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Wednesday, September 8, 2010

Department of Justice

Acting United States Attorney Gregg L. Sullivan Eastern District of Tennessee


KNOXVILLE, Tenn. – Kevin Matthew Flannery, 63, and Margaret Anne Flannery, 61, both of Gatlinburg, Tennessee, pled guilty today to subscribing materially false tax returns before the Honorable Thomas W. Phillips, United States District Judge for the Eastern District of Tennessee, in Knoxville. Sentencing has been set for January 26, 2011.

Kevin and Margaret Flannery each face a maximum punishment of three years in prison, one year of supervised release, a $250,000 fine, and a $100 special assessment fee. Additionally, the Flannerys may be ordered to pay restitution to the Internal Revenue Service (IRS).

Kevin Flannery pled guilty to one count of subscribing a false tax return for M.K.M.K. Associates, Inc., doing business as “Southland Car and Jeep Rental” (Southland), for tax year 2003. Margaret Flannery pled guilty to one count of subscribing a false tax return for X.M.K.M. Enterprises, Inc., doing business as “Famous Fries,” for tax year 2002. Margaret Flannery was the president and twenty-five percent of owner of Famous Fries and Southland, and Kevin Flannery was the treasurer and twenty-five percent owner of both entities. Both entities were Tennessee C corporations located in Gatlinburg, Tennessee, and were run as family businesses.

Margaret Flannery was primarily responsible for the daily operations of Famous Fries and Kevin Flannery was responsible for the daily operations of Southland. Famous Fries was run exclusively as a cash business, and Southland was largely a cash enterprise as well. Kevin and Margaret Flannery participated in a cash skim from Famous Fries. In addition, Kevin Flannery skimmed cash from Southland. The defendants filed corporate tax returns for Famous Fries and Southland. However, although Kevin and Margaret Flannery provided gross receipts amounts and other information to the accountants for Southland and Famous Fries, respectively, they did not inform the accountants of the true gross receipts of the entities. The accountants prepared the corporate tax returns for the companies based upon the records provided by Kevin and Margaret Flannery. These tax returns, which Margaret Flannery signed for Famous Fries, and which Kevin Flannery signed for Southland, were materially false because they substantially understated the actual gross receipts.

“Most taxpayers choose to report the income they receive and file correct returns,” stated Christopher R. Pikelis, Special Agent in Charge, IRS Criminal Investigation – Nashville Field Office. “Those taxpayers who choose to do the right thing should be assured that the system works, and that those who don’t follow the rules will be punished,” stated Pikelis.

This investigation and subsequent indictment was conducted by the IRS Criminal Investigation. Assistant United States Attorney J. Edgar Schmutzer and United States Department of Justice, Tax Division, Trial Attorneys Tracy Gostyla and Rebecca Perlmutter represented the United States.

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