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Accountants Behaving Badly: DOJ Has Been Busy Busting CPAs For a Variety of Crimes

Plus, a Louisiana tax preparer who pleaded guilty to four counts of tax fraud will be sentenced on Tax Day.

New York Accountant Pleads Guilty to Federal Tax Charge [Justice Department]
James Guerra, a CPA from Dix Hills, NY, waived his right to be indicted and pleaded guilty on Jan. 25 to a federal tax offense during a court hearing via videoconference.

According to the DOJ:

Guerra worked as an accountant for Bruno DeFabio, an owner of several pizza restaurants in Connecticut and New York, including Pinocchio Pizza LLC, doing business as Pinocchio Pizza in New Canaan, Connecticut; Top Oven Restaurant Corp., doing business as Pinocchio Pizza in Wilton, Connecticut; DiFabio Brothers Pizza Corp., doing business as Amore Pizza in Scarsdale, New York; Odell Pizza, Inc., doing business as Amore Cucina and Bar in Stamford, Connecticut; Nepperhan Restaurants Group, Inc., doing business as ReNapoli Pizza, in Old Greenwich, Connecticut, and Homefield Restaurant Corp., doing business as Pinocchio Pizza in Pound Ridge, New York.

DiFabio and his businesses engaged in a practice whereby cash was removed from the cash registers and not deposited into the restaurants’ operating bank accounts, and Guerra knew that DiFabio had a practice of paying his employees in cash. Although Guerra was aware that DiFabio was failing to collect required withholding taxes from his employees and, in turn, not paying over these taxes to the IRS, Guerra reviewed and approved DiFabio’s quarterly tax returns that DiFabio subsequently signed and filed with the IRS.

Guerra, 58, pleaded guilty on Monday to one count of willful failure to collect and pay over withholding taxes. A sentencing date has yet to be scheduled.

DiFabio is also awaiting sentencing. He pleaded guilty on Oct. 25, 2018, to one count of conspiracy to file false income tax returns and payroll tax returns. At the time he agreed that the loss to the IRS in income taxes and employment taxes for the 2013 through 2015 tax years was $816,954, according to the DOJ.

In addition, DiFabio’s business partner in some of his restaurants, Steven Cioffi, pleaded guilty to one count of aiding and assisting in the filing of a false tax return on Sept. 24, 2018. And on June 4, 2019, Idalecia Lopes Santos, a bookkeeper who worked for DiFabio, pleaded guilty to one count of tax evasion.

Cioffi and Santos have yet to be sentenced.

Accountant Who Aided Worldwide Scam Charged with Small Business Administration Loan Fraud [Justice Department]
Daniel Gibson, a CPA from Marlboro, NJ, who assisted in a scam involving valuable artwork and a Swiss bank account, was charged by information with one count of conspiracy to commit bank fraud on Jan. 7 in connection with a scheme to fraudulently obtain a Small Business Administration loan.

And here’s why Gibson might end up in jail:

According to court documents, 1 Global Capital LLC was a commercial lending business based in Hallandale Beach, Florida, that made the equivalent of “pay day” loans to small businesses at high interest rates beginning in or around 2013. Gibson was a certified public accountant licensed in the State of New York who served as the accountant for 1 Global, 1 Global’s former chairman, and a number of businesses owned and operated by 1 Global’s former chairman.

The Information alleges that in 2011, 1 Global’s former chairman took out an approximately $3 million loan backed by the SBA, purportedly to be used as working capital for a nutraceutical business that he owned at the time. 1 Global’s former chairman and his wife were required to personally guarantee the SBA loan in full.

From about 2013 to 2018, Gibson and 1 Global’s former chairman misrepresented to the SBA that the nutraceutical company failed as a business and that 1 Global’s former chairman had no other assets or income to make his payments on the SBA loan. According to the Information, Gibson and 1 Global’s former chairman concealed from the SBA certain assets and income that could have been used to repay the loan, including: (a) money that 1 Global’s former chairman received from 1 Global beginning in 2013, which totaled hundreds of thousands of dollars during the period in question; (b) valuable artwork that belonged to 1 Global’s former chairman; and (c) an offshore Swiss bank account in the name of and controlled by 1 Global’s former chairman, containing at one point over $1 million. According to the Information, the SBA is currently owed $1,783,019.14 on this loan.

Accountant Sentenced to Prison for Tax Evasion and Obstruction Offenses [Justice Department]
Louis DeMaio, an accountant from Guilford, CT, was sentenced on Jan. 12 to 30 months of imprisonment, followed by one year of supervised release, for tax evasion and obstruction offenses. DeMaio, 70, is required to report to prison on May 12.

The DOJ sayeth:

DeMaio was employed as an accountant in East Haven and, from approximately 2010 to 2018, also operated Almatt LLC, a temporary employment agency that provided day laborers to construction companies. Although DeMaio listed an individual (“Individual A”) on paper as the owner of Almatt, Almatt was effectively owned and run by DeMaio.

As part of Almatt’s operating procedures, Almatt invoiced construction companies for the cost of labor provided and, from the payments received from the companies, paid the employees for services rendered. Almatt and DeMaio then provided the employees with W-2 forms reflecting that Almatt had undertaken required federal tax withholdings. However, Almatt and DeMaio failed to withhold taxes and subsequently failed to pay over those withholdings to the IRS. Almatt also never filed yearly income tax returns or quarterly 941 forms reflecting federal withholding and payroll taxes owed.

In addition, DeMaio issued hundreds of thousands of dollars of checks from Almatt made out to himself and to family members who did not work at the business. From 2010 through 2018, DeMaio and his family received more than $2.5 million from Almatt. DeMaio failed to report any of these distributions on his federal personal income tax returns.

In 2015, the IRS initiated a civil examination of Almatt, and then expanded the examination to evaluate the completeness of DeMaio’s personal income tax returns. When the IRS confronted DeMaio about his failure to report income paid to him by Almatt, DeMaio fabricated a story that a substantial portion of the payments he received from Almatt were loan repayments from Individual A. DeMaio also provided an IRS revenue agent with a false notarized document that DeMaio had created to support his story. When the civil investigation was referred to IRS Criminal Investigation, DeMaio confirmed the fake loan repayment story in an interview with IRS special agents.

The investigation revealed that DeMaio underreported his income by more than $2.5 million. The tax loss as a result of DeMaio’s criminal conduct is $1,132,398.

DeMaio pleaded guilty on Aug. 11, 2020, to one count of tax evasion and one count of obstructing and impeding the due administration of Internal Revenue laws. He was ordered to pay full restitution, as well as interest and penalties.

Owner of Westwego, Louisiana Accounting Business Pleads Guilty to Tax Fraud Charges [Justice Department]
Henry Timothy pleaded guilty in U.S. District Court on Jan. 7 to four counts of tax fraud. The irony that Timothy, 70, will be sentenced on Tax Day, April 15 is not lost on us.

According to the DOJ:

Timothy is the owner and sole tax preparer for B&B Accounting Services, located in Westwego, Louisiana. He operates his business out of his home and has been a tax preparer since 2012. According to information presented to the court at the guilty plea hearing, Timothy admitted to preparing and electronically submitting false and fraudulent U.S. Individual Tax Returns on behalf of himself and his wife for the tax years of 2013, 2014, 2015 and 2016.

Timothy purposefully omitted approximately $83,304 in gross receipts for year 2013; $80,932 in gross receipts for year 2014; $73,391.79 in gross receipts for year 2015; and $82,592 in gross receipts for year 2016 from Schedule C of his 1040 U.S. Individual Tax Returns where the gross receipts are listed. The omission of this income resulted in an additional tax liability of $88,593. As a tax preparer, Timothy was well aware that he had to list all of his gross receipts but failed to do so in order to reduce his tax liability.

He faces a maximum penalty of up to three years in prison, a $100,000 fine, or both at sentencing.