Colorado Business Litigation Lawyer Blog

In July 2009, a Colorado jury found a man guilty of 52 criminal counts, including violations of the Colorado Organized Crime Control Act, for stealing $11 million from the Colorado Department of Revenue.

The man’s girlfriend, a supervisor at the department, took the money through various schemes, including creating false businesses and fake tax returns. The woman said she took the funds at her boyfriend’s urging because she loved him and wanted him to leave his wife.

The man said that he believed the woman was withdrawing the funds from her trust account, a claim that the jury found incredible. The man lost all of the money in 18 months on business ventures, land deals, jewelry, cars and trips. His girlfriend spent none of the money on herself.

The man’s sentence of 58 years in jail was imposed on September 24. His girlfriend pleaded guilty and was sentenced to 24 years in prison. She must also pay $10.8 million in restitution to the state.

The moral of this story is that one should never take that which the tax man has first taken away.

U.S. District Judge Edward J. Lodge, recently issued a preliminary injunction barring Penny Lea Jones of Idaho Falls, Idaho, from preparing federal income tax returns for others, while the lawsuit is pending. The court found that Jones promotes a tax defier scheme that claims large fraudulent tax refunds for customers.

The court found that Jones repeatedly prepared federal income tax returns claiming bogus refunds based on a tax fraud scheme known as the "redemption" scheme. The court held that Jones prepared and filed 333 income tax returns for customers in 2008 and 2009 claiming more than $93 million in fraudulent refunds. The court said that the redemption scheme is based on a frivolous theory that the federal government maintains secret accounts for its citizens, and that taxpayers can gain access to funds in those accounts by issuing IRS 1099-OID forms to their creditors.

The case against Jones is one of seven lawsuits the Justice Department filed across the nation in October 2009 that seek to shut down tax preparers who allegedly promote the redemption scheme. The defendants in those cases allegedly prepared tax returns fraudulently requesting a total of $562.4 million in refunds. Under the scheme, participants file a series of false IRS forms, including tax returns, amended returns, and Forms 1099 (including Form 1099-OID) or Forms W-2, to request fraudulent tax refunds based on phony claims of large income tax withholding.

The Internal Revenue Service (IRS) catches the vast majority of fraudulent redemption-scheme tax refund claims without issuing any refund. Taxpayers who submit the claims face substantial civil monetary penalties, and possible criminal prosecution.

In the past decade, the Justice Department’s Tax Division has obtained more than 435 injunctions against dishonest tax-return preparers and tax-fraud promoters.

The recent 7.0 magnitude earthquake that struck the impoverished nation of Haiti has killed well in excess of 50,000 and injured an unknown number.

Numerous nations, led by the U.S., have begun delivering badly needed food, water, medical supplies and treatment, rescue workers, cleanup and demolition crews and security personnel. One major problem is that the Port Au Prince airport is so crowded that many planes with urgently needed supplies are unable to land and often are delayed for at least one day.

As I’ve written before, when donating to a charitable organization, you should select one or more whose contributions are reasonably sure to get to those in need and are not severely diluted by high administrative expenses, graft and pay-offs.

The internet website charitywatch.org (The American Institute of Philanthropy) has compiled a top-rated list of charities involved in the Haiti earthquake relief efforts. Each charity is given an “A” to “F” rating, based on the portion of their budget going to program services and their fundraising efficiency. You should carefully read the information on the charitywatch.org website in order to diminish the chance of having your credit card number stolen.

In these troubled economic times here in the U.S., many people are financially unable to donate at this time. But if you are able to donate, give an amount you are comfortable with, given your own financial situation. Remember, however, that the need is critical and will be for quit some time to come. I’m sure that all donations will be appreciated sincerely.

Denver station KUSA-TV reported January 11, 2010 that Krahl Construction has
halted work on a $1.5 million project at the main branch of the Denver Public Library as
the apparent result of a January 5 FBI search of Krahl's Chicago headquarters. Krahl also
has an office in Centennial, Colorado.

Krahl notified employees on January 8 that the company would be shutting down
the project. Neither the FBI nor Krahl disclosed why the raid took place, but an FBI
official said the search was part of an ongoing investigation and that the FBI was
"looking for evidence of a crime." No arrests were reported.

Krahl has been paid $430,000 for work already completed, but has been paid
nothing for unfinished work. New bids can be solicited after 10 days according to city
rules.

The company has an "A+" rating from the Chicago Better Business Bureau, and
reportedly does around $100 million a year in commercial construction work. It was
recently working as general contractor on an $81 million project at Riverside Medical
Center in Kankakee, IL, but hospital officials immediately hired another company to
finish the project.

In Manhattan’s Federal District Court today, 51 year old, Anil Kumar plead guilty to one count of securities fraud and one count of conspiracy to commit securities fraud with Raj Rajaratnam. He also agreed to cooperate with prosecutors in the widening investigation. Mr. Kumar is the 7th person to pled guilty in what some are calling the biggest hedge fund insider trading scheme case in US history.

Mr. Kumar admitted that from 2003 to 2009 he received $2.6 million from Galleon hedge fund founder and billionaire Raj Rajaratnam in exchange for confidential information about clients he was working with to make illegal stock trades.

In order to hide the cash payments, Mr. Kumar admitted that Mr. Rajaratnam opened a Swiss bank account for him under a different name and then funneled the payments to the account, and eventually into Galleon’s hedge funds. Mr. Rajaratnam praised Mr. Kumar for the information he provided, at one point telling him he was, “a hero,” according to prosecutors.

As a result of his guilt plea, Kumar could face up to 25 years in prison. Charges against Mr. Rajaratnam, who earlier plead not guilty, are also pending.