United States Attorney's Office District of Connecticut
Press Release

RHODE ISLAND BUSINESS OWNER SENTENCED TO FEDERAL PRISON FOR TAX FRAUD RELATED TO KICKBACK SCHEME

Nora R. Dannehy, Acting United States Attorney for the District of Connecticut, announced that LOUIS G. XIFARAS, 58, of Bristol, Rhode Island, was sentenced today by United States District Judge Vanessa L. Bryant in Hartford to 12 months and one day of imprisonment, followed by one year of supervised release in home confinement under electronic monitoring.  Judge Bryant also ordered XIFARAS to pay a fine in the amount of $50,000.  On May 2, 2008, XIFARAS pleaded guilty to one count filing a false income tax return.

According to documents filed with the Court and statements made in court, XIFARAS formerly owned and operated Innovative Network Solutions (“INS”) of Pawtucket, Rhode Island, a company that provided computer Internet services including server installations.  In 1999, an employee of Southwestern Bell Communications (“SBC”) approached XIFARAS with a proposal that he would ensure INS received subcontracting work from SBC in exchange for kickbacks being paid to the SBC employee.  The method by which the kickbacks were paid to the SBC employee was to put his wife on INS’ payroll as a “no-show” employee.

INS was an S Corporation, which means that the company paid no income tax.  Rather, the company’s income and expenses were reported on the owner’s income tax return.  In 2002, XIFARAS reported income of $968,070, deducting $272,882 that INS paid to the SBC employee’s wife.  However, kickbacks disguised as salary for a no-show job are not deductible business expenses, so XIFARAS should have reported taxable income of $1,240,952, not $968,070.

Today, Judge Bryant ordered XIFARAS to pay the $50,000 fine and $222,078 in back taxes within 30 days.  XIFARAS also must pay to the IRS $166,558.60 in penalties and $164,142.12 in interest.

This case was investigated by Internal Revenue Service – Criminal Investigation Division and the Federal Bureau of Investigation.  The case was prosecuted by Assistant United States Attorney Calvin B. Kurimai.

CONTACT:

U.S. ATTORNEY'S OFFICE
Tom Carson
(203) 821-3722
thomas.carson@usdoj.gov