Former cortez resident indicted for wire fraud and income tax evasion
DENVER – Brian K. Shoults, age 42, of Mesa, Arizona, was indicted last week by a federal grand jury in Durango, Colorado, for wire fraud and income tax evasion, the United States Attorney’s Office and IRS – Criminal Investigation announced. Shoults was arrested on February 8, 2013, and on that date appeared before a U.S. Magistrate Judge in Durango. He was released on a $50,000 unsecured bond. He is expected to be back in court on April 19, 2013 for arraignment, which will also take place in Durango.
According to the indictment, from April 8, 2008, through August 25, 2011, Shoults executed a scheme to defraud the Copy Shop Inc. (doing business as Office Outpost), located in Cortez, Colorado, in an effort to embezzle more than $250,000 from that company.
Shoults, a bookkeeper for Office Outpost, would allegedly electronically wire money from the Office Outpost accounts for his own personal use without the knowledge of any other employees or owners of the Office Outpost. He electronically logged into Office Out Post's accounts at Community Banks of Colorado, located in Cortez, Colorado, to transfer money from the Office Outpost's accounts into two of his personal bank accounts over which he had signatory authority.
As bookkeeper, Shoults oversaw Office Outpost's payroll, including the calculation and payment of payroll checks to Office Outpost's employees. He had authority to access Office Outpost accounts and draw on those funds in order to pay payroll expenses as well as other business expenses incurred by Office Outpost. He also had sole responsibility for reconciling the Office Outpost's bank statements with its internal books and records. This allowed Shoults to write checks from the Office Outpost's accounts without supervision from or the knowledge of other employees or owners of Office Outpost.
Shoults allegedly committed tax evasion for years 2008, 2009, 2010, and 2011 by willfully failing to report all income he actually received from Office Outpost. For each corresponding year, he was required to report all income on his U.S. Individual Income Tax Form 1040 which was required to be filed the following year by April 15. Using his position at Office Outpost, he manipulated his W-2 form to show less income then he actually received from Office Outpost. Such additional taxable income substantially increases the amount of tax due and owing to the United States of America.
“The old adage ‘Trust but Verify’ is particularly important for business’ books and financial records,” said U.S. Attorney John Walsh. “All too often, leaving one person in charge of bookkeeping opens the door to massive theft,” as in this case.”
“This is a reminder that all taxpayers should file complete and accurate tax returns; all income regardless of the source is taxable,” said Steven Boyd, Special Agent in Charge, IRS Criminal Investigation, Denver Field Office. “It’s important for business to have good internal controls which includes segregation of duties to help reduce fraud and errors.”
“This case like most embezzlement cases is a prime example of how only having one employee overseeing the businesses’ banking accounts can end up in a big loss for the business,” said Cortez Police Department Detective Lieutenant Jim Kingery said. “The thefts start out small but once they’ve tested the waters and gotten away with it they generally go for more. Thankfully with the Cortez Police Department and the IRS – Criminal Investigations working together there can be a positive outcome. When you have specific crimes like this it is good to be able to work with an agency that does this on an everyday basis.”
Shoults was charged with one hundred and twenty-three counts of wire fraud and four counts of attempting to evade or defeat tax (income tax evasion). If convicted of wire fraud he faces not more than 20 years in federal prison, and a fine of up to $250,000 per count. If convicted of tax evasion he faces not more than 5 years in federal prison, and a fine of up to $250,000 per count.
This case was investigated by IRS-Criminal Investigation and the Cortez Police Department. The case is being prosecuted by Assistant U.S. Attorney James Candelaria.
The charges contained in the indictment are allegations, and the defendant is presumed innocent unless and until proven guilty.