WASHINGTON – Thomas J. Ernst, formerly a resident of McLean and Arlington, Va., was arraigned today in the Eastern District of Virginia. Ernst was indicted March 10, 2011, for one count of corruptly endeavoring to impede the Internal Revenue Service (IRS), three counts of tax evasion for 2004, 2005 and 2006, and two counts of failing to file corporate tax returns in 2004 and 2005, the Justice Department and IRS announced today. Ernst appeared today before the Honorable U.S. District Court Judge Claude M. Hilton.
According to the indictment, Ernst was the president and chief executive officer of Medicure Plus Inc., a health insurance benefits administration company. From 2000 through 2006, Medicure operated as a third party administrator of the Postmasters’ Benefits Plan (PBP), the health benefits carrier for the National League of Postmasters (NLP). Medicure and NLP entered into a 10 year guaranty agreement under which Medicure managed PBP’s operations; NLP paid Medicure $166,000 each month plus a $33,000 administrative fee.
According to the indictment, between 2001 and 2007, Ernst corruptly endeavored to obstruct and impede the due administration of the IRS by causing Medicure to make payments from its corporate bank account for numerous personal expenses, including: a summer rental house; more than $1.5 million in payments to himself, his wife, sister-in-law and children; his son’s Georgetown University college education; and various property purchases and rentals. None of these payments were included on any personal income tax return as income to Ernst. Additionally, Ernst used nominee bank accounts, purchased and leased assets in the names of his children and sister-in-law and created fictitious documents to conceal his income and ownership of assets from the IRS.
Ernst did not file U.S. Individual Income Tax Returns, Forms 1040 with the IRS for 2001 through 2006 and is charged with evading his taxes in 2004, 2005 and 2006. Further, Ernst failed to cause Medicure to ever file a corporate income tax return, Form 1120, and he is charged with failing to file a Medicure corporate income tax return in 2004 and 2005.
An indictment is merely a formal charge by the grand jury. The defendant is presumed innocent unless and until proven guilty in U.S. District Court. If convicted, the defendant faces a maximum potential sentence of 20 years in prison. The trial date has been scheduled for Aug. 2, 2011, before Judge Hilton.
This case was investigated by IRS Criminal Investigation and is being prosecuted by Assistant U.S. Attorney Charles Connolly and the Department of Justice’s Tax Division Trial Attorneys Caryn Finley and Thomas Krepp.
More information about the Justice Department’s Tax Division and its enforcement efforts is available at www.usdoj.gov/tax/.