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Justice News

Department of Justice
U.S. Attorney’s Office
Western District of Virginia

FOR IMMEDIATE RELEASE
Thursday, February 26, 2015

Operation 10% Results In Multi-Year Prison Sentences For West Virginia Coal Operators Convicted Of Tax Evasion And Structuring

ABINGDON, VIRGINIA – Two defendants, who were part of a cash selling scheme involving over $10 million dollars in structured transactions which was designed to defraud the Internal Revenue Service, were sentenced today in the United States District Court for the Western District of Virginia in Abingdon.

Calling this “a very serious crime,” United States District Judge James P. Jones sentenced William "Bill" F. Adams, Jr., 55, Yukon, W.Va., and John B. Ward, 43, War, W.Va. to imprisonment for a term of 36 months. He also ordered Adams to forfeit $2.1 million and Ward to forfeit $2.2 million dollars. The defendants operated various coal mines near Caretta, West Virginia, including RS Mining, WA Mining and War Creek Mining. At the conclusion of a three week jury trial in January 2014, both defendants were found guilty of the felony charge of conspiring to defraud the United States in the collection of taxes and structuring cash transactions to avoid reporting requirements. In addition, Ward was found guilty of 24 felony counts of illegally structuring transactions and Adams was convicted of 13 counts of illegally structuring transactions.

Ward and Adams were investigated and prosecuted as part of an investigation titled “Operation 10%.” The name was based on the fact that the people who sell cash to coal operators for purposes of tax evasion typically charge a fee of 10 percent. The scheme typically involved a coal operator’s company writing a check to a cash seller for a certain amount of money – for example, $77,000. The cash seller, disguised as a mine supply business, would then deposit the check in a bank and then make multiple cash withdrawals of $10,000 or less to avoid reporting requirements. Using this example, the cash seller would provide the coal operator $70,000 in cash and keep a fee of 10% - $7,000. The coal operator than pocketed the cash or used it to pay his employees in cash. The coal operator deducted the payment to the cash seller as a business expense and did not report the cash he kept as personal income and did not pay employment taxes on the cash paid to employees.

Operation 10% has resulted in seizures and recovery by the United States of over $8.7 million to be forfeited or applied to evaded taxes. In addition to Ward and Adams, the following twenty-three defendants previously pled guilty to felony charges and received sentences ranging from probation to imprisonment for a term of 24 months:

Name
City
Age
Sandra Marahlee Addair
War, W.Va.
46
Timothy Gregory Allen
Hurley, Va.
44
Henry Lee Barnett
Tazewell, Va.
43
Carl Demas Blevins
Tazewell, Va.
55
David Lee Cordill
Doran, Va.
64
Billy Ray Dotson
Meadowview, Va.
61
Michael Wayne Dunlap
Sumerco, W.Va.
58
Darrell Wayne Felts
Ballard, W.Va.
60
Elmer Fuller
Bristol, Va.
64
Jeffrey Kennis Justus
Pounding Mill, Va.
59
Charles Edward "C.E." McReynolds
Vallscreek, W.Va.
63
J.D. "Dot" McReynolds
Tazewell, Va.
44
Truong “Hoppy” Van Nguyen
Tazewell, Va.
78
Hung “Sang” Quoc Nguyen
Iaeger, W.Va.
40
Melvin Parsley
Williamson, W.Va.
57
Angela Denise Payne
War, W.Va.
48
Michael Dwaine Poskas III
North Tazewell, Va.
63
David Raber
Tazewell, Va.
54
Clinton Lester Ramey
Abingdon, Va.
58
Rosie Diane Ritchie
War, W.Va.
40
John Duane Tolliver
Iaeger, W.Va.
58
Kermit Clayton Wiley
Princeton, W.Va.
64
Allen Henry Workman
Huddy, Ky.
57

Information obtained as part of Operation 10% also led to several federal convictions in U.S. District Court in Beckley, WV.

Assistant United States Attorney Randy Ramseyer prosecuted the case on behalf of the United States. The case was investigated by the Bristol, Virginia, Office of the Internal Revenue Service – Criminal Investigation. The Charleston, West Virginia, offices of the United States Attorney’s Office and the Internal Revenue Service – Criminal Investigation assisted in the investigation and prosecutions.

Updated April 15, 2015