Appearing before United States District Judge Katherine Polk Failla in August, tax accountant Salvatore Arena, 47, of Queens, New York, pleaded guilty to “defrauding clients who trusted him to prepare and pay their taxes,” to quote the Department of Justice. The charges to which he confessed included: (1) one count of wire fraud, a violation of 18 U.S. Code § 1343; (2) one count of mail fraud, a violation of 18 U.S. Code § 1341; and (3) one count of money laundering, a violation of 18 U.S. Code § 1956. Arena, who now awaits sentencing this December, faces more than 20 years in prison for “misappropriating money his clients intended would be used to pay their taxes,” defrauding other taxpayers and the IRS while stealing nearly $790,000 – funds which Arena has since been ordered to forfeit. Our tax attorneys will provide updates in December, when Arena is scheduled to be sentenced.
Though wire fraud, bank fraud, and money laundering are not “tax crimes” in the purest sense of the word (as opposed to offenses like tax evasion or willfully failing to file returns), these types of charges are often rooted in tax compliance issues. Indeed, the IRS Criminal Investigation Division (IRS-CI) routinely investigates money laundering, corporate fraud, and other alleged non-tax crimes, with more than 1,170 non-tax investigations initiated in 2018 (compared to 1,714 tax investigations), according to last year’s IRS-CI Annual Report. Thus, a tax audit or IRS criminal investigation could lead not only to tax fraud charges, but in some scenarios, additional non-tax charges like money laundering or related financial crimes, commonly referred to as “white collar crimes.”
In this instance, for example, the wire fraud charge was filed as a result of Arena “misappropriating tax payments clients had wired into a bank account he controlled.” This meets the legal definition of wire fraud supplied by 18 U.S. Code § 1343, which broadly prohibits taxpayers from using “wire, radio, or television communication” to defraud or steal from others in any way. (For example, the DOJ recently reported on a Montana woman who was charged with tax evasion and wire fraud after she “convinced several individuals… to send her hundreds of thousands of dollars between 2000 and 2016.”) Additionally, Arena “[diverted] pre-payments of taxes to his own tax account,” which enabled him to claim illegal refunds.
At sentencing in December 2019, Arena faces imposing penalties, with the bank fraud, wire fraud, and money laundering charges carrying a maximum 20-year sentence each. Moreover, Arena was ordered to repay more than $789,000, along with an unspecified amount of “restitution as ordered by the court.”
Tax professionals should take this case to heart and seek immediate legal guidance from a tax defense attorney if dealing with criminal tax exposure related to false, fraudulent, or unfiled returns. The tax evasion defense attorneys at the Tax Law Office of David W. Klasing have extensive experience representing CPAs and tax preparers faced with criminal liability, and are prepared to defend you vigorously against misdemeanor or felony charges involving tax preparer fraud, tax obstruction, or related allegations. Compared to other types of taxpayers who are facing criminal charges, there is more at stake for a tax professional – including the permanent loss of his or her practice or license.
Make sure your case is in competent hands. Choose an award-winning California tax lawyer with decades of experience, like those at the Tax Law Office of David W. Klasing. Contact us online right away to arrange a reduced-rate consultation or call our main office in Irvine at (800) 681-1295 for 24-hour support.
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