North Carolina Paving Contractor Pleads Guilty to Tax and Bank Fraud

Tommy Edward Clack pleaded guilty in federal court in Greensboro, N.C., to one count of willfully filing a false federal income tax return and one count of knowingly making a false statement to a federally-insured bank in order to obtain a mortgage loan, the Justice Department and the Internal Revenue Service (IRS) announced today.

According to filings with the court, for approximately the past 10 years Clack has been an itinerant, self-employed paving contractor doing business in North Carolina, South Carolina, Maryland, and Florida.  Clack operated under several different business names, and he changed the names of his paving business frequently in order to avoid scrutiny by state and federal law enforcement agencies.  As a result of his business practices, over the years Clack was charged with multiple state criminal violations in Maryland, North Carolina, South Carolina and Florida. Since June 2010, Clack has been under an injunction banning him from operating as a driveway paving contractor in North Carolina.  He is also subject to a cease-and-desist order in Maryland banning him from various fraudulent practices.

According to court documents, Clack significantly underreported the income from his paving business on his tax returns.  From 2004 to 2007, Clack earned gross income of over $5.7 million, but reported only a fraction of it to the IRS.  Clack underreported his income by approximately $294,829 in 2004; $1,178,822 in 2005; $1,868,556 in 2006 and $2,428,710 in 2007.  Clack’s returns were prepared by an accountant, but Clack knowingly provided her with false information upon which to base Clack’s returns, and signed his returns knowing that they significantly understated his income.  Altogether, as a result of these false returns Clack underpaid his taxes during this period by approximately $1,350,597.  To conceal his tax fraud, Clack employed a number of strategies: he did not maintain books and records, dealt extensively in cash, paid his employees in cash and structured currency transactions with his bank in amounts designed to evade the bank’s requirement to file Currency Transaction Reports with the IRS.

Court documents state that in 2003, Clack submitted a mortgage loan application in the name of his then-wife to a bank in Greensboro.  The application sought a $640,000 loan to finance the purchase of a $1.2 million home.  As part of the loan application, Clack provided the bank with a 2002 tax return in his wife’s name, which reported adjusted gross income of $372,748 and claimed total tax liability of $127,745.  Clack represented that this tax return had been filed with the IRS, when in fact it had not been.  In fact, Clack and his then-wife had filed a 2002 joint federal income tax return which claimed that the couple had adjusted gross income of $17,656 and total tax liability of $2,685.  Had the bank known of the discrepancy, they would not have issued the loan.  Clack ultimately defaulted on the loan, and the bank suffered a loss after foreclosing the collateral.

For the false tax return charge, Clack faces a maximum of three years in prison, one year of supervised release and a maximum fine of $250,000.  Clack faces a maximum of 30 years in prison, five years of supervised release and a maximum fine of $1,000,000 for the bank fraud count.  Sentencing is scheduled for March 7, 2014.

The case was investigated by special agents of the IRS - Criminal Investigation, with assistance from the North Carolina State Bureau of Investigation.  It is being prosecuted by Trial Attorney Jonathan Marx of the Justice Department’s Tax Division.