February 23, 2012
Department of Justice
United States Attorney William C. Killian Eastern District of Tennessee
Gatlinburg Business Owners Kevin and Margaret Flannery Sentenced for Subscribing False Tax Returns
KNOXVILLE, Tenn. – Kevin Matthew Flannery, 65, and Margaret Anne Flannery, 63, both of Gatlinburg, Tenn., were sentenced today in U.S. District Court in Knoxville, by the Honorable Thomas W. Phillips, U.S. District Judge. Kevin Flannery was sentenced to serve 24 months in prison. Margaret Flannery was sentenced to serve three years probation and one year of home confinement. Including relevant conduct, the Court found the tax loss associated with this case to be $550,649.13.
In September 2010, Kevin pleaded 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. On the same date, Margaret pleaded 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 was the president and 25 percent owner of Famous Fries and Southland. Kevin Flannery was the treasurer and 25 percent owner of both entities. Both entities were Tennessee C corporations located in Gatlinburg, Tenn., and were run as family businesses.
Margaret was primarily responsible for the daily operations of Famous Fries while Kevin 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. The Flannerys both participated in a cash skim from Famous Fries. In addition, Kevin skimmed cash from Southland. Both filed corporate tax returns for Famous Fries and Southland. However, although they 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 the Flannerys. These tax returns, which Margaret signed for Famous Fries and Kevin 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 Henry, Special Agent in Charge, Internal Revenue Service (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 Henry.
This investigation was conducted by the IRS Criminal Investigation Division. Assistant U.S. Attorney J. Edgar Schmutzer and U.S. Department of Justice, Tax Division, Trial Attorneys Tracy Gostyla and Rebecca Perlmutter prosecuted the case on behalf of the United States.