Tax Fraud Blotter: Get your points here!
Scrap rap; the roof caves in; and other highlights of recent tax cases.
La Crosse, Wisconsin: Dentist Frederick G. Kriemelmeyer, 70, has been convicted of four counts of tax evasion.
In 2007, Kriemelmeyer was ordered to pay $135,337 for unpaid federal income taxes. By 2012, the IRS had assessed him for more than $450,000 in taxes, interest and penalties. From at least 2013 through 2015, he filed no returns reporting income from his dental practice, directed his patients to pay him in cash or by check with blank payee lines, and paid his business and personal expenses with third-party checks and cash.
Sentencing is scheduled for May 19. Kriemelmeyer faces a maximum of five years in prison for each count of tax evasion. He also faces a period of supervised release, monetary penalties and restitution.
Birmingham, Alabama: Resident John P. Cooney, 70, has pleaded guilty to tax evasion.
In 2011, Cooney filed delinquent federal returns for 2008 through 2010 on which he admitted that he owed some $780,000 but did not include payment. To evade his taxes, Cooney created the nominee entity GVA Advisors and directed that income from his employer and dividends from his investments be paid to an account in GVA’s name rather than to him directly. From 2013 through 2016, he deposited more than $435,000 into the GVA account. By 2017, Cooney owed more than $1.3 million in balances, penalties and interest to the IRS.
Sentencing is scheduled for May 28, when Cooney faces a maximum of five years in prison as well as a period of supervised release and monetary penalties. He has agreed to pay $1,311,904 in restitution to the U.S.
Saratoga, California: Businessman Jyh-Chau “Henry” Horng has been sentenced to three years in prison for failing to report millions of dollars in profits.
Horng was a minority owner of a home-based international trading business that sold scrap metal to China while that country was undergoing its economic and infrastructure boom. From 1999 through 2008, he failed to report on his tax returns millions in profits from the business. Instead, he and his wife used the money to buy residential properties in New York and the San Francisco area, invest more than $5 million in a shopping center and purchase a Bentley.
During an audit, Horng made false statements to the IRS, including that neither he nor his wife had any foreign bank accounts. After the audit, Horng failed to file returns from 2009 through 2018. He was convicted in 2018 of filing false returns and making false statements to an IRS agent while under audit. After the verdict, Horng also pleaded guilty to lying on a bank mortgage application.
Horng was also ordered to serve three years of supervised release and to pay $1.1 million in restitution to the U.S.
Hoover, Alabama: Salesman and tax defier Ivan Scott Butler has pleaded guilty to tax evasion.
Butler was an automobile industry consultant and sold automobile warranties as an independent salesman. In 1993, Butler stopped filing returns and attended tax-defier meetings and purchased tax-defier materials. Five years later, Butler used several Nevada nominee corporations to receive his income. In or around 1999, Butler moved hundreds of thousands of dollars, some in precious metals, to bank accounts in Switzerland and concealed his assets in offshore insurance policies held in the name of non-U.S. insurance providers, disguising his ownership of the funds.
In 2014, Butler converted some of his insurance annuities into precious metals, which were shipped to Butler and another individual in the U.S. Some of those precious metals were given to friends and family for safekeeping.
In total, Butler caused a tax loss to the IRS of $1,093,400.
Sentencing is scheduled for June 24. Butler faces a maximum of five years in prison, as well as a period of supervised release, restitution and monetary penalties.
Manitou Springs, Colorado: Scott Daniel Roughen, 54, has been sentenced to two years in prison, to be followed by three years of supervised release, for tax evasion.
Roughen failed to file individual federal tax returns for tax years 2000 through 2006. After the IRS assessed tax liabilities for Roughen for those tax years, he evaded the taxes for more than a decade by hiding his income through shell corporations, using bank accounts held in other names, setting up multiple offshore bank accounts and recruiting others to lie to the IRS for him.
He was also ordered to pay $995,033.51 in restitution.
Arcadia, California: Steve Chen, 62, a.k.a. “Li Chen” and “Boss,” has agreed to plead guilty to federal criminal charges that he falsely promised profits to more than 70,000 victim investors worldwide in a scheme involving a sham digital currency purportedly backed by amber and other precious gemstones.
Chen was owner and CEO of U.S. Fine Investment Arts and six other companies that used the same address. From July 2013 until September 2015, he fraudulently promoted and solicited USFIA investments and ultimately obtained some $147 million from victim investors.
Chen admitted that he promoted USFIA as a successful multi-level marketing company that extracted amber and other gemstones from mines in the U.S., the Dominican Republic, Argentina and Mexico — mines that were, in fact, non-existent. Investors were duped into buying investments in amounts of $1,000 to $30,000 each. These “packages” purportedly were comprised of amber and other gemstones, as well USFIA “points,” which could be converted to USFIA shares when the company had its IPO. Chen admitted that he never intended for USFIA to have an IPO.
USFIA offered other bonuses such as cash, travel, luxury cars, homes in the Los Angeles area and visas for immigrant investors to investors who recruited others to purchase these “packages,” Chen admitted. Beginning in 2014, Chen and others altered the promotion by substituting “Gem Coins” — ultimately determined to be worthless — instead of points. They falsely promoted these “coins” as a legitimate digital currency backed by the company’s gemstone holdings. Chen also falsely represented that these “coins” were in wide circulation in the jewelry and finance industries.
Chen also admitted that the company did not generate any significant revenue from its business operations, apart from sales of investment packages to victim-investors. The amber and other gemstones in the packages — including those displayed at USFIA’s Arcadia headquarters — were obtained from domestic and foreign commercial suppliers, assigned grossly inflated prices and worth much less than what investors paid USFIA for them.
Chen also admitted to attempting to evade payment of federal income taxes. He reported gross income for 2014 of $138,015, when in fact his income for that year was approximately $4,816,193, for which Chen owed $1,885,094 before interest and penalties.
Once he pleads guilty, Chen will face a maximum of 10 years in prison.
Howell, New Jersey: Business owner Wilson Salas-Molina, 39, has admitted to tax evasion and failure to pay the IRS more than $540,000 in employment taxes.
Salas-Molina was the owner and operator of the roofing business US Contractor (a.k.a. Wilson Contractors, a.k.a. WC Contractor). From 2012 to 2018, Salas-Molina cashed checks he received from roofing clients and paid his 14 employees in cash to conceal his payment of wages and his failure to report, account for and pay over federal employment taxes.
The scheme resulted in a failure to withhold and pay over $540,000 in employment taxes to the IRS.