Former insurance broker Shawn Christopher Gorrell, 39, of Jenks, Oklahoma was convicted by a federal jury on Tuesday, January 23, 2018 of felony wire and tax fraud. The charges arose from Gorrell’s misuse of approximately $2.5 million in investor funds, which were utilized not to invest in conservative ventures, as investors were promised, but rather, to finance Gorrell’s dreams of becoming a professional poker player. In addition, Gorrell misappropriated a portion of the funds for day trading on E*TRADE, a popular online stock brokerage firm, and covering other personal expenses. According to court records, Gorrell resorted to closing his investment service business, relocating to Montana, and, if that wasn’t enough, faking late-stage cancer to avoid his defrauded investors, at least one of whom confronted Gorrell after being contacted by the Federal Bureau of Investigation (FBI). Gorrell is now awaiting sentencing, which is scheduled to take place April 23, 2018.
In 2007, Gorrell was fired from his job at a Tulsa, Oklahoma-based insurance company. Not to be discouraged, he then launched a business of his own, this time in the field of investment services.
Over a period of several years, four individuals, three of them Tulsa-based dentists, hired the business to manage their financial investments, entrusting to Gorrell amounts that ranged from $155,000 to $1.5 million. Collectively, the funds given to Gorrell for investment totaled approximately $2.5 million.
According to court documents, one investor, dentist Wade Sessom, who contributed $155,000, stated during Gorrell’s six-day trial, “It was everything I had.” When asked by an Assistant U.S. Attorney whether he got “any of that back,” Dr. Sessom replied, “Zero”: a far departure from the up to 12% returns Gorrell advertised on what were ultimately shown to be “bogus investments.”
Unfortunately for Dr. Sessom and the other three investors, funds were not invested as promised, but instead, secretly diverted to finance Gorrell’s personal hobbies, namely professional poker and online day trading.
“Lots of money went to cash — just straight out cash,” said Assistant U.S. Attorney Kevin Leitch, adding that “hundreds of thousands of dollars” were diverted to day trading and personal expenses, including Gorrell’s mortgage. In Leitch’s words, the money indulged Gorrell’s “insatiable appetite” for gambling on poker matches and day trading – a practice the U.S. Securities and Exchange Commission describes as “highly risky,” noting that traders “typically suffer severe financial losses” and “should only risk money they can afford to lose.” (Even Gorrell’s defense attorney conceded that using investor funds for day trading was “not the best idea.”)
The scheme began to unravel when one of Gorrell’s investors was contacted by the FBI, spurring a confrontation in which Gorrell told the investor that he was dying of cancer, with only six months left to live – and that the money was gone.
The cancer was imaginary, but the investors’ financial losses were very real, leading a grand jury to indict Gorrell on three counts of wire fraud, a violation of 18 U.S. Code § 1343 (fraud by wire, radio, or television), last February. In October, the jury returned a “superseding indictment,” which is sometimes used to supplement or override an existing indictment when new evidence arises in a criminal case, tacking onto the original wire fraud charges three additional counts of tax evasion, a violation of 26 U.S. Code § 7201. Following Gorrell’s January conviction in United States District Court for the Northern District of Oklahoma before Judge Gregory K. Frizzell, a sentencing hearing was scheduled to take place April 23, 2018.
Unfortunately for Gorrell, the sentence handed down at the hearing could be lengthy. The federal wire fraud statute, 18 U.S. Code § 1343, establishes a prison sentence of up to 20 years, which may be accompanied by a hefty fine, for this offense. Meanwhile, 26 U.S. Code § 7201 establishes harsh tax evasion penalties of its own, setting forth a fine of up to $100,000 (or $500,000 for corporations) and a sentence of up to five years in prison.
“The tragedy,” said Leitch in court, was that “by the time this was all said and done, the money was gone.”
While all taxpayers must adhere to the law, the need for careful compliance is especially great among investment managers and investment advisers, who are held to elevated standards due to the fiduciary duty owed clients. Though any taxpayer risks serious court-imposed penalties if convicted of tax fraud, the stakes are higher for financial professionals, who risk facing disciplinary actions for crimes of “moral turpitude” – a category which, to quote the Offices of the United States Attorneys, includes “any crime having as an element the intent to defraud.” In plain terms, crimes that involve lying or dishonesty – namely tax offenses, among other white-collar crimes – are generally crimes of moral turpitude, and thus, jeopardize the career of the accused.
Don’t allow a misinterpretation of tax laws to imperil the career and reputation you have worked so hard to build. If you have questions about state, federal, or international tax compliance, are concerned about an ongoing or upcoming IRS tax audit, suspect that you have been targeted for an IRS criminal investigation, or simply require trustworthy tax preparation services to see you safely through this tax season, contact the experienced tax evasion attorneys at the Tax Law Office of David W. Klasing online, or call us today at (800) 681-1295 for a reduced-rate phone consultation. Based in the Los Angeles metropolitan area, our aggressive criminal tax defense lawyers serve business entities and individual taxpayers in California, out of state, and overseas.
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