New York Federal Court Permanently Bars Two Brothers from Preparing Tax Returns & Promoting Tax Evasion Schemes
Men Who Prepared Fraudulent Returns Violated Previous Court Injunction
WASHINGTON – A federal court in Brooklyn, N.Y., has permanently barred brothers Archie J. Pugh Jr. and Theodore Pugh from promoting tax evasion schemes and preparing federal income tax returns for others, the Justice Department announced today. The court described the Pughs’ fraudulent activity as "pervasive and ongoing." According to the order, Archie Pugh is the sole proprietor of Archie’s Tax and Accounting Service in Jamaica, N.Y., and both he and Theodore Pugh prepared returns at that location.
In the civil injunction order and 71-page decision, Judge Kiyo Matsumoto of the U.S. District Court for the Eastern District of New York found that since at least 1998 the Pughs promoted the bogus "‘claim of right’ tax-evasion scheme," which falsely claims that compensation paid for work is not subject to income tax, and prepared tax returns based on that scheme. The court previously entered a preliminary injunction in April 2008 to stop the Pughs from marketing the scheme and preparing income tax returns, but the Pughs violated that order in 2009 by preparing 93 returns.
According to the court, the Pughs attempted to conceal their preparation of the fraudulent returns by failing to sign them as paid preparers, and refused to recognize the falsity of the scheme when they knew or should have known it was false. According to the order, the Pughs improperly attempted to deduct over $3.8 million in customers’ wage income and claim over $500,000 in tax refunds.
John A. DiCicco, Acting Assistant Attorney General for the Justice Department’s Tax Division, thanked Daniel Applegate, the Tax Division trial attorney who handled the case, and Lori Dixon and Shauna Henline of the Internal Revenue Service’s Small Business/Self Employed Division, who investigated it.
Memorandum and Order (PDF)