April 25, 12

NEWS / Massachusetts Financial Advisor Sentenced to 60 Months in Prison for Tax Crimes and Contempt

Kevin P. Mahoney of Attleboro, Mass., was sentenced today to 60 months in prison, following trial convictions on corruptly endeavoring to obstruct the administration of the Internal Revenue laws, filing false tax returns with the Internal Revenue Service (IRS) and criminal contempt of court, the Justice Department and the IRS announced. U.S. District Judge Joseph L. Tauro presided over the trial and imposed the sentence. A Boston jury convicted licensed stockbroker, insurance agent and financial advisor Mahoney on Jan. 25, 2012. Mahoney was charged with one count of corruptly endeavoring to obstruct the administration of the Internal Revenue laws, eight counts of contempt of court and eight counts of filing false tax returns. He was convicted on all counts. Judge Tauro also ordered Mahoney to pay $367,000 in restitution to the IRS. Mahoney was remanded to prison immediately following the sentencing hearing.



The evidence at trial showed that Mahoney had failed to pay all of his taxes for the years 1996 through 2001 but had attempted to pay tax-related debts by submitting to the IRS more than $2.2 million in fictitious financial instruments, called Bills of Exchange, and checks drawn on a closed bank account. The evidence further showed that Mahoney obtained fake Bills of Exchange from American Rights Litigators (ARL), a now-defunct Florida-based organization that was permanently enjoined from promoting and selling certain fraudulent tax schemes based on its prior promotion and sale of the same. ARL was also used by imprisoned actor Wesley Snipes . After filing for bankruptcy, Mahoney caused a worthless promissory note made by now-deceased “sovereign citizen” Jerry Ralph Kane to be submitted to the IRS as purported payment for approximately $805,000 in taxes that Mahoney owed at that time.



The evidence also showed that Mahoney submitted to the IRS false individual income tax returns for the years 2000 through 2006 that he knew failed to report more than $1.3 million in taxable income received from various financial institutions. Along with his tax returns, Mahoney had submitted altered IRS Forms 1099-MISC on which he changed to zero the amount of non-employee compensation that the financial institutions had reported paying him. For instance, Mahoney attached to his 2006 tax return an altered Form 1099-MISC in which he claimed that a life insurance company paid him non-employee compensation of zero when it had actually paid him approximately $73,000. Mahoney also filed a false 2007 Nonresident Alien Tax Return in which he falsely claimed a refund of almost $389,000.



According to evidence at trial, the U.S. District Court for the District of Massachusetts had permanently enjoined Mahoney in July 2002 from, among other things, engaging in conduct that interfered with the administration of the Internal Revenue laws. The injunction proceedings were brought against Mahoney in accordance with a lawsuit filed by the Justice Department’s Tax Division. Mahoney committed criminal contempt by violating the permanent injunction in that he assisted in the preparation and submission to the IRS of income tax returns for other people that falsely claimed more than $50 million dollars in refunds based on false IRS Forms 1099-OID and an IRS Form 1099-C falsely reporting $300 million in debt purportedly owed to a third party by an IRS employee.



The case was investigated by Special Agents from IRS - Criminal Investigation and was prosecuted by Trial Attorneys Jeffrey McLellan and Kenneth Vert of the Justice Department’s Tax Division. Assistant Attorney General Kathryn Keneally of the Tax Division commended the special agents and thanked U.S. Attorney Carmen M. Ortiz and her entire office for their assistance.



Additional information about the Tax Division and its enforcement efforts may be found at www.justice.gov/tax .

http://www.justice.gov/opa/pr/2012/April/12-tax-529.html

Tags: criminal investigation, form 1099, irs form,