On Wednesday, July 19, 2017, 54-year-old Morganville, New Jersey resident Giacomo Giorlando, owner of trucking company 4 G’s Trucking, pleaded guilty in Trenton federal court to one count of bankruptcy fraud and three counts of tax evasion. In January 2018, U.S. District Judge Peter G. Sheridan, before whom Giorlando pleaded guilty the previous year, sentenced Giorlando to 18 months in federal prison. In addition to imposing a lengthy prison sentence, Judge Sheridan also ordered the defendant to pay more than $800,000 in restitution, the bulk of which must be paid to the Internal Revenue Service (IRS). Moreover, Giorlando will be facing three years of “supervised release,” which is similar to parole in requiring strict compliance with numerous – and often highly restrictive – conditions of release.
According to the information charging Giorlando, the defendant “knowingly and willfully did attempt to evade and defeat a substantial part of the income tax due and owing to the United States” on three separate occasions, filing with the IRS a “false and fraudulent… personal Income Tax Return, Form 1040” for the tax years 2011, 2012, and 2014. (As our Orange County tax evasion defense attorneys explained in a previous article concerning felony tax evasion charges against two Chicago-based restaurant owners, informations are typically used in situations where the defendant, having waived his or her right to an indictment, intends to plead guilty as part of a plea agreement with prosecutors.)
These allegations, to which Giorlando would eventually plead guilty, underlaid the three counts of tax evasion, while the bankruptcy fraud charge arose from Giorlando’s failure, in violation of federal bankruptcy laws, to accurately disclose all assets using bankruptcy forms, notably Form B 106A/B (Schedule A/B: Property), Part 4 of which requires debtors to list financial assets including but not limited to cash, checking accounts, savings accounts, investment accounts with brokerage firms, retirement and pension accounts, and trusts. According to a Department of Justice (DOJ) press release issued at the time of sentencing, “When Giorlando filed for bankruptcy in May 2014, he failed to accurately report his assets from at least 10 accounts at TD Bank and one account at Provident Bank that he maintained during the time frame covered by the bankruptcy. The bankruptcy was approved” – and later, even discharged – “based upon this false and incomplete information.”
Attempting to hide assets when filing Chapter 7 or Chapter 13 (or, though less common, individual Chapter 11) can have disastrous consequences for the debtor, including prison time, criminal fines, and involuntary dismissal of the underlying bankruptcy case. Criminal tax exposure for evasion of payment is also present where assets or sources of income are hidden from State and Federal Tax Collectors.
Even where a taxpayer has zero intention of filing for bankruptcy, there is still a lesson to be learned from Giorlando’s case: namely, that tax evasion can result in severe consequences. These consequences may include incarceration, criminal fines and restitution, and, in cases where supervised release is ordered, mandatory compliance with various “conditions of release,” which may range from community service to psychological counseling to a slew of financial, employment, and even location restrictions, depending on the offender.
If the tax offender is a licensed professional conviction of a tax crime can additionally be a career ender. That is, most professional credentialing boards have character and fitness standards that licensed professionals must adhere to. Regardless as to whether one is a doctor, lawyer, or accountant, certain deviations from professional character and fitness standards can result in a loss of one’s license to practice. In the case of a tax fraud conviction, most professional boards will consider this a serious matter because tax fraud and tax evasion are inherently crimes of dishonesty. Crimes involving an element of dishonesty or “moral turpitude” are frequently grounds for professional discipline. In the case of an attorney, for instance, conviction for tax fraud and other felonies involving dishonesty or fraud is typically grounds for disbarment.
Through his tax fraud scheme, in which Giorlando “comingled business revenue with his personal funds, utilized a check-casher to cash business checks, deposited the proceeds of his business into various bank accounts, and then significantly inflated expenses to reduce his taxable income,” Giorlando caused a tax loss amounting to just over $460,000. As restitution, he was ordered by Judge Sheridan to pay $750,000 to the IRS, with an additional $65,000 ordered to be paid to his creditors, who were defrauded by Giorlando’s intentional failure to list financial assets on his bankruptcy schedules.
Notice that, at $815,000, the total restitution order actually exceeds the tax loss Giorlando caused by approximately $400,000, which should remind taxpayers that the DOJ is unafraid to impose harsh monetary penalties when tax evasion is detected. This should also be evident from Giorlando’s 18-month prison sentence, which could have been even longer – up to 60 months, in accordance with 26 U.S. Code § 7201 (attempt to evade or defeat tax), as noted in an earlier DOJ press release – had the case unfolded differently.
With another tax season just around the corner, taxpayers should be on high alert. Even negligent or accidental tax errors can expose well-meaning taxpayers to costly civil penalties, while a deliberate or “willful” attempt to circumvent the Tax Code can result in swift recommendation for prosecution, as Giorlando’s case – like many others covered in our tax law blog – should make plain to our regular readers.
Don’t risk being targeted for an IRS audit, or worse, an IRS criminal investigation. While aggressive legal representation by an experienced criminal tax defense attorney or IRS tax audit attorney is essential if you have already found yourself in the IRS’ crosshairs, the safest strategy is to avoid preventable tax controversies by seeking out meticulous, detail-oriented tax preparation you can trust. At the Tax Law Office of David W. Klasing, our knowledgeable, award-winning team of tax attorneys, CPAs, and EAs draws upon decades of experience handling a wide array of municipal, state, federal, and international tax matters on behalf of individuals and businesses, ensuring timely and accurate tax preparation services for business owners, retirees, expatriates, bankruptcy debtors, high net worth individuals, and more.
Whether you are worried about an upcoming audit of your real estate business, are concerned about a previous failure to file taxes, or simply have questions about effective and strategic tax planning for your family or your business, turn to the Tax Law Office of David W. Klasing for zealous support focused on total client satisfaction. For a reduced-rate consultation concerning a tax question or concern, contact us online, or call our California tax law firm at (800) 681-1295 today. With Tax Day 2018 already coming around the corner, it is never too early to begin preparing.
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