Engineering Firms’ CPA Sentenced to Prison for Role in Tax Scheme
Caused Millions in Tax Loss and Obstructed IRS Efforts to Collect Money and Penalties Owed
Michael H. Higa, the Certified Public Accountant (CPA) and controller of several engineering businesses, was sentenced yesterday to 40 months in prison in Honolulu, Hawaii, announced Principal Deputy Assistant Attorney General Richard E. Zuckerman of the Justice Department’s Tax Division and U.S. Attorney Kenji M. Price for the District of Hawaii.
On Nov. 20, 2018, a jury convicted Higa of conspiracy to defraud the United States along with co-conspirator Wagdy Guirguis. In addition to the conspiracy conviction, Higa was also convicted of one count of assisting in the preparation of a false tax return. The convictions arose from a scheme to divert funds from Guirguis’ business entities for his own personal benefit and to avoid the payment of federal employment taxes, corporate and individual income taxes, and Internal Revenue Service (IRS) penalties.
According to the evidence presented at trial, Guirguis operated numerous engineering businesses. Higa, a CPA, was the controller of these businesses. Higa also served as a nominee officer of another entity controlled by Guirguis. When the IRS determined Guirguis’ businesses owed over $800,000 in federal employment taxes and assessed an $812,000 penalty, Guirguis and Higa took steps to place income and assets out of the reach of the IRS. For instance, Guirguis and Higa used a nominee entity to fraudulently convey a condominium to Guirguis’ wife. After an IRS revenue officer began questioning Mrs. Guirguis’ sole ownership of this condominium, Guirguis and Higa instructed a bookkeeper to alter the books and records in an attempt to conceal this transaction from the IRS.
From 2001 through 2012, Guirguis and Higa also used a nominee entity to divert approximately $1.3 million from Guirguis’ businesses for Guirguis’ personal use. As a result of their diversion and concealment efforts, Guirguis’ 2010 through 2012 returns omitted $553,000 in income, resulting in a tax deficiency of $165,000. In addition, Higa prepared a false corporate income tax return for one of Guirguis’ entities that failed to report over $1.3 million in gross receipts.
In addition to the term of imprisonment, U.S. District Judge Helen Gillmor ordered Higa to serve three years of supervised released and to pay $2,045,544.97 (jointly and severally with his co-defendant Guirguis) in restitution to the IRS.
On June 27, Guirguis was sentenced to five years in prison. In addition, Judge Gillmor ordered Guirguis to serve three years of supervised released and to pay $3,078,157.81 in restitution to the IRS minus any payments already made to the IRS.
Principal Deputy Assistant Attorney General Zuckerman and United States Attorney Price thanked special agents of IRS-Criminal Investigation, who investigated the case, and Tax Division Senior Litigation Counsel John Sullivan and Trial Attorney Anahi Cortada and Assistant United States Attorney Rebecca Perlmutter, who prosecuted the case.
Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.