Saturday, March 25, 2017

Another Offshore Account Guilty Plea Coupled with Bank Fraud Conspiracy (3/25/17)

DOJ Tax announced here a guilty plea to commit tax and bank fraud by a U.S. taxpayer, Casey Padula, with offshore accounts assisted by two offshore account enablers, Joshua VanDyk and Eric St-Cyr at Clover Asset Management.  I link at the end of this blog the prior blogs involving those enablers who previously pled and were sentenced.  The key excerpts listing Padula's skullduggery are:
According to documents filed with the court, Casey Padula, 48, of Port Charlotte, was the sole shareholder of Demandblox Inc. (Demandblox), a marketing and information technology business. Padula conspired with others to move funds from Demandblox to offshore accounts in Belize and disguised them as business expenses in Demandblox’s corporate records. Padula created two offshore companies in Belize: Intellectual Property Partners Inc. (IPPI) and Latin American Labor Outsourcing Inc. (LALO). He opened and controlled bank accounts in the names of these entities at Heritage International Bank & Trust Limited (Heritage Bank), a financial institution located in Belize. From 2012 through 2013, Padula caused periodic payments to be sent from Demandblox to his accounts at Heritage Bank and deposited approximately $2,490,688. Padula used the funds to pay for personal expenses and purchase significant personal assets. However, he falsely recorded these payments in Demandblox’s corporate books as intellectual property rights or royalty fees and deducted them as business expenses on Demandblox’s 2012 and 2013 corporate tax returns causing a tax loss of more than $728,000. 
Padula also conspired with investment advisors Joshua VanDyk and Eric St-Cyr at Clover Asset Management (CAM), a Cayman Islands investment firm, to open and fund an investment account that he would control, but that would not be in his name. Heritage Bank had an account at CAM in its name and its clients could get a subaccount through Heritage Bank at CAM, which would not be in the client’s name but rather would be a numbered account. Padula transferred $1,000,080 from the IPPI bank account at Heritage Bank in Belize to CAM to fund a numbered account. 
In addition to the tax fraud, Padula also conspired with others to commit bank fraud. Padula had a mortgage on his Port Charlotte, Florida home of approximately $1.5 million with Bank of America (BoA). In 2012, he sent a letter to the bank stating that he could no longer repay his loan. At the same time, Padula provided Robert Robinson, III, 43, who acted as a nominee buyer, with more than $625,000 from his IPPI bank account in Belize to fund a short sale of Padula’s home. Padula and Robinson signed a contract, which falsely represented that the property was sold through an “arms-length transaction,” and agreed that Padula would not be permitted to remain in the property after the sale. Padula in fact never moved from his home and less than two months after the closing, Robinson conveyed it back to Padula by transferring ownership to one of Padula’s Belizean entities for $1. Robinson also pleaded guilty today to signing a false Form HUD-1 in connection with his role in the scheme. 
* * * * 
Padula faces a statutory maximum sentence of five years in prison, a term of supervised release and monetary penalties. As part of his plea agreement, Padula agreed to pay restitution in the amount of $728,609 to the IRS and to BoA in the amount of $728,609. Robinson faces a statutory maximum sentence of one year in prison, a term of supervised release, restitution and monetary penalties.
The related documents are:
  • The Information, here.
  • The Plea agreement, here.
JAT Comments:

1.  The plea is to a single conspiracy count which alleges two conspiracies -- (i) a defraud / Klein conspiracy to impair, impede or defeat the lawful functions of the IRS and (ii) an offense conspiracy to violate 18 USC § 1344(1), Bank Fraud, here.  Interestingly, the offense of Bank Fraud is a 30-year offense.

2.  If the Bank Fraud had been committed (as seems to have been the case because the bank is awarded restitution of $739,459.90), the participation in the conspiracy would have made him guilty of Bank Fraud as well as the conspiracy.  Apparently, by agreeing to plea only to the conspiracy and tucking that conspiracy along with the Klein conspiracy, Padula limited his incarceration exposure to 5 years.  Of course, the Guidelines calculations indicated below will almost certainly make the sentence below 5 years anyway.

3.  Just as an aside, if the conspiracy is to commit a misdemeanor offense, the maximum incarceration is the same as the misdemeanor offense, but if the conspiracy is to commit a felony offense, regardless of the maximum incarceration for the felony offense, the maximum incarceration period is 5 years and that is true whether the conspiracy is to commit a less than 5-year offense (such as 7206(1) or 7206(2), both of which are 3-year offenses) or a 30-year offense such as Bank Fraud.

4.  The Sentencing Guidelines Calculation are a bit different than normally encountered in tax crimes because there are two types of conspiracy involved - tax and bank fraud.  As recounted in the plea agreement quoting SG  § 1B1.2(d), the conviction to commit more than one offense is treated for guidelines calculations as if the defendant had been convicted on each as if it were a separate count.  The two calculations produce the same base offense level (with 2 level enhancement for sophisticated means) of 20.  So 20 is the base level used.  There is a two level addition for grouping in SG § 3D1.4.  And the defendant will get the 3 level reduction for acceptance of responsibility.  Although both side are free to argue appropriate Booker variances under 18 USC  § 3553, the Government agrees to recommend a sentence at the low end of the Guidelines range.

4.  The defendant agrees that he is liable for the fraud penalties under  §§ 6663 and 6651(f) on the amount of restitution credited to tax and agrees to the immediate assessment of those penalties.  (Note that the base income tax amount in restitution can be assessed immediately upon sentencing.)

5.  The factual basis for the plea begins on p. 15 of the plea agreement.

Prior Blog Entries on Joshua Vandyk and Eric St.-Cyr (reverse chronological order):
  • Two Enablers Caught in Sting Investigation Sentenced (Federal Tax Crimes Blog 10/3/14), here.
  • Offshore Enabler Nabbed in Sting Operation Sentenced (Federal Tax Crimes Blog 9/5/14), here.
  • Enabler Guilty Pleas from Sting Operation (Federal Tax Crimes Blog 7/12/14), here.
  • IRS Sting Investigation Nabs Offshore Bank Account Enablers (Federal Tax Crimes Blog 3/24/14), here.

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