California Attorney, a Prior Tax Offender and Embezzler, Pleads Guilty to tax Evasion (10/21/19)

I received an email from IRS CI announcing the following plea

James Roy McDaniel, 66, who pleaded guilty before United States District Judge S. James Otero to one count of tax evasion, is scheduled to be sentenced on February 3, 2020.  At sentencing, McDaniel could receive a statutory maximum sentence of five years imprisonment. 

McDaniel was a licensed California attorney for more than two decades, until he pleaded guilty in late 2004 to one felony count of subscribing to a false income tax return. In 2005, McDaniel was sentenced to three years in federal prison for that crime, and he surrendered his license to practice law in California. In that case, McDaniel’s failure to report income resulted in a tax loss of $677,368 to the federal government, according to court documents. McDaniel’s additional income was the result of his embezzlement of over $1.6 million from two prominent families he represented as an attorney.  McDaniel served time in state prison for the embezzlement. 

The IRS subsequently assessed McDaniel more than $1.4 million in taxes, interest and penalties for the tax years 1997 through 2001, court papers state. 

According to the signed plea agreement, McDaniel willfully attempted to evade paying his debt to the IRS by creating two shell companies – Davis Bell Consulting LLC and James Roy Consulting LLC – where he directed payments for tax and estate planning consulting work he performed after being released from prison. During a scheme that allegedly ran from May 2008 until December 2012, McDaniel attempted to mislead federal tax authorities and conceal his income by directing other people to sign documents identifying themselves as the sole managing members of the shell companies. As part of the scheme, McDaniel directed them to open bank accounts where he deposited checks for his tax and estate planning work. 

McDaniel continued to earn income for tax and estate planning consulting work during each of calendar years 2008 to 2018, but willfully failed to report his income, and willfully failed to file tax returns with the IRS for tax years 2011 to 2018. 

McDaniel admits that from 2012 through 2017, he received taxable income of at least $527,944, and subsequently owes unpaid taxes of $184,126, in addition to the $1.4 million previously assessed. 

I'll post a link to the DOJ Tax or USAO web page on the plea when I have it.

JAT Comment:  

1.  This is not your typical tax crimes case.  The typical tax crimes offender is a one-time offender and is not charged again after serving his time.  There is more than one possible reason for that.  The first is that the offender learned his lesson and will not commit tax crimes again.  The second is that perhaps the IRS and DOJ do not want to fire their limited prosecutorial bullets at repeat offenders who may seem incapable of learning lessons.  Still, I suppose that some of these repeat offenders have to be tried simply to discourage others who might be tempted after being convicted for tax crimes.