In March, a Brooklyn resident pled guilty to charges including insider trading and tax evasion after a years-long battle over the terms of a plea agreement. The defendant faces sentencing in July where he could receive up to 25 years in prison, not to mention substantial fines and restitution.
The government takes any effort to obscure income, whether legally or illegally obtained, as a personal affront and has ramped up its efforts to identify and prosecute tax evaders in recent years. Even honest taxpayers with minor mistakes in their past tax disclosures can get swept up in aggressive government action if they do not act in time to prevent it.
To learn about the steps you can take to build up your defenses and come into compliance with the federal tax code, contact the Dual Licensed Criminal Tax Defense Attorneys and CPAs at the Tax Law Offices of David W. Klasing today. We can be reached by phone at our offices at (800) 681-1295 or schedule online today.
Last month, a New York City man pled guilty in federal court to two counts of insider trading and tax evasion. Jason Peltz, 39, entered his plea in Brooklyn’s federal district courthouse after finally reaching a plea agreement with prosecutors after a lengthy period of negotiations. Peltz had previously pled not guilty to the charges.
The charges against Peltz stemmed from his initial act of trading on securities using “material non-public information,” which, by law, is insider trading. Specifically, Peltz purchased stock in chemical manufacturer Ferro Corp after learning from a friend that it had received a takeover bid. Peltz also shared the information about the takeover bid with others. Recipients of Peltz’s tip included a reporter who wrote an article about the bid offer. The article resulted in an increase in Ferro Corp’s stock price. The reporter does not face prosecution for any charges at this time.
Peltz and his source within Ferro Corp received significant financial benefits in return for sharing the tip with other co-conspirators who profited from the trades. The payments to Peltz continued over a period of time. At Peltz’s direction, the payments were made to corporate and nominee bank and credit card accounts, allegedly to conceal these illicit sources of income from the IRS. In statements made under penalty of perjury to the IRS in 2017, Peltz claimed that he had had no income since December of 2015.
As part of his plea, Peltz submitted a written statement to the court, which was read aloud by U.S. District Judge Nicholas Garaufis. In the statement, Peltz admitted that he purchased the securities based on the information he received from a friend and that he knew that trading on the information was against the law when he made the transaction.
Peltz is scheduled to be sentenced on his guilty plea in July. He faces a maximum prison sentence of up to 25 years. His sentence may also include the forfeiture of all proceeds from the illicit trades or payments from co-conspirators and restitution to the IRS for the unreported tax debt. According to the Department of Justice’s press release, this figure could exceed $1 million.
Peltz’s prosecution and plea negotiations were handled by the United States Attorney for the Eastern District of New York, which is viewed by many as the preeminent prosecutorial body for financial crimes in the country. The FBI’s New York field office and the IRS Criminal Investigations Division (IRS-CI) were also involved in handling the case.
Breon Peace, the U.S. Attorney for the Eastern District of New York, made sure to mention the significance of both the insider trading and the tax evasion in his public statement on the case. Said Peace, “With today’s plea, Peltz admitted to trading on material non-public information about a publicly traded company to line his own pockets and also to lying about his income to avoid paying taxes on a substantial tax liability.” Peace went on to speak directly to other potential targets of his office. “This Office will vigorously prosecute traders who seek to cheat the system, harm the investing public and undermine the integrity of our financial markets. We will hold accountable those who lie to avoid paying their fair share of taxes.”
Thomas Fattorusso, the Special Agent-in-Charge of the IRS-CI operation, also made it clear that this type of action should be expected out of his department. “Plain and simple, it’s illegal to use non-public information to buy and sell stocks. Doing so manipulates the markets and can have detrimental effects on the wallets of individuals who play by the rules,” said Fattorusso. “But this defendant didn’t stop there; he made significant financial gains and then claimed that he had no income in an effort to blatantly evade taxes.”
If you have undisclosed tax noncompliance, it is in your best interest to act early instead of waiting and hoping that the government won’t notice. Recent IRS-CI activity like the type observed in the Peltz case suggests that the government is likely to get more aggressive in tracking down and identifying noncompliance.
Even if your noncompliance was an honest mistake, you could still get caught up in an IRS audit or criminal investigation. These invasive government actions can be time-consuming, stressful, and have a negative impact on your reputation and ability to secure credit. We urge you to reach out to a Tax Attorney as soon as possible to fend off the negative consequences of undisclosed tax issues in your past filings.
If you have failed to file a tax return for one or more years or have taken a position on a tax return that could not be supported upon an IRS or state tax authority audit, eggshell audit, reverse eggshell audit, or criminal tax investigation, it is in your best interest to contact an experienced tax defense attorney to determine your best route back into federal or state tax compliance without facing criminal prosecution.
Note: As long as a taxpayer that has willfully committed tax crimes (potentially including non-filed foreign information returns coupled with affirmative evasion of U.S. income tax on offshore income) self-reports the tax fraud (including a pattern of non-filed returns) through a domestic or offshore voluntary disclosurebefore 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, KovelCPAs 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!