Business Owner Sentenced to 18 Months in Prison for Conspiracy to Defraud the IRS

May 19, 2008

Greenbelt, Maryland - U.S. District Judge Deborah K. Chasanow sentenced Ernest Lee, Jr., age 42, of Clinton, Maryland, today to 18 months in prison, followed by three years of supervised release for conspiracy to defraud the IRS, announced United States Attorney for the District of Maryland Rod J. Rosenstein. Judge Chasanow also ordered Lee to pay $340,001.57 in taxes owed.

According to the plea agreement, beginning in or about February 1995 through at least 2002, Ernest Lee, Jr. was responsible for maintaining the payroll and financial and accounting records for the family-owned, ceramic-tile installation business called ELT, Inc. As part of his duties, Lee, Jr. was responsible for remitting FICA, withholding and federal unemployment taxes owed by ELT, Inc. to the IRS and the Social Security Administration for ELT, Inc. employees. For tax years 1998-2000, Lee, Jr. failed to pay approximately $161,000 in FICA, withholding and federal unemployment taxes owed by ELT, Inc.

In addition, for the period of 1998-2001, Ernest Lee, Jr. caused ELT, Inc’s corporate bank account to pay for the personal expenses of his father, his mother, himself, his wife, and other family members. Many of the personal expense payments were recorded inaccurately or falsely by Lee, Jr. in the company’s accounting software as payments of business expenses such as purchase of supplies. The personal expenses paid for from ELT, Inc.’s business account included: the mortgage for his parents’ residence, the utility bills for his parents’ residence, the wedding expenses for his sister’s wedding, purchases of furniture for Lee, Jr.=s children, and purchases of non-business items made on personal credit cards issued to Lee, Jr. and his wife. The total amount of personal expenses paid from the business account from 1998 through 2001 exceeded $362,000. Moreover, Lee, Jr. underreported his adjusted gross income and the income for his father for tax years 1996 to 2001 and 2000-2001, respectively.

United States Attorney Rod J. Rosenstein thanked the Internal Revenue Service - Criminal Investigation for its investigative work and commended Assistant United States Attorney Gina L. Simms and Tax Division Attorney Jerrold Kluger, who prosecuted the case.



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