Thursday, February 11, 2010

DOJ Tax Budget Request - The Criminal Parts #4 - Pure Tax Crimes

More on the DOJ Tax Budget Request


“Pure Tax Crimes”

The core of the Tax Division’s criminal work involves so-called “legal source income” cases. These cases encompass tax crimes involving unpaid taxes on income earned legally (e.g., a restaurateur who skims cash receipts or a doctor who inflates deductible expenses.) When these cases involve difficult issues of tax law or complex methods of proof, United States Attorneys’ Offices often call upon the special skills that Tax Division prosecutors bring to the Justice Department’s goal of combating financial fraud and reducing white-collar crime.

Evasion of taxes on income from legal sources significantly erodes the federal tax base. The Division’s enforcement activities are a strong counter to that erosion, providing a significant deterrent to those who contemplate shirking their tax responsibilities. These prosecutions often receive substantial local press and media coverage and assure law-abiding citizens who pay their taxes that tax cheats are not getting away with it. The government’s failure to vigorously prosecute such cases would undermine the confidence of law-abiding taxpayers and jeopardize the government’s ability to operate a revenue collection system whose cornerstone is voluntary compliance.

During the past year, Division attorneys investigated and/or prosecuted cases involving tax crimes committed by individuals from all walks of life, including corporate executives, business owners, attorneys, doctors, dentists, movie actors, and others.

For example, in March 2009, in United States v. Glenn E. Lockwood (D. Alaska), the defendant, a dentist, was sentenced to five years in prison. The defendant was convicted of evading taxes of approximately $575,000 during tax years 2000 through 2003 following a jury trial in October 2008. The defendant had created a corporation for the purpose of entering into a fictitious offshore executive leasing and deferred compensation scheme to fraudulently reduce his taxable income and to channel his income into offshore investments. He used nominees and sham trusts to disguise his interest in assets, and he used corporate funds to pay for personal expenses that were then fraudulently deducted as business expenses.

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