Articles Posted in White Collar Crimes

Original Case Details

A 44-year-old man from Novi was recently federally charged for allegedly committing fraud to obtain over $3 million in federal pandemic loans. He is alleged to have developed a plot to cheat banks by submitting applications for loans that had false and fraudulent information. He was flagged for 19 different loan applications that were all allegedly tied to him in some way. The information submitted for these loans includes paperwork for multiple businesses that either did not exist or did not actually have the employees and wage information that the man allegedly submitted. One of the businesses listed was called “Bless My Grind LLC.” The loans, if valid, would have been distributed by the federal government under the Paycheck Protection Program (PPP) that were guaranteed by the Small Business Administration under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The PPP allows businesses who qualify to receive loans at a 1% interest rate which can later be forgiven if the businesses spend the money within a specific time period with a minimum percentage going towards payroll expenses. Federal authorities have placed a special focus on investigating and prosecuting those who they suspect of fraud related to the pandemic fund and pandemic assistance. This is the latest in a wave of federal pandemic fraud cases that the federal government has pursued. It is expected that cases similar to this will become more commonplace as federal authorities continue to investigate pandemic assistance claims.

Federal Wire Fraud Charges and Related Penalties

Original Case Details

The federal government continues to pursue legal action against Larry Inman, a Michigan state representative representing Michigan’s 104th District. Inman is accused of putting his vote out for sale relating to a 2018 Michigan wage law issue. He is alleged to have asked for a $30,000 campaign contribution to vote “no” on the wage law issue in a set of text messages. Inman faced a jury trial in December 2019 where he was charged with three separate federal offenses:

• Attempted Extortion: This is a federal felony that carries a maximum penalty of up to 20 years in federal prison upon conviction and a fine of up to $250,000.

Original Case Details

A married couple that owns the popular Sterling Heights Asian restaurant Chung Ki Wa have been accused of both filing false tax returns as well as using a “zapper” that falsifies business transactions. Chung Ki Wa is known for its Korean BBQ, Japanese Sushi, and Chinese dishes. The Michigan state Department of Treasury found that the couple allegedly failed to report more than $165,000 in sales tax that they should have collected since 2013. A zapper is a software that is used by business owners to manipulate their point of sale devices, typically programming the software to suppress sales numbers in an effort to under-report tax liabilities to the government. An investigation into what was leading to this underreporting led to the Attorney General’s office believing that the couple was using a zapper.

Summary of Criminal Charges and Potential Penalties

Original Case Details

The fallout from alleged corruption in Macomb County continues. Former Macomb County public works commissioner Anthony Marrocco is the latest in a line of officials to be criminally charged for actions while in office. He’s accused of making lavish expenditures on himself using illegal money obtained in an extensive extortion scheme. The alleged scheme involves Marrocco directing his operations manager Dino Bucci and others inside Marrocco’s office to pressure local builders and contractors to buy hundreds of thousands of dollars in tickets to Marrocco political fundraisers. He allegedly kept lists of who bought tickets and who didn’t and would punish those who didn’t by making it difficult for them to obtain permits, payments, and even refusing to award Macomb County work contracts altogether. Bucci has already pled guilty for his role as a “bag man” in what is described as a pay-to-play mafia-type scheme.

Criminal Charges & Allegations

The Department of Justice Tax Division’s Acting Deputy Assistant AG Stuart M. Goldberg recently announced that three individuals, two of them managers of a Michigan healthcare management company and one an executive assistant, have been indicted by a Flint federal grand jury in an alleged employment tax scheme.

The managers, Joseph DeSanto and Edward Cespedes, are charged with failing to pay over payroll taxes to the IRS. Gerri Avery, executive assistant responsible for payment expenses, is charged with attempting to obstruct IRS laws.

The healthcare management services company is located in Southfield and operates under the name Integrated HCS Practice Management. According to the indictment, during the period from October 2013 to February 2014 DeSanto and Cespedes failed to pay the full taxes deducted from employee’s paychecks over to the Internal Revenue Service. The misappropriated money was allegedly used by the two men for personal expenses and company operating expenses.

Recently it was announced by the Department of Justice Tax Division’s Acting Deputy Assistant AG Stuart M. Goldberg that Sarah Vidican, owner of Magnalty LLC had been charged with failing to file tax returns and filing a false tax return. Vidican’s marketing and consulting firm (Magnalty) allegedly provides services to chiropractors and physicians in both Michigan and Florida.

According to the indictment returned by a Flint federal grand jury, Vidican underreported the income for Magnalty when she filed a fraudulent 2012 partnership tax return. Vidican also did not file a partnership tax return for Magnalty for the year 2014, and failed to file a personal tax return for 2013 according to the indictment.

The investigation of Vidican and the business was conducted by IRS Criminal Investigation special agents. The case will be prosecuted by Tax Division Trial Attorneys William Guappone and Mark McDonald.

Recently it was announced by U.S. Attorney Barbara McQuade that 34-year-old Michael Davis of Detroit was sentenced to 40 months in prison and restitution after Davis engaged in a fraudulent scheme whereby he supplied luxury cars to drug dealers. IRS Criminal Investigation Special Agent in Charge Jarod J. Koopman and U.S. Secret Service Special Agent in Charge Jeffrey Frost joined McQuade in the announcement.

Davis pleaded guilty to one count of wire fraud and one count of money laundering, aiding and abetting according to court documents. Upon his release from prison, he will be on supervised release for three years for each count, to be served concurrently.

According to the press release, Davis recruited straw buyers to purchase vehicles including Porsches, Audis, Mercedes, BMWs, Cadillacs, and other luxury vehicles to be used in the scheme. In order to get financing for these luxury cars, the straw buyers would provide lenders with bogus financial information under Davis’ direction. After taking possession of the luxury cars, Davis ultimately removed the lender as a lien holder from the titles through a “washing” scheme involving a number of transactions before he and other working with him would sell the cars, often to criminals including drug dealers who wanted vehicles with unclear title histories.

Recently Marian Kay Dombroski, a resident of Whittemore, was sentenced to 12 months, 1 day in prison after pleading guilty to one count of attempting to evade and defeat the payment of tax according to court documents. Dombroski and her husband reportedly purposely tried to avoid paying income tax to the IRS for the years 2000 through 2003.

Dombroski owed income taxes for the four year period in the amount of $105,827.70, and used various methods to avoid paying the taxes owed. According to case documents filed in January of this year, the defendant failed to file income tax returns with the IRS and concealed or attempted to conceal the correct income and asset information from the U.S. government. Dombroski will also be on supervised release for one year upon her release from prison, and must pay the IRS taxes owed in addition to penalties and/or interest. Court documents indicate the defendant will make payments to the IRS on a monthly basis.

The statutory penalties for this offense which is a violation of Title 26, United States Code, Section 7201 is a maximum of five years in prison, with up to three years of supervised release upon release from prison. Fines of up to $100,000 also apply in some cases in addition to repayment of back taxes to the IRS.

There are many offenses that fall under the category of white collar crimes, but all are generally motivated by the possibility of financial gain.  Some of these crimes include money laundering, embezzlement, tax evasion, insurance fraud, bribery, certain Ponzi schemes, and securities fraud.  The biggest factor that sets white collar crimes apart from other criminal offenses is that they typically don’t involve violence or overtly illegal activities, such as drug-related crimes.

In the majority of cases, white collar crimes are investigated by federal authorities.  If evidence is sufficient to warrant criminal charges, the case may be prosecuted at the federal level as well.  Much of the general population believes that those found guilty of white collar crimes are not punished accordingly, and often treated with leniency.  The truth is many individuals convicted of tax evasion, Ponzi schemes, embezzling and other financial crimes often face sentences that are just as severe as those found guilty of more serious or violent crimes.  Penalties may include significant fines, restitution, and long prison terms.
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