01-23-04 -- Watson, Buddy and Maria -- Guilty Pleas -- News Release

Brick Township Couple Pleads Guilty to Tax Fraud Conspiracy for Skimming $260,000 in Business Income

CAMDEN - A Brick Township couple who own a flooring business pleaded guilty today to a conspiracy charge in connection with the skimming of more than $260,000 in unreported receipts from their businesses, U.S. Attorney Christopher J. Christie announced.

Buddy Watson, 49, and Maria Watson, 42, entered their pleas before U.S. District Judge Freda L. Wolfson.

At their plea hearings, both defendants admitted that between 1994 and 1998 they were the shareholders of Modern Home Floor Covering, Inc. ("Modern Home"), a company which sells carpeting and flooring materials from stores in South Belmar, Brick Township and Wall Township. They stated that Modern Home marketed on a retail basis to both residential and commercial customers, and also supplied materials to contractors in connection with new home construction.

The couple admitted that they kept for their own benefit monies paid by various customers of Modern Home, and in doing so failed to report those diverted gross receipts as income on the company's federal tax returns, thereby failing to report that income on their joint income tax returns. Furthermore, the Watsons admitted to altering, destroying and creating invoices to conceal the true amount of sales transactions and to create the appearance that certain transactions were for smaller amounts than were in fact the case.

The Indictment to which they pleaded guilty states that the Watsons failed to report more than $350,000 in company receipts. In addition, the Indictment states that in 1994 and 1995, the Watsons used company money to pay for more than $19,500 worth of work done on their Brick home.

Both defendants pleaded guilty to one count of conspiracy to defraud the IRS and the United States, which carries a statutory maximum penalty of five years in prison and a $250,000 fine or twice the gross amount of any pecuniary loss or gain, which ever is greatest. The couple remains free pending sentencing on $100,000 bond each, secured by their residence.

Under U.S. Sentencing Guidelines, Judge Wolfson, will determine the actual sentence based upon a formula that takes into account the severity and characteristics of the offense and the defendant's criminal history, if any.

Parole has been abolished in the federal system. Under the Sentencing Guidelines, defendants who are given federal custodial terms must serve nearly all that time.

Christie credited Special Agents of the IRS, under the direction of Special Agent in Charge Patricia J. Haynes, with bringing the case.

The Government is represented by Assistant U.S. Attorney Leibman of the U.S. Attorney's Government Fraud Unit.

Defense Counsel: Harvey Poe, Esq. Florham Park