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March 2, 2021

Hedge fund manager Thomas E. Sandell has paid $105 million to resolve claims first brought by a whistleblower under the New York False Claims Act alleging that Sandell evaded tens of millions in state and local taxes by falsely claiming that $450 million in management and performance fees he recognized in 2017 were not earned for services performed in New York, despite the fact that his fund, Sandell Asset Management Corporation, operated in New York and represented to the SEC that New York City was its principal place of business.  In his effort to evade NY taxes, Sandell moved to London for a period of time, opened an office in Florida, and managed SAMC expenses through a shell company that he also owned and controlled, all while continuing to perform the investment services that generated the fee income in New York.  When Sandell’s accountant informed him that he would have to pay NY state taxes, he terminated them and retained a firm that took his preferred position.  The whistleblower will receive an award of $22.05 million, which is 21% of the government’s recovery. NY

December 7, 2020

A chain of supermarkets in the New York area has been ordered to pay $4.7 million to settle claims under the state False Claims Act that alleged the chain operated a series of tax avoidance schemes from 2012 to 2018.  The case against Food World entities Pine Tree Meat & Produce Inc., Food Jungle, Inc., Sonamoo, Inc., and CNI Meat & Produce, and owner Hi Jong Lee was sparked by a qui tam whistleblower and involved three schemes: the use of separate cash registers so cash purchases would not be recorded for tax purposes, the use of fake merchandise returns to underreport actual sales, and the payment of a majority of its employees in cash and off the books.  AG NY

October 22, 2020

Jerry Taylor of North Carolina has been sentenced to five years in prison and ordered to pay more than $6.1 million in restitution for his role in a $9.4 million fraud scheme targeting North Carolina’s Medicaid program.  Along with his brother Tony and co-conspirators in Ohio and New York, Taylor submitted claims for behavioral health services benefiting local at-risk youth that were purportedly performed at companies he owned and operated with his brother, but that were in reality not actually performed or misrepresented in the claims.  In addition to defrauding Medicaid, Taylor also evaded taxes by failing to report more than $1.6 million in reimbursements in 2016 and 2017.  For those charges, Taylor will pay over $346,000 to the IRS.  USAO WDNC

October 15, 2020

Robert F. Smith, who formed and beneficially owned Belize entity the Excelsior Trust and Nevis entity Flash Holdings, has entered into a non-prosecution agreement, agreeing to pay $139 million, to resolve claims that between 2000 and 2015 he unlawfully used the offshore entities and their offshore bank accounts to conceal income earned by him on private equity investments and evade millions in taxes.  Using the offshore trust accounts, Smith willfully did not report to the IRS over $200 million of partnership income.  In addition, he unlawfully failed to report his ownership of foreign bank accounts in BVI and Switzerland.  The $139 million settlement consists of $56 million in taxes and penalties on unreported income and $82 million in penalties stemming from his failure to report his offshore bank accounts.  In addition, Smith agreed to abandon a $182 million refund claim based on alleged charitable contributions in 2018 and 2019.  DOJ; USAO ND Cal

October 10, 2020

The owners of Keystone Biofuels Inc., Ben Wootton and Race Miner, were sentenced to approximately 5.5 years imprisonment each and they and Keystone were ordered to pay restitution and fines totaling $9.23 million to the IRS and Pennsylvania Department of Environmental Protection following their convictions at trial for charges relating to their renewable fuels scam.  The defendants falsely claimed that they were able to produce biodiesel that permitted them to create renewable fuel credits known as RINs; then then sold both the non-qualifying fuel and the fraudulently-created RINs.  In addition, Keystone claimed federal tax refunds under the IRS Biofuel Mixture Credit program, creating false books and records to conceal the non-qualifying, and in some cases non-existent, fuel.  DOJ

October 9, 2020

Steve Choi, who owned and operated companies that provided food services in federal government buildings in the D.C. area, was sentenced to nearly two years in prison and ordered to pay over $11 million in restitution following his guilty plea on tax charges.  The government alleged that Choi failed to pay over $10 million in employment and sales taxes, despite withholding more than $4.4 million in employment taxes from employee checks and charging sales taxes to customers.  DOJ

October 6, 2020

Financial services firm Strachans SA, now Strachans SA in Liquidation, pleaded guilty to charges that it conspired with U.S. taxpayers and others to enable the taxpayers to conceal income and assets in offshore accounts.  Strachans services included the formation of trusts and offshore companies, management of undeclared assets held by nominee sham entities, and the facilitation of cash withdrawals by U.S. clients from the undeclared offshore entities through fake loans, sham consultancy agreements, dummy invoicing, and other methods.  Strachans, which voluntarily disclosed its conduct to the IRS in 2014, will pay a fine of $500,000DOJ

August 26, 2020

LA-based clothing company Ambiance Apparel and its owner Sang Bum “Ed” Noh have pleaded guilty to customs violations and tax offenses, agreeing to pay a total of $118 million, which includes $36 million in previously-seized cash.  Defendants evaded import tariffs by colluding with Asian manufacturers for the submission of invoices to CBP that fraudulently understated the value of imported clothing. The fraudulent invoices indicated payment terms by letter of credit; a second invoice for the balance of the actual price was paid by defendants by wire transfer. In less than five years, Ambiance undervalued imports by about $82.6 million and failed to pay more than $17.1 million in tariffs. In addition, defendants failed to properly report cash transactions and maintained a second set of books for cash transactions, evading nearly $17 million in taxes.  The company will be placed on probation for five years and will be ordered to undertake specific compliance procedures.  USAO CD Cal

August 6, 2020

Following his conviction at trial on charges to defraud the EPA and IRS, David Dunham, who had ownership interests in Smarter Fuel LLC and Greenworks Holdings LLC, was sentenced to seven years in prison and ordered to pay restitution of $10.21 million.  Dunham fraudulently applied for, received, and sold over $50 million in EPA, IRA, and USDA credits and payments for producing biofuels that he, in fact, did not produce and, in many instances, had never possessed in the first place.  DOJ

July 22, 2020

Tony Garrett Taylor has been sentenced to 8 years in prison and ordered to pay over $6 million to the North Carolina Medicaid program and over $1 million to the IRS after pleading guilty to committing healthcare fraud and tax evasion.  Along with his brother, Jerry Lewis Taylor, the defendant conspired to use outpatient behavioral health services companies owned and operated by the brothers to submit false claims to Medicaid for services that were either never provided or misrepresented.  Jerry Lewis Taylor has also pleaded guilty and is currently awaiting sentencing.  AG NC
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