Former Beverly Hills Payroll Processing CEO Convicted of Tax Fraud following Divorce Allegations

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Former Beverly Hills Payroll Processing CEO Convicted of Tax Fraud following Divorce Allegations

Payroll Processing CEO Convicted of Tax Fraud

John Visconti, 71, is the former and once high-flying CEO of a Hollywood payroll processing company known as Axium. The company provided payroll services to many of Hollywood’s prominent entertainment and media companies. Prior to the company’s 2008 collapse, it was estimated that Visconti owned roughly 90 percent of the then-respected firm. At the company’s peak, some have estimated that the company processed hundreds of millions of dollars in payroll obligations.

However, the days of a lavish and luxurious lifestyle would come crashing down on the former CEO in 2008.  That year, the company filed for bankruptcy protection leaving hundreds of workers in and around Los Angeles holding worthless paychecks. Shortly thereafter, a lender sued Visconti and another corporate officer alleging that they had used the company to finance a lavish lifestyle that included the purchase of luxury cars, private jet flights, vacations, and legal fees stemming from Visconti’s divorce.

Allegations During Divorce Proceedings may Have Contributed to Triggering Criminal Tax Investigation

Following the 2008 collapse of his company, Visconti’s wife sued for divorce. In the divorce filings, Maha Visconti alleged in the divorce complaint that,

This is a case related to a hotly contested divorce. This case involves massive fraud, theft, conspiracy, self-dealings, unjust enrichments, the looting of assets of the now-bankrupt Axium International Inc., one of the major entertainment industry’s that was leading payroll services firms [sic] and all of the entities and subsidiaries of Axium Holdings Inc.

Specific allegations by Maha Visconti included two particular transactions. In August 2006, $100 million in assets vanished from the company’s books. Then, in March 2007, an additional $80 million in wealth appeared to evaporate into thin air. She alleged that the former CEO worked with his lawyer to secretly channel funds to the law firm and to various sham entities created to house the company’s pilfered assets. Maha Visconti also claimed that her former husband would offer her brother $50,000 of every $200,000 they might secretly deposit in foreign banks.

In high-asset couples, it is not particularly uncommon for a spouse to attempt to use a spouse’s past tax crimes as leverage. Furthermore, when a divorcing spouse takes the position that he or she does not have the ability to make child support or spousal support payments, the other spouse may come to believe that he or she has no choice but to disclose fraud, offshore accounts, and other concealed wealth. Of course, this may backfire and implicate both spouses, but certain spouses may believe that the facts in their situation make this their only option or they may believe that they will qualify for innocent spouse relief.

What Tax Charges Did the CEO Face?

Visconti was indicted in June 2014 facing allegations that he and another officer siphoned hundreds of millions of dollars from the company and failed to report the income to the IRS. The 2014 indictment alleged that Visconti and his co-conspirator routinely took unreported weekly cash payments of roughly $8,000. Furthermore, the co-conspirators formed a construction consulting company that billed Axium for $570,000 worth of services without disclosing their interest in the firm. Visconti was also charged with routing about one-half of the wages of a fictitious Axium employee to his own bank accounts.

CEO Was Convicted of Tax Fraud Following a Jury Trial

During a week-long trial, prosecutors showed that Visconti and a co-conspirator diverted approximately $5.1 million from Axium between 2005-2007 and took an additional 1.9 million in loans that he never repaid. Prosecutors were able to prove that Visconti engaged in many of the practices that creditors, his former wife, and prosecutors had alleged. In all, prosecutors believe that the co-conspirator’s acts resulted in a tax deficiency of more than $100 million.

Visconti was convicted of committing one count of tax evasion, conspiracy to defraud the IRS, and filing a false tax return. While Visconti will not face sentencing until January 2017, when he could face a maximum federal prison sentence of up to 13 years. Visconti is also subject to a fine of up to $750,000 and liability for the unpaid taxes. According to Acting Special Agent in Charge Anthony J. Orlando (IRS Criminal Investigations),   “Axium was a prominent payroll services business that had millions of dollars of client funds under its control. But instead of safeguarding that money and meeting their legal obligations to their clients and the IRS, [the co-conspirators] put their energy into siphoning money from the company for their own personal use.”