Wednesday, May 2, 2012

Convictions of Mail Fraud, False Claims and Conspiracy; Use of Offshore Accounts (5/2/12)

According to a DOJ Press Release, here [will post link when available], Curtis Morris and Richard Kellog Armstrong were convicted of "for mail fraud, filing false claims against the United States and conspiracy to file false claims against the United States."  "Morris was found guilty of three counts of mail fraud, seventeen counts of filing false claims against the United States and one count of conspiracy to defraud the United States. Armstrong was found guilty of one count of mail fraud, eight counts of filing false claims against the United States, three counts of engaging in monetary transactions in property derived from mail fraud and one count for conspiracy to defraud the United States."

The method they used to file the false claims was the use of Forms 1099-OID which reported bogus withholdings which they used to claim large refunds.
Armstrong received over $1.6 million and, according to the testimony at trial, quickly moved most of this money into accounts in the names of shell entities and offshore bank accounts.
I suspect that Mr. Armstrong did not report the offshore bank accounts either on FBARs or 1040s, but do not know why he was not prosecuted for either violation (of course, there may not have been any or significant earnings on the accounts).  Given the charges and convictions, adding additional counts would not make any difference in terms of sentence or deterrence effect.  And, the gravamen of the Government's complaints against the pair was stealing from the Government and not violation of reporting obligations.  Still, under the facts the FBAR reporting requirement would directly implicate his Fifth Amendment privilege and perhaps that was a consideration in not charging FBAR.

1 comment:

Please make sure that your comment is relevant to the blog entry. For those regular commenters on the blog who otherwise do not want to identify by name, readers would find it helpful if you would choose a unique anonymous indentifier other than just Anonymous. This will help readers identify other comments from a trusted source, so to speak.