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BUSINESSMEN SENTENCED IN TAX SCHEME
Skimmed Profits from Norwood Asbestos Company and Lied to the IRS

June 3, 2010

BOSTON, MA - Two businessmen were sentenced late yesterday in federal court with filing false tax returns that hid the profits of a Norwood-based asbestos removal company.

United States Attorney Carmen M. Ortiz and Susan Dukes, Special Agent in Charge of the Internal Revenue Service, Criminal Investigation – Boston Field Office, announced that DARRELL W. MACLEAN, 48, of Falmouth and CHARLES R. SMITH, JR., 44, of Sharon, were sentenced by the Honorable Nathaniel M. Gorton to 6 months incarceration based on charges that they filed false tax returns in connection with a cash skimming scheme in which they attempted to hide the profits of Suburban Middlesex Insulation (“SMI”), an asbestos removal company they co-own, from the Internal Revenue Service.

The charges arose out of MACLEAN and SMITH’s operation of SMI, which used teams of trained laborers that were supplied by temporary employment agencies to perform asbestos abatement work in public buildings in New Bedford, Brockton and elsewhere. One of the temporary employment agencies was owned by James Espinola, whom SMI paid by check usually each week in an amount based on the number of hours worked by his employees. Espinola ordinarily picked up these checks at SMI's Norwood office.

From 2001 to 2005, with Espinola’s assistance, MACLEAN and SMITH engaged in a scheme to evade income tax payments by having Espinola cash checks for them and by declaring those checks as business expenses on SMI's tax returns. Each week, either MACLEAN or SMITH would hand Espinola a second, larger check made payable either to Espinola or his company. These checks ranged in amount from $5,000 to $15,000, and purported to be in payment for temporary employment services. Espinola deposited the checks into his bank account, later withdrew the funds in cash. He then delivered the cash, minus a cut for himself, to MACLEAN and SMITH at their office.

On SMI's tax returns, MACLEAN and SMITH characterized all of the checks to Espinola as business expenses instead of as income to themselves personally, even though they knew that the funds in the second set of checks were returned to them by Espinola. For the years 2001 to 2005, MACLEAN and SMITH willfully omitted to report their respective shares of the cash from Espinola on their personal tax returns as taxable income. MACLEAN and SMITH also mischaracterized large personal expenditures, including renovations to their homes, as business expenses, and intentionally omitted to report such expenditures on their personal income tax returns as income.

For the tax years 2001 to 2005, MACLEAN and SMITH deprived the United States Treasury of approximately $981,880 and $538,571 in tax payments, respectively. Espinola was charged separately, and awaits sentencing.

The case was investigated by the Internal Revenue Service – Criminal Investigation. It was prosecuted by Assistant U.S. Attorney Jonathan F. Mitchell.

 

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