In a press release issued last month, the U.S. Department of Justice (DOJ) announced the conviction by federal jury of 46-year-old defendant Douglas A. Richardson, who “was found guilty of all 10 counts” of wire fraud and money laundering charged against him last year. Formerly a CFO and CPA, Richardson, who owned his own business and worked for the cell phone company Smart Prong Technologies, duped clients into making investments he then misused to repay debts and cover personal expenses. By misrepresenting how the funds would be spent, Richardson defrauded investors out of millions of dollars. Following his conviction in November, Richardson now faces sentencing – and the prospect of decades in federal prison.
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In August of 2018, Richardson was charged with six counts of wire fraud, a violation of federal law under 18 U.S. Code § 1343, and four counts of money laundering, a violation of 18 U.S. Code § 1956. Roughly one year later, he was convicted on all counts, exposing Richardson to the following criminal penalties: for each count of wire fraud, a maximum sentence of 20 years, without the possibility of parole (early release); and for each count of money laundering, a maximum sentence of 10 years, again without possibility of parole.
These are substantial penalties, for substantial fraud: approximately $7 million, according to the DOJ. Richardson, who took over as Smart Prong’s CFO and CPA in late 2013, in addition to owning his own separate CPA business since 2009, began to commit fraud in February of 2014. The fraud continued until October of 2016. During this period, “Richardson engaged in a scheme to defraud Smart Prong and several of the clients of his CPA firm,” Douglas A. Richardson, CPA, LLC.
According to the DOJ, Richardson misrepresented financial facts to “several clients” whom he “induced… to make investments,” insisting that “their loans and investments would be used for a certain purpose” which was never actually fulfilled. Unbeknownst to these clients, their investments instead went toward Richardson’s personal debts and expenses, including payments on a Corvette. The Corvette payment (which was nearly $73,000) was funded by an investment of $365,000 – another $230,000 of which was “used to repay… another individual for unrelated loans” to Richardson. From the remainder, Richardson wrote himself a check for $7,500.
While these types of offenses are not tax crimes – the DOJ made no mention of Richardson’s returns – they are, like tax offenses, investigated by the IRS Criminal Investigation Division (IRS-CI). Comprised of 2,000-plus special agents, who investigate referrals from IRS auditors (and in some cases, tax whistleblowers), IRS-CI conducts thousands of tax and non-tax investigations annually, including 1,500 tax investigations and 985 non-tax investigations during 2019. (For more 2019 tax crime statistics, explore the latest Annual IRS-CI Report, or browse other recent IRS stats.)
Because special agents receive tips from auditors, what begins as a routine examination can end with a tax fraud indictment. If you have been chosen for an IRS audit, and your auditor discovers indicators of tax fraud (i.e. willful noncompliance), the next step may be a criminal tax investigation.
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If you believe that you are at risk of being charged with tax and related financial crimes, you should take immediate action to begin protecting yourself and mitigating the potential damage. At the Tax Law Office of David W. Klasing, we are award-winning criminal tax defense attorneys who bring more than 20 years of experience to every case we defend, from misdemeanor offenses like willful nonpayment of taxes to serious felonies like tax evasion, tax obstruction, and filing false returns. If you are under investigation for tax fraud or have been selected for an IRS audit, contact our offices to set up a reduced-rate consultation, or call (800) 681-1295 for immediate assistance.
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