-court-cellphones-search-privacy.html

Georgia Man Indicted in Nashville for Investment Fraud and Money Laundering

According to an FBI press release, Rajesh Patel, a 55 year old man from Duluth, Georgia, was recently indicted on several counts of fraud and money laundering.

money-11.jpg

Mr. Patel's alleged scheme sought $500,000 from an investor to purchase a hotel. Mr. Patel later approached the same investor for $750,000 to purchase a beachfront hotel. The investor was told that the $750,000 would grant him a 25% interest in ownership of the hotel. Mr. Patel is accused of altering the partnership agreement by removing the investor's name from the documents, and for using the funds collected from the investor on Mr. Patel's unrelated personal expenses. Following the indictment, Mr. Patel pled not guilty.

Mr. Patel's indictment alleges five counts of wire fraud, four counts of money laundering, and one count of mail fraud. Each count of fraud carries a sentence of up to 20 years in prison. Each count of money laundering carries a sentence of up to ten years in prison. Also, if convicted, fines may be issued as well as the repossession of any assets obtained as a result of the alleged offenses.


Sources
http://www.fbi.gov/memphis/press-releases/2014/georgia-man-arraigned-on-fraud-and-money-laundering-charges
http://www.justice.gov/usao/tnm/pressReleases/2014/5-28-14.html

Tax Crimes and Why Employers Should Be Concerned

For the May/June edition of Cityview Magazine, I wrote an article entitled "Tax Crimes and Why Employers Should be Concerned." A copy of the article can be found here: http://www.cityviewmag.com/2014_03/#p=136

The text of the article is duplicated below:

In 2013, the Internal Revenue Service launched over 5,300 criminal tax investigations of individuals and companies suspected of breaking one or more federal criminal tax statutes. While the majority of the IRS is focused on collecting money, the Criminal Investigation Division (CID) of the IRS spends its time and resources investigating suspected tax evaders. Locally, the Tennessee Department of Revenue also investigates Tennessee residents and companies who may have violated Tennessee's criminal tax statutes. An increasing number of these investigations are targeting small business owners.

Many people often associate tax evaders with persons who are tax protesters or famous celebrities. The reality though is that the majority of tax prosecutions will be against "regular" people who are neither famous nor actively flaunting their disagreement with American tax laws.

For a federal criminal case, the prosecution must prove 3 things:

1. Tax Liability or Tax Deficiency: The actual existence of a due and outstanding liability must exist in order for the IRS to prove that a taxpayer attempted to avoid the assessment and/or payment of his/her tax.
2. Affirmative Act: The actual completion of a voluntary and intentional act in order to avoid one's known legal income tax responsibility including the assessment and/or the payment of a tax.
3. Intent / Willfulness: Any effort or attempt to avoid the assessment and/or payment of a tax. Examples of acts which may constitute criminal intent in this regard may include:


  • Filing a false tax return

  • Creating false records such as invoices and receipts

  • Deliberately destroying records

  • Making false statements to an IRS agent

  • Claiming false deductions

  • Concealing bank accounts and/or assets

  • Cash structuring

While there is no such things as a "debtor's prison" in the U.S., an emerging trend in tax prosecutions is indicting business taxpayers who have taken affirmative action to avoid payment of payroll taxes. The Government views failure to provide payment for payroll taxes as theft, as the employer has taken money from an employee and failed to pay the withheld amounts to the IRS.

An example of this sort of prosecution occurred in the case of United States v. James and Theresa DeMuro. The DeMuros operated an engineering and surveying company out of New Jersey. The evidence at their trial showed that they withheld over a half million dollars from their employees' checks but failed to turn over this money to the IRS. They also had attempted to evade tax responsibilities by shutting down a different company in what the government believes was a strategy to evade payment of unpaid employment taxes for that entity. The convicted couple also withheld money from employees' checks for health insurance, retirement accounts, and child support, but they failed to provide these funds to the appropriate agencies or accounts.

After a jury found them guilty of willfully failing to pay employment taxes to the IRS, the DeMuros each received 44-month prison sentences and were ordered to pay restitution of $1,337,952.12 to the IRS.

Another emerging trend in tax prosecutions is the increase in prosecutions against staffing companies and PEO's (Professional Employment Organizations). These types of companies often handle the processing of payroll for their clients, who are usually small businesses. These staffing companies and PEO's are also required to pay over payroll taxes to the IRS, and when the companies do not satisfy this requirement, they too could face criminal prosecution.

A recent example of this trend involves Richard Whatley, who was the owner of multiple staffing companies in Utah. The prosecution contended that Whatley's actions in failing to turn over payroll taxes from 2001 to 2006 resulted in a loss of more than $2.3 million in tax revenue. Whatley ultimately entered into a plea agreement and was sentenced to 51 months in prison for willfully failing to pay employment taxes to the IRS. He was also ordered to pay a fine of $541,513.

As the IRS continues to increase collection efforts, business owners should be wary of any acts that could be perceived as efforts to evade reporting or paying employment-related taxes. Smart business practices would be to never use taxes withheld from an employee's check for any purpose other than its intended use. If a small business owner or other decision makers have already failed to turn over withheld employee funds, the owner and decision makers should immediately contact a qualified tax professional to take immediate steps to correct past mistakes and provide protection from the long arm of the law.

Norman McKellar is the founder of The McKellar Law Firm, PLLC and the winner of multiple Cityview Top Attorney awards. His practice primarily deals with IRS tax resolutions and federal criminal defense. More information on his law firm can be found at www.HelpingClients.com, or follow him on Twitter @McKellarLawFirm.


Taxpayers Should Be Wary of Phone Calls from the "IRS"

March 26, 2014, by The McKellar Law Firm, PLLC

Taxpayers have lost more than $1 million this year in a scam where telephone callers are impersonating Internal Revenue Service officials. The impersonators are calling taxpayers and telling them they owe the IRS money and request payment via phone using a prepaid debit/credit card or wire transfer. If the caller balks at making the payment they are threatened with loss of driver's license, deportation, and/or imprisonment.

When calling, the scammers know the last four of the taxpayer's social security number and have a phone number that appears to be the IRS on a caller ID. In some cases they also follow up with taxpayers via official looking emails and call back claiming to be the police or the department of motor vehicles to further their ruse. Again, the caller ID supports the impersonator's assertions.

The IRS first warned of this scam in November 2013 and included it on its Dirty Dozen tax scam list for 2014. At first the scam seemed to be targeting new immigrants, but has since hit almost every state in the U.S.

The IRS wants taxpayers to know that its agents will not make these type of threats, or request bank card or bank information via phone. If you or someone you know gets a call like this and do NOT owe taxes to please call 800-366-4484; if you do owe taxes please call 800-829-1040. You may also check the IRS' website at www.irs.gov to view its current Dirty Dozen scam list.

Sources

http://www.forbes.com/sites/ashleaebeling/2014/03/21/if-the-irs-calls-hang-up/

http://money.cnn.com/2014/03/20/pf/taxes/irs-phone-scam/

www.irs.gov

Knoxville Woman Sentenced to More Than 7 Years for Bank Robbery

March 18, 2014, by The McKellar Law Firm, PLLC

Twenty-year-old Jordan Nicole Nicley of Knoxville, Tennessee, was recently sentenced to serve more than seven years in federal prison for her role in a May 31, 2013 attempted armed-robbery of a local bank.

suntrust_med.jpg

According to court records, Nicley's accomplices, Kaylon M. Batts and Dion A. Kinnear, disguised themselves as construction workers and entered the 2075 North Broadway SunTrust Bank location. They then threatened employees at gunpoint and demanded keys for the vault. However, since no employee had the keys, Batts and Kinnear fled the scene empty-handed.

The pair drove away in a Ford Ranger pickup truck that they had previously carjacked, which they promptly abandoned in a nearby alley. At that point, prosecutors claim Nicley picked them up in a Honda CRV and assisted them with their escape. Police officers later found the stolen pickup truck along with evidence of the foiled robbery, including discarded hardhats, orange vests, and bank slips.

Given Nicley's age and lack of criminal history, it is no wonder that she was overcome by emotions when U.S. District Judge Thomas Varlan sentenced her to seven years and four months in prison. Through tears, Nicley told Judge Varlan that she wished to be home with her family and to start over.

_______________________

Source: Knox News Sentinel, "Woman who drove getaway car in bank robbery gets prison sentence despite tears," Feb. 20, 2014

Sevier County Police Officer Sentenced to 18 Months for Social Security Fraud

February 25, 2014, by The McKellar Law Firm, PLLC

Sevier County's first ever K-9 officer has been sentenced to 18 months in prison for defrauding the Social Security Administration ("SSA") by committing social security fraud.

Joseph Laney, Jr., age 57, left the Sevier County Sheriff's Office in 1989 after becoming its first K-9 officer. Two years after leaving, Laney filed for disability benefits citing "affective mood disorder" and epilepsy. He was approved and received benefits for the next twenty years to the tune of $319,000.

download.jpeg

As a general rule when on disability benefits through SSA, one cannot do "substantial gainful activity" (SGA) and continue to receive these benefits. "SGA is defined as working and making more than $1,070 per month ($1800 per month if you are blind)." (http://www.disabilitysecrets.com/page1-13.html). Laney was clearly in violation of this activity as he ran a martial arts school, was a dog trainer, taught carry permit classes, was a bounty hunter, authored a book, and was a private investigator. Laney received money for all of these ventures, but failed to report this income to SSA and/or failed to inform them of his ability to work.

Prior to handing down Laney's sentence, Judge Varlan of the United States District Court in Knoxville, Tennessee stated, "[i]n reflecting the seriousness of the offense, the court takes into consideration not only the loss amount, which the court finds significant, but the time frame (of) approximately 20 years."

Maryville, Tennessee Couple Pleads Guilty to Procurement Fraud

December 13, 2013, by The McKellar Law Firm, PLLC

After five years of using his position as a Department of Defense contractor to scam the U.S. Military, the Afghan National Army, and private vendors, Maryville, Tennessee residents Keith Johnson and his wife, Angela Gregory Johnson pled guilty last month to a nearly $10 million procurement fraud scheme, according to a press release from the Dept. of Justice.

download (1).jpeg

In statements filed with the U.S. District Court for the Eastern District of Virginia, Keith Johnson and his wife filed fraudulent quotes in order to secure private industry supply contracts for the repair and maintenance of the Afghan National Army's vehicles while employed in Afghanistan. Mr. Johnson, using his position and credentials as a defense contractor, wrote letters to justify illegal purchase orders to receive the needed vehicle parts. Ms. Johnson, using her maiden name, aided in the double dealings by the solicitation of quotes from known venders without the proper recommendations or competitive procedures.

In addition the couple conspired with two additional employees of the central maintenance facility who provided "kickbacks" for the procurement of subsequent vehicle parts that were funneled through their work as subcontractors at the central maintenance facility. All parties concealed their business relationships in order to defraud reputable venders so that all contracts would be awarded to their private companies.

For their fraudulent activities, Mr. Johnson faces a maximum penalty of twenty (20) years in prison and his wife faces a maximum penalty of five (5) years when sentenced on February 14, 2014.

Owner of Health Care Clinic Pleads Guilty to $71 Million Medicare Fraud Scam

November 27, 2013, by The McKellar Law Firm, PLLC

After two years on the run from authorities, health care clinic owner Irina Shelikhova has been apprehended and subsequently sentenced for her role in an elaborate Medicare fraud scheme.

medicare-fraud.jpg

Shelikhova was the owner of a Brooklyn, New York medical clinic. The clinic was billing Medicare under three corporate names: Bay Medical Care PC, SVS Wellcare Medical PLLC, and SZS Medical Care PLLC. All of these entities were known collectively as Bay Medical Clinic. As owner of these clinics, Shelikhova masterminded a scheme from 2005 to 2010 to pay kickbacks to her "patients" in order to bill Medicare approximately $77 million in medical services that were either never provided or unnecessary. According to testimony, the owner went so far as to hire a medically unlicensed person to act as a doctor to provide medical care to her patients. She also directed her staff to make fake notations in patients' medical files and charts to assist with the bogus billing.

In order to facilitate the large amount of cash needed to pay her patients kickbacks, Shelikhova employed a gaggle of money launderers. She would write checks drawn on the medical clinic to several shell companies that were controlled by her network of money launderers. In turn, the launderers would cash the checks and give the cash back to the clinic. Patients were paid $50 or more to allow the clinic to bill Medicare for bogus medical services. From April to June 2010, approximately $500,000 was paid in kickbacks by Shelikhova to patients.

Shelikhova was originally indicted in July 2010. However, she fled the country and hid out in the Ukraine for two years. Upon her return to the U.S., Shelikhova was apprehended at the JFK airport in New York.

Shelikhova plead guilty to one count of conspiracy to commit money laundering. She has been sentenced to serve fifteen years in prison; three years of supervised release with a concurrent exclusion from Medicare, Medicaid, and all other Federal healthcare programs; ordered to forfeit $36,241,545; and ordered to pay $50,943,386 in restitution. Thirteen other co-conspirators have also been convicted in this case; one of those being Shelikhova's son.

Sources
http://www.nydailynews.com/new-york/medicare-fraud-fugitive-nabbed-jfk-airport-article-1.1099421

http://www.fbi.gov/newyork/press-releases/2012/owner-of-brooklyn-clinic-pleads-guilty-in-connection-with-71-million-medicare-fraud-scheme

http://www.justice.gov/opa/pr/2013/November/13-crm-1207.html

Breaking Bad and the Tax Consequences of Illegal Income

October 16, 2013, by The McKellar Law Firm, PLLC

As the hit show Breaking Bad comes to an end, Forbes ran an interesting article on the tax implications of illegal activities as it relates to the hit show.

breaking-bad.jpg

The author highlights a few problems that arise when conducting illegal transactions, including:

1. Illegal income is still considered taxable income by the IRS. Regardless of the legality of how the income was generated, the IRS still wants its piece of the pie.

2. Claiming expenses for an illegal business will typically result in an admission of participating in illegal activity, and the claimed expenses are most likely to be disallowed.

3. Money Laundering is a likely companion charge to tax evasion since most illegal income needs to be "washed," similar to Walter White's Car Wash in Breaking Bad.

4. If the person conducting the criminal action files a tax return but fails to disclose all his/her income, that person could be looking at a charge of filing a false tax return. If the alleged criminal does not file a tax return, then he/she may be dealing with a charge of failure to file a tax return.

5. Finally, if the alleged criminal decides to move his/her money offshore, he/she would be required to file an FBAR (Report of Foreign Bank and Financial Account). Violation of this requirement can carry a maximum civil penalty of $100,000 for each violation, and the criminal penalties can include a $500,000 fine and a maximum 10-year prison sentence.

Tax Return Preparer Pleads Guilty to Filing False Tax Returns

September 3, 2013, by The McKellar Law Firm, PLLC

Mark Goldberg, (pictured below) a tax return preparer from the Bronx in New York City, pled guilty to tax fraud last month. In the indictment Goldberg was charged with 40 counts of willfully and/or knowingly inflating tax deductions for his clients, 4 counts of filing fraudulent returns of his own, 1 count of obstruction of justice, and 1 count of wire fraud.

Goldberg.jpg

Goldberg ran his tax preparation business out of a storefront in the Bronx. There were always long lines of clients at his door waiting for his assistance in filing their taxes. The Government alleges that part of the reason Goldberg's business was so busy was due to the fraudulent deductions he filed for his clients which totaled more than $7,000,000 over a span of five years. These fraudulent reductions resulted in thousands of dollars in tax refunds to individuals who were not otherwise entitled to this money.

Goldberg pled guilty to one count of subscribing to a false tax return for himself, one count of aiding and assisting in the preparation of a false tax return, and one count of wire fraud. At his upcoming sentencing hearing, Goldberg will face a maximum possible sentence of 26 years in prison. As a condition of his plea deal, he cannot contest a forfeiture to the IRS of a business bank account that had a balance of $500,000. Goldberg is set to be sentenced December 17, 2013.

Sources
Dept. of Justice Press Release

New York Daily News' article


Tennessee Businessman Sentenced to 31 Years in Prison for Fraud

August 30, 2013, by The McKellar Law Firm, PLLC

Former Nashville, Tennessee area business owner, Richard Olive, 49, of Vero Beach, Florida, was convicted on charges of mail fraud, wire fraud, and money laundering by federal jury on March 7, 2013. Olive was ordered to serve 31 years in prison and to pay $5,992,181.24 in restitution to approximately 190 victims for crimes related to his operation of National Foundation of America (NFOA), headquartered in Franklin, Tennessee.

dollar cuff.jpg

According to a press release from the U.S. Attorney's Office, from January 2006 through May 2007, Olive represented that NFOA was a charitable organization. He stated multiple times to potential investors that NFOA was recognized by the IRS as a 501(c)(3) organization, even though he only donated approximately $108,000 to charity. That amount is less that ½ of 1% of the $23.6 million NFOA received. Olive continued to state this though he was counseled to cease at least twice by his attorney. Olive obtained assets of over $30 million during the time of operation, promising that in exchange for an "installment bargain contract," NFOA would provide a "guaranteed payout over a guaranteed period of time," as well as a "generous tax deduction." Evidence revealed at the trial showed that NFOA lacked the assets to meet these promises.

Later discoveries in the investigation showed that Olive solicited assets that included annuities, which have high penalties upon their surrender. Once Olive possessed the annuities, he promptly surrendered them to access the cash, incurring more penalties. With this cash, he began living a lavish lifestyle. Olive paid $153,000 on his personal credit card, funded a private jet for a family vacation to New Orleans, settled a lawsuit filed against him for $250,000, and purchased several properties, including a $690,000 condominium in Las Vegas.

Evidence at trial demonstrated that Olive deliberately misrepresented information pertaining to NFOA. In February 2006, merely days after NFOA gained its incorporation, Olive consulted a financial advisor and provided the advisor with fabricated financial statements that stated NFOA held substantial assets and had been operation in both 2003 and 2004. Three months later, he consulted with another financial advisor stating that the company had $35 million worth in assets. However, since its creation till June 2006, the charitable tax returns filed with the State of Tennessee, NFOA had only received $2.8 million in revenue. Olive was also served with a cease-and-desist order from five different states when they detected a misrepresentation of the company as an IRS recognized 501(c)(3) charitable organization. In May 2007, NFOA was seized and liquidated by the Tennessee Department of Commerce and Insurance.

Due to Olive's leadership in this sophisticated scheme, the large amount of money taken from numerous defenseless victims, and the misrepresentation of NFOA being a charitable organization, the District Court concluded additional sentencing enhancements were to be applied.

Two Tennessee Men Sentenced to Prison for Possession of Child Pornography

August 26, 2013, by The McKellar Law Firm, PLLC

Persons charged with violation of federal child pornography laws can face severe sentences, as two Tennessee men are now fully aware. Charles Wesley Bush, of Knoxville, Tenn., and Patrick Shane O'Ferrall, of Piney Flats, Tenn., were recently sentenced to prison time for possession of child pornography and other related charges.

hand over keyboard.jpg

The Honorable Thomas A. Varlan, Chief U.S. District Court Judge, sentenced Bush on Aug. 20, 2013 to serve 151 months in federal prison for both the possession and distribution of child pornography. In October 2012, Bush was arrested pursuant to a four-count indictment charging him with distribution and possession of child pornography, and he ultimately pleaded guilty in March 2013. According to a press release from the U.S. Attorney's Office, Bush caught the eye of federal authorities through his use of the internet to distribute child pornography. A search of Bush's computer showed that he possessed 232 images and 299 video files of child pornography.

In another Eastern District of Tennessee case, Judge Leon Jordan sentenced Patrick Shane O'Ferrall of Piney Flats, Tenn., to a statutory maximum sentence of 120 months in prison. O'Ferrall was also ordered to pay restitution to a victim, whose image was among the child pornography depictions. According to a U.S. Attorney's Office press release, O'Ferrall's investigation began when, following his arrest for domestic assault, his spouse discovered pornographic images of young children on CDs among his belongings. Officers then confiscated computers and other forms of electronic media from O'Ferrall's residence, and the seized items contained over 3,500 images containing child pornography and DVDs containing videos of young children engaged in sexual acts.

As these cases show, child pornography can carry severe penalties. If you are suspected of being involved with a federal sex crime, act immediately to consult with an experienced federal criminal defense attorney.

Staffing Company Owner Sentenced to 51 Months in Prison for Failing to Pay Payroll Taxes

July 31, 2013, by The McKellar Law Firm, PLLC

A growing area of tax fraud is originating from staffing companies and PEO's (Professional Employer Organizations) who withhold taxes from their workers and fail to turn the withheld funds over to the IRS. A case earlier this month resulted in a former owner of such a company receiving a 51-month prison sentence for committing such a crime.

Payroll.jpg

Richard Whatley, who was once part owner and/or financial controller for three staffing companies located in Utah, was indicted in 2010 for five counts of willful failure to account for and pay over employment taxes for these businesses which were under his control from 2001 to 2006. Prosecutors alleged Whatley's infractions resulted in the loss of more than $2.3 million in tax revenue.

Whatley struck a plea deal in his case in which he accepted a sentence of 51 months in prison and a fine of $541,513 in exchange for a plea of guilty to one count of willful failure to account for or pay over taxes. Whatley admitted to prosecutors that while he did collect fourth quarter taxes from employees of one of his staffing companies in 2003, he did not turn over the money to the IRS. T

26 USC § 7203 states that any persons found to have willfully failed to account for or pay over taxes to the IRS are subject to a fine up to $25,000 for an individual or $100,000 for a corporation. The statute also declares that the individual, if convicted, will be charged with a felony and could face up to five years in prison.

To determine the meaning of "willfulness" one must turn to the case law of Cheek v. United States, 498 U.S. 192, 201 (1991), United States v. Pomponio, 429 U.S. 10, 12 (1976), and United States v. Bishop, 412 U.S. 346, 360 (1973). These cases determined willfulness to be defined as the "voluntary, intentional violation of a known legal duty." Courts do not require direct proof of willfulness. Instead, the court can infer by the behavior or acts of a defendant that his or her conduct had the effect of misleading or concealing the desired information from the government. Spies v. United States, 317 U.S. 492-499 (1943). This conduct includes any efforts by the defendant that the court infers had the intention to "place assets beyond the government's reach after a tax liability has been assessed." United States v. Mal, 942 F.2d 682, 687 (9th Cir. 1991).

This was not Whatley's first brush with law. He previously served 27 months in prison for mail fraud and interstate transportation of stolen funds. He completed probation for these crimes in November of 2003.

Two Stars of "Real Housewives of New Jersey" Indicted for Federal Fraud and Tax Charges

July 30, 2013, by The McKellar Law Firm, PLLC

According to a press release from the Department of Justice, Teresa and Joe Giudice were indicted by a federal grand jury in a 39-count indictment for a multitude of federal crimes, including mail fraud, wire fraud, bank fraud, making false statements on loan applications, bankruptcy fraud, and failure to file tax returns. The New Jersey couple regularly appear on the Bravo TV show "Real Housewives of New Jersey."

Giudice.jpg

According to the Indictment, the Giusepe's are accused of the following acts:

  • From 2001 to 2008, the Giuseppe's allegedly committed mail and wire fraud by submitting fraudulent loan and mortgage applications, along with false supporting documentation. In particular, they are accused of falsely stating that they were "employed and/or receiving substantial salaries when, in fact, they were either not employed or not receiving such salaries."
  • In 2001, Teresa Giudice applied for a mortgage loan of $121,500, and she allegedly falsely claimed she was employed as an "executive assistant," and she provided fake W-2 forms and fake paycheck stubs which she claimed were issued by her employer. The Government alleges that Mrs. Guidice's claims related to this mortgage loan were false.


  • In 2009, the Giudices filed a Chapter 7 bankruptcy protection in the U.S. Bankruptcy Court in Newark, New Jersey. The Guidice's, along with anyone else who files for bankruptcy protection, were required to disclose their assets, income, and liabilities, among other things, to the United States Trustee. The Government claims that the Giudice's intentionally "concealed businesses they owned, income they received from a rental property, and Teresa Giudice's true income from the television show 'The Real Housewives of New Jersey,' website sales, and personal and magazine appearances." The indictment also argues that the Giudice's concealed their anticipated increase in income from the upcoming season of the "Real Housewives of New Jersey." As a result of these alleged actions, the Giudice's are charged with committing bankruptcy fraud for concealing and making false oaths and declarations about the assets and income during their bankruptcy case.


  • The Indictment also alleges that during tax years 2004 through 2008, Giuseppe "Joe" Giudice received income totaling $996,459, but did not file tax returns for those years.

The Guidice's are looking at a potentially substantial sentence if convicted of these crimes, and are specifically looking at the following maximum punishments:


  • Conspiracy to commit mail and wire fraud - up to 20 years in prison and a maximum $250,000 fine.

  • Bank fraud and loan application fraud counts - each carry a maximum of 30 years in prison and a $1 million fine.

  • Bankruptcy fraud counts each carry a maximum penalty of 5 years in prison and a $250,000 fine.

  • Failure to file a tax return counts each carry a maximum penalty of one year in prison and a $100,000 fine.

Detroit Pizza Restaurant Owner Indicted for Tax Fraud

July 29, 2013, by The McKellar Law Firm, PLLC

Detroit, Michigan, Pizza Restaurant owner Happy Asker is most likely unhappy after the Justice Department indicted him and several others earlier this month for federal tax violations related to his business, Happy's Pizza.

1364933_pizza_2.jpg

Michigan-based Happy's Pizza grew into a thriving business with 100 franchises across six states. After a three-year investigation of the business, Happy along with Maher Bashi, Tom Yaldo, Arkan Summa and Tagrid Bashi are facing charges for multiple federal and tax offenses listed below:

• 3 counts of filing a false individual tax return for Happy
• 21 counts of aiding in the filing of false payroll tax returns for Happy and Maher;
• 23 counts of aiding in the filing of false payroll tax returns regarding specific Happy Pizza franchises for Yaldo
• 11 counts for aiding in the filing of false corporate tax returns in regards to specific Happy Pizza franchises for Happy and Bashi
• 1 count of obstructing the due administration of internal revenue laws for Happy and Bashi
• 1 count of obstruction for Summa and Bashi (charged together)
• 1 count of obstruction for Yaldo

The problems for Happy's Pizza originally came to light in 2010 when thirty DEA, ATF, and IRS agents infiltrated the company's corporate offices and seized all of the business and personal records. The company maintains they have completely cooperated with the authorities for the last three years, and asked the public not to pre-judge the situation. In a statement released by the company it stated that the IRS investigated all 100 of its franchisee restaurants and only found seven stores to have under-reported income (the government says there were nine stores). It further vowed to vigorously defend its founder.

Happy and his associates stand to face up to five years in prison and a $250,000 fine for the conspiracy charges; up to three years in prison and a $250,000 fine for each count of filing a false income tax return and aiding or assisting in filing a false return; and a maximum of three years in prison and a $250,000 fine for each count for obstruction.

Sources
Dept. of Justice Press Release, "Pizza Franchise Owner and Four Others Indicted for Tax Fraud," July 16, 2013

CBS Detroit, "Happy's Pizza Founder Will Fight Tax Charges," July 17, 2013