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On Wednesday, July 18, 2018, defendant Marc Howard Berger, CPA and resident of Walnut Creek, California, was found guilty on three counts of aiding and abetting the filing of a false return. The guilty verdict resulted from charges originally filed in September of 2017, when Berger and co-defendant G. Steven Burrill were indicted on multiple counts of tax fraud. Burrill, who entered a guilty plea in 2017, is scheduled to be sentenced this September. The date for Berger’s sentencing hearing has yet to be determined.
Prior to his indictment, Berger practiced as a Certified Public Accountant at a tax preparation firm. Unfortunately, he used his sophisticated knowledge of the tax system to circumvent rather than uphold the law, ultimately leading to prosecution and conviction.
One of Berger’s clients was G. Steven Burrill, who, as CEO of several financial companies, “managed venture capital funds” through the organizations he controlled, according to a press release issued by the Department of Justice (DOJ). One such fund, Burrill Life Sciences Capital Fund III, L.P., was valued at approximately $283 million.
According to the press release, “Between December 2007 and September 2013, Burrill transferred more than $18 million from the [Burrill Life Sciences Capital] Fund to his management companies in excess of the management fees… due and allowable under the agreements that governed the Fund.” Berger agreed to help Burrill conceal from the Internal Revenue Service (IRS) the $18 million, which Berger omitted from tax returns prepared on Burrill’s behalf. By hiding the income with Berger’s assistance, Burrill evaded the payment of over $4.7 million in personal income tax liabilities over the period from 2009 to 2013, shortly after Burrill began to make the transfers in late 2007.
On September 14, 2017, a grand jury indicted both men on various tax crimes. Burrill later pleaded guilty to two offenses: one count of tax evasion, which is prohibited under 26 U.S.C. § 7201 (attempt to evade or defeat tax), in addition to one count of investment-advisor fraud. At his sentencing hearing on September 25, 2018, he may risk the maximum statutory penalties for tax evasion, which include a fine of up to $100,000 and a prison sentence of up to five years.
Berger, who used his tax knowledge to help Burrill, was charged with a different crime: three counts of aiding and assisting in the preparation of a false tax return, commonly known as “tax preparer return fraud,” which is prohibited by 26 U.S. Code § 7206(2) (fraud and false statements, aid or assistance). As our criminal tax defense attorneys have discussed, tax advisors can be held liable for helping clients commit tax evasion, as Burrill and Berger’s cases illustrate.
Tax preparer return fraud carries slightly more lenient penalties than tax evasion – but the ramifications are still devastating. In accordance with 26 U.S. Code § 7206, criminal penalties for tax preparer fraud can include fines of up to $100,000, and prison terms of up to three years, per each count alleged. Moreover, the tax preparer will be subject to various disciplinary sanctions, potentially spelling the end of the preparer’s career.
Acting United States Attorney Alex G. Tse used the verdict as an opportunity to issue a warning to taxpayers – and tax preparers. “We commend today’s jury verdict,” he stated, adding, “Tax preparers must know that they cannot willfully assist clients in defrauding the IRS and failing to pay their fair share.”
Whether you are a tax preparer filing a return on behalf of another individual, or a taxpayer seeking tax preparation services, you must exercise caution to comply with state and federal tax laws. Failing to report the full amount of your taxable income – including, where applicable, your foreign income (or even income from criminal activity) – is a serious tax violation with potential to result in a tax audit, IRS criminal investigation, and eventually, prosecution.
If you need assistance preparing and filing a federal or California tax return, reporting your domestic or offshore income, or defending yourself during an IRS tax audit or criminal tax investigation, the Orange County tax evasion lawyers at the Tax Law Office of David W. Klasing can help. Serving taxpayers and tax preparers throughout Northern California and Southern California, we have more than 20 years of experience providing tax preparation, criminal tax defense, and audit or audit appeals representation. We have successfully handled numerous cases involving criminal tax exposure for CPAs, and are prepared to defend you with precision, tenacity, and zeal. For a reduced-rate consultation, contact the Tax Law Office of David W. Klasing online, or call (800) 681-1295.
Also, we’ve expanded our offices! In addition to our offices in Irvine and Los Angeles, the Tax Law Offices of David W. Klasing now have offices San Bernardino, Santa Barbara, Panorama City, Oxnard, San Diego, Bakersfield, San Jose, San Francisco, Oakland and Sacramento.