Tax Fraud Blotter: Justice done
Very deconstructive; snowboard job; matters of discipline; and other highlights of recent tax cases.
Heppner, Oregon: Dr. Kenneth Wenberg, 73, has been sentenced to a year and a day in prison and three years of supervised release for failing to report income resulting in a tax loss of some $128,000.
Dr. Wenberg created nominee entities to hide assets and income he personally earned while serving as a physician at the Morrow County Health District and Urgent Health Care Center. He instructed MCHD and UHCC to make payments for services he performed directly to sham entities to avoid income tax liabilities.
He opened numerous bank accounts and purchased real property in the names of his nominee entities. He also paid for his and his family’s personal living expenses out of the nominee accounts.
Dr. Wenberg, who previously pleaded guilty, was also ordered to pay $128,964 in restitution to the IRS.
Grain Valley, Missouri: Business owner Jeremy Hull, 43, has pleaded guilty to failing to pay more than $1.5 million in federal and state payroll taxes collected from his employees.
Hull owned and operated Hullmark LLC, a construction company, from December 2010 to December 2016. Hull withheld $707,029 in federal income taxes and FICA taxes from his employees’ wages from 2013 through 2014. Hull also withheld $866,337 in state taxes from his employees’ wages.
He admitted that he failed to account for and pay over those taxes to the IRS and the Missouri Department of Revenue.
Hull must pay $707,029 in restitution to the federal government and $866,337 restitution to Missouri. He is also subject to up to five years in prison.
Lewisboro, New York: Town Justice Marc A. Seedorf has pleaded guilty to tax evasion.
From 2009 through October 2019, Seedorf was a town justice and received income from the private practice of law. He did not file federal individual income tax returns for the tax years 2005 through 2015 and incurred a federal tax liability of some $487,000.
In August 2012, he received $1,524,116 in a settlement of a civil lawsuit. At his request, the law firm that represented Seedorf deposited the settlement proceeds into its attorney trust account, to be disbursed to Seedorf later. In the following years, Seedorf instructed the law firm to disburse portions of the settlement to accounts other than his personal bank account, including his law firm’s operating account, his law firm’s attorney trust account and his brother-in-law’s personal account to disguise the source of funds he used to make payments to the IRS and other creditors and the existence of the remainder of the settlement proceeds.
From January 2010 through June 2013, the IRS tried to collect Seedorf’s tax liability but he failed to provide any records to the IRS or make any payment. In June 2013, after the IRS initiated a levy on an investment account held by Seedorf, he had the settlement law firm wire $400,000 of the settlement proceeds to his own law firm’s attorney trust account, from which he paid a portion of his outstanding taxes. He also lied to the IRS that he had borrowed the funds from his own law firm’s trust account.
In December 2014, an IRS agent asked Seedorf whether he had received any non-taxable income from 2009 through 2013. Seedorf never disclosed the 2012 lawsuit settlement or the existence of the more than $540,000 of settlement proceeds that remained in an attorney trust account.
Sentencing is March 24. Seedorf faces a maximum of five years in prison.
Pittsburgh: Business owner Robert Rionda Jr. has pleaded guilty to tax evasion.
Rionda owned and operated Arms Insurance Group, a Subchapter S corp, from 2002 through May 2014. In October 2011, the IRS opened a case on Rionda for unpaid income taxes for the 2009, 2010 and 2011 tax years. In May 2012 the IRS levied his personal bank accounts.
He then told his company’s controller/bookkeeper to stop issuing salary checks to Rionda and his wife, stop using his personal checking accounts altogether and start paying all of his personal bills from the company’s bank accounts. Over the next several years, Rionda continued to file apparently accurate corporate returns on behalf of Arms Inc. as well as personal income tax returns, but he made only minimal payments to the IRS for the personal income taxes he owed.
During 2009 to 2014, Rionda received distributions from the company that varied from approximately $376,000 to $1.6 million per year.
He sold Arms Inc. to his son over time starting in May 2014 and stayed on as a part-owner of the son’s new business, Arms Insurance Group LLC (Arms LLC). Arms LLC began making payments by check to Rionda that represented monthly payments on a promissory note, rent payments and owner draw payments. Rionda deposited some of these checks to two bank accounts held by Arms Inc., rather than depositing them to personal bank accounts in his own name.
During the years 2014-2016, the new company, Arms LLC, paid distributions to Rionda of $92,000, $298,410 and $291,460. Rionda made no substantial payments towards his taxes but did make payments towards his personal mortgage, a mortgage on a business property, his credit cards and his utility bills. In addition, he also transferred millions of dollars in loans and purported investments to another individual.
The total tax loss, including assessed interest and penalties, is $1,539,117.
Sentencing is March 5. The law provides for a total sentence of five years in prison, a fine of $250,000 or both.
Portland, Oregon: Nathan Wheeler, 43, a CPA, has been sentenced to 51 months in prison and three years of supervised release for wire fraud and tax evasion.
Since 2012, Wheeler, who pleaded guilty in 2018, owned and operated Bridge City Advisors, an accounting firm that provided investment and legal services. Wheeler persuaded clients to invest in real estate development projects. Instead of providing promised rates of return and real estate security interests, Wheeler converted his clients’ money to his own use, living an extravagant lifestyle and building a large marijuana business.
Wheeler created LLCs as an investment vehicle on behalf of his clients and named himself a member. He then opened bank accounts for his clients and attempted to gain signing authority. One of his first victims was a C trust established for the benefit of two children whose father died in April 2011. Wheeler was named a trustee and facilitated the sale of the father’s business six months after his death.
Unbeknownst to the children or their representatives, Wheeler used the proceeds to purchase a large residential real estate development. He also repeatedly refused to pay for the children’s expenses, falsely claiming that the funds were frozen because of a lawsuit involving their deceased father.
A second Wheeler victim was a silver medalist for the U.S. Olympic snowboarding team who had created his own line of snowboarding equipment. Wheeler managed to gain signing authority on some of the victim’s bank accounts and made multiple unauthorized transfers of funds to his own accounts. In just two years, Wheeler embezzled more than $962,000 from the athlete victim.
Many of Wheeler’s victims were also retirees, one of whom invested more $236,000 with Wheeler. Shortly after, Wheeler used $27,500 of the victim’s money to buy an engagement ring for his fiancée. He spent a large portion of the money he stole from clients at the Hard Rock Café in Las Vegas, at strip clubs, on travel and on expenses related to his marijuana operations. Between 2011 and 2014, Wheeler defrauded clients of more than $4.4 million.
Sacramento, California: The California Tax Education Council, a state-mandated nonprofit that manages the registration of unlicensed preparers, now posts disciplinary actions taken against registered preparers by the council, including misconduct that results in suspending or revoking a registration. CTEC is also required to post a list of its registrants on probation that specifies the reason why and the terms.
California law requires paid tax preparers to be either a CPA, Enrolled Agent, attorney or CTEC-registered tax preparer. Of the 80,000 tax preparers estimated to be doing business in California, 40,000 are registered with CTEC.