Tax Travails of the Rich (Perhaps Famous) Enablers of the Rich (Perhaps Famous) (9/8/20)

USAO D NJ issues a press release, Former Luxury Car CEO and Luxury Watch Dealer Admit Tax Charges in Connection with Scheme to Misallocate Limited Edition Sports Cars, here.

Excerpts:

The former chief executive officer [Maurizio Parlato, 58] of a New Jersey-based importer of Italian luxury cars admitted today that he failed to report to the IRS as income kickback payments he received for misallocating limited edition sports cars, Attorney for the United States Rachael Honig announced.

A luxury watch dealer [Gigi Knowle, 69] also admitted failing to report to the IRS commission he received for helping facilitate the unauthorized sale of one of those limited edition sports cars.    

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Parlato was a resident of Florida and served as the CEO of a company (Company B) based in Englewood Cliffs, New Jersey, from 2002 to 2009. Company B was responsible for distributing automobiles that were produced by a luxury automobile manufacturer (Company A) based in Maranello, Italy. Company B distributed Company A’s luxury automobiles in the Western Hemisphere through dealers based in the Americas.

Company A produced several highly desired automobile models in small quantities. Parlato had some measure of authority over the allocations of those limited edition automobiles.  In 2013, Company A announced it was creating its most exclusive model to date: a “supercar,” limited to only 500 units and carrying a manufacturer’s suggested retail price (MSRP) of approximately $1.4 million. Company A and Company B established a formula to determine which customers would be placed on the approved list to buy a supercar. 

After resigning as CEO of Company B, Parlato assisted Company B dealers and supercar purchasers in misallocating supercars in exchange for kickback payments. Between 2015 and 2017, Parlato received approximately $2.8 million from Company B dealers and supercar purchasers in exchange for, among other things, assisting them in misallocating supercars to customers who were not on the list of approved purchasers. Parlato admitted that he failed to report the $2.8 million in kickback payments he received as income on his federal individual income tax returns. Parlato also admitted that he attempted to hide some of these funds from the IRS by depositing them in a bank account in Spain and failing to disclose the existence of that bank account.  Parlato admitted that he avoided paying more than $1.1 million in taxes.

Knowle also received payments in connection with his role in misallocating a supercar.  In 2015, Knowle lived in Florida and worked as a luxury watch dealer. That year, Knowle assisted Parlato in facilitating the sale of a supercar to another individual who was not on the approved list. Knowle received approximately $560,000 as commission for his role in the sale, some of which Knowle distributed to Parlato and others who were also involved in misallocating the supercar to the unapproved purchaser. Knowle failed to disclose the commission on his personal income tax returns. Knowle admitted that he avoided paying approximately $175,000 in taxes. 

The count of subscribing to a false tax return carries a maximum potential penalty of three years in prison and a $250,000 fine, or twice the gross gain or loss from the offense. The count of failing to file a FBAR carries a maximum potential penalty of five years in prison and a $250,000 fine.   

JAT Comments:

1.  According to Kristen Lee, Former Ferrari and Bugatti executive admits to dodging taxes, taking $2.8 million in bribes to misallocate supercars (Business Insider 9/4/20), here:

Though neither the release nor the court documents specifically name Company A or Company B, Maranello, Italy, is famously the home of luxury Italian automaker Ferrari. Ferrari North America is based in Englewood Cliffs, New Jersey. The unnamed "supercar" certainly matches the description of the Ferrari LaFerrari, which was launched in 2013 and only 500 were made. Having an approved list of buyers is certainly something Ferrari is known to do.