Houston Attorney and Others Charged with Tax Crimes (8/21/19)

The USAO for SD Texas announced issued a press release titled "Houston Personal Injury Attorneys and Case Runners Indicted," here.  I don't know that there is anything exceptional about the case, but being from Houston this caught my attention.  I don't know any of the players mentioned in the press release.

Here are the key excerpts:

The charges against Stern and his alleged co-conspirators stem from a long-running criminal scheme to evade taxes. Stern also allegedly obtained his personal injury cases through barratry - the illegal practice of soliciting law firm clients by paying kickbacks to middlemen known as “case runners.”  

Stern and his co-conspirators sought to enrich themselves by illegally recruiting clients through the payment and receipt of illegal kickbacks in order to generate personal injury cases and legal fees, according to the charges. They allegedly worked to conceal and disguise the payments and hide their resulting income from the IRS by filing false documents with them. These allegedly included tax returns, 1099 forms and an offer in compromise that falsely reported material information including amounts of income, expenses and taxes due and owing. 

Once Stern became aware of the investigation, he allegedly worked to obstruct justice by ordering others to destroy subpoenaed documents and instructing co-conspirators not to cooperate. 

According to the indictment, Stern employed multiple devices to disguise his illegal kickback payments to case runners as legitimate referral fees paid to attorneys or as other types of legitimate payments that would be deductible under the tax laws. Stern allegedly funneled kickback payments to case runners Ratcliff and Marcus Esquivel (charged in a separate case) through the accounts of Bradley and Plezia. The charges allege Stern claimed the payments were legitimate referral fees to Bradley and Plezia rather than illegal kickbacks to Ratcliff and Esquivel. 

The indictment also alleges Stern wrote referral fee checks in the names of attorneys who never received the checks. Instead, Morris would allegedly cash the checks with forged endorsements at check-cashing locations and use the funds to pay illegal kickbacks owed to himself and other case runners for Stern’s referrals.    

Stern allegedly also filed 1099 forms that falsely reported to the IRS the nature of the payments and to whom they were made. On his tax returns, Stern falsely reported the illegal, non-deductible kickback payments as legitimate, deductible business expenses, which greatly reduced his tax burden, according to the charges. 

Bradley and Plezia allegedly filed false tax returns to facilitate the scheme.  Ratcliff failed to report many of the kickback payments he received as income on his company’s tax returns, according to the charges. Stern and Morris also allegedly caused another attorney to file false tax returns and a false offer in compromise with the IRS to help cover-up the scheme. 

All defendants are charged with conspiracy to defraud the United States. If convicted, they each face up to five years in prison. For willfully filing a false tax return, Stern, Ratcliff and Bradley face another three years of imprisonment. Aiding and assisting in the preparation and presentation of false tax returns carries another potential three-year-term, for which Stern and Morris are charged. If convicted of witness tampering or obstruction of justice, Stern could be sentenced up to 20 and 10 years, respectively.
The press release has the standard disclaimer: 

* * * * 

An indictment is a formal accusation of criminal conduct, not evidence.
A defendant is presumed innocent unless convicted through due process of law.

Tax Practitioner Self-help Defense Fails (3/8/12)

Criminal defense attorneys are always thinking about ways to win their cases.  Defendants also have a keen interest in winning.

One of the best defenses is to neutralize key prosecution witnesses.  But there are ways to do that and not to do that.  This blog is about a way not to do that.  It from the following article Calif. tax preparer accused of ordering hit on 2 (CBS News 3/6/12), here.  The balance of this blog reports the article.  I have no independent knowledge of the events described.

A tax practitioner -- a former IRS agent -- operated a tax preparation business for the wealthy.  In at least some instances, he had wealthy clients who were inattentive, permitting him to steal large amounts of money from them.  The article is cryptic about precisely he managed to steal the money in a tax practice, but apparently he would present a return to the clients showing a very large tax bill, convince the clients that they should deposit the tax into his account so that he could write the check to the IRS, and then file false returns showing much less liability and paying that smaller amount.  He would pocket the difference.  I am not sure that is exactly how it worked in all cases, because there is another statement in the article that he filed a return for a client reporting $ 42.1 million when the client's income was only -- get this, only -- $20.7 million.  I am not sure how he would get his money by reporting more tax than he got from the client.  Still, somehow, allegedly, he did stole from his clients.  He was indicted on multiple clients of fraud.  Not tax fraud; just fraud for defrauding clients.

So, the tax practitioner attempted some self help.  Not just neutralize, but eliminate the key witnesses against him.  According to the article, he stands "accused of ordering at least two former customers killed as they prepared to testify against him on fraud charges."

One notable quote from his attorney:  "I find it almost impossible to believe."  (I suppose this was the attorney in the pending fraud case, perhaps pressed into interim service also on the witness tampering charge (although I suspect he would be disqualified from representing him in that case.)