July 26, 11

NEWS / Former Northern Virginia Resident Pleads Guilty to Tax Evasion and Impeding the Internal Revenue Ser

Operated as a Third Party Administrator of the Postmasters’ Benefits Plan - The Health Benefits Carrier for the National League of Postmasters

WASHINGTON – Thomas J. Ernst, formerly a resident of McLean and Arlington, Va., pleaded guilty to one count of corruptly endeavoring to impede and impair the Internal Revenue Service (IRS) and one count of tax evasion for 2005, the Department of Justice and IRS announced today. According to the plea agreement, the tax loss exceeds $2.5 million.



According to court documents, between 2000 and 2006, Ernst served as the president and chief executive officer of Medicure Plus Inc., a health insurance benefits administration company. Medicure operated as a third-party administrator of the Postmasters’ Benefits Plan (PBP), the health benefits carrier for the National League of Postmasters (NLP). Medicure and NLP entered into a 10 year guaranty agreement under which Medicure managed PBP’s operations; NLP paid Medicure $166,000 each months plus a $33,000 administrative fee.



According to the plea agreement and statement of facts, Ernst admitted that between 2001 and 2007, he corruptly endeavored to obstruct and impede the due administration of the Internal Revenue laws by causing Medicure to make payments from its corporate bank account for numerous personal expenses, including, a summer rental house, more than $1.5 million in payments to himself, his wife, his sister-in-law and his sons, his son’s Georgetown University college education and various property purchases and rentals. In all, these payments totaled more than $3.3 million. Additionally, Ernst admitted that he used nominee bank accounts, purchased and leased assets in the names of his sons and sister-in-law and created fictitious documents to conceal his income and ownership of assets from the IRS. In addition, Ernst admitted that he caused Medicure to fail to file corporate income tax returns, despite Medicure earning more than $11 million in gross income between 2001 and 2006.



According to court documents, Ernst also admitted that between 2001 and 2006, he failed to file a U.S. Income Tax Return, Form 1040 with the IRS, despite the fact that he was required to do so by law. Ernst specifically admitted that in 2005 he received taxable income of at least $915,678, upon which a substantial tax was due and owing. In an attempt to evade and defeat the assessment and payment of this tax, he admitted to failing to file an income tax return by April 17, 2006, and by, among other things, using nominee bank accounts and his family members to conceal his income from the IRS.



Ernst faces up to three years in prison and a $250,000 fine for the corruptly endeavoring to impede and impair the IRS conviction and up to five years in prison and a $250,000 for the tax evasion conviction. U.S. District Court Judge Claude M. Hilton of the Eastern District of Virginia scheduled sentencing for Dec. 16, 2011.



The case was investigated by the IRS-Criminal Investigation Division and prosecuted by the Justice Department’s Tax Division Trial Attorneys Caryn Finley and Thomas Krepp, and Assistant U.S. Attorney Charles Connolly of the Eastern District of Virginia.

http://www.justice.gov/opa/pr/2011/July/11-tax-968.html

Tags: document, criminal investigation,