04-12-04 -- Donatio, Joseph et al. -- Indictment -- News Release

Three Members of Group Known as "The Restored Israel of YAHWEH" Indicted/Arrested in Scheme to Defraud the United States

CAMDEN - Three high-ranking members of a May Landing organization named The Restored Israel of YAHWEH were arrested today on a federal Indictment charging conspiracy to defraud the United States, evasion of federal employment taxes, and failure to file individual income tax returns, U.S. Attorney Christopher J. Christie announced.

The Indictment, unsealed with today's arrests, describes a scheme by members of The Restored Israel of YAHWEH (R.I.O.Y.) in which they impeded and obstructed the Internal Revenue Service from the assessment and collection of federal taxes.

According to the Indictment, Joseph Donato, 46, of Mays Landing, and Kevin McKee, 47 of Egg Harbor Twp., owned and operated McKee Donato Construction Company, a partnership located in Mays Landing. Joseph Donato's wife Inge, 44, was the company's bookkeeper and, as such, provided payroll records to the company's accountant for use in preparing employment tax returns, according to the Indictment.

The Donatos and McKee were arrested early this morning at their homes by IRS Criminal Investigation agents. Each of the defendants made an initial appearance before U.S. Magistrate Joel B. Rosen. Inge Donato was released on a $100,000 personal recognizance bond, while both Joseph Donato and McKee were detained after they refused to obey the parameters of any bail package. The defendants will have an arraignment hearing on April 22 before U.S. District Judge Jerome B. Simandle.

Count One of the 21-count Indictment charges that beginning in March 1996 until the present, the defendants conspired with each other and others to defraud the United States by failing to withhold, report and pay over federal employment taxes (which includes federal income tax withholding and Federal Insurance Contribution Act taxes (FICA)) on behalf of the construction company's employees who were members of R.I.O.Y.

The Indictment alleges that R.I.O.Y., instructed its members not to pay federal income taxes. While the defendants failed to withhold, report and pay over federal employment taxes for the construction company's employees who were R.I.O.Y. members, they did so for employees who were not R.I.O.Y. members, according to the Indictment.

The Indictment alleges 63 overt acts including: the furnishing of false payroll information to the construction company's accountant; and the signing of false and fraudulent Quarterly Federal Tax Returns (Forms 941). Furthermore, the Indictment alleges that the defendants caused 20 false quarterly forms 941, covering quarters ending in December 1996 through December 2001, to be filed with the IRS which under-reported employee wages by approximately $698,736 and FICA taxes by $106,907.

The Indictment also alleges that the defendants used construction company checks to pay for personal purchases which included automobiles, a refrigerator and painting at Donato's personal residence.

Counts 2 through 13 charge all three defendants with evasion of employment taxes on behalf of the construction company. For the tax year quarters ended March 1998 through December 2000, the defendants prepared, signed, and caused to be filed Forms 941 with the IRS that falsely and fraudulently reported total wages and FICA taxes, in that they failed to include the payroll and tax information regarding the construction company's employees who were members of R.I.O.Y. According to the Indictment, the filed Forms 941 under-reported total wages of approximately $673,742, and resulted in total FICA taxes due and owing of approximately $103,082.

Counts 14 through 17 charge Joseph and Inge Donato with failure to file their U.S. Individual Income Tax Returns for the years 1997 through 2000. Counts 18 through 21 charge McKee with failure to file his U.S. Individual Income Tax Returns for the years 1997 through 2000.

Each count of conspiracy to defraud the United States carries a maximum penalty of five years in prison and a fine of $250,00. Each count of evasion of employment taxes carries a maximum penalty of five years in prison and a fine of $250,000. Each count of failure to file Individual Income Tax Returns carries a maximum penalty of one year in prison and a fine of $100,000. Parole has been abolished in the federal sentencing system, defendants who are given prison term must complete nearly all that time

Under U.S. Sentencing Guidelines, the U.S. District Judge to whom the case is assigned, upon conviction, would determine the actual sentence based on a formula that takes into account the severity and characteristics of the offense and the defendant's criminal history, if any, according to Assistant U.S. Attorney Thomas DiLeonardo.

The Indictment is available by contacting the U.S. Attorney's Office Public Affairs Office at either 856-757-5233 or 973-645-2888.

Despite Indictment, every defendant is presumed innocent, unless and until found guilty beyond a reasonable doubt, following a trial at which the defendant has all of the trial rights guaranteed by the U.S. Constitution and federal law.

Christie credited Special Agents of the IRS Criminal Investigation section, Mays Landing Field Office, under the direction of Special Agent in Charge Patricia J. Haynes, with developing the case against the defendants.

The Government is represented by Assistant U.S. Attorney Thomas DiLeonardo of the Criminal Division in Camden.

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Defense Attorney: Chris O'Malley Federal Public Defender's Office