Businesses, their owners, management and tax adviser and others using or contemplating using aggressive federal income, employment or other tax practices should heed the warning sent by the recent grand jury indictment and continuing Justice Department prosecution of cable reality television show Chrisley Knows Best stars Todd and Julie Chrisley on multiple counts of conspiracy, bank fraud, wire fraud, and tax evasion and companion indictment and prosecution of the Chrisley’s accountant, Peter Tarantino, on tax-related offenses.
On August 13, 2019, the Justice Department announced the grand jury indictment of the Chrisley son charges of cheating taxpayers by actively evading paying federal taxes on the money they earned and defrauding a number of banks by fraudulently obtaining millions of dollars in loans.
While the indictment and prosecution of the high profile Chrisleys has dawn extensive media coverage, the expanding aggressiveness of the Internal Revenue Service and Justice Department to zealously investigate and prosecute individuals and businesses that cheat on their tax obligations and the growing number of individuals ordered imprisonment for their conviction on these charges. Amid this aggressive enforcement climate, businesses or individual taxpayers, their management, operators, investors and advisors should think twice before using illegal or inappropriately aggressive tax minimization strategies or other practices that could violate federal corporate, income, employment or other tax laws.
Chrisley Charges & Prosecution
Among other things, the grand jury indictment charges the Chrisleys and their accountant, Peter Tarantino, of conspiring to defraud the IRS by failing to timely file income tax returns or pay income taxes for the 2013, 2014, 2015, and 2016 tax years. Although Todd Chrisley publicly claimed on a 2017 national radio program “obviously the federal government likes my tax returns because I pay 750,000 to 1 million dollars just about every year so the federal government doesn’t have a problem with my taxes,” the Justice Department and IRS allege the Chrisleys did not file or pay tax returns for 2013, 2014, 2015, and 2016 but instead, with the aid of Tarantino, allegedly took steps to obstruct IRS collection efforts including hiding income, lying to third parties about their tax returns, and – in Tarantino’s case – lying to FBI and IRS-CI Special Agents.
In addition to the tax fraud charges, the indictment and related information presented in court by the Justice Department also charge Todd and Julie Chrisley with conspiring to defraud numerous banks by providing the banks with false information such as personal financial statements containing false information, and fabricated bank statements when applying for and receiving millions of dollars in loans from as early as 2007 to 2012..
After fraudulently obtaining these loans, the Justice Department says the Chrisleys allegedly used much of the proceeds for their own personal benefit. In 2014, two years after the alleged bank fraud scheme ended, the Justice Department claims Todd and Julie Chrisley allegedly used fabricated bank statements and a fabricated credit report that had been physically cut and taped or glued together when applying for and obtaining a lease for a home in California.
Other Convictions & Sentencings Show Criminal Tax Prosecution A Real Risk For Overly Aggressive Taxpayers and Tax Advisors
In weighing their own exposure to federal tax prosecution, individual and business taxpayer, their investors, operators, owners, and tax advisors should resist the urge underappreciate their own risk by attributing the prosecution of the Chrisley’s to their celebrity status. In fact, in announcing the Chrisley indictments, the Justice Department made a point of emphasizing that the Chrisley prosecution is part of a much larger and coordinated effort by the IRS and Department of Justice to aggressively find and crack down on individuals who try to conspire with others to hide their income and then lie to federal agents when confronted. In this respect, Thomas J. Holloman, III, Special Agent in Charge of the Atlanta Field Office, made a point of denying that the Chrisley prosecution was based upon their celebrity status, but rather raises from the IRS’ policy of “zero tolerance for individuals who attempt to shirk their tax responsibilities.”
An already lengthy and quickly mounting list of federal criminal tax prosecutions and prosecutions and convictions certainly lend credence to Holloman’s claim. See, See, e.g., Detroit Area Businessperson Pleads Guilty to Payroll Tax Crime (August 28, 2019); Former Operators of Michigan Adult Foster Care Homes Sentenced for Income and Employment Tax Crimes (August 27, 2019); Alabama Man Sentenced to Prison for Filing a False Tax Return (August 27, 2019); North Carolina Office Manager Sentenced to Prison for Employment Tax Fraud (August 27, 2019); Former CPA Indicted for Failing to Report Foreign Bank Accounts and Filing False Documents with the IRS (August 27, 2019); Former CPA Indicted for Failing to Report Foreign Bank Accounts and Filing False Documents with the IRS (August 14, 2019; Portland, Maine Tax Return Preparer Pleads Guilty to Preparing False Tax Return (August 13, 2019); Federal Court Shuts Down Palm Beach County, Florida Tax Return Preparers (August 8, 2019); Waco Tax Return Preparer Pleads Guilty to Conspiring to Defraud the United States (August 5, 2019); Justice Department Announces Resolution with LLB Verwaltung (Switzerland) AG (August 2, 2019); Michigan Woman Convicted of Obstructing The IRS (July 26, 2019); Brooklyn Business Owner Pleads Guilty in Employment Tax Scheme (July 26, 2019); Colorado Tax Defier Convicted Of Tax Evasion (July 22, 2019); Michigan Defendant Pleads Guilty to Conspiracy to Steal From an Organization Receiving Federal Funds (July 22, 2019); North Carolina Tax Return Preparer Pleads Guilty to Conspiracy to Defraud the IRS (July 19, 2019); Virginia Businessman Pleads Guilty to $5 Million Employment Tax Fraud and Illegal Firearm Possession (July 19, 2019); Justice Department Announces Addendum to Swiss Bank Program Category 2 Non-Prosecution Agreement with Banque Bonhôte & Cie SA (July 19, 2019); Texas Tax Return Preparer Sentenced to Prison in False Tax Return Scheme (July 16, 2019); Kansas City, Missouri, Woman Sentenced to Prison for Wire Fraud and Using Stolen Identities to File False Tax Returns (July 16, 2019); Federal Court Bars Florida Tax Return Preparer and Her Businesses From Preparing Tax Returns (July 15, 2019); Michigan Defendant Pleads Guilty to Conspiracy to Defraud the IRS and Steal From an Organization Receiving Federal Funds (July 12, 2019); Property Preservationist Pleads Guilty in $10 Million Dollar Fraud Scheme (July 8, 2019); Tulsa Man Pleads Guilty to Payroll Tax Fraud (July 3, 2019); Maryland Woman Pleads Guilty to Theft of Government Money and Aggravated Identity Theft (July 2, 2019); Engineering Firms’ CPA Sentenced to Prison for Role in Tax Scheme (July 1, 2019); North Carolina Tax Return Preparer Sentenced to Prison for Conspiring to File False Tax Returns
Take, for instance, the criminal employment tax fraud prosecution that lead a federal court on August 28, 2019 to sentence adult foster home owner/operator Jeremiah Cheff to 27 month in prison and his wife Nicolette to two years’ probation.
On August 28, 2019, a federal judge sentenced adult foster home owner and operator Jeremiah Cheff to 27 months in prison, and Nicolette Cheff to two years of probation as punishment for employment tax fraud. According to court documents and the evidence presented at trial, the Cheffs owned and controlled the financial and business operations of 16 foster care homes that cared for adults with mental illnesses and developmental and physical disabilities. From September 2010 through September 2014, prosecutors charged the Cheffs withheld payroll taxes from employees’ paychecks, but failed to timely file payroll tax returns and pay over the withheld funds to the Internal Revenue Service (IRS). Jeremiah Cheff also failed to file several individual income tax returns and, when the IRS attempted to collect unpaid payroll taxes, he sent the IRS a false financial instrument claiming to be worth $80,000 and falsely claimed to a revenue officer that he had paid the taxes due.
On April 11, 2017, Nicolette Cheff pleaded guilty to failing to file an Employer’s Quarterly Federal Tax Return and failing to file an Individual Income Tax Return. On May 20, 2019, a jury found Jeremiah Cheff guilty of 60 counts of willfully failing to account for and pay over payroll taxes. He was also convicted of corruptly endeavoring to obstruct the IRS, and failing to timely file his 2013 through 2015 individual income tax returns. In addition to the term of imprisonment imposed, United States District Judge Linda V. Parker ordered Jeremiah Cheff to serve two years of probation and ordered both Cheffs to pay restitution in the amount of $199,647 to the IRS.
The Cheffs’ conviction and sentencing resulted from the aggressive investigations and prosecution of businesses and individuals illegally skirting tax liability for tax fraud and related crimes that the IRS and Justice Department that are resulting in an already lengthy and ever-growing list of tax fraud prosecutions and convictions.
Beyond their actual criminal sentencing and payment of restitution, the Cheffs and other business operators with criminal tax convictions or owned or employing others with those convictions can suffer disqualification or restriction of eligibility to serve as providers or contractors to federal and/or state programs and other business opportunities, employee and investor lawsuits, shame and other consequences..
In light of these and other prosecutions and convictions, individuals and businesses that have, are or are considering using, promoting, assisting or advising others, or doing business with others engaged in prohibited or aggressive employment, income or other tax practices, making false or misleading representations to avoid taxes or tax prosecution or engaging in other conduct prohibited by federal tax laws should think twice. Beyond the potentially painful civil penalties and interests that generally arise from many tax law violations, such actions increasingly could result in criminal prosecution and conviction under the current IRS and Justice Department “zero tolerance” policy. Tax advisors and preparers also are reminded of their own special heightened tax preparer liability exposure from advising or representing individuals or businesses involved in such actions. Parties who suspect they or someone they do business in has engaged in such practices should contact a qualified attorney admitted to and with extensive experience representing and defending clients in tax fraud and other tax violations before the IRS and Justice Department. While the investigation and resolution of such concerns likely may require the use of accountants or other consultants, taxpayers and advisors are cautioned the highly sensitive legal nature of the investigations and discussions required to examine and address these issues make it highly advisable for all parties to ensure all communications and dealings are conducted to the extent possible pursuant to and in furtherance of an established legal representation by legal counsel experienced in the tax and other laws involved and within the scope of attorney client privilege.
About The Author
Cynthia Marcotte Stamer is a Martindale-Hubble “AV-Preeminent (Top 1%) rated practicing attorney and management consultant, health industry public policy advocate, widely published author and lecturer, recognized for her nearly 30 years’ of work with business and government clients and their leaders as a LexisNexis® Martindale-Hubbell® “LEGAL LEADER™ and “Top Rated Lawyer,” in Health Care Law and Labor and Employment Law; a D Magazine “Best Lawyers In Dallas” in the fields of “Health Care,” “Labor & Employment,” “Tax: Erisa & Employee Benefits” and “Business and Commercial Law,” a Fellow in the American Bar Foundation, the Texas Bar Foundation and the American College of Employee Benefit Counsel.
Board Certified in Labor and Employment Law by the Texas Board of Legal Specialization, Ms. Stamer serves as outside general counsel and special counsel advice, representation and other legal and operations services on a real-time “on demand,” special project and ongoing basis tailored to the needs of the domestic and multinational insurance, healthcare, energy, consulting, manufacturing and other clients on compliance, risk management and other performance and controls matters.
Best recognized for her work on labor and employment, employee benefits and compensation, healthcare, insurance and risk management, technology and privacy and data security concerns, her experience encompasses work with management of a diverse array of clients and matters including domestic and multinational employers across many industries, health and other employee benefit plans, payroll, staffing, recruitment, technology, audit, training and coaching, consultin, and other outsourcing service providers, public and private health care providers, health and other insurers, banking and financial services, manufacturing, retail and other sales, hospitality, manufacturing, consulting, engineering bankruptcy, turnaround management restructuring and reengineering, and other change management, technology and other vendors, nonprofit, government and others domestically and internationally.
Author of a multitude of highly-regarded works and training programs on published by BNA, the ABA and other premier legal and other industry publishers, she also consults to and trains business and government and their leaders and speaks extensively about a wide range of general and special legal, business process and operations a and other concerns.
Beyond these involvements, Ms. Stamer also is active in the leadership of a broad range of other professional, charitable and civic organizations. Through these and other involvements, she provides hands on leadership, consulting and other support to develop and build solutions, build consensus, garner funding and other resources, manage compliance and other operations, and take other actions to identify promote tangible improvements in health care and other operations and policies.
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