Accountants Behaving Badly: Kickback Schemes, Hiding Money From the IRS, Embezzlement Spree

Plus, Pennsylvania accountant loves tax evasion, North Carolina CPA indicted on securities fraud charge, and Kentucky accountant gets jail time for sex trafficking.

Accountant sentenced to prison for role in doctor-bribery scheme [Press-Telegram]
George Hammer—an accountant who enabled the owner of a hospital in Long Beach, CA, to pay more than $40 million in illegal kickbacks to doctors in exchange for them referring thousands of spinal-surgery patients—was sentenced to 15 months in federal prison on June 24 for a tax offense related to the scheme.

Hammer, 69, was sentenced in Los Angeles by U.S. District Judge Josephine Staton, who also ordered the defendant to pay an $8,000 fine and forfeit $500,000 in proceeds from the scheme, according to the U.S. Attorney’s Office.

Hammer, who pleaded guilty in August 2018 to one count of filing a false tax return, was the financial officer for various companies controlled by Michael D. Drobot, who owned Pacific Hospital in Long Beach.

New Jersey CPA Admits to Concealing $147,000 From the IRS [CPA Practice Advisor]
CPA William Kawam told a judge on June 30 that he failed to disclose nearly $147,000 of income on his tax returns during a three-year period, authorities said.

Kawam, 57, of Hewitt, N.J., pleaded guilty last week to charges of subscribing to false tax returns and conspiracy to defraud the United States during a videoconference before U.S. District Judge Madeline Cox Arleo.

According to the U.S. Attorney’s Office for the District of New Jersey, Kawam and an unnamed co-conspirator developed a scheme in 2015 to conceal money from the IRS. Kawam’s partner in crime compensated the CPA for a portion of his accounting services by giving Kawam one of his businesses’ credit cards, which the accountant was allowed to use to pay personal expenses, officials said.

Kawam failed to report the charges as income, and his co-conspirator failed to report the charges as business expenses. Kawam failed to report $146,605 for tax years 2015, 2016, and 2017, resulting in a tax loss of approximately $54,400.

Former Marin accountant sentenced for embezzlement [Marin Independent Journal]
Stephanie Simontacchi, a former accountant who worked for a Marin Headlands resort, was sentenced on July 1 to more than two years in prison for embezzlement and tax evasion.

Simontacchi, 48, of Petaluma, CA, stole 81 checks while she worked for the Cavallo Point Lodge near Sausalito, federal authorities said. She misappropriated $384,363.28 between October 2012 and March 2016. Later, while working as an accountant at Redwood Credit Union, she embezzled about three dozen checks valued at nearly $440,000, according to the U.S. Attorney’s Office in San Francisco. The credit union crimes occurred from April 2016 to April 2019.

The prosecution also said Simontacchi prepared false income tax returns for the years 2013 to 2019, shorting the government more than $100,000.

A federal grand jury indicted Simontacchi on 18 counts in June 2021. The charges included bank fraud, embezzlement, and tax evasion. Simontacchi pleaded guilty in February to one count of each crime. She agreed to pay at least $821,525.52 in restitution, the prosecution said.

Chester County accountant, on probation, found guilty in tax case [Daily Local News]
Michael Goldner was found guilty last month of tax evasion and failing to file tax returns after a trial in U.S. District Court in Philadelphia.

Goldner, 51, of Malvern, PA, was accused by the U.S. Attorney’s Office with charges arising from his alleged scheme to use his cash and his employer’s business bank accounts to hide his actual income and therefore avoid paying his legitimate tax obligations. Goldner was charged in June 2021 with one count of tax evasion and two counts of failure to file personal income tax returns, according to a press release from U.S. Attorney Jennifer Arbittier Williams.

Evidence presented at his trial, which ended with a guilty verdict on June 3, showed that for the tax years 2013 through 2017, Goldner reported more than $4 million in income and $1.8 million in tax due, of which he paid less than $100,000. Further, from 2016 to 2020, Goldner evaded the payment of these outstanding taxes while earning a substantial income.

For the years 2016 and 2017, Goldner filed tax returns that failed to report this additional income from his employer. For tax years 2018 and 2019, he failed to file a return altogether.

In 2015, Goldner pleaded guilty to wire fraud and tax evasion after bilking would-be investors. He was on probation for that case at the time of his arrest on the current tax evasion case, having been sentenced in 2016 and ordered to pay $5 million in restitution.

Federal Indictment Charges CPA With Securities Fraud [Justice Department]
A federal grand jury in Charlotte, NC, indicted 48-year-old Mac Wayne Billings, of Raleigh, with securities fraud on June 22 for defrauding at least 19 victims of more than $3.6 million.

Here’s the low-down on Billings’ alleged securities fraud from the U.S. Attorney’s Office for the Western District of North Carolina:

According to allegations contained in the indictment, between 2012 and 2019, Billings engaged in securities fraud through his company, Alpha Finance Company (ALPHA), located in Sparta, North Carolina. The indictment alleges that Billings fraudulently obtained more than $3.6 million from at least 19 victims throughout Alleghany, Wilkes and Surry Counties, by soliciting them to invest in ALPHA via “debenture notes.” A debenture note is a type of debt instrument typically not backed by a collateral. As alleged in the indictment, Billings, who is a licensed North Carolina CPA, falsely promised ALPHA’s victim-investors that their money would be used to make high interest consumer loans from which the investors would receive interest payments. Contrary to his promises, Billings used little, if any, of the investors’ funds to make new consumer loans. Rather, Billings used some of the investors’ money to make payments to other investors and to pay himself over $1 million in salary and distributions from ALPHA.

The indictment further alleges that Billings used investment statements, emails and meetings to mislead and deceive victim-investors into believing that ALPHA was a profitable company and that the victims’ investments were safe. In this regard, Billings allegedly failed to disclose material information concerning ALPHA’s financial and business troubles to victim-investors, including that he had sold or mortgaged most of ALPHA’s assets to hard money lenders. Based on the fraudulent information provided by Billings, many of the victim-investors renewed and/or made additional investments with ALPHA, causing them to incur further financial losses.

Finally, lawsuits brought by the North Carolina Commissioner of Banks (NCCOB) and the North Carolina Attorney General’s Office alleged that Billings failed to comply with North Carolina laws governing consumer finance and retail installment loans. Billings defaulted on these lawsuits. Consequently, the NCCOB revoked ALPHA’s license due to non-compliance with North Carolina’s Consumer Finance Act. Courts in Alleghany and Wake Counties declared ALPHA’s loan null and void, leaving the investor-victims with no assets to recoup their losses.

If convicted, Billings faces a maximum prison term of 20 years and a $5 million fine.

Delaware Auditor Dodges Felony Charges, Guilty of Misconduct [Associated Press]
The jury in the corruption trial of Delaware State Auditor Kathy McGuiness acquitted her on July 1 of felony charges of theft and witness intimidation but found her guilty on three misdemeanor counts.

Jurors deliberated for about four hours over two days before finding McGuiness, a Democrat elected in 2018, guilty of conflict of interest, official misconduct, and structuring a contract with a consulting firm to avoid compliance with state procurement rules.

It marks the first time in Delaware history that a sitting statewide elected official has been convicted on criminal charges.

Even though fellow Democrats quickly called on her to resign, the misdemeanor convictions don’t prevent McGuiness from holding public office, and she said she still plans to seek re-election in November.

‘Horrific crimes.’ Former Ky. accountant sentenced for role in sex-trafficking conspiracy. [Lexington Herald-Leader]
Mark Milslagle, a former accountant in Lexington, KY, was sentenced to five years and 10 months in prison on June 28 for his role in a sex-trafficking conspiracy that a federal judge called a horrific crime.

Milslagle’s sentence also includes a $5,000 special assessment and a $22,000 fine, and he will be under court supervision for 15 years after he gets out of federal prison.

Milslagle, 51, took part in a scheme that victimized young women suffering from drug addiction, who took part in prostitution so they could continue receiving pain pills they needed in order to avoid painful withdrawal symptoms.

The head of the conspiracy was Logan Ray Towery, a former Berea city council member who later lived in London and sold drugs. Towery admitted he used drugs to lure and coerce women to have sex with him. He often threatened to withhold drugs so the women would take part in sex acts, according to his plea agreement. He also gave women pills without charge in order to get them addicted, then provided them to his prostitution customers to work off the debt and keep getting drugs. Towery told authorities Milslagle was his biggest customer. He delivered women to Milslagle at motels in London and Corbin.

According to his LinkedIn page, Milslagle was the owner of MJM Tax & Accounting Services in Lexington, KY.

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