Ronald E. Burrell, former chief executive officer (CEO) of Caremerica Inc., and Michael R. Elliott, former chief financial officer (CFO) of Caremerica Inc., were sentenced today in Wilmington, N.C., the Justice Department and Internal Revenue Service (IRS) announced. Judge James C. Fox sentenced both Burrell and Elliott to 60 months imprisonment and ordered them each to pay restitution of over $4.8 million.
Burrell, a resident of Wilmington, N.C., pleaded guilty to conspiracy to defraud the IRS on Jan. 3, 2012, and Elliott, a resident of Loris, S.C., pleaded guilty to conspiracy to defraud the IRS on July 18, 2012.
According to the charging documents, Burrell and Elliott co-owned and operated a chain of assisted living facilities (ALFs) in North and South Carolina. The ALFs were managed by Caremerica Inc., a Leland, N.C.-based company that Burrell and Elliott also owned and operated. Burrell was the president and CEO for Caremerica, the Caremerica ALFs and other related companies. Elliott, formerly a certified public accountant, served as the CFO and tax return preparer for the Caremerica companies. Burrell and Elliott were the corporate officers responsible for ensuring that the Caremerica companies collected, reported and paid over federal employment taxes to the IRS. However, with Burrell and Elliott at the helm, the Caremerica companies accrued more than $4.5 million in employment tax liabilities between approximately 2003 and 2006. Among other things, Burrell and Elliott filed, or caused to be filed, false IRS forms that reported full payment of the employment taxes due, when in fact only a small fraction of the taxes, or none at all, were paid.
Charging documents further allege that in 2003, Burrell and Elliott acquired majority ownership of Partners Pharmacy Services Inc. (PPS), which provided prescription drug and related services to the Caremerica ALFs. In April 2005, Burrell and Elliott sold PPS to a subsidiary of Omnicare Inc. At the closing, Burrell and Elliott received $1.6 million and $1.4 million, respectively. The PPS sale proceeds were disbursed at a time when the IRS was attempting to collect unpaid employment taxes from the Caremerica companies, as well as from Burrell personally. To prevent the IRS from discovering their PPS proceeds, Burrell and Elliott took active steps to conceal them. Among other things, Burrell formed a nominee company in his wife’s name through which he funneled a portion of his PPS sale proceeds in order to avoid IRS collection action. As a result of his concealment efforts, Burrell deceived the IRS into accepting a $29,000 settlement on a $300,000 personal tax liability and opened another assisted living facility with the PPS proceeds. Elliott directed his $1.4 million share to be wired into the bank account of his then-girlfriend. Burrell and Elliott then filed false 2005 federal income tax returns that failed to report the PPS proceeds. Elliott and Burrell also obstructed justice by making false statements under oath in bankruptcy proceedings and in IRS disclosure forms.
Kathryn Keneally, Assistant Attorney General for the Justice Department’s Tax Division, commended the efforts of the IRS - Criminal Investigation special agents who investigated the case, and Tax Division Trial Attorneys Adam Hulbig and Todd Ellinwood, who prosecuted the case.