Giacomo Giorlando, the owner of a New Jersey wine delivery business, has admitted to evading income taxes and committing bankruptcy fraud. 54-year Giorlando of Morganville plead guilty to three counts of tax evasion and one count of bankruptcy fraud in a Trenton federal courthouse on Wednesday, July 19th. The trucking owner faces up to 20 years in prison and a $250,000 fine.
In a recent blog on rapper DMX’s pending tax fraud charges, we discussed the differences between tax evasion and tax avoidance. As a quick recap, tax evasion is the illegal attempt by the taxpayer to convince tax authorities that their tax liability is less than it actually should be. This is usually accomplished by under-reporting one’s income or claiming false tax deductions and credits. Tax avoidance is the legal use of claiming credits and deductions, entity structuring and legal tax planning to reduce one’s tax burden.
It appears that Giorlando has employed some of the same evasion methods used by DMX. According to federal prosecutors, Giorlando mixed business revenue with his funds utilized a check casher to cash business checks and deposited the proceeds of his business into various bank accounts. The Department of Justice press release made reference to Giorlando “substantially understating the amount of income” he received, as well as “significantly inflating expenses” to reduce his taxable income for the years 2011, 2012 and 2014, amounting to a federal tax loss of over $460,000.
Giorlando was hiding at least 11 bank accounts he used for both business revenue and personal funds when he filed for bankruptcy in May 2014. The bankruptcy was approved based on Giorlando’s misrepresentations and illegal omissions. The press release describes Giorlando’s actions as “knowing and willful.”
Generally classified as a “white-collar crime,” bankruptcy fraud is defined under 18 U.S.C. § 157. The crime can take four basic forms. These include:
Nearly 70 percent of all bankruptcy crimes (including those committed by Giorlando) take the first form—a debtor concealing assets to avoid their forfeiture. A debtor’s assets must be listed using accurate, complete and up-to-date information when the debtor files for bankruptcy, whether or not the debtor believes an asset has a net value. Creditors can only liquidate assets listed by the debtor, and the creditor gets to decide whether the asset has a net value – not the debtor. Therefore, concealing assets will allow the debtor to fraudulently keep them, despite owing an outstanding debt. Bankruptcy fraud can also be broadly defined under Title 11 of the U.S. Code as making false statements, or supplying false or misleading information in connection with any bankruptcy proceedings.
The future ramifications of committing bankruptcy fraud can be quite serious. If you intentionally conceal assets and are found to have engaged in intentionally deceptive behavior, it is likely that the court will deny your discharge or potentially throw out your case altogether. This will leave you personally liable for your debts without any of the other benefits that typically go along with filing for bankruptcy.
Though considered a non-violent offense, bankruptcy fraud still carries the threat of criminal prosecution. It is important to keep in mind that additional crimes may be charged alongside bankruptcy fraud. Falsifications on bankruptcy forms often constitute perjury under 18 U.S.C. § 157, which authorizes heavy punishments for this type of offense. Like tax evasion, bankruptcy fraud carries a sentence of up to five years in prison, a fine of up to $250,000, or both. Even just intending to commit bankruptcy fraud may be punishable.
Bankruptcy fraud and tax evasion are often seen in conjunction with one another. Both typically involve the concealing of assets and other intentional misrepresentations of one’s income. Both are ultimately schemes to defraud the U.S. government and yield a taxpayer undeserved and illegal monetary benefits. Because of the relationship between these offenses, it is critical to have a tax attorney who is also well-versed in bankruptcy.
Even law-abiding taxpayers share in this need due to the concept of tax motivated bankruptcy. This process allows a taxpayer to discharge a debt and can even stop collection attempts by the IRS or state tax agencies during the bankruptcy process. Tax motivated bankruptcy can be a tremendous source of relief to those worried about losing their hard-earned assets.
The bankruptcy process is often misunderstood by taxpayers and tax professionals alike. Working with an experienced tax practitioner can help a taxpayer assess and make the right decisions to safeguard their financial future. With a combined 20 years of experience as a Certified Public Accountant and tax attorney, David Klasing knows the tax motivated bankruptcy process inside and out and can provide aggressive advocacy for all your tax related needs. Call the Tax Law Offices of David W. Klasing at (800) 681-1295 today, or schedule an online reduced-rate consultation.