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MANHATTAN U.S. ATTORNEY ANNOUNCES CHARGES AGAINST ECONOMIST FOR ENGAGING IN 22-YEAR SCHEME TO EVADE TAXES AND OBSTRUCT THE IRS

FOR IMMEDIATE RELEASE
Monday, April 16, 2012

Preet Bharara, the United States Attorney for the Southern District of New York, and Victor W. Lessoff, the Acting Special Agent-in-Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation Division (“IRS-CID”), today announced the unsealing of charges against DAVID GILMARTIN, an economist and Ph.D., for engaging in a 22-year scheme to evade payment of $500,000 in income taxes owed to the Internal Revenue Service.  GILMARTIN, who lived in New York until 2006, was arrested this morning in Phelan, California, where he now resides.  He will be presented this afternoon before United States Magistrate Judge Sheri Pym, in federal court in Riverside, California. 

Manhattan U.S. Attorney Bharara said: “For more than two decades, David Gilmartin, an economist with a Ph.D., allegedly went to great lengths to avoid his legal obligation as a citizen to pay taxes.  Our economy cannot function without everyone paying their fair share of taxes and we will not tolerate those who act as if the tax laws do not apply to them.”

IRS-CID Acting Special Agent-in-Charge Lessoff said: “The prosecution of individuals who intentionally conceal income and evade taxes is a vital element in maintaining public confidence in our tax system.  We should not expect the honest taxpayer to foot the bill for those who hide income from the IRS.  Special Agents of IRS-Criminal Investigation continually demonstrate their resolve in investigating allegations of complex tax fraud.”

The following allegations are based on the Indictment unsealed today in Manhattan
federal court:

GILMARTIN, who has a Ph.D. in economics, provided a variety of economics-related consulting services to employers and clients between 1989 and 2010.  Those services included: analyzing and reconstructing clinical databases for pharmaceutical companies; performing profitability analyses for credit card companies; conducting statistical analyses for a large pharmaceutical company in connection with a new drug application; and analyzing and preparing testimony for companies involved in patent and antitrust litigation.  

Despite being paid compensation for every year between 1989 and 2010, GILMARTIN failed to file tax returns with the IRS as required, and failed to pay more than $500,000 that he owed in taxes.  As alleged, GILMARTIN took various steps to evade his tax obligations and obstruct the IRS’s ability to collect back taxes, including:

  • Submitting IRS forms to certain employers in which he falsely and fraudulently claimed to be exempt from taxes, in order to cause the employers not to withhold taxes;

  • Providing someone else’s Social Security number to his employer and representing that it was his;

  • Refusing to provide an employer with his Social Security number, citing a purported “religious objection,” in an attempt to prevent the employer from withholding taxes;

  • Causing checks paid to him as compensation to be made payable to a finance company, in order to pay down a personal line of credit and to prevent the IRS from seizing, pursuant to bank levies, the funds paid to him as compensation;

  • Causing checks that were paid to him as compensation to be cashed against a personal bank account rather than be deposited; and

  • Causing checks paid to him as compensation to be endorsed directly to a bank rather than deposited in a personal bank account, in order to pay outstanding balances on his credit card with that bank and to prevent the IRS from seizing, pursuant to bank levies, the funds paid to him as compensation.

*     *     *

GILMARTIN, 68, is charged in a four-count Indictment with tax evasion, obstruction of the IRS, failure to file a tax return, and failure to pay taxes.  On the tax evasion charge, GILMARTIN faces a maximum sentence of five years in prison, and he faces a maximum sentence of three years in prison on the IRS obstruction charge.  GILMARTIN also faces a maximum sentence of one year in prison on each of the failure-to-file and failure-to-pay taxes charges.

Mr. Bharara praised the outstanding efforts of IRS-CID in the investigation.

This case is being handled by the Office's Complex Frauds Unit.  Assistant U.S. Attorney Stanley J. Okula is in charge of the prosecution.

The charges and allegations contained in the Indictment are merely accusations and the defendant is presumed innocent unless and until proven guilty.

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