A Farmington Hills Michigan man was sentenced this week to 6 years imprisonment, followed by three years of supervised release. The sentence was imposed as the result of a 2010 conviction by a federal jury on tax evasion and three counts of failing to file tax returns.
In addition, the United States District Court Judge ordered the man to pay restitution, including interest and penalties, to the IRS of $4.2 million due immediately.
According to court records, during the tax years 1997 through 2005, he earned millions of dollars in taxable income by running and promoting adult websites, spamming millions of e-mail addresses, and consulting for adult entertainment dance clubs.
In 2003, he filed his 1997 through 2001 tax returns, reporting over $3.7 million in income with $1.4 million in taxes owed to the IRS. He submitted an Offer in Compromise to the IRS to settle his tax debt for an amount that was far less than he owed. The offer was not accepted, and he then failed to file tax returns for the years 2003 through 2005, during which time he earned more than $1.4 million in income.
According to court records, the IRS attempted to collect the taxes due through liens and levies, however, the man was able to thwart their attempts by concealing his assets through the use of nominees, and making false statements to IRS agents.
Knowing that he owed the IRS a significant amount of tax, the man continually paid himself in cash from the accounts of the adult entertainment clubs he ran, gambled at casinos with large sums of money drawn from those same accounts, and used financial accounts he controlled that were in the names of nominees to pay his bills. He also leased and purchased high-end vehicles in other people’s names.
After the sentence was announced, the Special Agent in Charge with IRS Criminal Investigation said that “he cheated the American public out of $1.4 million. He did this on purpose, by concealing his assets and lying to IRS agents. He blatantly wasted the time of IRS agents and taxpayer dollars. A federal jury of his peers found him guilty and the judge has now held him fully accountable.”