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One of the largest IRS cases in History
This investigation was requested by an
accounting firm in connection with a prospective client transaction and
included, among other elements, manual civil and criminal record searches on
the company and its two principals. Court documents and media sources revealed
that the subject company and four of its subsidiaries are under federal
indictment for conspiracy and wire fraud as part of a multimillion dollar tax
fraud scheme orchestrated by the companies' founder. In addition, one of the principals
was recently sentenced to over 20 years in prison and ordered to pay
restitution of $180 million to the Internal Revenue Service. The subject pleaded
guilty to five felonies, including failure to collect and pay payroll taxes and
obstructing a federal investigation. In what is reportedly one of the largest
employment tax-fraud cases in IRS history, this individual attempted to justify
his actions by claiming insanity.
The company and its subsidiaries were also defendants
in dozens of lawsuits for fraud and breach of contract with damage claims
totaling over $220 million, in addition to filing for Chapter 11 bankruptcy. Several
motions had been filed to dismiss the bankruptcy proceedings, one of which was
made by the company's former accountants who were sued for professional
negligence. In court papers, the accountants asked that the case be dismissed
or converted to a Chapter 7 because "the only reason the debtor filed the
petition was in an effort to help (the founder's) criminal case." The
motion to dismiss also argued that the company has no chance to successfully reorganize
because it is a "sham company used only for illegal activities," has no
remaining employees and no income.
While civil litigation searches revealed
the company's instability, the criminal search results helped bring the
company's and its principals' mode of operation into focus.
In our next News
Blast, we'll look at the importance of investigating all the major players in a business engagement.
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