When it comes to tax compliance, no one is above the law – especially those who once enforced it. For proof, one needn’t look further than the case of former NYPD officer Gerard Scparta, 53, of Campbell Hall, New York, who was sentenced on August 9 to a term of 18 months in prison for disability and tax fraud. Scparta, who defrauded both the Social Security Administration (SSA) and the Internal Revenue Service (IRS) by intentionally misrepresenting his income, was also ordered to pay restitution exceeding $725,000. Moreover, he will forfeit approximately $630,000 in illegally obtained disability benefits, bringing the total cost of his crimes to roughly $1.3 million (to say nothing of any additional costs associated with prosecution). Where taxes are concerned, the old adage that “crime doesn’t pay” is highly accurate – a fact evidenced by the IRS Criminal Investigation Division’s conviction rate, which, according to the IRS, has not dropped below 90% in the past 100 years.
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According to a Department of Justice (DOJ) press release issued at the time of sentencing, Scparta fraudulently obtained disability benefits while not only working, but earning substantial income: around $1.6 million, compensation which he received for providing security services at a Manhattan strip club. To place that figure into greater context, the SSA generally denies disability benefits, such as Social Security Disability Insurance (SSDI), to any non-blind individual who earns $1,220 or more per month, placing Scparta well outside the SSA’s financial eligibility criteria.
Despite supporting himself with a considerable salary, Scparta collected approximately $630,000 in disability benefits for which he was ineligible, deliberately deceiving the SSA “over a period of 20 years” beginning around 1997 and continuing through approximately 2017. (In one instance, the press release reported, Scparta “pretended that he did not know where he was, could not remember the last four vice presidents, and had trouble repeating numbers that were told to him” when examined by a doctor.)
Manhattan U.S. Attorney Geoffrey S. Berman did not mince words when summarizing the scheme, calling Scparta’s actions “reprehensible” and stating that the defendant “perverted the Disability Insurance system for his own personal gain, depleting a system intended for people with legitimate claims who depend on those benefits for their well-being.” He added that Scparta, who was sentenced by U.S. District Judge Alison J. Nathan in Manhattan federal court to one and a half years in federal prison, “will trade velvet ropes for steel bars.”
In addition to engaging in disability fraud by collecting benefits despite exceeding SSA income limits, Scparta also committed tax fraud, willfully hiding taxable income from the IRS by failing to report roughly $268,600 during the 2012 through 2016 tax period. By underreporting his income by hundreds of thousands of dollars, Scparta intentionally or “willfully” avoided paying his full tax liability, and in so doing, violated 26 U.S. Code § 7201 (attempt to evade or defeat tax), which is the federal statute defining tax evasion. 26 U.S. Code § 7201, or IRC § 7201, makes tax evasion a felony offense punishable by criminal fines of up to $100,000, and/or sentencing of up to five years.
Though people sometimes use the term broadly, “tax evasion” refers to one specific crime, distinct and separate from other tax offenses. For example, willfully filing to file a tax return (26 U.S. Code § 7203) is a separate offense from tax evasion, even though both involve the illegal and deliberate avoidance of one’s tax debts. These distinctions are important because different penalties are imposed for various tax crimes. For instance, the maximum sentence for tax evasion is five years or 60 months, as compared to the maximum three years or 36 months for willfully filing a false return (26 U.S. Code § 7206(1)), versus one year for willful failure to file or pay taxes (26 U.S. Code § 7203).
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At the beginning of this article, our tax defense attorneys alluded to the fact that the IRS’ conviction rate has not fallen below 90% at any point since 1919. (In 2018, it was 91.7%, a slight increase from 91.5% in 2017.) This data could not send a clearer message: if you are under investigation for tax evasion, have been contacted by law enforcement regarding an investigation into another individual (such as a former spouse or employer), or are concerned about a tax audit leading to criminal charges, you may be in serious danger. It is in your best interests to contact an experienced tax evasion lawyer, like the Orange County tax fraud defense attorneys at the Tax Law Office of David W. Klasing.
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Providing award-winning service throughout Northern and Southern California, our nationally recognized tax office is dedicated to protecting your reputation, upholding your rights, and fighting to minimize civil and criminal tax penalties. Contact us online right away to arrange a reduced-rate consultation, or call (800) 681-1295 to speak with an attorney confidentially.
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