Many professionals have at least two particular weaknesses when it comes to engaging in various forms of fraud including tax evasion. First, they believe that their high social standing and role as a respected member of the community will provide them insulation from suspicion. These individuals often assume that people will either discount them as being a potential fraudster because of their standing in the community. Failing that, they may believe that their status as an individual with resources and, perhaps, legal training will cause prosecutors to think twice before launching an investigation and prosecution.
Furthermore, many professionals and highly successful individuals often believe themselves to be the smartest person in the room. While this quality and self-confidence are often necessary to get ahead in the world, it can be disastrous when applied to a fraudulent undertaking. These individuals believe that their scheme will be the one that is so creative or complex that the auditors and investigators will fail to identify it. However, time and time again, criminal tax convictions prove that both of these assumptions are misguided and likely to lead to short-term gains that result in long-term consequences that can include a federal prison sentence.
For years, William J. Reilly was a New York attorney who was well- respected and engaged in particularly lucrative legal practice. From at least 1992 through 1997, Mr. Reilly was a respected outside securities counsel attorney. As part of his compensation for legal services rendered, Mr. Reilly received stock options that entitled him to purchase stock in the corporation. In 1997, Mr. Reilly exercised these options. Later, he sold some of these shares for more than $1.6 million.
After exercising these options, Mr. Reilly engaged in several significant transactions through which he obtained substantial assets. Mr. Reilly acquired two homes in Boca Raton, Florida, a home in Vermont, and a parcel of oceanfront property located in Portsmouth, Rhode Island. These properties were not placed in Mr. Reilly’s name with the exception of one of the Boca Raton properties. Rather, Mr. Reilly used shell companies to conceal his ownership. At some point, the Rhode Island home was transferred to a shell company.
It is from this timeframe where Mr. Reilly failed to pay Rhode Island income taxes. These unpaid taxes were later the subject of a Rhode Island Supreme Court decision where. Reilly was ordered to pay back more than $1.2 million in unpaid taxes. Since 2011, Mr. Reilly has appeared on the Top 100 income Tax Delinquents list published by Rhode Island and now owe nearly $1.6 million.
Later, from roughly 2005 through 2010, Reilly also made use of an array of accounts and entities under his control to conceal income. Prosecutors charge that Mr. Reilly used law firm accounts and shell corporations to funnel income to his personal accounts. These funds were used to pay for an array of personal and luxury expenses including his daughter’s private schooling, his son’s political campaigns, and more than $50,000 in tickets for concerts and sporting events.
For evading more than $1.5 million due in income taxes for the 1997, 1999, 2001, 2002, and 2004 through 2007 tax years Mr. Reilly pleaded guilty to a single count of tax evasion under 26 USC §7201. Tax evasion consists of any intentional or voluntary steps used to avoid or otherwise defeat either the assessment or payment of tax. Individuals who are convicted under this statute are subject to a potential federal prison sentence of up to 5 years. Furthermore, a $100,000 penalty can be imposed upon individuals who violate this statute. Furthermore, tax evasion convictions are also typically accompanied by an order to pay restitution for the unpaid tax, penalties, and interest.
If you are facing serious criminal tax charges such as tax evasion, you need experienced representation. Absent direct admissions by the taxpayer, IRS auditors and the prosecuting Department of Justice attorney must typically make their case through indirect, circumstantial evidence. However, taxpayers who don’t fully understand the information the government has and fail to establish a buffer often make statements that corroborate circumstantial evidence and provide additional direct proof of their wrongdoing. If you have been accused of a tax crime or face a IRS audit with potential underlying criminal issues contact the experienced tax lawyers of the Tax Law Offices of David W. Klasing today. To schedule a reduced-rate confidential consultation call 800-681-1295 today or contact us online.