Father and Daughter Plead Guilty to Conspiracy to Defraud United States by Impeding Internal Revenue Service
NEWPORT NEWS, Va., - James Clayton Morgan, (67), and Kimberly Morgan Henretty, (46), of Williamsburg, Virginia, have pled guilty to one count of Conspiracy to Defraud the United States, in connection with a scheme to obstruct the Internal Revenue Service in the assessment and collection of corporate and individual income and employment taxes from at least 2001-2005. Neil H. MacBride, United States Attorney for the Eastern District of Virginia, made the announcement after the pleas of guilty by Morgan and Henretty in a case pending before Senior United States District Judge Robert G. Doumar.
From at least the 1990’s through 2007, Morgan was the owner/president of Joe Morgan Builders, Inc., a company engaged in residential construction, in Williamsburg, Virginia. Morgan’s daughter, Henretty, worked for Morgan, performing various administrative functions including, but not limited to, accounting and bookkeeping services.
Beginning in the mid-1990s, Morgan fell into non-compliance with the
Internal Revenue Service in regard to employment taxes owed by Joe Morgan Builders, Inc. Additionally, no personal or corporate income tax returns had been filed on behalf of Morgan or Joe Morgan Builders, Inc., for tax years 1998 - 2005, until in or about August 2006.
The Internal Revenue Service took a number of measures to attempt to bring
Morgan and Joe Morgan Builders, Inc., into compliance with their tax obligations, including, but not limited to, the issuances of notices and requests, the filing of liens and levying of the company bank account. In order to avoid his employment tax obligations, in or about April 2000, Morgan formed another company called Built-Rite Custom Homes, Inc.
In or about the Summer of 2006, after being advised as to a criminal investigation
being conducted by the Internal Revenue Service, Henretty prepared and provided incomplete and false information to an accountant for the preparation of delinquent Form 1120 U.S. corporation income tax returns for Joe Morgan Builders, Inc. In August and September 2006, Morgan signed and filed, under penalties of perjury, delinquent U.S. corporation income tax return for Joe Morgan Builders, Inc. for the years 2001-2005. An analysis conducted by the Internal Revenue Service into the bank account records of Joe Morgan Builders, Inc., revealed that the delinquent U.S. corporation income tax returns for tax years 2001 through 2005 underreported gross receipts in the amount of approximately $876,311.32.
The investigation also revealed that Morgan and Henretty paid employees of Joe Morgan Builders, Inc., in cash; kept business receipts out of the business bank account by either cashing business checks and taking receipt of the cash and/or depositing the business receipts into personal bank accounts and/or using the cash to pay personal expenses; and did not report the Joe Morgan Builders, Inc., funds taken for their personal use on their U.S. individual income tax returns. Morgan and Henretty also prepared unfiled tax returns that overstated Morgan’s income in order to obtain bank loans.
After the criminal investigation began, Morgan and Henretty made various false statements to a special agent of the Internal Revenue Service Criminal Investigation Division, including, but not limited to: that an accountant advised Morgan not to file tax returns for approximately two years and that the Internal Revenue Service would deal with them in a more advantageous manner after five years of non-compliance; and that poor records prohibited the filing of accurate corporate income tax returns.
Morgan and Henretty are scheduled to be sentenced on July 19, 2010. On the charge of Conspiracy to Defraud the United States, each defendant faces a maximum term of five years imprisonment, followed by three years of supervised release. The plea agreement also requires that Morgan and Henretty file true and accurate tax returns.