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Tuesday, October 28, 2014

North Carolina Businessman Sentenced to Prison for Failing to Report More Than $1 Million in Income

A Wilmington, North Carolina, man was sentenced yesterday to serve 12 months and one day in prison for tax evasion by Chief U.S. District Judge James C. Dever III in Raleigh, North Carolina, the Justice Department and Internal Revenue Service (IRS) announced today. 

Jeffrey Wayne Scott, 48, pleaded guilty on May 14 to one count of willfully attempting to evade his personal income tax for tax year 2007.

According to court documents and court proceedings, Scott has owned and operated Greenville Loop Seafood (GLS), a seafood distribution company located in Wilmington, since 1995.  For tax years 2006 through 2010, Scott and his wife filed joint individual income tax returns.  Scott, under penalty of perjury, reported that his taxable income for these five years ranged between $23,934 and $92,999, and paid only $91,800 in federal income taxes for this time period.  However, during these five years, the Scotts spent far in excess of this reported taxable income on personal expenditures.

According to court documents and court proceedings, between 2006 and 2010, the Scotts paid for nearly all of their living expenses with checks from GLS.  This included, among other things, utilities, insurance premiums, landscaping, home improvements, school fees and a country club membership.  They also purchased five vehicles totaling more than $200,000, a $100,000 boat and a $2.1 million waterfront home.  Scott also made a monthly transfer of $10,000 from the GLS business account into a personal brokerage account.  After the purchase of their home in June 2009, Scott stopped transferring funds to the brokerage account, but instead used funds from the GLS business account to pay the mortgage and related expenses.  The IRS calculated that Scott failed to report in excess of $1,270,000 in taxable income for these five years and owed at least $412,844 in additional federal income taxes. 

According to court documents and court proceedings, when first contacted by IRS-Criminal Investigation agents in June 2011, Scott falsely stated that he was letting friends stay in his second home rent free.  Furthermore, despite being aware that he was under criminal investigation, in November 2012, Scott filed a false 2011 GLS corporate income tax return claiming work on his personal residence, including painting and repair work by a plumber , and health bills related to his family dog as business expenses.

This case was investigated by special agents of IRS-Criminal Investigation.  Assistant U.S. Attorney Susan B. Menzer for the Eastern District of North Carolina and Trial Attorney Todd A. Ellinwood of the Justice Department’s Tax Division are prosecuting the case.

Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.

Press Release Number: 
Updated October 28, 2014