07/07/2009

News / Allentown Attorney Pleads Guilty to Filing False Tax Returns

PHILADELPHIA—John P. Karoly, Jr., 59, pleaded guilty today to three counts of willingly filing false federal income tax returns under-reporting his income by approximately $5.2 million, announced United States Attorney Michael L. Levy. The superseding indictment alleged that defendant John P. Karoly Jr. failed to report substantial amounts of taxable income on his federal income tax returns for calendar years 2002, 2004, and 2005.

Karoly was indicted in September 2008 along with his son, John P. Karoly III, a/k/a J.P. Karoly, and John J. Shane. The original indictment alleged a scheme by the defendants to defraud the multi-million dollar estates of Karoly's brother and sister-in-law, Peter Karoly and Lauren Angstadt, by creating and submitting phony wills after the couple was killed in a plane crash. As part of the plea agreement, defendant Karoly must immediately withdraw as attorney and party to the civil Will contest. Additionally, Karoly must renounce any share of the estates should a court determine that the June 2, 2006 Wills of Peter Karoly and Lauren Angstadt are authentic.

A superseding indictment alleged, in addition to the tax counts, that in 2004, Karoly made a $500,000 donation to the Lehigh Valley Community Foundation (LVCF), a non-profit organization in Allentown, Pennsylvania, and then had the money returned to him in an effort to defraud the the Lehigh Valley Community Foundation and the Dubbs UCC church of Allentown. Mail fraud and money laundering charges in connection with those counts of the superseding indictment are scheduled for a non-jury trial on stipulated facts for September 2009.

As a result of today's plea, Karoly faces an advisory guidelines sentencing range of 51 to 63 months in prison. Sentencing has not yet been scheduled.

The case was investigated by the Federal Bureau of Investigation (Allentown Resident Agency) and the Internal Revenue Service, Criminal Investigation Division (Bethlehem Office). It is being prosecuted by Assistant United States Attorneys Seth Weber and Kevin Brenner.

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