Old Saybrook Resident Pleads Guilty to Multiple Tax Offenses

Deirdre M. Daly, United States Attorney for the District of Connecticut, and Joel P. Garland, Special Agent in Charge of IRS Criminal Investigation in New England, announced that DAVID ADAMS, 56, of Old Saybrook, pleaded guilty today in Hartford federal court to a six-count superseding indictment charging him with various tax offenses.  A trial in this matter was scheduled to start today.

According to court documents and statements made in court, in the early 1980s, and then continuing from 1996 onward, ADAMS was substantially delinquent in filing his tax returns and paying amounts owed to the IRS.  Starting at least as early as 1998, ADAMS repeatedly engaged with IRS collections officers tasked with trying to get ADAMS into compliance with the tax laws.  Although IRS collections officers repeatedly advised ADAMS about his obligations to pay estimated taxes, he continually failed to pay those taxes on time or in sufficient amounts. 

As part of this tax fraud scheme, ADAMS engaged the services of a certified public accountant to prepare his personal tax returns beginning in approximately 1993, and then repeatedly failed to give the accountant complete, accurate information.

In 2002, ADAMS sold an online floral business, which accounted for a significant portion of more than $6 million in taxable income he claimed on his 2002 tax return.  Although ADAMS represented to the IRS in August 2003 that he was enclosing payment of $1,250,000, no such payment was enclosed and ADAMS never made the payment.

In June 2011, ADAMS sold his partnership interest in another online floral business and received $4,708,419.20 wired into his personal bank account as part of the net proceeds owed to him as a result of the sale.  Although he knew that he owed substantial taxes on that amount, ADAMS engaged in a number of affirmative acts to conceal and attempt to conceal this income in order to evade the assessment of a tax including:  (1) failing to tell his accountant about the $4,708,419.20 in income ADAMS received in 2011; (2) providing the accountant with false information about ADAMS’s estimated tax payments for the year, telling the accountant that he had paid $220,000 when in fact, ADAMS knew he had only paid $100,000 in estimated taxes for 2011; (3) causing the accountant to prepare his 2011 tax return with false and fraudulent information; and (4) representing to an IRS revenue officer who was responsible for collecting ADAMS’s delinquent tax payments and securing ADAMS’s overdue tax returns, that he had hoped to have funds to pay down his back tax liability (including tax liability associated with the 2002 sale), but that nothing had been “panning out.”  ADAMS failed to disclose to the revenue officer that he had received $4,708,419.20 in cash less than three weeks earlier.

In June 2012, ADAMS received an additional $1,320,609.59 into his personal bank account as net proceeds of the 2011 sale.  Although he knew that he owed substantial taxes on that amount, ADAMS failed to disclose the income to his accountant, and failed to declare it on his tax return for that year.

In total, ADAMS engaged in a more than 16-year effort to inhibit the IRS’s efforts to collect back taxes from him.  Among other things, ADAMS bounced checks to the IRS; told IRS collections officers that payment had been sent when it had not; promised to pay delinquent tax liabilities in full and then delayed payment, made only partial payment, failed to pay at all, or paid off one liability while leaving another liability unpaid; claimed that he lacked funds to pay his delinquent tax but failed to disclose that he had access to enough cash to fully pay back his tax liabilities; filed false and fraudulent returns with the IRS; overstated the amounts of estimated taxes paid to the IRS, and failed to declare more than $6 million in income to the IRS.

ADAMS was arrested on a federal criminal complaint on April 14, 2016.

On December 6, 2016, a grand jury returned a superseding indictment charging ADAMS with two counts of tax evasion, three counts of making and subscribing a false tax return, and one count of attempting to interfere with the administration of the IRS laws.  Each tax evasion offense carries a maximum term of imprisonment of five years, each count of filing a false tax return carries a maximum term of imprisonment three years, and the interference charge carries a maximum term of imprisonment of three years.

ADAMS is scheduled to be sentenced by U.S. District Judge Vanessa L. Bryant on January 11, 2018.

As of October 2016, ADAMS owed more than $4.7 million in back taxes, interest and penalties for tax years 2002, 2006, 2007, 2008, 2009, 2011, and 2012.  Interest and penalties have continued to accrue since that time.

ADAMS is released on a $500,000 bond pending sentencing.

This matter has been investigated by the Internal Revenue Service – Criminal Investigation Division.  The case is being prosecuted by Assistant U.S. Attorneys Susan L. Wines and Jennifer R. Laraia.