Return Preparer and Client Sentenced for Roles in Offshore False Expense Scheme
Wifredo A. Ferrer, United States Attorney for the Southern District of Florida, and José A. Gonzalez, Special Agent in Charge, Internal Revenue Service, Criminal Investigation Division (IRS-CID), announced that defendant Tom F. Castellanos, of Coral Gables, was sentenced on April 25, 2012 to 12 months and one day in prison, to be followed by 1 year of supervised release. Co-defendant Manuel Rivero, Jr., of Miami, was sentenced on April 20, 2012 to 30 months in prison, to be followed by 1 year of supervised release. Each defendant previously pled guilty to one count of conspiring to defraud the Internal Revenue Service, in violation of 18 U.S.C.§ 371.
According to court documents, between 2001 and 2007, Castellanos operated a roofing business called East Coast Metals, Inc. (ECM) based in Hialeah, FL. In late 2001, Castellanos complained to his return preparers, including co-defendant Rivero, about the amount of federal income tax he had to pay, and these complaints led to a series of discussions with the tax preparers about a way to avoid paying Castellanos' full share of income taxes. As a result of these discussions, one of the return preparers arranged for the creation of a Panamanian corporation called National Steel Processors, Inc. (NSP) and arranged the opening of a bank account for that company in Panama. NSP was a shell corporation that provided no services, had no employees, and manufactured nothing.
Court documents state that for income tax purposes, Castellanos claimed that ECM purchased materials from NSP. Acting on instructions from Rivero, Castellanos initially created false invoices purporting to represent his company's purchases from NSP. Later, Castellanos stopped manufacturing false invoices, but continued entering falsified purchases from NSP on the books of ECM. For tax years 2002 to 2007, Castellanos used these fake purchases to claim expenses, or cost of goods sold, that falsely reduced the tax liability of ECM and himself. Rivero prepared tax returns on behalf of ECM and Castellanos with full knowledge that the claims relating to NSP expenses were false. The amount of false purchases claimed during the conspiracy exceeded $10 million. Rivero also knew that Castellanos wrote checks to NSP that were deposited in the Panamanian bank account and that Castellanos had access to these funds. Castellanos used the funds to make loans and to purchase a condominium and boat dock in Bimini.
Mr. Ferrer commended the investigative efforts of the Internal Revenue Service, Criminal Investigation Division. These cases are being prosecuted by Assistant U.S. Attorney Karen Rochlin.
A copy of this press release may be found on the website of the United States Attorney's Office for the Southern District of Florida at http://www.usdoj.gov/usao/fls. Related court documents and information may be found on the website of the District Court for the Southern District of Florida at http://www.flsd.uscourts.gov or on http://pacer.flsd.uscourts.gov.