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CFO Sentenced to Prison for Tax Evasion and Check Kiting

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August 7, 2015
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August 7, 2015

CFO Sentenced to Prison for Tax Evasion and Check Kiting

When the IRS and Department of Justice (DOJ) decide to pursue charges, taxpayers face extremely difficult odds of success. In fact, in a series of talks discussing the DOJ’s tax enforcement priorities, Acting Assistant Attorney General Caroline Ciraolo revealed that the DOJ is handling more than 6,000 enforcement matters at any one time. The approximate 340 attorneys who handle these tax matters boast a conviction rate that exceeds 95 percent. In light of such a high rate of successful prosecutions, it is no wonder that taxpayers who come under investigation are apprehensive and, quite frankly, afraid of the consequences they may face.

However, it is essential to remember that you do not have to face the experienced tax attorneys of the DOJ alone. For more than 20 years, Tax Attorney and CPA David W. Klasing has fought on behalf of taxpayers and businesses facing serious civil or criminal tax charges. Our tax professionals proceed strategically and aggressively to mitigate or eliminate the penalties and other tax consequences you may face.

CFO Sentenced on Bank Fraud and Tax Fraud Charges

According to court documents, Brian M. Quimby was employed as the CFO for Thayer Power and Communications. During his tenure as CFO, Mr. Quimby engaged in a scheme known as check kiting. Check kiting is a well-known and long-established for of check fraud, but due to the inherent nature of how checks work, it is difficult to detect such a scheme until a sufficient number of transactions have been completed or until the scheme begins to unravel. However, essentially, a check kiting scheme is a type of financial fraud where a check is transformed from a method of exchange – a negotiable instrument – to an unauthorized loan. That is, the check is written for an amount where the account it is drawn against has insufficient funds to cover the check. While this would normally trigger a message for non-sufficient funds (NSF), an individual engaged in a kiting scheme will falsely inflate the perceived balance of the account by writing a check from a second account to cover the draw on the first account. While there are many variations of the check kiting fraud, this captures the essential elements of the fraud.

In any case, Mr. Quimby engaged in a check kiting scheme that defrauded Thayer Power and Communications and Key Bank. Mr. Quimby also failed to file income taxes in 2007 – likely in an attempt to conceal his fraudulent income gained through the check kiting scheme. Despite knowing that he had not filed taxes, Mr. Quimby apparently lied to an IRS agent stating that he did file. Mr. Quimby was sentenced to a 27 month federal prison sentence. Furthermore the court ordered him to repay $202,789 to Thayer and nearly $90,000 to the IRS.

Dual Suicides by Execs Involved in Payroll Tax Fraud Matter

One executive had an ownership interest in the company and was CFO. The other executive was co-owner and sever as the company’s chief operating officer (COO).  Tragically, both executives of SPG took their lives just one week apart and after both had been working with the IRS Criminal Investigation division. Toby Steven Fanning was found dead in his backyard in an apparent suicide. Philip Edward Lawrence was found dead at a cemetery near Lenoir City Park due to a shotgun blast. The impetus for the men’s apparent suicides? An alleged payroll tax scheme that prosecutors claim was masterminded by the CEO of Service Provider Group (SPG), Zebbie Joe Usher III. According to allegations found in court records, Fanning, Lawerence, & Usher, would sign up client companies for SPG’s payroll services business. But, rather than holding payroll tax funds in trust for the client companies, prosecutors allege that the three would skim money that SPG was supposed to pay over to the U.S. government. To hide their alleged misdeeds, prosecutors claim that the three engaged in a systematic underreporting of payroll taxes owed by clients for the first three-quarters of the year, and then inflated fourth-quarter payroll taxes to conceal the underpayment. By the time authorities detected the scheme, approximately $29,174,931.87 in payroll tax losses had already been incurred. Usher’s sentencing, originally slated for January, is now scheduled for July 9th.

Facing Payroll Tax or other Problems?

If you are facing serious tax issues due to your individual taxes or business taxes, the Tax Law Offices of David W. Klasing may be able to help. Our tax professionals work to mitigate the tax consequences you may face due to tax noncompliance. To schedule a reduced-rate consultation at our Los Angeles, Irvine, or San Diego offices call 800-681-1295 or contact us online.