United States Attorney Richard B. Roper
Northern District of Texas

ATTORNEY SENTENCED TO TWO YEARS IN FEDERAL PRISON FOR TAX EVASION

Carl Edmond Gaines Also Ordered to Pay More than $90,000 Restitution

DALLAS — Carl Edmond Gaines, the attorney-in-charge of Carl E. Gaines and Associates, P.C., was sentenced by U.S. Senior District Judge Sidney A. Fitzwater to 24 months in prison and ordered to pay $90,838 restitution, announced U.S. Attorney Richard B. Roper of the Northern District of Texas. Gaines pled guilty to a one-count Information charging tax evasion for the tax year 2003. Judge Fitzwater ordered that Gaines surrender to the Bureau of Prisons on July 29, 2008, to begin serving his sentence.

According to the factual resume filed in the case, Gaines’ law firm handled both criminal and personal injury matters. Beginning in September 2003, and continuing until June 2006, the law firm defrauded the private health care system by diverting settlement monies from the firm’s client trust account, into which insurance settlement proceeds were deposited.

Gaines admits in court documents that as the attorney-in-charge of the firm, the client trust account was his responsibility and that he was to ensure that clients’ proceeds were being properly maintained and that only appropriate distributions from the account were authorized. However, an office administrator that Gaines hired, Cotis L. Woods, Sr., used the firm’s client trust as a personal checking account for himself and others.

The factual resume further states that settlement checks were deposited into the firm’s trust account and the proceeds were disbursed in thirds; one third for legal fees, one third for medical expenses, and one third for any remaining portion of the settlement check to the client. The firm sometimes failed to pay the client any money and, at times, also refused to reimburse the medical providers. The account routinely suffered insufficient funds, and in many instances, monies intended for the client and medical providers were embezzled from the account and diverted to Gaines, Woods, and other employees of the firm.

Gaines admitted that he didn’t file a federal income tax return for 2003 and 2004 and evaded $54,380 in taxes for tax year 2003, and $26,058 for tax year 2004.

U.S. Attorney Roper praised the investigative efforts of the Internal Revenue Service - Criminal Investigation. Assistant U.S. Attorney Sarah Saldaña prosecuted the case.

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