2002-11-21 -- Abreu, Rene et al. -- Superseding Indictment -- News Release

West New York Businessman Rene Abreu and Others Indicted for Tax Violations; CPAs Plead Guilty This Week to Assisting Abreu in Tax Schemes

NEWARK - A Superseding Indictment was returned today, adding tax charges against West New York businessman Rene Abreu, his wife and others, U.S. Attorney Christopher J. Christie announced.

The Superseding Indictment follows two guilty pleas earlier in the week from two certified public accountants, formerly of the Edison accounting firm Milgrom, Galuskin, Balmouth and Company. The CPAs, Ronald Rosner and Martin Galuskin, pleaded guilty in cooperating plea agreements to aiding and assisting Abreu and his wife, Lourdes Adan-Abreu, in the preparation and filing of false income tax returns, according to Assistant U.S. Attorneys Carlos Ortiz and Deborah Goldklang.

"We will vigorously seek prosecution of tax professionals who knowingly assist their clients in preparing false income tax returns," said Anne D. Fahy, Special Agent in Charge of the IRS Criminal Investigations Field Office in Newark. "Their knowledge and training and blatant disregard for our tax laws make these CPAs as culpable as those for whom they prepared the tax returns."

The additional four charges contained in the Superseding Indictment (Counts 44 through 47) allege that the Abreus, Ana Martell and others were involved in a conspiracy to defraud the IRS, and that the Abreus filed false income tax returns with the IRS.

The 47-count Superseding Indictment charges nine individuals with various criminal violations, including conspiracy to commit mail fraud, bank fraud, money laundering, extortion, structuring currency transactions, bank bribery, conspiracy to defraud the IRS and filing false federal income tax returns.

The Superseding Indictment charges Abreu, 40, his wife, 39, who together own several Hudson County-based companies, including The Mortgage Pros, Inc., Abreu Real Estate and RLA Homes; Martell, who is an employee of The Mortgage Pros, Inc. and Chief Financial Officer of RLA Homes; and Luis Nieves, a Senior Vice President for Hudson United Bank, a New Jersey-based financial institution.

Eleven individuals were originally charged in a 43-count Indictment in May. The original Indictment charged multiple conspiracies including mail fraud, extortion and cash structuring in excess of $2 million, as well as several bank fraud schemes, money laundering, bribery of bank officials and more. Rosner and Manuel Mier - both charged in the original Indictment - have now pleaded guilty in cooperating plea agreements with the U.S. Attorney's Office.

Count 44 of the Superseding Indictment, which carries a maximum penalty of five years in prison and a $250,000 fine, charges the Abreus and Martell with conspiring to defraud the United States by defeating the governmental functions of the IRS to ascertain and collect income taxes. The Abreus allegedly used corporate funds of their various companies to pay for personal expenses which they failed to report as income on their individual tax returns. The Abreus, along with Martell, classified these payments as loans to the Abreus from their companies, which reduced the balance of the Abreus' officer loan accounts and enabled them to avoid reporting these payments as income on their tax returns. The Abreus and Martell also classified in excess of $700,000 in cash which was structured into bank accounts under the control of the Abreus, as repayment of loans, which reduced the balance of the officer loan accounts. This enabled the Abreus to avoid reporting income on their tax returns.

Count 44 further charges that the Abreus falsely inflated the amount of improvements made on the Abreus' residence in Old Tappan, and created a fictitious loss that was deducted by the Abreus on their income tax returns. Count 44 also charges the Abreus and Martell with creating a loss on the Abreus' tax returns by creating a fictitious loss on a subchapter S corporation owned by the Abreus, namely RLA Homes, which created losses deducted on the Abreus' personal tax returns.

Counts 45 through 47, which each carry a maximum penalty of three years in prison and a $250,000 fine, charge the Abreus with filing false 1996, 1997 and 1998 individual income tax returns, which they did not believe to be true and correct as to every material matter. The Superseding Indictment alleges that in additional to declaring false losses on their individual tax returns, the Abreus failed to report as income approximately $176,510 in cash they received in 1996; $397,354 in cash they received in 1997; and $91,400 in cash they received in 1998. In total, the Superseding Indictment alleges in excess of $391,449 in taxes avoided by the Abreus from 1996 through 1998.

On Tuesday, Rosner, 60, of Manalapan, pleaded guilty before Judge Greenaway to a one-count Information, charging him with aiding and assisting the Abreus in the preparation and filing of a false 1996 joint individual income tax return.

Rosner admitted participating in a planning meeting with the Abreus and others in December 1996, where he discussed how the Abreus could deduct a loss on their personal tax returns from the sale of their Old Tappan residence. Rosner further admitted that he and the Abreus agreed to falsely increase the amount of improvements the Abreus made to the home by at least $70,000 on their 1996 U.S. individual income tax return, in order to enable the Abreus to falsely reduce the amount of taxes they owed on their 1996 tax return.

Galuskin, 63, of Franklin Park, pleaded guilty on Wednesday before Judge Greenaway to count two of a two-count Information, charging him with aiding and assisting Rene Abreu and Lourdes Adan-Abreu in the preparation and filing of false 1997 and 1998 joint income tax returns, respectively.

Galuskin specifically admitted participating in a planning meeting with the Abreus and others in December 1998 where he discussed how the Abreus could report a deduction on their personal income tax return for any loss incurred by RLA Homes, a subchapter S corporation owned by them, which would flow through onto their personal return, thereby eliminating all of the income reported on this return by the Abreus.

Galuskin also admitted learning that Rene Abreu had caused a check to be written to himself from RLA Homes in December 1998 in the amount of $824,000, which created an insufficient balance in the officer loan account at the end of 1998, which would have prevented the Abreus from deducting on their 1998 return the full amount of the RLA Homes loss. Galuskin admitted creating a journal entry in the books and records of RLA Homes, which reversed the effect in the Abreus' officer loan account of the $824,000 check written by RLA Homes to the Abreus in December 1998, and enabled the Abreus to deduct the full amount of the RLA loss on their 1998 personal income tax returns.

Galuskin further admitted having a conversation with Abreu regarding the RLA check which Abreu wrote to himself prior to the end of 1998, during which Abreu told Galuskin that he did not have sufficient cash to pay tax in 1998 and that Abreu needed Galuskin to buy Abreu another year.

On Sept.30, Mier, 48, of Hillside, also pleaded guilty before Judge Greenaway to counts 17 and 18 of the original Indictment. Count 17 charged Mier with conspiring with Rene Abreu and others to extort money for the protection of illegal gambling.

Count 18 charged Mier with conspiring with Abreu and others to structure currency transactions, by causing in excess of $2 million to be deposited into accounts at Hudson United Bank and other financial institutions in amounts of less than $10,000, to avoid the filing of currency transaction reports by the financial institutions, as required by law.

On Oct. 18, Ciro Mederos, 43, an attorney with a law practice in Union City, pleaded guilty before Judge Greenaway to a one-count information, charging him with conspiring with Abreu and other employees and associates of The Mortgage Pros, Inc., to defraud several financial institutions by fraudulently submitting fictitious loan-related documents to these institutions, to induce the institutions to issue residential loans to clients of The Mortgage Pros, Inc.

Under U.S. Sentencing Guidelines, Judge Greenaway will determine the actual sentences of Mier, Mederos, Rosner and Galuskin based on a formula that takes into account the severity and characteristics of the offense and their criminal history, if any.

Parole has been abolished in the federal system. Under Sentencing Guidelines, defendants who are given custodial terms must serve nearly all that time.

Christie credited Special Agents of the IRS Criminal Investigation section in Newark, under the direction of Special Agent in Charge Anne D. Fahy; and Special Agents of the FBI in Newark, under the direction of Special Agent in Charge Louie F. Allen, for their work in developing the case.

The Government is represented by Assistant U.S. Attorney Ortiz, Chief of the Government Fraud Unit in Newark, and Assistant U.S. Attorney Goldklang of the Special Prosecutions Division in Newark.

-end-

Defense Attorneys:

Rene Abreu: Gerald Krovatin, Esq. Newark

Lourdes Abreu: Scott Thompson, Esq. Roseland

Rosner: James Cecchi, Esq. Roseland

Galuskin: Lawrence Horn, Esq. Newark