According a Department of Justice press release, a Rhode Island businesswoman pleaded guilty to multiple counts related to a Ponzi scheme that she perpetrated against her friends and family. This story is illustrative of the connection between the IRS and other federal law enforcement agencies and how an investigation unrelated to tax can lead to tax-related charges.
Ponzi Scheme Organizer Charged, Convicted of Tax Crimes
Monique Brady, 44, owned and operated MNB, a company that she maintained was responsible for the rehabilitation of large properties for resale. She sold this falsehood as an opportunity to potential investors who were looking to get into the real estate rehabilitation market. She told the potential investors that the contracts MNB received were large and were valued between $20,000 and $80,000 per contract. She held that she needed their investment to pay subcontractors to perform the work required by the rehabilitation contracts.
In actuality, MNB was a real company, but with much smaller operations. MNB was indeed hired to do work on properties, such as mowing the grass, removing snow, and performing small tasks such as rewiring electrical fixtures. According to prosecutors and investigators, the average task yielded MNB approximately $1,000. Many projects were between the price points of $25 and $100.
In an effort to assure her investors that they were indeed investing into a true profitable business venture, Brady created false emails from a management company not associated with Brady, using a stolen identity, indicating that MNB had been awarded large contracts to rehabilitate particular properties.
Court records show that over half of the 171 properties that Brady told investors she had received large rehabilitation contracts for were properties that she or MNB had no relationship to. The remainder of the properties were those at which Brady was responsible for providing the menial services described above. Brady convinced 31 individuals to invest in her Ponzi scheme by guaranteeing a 50 percent share in the profit earned. In actuality, most investors lost money, resulting in a total loss of nearly $5 million. The investors Brady swindled were primarily those that she knew, including a friend from law school, the nanny of her children, and family friends.
Criminal Tax Obstruction
Upon learning that she was under investigation by IRS Criminal Investigations agents, Brady directed her investors to delete all email correspondence, texts, and records related to the rehabilitation projects. Brady admitted that this request was in an effort to obstruct the IRS investigation into her scheme.
Brady’s charges included wire fraud, aggravated identity theft, and obstructing an IRS investigation. After pleading guilty, she remained in federal custody and will be sentenced in October. It is unclear whether she will be released temporarily prior to her sentencing.
Brady faces up to 20 years in prison on the wire fraud count, up to three years in prison for the IRS obstruction charge, and a mandatory two-year sentence on the charge of aggravated identity theft (which will be served concurrently to any other federal prison sentence imposed). Additionally, Brady will likely be sentenced to serve a term of supervised release after her physical incarceration ends. Lastly, she will likely be ordered to pay restitution to both her victims and the IRS for any unpaid taxes.
Criminal Investigations Unrelated to Tax can Lead to Tax Charges
This story illustrates how criminal behavior unrelated to tax can lead to tax charges. When to government investigates an individual for any crime that involves money, there is a high likelihood that the individual suspected of a crime may have also violated the tax laws. For instance, if an employee of a bank was embezzling money, those funds are properly includible in the gross income of the embezzler. Thus, it is easy to see how nearly any financial crime can lead to additional tax charges. Likewise, if an individual or business is investigated for tax-related issues, the IRS may uncover illegal activity unrelated to tax. The IRS will then refer the discovered information to the relevant government entity.
If you believe that you or your company may have engaged in activity that, if discovered, would draw unwanted attention by the IRS or another federal or state agency, it is in your best interest to contact an experienced tax defense attorney to analyze your facts and circumstances and develop a strategy to mitigate any potential negative repercussions associated with the risk.
Contact an Experienced Tax Attorney Today
The tax and accounting professionals at the Tax Law Offices of David W. Klasing have extensive experience representing taxpayers from all walks of life. Whether you are a business owner facing a sales and use tax audit or you have received notice that your individual return is being examined, our team of zealous advocates are standing by to help you develop a sound legal strategy that will keep your personal and financial interests at the forefront of importance. Do not lose sleep over the possibility of tax evasion or other tax-related charges from the IRS or state taxing authorities. Contact the Tax Law Offices of David W. Klasing today for a reduced-rate consultation.
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