As Tax Day Approaches, U.S. Attorney’s Office Pledges Pursuit Of Tax Offenders
MINNEAPOLIS—As Tax Day approaches, the U.S. Attorney’s Office reminds all Minnesotans that the deadline for filing federal income tax returns is Monday, April 15. To exemplify federal law enforcement’s commitment to pursue those who fail to pay their taxes or otherwise defraud the tax system, the Office noted that federal prosecutors in the District of Minnesota this week charged four individuals with tax-related crimes in three separate cases:
On April 9, 2013, Roger Martin Pedley was indicted for evading taxes for tax years 2000-2009, and for knowingly structuring his financial transactions to evade federal reporting requirements. Pedley was charged with four counts of tax evasion, six counts of structuring cash transactions, and two counts of making false statements to a federal agent.
If convicted, Pedley faces a potential maximum penalty of five years in prison on each count. Any sentence would be determined by a federal district court judge. This case is the result of an investigation by the IRS-Criminal Investigation. It is being prosecuted by Assistant U.S. Attorney John Docherty.
In another case, charged on April 9, 2013, the former owner of Life Care PCA, a Farmington-based home health care company, was indicted for failing to pay federal income and employment taxes withheld from workers. The indictment charges Daniel Nok Musa with 14 counts of failure to account for and pay over withheld taxes. The indictment was unsealed following Musa’s initial appearance in federal court.
The indictment alleges that beginning in 2002, and for every quarter from at least January 1, 2005, through October 31, 2009, Musa failed to timely pay over to the IRS a total of approximately $180,000 in withheld employee taxes as well as the employer’s share of FICA taxes. From August 1, 2006, through November 1, 2009, Musa was the sole owner and president of Life Care.
If convicted, Musa faces a potential maximum penalty of five years in prison on each count. Any sentence would be determined by a federal district court judge. This case is the result of an investigation by the IRS-Criminal Investigation. It is being prosecuted by Assistant U.S. Attorney Michael L. Cheever.
In another indictment unsealed earlier this week, two executives of a Minnesota-based multi-level marketing company were charged for failing to file federal tax returns. The indictment, which was filed on April 9, 2013, charges Bradley Collin with one count of conspiracy to defraud the U.S. and three counts of failure to file a tax return. Michael Schlegel was charged with one count of conspiracy, three counts of tax evasion, and three counts of failure to file tax returns. The indictment was unsealed following the defendants’ initial appearance in federal court.
The indictment alleges that from 2002 through 2010, the defendants conspired with each other and others to defraud the U.S. by obstructing the IRS in its lawful collection of income taxes. To that end, Schlegel and Collin allegedly failed to make any payments toward the back taxes, interest and penalties levied against them in 2000, which totaled more than $600,000 and $800,000 respectively. The defendants also purportedly failed to file federal individual tax returns for tax years 2002-2009, pursuing “tax protestor” ideologies.
The indictment states that from 2002 to 2009, Schlegel controlled NatureRich, Inc., a multi-level marketing company that sold natural and health-related products. Like similar companies, NatureRich paid commissions to salespeople based on direct sales and on the sales of downstream salespeople. At various times between 2002 and 2009, Schlegel and Collin reportedly received wages and commission payments from NatureRich that totaled more than $400,000. Schlegel also purportedly caused NatureRich to pay his commissions to a nominee trust called the “Andrew James Living Trust,” from which he then paid his family’s expenses. During that time, Schlegel also operated a painting business, allegedly receiving more than $400,000 in income from painting contracts.
In 2004, the defendants, through the use of nominee entities, allegedly began engaging the “warehouse” banking services of Olympic Business Systems and Century Business Concepts. “Warehouse” banking refers to the use of one or more bank accounts in which the funds of multiple clients are deposited, thereby concealing the true source of the funds.
The indictment alleges that the defendants also filed misleading federal corporate tax returns in the name of NatureRich in an effort to conceal the true extent of their personal interest in and the income derived from NatureRich. In all, the defendants allegedly attempted to conceal at least $3 million in gross income from the IRS, thereby avoiding income taxes on that income and also avoiding having those funds seized for payment of their previous tax debts.
If convicted, the defendants face a potential maximum penalty of five years in prison on the conspiracy count, and one year on each count of failure to file a tax return. In addition, Schlegel faces a potential maximum penalty of five years on each tax evasion count. All sentences will be determined by a federal district court judge.
This case is the result of an investigation by the IRS-Criminal Investigation. It is being prosecuted by Assistant U.S. Attorneys Tracy L. Perzel and Benjamin F. Langner.
The District of Minnesota has been active in other tax cases. On April 9, 2013, in St. Paul, a Twin Cities-based attorney doing business as Sea Law Office, PLC, was sentenced for failing to report and pay taxes on more than $420,000 in income for tax years 2006 through 2010. United States District Court Judge Richard H. Kyle sentenced Bobby Gordon Okechuku Onyemeh Sea to eight months in prison on one count of filing a false U.S. Individual Income Tax Return. Sea was charged on November 2, 2012, and pleaded guilty on November 26, 2012.
From 2006 through 2012, Sea earned gross receipts for legal services, and in his plea agreement, he admitted failing to report those receipts on his tax returns. He also admittedly used the unreported income for his personal benefit. In addition, Sea admitted that on April 15, 2008, he filed a false 2007 tax return. Specifically, he reported a taxable income of $9,087, and refundable credits of $3,529, thus understating his taxable income by approximately $100,000 and claiming refundable credits that were not earned.
Sea also admitted filing false tax returns for tax years 2006, 2008, 2009, and 2010. As a result, he is admittedly responsible for a total tax loss of at least $80,000 but less than $200,000.
This case was the result of an investigation by the Internal Revenue Service-Criminal Investigation. It was prosecuted by Assistant U.S. Attorneys Timothy C. Rank and Ann M. Anaya.
The District’s efforts to pursue tax dodgers were also enhanced last fall thanks to a U.S. Justice Department directive. In September 2012, the Department’s Tax Division issued a new directive to further the efforts of the Tax Division and U.S. Attorney offices in effectively responding to the grave challenges in stolen identity refund fraud (“SIRF”) cases. Tax Division Directive 144 now allows federal prosecutors to charge by complaint those criminals who are engaged in SIRF crimes. They may also obtain search warrants for the purpose of forfeiture of criminally derived proceeds arising from SIRF crimes, all without prior authorization from the Tax Division. To ensure fair and consistent nationwide enforcement of tax laws, the Tax Division has supervision over virtually all criminal proceedings arising under tax laws. Tax refund fraud, involving the use of stolen identities to steal refunds, has emerged as a fast-growing crime. Strong coordination at all levels of law enforcement is vital to combat these criminals.
The District of Minnesota is prosecuting several SIRF cases. Last month, three individuals pleaded guilty to participating in a conspiracy to file false tax returns to generate inflated refunds. Two of the defendants were licensed tax preparers. In November 2012, two defendants pleaded guilty to participating in a conspiracy to file false tax returns and claim tax refunds using stolen personal information.
For more information about the Tax Division and its enforcement efforts, visit www.justice.gov/tax. The Minnesota U.S. Attorney’s Office wants to remind people to protect themselves from identity theft. For more information, visit http://www.stopfraud.gov/protect-identity.html.
An indictment is a determination by a grand jury that there is probable cause to believe that offenses have been committed by a defendant. A defendant, of course, is presumed innocent until he or she pleads guilty or is proven guilty at trial. Per U.S. Department of Justice policy, the U.S. Attorney’s Office is not allowed to provide the age and city of residence for defendants charged in criminal tax cases.