Tax Fraud Blotter: Skim game

Accounting

Yacht happening; going, going, gone; grey and bootleg; and other highlights of recent tax cases.

Lake Worth, Florida: Businessman Dusko Bruer has pleaded guilty to tax evasion and willful failure to file a FBAR.

Bruer owned and operated a company that bought U.S.-made agricultural machinery and parts and sold them globally. Beginning in 2003, the company did not pay Bruer a salary. Instead, he used millions of dollars from the company’s bank accounts to pay his personal expenses, make investments abroad and make transfers to an employee and his family. From 2007 through 2011, he transferred more than $5.8 million of the company’s profits to foreign financial accounts.

Bruer used the company’s profits to buy a yacht, purchase a waterfront home for his girlfriend and himself, purchase a home for an employee and buy real property in Serbia. Between 2007 and 2014, Bruer failed to report more than $7.7 million in income and did not pay federal taxes of more than $2.7 million.

Although Bruer’s company had a number of employees and reaped millions in profits, he never filed a corporate return for the company nor did the company ever pay taxes on its income. During those years Bruer also never filed employment returns reporting wages that the company paid to its employees, nor did the company withhold and pay over payroll taxes.

From 2007 through 2015, Bruer maintained financial accounts in Croatia, Germany, Serbia and Switzerland. He did not report his ownership of the accounts to the FinCEN and used assets in his foreign accounts for personal use.

From 1999 to 2014, Bruer never filed a personal return nor did he pay income tax. In 2015, Credit Suisse closed his account in Switzerland and advised him to enter the Offshore Voluntary Disclosure Program. Bruer did not enter into the OVDP because he determined that the cost would be too high. Instead, he made a “quiet” disclosure that involved filing several delinquent federal returns, not flagging the returns in any way or paying the taxes, penalties and interest that would be paid in OVDP. The returns disclosed only the funds he held in the Credit Suisse account and not the funds he held in the accounts in Croatia, Germany and Serbia, nor did they report the income he earned from his company.

Sentencing is June 12, when Bruer faces a maximum of five years in prison for each charge, three years of supervised release, restitution and monetary penalties.

Rapid City, South Dakota: Joseph Bennington, 42, has been sentenced to 15 months in prison and ordered to pay $124,645 in restitution to the IRS, as well as to pay a $100 special assessment.

Bennington was convicted of tax evasion after failing to file an income tax return and failing to pay income taxes for 2017. He also failed to file and pay income taxes for tax years 2008-2016, despite earning substantial income during the same period.

Bennington also concealed his true income by cashing checks he received from Black Hills Auto Auction Inc., instead of depositing the checks into his bank account.

Nashville, Tennessee: Robert R. Burton, 50, of Madisonville, Louisiana, has pleaded guilty to embezzling $763,887 from Omnis Health Inc. and to tax evasion.

Between July 2013 and May 2017, Burton was the president of Nashville-based Omnis, which sold diabetic testing kits. He admitted that from December 2013 through January 2017 he embezzled some $763,887 from Omnis by submitting false and fraudulent reimbursement requests to the controller of the company, claiming that he had purchased supplies and incurred travel expenses which he had not. Burton fabricated receipts to include with his fraudulent requests.

To accomplish a large portion of his scheme, he submitted reimbursement requests for diabetic testing products, which he falsely claimed he had purchased. Burton claimed that he was using personal funds to purchase “grey market” diabetic testing supplies on the open market; that he was purchasing the supplies so Omnis could conduct research; that he was purchasing lower-priced “bootleg” diabetic testing supplies to take them off the market; and that he was sending the products to Omnis’s parent company for testing.

Burton never actually purchased the supplies, but instead visited multiple online vendors, such as Amazon or Diabetessupplies4less.com, placed the products in his online shopping cart, printed the computer screens displaying his shopping cart as the receipt, and then attached those receipts to his reimbursement requests. Burton also fabricated credit card transaction receipts falsely showing he had purchased the products and attached those receipts with his reimbursement requests. He was reimbursed at least $484,328 for supplies he never purchased.

Burton also admitted that he frequently submitted false travel expense reimbursements and travel advances, claiming that he traveled for business to meet with suppliers, customers and individuals from the corporate office, and to attend conferences. In fact, he never took most of the flights for which he was reimbursed some $203,747.83. Similar to how he falsified expense reports for testing supplies, Burton visited an airline’s website, printed an itinerary that displayed a cost for the flight and submitted that as the receipt without ever purchasing the flights.

In addition to the airline reimbursements, Burton falsely claimed that he had attended conferences and fabricated credit card transaction receipts of at least $102,056.

Rather than depositing the reimbursement checks into his bank accounts, Burton cashed them at a bank or a check cashing business and either spent the cash or deposited it onto prepaid debit cards. He then often used the funds for gambling.

He failed to report the embezzled funds on his personal tax returns for tax years 2014 through 2016 and failed to timely file his 2017 personal return. In addition, he provided false income information to his preparer.

The loss to the IRS totals $295,129.

Burton faces up to 20 years in prison on a charge of wire fraud and up to five years in prison on the charge of tax evasion, and a fine of up to $250,000 on each count. Sentencing is Aug. 28.

Atlantic City, New Jersey: Coby Frier has admitted evading payment of income taxes on money he diverted from his businesses.

Frier was one of the owners of several local bars, restaurants and clubs and admitted that from 2012 through 2015 he skimmed cash from the businesses. He later used the money for personal expenses, including luxury hotels, department store purchases and dining out. He also admitted to using cash from the businesses to make down payments on luxury vehicles and to keeping these down payments under the $10,000 reporting threshold.

For 2012 through 2015, Frier did not report as income the cash skimmed from the businesses, did not file personal income tax returns and paid no personal income tax.

The charge to which he pleaded guilty carries a maximum of five years in prison and a $250,000 fine. Sentencing is Sept. 11.

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