Collared; gone deep; to protect and disserve; and other highlights of recent tax cases.
Marietta, Georgia: Dog broker Justin Daniels, 48, has been sentenced for filing false returns.
Since 2006, he had sold Yorkie, Morkie and Shi-Tzu puppies. Although his customers believed he was selling the puppies directly, the animals were in fact being raised by breeders in Kentucky and Tennessee. The puppies cost $800 to $1,200, and between 2015 and 2018 Daniels received and deposited more than $2.3 million into personal checking accounts.
Based on information provided to his preparer, Daniels underreported $1,186,830 in gross receipts during those years, resulting in additional tax due of $258,265. At the same time, Daniels was submitting false information on his returns and representing to private lenders that he made substantially more money to obtain loans.
Convicted in December after he pleaded guilty, Daniels has been sentenced to 14 months in prison to be followed by a year of supervised release. He was also ordered to pay $258,265 in restitution.
Lutherville-Timonium, Maryland: Exec Michelle Leach-Bard has pleaded guilty to failing to pay employment taxes to the IRS and embezzling from an employee benefit plan.
Leach-Bard was the owner and sole corporate officer of iProcess Online Inc., a third-party accounting company that specialized in payroll, HR and bookkeeping. From at least October 2016 through the end of 2021, she was responsible for withholding Social Security, Medicare and income taxes from employees’ wages and paying that money to the IRS. She had the money withheld but did not pay it over.
In total, Leach-Bard caused a tax loss to the IRS of $2,663,264.12.
In addition, iProcess had a 401(k) for some employees, with contributions deducted from participating employees’ wages. Beginning around 2007, Leach-Bard did not pay those employee contributions to the plan; in total, she did not pay to the 401(k) some $207,180.41 in wages that had been withheld from employees’ paychecks. She also did not make some $18,740.37 in matching contributions for certain employees.
Sentencing is Aug. 20. She faces up to five years in prison for both the tax and embezzlement charges as well as a period of supervised release, restitution and monetary penalties.
Belle Chasse, Louisiana: Bookkeeper Mary B. Katicich, of Marrero, Louisiana, has pleaded guilty to one count of wire fraud and one count of making and subscribing a false return.
She used her position with J&J Diving Corp. to fraudulently divert funds from the company’s bank account. She also filed a return for 2016 that failed to report some $120,190.58 of income.
Katicich faces a maximum of 20 years in prison for the wire fraud count and up to three years on the tax charge. On each count Katicich faces a fine of up to $250,000 or the greater of twice the gross gain or twice the gross loss to any person resulting from the offense. In addition, Katicich faces a term of supervised release of up to three years on the wire fraud count and up to a year on the tax count. Each count also carries a $100 mandatory special assessment.
Inglewood, California: Porfirio Estrada has been sentenced to 18 months in prison for underreporting income he received for construction services, causing a tax loss of nearly a half million dollars.
Estrada, who pleaded guilty in September, filed false returns for 2015 to 2017. He underreported his income by nearly $3.2 million, income gained through roofing and other contracting services. Instead of depositing checks received for his services, Estrada took them to check-cashing services and did not inform his tax preparer of the income.
He was also ordered to pay $446,575 in restitution to the IRS.
Prior Lake, Minnesota: Tax preparer Beau Wesley Gensmer has been sentenced to eight years and six months in prison for wire fraud and assisting in the preparation of false returns.
From 2012 to 2018, Gensmer developed a scheme to file 63 returns that claimed fraudulently inflated refunds for unwitting taxpayer clients. He hired two tax preparers to whom he emailed false information, including fraudulent business losses and charitable contributions. The preparers relied on the information provided by Gensmer, and, as a result, prepared and e-filed false returns for each of his clients. Gensmer charged his clients a commission of some 30% for each fraudulent refund.
He caused a total tax loss to the IRS of $6.7 million.
As part of his scheme, Gensmer also provided “audit protection services” to clients who were audited by the IRS for the fraudulent returns he helped prepare; he submitted false documents to the IRS during these audits.
Gensmer, who
Campbell, California: Exec Shane Brightpath Mike has pleaded guilty to failing to pay employment taxes from the wages of his employees.
Mike owned and was the president and COO of Excel Behavioral Services, which provided home care to persons with disabilities. He was responsible for withholding Social Security, Medicare and income taxes from his employees’ wages and paying those funds to the IRS, and for the fourth quarter of 2014 through the third quarter of 2015 he paid none of the withheld taxes to the IRS. For 3Q14, Mike only paid part of the funds withheld.
He failed to pay more than $1 million in taxes to the IRS during these five quarters, and used the money to pay his personal expenses.
Mike also filed false personal income tax returns for 2014 and 2015, falsely claiming credit for federal tax withholdings from wages he received from Excel, knowing that they hadn’t been paid over to the IRS.
In total, Mike caused a tax loss to the IRS of $1,177,947.
Sentencing is Sept. 24. He faces up to five years in prison, as well as a period of supervised release, restitution and monetary penalties.
Hartford, Connecticut: Business owner Kevin Biebel, of Hardeeville, South Carolina, and formerly of New Milford, Connecticut, has pleaded guilty to a tax offense.
Biebel operated Art Metal Industries, a metal fabrication business. In 2017, AMI had total gross receipts of more than $1.5 million and a net profit of more than $550,000. That year, Biebel transferred more than $350,000 from AMI to his personal bank account for various expenditures.
In 2018, the IRS sought to collect delinquent payroll taxes from Biebel for AMI and instructed him to file delinquent 1040s for 2016 and 2017. In September 2018, Biebel filed the returns, which fraudulently reported that he had zero total income and zero total tax due for both years.
That year, AMI also received more than $2.7 million in gross receipts and had a profit of more than $1.2 million. Biebel transferred funds from an AMI bank account to his personal bank account and another bank account held in the name of Diego Trust, a limited liability company for which Biebel was the sole listed member. Biebel used more than $750,000 from those accounts to purchase a home in South Carolina and other assets.
He also failed to file individual income tax returns for 2018, 2019 and 2020.
Between 2016 and 2020, Biebel failed to report more than $2.8 million in business income from AMI, resulting in a tax loss of some $900,000. He also failed to withhold and pay over some $300,000 in employment taxes.
Biebel pleaded guilty to filing a false tax return, an offense that carries up to three years in prison. He has agreed to pay restitution of $1,208,801.
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