More Tax Lessons from Reality Stars on What Not to Do, Plus Lionel Messi

We discussed last week the surprise when a highly visible reality star is charged with or convicted of tax evasion or other financial crimes (see last week’s post here about The Situation and referencing Richard Hatch). This week, stars of the Real Housewives of New Jersey Teresa and Giuseppe (Joe) Giudice were sentenced to 15 and 41 months’ imprisonment, respectively, for having pleaded guilty to conspiracy and bankruptcy fraud charges. Comments made by the federal judge at sentencing indicate that the Giudices were less than forthright in their pre-sentence submissions and that, perhaps more than anything, factored into Teresa receiving a jail sentence, rather than probation. Let these reality stars be a reminder to all defendants to be truthful with the court, including at sentencing, or risk the consequences.

The Giudices were named in a 39-count indictment that described a number of schemes that generally allowed them to live beyond their means for years, beginning in 2001. The schemes involved submitting false documents and making fraudulent statements to lenders, banks, and a bankruptcy court, and, in Joe’s case, failing to file tax returns. Anyone who watches this show and the franchise would agree that the stars’ means often (if not always) is a part of the storylines, though that is no excuse for criminal conduct.

Yesterday, documents and information provided by the Giudices prior to sentencing (required in every case and utilized to assess the defendant and assist in determining an appropriate sentence, including what amounts are appropriate to order in terms of restitution and criminal penalties) were allegedly false and incomplete. According to the government (as reported by ABC News here), Teresa failed to note as assets “several cars, ATVs, and [construction equipment], claimed no jewelry, and said her $3 million home is filled with just $25,000 worth of furniture” (though the couple holds a $1 million insurance policy for household furnishings). These alleged omissions did not please United States District Court Judge Esther Salas, who stated that, “it feels like things have been hidden.” As her further statements make clear, this obfuscation might have been the tipping point in ultimately ordering that Teresa be incarcerated:

For a moment, I thought about probation until I read the government’s report. What you did in the financial disclosure really sticks in my craw. It’s what the court has a problem with. It shows blatant disrespect for the court. I’ve seen a lot, but I’ve never seen the confusion and work that went into these financial documents. The conduct which you piece-mealed, these financial documents, which I needed for this case were harder to decipher than any I’ve encountered.

(As reported by UsMagazine here). In addition, Joe was required by his plea agreement to file accurate personal returns for the years 2000 through 2011, which he had not yet done, and to pay back taxes and penalties amounting to $240,000, which neither he nor his lawyer seemed to know if he had yet repaid.

These sentences also reflect the high degree of discretion a judge retains in fashioning an appropriate sentence because the sentences were ordered to be served consecutively. Teresa will be incarcerated first, beginning January 5, so that she may spend the holidays with her four young daughters. Joe’s period of incarceration will begin once Teresa is released (which, based upon good time credit and other factors, could be less than one year), so that one parent remains available to care for the children. It is likely that the Court intentionally staggered the sentences in this manner, with Teresa being incarcerated first, because Joe is not a U.S. citizen and faces the likelihood of deportation to Italy upon completing his prison sentence.

At least one other former star of the Real Housewives franchise has also recently found herself in criminal trouble. Dana Wilkey, who appeared on the Real Housewives of Beverly Hills and was best known for announcing the cost of whatever she was wearing, including a pair of $25,000 sunglasses, was arrested in June 2014 for wire fraud conspiracy and wire fraud. She allegedly paid $360,000 in kickbacks through her advertising agency for internet marketing work performed for Blue Shield of California to two named defendants, one of whom was a Blue Shield employee who assisted in having the contract awarded to Ms. Wilkey’s agency and thereafter also concealed the inflated invoices submitted by Ms. Wilkey for payment. Ms. Wilkey has pleaded not guilty.

In celebrity tax evasion news abroad, BBC News is reporting today that Lionel Messi will face tax evasion charges in Spain. Mr. Messi is widely considered the world’s best soccer player and, now, the highest paid, following a $50 million deal earlier this year with his Spanish club, FC Barcelona, and a reported $20 million in endorsement deals. Last year, Mr. Messi and his father Jorge Messi were accused of defrauding the Spanish tax authorities of $5.4 million by utilizing companies in Belize and Uruguay from 2007 through 2009 to conceal income earned in endorsement deals with Adidas, Pepsi-Cola, and others. In defense, Mr. Messi argued that his father controlled his finances to such a degree that he should not be held culpable for any tax fraud, and his father caused a “corrective payment” of over $6.2 million to be made to satisfy the unpaid tax with interest. The Spanish prosecutors thereafter recommended that the charges be dropped, reasoning that Mr. Messi was not involved in the decisions relating to his finances or fully aware of the implications of utilizing foreign entities as it related to his tax obligations in Spain. Today, the court rejected this prosecutors’ request, explaining that Mr. Messi can still be charged with tax fraud, even if he did not “have complete knowledge of all the accounting and business operations nor the exact quantity” but was only “aware of the designs to commit fraud and consent to them.”

Recent Sentences for Federal Tax Crimes in 2014 – Part 3

Today we conclude our review of recent sentences imposed in federal tax crime cases in 2014. In our two previous posts here and here, we reviewed sentences relating to Foreign Bank Account, Tax Evasion, Employment Tax, False Tax Returns, and Tax Return Preparer crimes. In this post, we review sentences imposed for crimes for Returns Submitted via Identity Theft. Merely based upon the number of sentences detailed here, you can easily see how this area of the law has become a focus for the Justice Department.

Returns Submitted via Identity Theft

As the leader of a multi-state fraud conspiracy based in Alabama, Christopher Davis had pleaded guilty to conspiracy to defraud the U.S., wire fraud, and aggravated identity theft. Mr. Davis and co-conspirator Kenneth Blackmon would utilize personal identifying information, obtained from a number of sources, including from an Alabama medical facility, to file false tax returns that claimed refunds. Mr. Davis would receive the refunds from the IRS on prepaid debit cards and then direct runners to travel to Georgia and South Carolina to make cash withdrawals using the debit cards and return the cash to Mr. Davis. At one point, Mr. Davis had over 600 stolen identities and 200 prepaid debit cards. Mr. Davis was sentenced to 60 months in prison and was ordered to forfeit over $300,000. [DOJ press release here].

Another ringleader of a tax refund conspiracy run out of a Bronx apartment from 2011 to 2012, Jose Angel Quilestorres (a/k/a Carlos Jose) had pleaded guilty to several counts, including making a false claim, aggravated identity theft, and conspiracy to defraud the government. The tax refund fraud mill operated by Mr. Quilestorres caused false tax returns to be filed utilized personal identifying information from individuals living in Puerto Rico, who are issued Social Security Numbers but do not have to pay income tax unless they receive income from a U.S. company or the U.S. government. Using more than 8,000 stolen identities, Mr. Quilestorres obtained the fraudulent refund checks sometimes by bribing mail carriers to intercept the checks and deliver them to at least a dozen other individuals who were involved in this scheme. Mr. Quilestorres was sentenced to nine years in prison and ordered to pay $10.1 million in restitution. [Quilestorres complaint found here].

David Haigler, of Alabama, had pleaded guilty for a stolen identity tax refund fraud scheme. He had obtained 263 tax refund checks totaling over $600,000, obtained fictitious powers of attorneys for the individuals named on the checks, and then cashed the checks. He paid a portion of the proceeds to those who provided him with the fraudulent checks. Mr. Haigler was sentenced to 37 months in prison and three years of supervised release and ordered to pay $606,781 in restitution. [DOJ press release here].

Noemi Rubio Baez, of California, had pleaded guilty to having conspired in a scheme from 2008 to 2012 to electronically filing false tax returns using false income information and falsely claiming refunds through false tax credits. She had also pleaded guilty for aggravated identity theft because some of the filers had been unaware that she had filed returns using their names. Ms. Baez was sentenced to 30 months in prison and three years of supervised release and ordered to pay $703,536.86 in restitution. [DOJ press release here].

Former Alabama bank teller LaQuanta Clayton had pleaded guilty to crimes related to her opening five bank accounts in the names of another individual, without his knowledge, in order to receive fraudulent tax refunds. She then made withdrawals for the refund amounts and provided them to others who were involved in a larger scheme of submitting false returns for fraudulent refunds. Ms. Clayton was sentenced to 21 months in prison and three years of supervised release and ordered to pay $185,730 in restitution. [DOJ press release here].

An Alabama husband, wife, and son, Christian Young, Mary Young, and Octavious Reeves, had pleaded guilty to conspiring to obtain stolen identities in order to file false tax returns claiming refunds that were issued on prepaid debit cards, which proceeds, totaling over $400,000, were withdrawn by the family. All received sentences that included imprisonment – Ms. Young for 87 months, Mr. Young for 70 months, and Mr. Reeves for 51 months – and three years of supervised release. Mr. and Ms. Young were ordered to pay over $400,000 in restitution. Mr. Reeves was ordered to pay $42,257 in restitution. [DOJ press release here].

Ricky Lee Greenwood, of Oregon, had pleaded guilty to aggravated identity theft, wire fraud, and filing a false return. He had filed at least 66 false returns using fictitious wage and dependent information, including of unemployed individuals, in order to maximize credits to claim false refunds. Mr. Greenwood was sentenced to 40 months in prison and three years of supervised release and ordered to pay $296,106 in restitution. [DOJ press release here].

Virginia Parks-Bert, of Virginia, had pleaded guilty to defraud the government and aggravated identity theft. She had false returns for herself and others that contained false wage and tax withholding information in order to obtain false refunds, intentionally in small amounts so as to avoid IRS detection. Ms. Parks-Bert was sentenced to 42 months in prison and three years of supervised release and ordered to pay over $135,000 in restitution. [DOJ press release here].