Every month, we pick three of the most amusing convictions we find from Tax Court to share with our readers, but this month? HOLY COW! We wanted to share one WHOPPER of a fraud…
The alleged mastermind of the scheme, attorney Joseph Garza, was indicted on 18 counts of wire fraud, one count of conspiracy to commit wire fraud, and 22 counts of aiding and assisting in the preparation of fraudulent income tax returns as well as a charge of conspiracy to defraud the United States. Attorney and CPA Kevin McDonnell and CPA James Richardson, co-owners of tax preparation and accounting firm McDonnell Richardson, P.C., were added to the case in a superseding indictment and the pair are charged with one count of conspiracy to defraud the United States, one count of conspiracy to commit wire fraud, and five counts of assisting in the preparations of fraudulent tax returns. Craig Fenton, a tax manager at McDonnell Richardson, was indicted on the same charges.
According to the court documents, Mr. Garza allegedly directed his clientele to use hand-picked tax professionals – including Mr. McDonnell, Mr. Richardson, and Mr. Fenton – who helped him illegally shelter their otherwise taxable income. Mr. Garza allegedly charged clients a percentage of the predetermined amount of money they had chosen to shelter from taxes; Mr. McDonnell, Mr. Richardson, and Mr. Fenton were compensated for their roles in the scheme as well.
The defendants allegedly created multiple shell companies – including shell “services” companies and shell “investment” companies – to create a circular flow of funds to help clients avoid paying taxes.
The scheme allegedly resulted in more than $1 billion in unreported income and more than $200 million in unpaid taxes.
Obviously, a case like this will take potentially years to sort out, but the mere fact it occurred is amazing to us!