“Girls Gone Wild” founder Joe Francis feels he finally got a break when a federal judge okayed a deal that Francis struck with prosecutors. Under the agreement, Francis was credited with 301 days already served and sentenced to one year of probation.

The plea deal was struck after Francis learned that a key witness, Francis’ former accountant, had withheld information from his defense team at trial. Francis was originally indicted on tax evasion charges in 2007 stemming from a number of income omissions and false deductions. He pleaded guilty to two misdemeanor counts of filing false tax returns and one count of bribing Nevada jail workers.

“I think we won that one,” Francis said after the hearing.

The former bad boy was polite during the hearing, answering questions as asked. It was quite a turn-around from the belligerent persona he had maintained since the charges were first brought against him in 2007.

After the hearing, he kissed his mother.

Apparently he really does kiss his mother with that mouth.

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Jeffrey Chernick, a toy salesman out of New York, was sentenced on Friday to three months in prison for hiding millions of dollars from the IRS. Upon his release, Chernick will serve six months’ house arrest and six months’ probation. The judge did not impose an additional fine as Chernick is already subject to more than $4.5 million in civil penalties for filing a false tax return.

Chernick becomes the second UBS client to be sentenced in the scandal. Earlier in the week, Steven Michael Rubinstein was sentenced to three years’ probation, one year of house arrest and a$40,000 fine.

I noted at the Rubinstein sentencing that I felt that the punishment was light. US District Judge James Cohn apparently felt similarly, noting with respect to these specific cases, “The concept that tax evaders can get probation sends the wrong message… Some amount of incarceration is warranted.”

Chernick cooperated with authorities, which may have lessened his sentence: he had faced up to three years in prison. But even prosecutors sought leniency for Chernick, suggesting that his cooperation played a “significant and early step” in the UBS investigations, offering information about other taxpayers and banks.

In addition to pleading guilty to tax evasion, Chernick also admitted to paying a bribe, arranged by attorney Matthias Rickenbach and Swiss banker Hansruedi Schumacher, to a Swiss government official for information about which UBS accounts would be given to US authorities. That investigation is ongoing and it will be interesting to see the reach of the bribery scheme.

Chernick began setting up offshore accounts as early as 1981 in order to hide commissions on toy sales from the IRS. Over the years, he moved money from account to account and otherwise attempted to conceal his assets.

Interestingly, Chernick made an effort to sign up for the IRS’ voluntary disclosure program but did not qualify. Taxpayers who were under investigation or already facing charges did not qualify for the program.

Expect more high profile disclosures over the next few weeks. Clearly, the IRS hopes to send a message. The real question is: who’s getting it?

Technorati Tags:
IRS, Jeffrey Chernick, Matthias Rickenbach, tax evasion, Steven Michael Rubinstein

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“Survivor” winner Richard Hatch is finally a free man. The controversial TV personality, sometimes referred to as the “fat naked guy” on the show, has completed his sentence for tax evasion and related charges.

Hatch walked out of jail this morning, about 6 a.m.

But that doesn’t mean that he’s completely off the hook. Hatch must still serve three years of supervised release, complete a mental health program and pay the remainder of his taxes.Similar Posts:

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Rapper and Wu-Tang Clan member Method Man was arrested Monday on tax evasion charges stemming from an alleged refusal to pay personal income taxes. Method Man, whose real name is Clifford Smith, has reportedly failed to pay taxes from 2004 to 2007. His tax bill for the period was just $32,799 plus penalties and interest.

That actually begs the question: why an arrest? One of the charges is said to be a felony violation of “repeated failure to file personal income and earnings tax.” Failure to pay is a misdemeanor. And yet, Staten Island District Attorney Daniel Donovan has said the rapper will be “aggressively investigated and prosecuted” if he’s found guilty of the charges.

Is he teaching Method Man a lesson or is there something more?

If you voted something more, you and I are on the same page. A few months ago, the police paid Method Man a visit for, you guessed it, the same thing. In March, the Department of Taxation showed up on Method Man’s door with a number of police officers. At the time, the rapper was said to owe more than $50,000. And he had a great explanation for it:

Because I got high, I forgot to pay. It was stupid. I’m an idiot for that.

The government took his 2008 Lincoln Navigator to satisfy part of his obligations. Method Man insisted that he could have paid had he not been high, declaring, “I got plenty of money!”

Six months later, apparently he hasn’t worked out his tax and “other” issues. And I’m guessing the NY Department of Taxation doesn’t find it very funny quite as funny as he does. He faces up to four years in prison if convicted of the charges.Similar Posts:

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Here’s a crazy thought: if you give people a financial incentive, you can make them do almost anything (trust me, I watch a lot of reality TV).

For the IRS, the financial incentive comes in the form of increased rewards for turning in tax cheats. A new law, which was established by the Tax Relief and Health Care Act of 2006, rewarded taxpayers who reported tax cheats in the workplace. But they aren’t looking for small potatoes: the tax, penalties, interest, additions to tax, and additional amounts in dispute must exceed $2 million for any taxable year (that’s the sother restrictions also apply).

Is it working? Boy is it ever. The IRS whistleblower office announced this week that tips have increased to about 100 per month – up from 10-20 per month before the incentives. And it’s big money: 64 of the cases from last year alleged underpayment of $100 million or more. Run the quick numbers on that. If true, it’s mind-boggling.

That doesn’t mean that things have gone smoothly. The law is still very new (it took effect in 2007) and tax cases take a long time to investigate and prosecute. As a result, there hasn’t yet been a single payout to a tipster.

The program has met with mixed reactions in Washington. Some point to the increased numbers of complaints and say that it’s proof that upping financial incentives was the right thing to do – and that it’s just a matter of working out the kinks for payment. Others claim that the process is too slow and will discourage future tipsters from coming forward. Still others claim that the process actually encourages fraud. Joe Francis (of Girls Gone Wild fame) is a prime example: Francis claimed that his accountant set him up by preparing returns without his knowledge and then turned him into the IRS under the whistleblower program to get a reward (Francis later took a plea for filing false returns).

What do you think? Is the program a good idea? Or a bad idea with some good press?Similar Posts:

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“Girls Gone Wild” founder Joe Francis has agreed to a plea arrangement that will significantly reduce his outstanding tax liability and keep him out of jail (for a bit – I’m making no promises about what he’ll do next). Francis has agreed to plead guilty to two counts of filing false tax returns and one count of bribing Nevada jail workers.

Francis, who has already spent 301 days in jail, will receive credit for time served. In addition, he will receive a year of supervised release and pay a quarter of a million dollars in restitution. The agreement, which slashed the potential jail sentence for Francis, doesn’t completely put an end to Francis’ tax woes but does require tax issues relating to Francis or his companies from 2002 to 2008 to be handled in civil or administrative arenas.

Francis had been accused of tax evasion relating to his business. Francis’ attorney, Brad D. Brian, has said – and I’m not making this up – that prosecutors “didn’t understand Francis’ business model” and the expense related to the “Girls Gone Wild” brand. Similar Posts:

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In just a little under three hours, the Philadelphia Eagles will hit the field for the third of their four pre-season games. So far, they’ve given their fans nothing to cheer about. They have, however, given them plenty to talk about – not the least of which is the signing of former bad boy (and felon) Michael Vick.

Michael Vick, who pleaded guilty to “Conspiracy to Travel in Interstate Commerce in Aid of Unlawful Activities and to Sponsor a Dog in an Animal Fighting Venture”, is set to make his Eagles debut tonight against the Jacksonville Jaguars. The debut follows a conditional reinstatement for Vick by NFL Commissioner Roger Goodell.

Several teams expressed interest in Vick who had made quite a splash in the NFL during his early tenure. He still holds records for the most rushing yards by a quarterback in a single season (1,039 in 2006), highest average per carry in a single season (8.45 in 2006), 100-yard career rushing games by a quarterback (eight), best two-game rushing total (225 in 2004) and rushing yards in a single game (173 in 2002). But in a move that stunned almost everybody (including this Eagles fan), the Philadelphia Eagles signed Vick to a 2 year contract. Yeah, I thought he was going to the Steelers, too.

As it turns out, it’s a move that the Eagles could have received some tax benefits for… The Eagles could have recuperated some of the $1.6 million contract with Vick via a $10,000 tax credit offered to employers by the Mayor’s Office for Re-entry of Ex-Offenders (MORE). The credit was added to the existing program (which includes opportunities for education and job training) to encourage businesses to hire ex-offenders. So far, reportedly only six businesses have taken advantage of the credit. Would the Philadelphia Eagles be lucky #7 (ironic, since that’s Vick’s Falcons number)? Not this time. A team spokesperson told the Philadelphia Daily News that wasn’t going to happen.

But the move has put a new emphasis on the tax credit. According to the Mayor’s Office, there are approximately 298,400 adults living in Philadelphia who have a criminal background and who are technically ex-offenders. That’s more than a quarter of a million people. A quarter million potential employees. A quarter millions potential taxpayers. A quarter million potential actual contributing members of society.

Or we could just continue to pump money into the prison system by choosing to pretend that it’s not a problem (approximately 40% of offenders go back to jail, as high as 70% in California).

Philadelphia is opting for the former and choosing to believe in second chances – in more ways than one. Statistics suggest that ex-offenders with sustainable jobs remain ex-offenders, a finding that isn’t lost outside of Philadelphia. Kansas, Illinois and Iowa are just a few of the states that offer similar programs. The feds also offer an incentive in the form of a Work Opportunity Tax Credit. A business which hires a qualified ex-felon (defined as “an individual who has been convicted of a felony and has a hiring date which is not more than one year after the last date on which he was so convicted or released from prison”) may be entitled to a federal tax credit in the amount of $2400. Other target groups, including disabled vets, are also included in the program. George W. Bush re-authorized the bill in 2006 and expanded in 2007, once remarking, “America is the land of the second chance – and when the gates of the prison open, the path ahead should lead to a better life.”

While the Eagles take a pass on this tax break, maybe other local employees will give it a second look.

But for tonight, are you ready for some football?

Hat Tip: @jmnaylor via Twitter

(Image by Keith Allison from Baltimore, USA under Creative Commons Attribution ShareAlike 2.0 License)

Technorati Tags:
Michael Vick, Philadelphia Eagles, Work Opportunity Tax Credit

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In 2008, United States Attorney Laurie Magid announced that indictments had been filed against three defendants: Habeeb Malik, Ira Weiner, and Thongchai Vorasingha. The three were charged with, among other things, conspiracy to make false statements in applications to become United States citizens.

The three, Malik, Weiner and Varasingha, went before a federal judge last month on charges relating to immigration and naturalization fraud and were found guilty; sentencing will be in October. Weiner and Varasingha are expected to spend between two and three years in prison for their roles in the scheme, although the verdict has been appealed.

Malik owned and operated The Foundation of Human Services, a company in Broomall, Pennsylvania, just down the road from Philadelphia. The company promised to assist foreign individuals in becoming naturalized United States citizens. But they had a little bit more in mind than just “assisting” – they were cheating the system.

Weiner and Varasingha were physicians in the greater Philadelphia area who, according to the indictment, would for a $120 fee complete an INS waiver form N-648 with false information. The USCIS (US Citizenship and Immigration Services) regulations allow applicants who are seeking an exception from the English and civics requirements for naturalization based upon a disability or impairment to submit the form N-648 along with a doctor’s certification. Weiner and Varasingha allegedly provided the certification in cases when it was not warranted at the urging of Malik for at least 150 immigrants.

Malik will spend a little longer in prison than his co-defendants. In addition to the conspiracy charges, Malik failed to report the income from his schemes on his federal tax returns. He underreported his income for each of the years he was involved in the scheme, according to the indictment. Malik underreported his income by various amounts in those years, allegedly failing to report at least $132,000 in 2004 alone.

And the lesson to be learned here? Even if you’re committing a crime, file accurate tax returns. Why make a bad situation worse? Even Al Capone figured that one out.

You can read the entire indictment against Malik, Weiner and Vorasingha here (downloadable as a pdf).

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I feel like I should send Richard Hatch a fruit basket or something for making it so easy to find things to blog about…

As you know, Richard Hatch has been serving time for tax evasion for, among other things, not paying the tax on his “Survivor” winnings. He requested and was granted house arrest for the remainder of his sentence. But apparently, he doesn’t quite get the idea behind house arrest… To leave the house, you have to ask permission from the federal Bureau of Prisons. Only, he didn’t quite do that.

He opted to do three television interviews on Tuesday, all three for NBC-affiliated shows, including the “Today” show. He only asked permission to do the one. So he’s back in the slammer.

During the interviews, Hatch repeatedly claimed that he was innocent of the tax evasion charges. He says that he will pay the IRS when he receives a bill (which he says has never happened). And he now says that his conviction is the result of “prosecutorial misconduct” and discrimination because he is gay. Right. Not the million dollars he chose to not report. Just because he’s gay.

Oh Richard, Richard, Richard…

You can watch the entire interview here (about 7-1/2 minutes long):

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Earlier today, I wrote this post wherein I more or less insinuated that I believed that Daniel Andersen might be inclined to tout his tax evasion nonsense again, despite being caught and serving time in a California federal prison.

A few hours earlier, I had been tweeting away about the signing of Michael Vick with my team, the Philadelphia Eagles. A couple of those tweets are here:

and here:

And I meant what I said. I do believe in limits to punishment and I believe in second chances.

A few hours later, I’m on the treadmill watching the Andy Reid/Tony Dungy/Michael Vick press conference hit ESPN. Dungy spoke really eloquently about second chances and rehabilitation and giving people the benefit of the doubt. And about halfway through, it hit me: I’m a big hypocrite.

I was willing to believe that someone who had done their time might be capable of starting over in the one instance – and then I automatically poo-pooed (that’s the technical term) the very notion in another. And that, my dear readers, doesn’t speak very nicely of me, does it?

So, for the record, I am hopeful that Michael Vick truly is remorseful for his mistakes and goes on to do good things with his life, as well as serve as a good example for others. Likewise, I hope that Daniel Andersen is sorry for the mistakes that he has made and goes on to be a productive member of society when he gets out. (Psst, Daniel, how’s your long ball? The Phillies could use some more offense.)

And I never should have implied otherwise.

Technorati Tags:
tax evasion, Michael Vick, Philadelphia Eagles, Tony Dungy, Andy Reid, Daniel Andersen

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