More accountants behaving badly at BDO Puerto Rico. First it was good ol’ Fernando Scherrer, the BDO Puerto Rico managing partner who got indicted for taking part in a shady corruption scandal last year that also involved Puerto Rico’s former education secretary and the former head of the Puerto Rico Health Insurance Administration.
Now, the head of tax at BDO Puerto Rico, Gabriel F. Hernández, who is also a co-founding partner of the firm (along with Scherrer), was arrested by federal agents at his home on Oct. 21 and indicted on 10 counts of wire fraud for attempting to gyp the IRS out of some money.
Here’s what Bill Barr’s DOJ had to say about Hernández’s alleged scheme:
According to allegations in the indictment, Hernández, a CPA who served as the tax manager and partner-in-charge of the tax division of a large public accounting, tax, consulting, and business advisory firm, devised a scheme to defraud the IRS.
The scheme, as alleged, related in part to two tax incentive acts: Act 20, also known as the Export Services Act, which offers tax incentives for Puerto Rican companies to export services to other jurisdictions, and Act 22, also known as the Individual Investors Act, which offered tax incentives to individuals who relocate to Puerto Rico.
Under the scheme, as alleged, Hernández unjustly enriched himself and others by receiving fees in exchange for preparing and filing and causing to be prepared and filed a false federal income tax return with the IRS and fraudulent applications and other records related to the acts.
The indictment further alleges that, as part of the scheme Hernández and others evaded the assessment and payment of taxes by engaging in financial transactions devoid of any economic substance (sham transactions). The transactions allegedly were intended to create the illusion that Hernandez’s clients earned income from services performed within Puerto Rico, rather than within the mainland United States.
If found guilty, the defendant faces a maximum statutory sentence of up to 20 years in prison and a fine up to $250,000 for charges relating to wire fraud.
According to El Nuevo Dia, Hernández, 55, pleaded not guilty after his arrest last Wednesday. Magistrate Marcos E. López set Hernández’s bond at $250,000 and prohibited him from continuing to advise clients.
However, López authorized the certified public accountant (CPA) to meet with his co-workers to organize an orderly transition for the rest of the BDO firm’s employees to serve their clients. Hernández will not be able to offer any type of financial advisory and planning service.
Hernández also is not allowed to travel outside of Puerto Rico without the court’s permission and he has to surrender his passport.
According to his bio on BDO Puerto Rico’s website—which BTW says Hernández “has substantial experience in assisting clients in negotiating tax exemption packages under the various tax incentive laws available in Puerto Rico”—Hernández previously worked at PwC, Arthur Andersen, and EY.
Puerto Rico CPA Indicted and Arrested on Wire Fraud Charges in Relation to Act 20 and Act 22 Scheme [Justice Department]
Gabriel Hernández pleads not guilty and is set a $250,000 bond [El Nuevo Dia]
IRS arrests another of the partners of the firm BDO Puerto Rico [Noticel]
BDO Puerto Rico Managing Partner Resigns After Indictment In Massive Corruption Scandal
All Fat Guys Can Relate to Ex-BDO Puerto Rico Managing Partner Trying to Put On a Belt
Accountants Behaving Badly: Ex-BDO Puerto Rico MP Charged, Sick Demands, Stealing $365K