Doctor And Wife Convicted Of Decade-Long Tax Fraud
For Immediate Release
U.S. Attorney's Office, Southern District of California
SAN DIEGO – United States Attorney Laura E. Duffy announced that a federal jury returned guilty verdicts on all counts against Dr. James Francis Murphy and his wife, Denine Christine Murphy, based on their years-long efforts at preventing the IRS from assessing and collecting the hundreds of thousands of dollars of income taxes they owed from the operation of their medical practice in Encinitas, California, and Omaha, Nebraska.
Evidence presented at trial showed that despite earning as much as $1 million a year from their osteopathic medical practice, Dr. and Mrs. Murphy paid almost no federal income taxes for a decade. Instead of accurately declaring their income and paying taxes lawfully owed to the United States, and despite repeated warnings from the IRS, the Murphys filed false income tax returns for the medical practice using a bogus “trust,” filed false personal income tax returns that concealed their true income, and in certain years simply refused to file required tax returns at all.
As presented at trial, when confronted by the IRS and notified that they owed substantial sums in taxes, the Murphys engaged in a variety of schemes to thwart the United States’ attempts to correctly assess and collect these taxes. These schemes included: (1) falsely claiming that they were not citizens of the United States; (2) frivolously claiming that the federal tax laws did not apply to them; (3) fraudulently presenting fictitious documents such as “Private Offset Discharge and Indemnity Bonds” and “Bonded Promissory Notes,” purportedly worth hundreds of millions of dollars, as payment on their tax obligations; and (4) fraudulently claiming that the hundreds of thousands of dollars they paid to credit card companies, utilities and other vendors were actually withholdings of federal income taxes, thereby entitling them to over a million dollars in refunds from the IRS. The defendants even claimed that then-Secretary of the Treasury Henry Paulson was their “fiduciary” and was responsible for paying their taxes.
The defendants were found guilty by a jury after a two-week trial held before U.S. District Judge Anthony J. Battaglia, and were ordered to appear again for sentencing on September 12, 2014.
U.S. Attorney Duffy said she is pleased with the jury’s verdict. “The Murphys have found out that the old adage is true: Nothing is certain but death, taxes and prosecution if you don’t pay your taxes.”
Erick Martinez, Special Agent in Charge of IRS Criminal Investigation’s Los Angeles Field Office commented, “James and Christine Murphy’s use of a sham trust served no other purpose than to hide the income they earned from the medical practice. Their filing of false tax returns and false claims of payment to the IRS were tax elimination tactics, used to further promote their criminal activities. Today’s jury verdict emphasizes that those who use these elaborate tax schemes run the risk of criminal prosecution.”
|Dr. James Francis Murphy||Age: 53||Encinitas, California|
|Denine Christine Murphy||Age: 51||Encinitas, California|
Count 1: Corrupt interference with the administration of the internal revenue laws, in violation of 26 U.S.C. § 7212(a). Both defendants. Maximum penalties – 3 years’ custody, $250,000 fine.
Counts 2-5: Presenting fictitious financial obligations, in violation of 18 U.S.C. § 514. Defendant Dr. James Francis Murphy. Maximum penalties – 10 years’ custody and $250,000 fine (per count).
Counts 6-8: False claims to the United States, in violation of 18 U.S.C. § 287. Both defendants. Maximum penalties – 5 years’ custody and $250,000 fine (per count),
Internal Revenue Service, Criminal Investigation
TIGTA (Treasury Inspector General for Tax Administration)
*Indictments and complaints are not evidence that the defendant committed the crime charged. All defendants are presumed innocent until the United States meets its burden in court of proving guilt beyond a reasonable doubt.
Updated July 23, 2015