Kingston, Tennessee resident Jessica Potter Stafford, 34, was sentenced today in the Eastern District Court by U.S. District Court Judge Thomas W. Phillips, to serve 27 months in prison and pay restitution of almost $120,000 to the Internal Revenue Service and $111,794.35 to her former employer, Robert McManus. This sentence is a result of Stafford pleading guilty on February 3, 2011, to 10 counts of wire fraud and three counts of income tax fraud.
According to a press release from the United States Attorney's Office, Stafford was employed as Director of Administration for several businesses owned by Robert McManus. In the course of her employment, she was issued credit cards to be used for the sole purpose of paying expenses relating to her employment duties. Stafford later admitted that from January of 2005, through August of 2008, she used company credit cards to charge more than $200,000 in personal charges at local retail stores. The filed plea agreement states that Stafford then paid for the unauthorized charges with McManus' funds. Stafford admitted that she incurred income that she failed to report on her federal income tax returns for 2006, 2007, and 2008.
As with many economic crimes, the underlying economic fraud (i.e., the wire fraud) was also accompanied by tax related charges. The philosophy of the Government is rather straightforward: if someone steals funds, he/she is not going to report this income on his/her tax return. Failure to report income on a tax return is tax fraud. In other words, the tax fraud charges are like shooting fish in a barrel for the Government if they can prove the non-tax related fraud charge (e.g., wire fraud). In this case with defendant Stafford, according to her plea agreement, she failed to report over $405,000 in income during these years, resulting in additional tax due to the United States of over $119,000.