Forget your run of the mill tax evasion schemes. That’s so early 2000s. These days, it seems, structuring in order to avoid paying taxes is all the rage.
Under federal law, banks are required to report transactions, including cash deposits and withdrawals, totaling more than $10,000 in any single day: this information is included on a currency transaction report (CTR). The purpose of the CTR is to help the government track large transactions and prevent money laundering. Money laundering works this way: the bad guys get money through illegal activities – like drugs or theft. It’s important to get rid of that “bad” cash and replace it with legitimate cash so that it can’t be traced. The easiest way, of course, is to run the cash through a bank or other financial institution and replace those bad dollars with shiny new ones. That’s why federal laws require that large transactions be reported.
One of the ways that folks try to get around the law is to break down really large transactions into smaller ones, an act called structuring or sometimes, smurfing. So, if you had $100,000 in bad funds that you wanted to get rid of, rather than putting it all in at once, you would break it down into smaller transactions: say, 11 deposits of $9,091 in a number of different accounts or on a number of different days. The folks who make those deposits are sometimes called “runners” or “smurfs” (yes, after the little blue guys from the 1980s cartoons). And it’s illegal.
It’s important to note that the actual practice of making cash deposits (or withdrawals) of less than $10,000 is not illegal under 18 U.S.C. § 5324(a); it only violates the law when the transactions are structured “for the purpose of evading” those reporting requirements.
Structuring, of course, is what former Speaker of the United States House of Representatives Dennis Hastert (R-IL) was accused of doing in order to avoid detection on alleged hush money in a sex scandal. Kent Hovind, a controversial religious leader and convicted tax evader, was accused of the same kinds of crimes (albeit on a different scale). And it’s exactly what the Warners were accused of doing (and pleaded guilty to) in the FIFA scandal.
It may be easy to think that structuring allegations are limited to big time names and scandals. But that isn’t the case. Just ask Medhat El Amir, of Saddle River, New Jersey. El Amir, a doctor who owns three immediate care facilities in Hudson County, New Jersey, who has admitted to making millions of dollars in cash deposits over a number of years in order to avoid paying taxes.
El Amir admitted cashing $7,261,083 in Immediate Care insurance company checks at a check-cashing facility (the indictment seems to indicate that it was a single facility). Let’s just stop there for a moment: seven million dollars over a few years at a check-cashing facility. They had to love this guy. At between 1% and 3% per transaction (about standard for check-cashing facilities), the check-cashing company made out okay. While check-cashing facilities generally target the “bankless,” those low-to-middle income households that cannot afford to use the services of a bank, they also apparently provide a nice opportunity for avoiding reporting requirements.
El Amir used his leftover cash to pay personal expenses, including college tuition for his children, before hacking up the rest and depositing the proceeds into multiple bank accounts at TD Bank, Wells Fargo and Bank of America. And by multiple bank accounts, I mean 15 different accounts. He also deposited the funds into bank accounts he set up for his children while they were away at college. In doing so, he dragged his kids into the investigation (although his children were not charged and there is no indication that they were aware of what El Amir was doing).
Despite paying tens of thousand of dollars in tuition each year and living in a home valued at a couple million dollars, El Amir did not report most of the income on his taxes. El Amir did not file tax returns for the years 2007-2010, years where he had taxable income totaling $2,087,048 . He did file a tax return for the year 2008 but substantially underreported income in that year and claimed false deductions.
And it gets even better. When El Amir realized that the feds could possibly be onto him, he fraudulently transferred his home to his sister in order to keep it out of the reach of the IRS. He called it a sale but he continued to live at the residence and treat it as his own.
He knew his luck was running out and eventually, it did: El Amir was indicted in 2014 (you can read the indictment here as a pdf). Earlier this year, El Amir pleaded guilty to corruptly endeavoring to impede the due administration of the Internal Revenue Code and tax evasion.
El Amir faces up to three years in prison and a $250,000 fine on the corruption charged and up to five years in prison and a $250,000 fine on the tax evasion charge. His sentencing is scheduled for Wednesday of this week, on June 10, 2015.
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