Individuals convicted of tax evasion may face significant prison sentences, with the duration determined by the financial extent of the fraud to the government. Courts consider factors such as the amount of tax evaded, the duration of the tax evasion, and any aggravating circumstances. Tax evasion sentences serve as a deterrent and emphasize the legal consequences of financial misconduct.
Elliott Dennis Kleinman, a former employee of a New York-based global business, has been sentenced to 42 months in federal prison for orchestrating a $20 million kickback scheme in collaboration with drum suppliers. The scheme involved fraudulent billing, with Kleinman and a co-conspirator receiving kickbacks for inflated invoices.
If you require help with a tax issue, seek assistance from our Dual-Licensed Tax Lawyers & CPAs at the Tax Law Offices of David W. Klasing by dialing (800) 681-1295.
The Case Against Elliot Kleinman
On December 1, 2023, Elliott Dennis Kleinman, a 69-year-old resident of Bel Air, Maryland, was sentenced to 42 months in federal prison by U.S. District Judge Deborah K. Chasanow. This verdict followed Kleinman’s admission of guilt in a conspiracy to commit wire fraud and tax evasion associated with a kickback scheme that cost his employer, a family-owned global business headquartered in New York with manufacturing facilities in Harford County, Maryland, over $20 million.
Fraudulent Billing Scheme
Kleinman, along with another employee, Eugene DiNoto, misused their management positions to orchestrate a fraudulent billing scheme. They collaborated with Anthony P. Urcioli, Sr., the owner of Tunnel, Barrel & Drum Co, Inc. (TBD) and Hartford Fibre Drum, Inc. Through falsifying invoices, Urcioli billed the company for more drums than were actually supplied. In return, Kleinman and DiNoto received kickbacks from the inflated payments. This illicit arrangement extended from 2012 to January 31, 2020.
Expanding the Scheme
The kickback scheme expanded to include Hartford, another drum supply company owned by Urcioli. The falsification of invoices continued through regular communication between DiNoto and Urcioli, with instructions on the number of drums to charge but not deliver to Company 1.
Payment and Tax Evasion
Kickback payments to Kleinman were made through checks payable to “EDK Management, LTD,” a company he had formed. Urcioli wrote “drums” on the checks to create a façade of legitimate transactions. Kleinman received approximately $2,307,121 in kickbacks, deposited into EDK’s business account and used for personal expenses, or transferred to another account.
Between 2017 and 2019, TBD paid Kleinman approximately $1,034,911 in kickbacks. However, Kleinman failed to report these payments in his income tax returns, causing a loss of around $291,143 to the U.S. government.
Legal Proceedings
DiNoto and Urcioli have pleaded guilty to their roles in the scheme. The sentencing, conducted in November of 2023 by U.S. District Judge Deborah K. Chasanow, was announced by United States Attorney Erek L. Barron. Barron commended the FBI and the IRS for their investigative work and assistance building the case.
The legal proceedings that accompany tax evasion charges can be lengthy and complex. Fortunately, if you have been accused of illegally evading tax obligations, our Dual-Licensed Tax Lawyers & CPAs can help navigate these proceedings and mount your defense.
Factors Used to Determine Prison Sentences in Tax Evasion Cases
As previously mentioned, many different factors may be analyzed by courts when determining prison sentences in tax evasion cases. For example, any of the following may be considered:
Amount Evaded
Courts weigh the magnitude of tax evasion, considering the total amount unlawfully withheld from the tax authorities. Larger evasions typically result in more severe sentences, reflecting the gravity of financial misconduct.
Duration of Evasion
The length of time over which tax evasion occurs is a crucial factor. Courts assess whether the evasion was a one-time occurrence or an ongoing, prolonged scheme. Extended periods of non-compliance often lead to harsher sentences.
Aggravating Circumstances
In evaluating tax evasion cases, courts examine aggravating factors that intensify the severity of the offense. These may include deliberate concealment of income sources, use of fraudulent schemes, or attempts to obstruct tax investigations. Such aggravating circumstances contribute to the determination of an appropriate prison sentence.
Mitigating Factors
Courts also consider mitigating factors that may lessen the severity of the sentence. Cooperation with tax authorities, remorse, and a willingness to rectify the evasion can contribute to a more lenient judgment. Demonstrating efforts to comply with tax obligations may mitigate the overall impact on the individual facing charges.
Previous Offenses
A history of prior tax offenses may influence the sentencing decision. Repeat offenders often receive harsher penalties as the court takes into account patterns of non-compliance, emphasizing the importance of deterring repeat offenses.
Financial Impact on Others
The financial repercussions on individuals or entities affected by tax evasion can be a factor. Courts may consider the impact on employees, business partners, or other stakeholders when determining an appropriate sentence. This aspect adds a dimension of accountability beyond the individual offender.
Other Potential Penalties Associated with Tax Evasion Charges
In addition to prison terms, several other penalties may be assessed against tax evaders. For instance, perpetrators may face any of the following:
Fines
Fines are a common penalty imposed in tax evasion cases, with the amount determined by factors such as the extent of the evasion, the financial impact on tax authorities, and any aggravating circumstances. Individuals found guilty may be required to pay a substantial financial penalty and serve a prison sentence.
Restitution
Courts may order individuals convicted of tax evasion to make restitution to the affected parties or entities. This involves reimbursing the government or other victims for the financial losses incurred due to the evasion. Restitution aims to restore the wronged parties to their financial state before the commission of the offense.
Asset Forfeiture
Asset forfeiture is another consequence associated with tax evasion convictions. The court may order the forfeiture of assets acquired through the proceeds of the evasion or used in furtherance of the illegal activity. This penalty serves as a deterrent and aims to strip the offender of any gains obtained through fraudulent means.
Probation
In some cases, individuals convicted of tax evasion may be sentenced to probation instead of or in addition to imprisonment. Probation typically comes with specific conditions, such as regular reporting to a probation officer, adherence to financial obligations, and restrictions on certain activities.
Loss of Professional Licenses
Professionals, such as accountants, lawyers, doctors, architects, dentists, or tax advisors, may face the revocation of their professional licenses as a consequence of tax evasion convictions. This additional penalty emphasizes the serious repercussions for those in positions of trust who violate tax laws.
Call Our Law Firm for Assistance with Your Tax Problems
Get help from our Dual-Licensed Tax Lawyers & CPAs at the Tax Law Offices of David W. Klasing by calling (800) 681-1295 or clicking here to schedule a reduced rate initial consultation.
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!
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Regardless of your business or estate needs, the professionals at the Tax Law Offices of David W. Klasing are here for you. We are open for business and our team will help ensure that your business is too. Contact the Law Offices of David W. Klasing today to discuss your business with one of our professionals.
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