June 29, 2010
HOUSTON ATTORNEY AND WIFE CHARGED WITH MISAPPROPRIATING FUNDS OF VETERANS, MAKING FALSE STATEMENTS AND TAX FRAUD
(HOUSTON) - A Houston attorney and his wife have been indicted for conspiring to misappropriate more than $2 million from the accounts of military veterans, making false statements and tax fraud, United States Attorney José Angel Moreno announced today along with Special Agent in Charge John P. McDermott of the Department of Veterans Affairs (VA) – Office of Inspector General (OIG), Special Agent in Charge Robert G. Feldt of the Social Security Administration (SSA) – Office of Inspector General and Special Agent in Charge Rodney E. Clarke of the Internal Revenue Service – Criminal Investigation Division (IRS-CID).
Joe Phillips, 71, and his wife, Dorothy Phillips, 70, both residents of Houston, surrendered to federal authorities today. A 26-count indictment charging the couple with conspiracy, misappropriation by a fiduciary, making materially false statements to a federal agency and tax fraud was returned by a Houston grand jury on Thursday, June 24, 2010. The charges, according to the indictment, arise from an alleged scheme to steal more than $2 million from military veterans deemed incompetent for whom Joe Phillips served as a legal guardian and fiduciary responsible for managing their financial affairs. The couple appeared before U.S. Magistrate Judge Nancy Johnson this afternoon and have been ordered released on bond pending trial of the case. In addition to the bond, the court has further ordered that the defendants’ travel be restricted to the Southern District of Texas.
Joe Phillips, a former employee of the United States Department of Veterans Affairs in Houston, is an attorney who owns and operates a small law firm - the Law Office of Joe Phillips in Houston. Dorothy Phillips, his wife, served as his legal assistant and office manager. According to the indictment, Joe Phillips was either appointed by a probate court or otherwise designated to serve as the legal guardian and fiduciary for a number of incompetent veterans. In that role, he opened and maintained bank accounts to receive benefit payments from the VA and the SSA to pay the ordinary and customary living expenses of the incompetent veterans, including but not limited to rent, mortgage payments, utilities and travel. In addition, Joe Phillips was responsible for preparing and submitting annual accounting statements to the VA and the SSA reconciling the benefit payments he received for the veterans against the payments he had made on their behalf. Joe Phillips was entitled to receive 4% of the funds from each veteran as remuneration for his services as a court appointed fiduciary or representative pay.
Phillips and his wife are accused of stealing money from the bank accounts of veteran clients entrusted to Joe Phillips by and through his position as their fiduciary/guardian/representative payee by transferring funds into the Phillips’ personal joint bank accounts for their personal use beginning in or about January 2003 through December 2008, falsely and fraudulently representing to the VA the amounts of money contained in the client bank accounts as stated in the annual accounting statements prepared by both of them and signed by Joe Phillips beginning in 2003 through September 2007 and failing to report hundreds of thousands of dollars in Schedule C receipts for tax years 2003 through 2007.
The charges are the result of an investigation conducted by the VA - OIG, the SSA - OIG and IRS-CID initiated in 2008 after the thefts were discovered after a routine audit.
Other than the tax fraud charge, which carries a maximum punishment of three years incarceration upon conviction, all other offenses alleged in the indictment carry a maximum punishment upon conviction of five years imprisonment and a fine not to exceed $250,000. The Phillips may also be required to pay restitution. Joe Phillips no longer serves as a fiduciary for any of his former military veteran clients.
This case is being prosecuted by Assistant United States Attorney Vernon Lewis.
# # #