According to a Department of Justice press release, a Philadelphia man has pleaded guilty to wire fraud and tax evasion after deceiving business partners and failing to report his income to the IRS. The case serves as a clear example of how business-related financial misconduct can trigger both criminal fraud charges and criminal tax enforcement. If you have failed to report income, filed an inaccurate return, or used business funds for personal expenses without proper documentation, it is in your best interest to consult with an experienced tax defense attorney as soon as possible to determine how to get right with the government.
Defendant Diverted Business Funds and Failed to File His Required Tax Returns
Court records reveal that John “Jack” Griffin, of Philadelphia, was the founder and principal of Second Story Farming Inc., which operated under the name Metropolis Farms. The company focused on vertical farming, a method of growing crops in stacked layers using environmentally controlled systems. Second Story Farming engaged in multiple business lines, including growing and selling vertically farmed crops, developing vertical farming technology, and selling turnkey farming systems to customers.
In 2017, Griffin entered into contracts with two companies to sell them vertical farming systems. Each system was marketed as a complete package, including materials, supplies, equipment, operational instructions, and the infrastructure needed to launch a functioning vertical farm. Before executing the deals, Griffin provided these companies with financial projections that dramatically overstated the revenue potential of the systems and significantly understated the associated expenses. Relying on those misrepresentations, the two companies agreed to pay Second Story Farming to construct the farms.
Rather than use the funds to fulfill the contracts, Griffin misappropriated much of the money for personal expenses and to support the research and development side of his business. This redirection of funds became the basis for the wire fraud charge, as it involved the use of electronic communications to perpetrate a scheme based on false pretenses and fraudulent inducements.
Griffin’s legal troubles did not stop with the wire fraud. In the same year that he earned income from these transactions, Griffin failed to file a personal income tax return, despite being legally required to do so. The government alleges that he took steps to conceal the income by withdrawing cash from business accounts, transferring funds to his wife, and using company assets to pay personal expenses. These actions formed the basis of the tax evasion charge, which carries serious consequences even apart from the fraud counts.
Griffin is scheduled to be sentenced on October 22. He faces a maximum sentence of twenty years in prison for each count of wire fraud and up to five years in prison for tax evasion. In addition to incarceration, he may also be sentenced to supervised release, ordered to pay restitution to the defrauded parties and the IRS, and subject to financial penalties.
Business Misconduct Can Have Serious Criminal Tax Consequences
While the facts of this case begin with misrepresentations to investors, Griffin’s conduct also included behavior that drew the attention of the IRS. Failing to file a tax return when income is earned is itself a violation of the Internal Revenue Code, but using business bank accounts to pay for personal expenses and disguising income through withdrawals and transfers only increases the severity of the matter. In the eyes of the IRS, these actions are viewed as intentional efforts to hide income, which can trigger not only additional civil penalties but also criminal prosecution.
The IRS often uses financial tracing to determine whether a taxpayer has concealed income or otherwise attempted to evade taxes. In cases involving business owners, the agency looks closely at how funds flow between business and personal accounts. When those transfers are not supported by documentation, or when there is a clear attempt to obscure the source or purpose of payments, the risk of criminal tax referral increases exponentially.
Taxpayers should also be aware that failure to file a return, when done willfully, is treated very differently than simple oversight. The IRS has long warned that willful noncompliance, especially when paired with attempts to mislead or conceal, can lead to charges of tax evasion, a felony offense with steep penalties. Filing obligations apply even when income is irregular or when taxpayers believe their net tax liability will be low. The act of filing is required regardless of whether the taxpayer intends to pay or believes payment will be due.
Why Early Legal Intervention Can Change the Outcome
Griffin’s case serves as a cautionary tale for business owners who allow their personal and business finances to become entangled or who take liberties with reporting obligations. It is not uncommon for entrepreneurs to use business income to fund their lifestyle, particularly in closely held entities. However, doing so without appropriate recordkeeping, reporting, and return filing can lead to severe civil and criminal tax consequences. Once the government identifies a pattern of misconduct, especially one that spans both fraud and tax violations, options for resolving the matter outside of court become limited.
By consulting with a seasoned tax attorney early, taxpayers who find themselves in a gray area can often take corrective action, file amended returns and reduce their exposure before the IRS or Department of Justice becomes involved. In some cases, voluntary disclosure or other pre-audit remedies can help keep the issue on the civil side of the ledger. Waiting until charges are filed on the other hand, leaves no room for negotiation and guarantees the chance of imprisonment, financial penalties, and reputational harm.
If you have failed to file a tax return, mischaracterized income or expenses, or used business assets for personal purposes without proper documentation, now is the time to seek legal guidance. A qualified and seasoned tax attorney can help you evaluate your situation, assess your risk, and put together a plan to rectify your situation and minimize your tax risk profile.
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