James Farnell, a resident of Boca Raton, Fla., pleaded guilty to one count of income tax evasion, the Justice Department and Internal Revenue Service (IRS) announced today. Farnell was previously indicted on April 19, 2012.
In January 2004, after being sued by the U.S. Securities and Exchange Commission (SEC) for securities violations at another company, Farnell began selling shares of a company that were held in a nominee name to the investing public. These stock sales, which occurred between 2004 and 2006, violated an injunction against Farnell in a previously filed lawsuit filed by the SEC. According to information provided at the plea hearing, the proceeds from the stock sales from 2004-2006 were not properly reported on Farnell’s income tax returns.
Prosecutors informed the court that Farnell failed to file his individual income tax return for 2005 and failed to pay federal income tax on over $480,000 in unreported capital gains from these stock sales. As a result, Farnell evaded at least $200,000 in federal income tax on his unreported income.
Farnell faces a potential maximum sentence of five years in prison, a fine of up to $250,000, full restitution to the IRS and a term of supervised release. U.S. District Judge William P. Dimitrouleas, who is presiding over the matter, set a sentencing date of January 10, 2013.
On Aug. 10, 2012, James Farnell’s co-defendant and brother, Michael Farnell, pleaded guilty to tax evasion for similar conduct. His sentencing is scheduled for Jan. 3, 2013.
Kathryn Keneally, Assistant Attorney General for the Justice Department’s Tax Division, and Wifredo A. Ferrer, U.S. Attorney for the Southern District of Florida, thanked IRS – Criminal Investigation for investigating the case, and also thanked the U.S. Securities and Exchange Commission and the United States Attorney’s Office for their assistance with the investigation. The case is being prosecuted by Tax Division Trial Attorney Jed Silversmith and Assistant U.S. Attorney Bertha Mitrani.
Additional information about the Tax Division and its enforcement efforts may be found at www.justice.gov/tax .