September 2006

Tax fraud investigations are the main component of IRS Criminal Investigation’s efforts to foster voluntary compliance with the tax laws. Many of these investigations include white-collar financial crimes in legal industries and involve individuals from all facets of our economy.

Special agents of IRS Criminal Investigation have investigated and recommended to the Department of Justice for prosecution several individuals involved in the construction industry. These investigations vary from tax evasion to employment tax fraud to money laundering conspiracies.

Statistical Information

* How to Interpret Criminal Investigation Data
Since actions on a specific investigation may cross fiscal years, the data shown in cases initiated may not always represent the same universe of cases shown in other actions within the same fiscal year. Therefore, in fiscal year 2004, the data should reflect an increase in convictions and sentenced due to the fiscal year 2003 increase in case initiations, prosecution recommendations and indictments.

Case Summaries

The following case summaries are excerpts from public record documents on file in the court in the judicial district in which the cases were prosecuted.

• On June 27, 2006, in San Francisco, CA, Sam Ho Low was sentenced to five months in prison, five months home confinement, ordered to pay $73,954 in restitution and pay a $6,000 fine for intentionally underreporting his business income between 1997 and 1999. According to the plea agreement, the defendant owned and operated Frank and Sam’s Construction and Remodeling Company, Inc., which was an "S" corporation under the Internal Revenue laws. Frank and Sam’s Construction provided remodeling and construction services for residential and commercial clients in the Bay Area. Low admitted to asking clients to pay by check or cash and that he cashed the checks and used some of the money to pay business expenses such as salaries, wages, building materials and building supplies. He also admitted that he did not tell his tax return preparer about the checks he cashed or the currency he received and that none of it was reported on his income tax returns. He also admitted that he gave his income tax return preparer only the business bank statements to calculate his gross receipts for years including 1997 and 1999. The net tax loss to the United States was $73,954.
• On May 19, 2006, in Columbia, SC, John Pierce Browne was sentenced to 46 months in prison for tax evasion.  Browne grossed more than $2.5 million from his siding and window company from 1998 to 2000 and did not pay his business or personal taxes.  Browne used his brother’s identity for his business dealings and to buy an office building.  He also used another name to buy a Cadillac, rent an apartment and pay his living expenses.  Browne admitted evading the payment of $164,550 in taxes owed for 1998-2000.
• On April 25, 2006, in San Francisco, CA, Lee Nobmann, the CEO and owner of Golden State Lumber (GSL), was sentenced to 15 months in prison, fined $40,000 and ordered to pay $330,000 in restitution.  Nobmann pleaded guilty on Dec. 8, 2005, admitting that he had his company pay for his personal expenses and deduct the funds as the company's business expenses from 1996 to 2000. Nobmann also acknowledged that he received rebate checks from vendors and deposited them into his personal bank account and did not report the payments as income for the company or as income on his personal income tax returns.  As a result, his company underreported its income by approximately $1.1 million and he did not report the income on his personal income tax returns. Nobmann illegally avoided paying approximately $330,000 in taxes.  The illegal activity came to light when he fired the CFO of GSL. Shortly after his termination, the CFO called the IRS to report Nobmann for tax evasion.
• On March 21, 2006, Robert E. Saunders was sentenced to 15 months in prison and ordered to pay $65,531 in restitution to the IRS.  According to court documents, Saunders created various trusts which acted as nominees to which he transferred both his business assests and his real and personal property, including his home, vehicles, bank accounts, and other personal possessions.  Saunders attempted to deduct personal living expenses on the trust tax returns.
• On December 5, 2005, in Los Angeles, CA, Michael Paul Monroe was sentenced to a year and a day in federal prison, followed by one year of supervised release with a condition of six months of home confinement, and a fine of $22,640 following his August 2005 guilty plea to one count of subscribing to a false corporate federal income tax return for Swim Pool Construction Co., Inc. for its fiscal year ending April 30, 2000.  Monroe admitted that he held an ownership interest in, worked for, and participated in the management of Swim Pool Construction Co., Inc. and Monroe Pool Service, Inc., both of which conducted business in the Los Angeles area.  Monroe admitted that Swim Pool Construction Co., Inc. failed to report business receipts of $2,196,893 for the three year period ending April 30, 2001, and that Monroe Pool Service, Inc. failed to report business receipts of $419,790 during the same time period.  Monroe admitted that he cashed some customers’ checks paid to the corporations, rather than deposit the checks into the corporations’ bank accounts.  Monroe failed to report the gross receipts from the cashed checks on the corporations’ tax returns.   As part of the plea entered in this matter, Monroe also agreed to have true and accurate tax returns filed for Swim Pool Construction Co, Inc. and Monroe Pool Service, Inc. for the fiscal years ending April 30, 1999, 2000, and 2001 and to have the corporations pay the IRS the taxes, penalties, and interest assessed on these tax returns.
• On November 30, 2005, in Minneapolis, MN, Chad Wetzel, the owner of a now defunct heating and ventilation company pleaded guilty to willfully failing to pay over Social Security and Medicare taxes to the IRS, embezzlement of funds from a union employee benefit plan, and perjury during a bankruptcy proceeding.  Chad Wetzel’s father, George Wetzel, pleaded guilty in March 2005 to conspiracy to commit mail fraud and embezzlement from a union pension plan.  As employer, Wetzel withheld and collected payroll taxes and union ERISA plan contributions from employee payrolls, but failed to pay these funds over to either the IRS or the unions. Wetzel also withheld employee premiums for health insurance, but did not pay these over to the health care benefit plans.  Wetzel’s company failed to pay over approximately $412,251 in payroll taxes to the Internal Revenue Service, approximately $134,835 in ERISA payments to unions, and over $7,000 in health care premiums.  In October 2003, Wetzel caused the company to file Chapter 11 bankruptcy.  During the bankruptcy proceedings, Wetzel concealed and did not disclose the existence of accounts, assets, and transfers of property and assets to the Bankruptcy Court.  He also lied under oath at a Creditors’ hearing when he falsely declared that he had disclosed all financial accounts and assets of the company and all transfers of ownership and property within the year prior to the company filing for bankruptcy protection.
• On November 14, 2005, in Columbia, SC, John Pierce Brown, aka Steinie Martin Browne, pleaded guilty to tax evasion. Brown operated Economy Siding and Windows, LLC.  From 1998 to 2000, Brown’s business grossed over $2.5 million but failed to pay any business or personal taxes.  To avoid paying taxes, Brown used another name to purchase a Cadillac, rent an apartment, and pay his living expenses.  Brown also operated his business and purchased an office building using his brother’s identity.  Brown admitted avoiding the payment of $164,550 in taxes owed for 1998-2000.
  

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