Tax Crime Junkies

Episode 11: From Garbage Man To Jailbird: His Career Took A Trashy Turn and He Took His CPA With Him Part II

This episode reveals the shocking conclusion of the story of Wagdy Guirguis and his CPA Michael Higa. The IRS’s investigation of Hawaii Pacific Finance reveals that for nearly 12 years, Wagdy was having Michael divert funds to his personal accounts, amounting to $1.3 million. In an attempt to make it seem like he did not owe any taxes, Wagdy orders his bookkeeper to remove certain transactions from the records. In 2017, both Wagdy and Michael were indicted on multiple charges of tax evasion. In 2019, Wagdy was found guilty of all charges against him and sentenced to 5 years in prison, 3 years of supervised release and $3 million in restitution. In spite of Michael’s lawyer trying to pin everything on Wagdy, Michael ends up convicted on one count of filing false corporate income tax returns and is sentenced to 40 months in prison, 3 years of supervised release, and just over $2 million in restitution. Sadly, Michael was diagnosed with stage 4 kidney cancer and was granted compassionate early release. Additionally, Wagdy himself passed away while in prison at 79 years old.
 
Talking Points
The IRS finds that from 2001-2012 Hawaii Pacific Finance was used to divert approximately 1.3 million dollars into Wagdy’s personal accounts 
Wagdy orders his bookkeeper to ‘clean up’ the balance sheet for Hawaii Pacific Finance and she declines; Michael instructs her exactly what she has to remove from the balance sheet while Wagdy watches over her shoulder as she is forced into doing his dirty work
One of Wagdy’s employees at GMP gets called to testify before a grand jury and Wagdy tries to force her to sign a statement saying that he had no knowledge of any wrongdoing. She refuses and leaves her job that day.
In August 2017, both Michael and Wagdy were indicted on multiple charges of tax evasion and conspiracy to defraud the government. They deny these charges. They are given a trial date of October 2018 and released on bond
Wagdy seeks permission to go to the mainland for his wife’s double lung transplant treatment; This request is denied. Michael is faced with restrictions that clash with his work as a CPA
Michael claims that Wagdy was to blame for everything and tries to have the charges against him dismissed. He then tries to get the case dismissed on the grounds that GMP is registered in Guam and that the US does not have jurisdiction over the tax returns. Section 6012 of the Internal Revenue Code shows this excuse is invalid.
Wagdy and Michael have separate lawyers with different approaches to the defense. Michael’s lawyers continue to attempt to downplay his role at GMP and put it back on Wagdy
In 2019, Wagdy is sentenced to 5 years in prison, 3 years of supervised release, and over $3 million in restitution. Michael is sentenced to 40 months in prison, 3 years of supervised release, and just over $2 million in restitution. GMP Associates and many of Wagdy’s other businesses are forced into involuntary dissolution
At the end of 2020, Michael files for compassionate early release after being diagnosed with Stage 4 Kidney Cancer
Just after Wagdy’s conviction, his wife passes away, and in March 2022, Wagdy dies in prison
 
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Episode 10: From Garbage Man To Jailbird: His Career Took A Trashy Turn and He Took His CPA With Him

This episode unveils the beginning of the story of Wagdy Guirguis, a garbage man turned jailbird whose career took such a trashy turn that he even took his CPA down with him. Wagdy owned multiple business entities, one of which was GMP Associates. Right from the beginning when he founded GMP Associates in 1999, he began to perform payroll tax evasion. When the IRS realized he was stealing from his employees, they added over $800,000 in trust fund recovery penalties to his debt. In 2003, Wagdy decided to hire a CPA named Michael Higa to be the financial controller for GMP, making Michael a co-conspirator to his tax crimes. Dom and Tom return to talk about the importance of being extremely careful of what responsibilities you agree to as a tax accountant, the financial and legal consequences of betraying clients’ trust, and what ended up happening to Wagdy and Michael. 
 
Talking Points:
In 1999, Wagdy creates GMP Associates and starts committing payroll tax evasion, effectively stealing from his own employees
Wagdy has the idea to turn trash into energy. He becomes President of Guam Resource Recovery Partners and attempts to negotiate a contract to be the only garbage disposal company on the island in spite of a local law prohibiting the incineration of trash on Guam
The IRS becomes suspicious of Wagdy and in 2002, sends him a letter ordering the immediate payment of all outstanding employee tax returns along with a large penalty
Instead of making the payments, he hires CPA Michael Higa and ropes him into his schemes
Wagdy opens GMP Hawaii, which is exactly the same as GMP Associates - except it has no tax debts
He continues stealing from his employees and has Michael move the money around so that it is more accessible for his personal use
The IRS sends an additional letter demanding payment, plus even more in penalties
Again, Wagdy creates another entity in an attempt to escape the tax debts
The GMP Entities work a contract for the Federated States of Micronesia. Micronesia fails to pay their bills and payroll expenses start piling up for GMP
Wagdy knows he needs to hide the money from the IRS, so he orders Michael to transfer money around the different entities to various personal accounts, at one point managing to transfer 3 million out of GMP Hawaii to his own account
Wagdy tries to hide the money by putting it into buying a condo, but has the condo legally owned by his wife. He thinks this will protect it from the IRS when they come to collect the debt
Was there finally a prison sentence for Wagdy? Did he end up taking his CPA down with him? Find out in Part 2!
 
 
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Episode 9: The Fall of Steve Martinez: From IRS Employee to Convicted Con Artist Part 2

This episode tells the second half of the story of Steve Martinez, an IRS employee turned con artist who committed fraud and tax evasion, and even attempted to hire someone to murder witnesses against him. Martinez made outrageous requests to the court, including asking for permission to go on a Disney cruise with his family, and later claimed he had Asperger's syndrome to avoid responsibility for his actions. He was ultimately sentenced to 24 years in prison and ordered to pay $14 million in restitution. Dom and Tom are back to discuss the consequences faced by Martinez's friends who had signed his bond, including foreclosure proceedings and legal fees.
 
Talking Points:
January 2012, Steve’s ankle monitor is removed and he experiences freedom on a Disney Cruise with his family. He decides he’s not going back to jail at any cost, even if that cost is murder.
When he returns home, he begins to stalk some of the witnesses on his case as he schemes.
March 2012, Steve slips out early in the morning and goes to the house of Ray, his former gardener. He brings 4 packages filled with documents containing personal identifying information on four individuals, including MaryAnne Harmon and Monique Segal. Steve offers to make Ray rich if he helps him out. He recommends using a silencer and two separate guns, offering to pay him part of the money up front - specifically the $40,000 in cash he had previously given to his limo driver Norman for safe keeping.
Ray does not take the bait and instead decides to turn the information over to the FBI. 
Recordings are obtained of Steve’s murder-for-hire scheme. Are they too prejudicial to be used?
Steve’s defense attorney argues that Steve cannot be held accountable for his actions because he has Asperger’s syndrome.
April 2013, Steve takes a plea deal. 27 people, including Steve’s wife, children, and many clients, show up to support him at his sentencing. They do not believe the charges against him. 
Steve is sentenced to 286 months in prison, $14 million in restitution, and a 500 hour drug program
His friends who had signed off on his bond are now on the hook for Steve violating the conditions. One friend had put his house up as collateral to secure the bond. The court decides to enforce the lien against the house. The court holds Steve’s other friend, the one who had not been willing to put his house up as collateral, responsible for the ½ million dollar bond. They request that the court remit the forfeiture. Eventually the friends are released of all but $13,000 of the bond.
Dom does some digging and finds out that back in 1989, Steve’s defense attorney was also disbarred for stealing money from clients!
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Episode 8: The Fall of Steve Martinez: From IRS Employee to Convicted Con Artist

Today’s episode reveals part one of the incredible true story of Steve Martinez, a former IRS agent and CPA turned con artist. Steve ran an intricate scheme committing tax evasion on behalf of both himself and his clients and defrauding his clients of millions of dollars. He created a dummy business which he used to embezzle his client’s tax return payments to the IRS while also filing false returns on their behalf. He then committed personal tax evasion by not reporting his illegally gained income. In 2009, Steve realized that he was being investigated and started defrauding even more people, using that money to pay off previous victims. He also tried to amend his tax returns to account for some of his unreported income. In 2011 he was finally arrested, but he managed to convince two of his clients to help him post bail. The conditions of his bail included restrictions like a strict curfew, GPS monitoring through an ankle monitor, and the inability to leave San Diego. Then things got even more twisted. Steve’s brother bought tickets for the whole family to go on a Disney Cruise, something that would require the conditions of Steve’s bail to be amended. They argued in court that this trip was for the benefit of Steve’s autistic son and that the ankle monitor and curfew were impacting Steve’s ability to be with his family. Shockingly, the court actually agreed to adjust the terms and Steve got to take a Disney Cruise while under indictment for stealing millions of dollars from his clients. 
 
Talking Points: 
Steve’s dummy business, EFTPS, used to embezzle his client’s money and commit tax evasion on their behalf
Steve’s double life as a respectable Christian family man and trusted CPA
Steve schemes more than 11 million dollars from clients, committing tax evasion himself when he does not report his gains. He fails to report more than 15.8 million dollars
In 2009, Steve amends his tax returns and reports additional income hoping to sidestep tax evasion
Steve defrauds more people, using the illegal gains as restitution for the victims of his prior frauds
The Supreme Court debate around whether embezzled money is taxable, settled in 1961
April 15, 2011, Steve is arrested for tax crimes on a $350,000 secured bail
April 21, 2011, Steve is released from custody after convincing two of his clients to post his bail and a friend to use their house to secure the bond
 The terms of Steve’s bond 
Steve continues working as a bookkeeper/consultant for clients with the approval of the court
Steve’s brother buys Disney Cruise tickets for January 2022, causing Steve to request that his bond be amended. Steve’s defense attorney convinces the court to adjust the terms, removing the curfew and ankle bracelet, returning his passport, and allowing him to attend the family cruise
In Part 2, get ready for things to get more twisted, with schemes involving a stolen limo and even a murder!
 
 
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Episode 7: The Con Artist Television Taxman of San Diego Part II- How One Man Duped the Public and Betrayed His Clients

Today’s episode is the exciting conclusion of the true crime tale of J. Douglas Jennings, the con artist television taxman of San Diego. He was involved in tax planning and ran a faith based practice, using religion to trick clients into trusting him. In the last episode, we learned about Doug Jennings’ most well-known case wherein he schemed an elderly client out of 3 million dollars and was subsequently disbarred. In spite of this, Doug and his wife, Peggy, kept up their criminal activities for a total of 25 years before being sentenced to prison for bankruptcy fraud and tax evasion. Over this 25 year period, Doug continued to get into more and more debt, hide valuable assets, and defraud several banks. In the end, Doug had racked up over $25 million in debt to creditors and individual investors. He was sentenced to 34 months in prison, while his wife was sentenced to 4 months and ordered to pay $1.5 million in restitution to JP Morgan Chase.
 
Talking Points
2013 Louise deCarl Adler, a bankruptcy judge, charges Doug and Peggy with embezzlement and or larceny in connection with fraudulent intent on a transaction
Doug owed over 25 million to creditors including banks like JP Morgan Chase, CitiBank; also owed individual investors 
He was sued 15 times for professional negligence & malpractice and 2 times for fraud
The Utah property case
Doug’s hidden assets and extensive debts
Judge Adler’s letter about Doug and his wife’s felonious intent and malicious actions
In 2017 Doug pleads guilty to bankruptcy fraud and tax evasion 
In 2018 Doug is sentenced to 34 months in prison. His wife, Peggy, is sentenced to 4 months in prison for bank fraud and aiding and abetting. She is ordered to pay JP Morgan Chase $1.5 million 
The importance of following ethical guidelines and avoiding misconduct, especially as accountants
Why you need to do your homework before doing business with someone
 
Quotes
“He ran a faith based practice that ended up being caught and sued more times than Lindsay Lohan.” (0:34-0:40 | Dom) 
"In the first bankruptcy case he filed, he did something that is not surprising at all when you see his character from past cases. He hid the fact that he had a stock interest in a real-estate deal worth 1 million dollars, he hid his 53-foot luxury yacht named the “Sea Eagle” worth 150,000, and let’s not forget how much he owed to the yacht docking business that he stored it at. Oh and he also hid 165 thousand worth of antique silver from authorities....not in prison that's for sure" (8:34-9:34 | Dom and Tom) 
“If people did more of their homework on who they were doing business with, I do really believe less fraud and less schemes would be imposed on the public.” (16:10-16:21 | Tom)
 
 

Episode 6: The Con Artist Television Taxman of San Diego: How One Man Duped the Public and Betrayed His Clients Part I

Today’s episode reveals the true crime tale of J. Douglass Jennings, a real life knock off version of Better Call Saul. This con artist television taxman of San Diego managed to completely fool the public as he betrayed his clients’ trust through embezzlement, professional negligence, tax fraud, and malpractice. He attracted potential clients through a faith based pitch while lying about and strongly exaggerating his credentials and capabilities. In spite of having been sued more than 15 times, found guilty in court on 10 charges of misconduct, and legally disbarred from practicing law, J. Douglass continued to run his tax consultancy business.
 
Talking Points
TV & Radio Tax Attorney Frauds Local Folks
“Faith-Based” Taxman uses Real-Estate to scheme clients
Bankruptcy, multiple appeals, and hiding assets
How not to become like Uncle Doug
 
Quotes
“J. Douglass Jennings, the attorney who will enter business transactions that will be harmful to your career, livelihood, and mental well-being." (19:37-19:46 | Dom) 
“Life moves pretty fast, is the saying. And in the tax industry, in particular, we're dealing with these deadlines, and we don't always have the time to properly document that communication. And it may not be in the budget to do so. To really sit and document what's discussed verbally in a meeting, or what's been communicated to you that we rely on for reporting and other things. And that really is the key. And so I would encourage listeners, if you feel like you cannot afford financially to take that much time in terms of documenting those communications, again, it's in your own best interest to do so, because it's always somebody else's word against yours. And the person who's able to prove it wins.” (32:15-33:08 | Dom) 
 
 
 
 

Episode 5: The Tragic End of a Career: How One Man’s Retirement was Derailed by Tax Fraud

Today’s episode reveals the curious case of Larry Couchet, a once well-respected CPA in Ohio whose retirement was derailed by tax fraud. Larry was the president and majority shareholder of an accounting firm in Ohio and had a great reputation in his community. He was 59, nearing retirement, and all was well until he began helping his clients file false personal income tax returns. This went on from 2006 to 2010 until the IRS got involved. In May of 2014, the IRS charged four members of the Field Group, Larry’s clients, and by extension indicted Larry as well. In spite of being charged for tax crimes and sentenced with 12 months and one day in prison along with a lengthy supervised release and fines, Larry is back practicing as a CPA after reinstatement to practice. 
 
Talking Points: 
Larry Couchet and his career prior to getting involved in tax fraud
The amount of records Larry gained access to through Cadillac Ranch Restaurants 
The warehouse jointly owned between Larry and his client JHF Property Holdings
The discrepancies in the Field Groups accounting books 
The previous criminal records of several of Larry’s clients
Larry’s cooperation with the investigation and self-sacrifice of his accounting license 
The confusing nature of this case, mainly why would Larry knowingly commit these tax frauds when they were of no benefit to him?
The question of whether this is a case of negligence or purposeful crime
How Larry returned to practicing as a CPA in spite of having been imprisoned for tax crimes
Quotes
“You cannot write off your federal taxes on your federal income tax returns.” (10:03-10:09 | Dom)
“You simply can't put a wall between what you know and preparing the tax return. It's not possible.” (11:34-11:42 | Tom)
“I find it hard to believe personally that somebody would intentionally commit tax evasion or tax crimes for no benefit to themselves. It's just in my mind, it doesn't add up.” (19:06-19:21 | Tom)
“The best option for any tax professional who notices their client has outright crooked books or suspicious transactions is simply withdraw from working with that client. You don't have to report it to the IRS. All you have to do is let the client know of what errors you've spotted on their returns or documents. Keep a record of what you advise them and move on.” (35:46-36:26 | Tom) 
 
 
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Episode 4: Greed and Deceit: The Moral Failures of an Accountant Turned Criminal

Today’s episode unveils the moral failures of an accountant turned criminal. Paul Henri Harleman was a contract bookkeeper in Hawaii who used his personal relationships to defraud his clients out of over 1.2 million dollars over a four year period. Paul started off with a fantastic reputation as a guy well trusted by his clients. It all changed when he became greedy and decided to deceive his clients, many of which were small business owners and nonprofit organizations. He opened up an LLC called Pacific Media Group, named as such because it was similar to the name of one of his client’s vendors. This allowed him to charge his client’s credit card and divert the money into his LLC’s bank account. Once his initial scheme was successful, Paul was emboldened to take it even further, committing 6 counts of wire fraud and 8 counts of money laundering before finally being arrested.
 
Talking Points:
The story of Paul Henri Harleman and how he used his intimate knowledge of his clients’ businesses and accounts to defraud them for years undetected
Paul’s payroll scheme through his LLC
Similar cases of bookkeepers abusing their relationships with clients
Common fraud schemes used to steal from small businesses
Internal control measures small business owners can implement to protect themselves from fraud
The value of an audit trail and creating deterrents 
Why small businesses need to establish a Code of Ethics for all employees to be trained on
An example of one of Paul’s actual emails to the judge assigned to his case
The conclusion of Paul’s story, his final charges and sentencing 
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Episode 3: From Log Homes to Lockup: The Unbelievable Tale of Martin Birk

Today’s episode reveals the unbelievable tale of Martin Birk, a Colorado businessman who went from log home salesperson to tax protester, and ultimately was sentenced to 15 years in prison. Birk started off as an honest businessman, filing his taxes each year, and running a thriving log homes business. When he took a business class at a local college, he got the wrong idea from something said by one of his professors about making sure tax laws apply to your specific income. He interpreted this as an indictment of the entire U.S. tax system and started to get involved with some really shady tax protester organizations like We The People. 
 
Talking Points: 
How Birk went from businessman to tax defier
Form 31.75 and Birk’s reactions to being subsequently ignored by the IRS
Tax Protester Organizations like We The People and the dangerous messages they spread
Birk’s threatening letters to the IRS in retaliation to them pulling $16,000 from his account and the subsequent SFR enacted by the IRS 
The initial charges and sentencing that causes Birk to flee Colorado for Florida with a car full of illegally obtained weapons
Evidence photos of the small militia Birk acquired
The Doctrine of Fugitive Disentitlement and how it revoked his chance for appeal
Birk’s ultimate sentence of 15 years in prison and how it more than doubled his initial sentence
Podcast production and show notes provided by HiveCast.fm
 
 

Episode 2: The Chrisley Con: How a Lavish Lifestyle and Fake Loans Led to Tax Fraud and Bankruptcy

Today’s episode reveals that Julie and Todd Chrisley, a couple with a successful TV show, lived a lavish lifestyle using loans they took out illegally from banks. They defrauded banks by creating fake documents and claiming to have money in other banks. They spent about 36 million dollars on luxury trips, hotels, wear, and apartments. Whenever a loan was due, they would defraud another bank and use the loan to pay back the previous one. Todd eventually filed for bankruptcy, walking away from about 20 million dollars in loans. Additionally, the couple failed to pay taxes owed from 2009 and 2013-2016 by registering their company under different names and creating false documents.
 
Talking Points:
Asset Management real estate firm between couple and third party Mark Braddock to manage and sold foreclosed properties and earned millions
Created fabricated bank documents as early as 2007 to obtain loans from community banks
Emails obtained by the FBI revealed their fraudulent activities
We also discuss the legality of Income Shifting
The Chrisley’s received their pay from their asset management company
They split the money and sent it to Chrisley and Company to avoid taxes
The assignment of income doctrine holds that a taxpayer may not avoid tax by assigning the right to income to another
Misuse of Funds
Chrisleys spent money on travel, properties, clothes, and luxury items
Repeated loan frauds to pay back loans due
Targeted Georgian community banks because it made the loan frauds easier
Chrisley’s had financial difficulties and became insolvent
Todd filed for bankruptcy and walked away from 20 million dollars total loans
Mark and the Chrisleys ended their partnership right before the lawsuit in 2012
SODDI Defense
Chrisleys claimed Mark Braddock was responsible for all the fraud that’s coming up in court
Mark got immunity for cooperating with the FBI and IRS
Emails showed Todd gave express instructions to Mark to use the accountant's stationary and signature
Todd and Julie's company, 7Cs Productions
Todd and Julie's control over the company
The couple's tax default in 2009
Listing Julie as the sole owner to evade IRS liens
 
False tax filings and evasion
Filing as married filing separately
False tax filings in 2011-2013
Collection status and Todd's bankruptcy proceedings
Hiring accountant Tarantino
Fabrication of documents and further tax evasion
Warning from Tarantino about IRS investigation
Fabrication of documents to make Julie's mother the sole owner of 7Cs Productions
Creation of new bank account for 7Cs to evade taxes
Todd's audacious claim on radio interview
Continued borrowing and false representations
The Chrisleys' borrowing activities
Loan taken out in March 2017
False statements to IRS Revenue Officer
Filing of false tax returns by Tarantino