Hidden Income from Illegal Shipments of Hazardous Waste Leads Investigators to Tax Evasion Scheme

In December 2016, then-45-year-old defendant Brian Brundage, who owned or previously owned several recycling businesses in the Chicago, IL area, was arrested on charges of felony tax evasion and wire fraud stemming from a years-long, multimillion-dollar scheme to illegally ship and sell hazardous waste materials. To avoid paying federal income taxes on the earnings derived from these activities, Brundage omitted the income from his tax return, instead spending the funds on luxury personal expenses and recording the “losses” as business expenses. In furtherance of his tax fraud scheme, Brundage lied to clients about the true destination of the waste materials, maintaining the illusion that “absolutely no reselling, no remarketing, no landfilling, no incineration, and no exportation” had taken place. That illusion – first damaged by Brundage’s arrest in 2016 – was shattered by the defendant’s guilty plea last month, when Brundage appeared in Chicago federal court to admit to both charges against him: one count of tax evasion, plus one count of wire fraud.


Chicago Business Owner Pleads Guilty to Tax Evasion, Wire Fraud in E-Waste Recycling Scheme

Before becoming entangled in the investigation which would eventually culminate in his guilty plea, Brundage owned two recycling businesses: one defunct entity known as Intercon Solutions Inc., and EnviroGreen Processing LLC, which played a major role in the indictment charging Brundage with tax crimes. As the name of the company suggests, Brundage represented EnviroGreen to clients, including government agencies, as an environmentally-conscious waste disposal service specializing in electronic waste products like cathode ray tubes (CRT), which are used to make glass screens for computers and televisions – and which, according to a Department of Justice press release, “contain potentially hazardous amounts of lead.”

Rather than living up to the company’s name (or clients’ expectations of how waste was handled), Brundage spent more than a decade – the period from 2005 to 2016 – “causing thousands of tons of e-waste and other potentially hazardous materials to be landfilled, stockpiled, or re-sold at a profit to companies who shipped the materials overseas,” according to the DOJ’s initial press release on the case. Notwithstanding any violations of environmental regulations that may have occurred, Brundage also engaged in tax crimes by making willful attempts to conceal from the IRS income generated by the overseas shipments.

Though the DOJ press releases did not specify precisely how much income the international shipments produced, the initial release noted that prosecutors were “seeking forfeiture of $10 million in cash,” while the second announcement, issued September 2018 after Brundage entered a plea agreement with prosecutors, stated the defendant confessed to dodging nearly $744,000 in federal tax liabilities. Brundage used the funds to indulge in luxury products and services, including jewelry, casinos, and hiring a professional housekeeper.

Brundage’s sentencing hearing is not scheduled to take place until February 2019. However, at that juncture, he will face some of the tax code’s harshest penalties under the federal tax evasion statute, 26 U.S. Code § 7201 – including a potential sentence of up to five years in prison. The penalties for wire fraud, a violation of 18 U.S. Code § 1343, are even greater: up to 20 years in prison, quadruple the length of the maximum sentence for tax evasion. According to IRS tax crime statistics (which are summarized in this short government report on tax offenses), “The average sentence length for tax fraud offenders [in fiscal year 2017] was 17 months.”

IRS Tax Attorneys Can Help You File Back Taxes and Mitigate Penalties

Numerous government agencies contributed to the investigation into Brundage’s illegal activities, from the IRS to the EPA to the U.S. General Services Administration. It is merely one example of how technology is making it increasingly easy for public agencies to share and analyze information that leads to tax offenders.

If you underreported income on your tax return, disguised personal expenses as business expenses, or took other actions to conceal domestic or foreign income sources from the Internal Revenue Service, you should discuss your situation with an experienced IRS tax lawyer as soon as possible and possibly consider making an offshore or domestic voluntary disclosure. Failure to file a tax return, failing to report all income, or making other omissions or misrepresentations can lead to severe penalties. However, by being proactive and consulting with an experienced tax attorney, you may be able to get caught up on tax filings and avoid or mitigate penalties for not filing taxes. For a reduced-rate consultation about back taxes or other tax preparation and compliance issues, contact the Tax Law Office of David W. Klasing online, or call today at (800) 681-1295 to schedule your appointment.




Also, we’ve expanded our offices! In addition to our offices in Irvine and Los Angeles, the Tax Law Offices of David W. Klasing now have offices San BernardinoSanta BarbaraPanorama CityOxnardSan DiegoBakersfieldSan Jose, San FranciscoOakland and Sacramento.

 

Helpful Q and A libraries:

https://klasing-associates.com/topics/audit-representation-faq/

https://klasing-associates.com/topics/assisting-cpas-with-client-criminal-tax-exposure-faq/

https://klasing-associates.com/topics/criminal-tax-representation-faq/

https://klasing-associates.com/topics/ovdi-faq/

https://klasing-associates.com/topics/fbar-compliance-and-disclosure-faq/

https://klasing-associates.com/topics/foreign-audit-faq/

https://klasing-associates.com/topics/international-tax-law-faq/

https://klasing-associates.com/topics/ovdp/