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Orlando IT Executive Pleads Guilty to Insider Trading, Tax Crimes

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    According to a Department of Justice press release, a Florida man recently pleaded guilty to insider trading and aiding in the preparation of a false tax return. This story should remind taxpayers that even if you provide false information to your tax preparer, you are responsible for the fraud on the underlying tax return that is filed. If you have failed to file a tax return for one or more years, or have filed (or have caused a tax return to be filed) that contains knowingly false information, it is in your best interest to contact an experienced tax defense attorney to determine the best strategy to come into compliance without facing criminal tax prosecution.

    Defendant Admitted to Trading on Insider Information and Lying on His Tax Return

    Court documents reveal that Dayakar Mallu, of Orlando, Florida, was an information technology executive. Using the information that he was privy to as an IT executive, Mallu and a co-conspirator used insider information to trade securities of Mylan N.V., a pharmaceutical company. Department of Justice prosecutors alleged that Mallu’s insider trading resulted in more than $4 million of illegal gains or losses avoided.

    As a part of the insider trading investigation into Mallu, federal authorities discovered that as a part of the preparation Opel Systems, LLC, Mallu’s own business, Mallu provided his tax return preparer with false information. Prosecutors alleged that Mallu indicated that a $1.3 million payment was to a contractor when in actuality, the payment was made into Mallu’s own brokerage account. Because the tax preparer was provided knowingly-false information, Opel Systems’ tax return for 2015 was criminally false. 

    Mallu will be sentenced in early 2022. He faces up to 25 years in federal prison for his criminal insider trading activity and up to three years in prison for aiding in the preparation of a false tax return. In addition, Mallu may be ordered to serve a term of supervised release upon his release from physical incarceration. Lastly, Mallu will likely be ordered to pay restitution, representing the tax loss that he caused and insider trading profits that he earned.

    Coming Into Compliance After Filing a False Tax Return

    Although most taxpayers investigated by the IRS have not engaged in insider trading, there are thousands of taxpayers who file false tax returns and are criminally prosecuted. There is a common misconception among some taxpayers that the IRS cannot catch every instance of tax noncompliance. Although that is true, the IRS is able to identify instances of tax cheating with much greater ease than in times past. Therefore, relying on the idea that the IRS will likely not uncover your tax noncompliance is dangerous.

    If you have failed to file a tax return for one or more years, or if you have taken a position on a tax return that could not be substantiated upon civil tax audit, eggshell or reverse eggshell audit or criminal tax investigation, you should contact an experienced tax defense attorney to discuss the facts of your case. Together, you and your seasoned tax attorney will determine your level of civil or criminal exposure and develop a road map to come into compliance without facing criminal tax prosecution. While you are being represented by experienced tax counsel, you will not have to go up against the IRS alone, allowing you to lose less sleep about your looming tax liability.

    Note: As long as a taxpayer that has willfully committed tax crimes (potentially including providing false information to your preparer coupled with affirmative evasion of U.S. income tax on domestic or 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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