Archive for the ‘Florida’ Category

Former Seminole Council Member Guilty of Tax Fraud

April 14th, 2012 No comments

The Seminole Tribe of Florida is one of three federally recognized Seminole entities in the U.S. The tribe has four reservations, one of which is the Big Cypress Reservation.

From 1987 to 2010, David Cypress served as an elected representative for the Big Cypress Reservation to the Tribal Council, which is the governing body of the tribe. One of Cypress’s responsibilities was to handle monetary distributions to tribal members.

Reported by the Sun Sentinel, Mr. Cypress pleaded guilty on Friday to filing a false 2007 income tax return for underreporting income, and agreed to pay $5.46 million in restitution to the IRS. The restitution covers tax, interest, and penalties owed from 2003 through 2009. He faces up to three years in prison.

According to the IRS, much of the underreported income was distributed by Cypress to other tribal members from his discretionary council fund. Although a federally recognized tribe as a sovereign nation is not subject to federal income taxes, individual members of the tribe do not fall under the exemption.

A Sun Sentinel investigation revealed that Cypress distributed more than $160 million in tribal funds between 1999 and 2007. Considering $160 million was more than the distributions of the other four council members combined during that time, it’s no surprise federal authorities suspected wrongdoing.

Cypress is due to be sentenced on August 9.

Tax Cheat’s DNA Breaks Cold Murder Case

January 11th, 2012 No comments

Last October, David Lee Hedrick was found guilty by a Florida jury of failing to pay sales tax to the state. In 2007, he had sold $764,000 worth of televisions to Tishman Hotel Corp., the owner of the Swan and Dolphin hotels at Walt Disney World, properly withheld $72,000 in sales tax, but never remitted the funds to the state. He was sentenced to fifteen years probation.

We read stories about taxpayers failing to remit sales tax all the time. What’s interesting about this story is what we learned after the conviction. As a convicted felon, Mr. Hedrick was required to provide the state his DNA.

The Orlando Sentinel is reporting that Hedrick’s DNA matched a blood sample taken from a murder scene over twenty years ago. On Monday, Hedrick was charged with first-degree murder.

Hedrick was a temporary employee at MyComp, the computer store where Betty Clair Foster was brutally murdered in 1991. At the time, authorities had no idea who killed her or why. Thanks to advanced technology and the DNA requirement, authorities now have a very strong idea regarding the who.

Categories: Florida, State and Local, Tax Fraud Tags:

Pursuing Tax Fraud by Relaxing Taxpayer Privacy Laws

September 12th, 2011 No comments

Last week, I wrote about Operation Rainmaker. Authorities in Florida arrested several individuals in connection with filing false income tax returns using stolen social security numbers of the living and deceased.

Unfortunately, authorities did not charge the perpetrators with tax fraud, because the taxpayer privacy laws won’t allow authorities to obtain information from the falsely filed returns.

Reported by Tampa Bay Online, Florida Senator Bill Nelson introduced legislation in Washington on Friday that may assist authorities with prosecuting individuals who file tax returns using someone else’s social security number for tax fraud. More specifically, the legislation “would require the Treasury Department to examine ways to allow the IRS to share information with local law enforcement while still protecting taxpayers from potential abuse.”

Perhaps Senator Nelson is a regular reader of Taxes in the Back. Yes, even I sometimes engage in wishful thinking.

Operation Rainmaker

September 5th, 2011 No comments

On Friday, authorities in Tampa, FL announced the arrest of several individuals in connection with a tax fraud scheme involving $130 million.

According to an article in the Seminole Heights Patch, task force members dubbed the investigation “Operation Rainmaker,” as authorities pursued “money that was raining down on the suspects.”

The scam involved identity theft. The perpetrators used stolen social security numbers of both the dead and living, prepared false income tax returns, and pocketed the refunds. When several true holders of social security numbers filed their returns and subsequently discovered returns were already on file, authorities knew something was amiss.

I’d like to note this story touches upon an issue I have previously discussed: In general, the IRS does not share tax information with any other person, including law enforcement authorities.

There are some exceptions, but none seemed to apply in this case.[1] Thus, efforts by authorities to crack down on the filers of the fraudulent returns were far more difficult than they needed to be. Even more, the perpetrators were not charged with tax fraud, but instead money laundering and identity theft.

It seems to me that the taxpayer privacy laws are too strict. Sure, we want taxpayers to fully disclose their income without facing any disincentives. Although the taxpayer privacy laws are indeed written to effectuate that notion, more exceptions can be implemented that not only maintain the encouragement of full disclosure but also assist authorities with more easily identifying tax scam artists.

[1] An argument could have been made that the following exception applied: Disclosure to Federal Officers or Employees for Administration of Federal Laws Not Related to Tax Administration. Certain elements must be established in order to trigger the exception. Applying this case to the elements leads me to believe the exception should apply. I do not know whether Operation Rainmaker authorities presented this argument.

Florida Congressman Under FBI and IRS Investigation

July 23rd, 2011 No comments

David Rivera is a Republican member of the House of Representatives, representing Florida’s 25th congressional district, which is based in South Florida. The Miami Herald is reporting that Rivera is now under investigation by the FBI and IRS for income tax evasion.

Authorities are examining a $1 million consulting contract between Flagler Dog Track, now known as Magic City Casino, and Millennium Marketing, which is co-owned by Rivera’s mother and her business partner. In October 2006, Millennium was hired to assist Flagler with a campaign to expand gambling in Miami-Dade County by having casino-style slot machines at pari-mutuels. Voters approved the expansion in January 2008.

The focus of the investigation is on Rivera’s work performed on the campaign on behalf of Flagler that was not disclosed as income. An attorney for Magic City claims that Rivera approached Flagler about the pro-slots campaign, and that neither Rivera’s mother nor her business partner were involved in the contract negotiations. Allegedly, Rivera did not report as income various payments received by Millennium under the contract. Although Rivera initially denied receiving any payments for work on the slots campaign, he later admitted to receiving “loans” from Millennium.

Like any good lawyer should, I must note that Rivera stands innocent until proven guilty. Rivera recently stated in an e-mail that federal authorities have not contacted him regarding the investigation. We’ll see what the investigation reveals, if anything.

Whether or not he’s guilty, it seems like Rivera made some poorly calculated moves. People are going to ask questions about a contract involving a political campaign and six figure payments that a congressman was closely tied to, particularly if he was initially quiet about it. It just smells of wrongdoing.

Categories: Florida, IRS, Politics Tags:
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