Tax evasion blotter: Clip seals
Turn on two timers; framed; the 30% solution; and other highlights of recent tax cases.
Vegas: Real estate professional Scott Lawrence has pleaded guilty to federal tax evasion.
From approximately 2009 to 2019, Lawrence owned and operated Turn Two Inc., a real estate company. In 2010, the IRS withdrew Lawrence’s personal bank account to settle an existing federal tax debt.
After learning about the levy, Lawrence began taking steps to dodge the collection, depositing a small portion of his wife’s paycheck into the levy account and withdrawing the rest in cash. Beginning in 2011, Lawrence began depositing all of his wife’s salary and other income into a corporate bank account held by Turn Two and used this account to pay for most of his family’s living expenses. Lawrence also ordered his attorney to pay taxes owed to the IRS from an intentionally overdrawn bank account and send a deceptive letter to the agency.
Lawrence owes more than $1.9 million in restitution to the IRS for his outstanding debt from 2005 to 2019. He will be sentenced on January 26 and faces a maximum of five years in prison for tax evasion. He also faces a period of supervised release, restitution and financial penalties.
Jacksonville, Florida: Raul Solis, 52, pleaded guilty to conspiring to defraud the IRS and employing workers who were neither legally admitted nor authorized to be employed in the United States.
In July, her son, Raul Solis-Martinez, 32, pleaded guilty to the same charge.
Solis and Solis-Martinez owned and operated Solis Brothers Company and Duval Framing, construction contracting companies. They conspired with each other and with the owner of another contractor, H&S Framing, to partially pay their employees with a mixture of checks and cash, and to avoid withholding the full amount of payroll taxes owed to the IRS.
Between 2014 and 2019, the couple’s workers received some $22,186,096.35 in wages that were never reported to the IRS and from which no tax was withheld. The loss to the US Treasury was approximately $5,613,082.38.
The two also defrauded the company that handled their payroll functions, as well as their workers’ compensation insurer, who both relied on the conspirators’ fake payroll reports to calculate the cost of their services. Solis and Solis-Martinez were also aware that many of their employees had immigrated to the United States illegally or were otherwise not authorized to work in the country. Some workers had in fact previously been deported from the United States to return to work for Solis and Solis-Martinez.
Both face a maximum of five years in prison; the two agreed to pay $5,613,082.38 in restitution to the IRS.
New York: Businessman David Seruya has pleaded guilty to tax evasion.
From 2009 to 2014, Seruya was the original owner and shareholder of a New Jersey-based home warranty company. In 2014, he completed a buyout and agreed to sell his shares back to the company and leave the company. In exchange, the company agreed to pay him more than $4.1 million, which included a lump sum payment and installments over 24 months.
Seruya under-reported to his tax preparer the actual amount of income he received from the sale of his shares and did not inform his tax preparer of the income from canceled mortgage debt. He also admitted to evading tax from 2010 to 2013.
The federal tax loss exceeded $1.1 million.
Sentencing is December 14. He faces up to five years in prison on each of three counts of tax evasion, as well as supervised release, restitution and monetary penalties.
Los Angeles: Tax preparer Thanh Ngoc Rudin, 58, pleaded guilty to conspiring to defraud the IRS and the Paycheck Protection Program.
Thanh Rudin was a director of Mana Tax Services, a tax preparation company, and conspired to commit two frauds. First, from June 2019 to July 2021, he conspired with his brother, Quin Ngoc Rudin, along with Seir Havana and others, to prepare and file false federal tax returns on behalf of at least nine professional athletes. Returns reported fabricated business and personal losses to generate undeserved refunds. The conspirators told the athletes that Mana could also amend the previous year’s returns to correct alleged errors made by the athletes’ former accountants in order to obtain additional refunds. Mana then charged the athletes 30% of the resulting refund.
Thanh Rudin and his conspirators also used Mana to apply for PPP loans on behalf of a number of small businesses, fictitious entities controlled by the conspirators themselves with few or no employees, and commercial entities controlled by others. The conspirators grossly inflated the number of employees and monthly salary costs on the claims and submitted fabricated supporting statements. Mana then charged 30% of the value of the loan received.
The two schemes resulted in total losses of over $25 million.
Thanh Rudin will be sentenced on November 9. He faces a maximum of five years in prison for conspiracy and 20 years for wire fraud. He also faces supervised release, restitution and financial penalties. Other conspirators pleaded guilty earlier this year.
Peoria, Ill.: Resident Samuel M. Powell II was sentenced to one year in prison for stealing government money.
Powell applied for a PPP loan in February 2021, saying he had operated a hair salon since June 2018 and had one employee with an annual payroll of $96,000. He was approved for a $20,000 loan and the money was deposited directly into Powell’s credit union account on March 2, 2021.
On the same day, he withdrew $9,500 in cash, followed by two withdrawals the next day: one for $9,500 and one for the remaining balance of $1,500. In June 2021, he applied for loan forgiveness, certifying that he had used the funds in accordance with PPP rules; the loan was cancelled.
Powell was not a licensed barber and did not own a barbershop.
He was charged in December and released on bail, but an arrest warrant was issued after he removed his electronic monitor and failed to appear for a hearing.
After his release from prison, Powell will serve two years of probation. He was ordered to pay $20,000 in restitution for the loan and $350 for damaging the surveillance equipment.
West Hartford, Connecticut: William Chen has pleaded guilty to extensive tax fraud involving restaurants in Connecticut and Massachusetts that he owns and operates.
He was responsible for the purchase and use of the POS system for restaurant orders and for training staff to use the system. Chen paid extra to activate “zapper” software, which deliberately deletes transactions from the system to create fraudulent sales records.
From around 2013 to 2020, Chen and others who worked in restaurants eliminated cash transactions to reduce gross receipts and the amount of sales tax collected and reported. This intentionally removed taxable restaurant income which he disclosed to his accountant.
Chen was also responsible for restaurant accounting and financial records, collecting and withholding employment taxes for the restaurants he worked at, and signing restaurant returns. For the 2013 through 2020 tax years, he failed to withhold, account for, and pay federal income taxes, FICA, and federal unemployment taxes for several cash-paid employees.
The tax loss totals $2,092,926.94.
Chen pleaded guilty to two counts of producing a false statement, which carries a maximum of three years on each count. Sentencing is October 21.