Bay Area Doctor Sentenced To More Than Three Years In Prison For Tax Evasion

SAN FRANCISCO – Dr. John Compagno was sentenced today to 37 months in prison and was ordered to pay restitution in the amount of $5,426,239 announced United States Attorney Brian J. Stretch and Internal Revenue Service, Criminal Investigation, Special Agent in Charge Michael T. Batdorf.

Compagno, 70, of Napa, Calif., pleaded guilty on December 14, 2016, to income tax evasion.  According to his plea agreement, Compagno is a medical physician specializing in pathology.  He is also the owner and operator of three corporations located in Hercules, Calif., including John Compagno, M.D., Inc., West Coast Pathology Laboratory, Inc., and Histopathology Reference Laboratory, Inc.

“As Dr. Compagno learned, no amount of success will insulate you from your civic responsibility to accurately report and pay your taxes,” said U.S. Attorney Stretch.  “The three-year prison term handed down by Judge Alsup is a fitting sentence for an individual who cheated the government out of millions of dollars of tax payments.”

“In today’s economic environment, it is more important than ever that the American people feel that everyone is playing by the rules and paying their fair share,” said Michael T. Batdorf, Special Agent in Charge, IRS Criminal Investigation. “Dr. Compagno overstated expenses and omitted dividends to avoid paying taxes to the IRS. The prosecution of individuals who intentionally evade taxes is vital in maintaining public confidence in our tax system.”

In his plea agreement, Compagno admitted he submitted both corporate and individual tax returns that understated his liability to the IRS.  For the tax years 2005 through 2011, Compagno caused a corporate tax return preparer to overstate the amount of expenses on the corporate tax return by including $10,679,080 in non-deductible expenses.  Because the amounts of non-deductible expenses were overstated, the amount of income taxes due were understated. This resulted in additional tax due of $3,859,060.  In addition, Compagno omitted $10,505,091 in constructive dividends from his 2006 through 2011 individual income tax returns.  This resulted in additional tax due of $1,567,179. In sum, Compagno acknowledged in his plea agreement he owed more than $5.4 million in unpaid taxes. 

Compagno was charged in an information filed November 16, 2016, with one count of tax evasion, in violation of 26 U.S.C. § 7201.  He pleaded guilty to the charge and acknowledged that he knowingly and willfully filed with the IRS a false 2010 corporate tax return.

The sentence was handed down by the Honorable William Alsup, U.S. District Judge.  In addition to the prison term and restitution, Judge Alsup ordered defendant to pay a fine of $75,000 and to serve three years of supervised release.  Judge Alsup also ordered the defendant to surrender on or before June 2, 2017, to begin serving his sentence.

Assistant U.S. Attorney Thomas Moore is prosecuting the case.  The prosecution is the result of an investigation by the Internal Revenue Service, Criminal Investigation.