Local Businessman Pleads Guilty to Avoiding Income Taxes on $1 Million Severance
|Feb. 10, 2012|
HOUSTON – Robert Edward Cone has entered a plea of guilty to using a foreign account to corruptly obstruct and impede the Internal Revenue Service (IRS) in the collection of approximately $282,871 in federal income taxes, United States Attorney Kenneth Magidson announced today along with Lucy Cruz, special agent in charge of IRS - Criminal Investigations (CI).
“Every American who pays his or her taxes should be offended that a select few use anonymous offshore accounts to evade the payment of their taxes,” said Cruz. “We owe it to every American taxpayer to use all lawful means to identify and prosecute both those who evade paying their tax obligations and those who assist these tax evaders.”
According to the plea agreement executed in Court today, Cone was employed as president of Industrial Holdings Inc. (IHI), a manufacturing company in Houston, during 2001. Under his employment agreement with IHI, Cone was entitled to receive a severance payment equal to four times his annual salary of $250,000. This $1 million severance payment came due in December 2001 when IHI negotiated a merger with another company.
In anticipation of receiving the $1 million severance payment, Cone emailed a trust company in the Channel Islands seeking advice on establishing an offshore business to help with his U.S. taxes. Cone directed the Foreign Trust Company to form a British Virgin Islands company called Jomach Limited and establish an account under Jomach Limited with the Royal Bank of Canada (Jersey Islands) Limited. Cone directed IHI to wire the $1 million severance payment into the foreign Jomach Limited account.
A few weeks later, Cone concealed the severance payment and the foreign account from his tax return preparer, not reporting either to the IRS on his taw return. Cone then signed and filed that tax return with the IRS. By concealing the $1 million severance payment, Cone corruptly obstructed and impeded the administration of IRS laws and the collection of federal income taxes totaling approximately $282,871 for tax year 2001.
Between January 2002 and October 2006, Cone directed the Foreign Trust Company to disburse funds from the Jomach Account to vendors of goods and services that he had purchased in the U.S. and to U.S. bank accounts that he controlled and from which he disbursed funds for his personal use, benefit and consumption. Cone later concealed his interest in the foreign account from another professional tax return preparer, who prepared a 2005 tax return for Cone, that falsely stated he had no interest in any foreign account. However, Cone had, in fact, caused two transfers of $5,000 each to be made to his personal benefit from the Jomach Account during that year. Cone also signed and filed that tax return with the IRS in 2006, further corruptly obstructing and impeding the IRS in the administration of IRS laws.
The plea agreement also provides that Cone will make full restitution of the unpaid taxes plus penalties and interest altogether totaling $939,917 and to remain subject to possible additional civil assessments by the IRS as a result of this offense.
United States District Judge Ewing Werlein, who accepted the plea today, set a sentencing date of May 11, 2012, at 10:00 a.m., at which time he faces up to three years imprisonment and a criminal fine of up to $250,000.
The investigation was conducted by IRS-CI and was prosecuted by Assistant United States Attorney Jimmy Sledge Jr.