Defendants Wagdy Guirguis, business owner, and Michael Higa, Guirguis’ CPA, were convicted of a laundry list of tax crimes by a federal jury in Hawaii last November. Most of the numerous convictions involved Guirguis, who, with Higa’s ongoing assistance, executed an elaborate succession of tax crimes over the course of more than a decade. While the offenses varied in nature, all shared the same underlying purpose: to enable evasion of tax liabilities, in this case at both the personal and corporate levels. Guirguis and Higa, who were tried in Honolulu, now await sentencing. While their penalties are yet undetermined, the consequences seem likely to be harsh, considering the number of crimes that were carried out – and the scope of the resulting tax losses. Our criminal tax lawyers will update this story when the defendants are sentenced later this year.
The indictment against co-defendants Guirguis and Higa, which is summarized in a Department of Justice (DOJ) press release issued November 2018, makes for an astonishing read. Over the course of years, the co-defendants engaged in a sprawling, multi-faceted tax evasion scheme that, between them, resulted in no fewer than 12 convictions. Guirguis was convicted of six different offenses on a total of 10 counts, including:
Higa, Guirguis’ accountant and co-conspirator, was also convicted of two offenses:
At sentencing, Higa and Guirguis will face, among other consequences, the following criminal penalties:
According to government records, the defendants began committing tax crimes as early as 2001, continuing through 2012, over which time Higa and Guirguis “used [a] nominee entity,” which was utilized to transfer a condominium to Guirguis’ spouse, “to divert approximately $1.3 million from Guirguis’ businesses for Guirguis’ personal use.” Not only was this entity used to “fraudulently convey” property; furthermore, when an IRS revenue officer (whose primary role is to collect outstanding tax debts) became suspicious regarding the condominium’s true ownership, the co-defendants responded by “instructing a bookkeeper to alter the books and records” so that the IRS would be hampered from tracing the transactions properly.
Why had Guirguis and Higa taken steps to transfer the condo in the first place? For the purpose of hiding the property from the IRS – which had previously “determined Guirguis’ businesses owed over $800,000 in federal employment taxes,” such as Medicare and Social Security taxes. Rather than remitting the withheld taxes to the government, as employers are required to do, Guirguis instead took steps “to pocket those funds [and] violate the trust of their employees and the United States,” in the words of Principal Deputy Assistant Attorney General Richard E. Zuckerman, who works within the DOJ’s Tax Division.
In addition to altering financial records, concealing assets from the IRS, “pocketing” employment taxes, and directing at least one employee “to sign a false statement” concerning his business bookkeeping activities, Guirguis also failed to report “millions of dollars of gross receipts” on corporate tax returns. In yet another instance, he simply failed to file a corporate income tax return outright, resulting in the concealment of “more than $1.7 million in gross receipts” from the IRS.
It doesn’t take a dozen tax crimes to attract the IRS’s attention – or to result in prison time. Any one of the offenses with which Higa or Guirguis were charged could lead to a taxpayer’s imprisonment, in addition to devastating criminal fines, civil fraud penalties, and IRS restitution orders. If you have failed to comply with tax laws in the past, it is urgent that you discuss your issue with a tax evasion defense lawyer before the situation escalates. The sooner a competent tax attorney becomes involved in your case, the better your options will be for reentering compliance with minimal damage and penalties. Our office has extensive experience in avoiding criminal tax prosecution where domestic or offshore income has been criminally evaded through domestic and / or offshore voluntary disclosures.
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