United States Attorney James R. Dedrick Eastern District of Tennessee
FOR IMMEDIATE RELEASE
Thursday, April 9, 2009
[Knoxville, TN] – United States Attorney Russ Dedrick and Special Agent in Charge Christopher Pikelis, Internal Revenue Service, Criminal Investigation Division, announced an indictment and convictions involving several federal tax enforcement initiatives in the Eastern District of Tennessee.
On March 23, 2009, Thomas E. Cowan, Jr., 64, of Elizabethton, Tennessee, was arrested on charges resulting from a federal indictment charging him with one (1) count of income tax evasion and three (3) counts of failure to file income tax returns. After his arrest and initial appearance before U.S. Magistrate Judge Bruce Guyton, he was released on his own recognizance.
According to the indictment, Cowan, an attorney, attempted to evade and defeat the payment of a large part of the income and self employment taxes, penalties and interest due to the United States for tax years 1993 through 1997. The indictment alleges that Cowan failed to file timely income tax returns with the Internal Revenue Service (IRS) each year and failed to pay any income tax due and owing for those years. Additionally, the indictment states that Cowan concealed his true income and assets by diverting income checks into the checking account of a family member, cashing checks, depositing earned income and making personal payments to and from his law firm’s trust account, and using nominees to conceal the ownership of assets from the United States.
The indictment also charges Cowan with failing to file federal income tax returns with the IRS for 2002, 2003, and 2004. In each of those years, the indictment states, that Cowan had gross income totaling $112,677.78, $72,412.63, and $50,971.83, respectively.
Members of the public are reminded that these are only charges and that every person is presumed innocent until their guilt has been proven beyond a reasonable doubt.
On March 23, 2009, Joseph D. Brandenburg, age 37, of Loudon, Tennessee, pled guilty before the Honorable Thomas W. Phillips, United States District Judge, to all five (5) counts of an Information previously filed in federal court, which included three (3) counts of wire fraud, one (1) count of money laundering and one (1) count of filing a false tax return. Brandenburg is scheduled to be sentenced on July 13, 2009 at 2:00 p.m.
Brandenburg was the operator of Extreme Logistics, LLC (Extreme). The Information charges that Extreme established a contractual relationship, commonly referred to as “factoring,” with Prime Financial Services, Inc. (Prime), a business that purchased accounts receivables. Under the factoring arrangement, Extreme would submit an invoice to Prime upon completion of a route hauled by Extreme on behalf of Bowater, TNT-GM, or TNT-BMW. Prime would pay Extreme a percentage of the invoice amount up front and the remaining balance, minus Prime’s fee, would be paid to Extreme after Bowater, TNT-GM, or TNT-BMW forwarded payment for the shipment to Prime.
During the plea hearing, Brandenburg admitted that he devised a scheme where he caused invoices to be submitted to Prime which falsely represented that Extreme had hauled loads of freight which Brandenburg knew had not been hauled. Prime then wire transferred funds into Extreme’s bank account after receiving the bogus invoices. Brandenburg acknowledged three fraudulent transactions in June 2005 which totaled $151,553.61.
Also, in support of his guilty pleas, Brandenburg admitted that in July 2005, he laundered the proceeds of the wire fraud scheme by transferring $30,000 from Extreme Logistics’ bank account to another business known as Extreme Properties, LLC. Additionally, Brandenburg admitted that he filed a false tax return for calendar year 2005, that reported a total loss of $1,806,235.00. Brandenburg acknowledged that he failed to report income on his tax return, which included personal purchases that he made from the Extreme Properties account. These items included building materials for his personal residence in Loudon, Tennessee, wages paid to laborers for work performed on his residence, and personal ATVs.
The plea agreement signed by Brandenburg sets forth that, for the purposes of the United States Sentencing Guidelines, his wire fraud scheme amounted in losses in excess of $1 million. Also, Brandenburg acknowledged that the tax loss to the United States resulting from false tax returns filed for 2004, 2005 and 2006 was between $400,000 and $1 million. Brandenburg agreed to pay restitution to the Internal Revenue Service a total of $633,772 in unpaid taxes for 2004 through 2006 plus at least $147,152 in interest.
This investigation was conducted jointly by the Internal Revenue Service, Criminal Investigation Division (IRS-CID), and the Federal Bureau of Investigation (FBI). Assistant U.S. Attorney Matthew
T. Morris represented the United States.
On April 1, 2009, Jimmy A. Dunn, 38, of Knoxville, Tennessee, plead guilty in federal court, before the Honorable Thomas W. Phillips, United States District Judge, to a one-count Information charging him with federal income tax evasion. Sentencing has been scheduled for August 20, 2009. Dunn could receive a sentence of up to five (5) years imprisonment and a $250,000 fine.
Court documents revealed that Dunn admitted that from 2001 through 2006, he earned income providing mortgage-broker related services. Additionally, for the purpose of concealing his income from the IRS through the concealment of personal wealth and assets, Dunn transferred the ownership of various properties from his name into various trusts. Dunn also admitted that he presented to his bank checks payable to his business for immediate cash payment to prevent the checks from posting to his business’ bank account, thereby concealing his income from the IRS in the event of an audit. Dunn admitted that through his conduct he evaded $248,220 in income tax owed to the United States collectively for calendar years 2001 through 2006.
This investigation was conducted by IRS Criminal Investigation. Assistant U.S. Attorney F. M. (Trey) Hamilton III represented the United States.
On April 2, 2009, Jeremy S. Schmid, 31, of Sevierville, Tennessee, was sentenced by United States Magistrate Judge Bruce Guyton, to a three-year term of probation and a six-month period of home detention. Schmid was also ordered to pay $204,723.47 in restitution to the Internal Revenue Service (IRS).
The sentencing was a result of a guilty plea by Schmid on October 30, 2008, to three counts of failing to file tax returns with the IRS. According to the stipulation of facts filed with the court at the time of his plea, Schmid admitted to willfully failing to file returns for the 2002, 2003 and 2004 tax years.
This investigation was conducted by the IRS Criminal Investigation Division, and Assistant U.S. Attorney Frank M. Dale, Jr., represented the United States.
On April 2, 2009, Delbert Foster Blount, III, age 40, of Ootlewah, Tennessee, plead guilty in federal court, before Honorable Thomas W. Phillips, United States District Judge, to a seven count Information filed on February 17, 2009, charging him with one (1) count of mail fraud, one(1) count of wire fraud, and five (5) counts of income tax evasion. Blount faces a maximum penalty of 65 years in prison and fines of up to $1.75 million when he is sentenced on August 20, 2009.
According to the filed plea agreement, from June 2000 until December 2006, Blount used his position as a financial advisor to encourage people to invest money in various savings and retirement vehicles that include, but are not limited to, 401(k) accounts, IRA accounts, and brokerage accounts, but then misappropriated the money for his person use. Blount admitted that he deposited checks received from investors into a nominee account to hide his theft. The plea agreement states that Blount then created false statements on his computer and posted them on the internet to lead his clients to believe that he had actually invested their money. If clients requested a distribution from their non-existent investments, Blount would delay them until he stole funds from other investors to deposit into the victim’s bank account.
Blount also failed to report the proceeds from the theft on his federal income tax returns he filed for 2002 through 2004, and he failed to file income tax returns for tax years 2005 and 2006. These actions resulted in a tax loss to the government of $469,592 for tax years 2002 through 2006.
According to the plea agreement, Blount stole over $1.2 million from his 26 clients and will be required to pay full restitution as ordered by the Court.