According to a press release issued by the United States Department of Justice, defendant Jeffrey Lyons, previously CEO of the now-defunct Pennsylvania oil and gas company Worley & Obetz, was charged in October with bank fraud (18 U.S. Code § 1344) and tax evasion (26 U.S. Code § 7201), both of which are felonies under the respective statutes. Worley & Obetz, whose Facebook page describes the company as a “family-owned business” founded during the 1940s, has been troubled since mid-2018, when executives – including Lyons – were investigated for what one U.S. Attorney called a “stunning” fraud. Lyons, who was charged alongside co-conspirators and company controllers Karen Connelly and Judith Avilez, now faces a sentence of up to 35 years in prison, in addition to fines and restitution exceeding $1 million.
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Though not a tax crime, bank fraud investigations are frequently aided by the IRS Criminal Investigation Division (IRS-CI), with several examples posted on our tax law blog. If an individual has been placed under investigation for or charged with committing bank fraud (or, for that matter, its counterpart wire fraud), tax evasion charges may also become a concern. Such was the case for Lyons, 58, who allegedly furthered a sprawling scheme to defraud not only Fulton Bank, but also, the Internal Revenue Service. And, if statistical data should tell our readers anything, it is that taxpayers seldom – if ever – defraud the IRS without eventually facing harsh consequences.
According to the Department of Justice (whose Tax Division, supported by IRS-CI, prosecutes federal tax crimes), Lyons and his co-defendants knowingly scammed Fulton Bank by exaggerating the company’s revenue on financial statements, thereby misleading the lender. Connelly, acting under Lyons’ guidance, even “taught [Avilez, her successor] how to commit the fraud” prior to her 2015 retirement as controller, effectively “passing the torch” to the next generation and ensuring the scheme could continue.
In total, prosecutors alleged the scam against Fulton persisted “for at least 15 years”: a criminal enterprise that, if the accusations are true, would be “stunning in scope and duration,” to quote U.S. Attorney William M. McSwain. However, though extensive, bank fraud was not the only crime alleged – at least, not against Lyons, who was additionally charged with tax evasion after failing to report “over $650,000 in income he received from Worley & Obetz in 2013.” (Note that, in tax fraud cases, the normally applicable IRS statute of limitations can be reset or extended, giving the government years of additional time to investigate and file criminal charges.)
If convicted, Lyons faces a daunting sentence of 35 years in federal prison: up to 30 years for bank fraud and up to five years for tax evasion, which are the statutory maximums established by 18 U.S. Code § 1344 and 26 U.S. Code § 7201, respectively. The same statutes allow judges to impose criminal fines as high as $1 million and $100,000 (or $500,000 for corporations), with the tax fraud statute moreover specifying that offenders shall be responsible for “the costs of prosecution.” These penalties can be amplified further by separate civil tax penalties, numerous examples of which are provided here. Finally, there can be debilitating consequences for one’s career, such as the suspension or revocation of professional licenses and credentials.
Being an executive will not protect a taxpayer from IRS scrutiny, as we have seen before. However, one need not be a CEO, CFO, or company president to face the threat of tax fraud charges. The IRS performs large numbers of tax audits each year, with recent figures ranging anywhere from 500,000 to 1 million – and some of the likeliest candidates include business owners, high net worth individuals, and non-filers. Audits can lead to or parallel criminal charges, making a strategic defensive response essential.
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If you need help filing back taxes, preparing for an IRS audit, or facing criminal tax charges in California, turn to the Tax Law Office of David W. Klasing for trusted representation anchored by more than 20 years of tax, accounting, and legal experience. Our award-winning tax lawyers have successfully represented countless individuals and business entities in civil and criminal tax matters, ranging from eggshell audit representation to fighting felony tax charges. Contact us online right away to arrange a reduced rate consultation, or call the Tax Law Office of David W. Klasing at (800) 681-1295.
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