I. Executive Summary

The case of Douglas Edelman, a former U.S. defense contractor, represents a significant instance of large-scale tax evasion intertwined with the complexities of international business and government procurement. Edelman recently pleaded guilty to a series of felony charges, admitting to concealing his 50% ownership stake in Mina Corp. and Red Star Enterprises, a defense contracting business that amassed over $7 billion through contracts with the U.S. Department of Defense (DoD). This admission brought to light a sophisticated, decades-long scheme designed to evade over $100 million in U.S. taxes. The fraudulent enterprise involved an intricate network of offshore entities, the use of nominee ownership, and a pattern of making false statements to multiple U.S. government agencies, including Congress, the DoD, and the Internal Revenue Service (IRS).  

The core of Edelman’s deception lay in attributing his substantial income and assets to his French citizen wife, who, as a non-U.S. resident, had limited U.S. tax obligations on foreign-sourced income. This elaborate charade allowed Edelman to divert millions in profits, primarily derived from supplying jet fuel for U.S. military operations post-9/11, to fund a lavish international lifestyle and various global investments. The case is not merely a matter of unpaid taxes; it underscores a profound breach of trust by a contractor who profited extensively from U.S. military endeavors, only to then defraud the U.S. government of its rightful share of those profits. The funds Edelman illicitly retained and spent were ultimately derived from U.S. taxpayer money allocated for national security and defense. This diversion for personal aggrandizement transforms the crime from a purely financial matter into one with significant ethical and national interest dimensions.  

The investigation, spearheaded by IRS Criminal Investigation (IRS-CI) and the Special Inspector General for Afghanistan Reconstruction (SIGAR), and supported by international law enforcement partners, unraveled Edelman’s complex financial dealings. His guilty plea to charges including conspiracy to defraud the United States, tax evasion, and making false statements carries a potential for substantial prison time, restitution, and monetary penalties. The protracted nature and intricate design of Edelman’s scheme, which operated for many years despite existing regulatory frameworks like the Foreign Account Tax Compliance Act (FATCA) and Foreign Bank Account Report (FBAR) requirements , and even a prior Congressional inquiry into his companies’ operations in 2010 , highlight the persistent challenges authorities face in detecting and prosecuting sophisticated white-collar crime. This persistence suggests the resourcefulness of determined financial criminals and underscores potential limitations in the proactive capabilities of enforcement agencies to unravel such deeply embedded fraudulent activities. The Edelman case serves as a critical study in the vulnerabilities within government contracting oversight and the ongoing battle against international tax evasion, prompting a re-evaluation of transparency, due diligence, and enforcement strategies.  

II. The Case of Douglas Edelman: Unmasking a Decade-Long Fraud

The prosecution of Douglas Edelman has peeled back layers of a meticulously constructed financial deception, revealing how a prominent defense contractor systematically defrauded the United States government over an extended period. Central to this narrative are Edelman himself, his enormously profitable business empire built on U.S. military contracts, and a history of operations that had previously attracted scrutiny.

A. Profile of the Defendant: Douglas Edelman

Douglas Edelman, aged 73 at the time of his guilty plea, is a U.S. citizen and former defense contractor who amassed considerable wealth through his business ventures. He had reportedly lived outside the United States since the 1990s, a factor that may have contributed to the international complexity of his financial arrangements. Edelman was the founder and acknowledged, in his plea, a concealed 50% owner of Mina Corp. and Red Star Enterprises, the entities at the heart of the tax evasion scheme.  

Edelman’s extended period as an expatriate might have played a role in his perception of the feasibility of conducting complex offshore schemes. Residing outside the U.S. for several decades could have provided both a psychological and logistical distance from direct U.S. tax authority oversight. The scheme’s heavy reliance on foreign corporate entities and bank accounts located in jurisdictions known for financial secrecy aligns with strategies often employed by individuals attempting to circumvent U.S. global income taxation obligations. The crux of his fraudulent activity involved attributing ownership of his corporate shares and the resultant income to his French wife, a non-U.S. citizen, thereby leveraging her different tax status to his advantage. Despite these efforts to obscure his financial activities and his residence abroad, the case ultimately underscores the United States’ commitment to citizenship-based taxation. The IRS and Department of Justice (DOJ) demonstrated a resolve to pursue U.S. citizens for tax evasion on their worldwide income, irrespective of their country of residence or the international location of their assets. Edelman’s eventual arrest in Spain and subsequent extradition to the United States serve as a stark illustration of the global reach of U.S. tax enforcement mechanisms when applied to its citizens.  

B. The $7 Billion Enterprise: Mina Corp. and Red Star Enterprises

Mina Corp. and Red Star Enterprises (Mina/Red Star) formed a significant defense contracting business, primarily engaged in providing jet fuel to the U.S. DoD. The scale of their operations was immense, with the companies having received over $7 billion from DoD contracts. These contracts were largely in support of U.S. military efforts in Afghanistan and the Middle East following the September 11, 2001 attacks.  

1. Operations and U.S. Department of Defense (DoD) Contracts

Mina/Red Star’s operations were critical to the U.S. military’s logistical chain in Central Asia. They held substantial, and at times sole-source, contracts to deliver fuel to key installations such as Bagram Air Base in Afghanistan and the Manas Transit Center in Kyrgyzstan. Notably, Red Star Enterprises secured exclusive ownership of a fuel pipeline that fed directly into Bagram Air Base, a strategic asset that underscored their integral role in the war effort. The companies themselves possessed an “ethereal, offshore quality,” with Mina Corporation reportedly registered in Gibraltar and Red Star Enterprises initially in Toronto, Canada.  

The awarding of such substantial contracts, some of which were sole-source and justified by appeals to national security, to companies with demonstrably opaque ownership structures operating in high-risk geopolitical environments, points to potential vulnerabilities within the DoD’s procurement and due diligence processes at the time. The 2010 Congressional investigation into Mina and Red Star, detailed in the “Mystery at Manas” report, found that their ownership was “buried deep under layers of shell companies formed in countries whose corporate laws are designed to facilitate secrecy and tax avoidance”. The same report noted that the Defense Logistics Agency-Energy (DLA-Energy), the contracting agency, had “little visibility” into the companies’ beneficial ownership or their intricate subcontracting relationships. Despite these characteristics, which would typically raise red flags, Mina/Red Star continued to secure billions of dollars in contracts. This situation raises pertinent questions about whether the operational urgencies of military logistics may have, at times, overshadowed the imperative for thorough vetting of contractors.  

Furthermore, the ability of Mina/Red Star to secure control over critical infrastructure, such as the Bagram pipeline, and to operate as a near-monopoly supplier in key warzone locations may have inadvertently provided them with considerable leverage. The “Mystery at Manas” report highlighted that Mina Corporation had developed a “unique fuel supply system that no other contractor could duplicate,” which led to DLA-Energy awarding a $600 million contract without competition in 2009, citing national security reasons. Such indispensability can create a dynamic where a contractor potentially gains undue influence or faces less stringent oversight, a recurring concern in critical defense supply chains where the continuity of supply is paramount. This operational leverage might have reduced the government’s inclination to scrutinize their internal affairs too intensely for fear of disrupting vital military support.  

Table 1: Key Individuals and Entities in the Edelman Case

To better understand the network of actors in this complex case, the following table identifies the principal individuals and corporate entities central to the Edelman affair:

Name/Entity	Role/Description	Key Snippet(s)
Douglas Edelman	U.S. citizen, former defense contractor, founder and 50% owner of Mina/Red Star. Pleaded guilty to tax evasion and other felonies.
Delphine Le Dain	French citizen, wife of Douglas Edelman. Alleged nominee owner of Edelman’s 50% share in Mina/Red Star. Indicted for conspiracy and tax evasion.
Mina Corp.	Defense contracting company, co-owned by Edelman, supplying jet fuel to U.S. DoD. Received billions in contracts. Registered in Gibraltar.
Red Star Enterprises	Defense contracting company, affiliated with Mina Corp., co-owned by Edelman, supplying jet fuel to U.S. DoD. Initially registered in Toronto.
Erkin Bekbolotov	Kyrgyz national, 50% co-owner of Mina/Red Star with Edelman. Responsible for fuel procurement and financial hedging.
Credit Suisse	Swiss bank where Edelman initially deposited company distributions before being asked to disclose accounts to U.S. authorities.
Bank Julius Baer	Singapore bank where Edelman moved accounts from Credit Suisse, held in the name of a nominee entity.
IRS-Criminal Investigation (IRS-CI)	Lead U.S. investigative agency for tax crimes; its International Tax & Financial Crimes group investigated Edelman.
Special Inspector General for Afghanistan Reconstruction (SIGAR)	U.S. oversight body for Afghanistan reconstruction; co-investigated Edelman with IRS-CI.
U.S. Department of Justice (DOJ)	Prosecuted the case against Edelman. Its Office of International Affairs assisted in extradition.
U.S. Department of Defense (DoD) / DLA-Energy	Awarded over $7 billion in fuel contracts to Mina/Red Star. DLA-Energy was the contracting agency.
U.S. House Subcommittee on National Security and Foreign Affairs	Conducted a 2010 investigation into Mina/Red Star’s contracts and alleged corruption in Kyrgyzstan.

2. Historical Context: Scrutiny in Afghanistan and Kyrgyzstan

The operations of Mina Corp. and Red Star Enterprises were subject to scrutiny long before Edelman’s tax evasion scheme fully came to light. Allegations of corruption and irregularities persistently surrounded their contracts, particularly those connected with the Manas Transit Center in Kyrgyzstan. These companies were accused of practices that allegedly enriched the families of successive Kyrgyz presidents, Askar Akayev and Kurmanbek Bakiyev, who presided over regimes widely regarded as kleptocratic.  

These persistent allegations culminated in a formal investigation in 2010 by the U.S. House of Representatives Subcommittee on National Security and Foreign Affairs. The resulting report, “Mystery at Manas: Strategic Blind Spots in the Department of Defense’s Fuel Contracts in Kyrgyzstan,” provided a detailed, if ultimately inconclusive regarding direct bribery, examination of the companies’ opaque operations. The investigation found “no credible evidence to financially link Mina and Red Star to President Bakiyev, his family, or affiliates.” However, it was highly critical of the companies’ pervasive secrecy, noting that their ownership structures were “buried deep under layers of shell companies” designed to ensure anonymity. The report also castigated DLA-Energy for its “superficial due diligence,” its failure to ascertain the beneficial owners of its contractors, and its tendency to ignore red flags of potential anti-competitive behavior. Furthermore, the U.S. Embassy in Bishkek was criticized for its lack of knowledge and engagement regarding the fuel contracts, despite the significant diplomatic tensions and allegations of corruption that strained U.S.-Kyrgyz relations. Mina and Red Star initially stonewalled this Congressional investigation, only providing substantial cooperation after subpoenas for documents and testimony were issued.  

The persistent allegations of corruption and the documented findings of the 2010 Congressional report, even without definitive proof of bribery by the companies in that specific inquiry, should have served as substantial indicators of counterparty risk for any ongoing or future DoD dealings with Mina/Red Star. The documented operational opacity and the questions surrounding their business practices in a high-corruption environment raised serious concerns. Yet, these companies continued to receive massive U.S. government contracts, and Edelman’s separate, albeit related, scheme to defraud the U.S. Treasury through tax evasion continued unimpeded for many more years. This suggests a potential systemic failure to integrate critical risk information derived from one type of government oversight (Congressional investigation into procurement and corruption) into the broader risk assessment frameworks used by other government functions, such as tax enforcement or ongoing contractor vetting.

The geopolitical sensitivity surrounding the Manas air base, which was a critical logistical hub for U.S. and NATO operations in Afghanistan, and the U.S. military’s significant reliance on it, may also have inadvertently shielded the contractors from more aggressive investigation or punitive contract actions, despite the swirling allegations. The “Mystery at Manas” report itself noted that the U.S. had developed an over-reliance on Mina and Red Star, creating a “significant unaddressed strategic vulnerability” in the fuel supply chain for the war effort. This operational dependency could have made U.S. officials, both in the DoD and potentially at diplomatic levels, hesitant to take actions that might disrupt the fuel supply, even when faced with serious concerns about the integrity and transparency of their key contractors.  

III. Anatomy of the Tax Evasion Scheme

Douglas Edelman’s tax evasion was not a simple oversight but a deliberate and multi-faceted scheme executed over many years. It involved sophisticated methods of concealing ownership and income, resulting in substantial financial losses to the U.S. Treasury, and the illicit enrichment of Edelman, who used the untaxed proceeds to fund a luxurious global lifestyle and further investments.

A. Concealment of Ownership and Income: A Multi-Faceted Deception

At the core of the scheme was Edelman’s admission of concealing his 50% ownership interest in Mina Corp. and Red Star Enterprises. The primary objective was to evade U.S. income taxes on the substantial profits he derived from the lucrative DoD contracts awarded to these companies. This deception was perpetrated through a variety of interconnected methods, as detailed below.  

Table 2: Methods of Concealment and Deception Employed by Douglas Edelman

The following table outlines the primary techniques Edelman utilized to hide his income and ownership, thereby defrauding the U.S. government:

Method	Description	Key Snippet(s)
Offshore Shell Companies & Structures	Utilized a “web of offshore structures” and “shell companies in tax havens” to channel and obscure income. Ownership interests were “buried under several layers of straw ownership in jurisdictions known for their corporate secrecy.”
Undisclosed Foreign Bank Accounts	Concealed income in foreign bank accounts not disclosed to U.S. authorities. Initially used Credit Suisse in Switzerland, then moved funds to Bank Julius Baer in Singapore when disclosure became mandatory at Credit Suisse. Accounts were often held in the names of other companies Edelman owned or through nominee entities.
Nominee Ownership (Delphine Le Dain)	Falsely represented that his 50% interest in Mina/Red Star was owned by his French citizen wife, Delphine Le Dain, who, as a non-U.S. person residing abroad, had no U.S. tax obligations on such foreign income. Ms. Le Dain allegedly signed false documents, including papers “gifting” Edelman money for personal expenses, to support this charade.
False Statements to U.S. Government	Repeatedly provided false information to various U.S. government bodies:
To Congress (2010)	Instructed his attorneys to falsely inform a House Subcommittee that Delphine Le Dain (a French co-conspirator with no U.S. tax obligations) co-owned Mina/Red Star.
To DoD (2010-2011)	Conveyed the same false narrative about Mina/Red Star’s ownership to the Department of Defense during contract negotiations.
To IRS (2016 OVDP)	Submitted a false application to the IRS’s Offshore Voluntary Disclosure Program (OVDP), continuing to conceal millions in income and misrepresenting ownership. Filed false tax returns for prior years (2007-2014) claiming income and assets belonged to Le Dain, or were merely gifts or consulting payments, not his share of business profits.
To DOJ (2018)	Continued to present the false story about Mina/Red Star’s ownership to the Department of Justice.
Creation of False & Backdated Documents	Caused the creation of false and backdated paperwork specifically to corroborate the fabricated story of Delphine Le Dain’s ownership of his share in the companies.
Failure to File Accurate Tax Returns & FBARs	For many years (until approximately 2015), Edelman did not file any U.S. individual tax returns to report the millions of dollars he was earning from Mina/Red Star. Subsequently, he filed false tax returns that continued to conceal his true income. He also failed to file required Reports of Foreign Bank and Financial Accounts (FBARs) for his foreign accounts.

Edelman’s decision in 2008 to close his accounts at Credit Suisse and move them to Bank Julius Baer in Singapore, after Credit Suisse informed him of the necessity to either disclose the accounts to U.S. authorities or close them, is particularly telling. This action was not an attempt to come into compliance with U.S. tax law, but rather a calculated maneuver to find a new jurisdiction and banking partner that he perceived as offering greater secrecy. The move to Singapore, coupled with the use of a nominee entity purportedly for the benefit of his daughters, demonstrates an escalation of his evasive tactics in direct response to increasing international pressure for tax transparency, particularly on Swiss banking institutions. This adaptive behavior is characteristic of sophisticated financial criminals seeking to stay one step ahead of enforcement efforts.  

The fraudulent application to the IRS’s Offshore Voluntary Disclosure Program (OVDP) in 2016 represents an especially audacious component of his deception. OVDPs are designed to allow taxpayers to voluntarily correct past non-compliance and come clean with the IRS. Edelman, however, attempted to manipulate this program by submitting false tax returns and continuing to conceal the true extent of his income and his ownership of Mina/Red Star. He reported only income from purported gifts or consulting payments, a narrative starkly at odds with the millions he was earning. This cynical misuse of a remediation process not only highlights a profound level of criminal intent but also suggests a belief that his fabricated ownership story was sufficiently robust to withstand IRS scrutiny, even within a program designed for disclosure. It demonstrates a brazen contempt for the U.S. tax system and its mechanisms for voluntary compliance.  

B. Financial Scale of the Fraud: Quantifying Hidden Income and Evaded Taxes

The financial magnitude of Douglas Edelman’s tax evasion scheme is staggering. Prosecutors alleged, and court documents support, that he concealed over $350 million in income derived from his business activities. This vast sum of undeclared income resulted in an evasion of approximately $129 million in U.S. taxes owed over multiple years. These figures place the Edelman case among the largest individual tax evasion schemes in U.S. history, marking it as a landmark case for both the IRS and the Department of Justice in terms of financial recovery and as a powerful deterrent example. The sheer scale of the evaded taxes signifies a substantial loss to the U.S. Treasury and underscores the severe economic impact that such high-level white-collar crime can inflict. The Department of Justice reportedly described the investigation as potentially “the biggest tax evasion case in DOJ history,” further cementing its exceptional significance.  

The defense contracting business itself, Mina Corp. and Red Star Enterprises, was valued at an immense $7 billion, with Edelman admitting to concealing his 50% ownership stake in this lucrative enterprise. The hidden $350 million in income was primarily generated from the profits of these U.S. defense contracts. This direct link is critical: it means that a significant portion of U.S. taxpayer money, originally allocated for national security and military support operations, was illicitly diverted by Edelman and never subjected to U.S. taxation as his personal income. This transforms the crime from a general tax evasion into one that also involves the misuse and diversion of public funds, adding another layer of gravity to the offense.  

C. Illicit Enrichment: Lifestyle and Investments Funded by Tax Evasion

The untaxed millions Edelman accrued were not merely hoarded; they were actively used to fund an exceptionally lavish international lifestyle and to make a variety of additional investments across the globe. Court documents and statements reveal that these illicitly gained funds were channeled into diverse ventures, including a music television franchise in Eastern Europe, a speculative land venture in Tulum, Mexico, and a farm in Kenya.  

Beyond these business investments, Edelman acquired substantial personal assets. These included a home in the desirable locale of Ibiza, Spain, a sophisticated townhouse in London, a ski chalet in Austria, and multiple yachts. Significantly, many of these high-value assets were reportedly purchased in the names of nominees, a classic technique used to obscure true beneficial ownership and shield assets from potential scrutiny or forfeiture.  

The global dispersal of Edelman’s investments and property acquisitions, all financed by the proceeds of his tax evasion, demonstrates the concerning ease with which illicitly obtained wealth can be laundered and integrated into the legitimate global economy if not detected and intercepted. His portfolio of assets spanned multiple continents and encompassed diverse classes, from entertainment businesses to agricultural ventures and luxury real estate. This wide distribution of assets not only complicates efforts for recovery and restitution but also highlights how the proceeds of significant tax fraud can fuel further economic activity, often across international borders and facilitated by nominee ownership structures, thereby obscuring the illicit origins of the capital and complicating the efforts of authorities to trace and seize these fruits of crime. The use of nominees for purchasing high-value assets like real estate and yachts is a well-established money laundering tactic, designed to break the direct paper trail between the criminal and the proceeds of their illegal activities. This suggests that Edelman was likely engaged not only in the primary crime of tax evasion but also in subsequent actions to launder the illicit gains, further entrenching the criminality of his enterprise.  

D. Parallel Deception: The Kandahar Air Base Internet Business

Adding another layer to his fraudulent activities, Edelman also concealed profits from a separate business venture. This enterprise involved providing internet services to members of the U.S. armed forces stationed at Kandahar Air Base in Afghanistan. Income from this business was also omitted from the false tax returns he filed. While the specific name of this internet service company is not detailed in the available court documents or press releases, its existence and the concealment of its profits are clearly stated.  

The decision to hide profits from the Kandahar internet business, in conjunction with the much larger Mina/Red Star tax evasion scheme, indicates a consistent pattern of fraudulent behavior. It demonstrates a willingness on Edelman’s part to exploit multiple revenue streams, particularly those connected to U.S. military operations and personnel, for illicit personal financial gain. This was not an isolated instance of opportunism related to one business; rather, it points to a more systematic approach to defrauding the U.S. Treasury across different ventures.

This secondary evasion also raises questions about the integrity of contracting and commercial activities within sensitive military environments like Kandahar Air Base. The provision of internet services on a major forward operating base would likely have involved some form of official approval, contract, or concession agreement. The fact that Edelman could operate this business and successfully conceal its profits from U.S. tax authorities suggests potential oversight gaps concerning the financial transparency and tax compliance of ancillary service providers operating in conflict zones. It implies that even businesses not directly involved in primary defense contracting, but nonetheless profiting from the U.S. military presence, could escape proper financial scrutiny.

IV. The Legal Reckoning

The unravelling of Douglas Edelman’s extensive tax evasion scheme was the result of a painstaking and internationally coordinated investigation, culminating in a significant indictment and his eventual guilty plea. This legal process underscores the capabilities and determination of U.S. authorities to pursue complex financial crimes, even those spanning decades and multiple jurisdictions.

A. The Investigation: Unraveling the Scheme

The investigation into Douglas Edelman’s financial affairs was a complex undertaking, spearheaded by special agents from IRS-Criminal Investigation (IRS-CI), particularly its Washington, D.C.-based International Tax & Financial Crimes specialty group. A crucial partner in this effort was the Special Inspector General for Afghanistan Reconstruction (SIGAR), an agency whose mandate includes combating waste, fraud, and abuse related to U.S. reconstruction efforts in Afghanistan. The Department of Justice formally tasked SIGAR and IRS-CI with the investigation into Edelman and his wife in September 2018, indicating the seriousness with which the allegations were viewed.  

The international dimensions of Edelman’s activities necessitated significant cross-border cooperation. The Justice Department’s Office of International Affairs played a vital role, particularly in securing Edelman’s arrest in Spain and his subsequent extradition to the United States to face charges. Further assistance was provided by His Majesty’s Revenue & Customs of the United Kingdom and the Joint Chiefs of Global Tax Enforcement (J5), an international coalition comprising the tax authorities of Australia, Canada, the Netherlands, the United Kingdom, and the United States, dedicated to combating transnational tax crime. The Guardia Civil of Spain was instrumental in effecting Edelman’s arrest. This multi-agency and multinational collaboration was indispensable given that Edelman was an expatriate U.S. citizen, utilized a web of foreign bank accounts and corporate structures, and was ultimately apprehended abroad. Without robust international agreements facilitating information sharing, mutual legal assistance, and extradition, the successful prosecution of such a case in the U.S. would have been significantly more challenging, if not impossible. This case serves as a clear example of the necessity for such deep cooperation in the modern fight against sophisticated, borderless financial crime.  

The investigation successfully navigated what was described as a “decades-long scheme” involving an “intricate web of financial entities across the globe”. The scale and complexity of the fraud were such that the DOJ reportedly characterized it as potentially “the biggest tax evasion case in DOJ history”. SIGAR’s prominent role in this tax evasion investigation is also noteworthy. It underscores a growing recognition of the nexus between financial crimes, such as tax evasion, and issues of waste, fraud, and abuse in reconstruction and conflict zones. The involvement of an agency like SIGAR suggests an expanding scope of oversight, where profits derived from activities in these sensitive environments, particularly when U.S. taxpayer money is the ultimate source of those profits, are subject to intense scrutiny that extends beyond direct contract fraud into areas like the personal tax compliance of contractors. This may signal a broader trend of leveraging specialized inspectors general to trace financial flows and ensure accountability in complex international settings.  

Table 3: Chronology of Significant Events in the Edelman Tax Evasion Case

The following timeline provides a sequential overview of key events in Douglas Edelman’s decades-long scheme, the investigative triggers, and the progression of legal actions:

Date/Period	Event	Key Snippet(s)
1990s	Douglas Edelman begins living outside the U.S.
1999	Edelman and Erkin Bekbolotov begin working as business partners in Central Asia.
2002	Red Star Enterprises founded; Edelman and Bekbolotov are 50-50 beneficial owners (Edelman’s share held through trusts in Delphine Le Dain’s name).
2003-2020	Period of Mina/Red Star operations and Edelman’s income generation from DoD contracts, as cited in the indictment.
2005	Mina/Red Star becomes profitable; Edelman begins taking distributions, depositing them into Swiss bank accounts (primarily Credit Suisse) held in the names of other companies he owned.
2008	Credit Suisse informs Edelman he must either disclose his accounts to U.S. authorities or close them. Edelman closes the accounts and opens new ones at Bank Julius Baer in Singapore under a nominee entity, purportedly for his daughters’ benefit.
2010 (July)	U.S. House Subcommittee on National Security and Foreign Affairs investigates Mina/Red Star contracts. Edelman causes his attorneys to falsely state to Congress that Delphine Le Dain co-owned the companies.
2010-2011	Edelman conveys the false ownership story to the Department of Defense during contract negotiations.
Until c. 2015	Edelman allegedly did not file any U.S. individual income tax returns and did not pay any U.S. tax on the millions of dollars he was earning annually from Mina/Red Star.
2015	Edelman allegedly files false U.S. tax returns for tax years 2007 through 2014, falsely claiming that his business interests, income, and assets belonged to Delphine Le Dain.
2016	Edelman makes a false application to the IRS’s Offshore Voluntary Disclosure Program (OVDP), filing false tax returns for prior years that continued to conceal millions earned from his company and from a separate internet business in Kandahar.
2015-2020	Edelman allegedly files false tax returns reporting that his only income was as a consultant and that he had no interests in any foreign businesses.
2018 (September)	Department of Justice tasks SIGAR and IRS-CI with investigating Edelman and his wife.
2018	Edelman conveys the false story about Mina/Red Star’s ownership to the Department of Justice during a presentation.
May/July 2024	A federal grand jury returns a 30-count indictment charging Douglas Edelman and Delphine Le Dain. The indictment is unsealed in July 2024.
July 3, 2024	Douglas Edelman arrested in Spain based on the U.S. criminal charges.
September 2024	Edelman extradited from Spain to the United States.
May 21, 2025	Douglas Edelman pleads guilty in U.S. District Court to 10 felony counts.
November 17, 2026	Sentencing hearing scheduled for Douglas Edelman before U.S. District Judge Colleen Kollar-Kotelly.
2026	Trial on the remaining counts of the indictment against Douglas Edelman is scheduled.

This chronology illustrates the protracted timeline of the fraudulent activities, the various points at which Edelman actively deceived U.S. authorities, and the gradual unfolding of the investigation and subsequent legal actions. It highlights the persistence of both the criminal enterprise and the eventual, comprehensive law enforcement response.

B. Indictment, Charges, and Guilty Plea

In May/July 2024, a federal grand jury returned a comprehensive 30-count indictment against Douglas Edelman and his wife, Delphine Le Dain. The indictment laid out a wide array of charges stemming from their alleged decades-long scheme to defraud the United States and evade taxes. The charges included one count of Conspiracy to Defraud the United States (violating 18 U.S.C. §371), fifteen counts of Tax Evasion (violating 26 U.S.C. §7201 and 18 U.S.C. §2), two counts of making False Statements to the IRS (violating 18 U.S.C. §1001), and twelve counts of Willful Violation of Foreign Bank Account Reporting (FBAR) Requirements (violating 31 U.S.C. §§5314, 5322(b), and 18 U.S.C. §2).  

On May 21, 2025, Douglas Edelman pleaded guilty to 10 of these felony counts. His plea specifically covered the conspiracy, multiple instances of tax evasion, and making false statements.  

Table 4: Summary of Charges Admitted by Douglas Edelman (Guilty Plea)

The following table itemizes the specific criminal charges to which Douglas Edelman formally admitted guilt, along with the relevant U.S. Code sections and maximum statutory penalties per count:

Admitted Charge	U.S. Code Section(s)	Counts Pleaded Guilty To	Max. Prison Penalty Per Count
Conspiracy to Defraud the United States	18 U.S.C. §371	1	5 years
Tax Evasion	26 U.S.C. §7201	7	5 years
Making a False Statement	18 U.S.C. §1001	2	5 years

Export to Sheets

Source:  

While the specific tax years covered by the seven tax evasion counts in the guilty plea are not explicitly delineated in the provided materials, the original indictment detailed evasion related to false tax returns filed in 2015 for the tax years 2007-2014, and further false returns filed for the period 2015-2020.  

Edelman’s decision to plead guilty to these ten serious felony counts—encompassing conspiracy, seven distinct acts of tax evasion, and two instances of making false statements—strongly suggests the formidable nature of the evidence amassed by the government. Such a plea often reflects a defendant’s strategic assessment that the prosecution possesses a high probability of securing convictions at trial on these core charges. The diversity of the admitted offenses underscores the multifaceted character of the criminal conduct that the government was prepared to prove.

The fact that Edelman pleaded guilty to a subset of the original 30 counts, with a trial on the remaining charges scheduled for 2026 , indicates complex legal strategies and negotiations. This arrangement possibly involves considerations about which charges carry the most severe sentencing implications under the U.S. Sentencing Guidelines, or which charges the government felt were most unequivocally provable versus those Edelman was unwilling to concede. Notably, the charges related to Willful Violation of FBAR requirements, which were part of the original indictment and carry a potential maximum penalty of ten years per count if proven to be part of a pattern of unlawful activity involving more than $100,000 annually , do not appear to be among the counts to which Edelman pleaded guilty. These FBAR charges, with their potentially higher statutory maximums, might be among those still pending for the 2026 trial, or their specific elements may have been points of contention in plea negotiations. The current plea focuses on the foundational tax evasion and the deliberate falsehoods told to U.S. authorities to perpetuate that evasion.  

C. The Web of Complicity: Co-conspirators and Related Guilty Pleas

Douglas Edelman was not the sole individual implicated in this extensive fraudulent scheme. The indictment and subsequent developments point to a network of individuals who allegedly played roles in facilitating or benefiting from the tax evasion and related deceptions.

1. Delphine Le Dain: Current Legal Standing and Alleged Role

Delphine Le Dain, Edelman’s French citizen wife, was indicted alongside him on charges of conspiracy to defraud the United States and 15 counts of tax evasion. Her alleged role was central to the concealment strategy: she was presented as the nominee owner of Edelman’s 50% share in Mina/Red Star. This was designed to exploit her status as a non-U.S. citizen residing abroad, who would generally not be liable for U.S. tax on foreign-sourced income from such holdings. Court documents allege that Le Dain actively participated by signing false documents, including papers that purported to “gift” Edelman money for his personal expenses, thereby lending credence to the fiction that the funds were not his taxable income.  

Despite her name being used on trusts and ownership papers, sources suggest Le Dain “never had any active role with the companies,” and that Douglas Edelman “controls the shares and is the de facto beneficial owner”. The current legal status of Delphine Le Dain following Edelman’s guilty plea in May 2025 is not explicitly clarified in the provided materials. While the original indictment clearly names her as a co-defendant , the press releases detailing Edelman’s plea refer to him working with “a French co-conspirator” without explicitly naming Le Dain in that immediate context.  

The indictment of Delphine Le Dain, even if her role is portrayed primarily as that of a passive nominee acting at Edelman’s behest, signals a clear intent by U.S. authorities to pursue individuals who knowingly facilitate tax evasion schemes. Her alleged signing of false documents constitutes affirmative acts that aided the conspiracy. This serves as a significant warning to spouses, family members, or other associates who might be persuaded or coerced into acting as nominees in such illicit arrangements. The prosecution of a non-U.S. citizen residing abroad, like Le Dain, also highlights the complexities and potential extraterritorial reach of U.S. law when foreign nationals are involved in conspiracies to defraud the U.S. government, particularly when they actively participate in acts of concealment. While her direct U.S. tax liability may be limited, her alleged participation in a conspiracy to help a U.S. citizen evade U.S. taxes brings her within the potential jurisdiction of U.S. criminal statutes for conspiracy and possibly for aiding and abetting tax evasion. The available information does not specify whether she has been arrested or extradited, which would be critical factors in the progression of any U.S. prosecution against her.

2. Erkin Bekbolotov: Co-Ownership and Involvement

Erkin Bekbolotov, a Kyrgyz national, was identified as the other 50% beneficial owner of Mina Corp. and Red Star Enterprises, alongside Douglas Edelman (whose share was nominally held by Le Dain). Bekbolotov had a background in finance and fuel trading in Central Asia and co-founded Red Star with Edelman. Within their partnership, he was reportedly primarily responsible for fuel procurement and financial hedging for the companies. The 2010 Congressional “Mystery at Manas” report also noted that Bekbolotov served as an intermediary between Maksim Bakiyev (son of the then-Kyrgyz President) and the U.S. Department of Defense in February 2009 during sensitive back-channel negotiations aimed at keeping the Manas air base open to U.S. operations.  

The provided research materials do not indicate that Erkin Bekbolotov was charged in connection with this specific tax evasion case alongside Edelman and Le Dain. His significance to this case stems from his role as Edelman’s long-term business partner and co-owner of the highly profitable defense contracting enterprise from which Edelman’s concealed taxable income was derived. The structure of their partnership, particularly the masking of Edelman’s true beneficial interest, was a foundational element of Edelman’s tax fraud. While not accused in this tax scheme, Bekbolotov’s operational role in the secretive Mina/Red Star companies formed the backdrop against which Edelman’s deceptions occurred. The extreme secrecy surrounding Mina/Red Star’s operations and ownership, which was managed by both Edelman and Bekbolotov, as detailed in the “Mystery at Manas” report , undoubtedly created an environment conducive to the type of concealment Edelman perpetrated for U.S. tax purposes. While this operational secrecy might have initially served other business purposes in the complex environment of Central Asia, it also provided an ideal smokescreen for Edelman to hide his beneficial ownership from the IRS.  

3. Other Associated Individuals and Entities

The web of complicity appears to extend beyond Edelman and Le Dain. According to the Special Inspector General for Afghanistan Reconstruction (SIGAR) in its April 2025 quarterly report, “Four former employees and executives from Mina Corporation and Red Star Enterprises… have pleaded guilty to federal tax evasion. An additional colleague at a spin-off company also pleaded guilty”. The specific names of these individuals are not provided in the SIGAR report excerpt or other readily identifiable documents focused on Edelman’s plea. However, a Department of Justice press release dated April 22, 2025, mentioned in the “Related Content” section of a news release about Edelman’s plea, states: “Defense Contractor’s Longtime Associate Pleads Guilty to Conspiracy to Defraud the United States. Ehr, 63, a longtime associate of a former defense contractor…”. It is plausible that this individual, Ehr, could be one of the persons referred to by SIGAR, although a direct, confirmed link is not present in the provided materials. The original indictment against Edelman and Le Dain also mentioned that Edelman worked with “several other co-conspirators”.  

The guilty pleas of multiple former employees and executives associated with Mina/Red Star suggest that the tax evasion or related fraudulent activities were not solely orchestrated and executed by Douglas Edelman in isolation. Instead, it points to a broader network of complicity within his corporate structures. For a scheme of this magnitude and duration, it is highly probable that Edelman required the assistance or knowing acquiescence of individuals within his organizations to manage the complex flow of funds, create or handle falsified documentation, or prepare financial reports in a manner that supported the overarching deception. These additional guilty pleas indicate a more systemic issue of fraud or illicit financial practices within the companies, extending beyond Edelman’s personal tax liability.

Furthermore, these related pleas likely provided crucial corroborating evidence and potentially incriminating testimony for the government’s case against Edelman. The cooperation of co-conspirators is a powerful tool for prosecutors. If former employees and executives were admitting to their roles in related fraudulent schemes and cooperating with the government, it would have significantly strengthened the evidentiary position against the principal architect, Edelman, thereby likely increasing the pressure on him to negotiate a guilty plea on the core charges.

D. Sentencing and Unresolved Charges: The Path Ahead

Following his guilty plea to 10 felony counts, Douglas Edelman faces significant legal consequences. For each of the 10 counts, he confronts a maximum statutory penalty of five years in prison, potentially totaling up to 50 years of incarceration. In addition to imprisonment, Edelman faces a mandatory period of supervised release upon completion of any prison term, substantial restitution to the U.S. Treasury for the taxes evaded, and other monetary penalties. The final sentence will be determined by U.S. District Court Judge Colleen Kollar-Kotelly, who will consider the U.S. Sentencing Guidelines, the nature and circumstances of the offenses, Edelman’s history and characteristics, and other statutory factors. The sentencing hearing has been scheduled for November 17, 2026.  

Crucially, Edelman’s legal jeopardy is not fully resolved by this plea. A trial on the remaining counts of the original 30-count indictment is scheduled for 2026. These remaining charges could include additional counts of tax evasion and, significantly, the 12 counts of Willful Violation of Foreign Bank Account Reporting (FBAR) requirements. A conviction for willfully violating FBAR obligations, particularly when deemed part of a pattern of unlawful activity involving more than $100,000 per year, can carry a maximum penalty of ten years in prison per count.  

The substantial restitution and monetary penalties that will be imposed aim not only to punish Edelman for his criminal conduct but also to recover a significant portion of the approximately $129 million in taxes he evaded, thereby recouping losses to the U.S. Treasury. Given the scale of this evasion, the restitution order is anticipated to be one of the largest of its kind.  

The pending trial on the remaining charges, especially if it includes the FBAR violations, could expose Edelman to considerably more prison time beyond the potential 50-year statutory maximum stemming from his current guilty plea. This indicates that the government may be maintaining leverage or is determined to pursue full accountability for all facets of his extensive criminal conduct. The fact that these FBAR charges, with their severe potential penalties, were not part of the plea agreement suggests either that the government believes it has a strong case to make on these specific violations at trial, or that Edelman was unwilling to plead guilty to these particular counts, perhaps due to their higher sentencing exposure or different elements of proof. This unresolved aspect of the case means that Edelman’s legal battle is far from concluded, despite his admission of guilt on ten significant felony charges.

V. Systemic Implications and Lessons From the Edelman Case

The Douglas Edelman case transcends the specifics of one man’s fraudulent actions, offering profound insights into the persistent challenges of offshore tax evasion, vulnerabilities in government contracting, and the critical need for enhanced transparency in financial dealings, particularly when public funds are involved.

A. Offshore Tax Evasion in the Modern Enforcement Era

The Edelman prosecution serves as a potent signal of the continued and intensified global enforcement efforts against offshore tax evasion. His scheme, originating in an era of greater bank secrecy, ultimately collided with a transformed international landscape characterized by increased transparency and cooperation among tax authorities. Initiatives such as the U.S. Foreign Account Tax Compliance Act (FATCA) and the OECD’s Common Reporting Standard (CRS) have fundamentally altered the environment by mandating that foreign financial institutions report information about accounts held by U.S. persons (and other participating jurisdictions’ residents) to the respective tax authorities, including the IRS. This has made the traditional strategy of hiding money and assets in undisclosed offshore accounts significantly riskier.  

The Edelman case is a stark reminder that opacity is no longer a reliable shield for wealth concealment. Authorities are increasingly holding wealthy individuals accountable for their tax obligations, even for conduct that may have occurred years or decades prior. The prosecution reinforces the message that knowingly using complex offshore structures, trusts, and nominee arrangements to disguise beneficial ownership and control of assets for the purpose of evading taxes can lead to severe consequences, including criminal prosecution, substantial financial penalties, and imprisonment. The role of whistleblower tip-offs, also mentioned as a factor in uncovering hidden wealth , further contributes to the risk exposure for tax evaders.  

This case also draws a clear distinction between legitimate international tax planning, which remains lawful, and abusive non-disclosure and fraudulent concealment, which are subject to aggressive enforcement. For U.S. citizens living abroad, the Edelman case carries particular weight. The core of his scheme involved attempting to attribute ownership of his assets and income to his non-U.S. citizen spouse, Delphine Le Dain, to exploit her different U.S. tax status. The government’s aggressive pursuit of the true “beneficial ownership” over nominal or legal ownership sends a strong message that substance-over-form arguments will be vigorously applied to unmask the real parties controlling and benefiting from assets and income. This focus on economic reality over legalistic structures is crucial for combating sophisticated tax avoidance and evasion strategies that rely on nominee arrangements and has broad implications for how individuals, particularly those in families with mixed citizenship, structure their financial affairs internationally. Edelman’s elaborate efforts, including moving accounts from Switzerland to Singapore when disclosure pressures mounted , ultimately proved futile against the backdrop of enhanced global tax transparency and the coordinated efforts of international bodies like the J5 tax enforcement consortium.  

B. Vulnerabilities in Defense Contracting and Government Oversight

The Edelman affair starkly exposes how individuals can exploit lucrative government contracts for massive personal enrichment through fraudulent means, even in the presence of established oversight mechanisms. The history of Mina Corp. and Red Star Enterprises operating with a significant degree of opacity and facing serious allegations of corruption in Kyrgyzstan for years prior to Edelman’s tax fraud coming to full public light is a critical backdrop. The 2010 Congressional “Mystery at Manas” report detailed numerous shortcomings in DLA-Energy’s oversight, including superficial due diligence regarding its contractors, a lack of knowledge concerning their beneficial ownership, a failure to adequately address red flags indicative of anti-competitive behavior, and a notable detachment by the U.S. Embassy in Bishkek from the oversight of these fuel contracts despite significant diplomatic fallout from the corruption allegations.  

Furthermore, it was highlighted that U.S. Federal Acquisition Regulations (FAR) did not, at the time, necessarily mandate deep scrutiny of the ownership structures of companies bidding for contracts, beyond checking them against federally maintained lists of suspended or debarred contractors. This regulatory environment allowed companies like Mina and Red Star to operate with considerable secrecy regarding their ultimate beneficial owners. The potential for “national security” exemptions to competitive bidding processes, or the sheer criticality of a sole-source supplier in a warzone, may also have contributed to reduced scrutiny or a reluctance to challenge these contractors too aggressively.  

The Edelman case demonstrates a critical potential disconnect between procurement oversight, which is often primarily focused on contract fulfillment and meeting urgent operational or national security needs, and financial and tax compliance oversight. It appears Mina/Red Star were largely successful in their primary role of delivering fuel , a success that might have inadvertently led DoD and DLA-Energy to overlook or deprioritize deeper financial scrutiny or demands for greater ownership transparency. Edelman’s extensive tax fraud ran parallel to these “successful” contract executions for many years. This suggests a compelling need for more integrated and holistic risk assessment protocols across different government agencies, ensuring that information and red flags identified in one area (e.g., procurement irregularities, opaque ownership structures, corruption allegations) trigger heightened scrutiny and appropriate action in others (e.g., tax compliance, counter-fraud investigations).  

The long history of opacity and the prior, unresolved allegations surrounding Mina/Red Star, as documented in the 2010 Congressional report and other sources , without leading to definitive punitive action or a significant change in their contracting status, may have inadvertently emboldened Edelman. This could have created a perception of impunity, encouraging the continuation and perhaps even the escalation of his tax evasion scheme. If previous investigations and serious allegations did not result in severe consequences for the companies or their owners, Edelman might have felt that his methods of concealment were effective and that the risk of detection for his distinct tax fraud was acceptably low. A culture of weak enforcement or a tolerance for opacity in high-stakes government contracting can unfortunately breed more significant and audacious criminality. SIGAR’s ongoing investigations into fund diversion and contractor issues in Afghanistan, and its pivotal role in the Edelman case itself, further highlight the specific and heightened risks inherent in procurement within conflict and post-conflict reconstruction environments.  

C. The Critical Need for Transparency in Public Procurement and Beneficial Ownership

The Edelman case serves as a compelling illustration of why transparency regarding who ultimately benefits from government contracts is of paramount importance. The entire fraudulent scheme hinged on Edelman’s ability to successfully hide his beneficial ownership of a 50% stake in Mina/Red Star from U.S. tax authorities. The difficulties faced by the 2010 Congressional investigation in determining the true ownership of these companies, which were described as “buried deep under layers of shell companies formed in countries whose corporate laws are designed to facilitate secrecy and tax avoidance,” underscore this challenge. Edelman’s deliberate use of shell companies, offshore trusts, and nominee owners (principally his wife) was specifically designed to obscure his control and beneficial interest from U.S. authorities.  

This lack of transparency has broader implications beyond tax evasion, extending to the fight against corruption, money laundering, and other financial crimes. When the ultimate beneficial owners of entities receiving vast sums of public money are unknown or deliberately obscured, it creates fertile ground for illicit activities to flourish undetected. The failure to effectively connect the dots between the opaque corporate structures of Mina/Red Star, which were clearly highlighted as problematic in the 2010 “Mystery at Manas” report, and the potential for other significant financial crimes such as the large-scale tax evasion perpetrated by Edelman, represents a significant missed opportunity for earlier intervention. While the 2010 report focused primarily on potential corruption related to Kyrgyz officials, the very same secrecy that was criticized was a key enabler of Edelman’s tax fraud against the U.S. government. This suggests that identified red flags concerning corporate transparency, regardless of the initial context of the investigation, should trigger broader financial crime risk assessments by all relevant government agencies. This case powerfully argues for the implementation and rigorous enforcement of stricter beneficial ownership transparency requirements, not just for financial institutions, but specifically for all entities receiving substantial government contracts, particularly those operating in high-risk sectors such as defense or in geographically vulnerable regions. Had robust, independently verified beneficial ownership disclosure been an absolute prerequisite for DoD contracts of the magnitude awarded to Mina/Red Star, Edelman’s scheme would have been substantially more difficult, if not impossible, to execute and maintain over such an extended period.

VI. Strategic Recommendations

The analysis of the Douglas Edelman case reveals critical vulnerabilities and areas for improvement in government contracting, international tax enforcement, and corporate transparency. The following recommendations are proposed to address these issues and mitigate the risk of similar large-scale frauds occurring in the future.

A. Enhancing Due Diligence and Anti-Fraud Protocols in Government Contracting

1. Mandate Comprehensive Beneficial Ownership Verification: Implement mandatory, rigorous beneficial ownership verification for all entities awarded significant government contracts, especially in high-risk sectors like defense and for operations conducted overseas. This process must extend beyond mere self-certification by contractors and should involve independent verification mechanisms, potentially leveraging emerging national and international beneficial ownership registries.
2. Strengthen Inter-Agency Information Sharing: Develop and formalize robust protocols for information sharing between key government agencies, including the Department of Defense, IRS, Department of Justice, Department of State, and relevant Inspectors General (such as SIGAR). This system should ensure that red flags identified by one agency (e.g., procurement irregularities, unusually opaque ownership structures, credible corruption allegations) automatically trigger heightened scrutiny and coordinated risk assessments by other relevant agencies, particularly those responsible for tax compliance and fraud investigation.
3. Implement Continuous Monitoring and Periodic Re-Vetting: Institute a system of continuous monitoring and periodic, in-depth re-vetting for contractors holding long-term, high-value, or sole-source contracts, particularly those operating in complex or unstable international environments. This should include regular re-assessment of beneficial ownership, financial stability, and compliance with all U.S. laws, including tax obligations.
4. Revise Federal Acquisition Regulations (FAR): The FAR should be amended to explicitly require deeper scrutiny of contractor ownership structures, particularly for entities with complex international corporate arrangements or those utilizing jurisdictions known for secrecy. The threshold for initiating investigations into contractors with opaque ownership should be lowered, and contracting officers should be empowered and trained to identify and escalate such concerns.

The Edelman scheme persisted for decades, in part due to shortcomings in initial and ongoing vetting. Proactive measures focusing on upfront transparency and robust, continuous due diligence are likely to be more effective deterrents and can prevent such extensive frauds from taking root, rather than relying solely on reactive investigations after significant losses have already occurred.  

B. Strengthening International Tax Enforcement and Information Exchange

1. Resource IRS International Operations and Multilateral Cooperation: Continue to invest in and expand the resources allocated to IRS-Criminal Investigation’s international operations. Bolster U.S. participation in and support for multilateral tax enforcement task forces like the Joint Chiefs of Global Tax Enforcement (J5), which are critical for tackling complex, cross-border tax evasion schemes.
2. Advocate for Stronger Global Beneficial Ownership Standards: Actively advocate for stronger, harmonized global standards for beneficial ownership registries, ensuring that information collected is accurate, verified, and accessible in a timely manner by tax authorities for enforcement purposes.
3. Enhance Data Analytics Capabilities: Invest in and deploy advanced data analytics tools to more effectively identify patterns and red flags indicative of offshore tax evasion, nominee ownership schemes, and other financial crimes from the vast amounts of information received through FATCA, CRS, and other international tax information exchange agreements.
4. Increase Public Awareness and Deterrence Campaigns: Launch targeted public awareness campaigns, particularly aimed at U.S. citizens residing or conducting business abroad and professional enablers (e.g., lawyers, accountants, financial advisors), highlighting the severe criminal penalties associated with offshore tax evasion and the facilitation thereof. High-profile prosecutions like the Edelman case should be leveraged for their deterrent effect.

The globalized nature of modern finance and business necessitates equally globalized and coordinated enforcement responses. Edelman’s operations, assets, and eventual arrest spanned multiple countries, and the success in bringing him to justice was heavily reliant on international cooperation. Strengthening these bilateral and multilateral cooperative frameworks is paramount for future enforcement success.  

C. Improving Beneficial Ownership Transparency Mechanisms Nationally

1. Ensure Robust Implementation of Transparency Laws: Vigorously implement and enforce existing beneficial ownership transparency laws, such as the Corporate Transparency Act in the United States. Consideration should be given to expanding their scope or lowering reporting thresholds if current provisions prove insufficient to capture entities of concern.
2. Resource Verification and Analysis Efforts: Provide adequate funding and personnel to the agencies responsible for collecting, verifying, storing, and analyzing beneficial ownership information (e.g., FinCEN in the U.S.). This is crucial to ensure the data’s quality, accuracy, and utility for law enforcement and tax administration purposes.
3. Establish and Enforce Penalties for False Disclosure: Establish clear, significant penalties for the provision of false, misleading, or incomplete beneficial ownership information to government authorities. Actively investigate and prosecute such violations to ensure the integrity of transparency regimes.

The role of professional enablers—attorneys, accountants, corporate service providers, and financial advisors—in the establishment and maintenance of complex offshore structures used for tax evasion is a critical area that requires continued focus for both enforcement and regulatory action. While not explicitly detailed as being charged in the Edelman case snippets, Edelman “caused his attorneys to tell Congress a false story” , and such elaborate schemes are rarely devised or implemented without professional assistance. Future strategies must consider how to enhance the accountability of professionals who knowingly or through willful blindness facilitate financial crimes like large-scale tax evasion.  

By implementing these strategic recommendations, the U.S. can bolster its defenses against sophisticated financial crime, enhance the integrity of its government contracting processes, and ensure greater fairness and compliance within its tax system, both domestically and internationally.

Financial Broker Sentenced To 42 Months In Prison For Tax Evasion And Failure To File Tax Returns

Geoffrey S. Berman, the United States Attorney for the Southern District of New York announced today that RICHARD JOSEPHBERG was sentenced to 42 months in prison for evading hundreds of thousands of dollars in taxes for the calendar year 2011 and willfully failing to file tax returns for the calendar years 2013 through 2015. JOSEPHBERG previously pleaded guilty to these crimes before U.S. Circuit Judge Richard J. Sullivan, who imposed today’s sentence.

According to allegations in the Indictment, court filings, and statements made in public court proceedings:

JOSEPHBERG was previously convicted in September 2007, in the U.S. District Court for the Southern District of New York, of 16 counts of tax fraud and one count of health care fraud, which resulted in a sentence of 50 months in prison and three years’ supervised release. JOSEPHBERG was released from custody and commenced his term of supervised release in late October 2010. While on supervised release, JOSEPHBERG began committing the tax crimes for which he was sentenced today.

Specifically, starting in late 2010, JOSEPHBERG began employment with an investor relations firm called CEOcast in Manhattan. Through the individual who operated CEOcast, JOSEPHBERG secured a commission-based arrangement with another investment firm, Socius Capital Group LLC (“Socius”). Socius agreed to pay JOSEPHBERG a commission of approximately 15 percent of any profit generated by Socius on financing deals originated by JOSEPHBERG. For originating one such financing deal, JOSEPHBERG was entitled to commission payments totaling approximately $1.57 million in 2011. After receiving payments totaling approximately $35,725 in his own name, JOSEPHBERG directed Socius to issue the remaining commission payments in the name of a newly formed corporate entity called “Almorli Advisors Inc.” JOSEPHBERG opened a new bank account in the name of Almorli Advisors Inc. (“Almorli Bank Account-1”), and deposited payments totaling approximately $1.53 million into that account.

In March 2012, while preparing to file 2011 federal income tax returns, JOSEPHBERG took steps to evade paying hundreds of thousands of dollars in federal income taxes by disguising and concealing the type of income that JOSEPHBERG had received from Socius. On or about March 27, 2012, JOSEPHBERG formed a second corporate entity called “Almorli Advisors NY LLC,” which served as a shell company to insulate JOSEPHBERG from IRS scrutiny. JOSEPHBERG caused his accountant to prepare a false 2011 partnership income tax return, Form 1065, in the name of Almorli Advisors NY LLC (the “2011 Form 1065”), listing JOSEPHBERG as a 99 percent partner and JOSEPHBERG’s son as a one percent partner. To evade a substantial part of the income taxes due and owing for 2011, JOSEPHBERG caused the 2011 Form 1065 falsely to report the commission payments from Socius, totaling approximately $1,574,922, as a long-term capital gain, rather than ordinary income. JOSEPHBERG’s purported 99 percent share of this false long-term capital gain flowed through to his 2011 individual income tax return, Form 1040. JOSEPHBERG’s fraudulent misclassification of this income resulted in a reported tax liability that was hundreds of thousands of dollars lower than the true tax liability because individual long-term capital gains were taxed at a significantly lower rate than ordinary income.

JOSEPHBERG also engaged in a scheme to evade the assessment of federal income taxes for calendar years 2013 through 2016. During those years, JOSEPHBERG received substantial income from performing consulting and other professional services. Despite earning substantial income, JOSEPHBERG failed timely to file any federal income tax returns for the calendar years 2013 through 2016 until after IRS agents informed JOSEPHBERG in May 2017 that he was under investigation. In addition to not timely filing any tax returns, JOSEPHBERG took various affirmative steps to evade the assessment of taxes. Among other things, JOSEPHBERG routed substantial amounts of income through Almorli Bank Account-1 and another bank account in the name of Almorli Advisors Inc., which bank accounts JOSEPHBERG controlled and used to pay for his personal expenses.

In all, through the crimes to which he pleaded guilty and relevant conduct, JOSEPHBERG caused the Internal Revenue Service (“IRS”) to incur losses of approximately $1.2 million. JOSEPHBERG’s scheme also caused a loss of $75,744.28 to the New York State Department of Taxation and Finance (“NYSDTF”), based in large part on JOSEPHBERG’s failure to timely file any state tax returns for 2013 through 2016.

In addition to the term of prison imprisonment, Judge Sullivan ordered JOSEPHBERG to serve 3 years of supervised release. Judge Sullivan deferred restitution to a later date.

Mr. Berman praised the outstanding investigative work of IRS Criminal Investigation in this case.

This case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorney Olga I. Zverovich is in charge of the prosecution.

Financial Broker Pleads Guilty In Manhattan Federal Court To Tax Evasion And Failure To File Tax Returns

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that RICHARD JOSEPHBERG pled guilty today to one count of tax evasion and three counts of willful failure to file tax returns. In particular, JOSEPHBERG admitted that he deliberately evaded the assessment of hundreds of thousands of dollars in federal income taxes by fraudulently reporting a 2011 commission of approximately $1.5 million as a long-term capital gain, which was taxed at a much lower rate than ordinary income. In addition, he admitted that he willfully failed to timely file any tax returns for the calendar years 2013 through 2015. As part of his plea, JOSEPHBERG agreed to pay at least $1,275,624 in restitution to the IRS and the New York State Department of Taxation and Finance. JOSEPHBERG pled guilty before United States Circuit Judge Richard J. Sullivan.

U.S. Attorney Geoffrey S. Berman said: “As he admitted, Richard Josephberg defrauded the IRS and evaded taxes by disguising more than $1.5 million in income as long-term capital gain. He also admitted he failed to file tax returns for four years. Now Josephberg awaits sentencing for his multifaceted tax dodge.”

According to the Indictment, public filings, and other statements made in open court:

JOSEPHBERG was previously convicted in September 2007, in the U.S. District Court for the Southern District of New York, of 16 counts of tax fraud and one count of health care fraud, which resulted in a sentence of 50 months in prison and three years’ supervised release. While on supervised release for that conviction, he began engaging in the criminal conduct that formed the basis of today’s plea.

Specifically, starting in late 2010, JOSEPHBERG began working for an investor relations firm (“Firm-1”) in Manhattan. Through the individual who operated Firm-1, JOSEPHBERG secured a commission-based arrangement with another investment firm (“Firm-2”), which agreed to pay JOSEPHBERG a commission of approximately 15 percent of any profit generated by Firm-2 on financing deals originated by JOSEPHBERG. For originating one such financing deal, JOSEPHBERG was entitled to commission payments totaling approximately $1.57 million in 2011. After receiving payments totaling approximately $35,725 in his own name, JOSEPHBERG directed Firm-2 to issue the remaining commission payments in the name of a newly formed nominee corporate entity called “Almorli Advisors Inc.” JOSEPHBERG opened a new bank account in the name of Almorli Advisors Inc. (“Almorli Bank Account-1”), and deposited payments totaling approximately $1.53 million into that account.

In March 2012, while preparing to file 2011 federal income tax returns, JOSEPHBERG took steps to evade paying hundreds of thousands of dollars in federal income taxes by disguising and concealing the type of income that JOSEPHBERG had received from Firm-2. On or about March 27, 2012, JOSEPHBERG formed a second entity called “Almorli Advisors NY LLC,” which served as a shell company to insulate JOSEPHBERG from IRS scrutiny. JOSEPHBERG caused his accountant to prepare a false 2011 partnership income tax return, Form 1065, in the name of Almorli Advisors NY LLC (the “2011 Form 1065”), listing JOSEPHBERG as a 99 percent partner and JOSEPHBERG’s son as a one percent partner. To evade a substantial part of the income taxes due and owing for 2011, JOSEPHBERG caused the 2011 Form 1065 falsely to report the commission payments from Firm-2, totaling approximately $1,574,922, as a long-term capital gain, rather than ordinary income. JOSEPHBERG’s purported 99 percent share of this false long-term capital gain flowed through to JOSEPHBERG’s 2011 individual income tax return, Form 1040. JOSEPHBERG’s fraudulent misclassification of this income resulted in a reported tax liability that was hundreds of thousands of dollars lower than the true tax liability because individual long-term capital gains were taxed at a significantly lower rate than ordinary income.

JOSEPHBERG also engaged in a scheme to evade the assessment of federal income taxes for calendar years 2013 through 2016. During those years, JOSEPHBERG received substantial income from performing consulting and other professional services. Despite earning substantial income, JOSEPHBERG failed timely to file any federal income tax returns for the calendar years 2013 through 2016 until after IRS agents informed JOSEPHBERG in May 2017 that he was under investigation. In addition to not timely filing any tax returns, JOSEPHBERG took various affirmative steps to evade the assessment of taxes. Among other things, JOSEPHBERG routed substantial amounts of income through Almorli Bank Account-1 and another bank account in the name of Almorli Advisors Inc., which bank accounts JOSEPHBERG controlled and used to pay for his personal expenses.

JOSEPHBERG’s tax evasion and failure to file tax returns had a dual purpose: by using corporate entities to conceal personal income, JOSEPHBERG was attempting both to evade paying his substantial outstanding tax liabilities from prior years (1997, 1998, and 2005) and to evade assessment of taxes for 2011 and 2013 through 2016, as charged in the Indictment.

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JOSEPHBERG, 72, of Greenwich, Connecticut, pled guilty to one count of tax evasion for the tax year 2011, which carries a maximum sentence of five years in prison, and three counts of willful failure to file tax returns for the tax years 2013 through 2015, each of which carries a maximum sentence of one year in prison. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. As part of his plea, JOSEPHBERG agreed to pay at least $1,275,624 in restitution to the IRS and the New York State Department of Taxation and Finance. JOSEPHBERG is scheduled to be sentenced by Judge Sullivan on July 15, 2019, at 2 p.m.

Mr. Berman praised the outstanding work of the Internal Revenue Service, Criminal Investigation, in this case. Mr. Berman also thanked the New York State Department of Taxation and Finance for its assistance in the prosecution.

This case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Olga I. Zverovich and Andrew D. Beaty are in charge of the prosecution.

Former Harrison Police Chief Pleads Guilty To Tax Evasion

Evaded More than $782,000 in Federal Income Tax by Failing to Report More than $2.5 Million in Revenue from 2011 through 2016

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Jonathan D. Larsen, the Acting Special Agent in Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced that ANTHONY MARRACCINI pled guilty today to tax evasion before U.S. District Judge Kenneth M. Karas in White Plains federal court.

U.S. Attorney Geoffrey S. Berman said: “As he admitted in court today, former Harrison Police Chief Anthony Marraccini failed to report more than $2.5 million he earned through his ownership of a construction company and several rental properties. At a time when he was the top law enforcement officer in Harrison, Marraccini broke the law and evaded more than $780,000 in income taxes. Sworn officers of the law should be held to a higher standard. At a bare minimum, they should be expected to obey the law.”

IRS-CI Acting Special Agent in Charge Jonathan D. Larsen said: “As the Chief of Police for the Town of Harrison, Anthony Marraccini held a position of trust in the eyes of the public. That trust was broken when he decided to commit a serious tax felony. The laws of the land apply to everybody, regardless of position or power. IRS-CI special agents will continue their work to ensure that everybody pays their fair share.”

According to the allegations contained in the Information:

During the relevant time period of 2011 to 2016, MARRACCINI was the Chief of Police for the Town of Harrison, New York. MARRACCINI also owned and operated Coastal Construction Associates LLC (“Coastal Construction”), a construction business, and was also employed as a salesperson for two title companies. In addition, MARRACCINI owned several residential rental properties. MARRACCINI reported some of Coastal Construction’s revenue and expenses, and the rental income from some of his rental properties, on his personal federal income tax return.

MARRACCINI failed to report all of Coastal Construction’s revenue on his income tax returns from 2011 through 2016. Instead, he deposited some checks Coastal Construction received for construction work into his personal bank accounts. He also cashed some checks Coastal Construction received at a check cashing service and kept the cash for his personal use. In some instances, MARRACCINI deposited checks Coastal Construction received into Coastal Construction’s bank accounts but took portions of the deposits as cash, thus reducing the amounts of the deposits on Coastal Construction’s bank account statements. MARRACCINI then falsely represented to his tax return preparers that Coastal Construction’s bank account statements showed the vast majority of the company’s revenue for each year.

MARRACCINI failed to report more than $2.3 million in revenue for Coastal Construction for the tax years 2011 through 2016.

MARRACCINI also failed to report a total of more than $199,800 in rents received from two rental homes he owned in Purchase, New York, from 2011 through 2015. In addition, MARRACCINI failed to report $24,500 in rents he received from a rental home he owned in Rye, New York, in 2013 and 2014.

In total, MARRACCINI failed to report more than $2.5 million in revenue from Coastal Construction and the rental properties, thereby evading more than $782,000 in federal income tax from 2011 through 2016.

* * *

MARRACCINI, 54, of West Harrison, New York, pled guilty to one count of tax evasion, which carries a maximum sentence of five years in prison. The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as the sentence will be determined by the court.

MARRACCINI is scheduled to be sentenced by Judge Karas on May 16, 2019.

Mr. Berman praised the outstanding investigative work of the IRS-CI and the Special Agents of the United States Attorney’s Office for the Southern District of New York.

This case is being handled by the Office’s White Plains Division. Assistant United States Attorney James McMahon is in charge of the prosecution.

Owner of Engineering Firms and CPA Convicted in Tax Scheme

Caused Millions in Tax Loss and Obstructed IRS Efforts to Collect Money and Penalties Owed

A federal jury in Honolulu, Hawaii, convicted Wagdy Guirguis and Michael Higa of conspiracy to defraud the United States yesterday, announced Principal Deputy Assistant Attorney General Richard E. Zuckerman of the Justice Department’s Tax Division and U.S. Attorney Kenji M. Price for the District of Hawaii. In addition to the conspiracy conviction, Guirguis was also convicted of three counts of filing false corporate income tax returns, one count of failure to file a corporate income tax return, three counts of tax evasion, one count of corruptly endeavoring to obstruct and impede the due administration of the Internal Revenue laws and one count of witness tampering. Higa was convicted of the conspiracy and one count of aiding and assisting in the preparation of a false tax return for one of Guirguis’ business entities. The convictions arise from a scheme to divert funds from Guirguis’ business entities for his own personal benefit and to avoid the payment of federal employment and income taxes.

“Employers who withhold employment taxes from their employees’ paychecks and choose to pocket those funds violate the trust of their employees and the United States,” said Principal Deputy Assistant Attorney General Zuckerman. “The Department of Justice will continue to identify and prosecute employment tax offenders, ensuring that such businesses and executives are held to account and do not gain an unfair advantage over honest employers who follow the law and pay their fair share.”

“Mr. Guirguis owed the Internal Revenue Service employment taxes and with the help of Mr. Higa, conspired to obstruct the Internal Revenue Service’s attempts to collect the tax by concealing income using a nominee entity and preparing false corporate and individual income tax returns,” said Acting Special Agent in Charge Troy Burrus. “The defendants’ actions to obstruct the Internal Revenue Service’s collection efforts are very serious. IRS-Criminal Investigation will continue to pursue employers, who collect these taxes and use the funds for personal gain.”

According to court documents and evidence presented at trial, Guirguis operated numerous engineering businesses. Higa, a certified public accountant, was the controller of these businesses. Higa also served as a nominee officer of another entity controlled by Guirguis. When the IRS determined Guirguis’ businesses owed over $800,000 in federal employment taxes and assessed a $812,000 penalty, Guirguis and Higa took various steps to place income and assets out of the IRS’ reach. For example, Guirguis and Higa used the nominee entity to fraudulently convey a condominium to Guirguis’ wife. After an IRS revenue officer began questioning Mrs. Guirguis’ sole ownership of this condominium, Guirguis and Higa instructed a bookkeeper to alter the books and records in an attempt to conceal this transaction from the IRS.

From 2001 through 2012, Guirguis and Higa also used the nominee entity to divert approximately $1.3 million from Guirguis’ businesses for Guirguis’ personal use. As a result of their diversion and concealment, Guirguis’ 2010 through 2012 returns omitted $553,000 in income, resulting in a tax deficiency of $165,000.

In addition, Guirguis filed corporate income tax returns that fraudulently omitted millions of dollars of gross receipts. For one of his businesses, Guirguis simply did not file a corporate tax return, thereby not reporting more than $1.7 million in gross receipts.

After the IRS levied the bank accounts of one business, Guirguis diverted incoming funds owed to that business, directing payment of the funds to a different business. Guirguis also instructed a tenant to disregard IRS collection notices and pay rent directly to him rather than to the IRS. Moreover, Guirguis made false and misleading statements to IRS revenue officers, all in an effort to obstruct the IRS’ efforts to collect on the taxes he and his companies owed.

To impede the criminal investigation into his tax violations, Guirguis falsely told an employee, who had testified before the grand jury, that he did not know about the false backdating done in the books of the nominee entity, and asked the employee to sign a false statement to that effect.

Guirguis and Higa face a maximum sentence of five years in prison each on the conspiracy counts. Guirguis faces a maximum sentence of five years on each of the tax evasion counts, three years in prison on each of the counts involving false tax returns and corrupt endeavors, and one year in prison for the count of failure to file a tax return, as well as a period of supervised release, restitution, and monetary penalties. Guirguis faces an additional maximum 20 year sentence for witness tampering. In addition to the maximum sentence of five years in prison on the conspiracy count, Higa faces a maximum sentence of three years on the aiding and assisting the filing of a false tax return count.

Principal Deputy Assistant Attorney General Zuckerman and U.S. Attorney Price commended special agents of IRS–Criminal Investigation, who conducted the investigation, and Tax Division Senior Litigation Counsel John Sullivan and Trial Attorney Anahi Cortada, who prosecuted the case.

Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.

Federal Prosecutions Serve as Reminder to Comply with Tax Obligations as Filing Deadline Approaches

CHICAGO — Federal authorities today announced criminal charges against several Chicago-area defendants for a variety of alleged tax schemes. With tax season in full swing, the prosecutions serve as a warning that individual taxpayers are responsible for the contents of their own return.

The criminal prosecutions announced today include charges against two Chicago tax preparers who allegedly assisted clients in obtaining thousands of dollars in fraudulent refunds, as well as charges against individuals accused of knowingly filing false tax returns or willfully failing to file tax returns as required.

In addition to potential criminal penalties, including incarceration, tax evaders remain responsible for all taxes and interest due, as well as civil penalties. The nation’s tax deadline this year is April 17.

“Tax offenses are neither victimless nor without consequence,” said John R. Lausch, Jr., United States Attorney for the Northern District of Illinois. “Taxes are how governments provide essential services. Our office strives to preserve the integrity of the federal tax system through vigorous criminal enforcement of the internal revenue laws.”

“Federal income tax compliance should be equally shared among all of the roughly 9.5 million Chicagoland residents,” said Gabriel Grchan, Special Agent in Charge, IRS Criminal Investigation, Chicago Field Office. “IRS-CI will continue focusing investigative efforts on individuals who contribute to the tax gap and do not comply with the law. With the filing deadline approaching, Chicagoans who might be thinking about cheating should think twice or risk the consequences.”

In an indictment returned last month, a federal grand jury charged JOHN OCWIEJA, 49, of Chicago, with six counts of willfully failing to file an income tax return. Ocwieja allegedly failed to file individual returns for the calendar years 2011 through 2016. Ocwieja has pleaded not guilty to the charges. A status hearing is set for May 9, 2018, before U.S. Magistrate Judge M. David Weisman. The government in Ocwieja’s case is represented by Assistant U.S. Attorney Andrianna Kastanek.

In another tax prosecution, professional tax preparer ANNA PLATOS, 58, of Hickory Hills, is charged with 19 counts of preparing and filing false and fraudulent income tax returns, and one count of obstructing the IRS. Platos, who owned Chicago-based Midway Accounting, filed the returns on behalf of numerous individuals for the tax years 2011 and 2012, according to the indictment. The returns claimed false tax deductions for car and truck expenditures, medical expenses, charitable gifts, and educational expenses, the indictment states. Platos has pleaded not guilty to the charges. A status hearing is set for May 8, 2018, before U.S. District Judge Amy J. St. Eve. The government in Platos’s case is represented by Assistant U.S. Attorney James P. Durkin.

The other professional tax preparer recently charged is IRVING BROWN SR., 69, of Chicago, who operated Irving Brown Sr. Tax Services. According to the indictment, Brown understated his own taxable income for the tax years 2011 and 2012, and he filed returns for taxpayers that he knew to contain false business losses. Brown also allegedly obstructed an IRS audit by fabricating documents and causing a taxpayer to submit them to the IRS. He is charged with two counts of subscribing a false tax return, twelve counts of aiding and abetting the filing of a false tax return, and one count of interfering with the administration of internal revenue laws. Brown has pleaded not guilty to the charges. A status hearing is set for May 9, 2018, before U.S. District Judge Robert W. Gettleman. The government in Brown’s case is represented by Assistant U.S. Attorney Andrew Erskine.

The U.S. Attorney’s Office also recently charged TARA D. SMITH, of Charlotte, N.C., with one count of willfully filing a false income tax return on her own behalf. Smith pleaded guilty to the charge earlier this week. In a plea agreement, Smith admitted that for the calendar year 2014, she filed a return that falsely claimed her total income was approximately $18,260, when she knew that her total income substantially exceeded that amount. Smith’s sentencing is set for July 20, 2018, before U.S. District Judge Sara L. Ellis. The government in Smith’s case is represented by Assistant U.S. Attorney Erika L. Csicsila. The City of Chicago Inspector General’s Office assisted in the Smith investigation.

A criminal information filed this month charges MICHAEL CIELAK, 54, of Chicago, with filing false tax returns. The charges allege that Cielak operated a business that generated scrap metal, and that he failed to report the income he received from the sale of scrap. Cielak will be arraigned on April 17, 2018, before U.S. Magistrate Judge Daniel G. Martin. The government in Cielak’s case is represented by Assistant U.S. Attorney Patrick King.

Earlier this month, the U.S. Attorney’s Office charged BARRY POTICHA, 73, of Northbrook, with scheming to impede the IRS. According to the charges, Poticha worked as the office manager and bookkeeper for two Chicago-area staffing companies. From 2000 through 2010, Poticha allegedly prepared and filed fraudulent tax returns to avoid the payment of employment taxes owed by the companies. Poticha will be arraigned on April 16, 2018, before U.S. District Judge Gary Feinerman. The government in Poticha’s case is represented by Assistant U.S. Attorney Kathryn E. Malizia.

A federal grand jury earlier this month indicted LATASHA MOSS, 30, of Cicero, with theft of government funds in relation to the theft of federal income tax refunds issued for returns filed in the name of other individuals. Moss will be arraigned on April 12, 2018, before U.S. Magistrate Judge Jeffrey T. Gilbert. The government in Moss’s case is represented by Assistant U.S. Attorney Sean K. Driscoll.

The public is reminded that charges are not evidence of guilt. The defendants with pending charges are presumed innocent and entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt. If convicted, the Court must impose reasonable sentences under federal statutes and the advisory U.S. Sentencing Guidelines.

Three People Charged in Stolen Identity Refund Fraud Scheme

CAMDEN, N.J. – Three people were arrested today for their alleged roles in an extensive scheme to obtain money through fraudulently obtained refund checks issued by the U.S. Treasury, U.S. Attorney Craig Carpenito announced.

Jorge Gutierrez, 39, of Merchantville, New Jersey; Alberto Sanchez, 34, of Camden; and Roque Bisono, 29, of Maple Shade, New Jersey, were indicted by a grand jury for conspiring to defraud the United States, theft of government funds, and aggravated identity theft. Sanchez was additionally indicted on witness tampering charges, and Bisono was indicted for making false statements to federal law enforcement officials in connection with the investigation. They appeared before U.S. Magistrate Judge Joel Schneider in Camden federal court.

A fourth defendant, Awilda Henriquez, 32, of Camden, remains at large.

According to documents filed in this case and statements made in court:

Stolen Identity Refund Fraud (SIRF) is a common type of fraud committed against the United States government that involves the use of stolen identities to commit tax refund fraud. SIRF schemes generally share a number of hallmarks. Perpetrators obtain personal identifying information, including Social Security numbers and dates of birth, from unwitting individuals, who often reside in the Commonwealth of Puerto Rico. They then complete Form 1040 tax returns using the fraudulently obtained information and falsifying wages earned, taxes withheld, and other data, always ensuring that the fraudulent tax return generates a refund. They direct the U.S. Treasury Department to mail refund checks to locations that the perpetrators control or can access. With the fraudulently obtained refund checks in hand, SIRF perpetrators generate cash proceeds by depositing the checks into bank accounts that they control or cashing the checks at check cashing businesses.

For the 2013 tax year, in excess of 3,300 SIRF tax returns were filed using the names and Social Security numbers of residents of Puerto Rico, where the refunds were directed to be mailed to a small section of Pennsauken, New Jersey. Of the 3,300 returns filed, several refund checks were issued and ultimately cashed at check cashing agencies in New Jersey, Philadelphia, and New York using false and fraudulent identifications, including fake New Jersey driver’s licenses, fake Social Security cards, and fake Department of Homeland Security Permanent Resident Identification cards.

Gutierrez, Bisono, Sanchez, and their conspirators allegedly obtained stolen identities of residents of Puerto Rico and used them to file fraudulent income tax returns seeking refunds to which they were not entitled. The conspirators recruited mail carriers from the U.S. Postal Service as part of the scheme to steal the tax refund checks from the mail. The mail carriers were paid for every U.S Treasury check that was stolen. The conspirators paid “check couriers” to cash the tax refund checks in a variety of ways, including at check cashing businesses in and around Camden, New Jersey. The check couriers presented fraudulent identifications at the check cashing businesses matching the names on the tax refund checks in order to cash the checks. In total, the scheme caused $565,091 in losses to the U.S. Treasury.

The counts of conspiracy to steal government funds are punishable by up to five years in prison. The counts of theft of government funds are punishable by a maximum potential penalty of 10 years in prison. The count of false statements is punishable by imprisonment of up to five years. The witness tampering count is punishable by up to 20 years in prison. The count of aggravated identity theft is punishable a statutory mandatory prison sentence of two years that must be served consecutively to any term of imprisonment imposed for the violation of any other count. All the counts are also punishable by a fine of up to $250,000, or twice the gain or loss caused by the offense.

U.S. Attorney Carpenito credited special agents of IRS-Criminal Investigation, under the direction of Special Agent in Charge Jonathan D. Larsen in Newark and Special Agent in Charge Vicki S. Duane in Philadelphia, and special agents of the U.S. Postal Service Office of Inspector General, with assistance from the U.S. Postal Inspection Service, under the direction of Inspector in Charge Daniel B. Brubaker, Philadelphia Division, with the investigation leading to today’s charges and arrests.

The government is represented by Assistant U.S. Attorneys Jason M. Richardson and Christina O. Hud of the Criminal Division, Camden.

The charges and allegations in the indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.

Brothers Sentenced to Prison for Defrauding U.S. Department of Defense

PITTSBURGH – Thomas G. Buckner, 66, of Gibsonia, Pa., and his brother, John. P. Buckner of Lyndora, Pa., have been sentenced in federal court to 30 months incarceration and a $500,000 fine, and 24 months incarceration and a $300,000 fine, respectively, on charges of major fraud against the U.S. Department of Defense and income tax evasion violations, United States Attorney Soo C. Song announced today.

According to the information presented to the court, the Buckner brothers were 50/50 owners of Ibis Tek, LLC. Ibis Tek’s main office was located at 912 Pittsburgh Street, in Butler, Pennsylvania, and it had an office at Ibis Tek Victory Road facility, 220 South Noah Drive, in Saxonburg, Pennsylvania. Ibis Tek manufactured both military and commercial products but specialized in the development of transparent armor and accessory products for tactical and military combat vehicles. Ibis Tek itself was not charged with any violations.

TACOM, located in Warren, Michigan, was responsible for letting and overseeing contracts on behalf of the U.S. Department of Defense, including contracts concerning High Mobility Multipurpose Wheeled Vehicle (Humvees). Ibis Tek had a subcontract to produce Vehicle Emergency Escape Window (VEE Window) Kits for Humvees. The Buckners inflated Ibis Tek’s costs to manufacture the VEE Window kits by creating Alloy America, LLC, (Alloy) a company that was co-located at Ibis Tek that the Buckners controlled, by using Alloy to purchase the frames in China for $20 per frame, and by using false invoices from Alloy to make it appear that Ibis Tek paid $70 per frame. In addition, the Buckners sold scrap aluminum collected in the manufacturing process but failed to credit that money to TACOM. The losses to TACOM were $6,085,709.

The income tax evasion charges against the Buckner brothers arose from not reporting the cash from sales of scrap aluminum, and for taking unallowable business deductions described below. Thomas Buckner repaid the I.R.S. more than $940,000 in restitution, penalties and interest; John Buckner repaid more than $980,000 in restitution, penalties and interest.

The contract fraud violations described above formed the basis for False Claims Act charges against the Buckner brothers brought by the Affirmative Civil Enforcement (ACE) Unit of the U.S. Attorney’s Office. Attorneys on both sides agreed on a civil settlement of $12,171,580.00. On Friday, October 6, 2017, the Buckner brothers made the final payment to the Department of the Treasury on their civil settlement.

Acting U.S. Attorney Song said, “The imposition of years of imprisonment, coupled with more than $2.7 million in restitution and fines, justly resolves the multi-year investigation into the $6 million fraudulent scheme of these defendants against the United States.”

There were three related guilty pleas entered in this investigation and each of these defendants is awaiting sentencing.

Harry H. Kramer, 52, of Wexford, Pennsylvania, pleaded guilty to one count of fraud for his role as CFO of Ibis Tek in the above described scheme against TACOM. Counts Two and Three charged him with filing false returns for Ibis Tek for 2009 and 2010.

David S. Buckner, of Warren, Michigan, (no relation to Thomas or John Buckner) pleaded guilty to a one-count Information charging him with impeding the IRS by acting as a financial intermediary who received and then paid out money from Ibis Tek, LLC to Anthony Shaw, for the purpose of concealing that the monies were income of Shaw.

Anthony A. Shaw, 55, of Rochester Hills, Michigan, pleaded guilty to a five-count Information. Shaw, formerly a civilian employee at TACOM, was a Deputy Project Manager responsible for directing development of and managing government contracts for combat vehicle systems such as Humvees. Shaw was charged in Counts One and Two with demanding and receiving a total of $1,055,500 of illegal gratuities paid by checks, cash and wire transfers by Thomas Buckner to and through David Buckner’s company, D & B Cycle Parts and Accessories, for Shaw’s benefit. Counts Three and Four charged Shaw with income tax evasion for 2009 and 2010 for not reporting the illegal gratuities. In Count Five Shaw was charged with making false statements when he denied that he had socialized with Thomas Buckner and John Buckner, and denied that he had traveled in a car, boat and an airplane owned by Thomas Buckner or John Buckner.

These cases were investigated by the Special Agents of the Department of Defense, Defense Criminal Investigative Service, the Internal Revenue Service, Criminal Investigation, and the U.S. Army Criminal Investigation Division.

“IRS-Criminal Investigation provides financial investigation expertise in our work with our law enforcement partners,” said IRS Acting Special Agent in Charge Ed Wirth. “Pooling the skills of each agency makes a formidable team as we investigate allegations of wrong-doing. Today’s sentences demonstrate our collective efforts to enforce the law and ensure public trust.”

Assistant United States Attorney Nelson P. Cohen prosecuted this case on behalf of the government.

Acting United States Attorney Soo C. Song commended the Special Agents of the Department of Defense, Defense Criminal Investigative Service, the Internal Revenue Service, Criminal Investigation, and the U.S. Army Criminal Investigation Division for the investigation leading to the successful prosecution of these defendants.

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Aurora Man Indicted for Fraud and Money Laundering

DENVER — Justin Manning, age 40, of Aurora, Colorado, was indicted by a federal grand jury on September 26, 2017 on charges of wire fraud, money laundering and filing false tax returns, Acting United States Attorney Bob Troyer and IRS Criminal Investigation Special Agent in Charge Steven Osborne announced. Today, October 2, 2017, Manning is scheduled to appear before a U.S. Magistrate Judge where he will be advised of his rights and the charges pending against him.

According to information contained in the indictment, between 2012 and 2015, Manning was employed as an asset protection manager and assistant store manager at a local Walmart. In those job positions, Manning had access to blank Money Network Checks used in Walmart’s Money Network System.

Beginning in approximately October 2013 and continuing through January 2015, Manning fraudulently filled out money network checks, and caused others to fill out the checks, in the name of third parties in order to deceive other Walmart employees into believing they were legitimate checks. Manning used his management positions to access the store’s register bags. He took cash from the store’s register bags and replaced it with fraudulent Money Network Checks totaling the same amount as the cash taken so that the register bags maintained the correct total balance and other Walmart employees would not realize cash had been taken from the bags. Manning has been charged with thirteen counts of wire fraud related to the processing of the fraudulent Money Network Checks.

Manning also knowingly engaged in financial transactions utilizing the proceeds of the wire fraud. Specifically, Manning is charged with three counts of money laundering for using cash proceeds derived from the fraud to purchase a diamond wedding ring set and a Toyota 4Runner and for transferring funds between accounts at a financial institution.

Additionally, in March 2014 and 2015, Manning filed U.S. Individual Income Tax Returns for the 2013 and 2014 tax years, respectively. When he filed these tax returns, Manning knew that he had intentionally not reported as income the cash he took as part of his fraudulent scheme.

Manning is charged with thirteen counts of wire fraud, three counts of money laundering and two counts of filing false tax returns. The indictment also includes a forfeiture count under which the government seeks to divest Manning of the proceeds obtained through the fraud. Wire fraud carries a penalty of not more than 20 years in federal prison, and a fine of up to $250,000 per count. Money laundering carries a penalty of not more than 10 years in federal prison, and a fine of up to $250,000 per count. False tax statement carries a penalty of not more than 3 years in prison and a fine of up to $100,000.

This case is being investigated by Internal Revenue Service – Criminal Investigation (IRS CI). This case is being prosecuted by Assistant U.S. Attorney Pegeen Rhyne.

The charges contained in the indictment are allegations, and the defendant is presumed innocent until proven guilty.

Texas Residents Indicted for Laundering and Structuring Proceeds from Sale of Second-Hand Prescription Drugs

Income Allegedly Not Reported on Federal Tax Returns

A federal grand jury sitting in Houston, Texas returned an indictment, which was unsealed today, charging two Texas residents with conspiring to commit money laundering and structuring currency transactions, announced Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division and Acting U.S. Attorney Abe Martinez for the Southern District of Texas. One of the defendants was also charged with tax evasion, filing false tax returns and failing to file tax returns.

Kenneth J. Coleman, 50, and Marcus T. Weathersby, 44, are charged in a nine-count indictment filed in the Southern District of Texas. According to the indictment and information provided to the court, Coleman owned Acacia Pharma Distributors Inc. and Four Corner Suppliers Inc., which allegedly purchased bottles of prescription medications from illegitimate sources and then sold the medications to another wholesale distributor who then sold them to pharmacies as new. Federal regulation requires wholesale distributors of prescription medications to provide to a buyer a pedigree – a written statement identifying each prior sale, purchase or trade of the drugs being sold that includes the business name and information of all parties to the prior transactions, starting with the manufacturer. Coleman and Weathersby are alleged to have created false pedigrees, which were provided to the wholesale distributor to whom Acacia and Four Corners sold the drugs. That distributor allegedly withheld payment until these false pedigrees were received.

The indictment alleges that Coleman and Weathersby deposited proceeds from the fraudulent sale of these second-hand prescription drugs into Acacia’s and Four Corner’s business bank accounts and used the funds to pay the suppliers of the illicit pharmaceuticals. Coleman and Weathersby are also charged with making approximately 240 cash withdrawals, totaling over $2 million in amounts less than $10,000, to evade bank-reporting requirements.

Coleman is also charged with evading Acacia’s and Four Corner’s income tax liabilities, filing false 2012 and 2013 individual income tax returns and failing to file individual and corporate tax returns. Weathersby was arraigned earlier today and detained pending his trial set for Oct. 16 in front of U.S. District Court Judge Lee H. Rosenthal. Coleman made his initial Court appearance earlier today and has been released on bond.

If convicted, Coleman and Weathersby face a statutory maximum sentence of 20 years in prison for the money laundering conspiracy and a maximum sentence of five years for the conspiracy to structure currency transactions. Coleman also faces a five-year statutory maximum sentence for each count of tax evasion, a maximum sentence of three years in prison for each count of filing a false tax return, and up to one year in jail for the failure-to-file charges. Both Coleman and Weathersby face a period of supervised release, restitution, forfeiture and monetary penalties.

An indictment is not a finding of guilt. It merely alleges that crimes have been committed. A defendant is presumed innocent until proven guilty beyond a reasonable doubt.

Acting Deputy Assistant Attorney General Goldberg and Acting U.S. Attorney Martinez thanked agents of IRS Criminal Investigation, the FBI, and the Federal Department of Agriculture, who conducted the investigation, and Trial Attorneys Sean Beaty and Terri-Lei O’Malley of the Tax Division, who are prosecuting the case.

Additional information about the Tax Division’s enforcement efforts can be found on the division’s website.

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