CALIFORNIA FAMILY MEMBERS AND EMPLOYEES
SENTENCED FOR CLAIMING FALSE BUSINESS EXPENSES ON
FEDERAL INCOME TAX RETURNS

WASHINGTON, D.C. – Eileen J. O'Connor, Assistant Attorney General for the Department of Justice's Tax Division announced today the sentencing of Michael R. Molus and Carol A. Molus, of Newport Coast, California. As owners of Mexmil, a Santa Ana company, both will serve time for conspiring to file false income tax returns that falsely claimed $1.8 million in business expenses.

"Business owners who evade taxes by claiming fictitious business expenses not only must pay their debt to the IRS with interest and penalties, they also may pay their debt to society by spending time in prison," said Eileen J. O'Connor, Assistant Attorney General for the Tax Division.

United States District Judge Napoleon A. Jones, Jr. sentenced Michael R. Molus to serve 12 months, 1 day in prison, followed by 3 years of supervised release. Judge Jones also ordered Michael R. Molus to pay $871,000 to the IRS per the terms in the plea agreement, and to pay a fine of $75,000. Carol A. Molus was sentenced to serve 3 months in a halfway house followed by 3 months home confinement, and 3 years of supervised release. Mrs. Molus was also ordered to cooperate with the IRS, and to pay an additional fine of $75,000.

In December 2001, Michael R. and Carol A. Molus each pled guilty to the felony crime of conspiracy to file false federal individual income tax returns for the years 1991 - 1994. According to the indictment, the charges arose from the defendants' operation of the Mexmil Company, based in Santa Ana, California. Mexmil manufactures aircraft fuselage insulation blankets at a facility in Mexicali, Mexico, which were sold to aircraft manufacturer Boeing.

The Indictment alleged that from 1991 to 1994, $1.8 million of Mexmil funds were falsely reported as business expenses on the Molus's returns, whereas the money was actually split by the Moluses and their employees for their personal use, including the purchase and decoration of a vacation home in Florida and the purchase of merchandise at Neiman Marcus.

The indictment also alleged that some of the Mexmil funds were distributed to five employees of Mexmil, including the three sons of Michael Molus, all of whom failed to report the income to the Internal Revenue Service. The sons, Mark S. Molus, Michael Richard Molus III (a.k.a. Rick Molus), and Matthew K. Molus, and fellow employees Jason C. McCann and Dwayne L. Ellison, were sentenced today for willfully failing to provide information to the Internal Revenue Service regarding their personal federal income taxes.

Judge Jones sentenced Michael Molus's three sons to one year probation, 100 hours of community service, and fines that ranged from $1,000 - $2,000. McCann and Ellison were also sentenced to one year probation and community service. The tax loss attributable to these five men was $113,340. A Mexican citizen who was indicted along with the convicted defendants, Enrique Gomez Avila, remains a fugitive.

The sentencing hearings today are the culmination of a long-term investigation by the Criminal Investigation Division of the Internal Revenue Service. Justice Department Trial Attorneys Danny N. Roetzel and Lori A. Hendrickson handled the prosecution.

Anyone who has information about suspected tax fraud should report it to the Internal Revenue Service tip line at 1-800-829-0433.

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