Tax Fraud Blotter: Clip joints

Accounting

Turn Two-timer; framed; the 30% solution; and other highlights of recent tax cases.

Las Vegas: Real estate professional Scott Lawrence has pleaded guilty to evading federal taxes.

From about 2009 through 2019, Lawrence owned and operated Turn Two Inc., a real estate company. In 2010, the IRS levied Lawrence’s personal bank account to satisfy an existing federal tax debt.

After learning of the levy, Lawrence started taking steps to dodge collection, depositing a small portion of his wife’s paycheck into the levied account and withdrawing the rest in cash. Beginning in 2011, Lawrence began depositing his wife’s entire paycheck and other earnings into a corporate bank account held by Turn Two and used that account to pay most of his family’s living expenses. Lawrence also directed his attorney to pay taxes owed to the IRS on an intentionally overdrawn bank account and to send a materially misleading letter to the agency.

Lawrence owes more than $1.9 million in restitution to the IRS for his delinquent debt from 2005 through 2019. He will be sentenced on Jan. 26 and faces a maximum of five years in prison for tax evasion. He also faces a period of supervised release, restitution and monetary penalties.

Jacksonville, Florida: Raul Solis, 52, has pleaded guilty to conspiring to defraud the IRS and to employing workers who were neither lawfully admitted to nor authorized to be employed in the U.S.

In July, his son, Raul Solis-Martinez, 32, pleaded guilty to the same charge.

Solis and Solis-Martinez owned and operated Solis Brothers Company and Duval Framing, construction subcontracting companies. They conspired with each other and with the owner of another contractor, H&S Framing, to pay their employees partially off the books with a mix of checks and cash, and to avoid withholding the full amount of payroll taxes owed to the IRS.

Between 2014 and 2019, the pair’s workers received some $22,186,096.35 in wages that were never reported to the IRS and from which no taxes were withheld. The loss to the U.S. Treasury was some $5,613,082.38.

The two also defrauded the company that managed their payroll functions, as well as their workers compensation insurer, both of which relied on the conspirators’ false payroll reporting to calculate the cost of their services. Solis and Solis-Martinez also knew that many of their employees had emigrated to the U.S. illegally or were otherwise not authorized to work in the country. Some workers had in fact been previously deported from the U.S. only to return and work for Solis and Solis-Martinez. 

Both face a maximum of five years in prison; both have agreed to pay $5,613,082.38 in restitution to the IRS. 

New York: Businessman David Seruya has pleaded guilty to tax evasion.

From 2009 to 2014, Seruya was an original owner and shareholder of a New Jersey-based home warranty business. In 2014, he entered into a buyout and agreed to sell his shares of stock back to the business and exit the company. In exchange, the company agreed to pay him more than $4.1 million, which included a lump sum payment and installment payments over 24 months.

Seruya underreported to his tax preparer the actual amount of income he received from the sale of his stock and did not inform his preparer about income received from canceled mortgage debt. He also admitted to evading taxes for 2010 to 2013.

The federal tax loss exceeded $1.1 million.

Sentencing is Dec. 14. He faces up to five years in prison on each of three counts of tax evasion, as well as supervised release, restitution and monetary penalties.

Hands-in-jail-Blotter

Los Angeles: Tax preparation exec Thanh Ngoc Rudin, 58, has pleaded guilty to conspiring to defraud the IRS and the Paycheck Protection Program.

Thanh Rudin was a principal of Mana Tax Services, a tax prep business, and conspired to commit two frauds. First, from June of 2019 through July 2021, he conspired with his brother, Quin Ngoc Rudin, as well as Seir Havana and others, to prepare and file false federal income tax returns on behalf of at least nine professional athletes. The returns reported fabricated business and personal losses to generate undeserved refunds. The conspirators told the athletes that Mana also could amend prior-year returns to correct purported errors made by the athletes’ previous accountants to get additional refunds. Mana then charged the athletes 30% of the resulting refund.

Thanh Rudin and his conspirators also used Mana to apply for PPP loans on behalf of a number of small businesses, shell entities controlled by the conspirators themselves with few or no employees and business entities controlled by others. The conspirators grossly inflated the number of employees and monthly payroll costs on the applications and submitted fabricated supporting returns. Mana then charged 30% of the value of the loan received.

The two schemes resulted in total losses of more than $25 million.

Thanh Rudin will be sentenced on Nov. 9. He faces a maximum of five years in prison for the conspiracy charge and 20 years for wire fraud. He also faces supervised release, restitution and monetary penalties. Other conspirators pleaded guilty earlier this year.

Peoria, Illinois: Resident Samuel M. Powell II has been sentenced to a year in prison for theft of government money.

Powell applied for a PPP loan in February 2021, claiming he’d operated a barber shop since June 2018 and had one employee with an annual payroll expense of $96,000. He was approved for a $20,000 loan and the money was direct-deposited into Powell’s credit union account on March 2, 2021.

That same day, he withdrew $9,500 in cash, followed by two withdrawals the next day: one for $9,500 and one for the remaining balance of $1,500. In June 2021, he filed a loan forgiveness application, certifying that he’d used the funds per PPP rules; the loan was forgiven.

Powell was not a licensed barber and did not own a barber shop.

He was indicted in December and released on bond, but an arrest warrant was issued after he removed his electronic monitor and failed to appear for a hearing.

Following his release from prison, Powell will serve two years on supervised release. He was ordered to pay $20,000 in restitution for the loan and $350 for damaging the monitoring equipment.

West Hartford, Connecticut: William Chen has pleaded guilty to an extensive tax fraud involving Connecticut and Massachusetts restaurants that he owns and operates.

He was responsible for purchasing and using the point-of-sale system for restaurant orders and for training staff on the use of the system. Chen paid an additional fee to activate “zapper” software, which deliberately deletes transactions from the system to create fraudulent sales records.

From approximately 2013 to 2020, Chen and others who worked at the restaurants deleted cash transactions to reduce the gross receipts and the amount of sales tax collected and reported. This intentionally suppressed the restaurants’ taxable income that he disclosed to his accountant.

Chen was also responsible for the accounting and financial records at the restaurants, for the collection and withholding of employment taxes for the restaurants at which he worked, and for signing the restaurants’ returns. For the 2013 through 2020 tax years, he failed to withhold, account for and pay federal income taxes, FICA and federal unemployment taxes for multiple employees who were paid in cash.

The tax loss totals $2,092,926.94.

Chen pleaded guilty to two counts of filing a false return, which carries a maximum of three years on each count. Sentencing is Oct. 21.

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