For Immediate Release

NEWS RELEASE SUMMARY

United States Attorney Carol C. Lam announced that Glenn Kawesch, a medical doctor specializing in ophthalmology, pled guilty today to one count of income tax evasion. Kawesch entered his guilty plea to a one count Information in U.S. District Court in San Diego before Judge M. James Lorenz.

In connection with his plea, Kawesch admitted that he intentionally evaded $4,198,040 in federal income taxes due on his U.S. Individual Income Tax Returns (Forms 1040) for the years 1997, 1998, and 1999, by failing to include income diverted from his corporation and by failing to properly report all taxable profits from his corporation. Kawesch incorporated his medical practice under the name Southwest Eye Care Center, Inc. and was doing business as Laser & RK Eye Centers. Kawesch admitted that he evaded a substantial part of his federal income taxes due and owing by filing false corporate tax returns (Forms 1120S) for Southwest Eye Care, Inc. Kawesch failed to report cash receipts totaling approximately $1,468,000 and overstated business expense deductions by approximately $14,525,000 on his corporate tax returns for the year 1997, 1998, and 1999.

Kawesch admitted that during the years 1997, 1998, and 1999, he performed corrective laser eye surgery on approximately 10,000 patients and charged fees ranging from $2,000 to $4,000 for each surgery. Kawesch's patients made payments to the medical practice through credit cards, checks, and cash. All patient payments received by check and credit cards were deposited directly into the medical practice's bank account and entered in the medical practice's accounting software program. Cash, on the other hand, was directly siphoned to Kawesch. Kawesch caused his administrative personnel not to record cash receipts on the medical practice books and caused his personnel not to deposit the cash into his business bank account. Kawesch would then spend the cash for personal purposes or hoard the cash in various locations throughout his home.

Kawesch admitted that he was involved in a scheme, with the assistance of attorneys and other individuals, to evade his income tax liability. This scheme involved sham contractual agreements which purported to make Kawesch an "employee" of Worldwide Career Management, a business entity supposedly operating in Dublin, Ireland. In accordance with the sham agreements, Worldwide Career Management supposedly "loaned out" Kawesch's medical services to a domestic entity called O&B Medical Group. Kawesch's medical services were supposedly contracted out to Southwest Eye Care, Inc. O&B Medical Group purportedly assigned its interests to ExecuPro Medical Corporation. On a regular basis, Kawesch and others caused payments to be made from Kawesch's corporation, Southwest Eye Care, Inc. to ExecuPro Medical Corporation supposedly in payment for Kawesch's services. These sham transactions were part of a tax evasion scheme to evade Kawesch's income tax liability. For the years 1998 and 1999, Kawesch caused Southwest Eye Care, Inc. to make $9,525,000 in payments to ExecuPro Medical Corporation. After receiving the funds from Southwest Eye Care, Inc. , ExecuPro Medical Corporation wired the funds, less an eight percent (8%) retained fee, to a Worldwide Career Management bank account located in Dublin, Ireland. Periodically, Worldwide Career Management wired these funds into a domestic investment account in the name of Worldwide Career Management Deferred Compensation Plan for Kawesch. At no time were these payments to ExecuPro Medical Corporation identified on Southwest Eye Care, Inc. books as salary or other taxable compensation to Kawesch. Kawesch failed to report the overwhelming majority of this income on his 1998 and 1999 U.S. Individual Income Tax Returns. Worldwide Career Management, O&B Medical Group, and ExecuPro Medical Corporation were merely conduits used by Kawesch to expatriate and repatriate Kawesch's untaxed income for the purposes of tax evasion. Although the domestic investment account referred to a "deferred compensation plan" on behalf of Kawesch, the funds were not in fact deferred compensation. These funds were actually taxable income over which Kawesch had control. For example, on or about December 1999, Kawesch used $1,900,000 of these funds to purchase a Lear Jet.

Kawesch also admitted that he was also involved in a tax evasion scheme on or about December 1998. With the assistance of an attorney and other individuals, Kawesch executed a fictitious Marketing Service Agreement between Southwest Eye Care, Inc. and an entity called Telco. The agreement purportedly called for Telco to provide marketing services to Southwest Eye Care, Inc. for a fee of $1,000,000. The agreement stated that if the marketing services were not provided the funds would be returned unless Telco made a capital investment in Sequoia, Ltd., supposedly an Island of Nevis, West Indies corporation. The entire Marketing Service Agreement was a ruse designed to enable Southwest Eye Care, Inc. to fraudulently take a $1,000,000 advertising expense deduction for marketing services that were never to be provided. Despite the fact that these funds appeared to be invested in Sequoia, Ltd., an offshore corporation, they were actually held in an investment account over which Kawesch maintained control. This tax evasion scheme was merely a means by which Kawesch could expatriate and repatriate income from Southwest Eye Care, Inc., which he used for personal purposes, and thereby bypass having to report this income on his 1998 U.S. Individual Income Tax Return. Additionally, because the $1,000,000 payment had the appearance of an advertising expense and was deducted on the corporate tax return for Southwest Eye Care, Inc., Kawesch fraudulently reduced the medical practice's 1998 net profit.

Kawesch further admitted that although he was assisted and advised by an attorney and other individuals regarding the false deferred compensation scheme and the offshore corporate investment scheme, at the time these events occurred he knew that these schemes were fraudulent and he intentionally entered into them as a means to evade income taxes.

United States Attorney Carol C. Lam stated, "This tax crime involved millions of dollars, and it was committed by a professional physician who was determined to cheat the system. This office will not look the other way when professionals use their education and experience to commit white collar crimes."

IRS Criminal Investigation Special Agent in Charge Denise L. Rubin said, "Most taxpayers report the income they receive and file correct returns. Those taxpayers who chose to do the right thing should be confident that the tax system works. In this case, Kawesch devised elaborate methods to conceal his income to intentionally evade his income taxes. Those who attempt to conceal their true income from the Internal Revenue Service through sham transactions and offshore schemes run a very high risk of being criminally prosecuted."

DEFENDANT

Glenn A. Kawesch

SUMMARY OF CHARGES

One Count:
Tax evasion - Title 26, U.S.C., 7201
5 years' imprisonment; $250,000 fine

AGENCY

Internal Revenue Service, Criminal Investigation