WASHINGTON - Madison Lee Oden, a former executive with Sterling McCall Automotive Group in Houston, and Richard Duane Davis, former owner of Skydive Houston in Waller, Texas, were sentenced to 15 months and 36 months in prison, respectively, by U.S. District Judge Lynn N. Hughes in Houston, the Justice Department and Internal Revenue Service (IRS) announced today.
In June 2008, following a bench trial before Judge Hughes in the Southern District of Texas, Oden was convicted of filing false tax returns for years 2000 through 2002 and Davis was convicted of aiding or assisting in the preparation of these same false returns. According to the evidence presented by the government at sentencing, Oden underpaid his income taxes for years 1993 through 2003 by approximately $1.7 million. Judge Hughes based his sentencing on the tax loss for years 2000 through 2002, which totaled approximately $800,000.
According to the evidence presented at trial, Davis purported to run his skydiving business through various partnerships, including Skydive Houston LLC, Skylakes Aviation LLC and Aircraft Aloft LLC. Evidence also showed that Davis prepared tax returns and provided financial services for clients out of his Spring, Texas, home. He performed these services under various business names, including R. D. Davis & Associates, R. D. Davis Investments and Financial Management Services.
As the evidence during trial established, Oden had his tax returns prepared by Davis since at least 1991. The evidence further demonstrated that Oden purchased tax write-offs from Davis as purported partnership "investments." Evidence showed that at least two tax returns prepared for Oden by Davis were audited, resulting in disallowance of items and tax due and owing. According to evidence produced during trial, Oden refused to cooperate during the IRS’s audit of his 1993 tax return, which Davis had prepared; instead, he sent frivolous correspondence to the IRS. Evidence at trial demonstrated that this audit resulted in a tax liability of $73,000, which Oden paid in 1997.
It was further shown at trial that the fraudulent losses on Oden’s 1998 through 2002 tax returns were similar to the losses that were disallowed during two previous audits of his tax returns. Evidence also showed that, during tax years 1998 through 2002, Oden reported wages totaling $3,982,955 and that for the same years, the total tax paid by Oden as a result of the fraudulent losses included on his returns was $327,164. According to the evidence at trial, Oden underpaid his income taxes for those years by approximately $1 million.
According to evidence at trial and court documents, in addition to the fraudulent skydiving partnership losses reported on Oden’s returns, Oden also offset his income with losses from a fictitious auto finance sole proprietorship and false losses related to Oden Family Limited Partnership, which Davis set up and through which Oden purported to manage property and assets.
"Tax defiers who think that there are no consequences to forsaking their federal tax obligations and submitting bogus documents to the IRS should know that such thinking is flat-out wrong," said Nathan J. Hochman, Assistant Attorney General of the Justice Department’s Tax Division. "They will be investigated, tried, and convicted as well as being branded felons for the rest of their lives, sentenced to prison, and still required to pay back all of the taxes, plus interest and steep penalties. The Justice Department is committed to stomping out tax defier conduct throughout the nation under the National Tax Defier Initiative."
"Filing false and fraudulent federal tax returns to avoid paying taxes is a crime and one that defrauds our government. This practice is unfair to honest taxpayers who willingly pay their fair share of taxes," said Eileen Mayer, Chief, IRS Criminal Investigation. "This sentence underscores the determination of investigators and prosecutors to uncover and bring tax wrong-doers to justice."
Assistant Attorney General Hochman thanked IRS-CI who investigated this case, and Tax Division trial attorneys Jennifer Ihlo and Jenny Grus, who prosecuted this case. More information about the Justice Department’s Tax Division and its enforcement efforts is available at www.usdoj.gov/tax .