A conviction for tax fraud can come with serious consequences such as large fines and jail time. This is true even in situations where the IRS believes an individual taxpayer committed a single act of fraud. In early March 2020, the government obtained guilty verdicts in a trial against a California businessman involved in a scheme to massively defraud the government by claiming renewable fuel tax credits for which his companies were not actually eligible. This cautionary tale demonstrates the importance of having a professional like a tax lawyer look over your returns to ensure that you are not claiming any credits for which you do not qualify.
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Background of the Case
The plaintiff in this case is a man named Lev Dermen who ran a sprawling petroleum empire based in Los Angeles. He became acquainted with two Utah businessmen, the Kingstons, who were the owners of a company called Washakie Renewable Energy. Dermen and the Kingstons worked together to fake the creation of millions of gallons of biodiesel by their companies. They did this by buying and then reselling biodiesel fuel created by other companies and then claiming this product as their own creation. They then claimed IRS tax credits offered to companies working to increase the amount of renewable fuel used and produced within the United State.
IRS agents and agents from other federal agencies became suspicious of their activity and began an investigation into Dermen and the Kingstons. They found evidence that the biofuel was not actually being produced as required. This evidence came in the form of doctored production and transportation records, among other documents. They also discovered evidence that the perpetrators had been cycling more than $3 billion dollars between multiple back accounts in an attempt to keep up the ruse of their buying and selling qualifying fuel.
Over the course of the scheme, Dermen and the Kingstons claimed over $1 billion in environmental tax credits for which they were not actually eligible. The IRS actually paid out about $500 million in fraudulent tax credits, which were distributed between the brothers and Dermen.
The Case Against Derman
The Kingston brothers and other associates pleaded guilty to the scheme in exchange for the prosecutor recommending lighter sentences for them. Still, Jacob Kingston, who was Dermen’s main co-conspirator, faces up to 30 years in prison under his deal. Dermen chose to take his case to trial. At trial, the Kingston brothers testified against him and offered a plethora of evidence of the scheme that had taken place.
Dermen was charged in federal district court with ten felony counts of conspiracy to commit mail fraud, conspiracy to commit money laundering, concealment money laundering, and expenditure money laundering. The trial was extremely involved and lasted over seven weeks from the time the jury was called until they reached a verdict. Jacob Kingston testified that Dermen had claimed that he controlled an “umbrella” of law enforcement entities around the region and the country and that Kingston had believed this would protect them from legal trouble. At the end of the trial, the jury found Dermen guilty on all ten counts. He has yet to be sentenced, but faces severe potential penalties including decades in prison and millions in restitution owed to the government.
The IRS Takes Instances that it Considers Fraud Very Seriously
The above case illustrates just how serious the IRS takes tax fraud, especially when it is done through a program like the renewable energy tax credit system that is designed to provide for the public benefit. If you are facing an audit or criminal tax investigation related to your business or personal tax returns, claiming these kinds of credits when you were not qualified for them, or committing other forms of tax fraud, you need to get in touch with a skilled tax attorney like those at the Tax Law Offices of David W. Klasing as soon as possible. We have tons of experience and success with mitigating any potential civil or criminal penalties you could face.
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Note: As long as a taxpayer that has willfully committed tax crimes (potentially including non-filed returns coupled with affirmative evasion of payment) self-reports the tax fraud (including a pattern of non-filed returns) through a domestic or offshore voluntary disclosure before the IRS has started an audit or criminal tax investigation / prosecution, the taxpayer can ordinarily be successfully brought back into tax compliance and receive a nearly guaranteed pass on criminal tax prosecution and simultaneously often receive a break on the civil penalties that would otherwise apply.
It is imperative that you hire an experienced and reputable criminal tax defense attorney to take you through the voluntary disclosure process. Only an Attorney has the Attorney Client Privilege and Work Product Privileges that will prevent the very professional that you hire from being potentially being forced to become a witness against you, especially where they prepared the returns that need to be amended, in a subsequent criminal tax audit, investigation or prosecution.
Moreover, only an Attorney can enter you into a voluntary disclosure without engaging in the unauthorized practice of law (a crime in itself). Only an Attorney trained in Criminal Tax Defense fully understands the risks and rewards involved in voluntary disclosures and how to protect you if you do not qualify for a voluntary disclosure.
As uniquely qualified and extensively experienced Criminal Tax Defense Tax Attorneys, Kovel CPAs and EAs, our firm provides a one stop shop to efficiently achieve the optimal and predictable results that simultaneously protect your liberty and your net worth. See our Testimonials to see what our clients have to say about us!
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Tax fraud does not have to involve big businesses or corporations. It can also be done on a smaller level by individual taxpayers who attempt to avoid a tax obligation or claim a tax credit by reporting false information to the IRS. This could be anything from claiming a dependent who is not actually dependent on you, to underreporting assets, to over-claiming exemptions.
No matter how big or small, the IRS takes this kind of fraud seriously and it can result in severe criminal and civil penalties. An audit could be a potential sign that the IRS believes something on your tax return is incorrect. As soon as you learn you are to be audited, or as soon as you learn anything that makes you believe the IRS could come after you for tax fraud, you need to retain an experienced tax attorney like those at the Tax Law Offices of David W. Klasing. We will fight to get your issues dealt with before they escalate into a larger situation like they did for Mr. Dermen. Call us today at 800-681-1295.
Regardless of your business needs, the professionals at the Tax Law Offices of David W. Klasing are here for you. We are open for business and our team will help ensure that your business is too. Contact the Law Offices of David W. Klasing today to discuss your business with one of our professionals.
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