Recently, a Fresno California business consultant received a sentence of multiple years in prison and nearly $2 million in restitution payments after pleading guilty to charges including wire fraud, bank fraud, and tax evasion. The defendant’s alleged schemes were egregious in nature, but the prosecution and sentencing show an increased criminal tax enforcement appetite on the part of the IRS.
With federal income tax audits and criminal tax investigations on the rise, now is the time to secure your defenses against the consequences that these invasive actions can bring to you or your small business. The first step in protecting yourself is reaching out for help.
To discuss your situation and concerns with a Dual Licensed Tax Lawyer and CPA, reach out to the Tax Law Offices of David W. Klasing today by calling us at our offices at (800) 681-1295 or schedule online HERE.
On April 18th, the Department of Justice issued a press release announcing Kenneth Shane Patterson, of Fresno, California, had received a sentenced from U.S. District Judge Dale A. Drozd of the U.S. District Court for the Eastern District of California. Patterson, 44, received a sentence that included 66 months in prison time and an order to pay $1.9 million in restitution to the IRS. The sentence followed Patterson’s entering of a guilty plea last October on charges of wire fraud, bank fraud, and tax evasion.
According to court documents, Patterson convinced the owner of a small business to provide him with funds that totaled over $1 million over the course of 31 months. Patterson represented to the small business owner that he would use this money to clear liens and pay other expenses so that he could ultimately purchase a skilled nursing facility in Pasadena. Patterson claimed that, once he had purchased the nursing facility business, he would sell it back to the small business owner for lower than market value. However, court documents suggest that Patterson never intended to use the funds he received from the small business owner to purchase the nursing facility, and instead spent them on separate business expenses as well as his own personal gambling.
Patterson also used a bank fraud scheme known as “check-kiting” to spend money that he did not have. Patterson wrote two checks totaling $230,000 from a JPMorgan Chase business account in his control and made them out to another business account that he controlled at Bank of America. However, Patterson’s JPMorgan Chase account was insufficient to cover the checks. In fact, court documents show that the JPMorgan Chase had a balance of less than $10,000 at the time of the transfer.
After the illegitimate transfer, Patterson quickly spent the funds from the Bank of America account before the bank realized that the check had bounced. As a result of Patterson’s check-kiting scheme, Bank of America sustained a loss of roughly $150,000.
Court documents suggest that Patterson made use of a variety of illicit strategies to evade both the assessment and payment of federal income taxes. These evasive behaviors date back as far as 2003. In particular, government prosecutors focused on Patterson’s having no personal bank account, paying expenses on business accounts, and doing a substantial amount of business in cash.
In this case, just like any other criminal tax proceeding, there are a few lessons that our Dual Licensed Tax Attorneys and CPAs can take away and use for the benefit of our clients.
Patterson described himself on his LinkedIn page as an “Accomplished Business Development Officer with over 20 years’ experience in the SBA Industry.” Patterson claimed that he had more than “$2 billion in SBA 7a, and SBA 504 Loans and SBA 504 Green Loans and USDA B&I Loans under [his] belt.” No matter how trustworthy someone may seem, you should always enlist the help of a Dual Licensed Tax Lawyer and CPA to help you evaluate any business dealings where you are parting with a large amount of your hard-earned money.
To secure the guilty plea, the IRS’ Criminal Investigations Division (IRS-CI), the FBI, and the Office of the Inspector General for the Federal Deposit Insurance Corporation (FDIC) utilized information that they had from Patterson’s tax filings from nearly 20 years ago. While some tax code violations are barred from prosecution after a certain amount of time has passed, others are not. If the government suspects that you may have some issues in your reporting history, they now have the capability and resources to investigate.
Even if you did nothing wrong and have nothing to hide, the process of a federal or California government audit or criminal tax investigation can be tedious, time-consuming, and have damaging effects on your personal and business reputation. Therefore, the best way to prevent the consequences of past mistakes coming back to bite you is to discuss your tax filing history with a Dual Licensed Tax Attorney and CPA.
Many criminal tax defendants who are hoping to avoid spending time behind bars will look to accept a plea agreement with prosecutors. A plea agreement is a deal where a defendant agrees to plead guilty to some charges in exchange for favorable considerations, such as other charges being dropped or lighter sentencing recommendations from prosecutors. However, just because a prosecutor recommends that a defendant avoid jail time or massive fines does not mean that a court is bound by the plea deal. Before accepting any type of agreement on criminal tax charges, be sure to discuss your situation with your Dual Licensed Criminal Tax Defense Attorney and CPA.
Our Dual Licensed Tax Attorneys and CPAs provide a circumspect approach to our clients’ issues that can benefit you no matter the circumstances. To find out more, call us today at (800) 681-1295.
If you have failed to file a tax return for one or more years or have taken a position on a tax return that could not be supported upon an IRS or state tax authority audit, eggshell audit, reverse eggshell audit, or criminal tax investigation, it is in your best interest to contact an experienced tax defense attorney to determine your best route back into federal or state tax compliance without facing criminal prosecution.
Note: As long as a taxpayer that has willfully committed tax crimes (potentially including non-filed foreign information returns coupled with affirmative evasion of U.S. income tax on offshore income) self-reports the tax fraud (including a pattern of non-filed returns) through a domestic or offshore voluntary disclosurebefore the IRS has started an audit or criminal tax investigation / prosecution, the taxpayer can ordinarily be successfully brought back into tax compliance and receive a nearly guaranteed pass on criminal tax prosecution and simultaneously often receive a break on the civil penalties that would otherwise apply.
It is imperative that you hire an experienced and reputable criminal tax defense attorney to take you through the voluntary disclosure process. Only an Attorney has the Attorney Client Privilege and Work Product Privileges that will prevent the very professional that you hire from being potentially being forced to become a witness against you, especially where they prepared the returns that need to be amended, in a subsequent criminal tax audit, investigation or prosecution.
Moreover, only an Attorney can enter you into a voluntary disclosure without engaging in the unauthorized practice of law (a crime in itself). Only an Attorney trained in Criminal Tax Defense fully understands the risks and rewards involved in voluntary disclosures and how to protect you if you do not qualify for a voluntary disclosure.
As uniquely qualified and extensively experienced Criminal Tax Defense Tax Attorneys, KovelCPAs and EAs, our firm provides a one stop shop to efficiently achieve the optimal and predictable results that simultaneously protect your liberty and your net worth. See our Testimonials to see what our clients have to say about us!