August 27, 10

NEWS / Partner at Major International Accounting Firm Convicted of Tax Crimes

WASHINGTON – A jury in U.S. District Court in Newark, N.J., has returned a guilty verdict against Stephen A. Favato, a resident of Point Pleasant Beach, N.J., and a partner in BDO Seidman LLP’s Woodbridge, N.J., office, the Justice Department and the Internal Revenue Service (IRS) announced today. The jury found Favato guilty of one count of corruptly endeavoring to obstruct and impede the Internal Revenue laws and one count of aiding and assisting in the preparation and filing of a false tax return.

During the trial, evidence presented proved that from late 2001 through April 2005, Favato attempted to obstruct the IRS by, among other conduct, advising his client, Daniel Funsch, on how to include false items on the 2002, 2003 and 2004 joint income tax returns for Funsch and his then-wife. Additionally, the evidence proved that Favato knowingly prepared and signed false joint tax returns for the Funsches for these years, causing over $114,000 of tax loss to the IRS in connection with the Funsches’ filed 2002 return and attempting to cause over $150,000 of tax loss in connection with tax years 2003 and 2004.

The evidence presented at the trial showed that Favato advised Funsch to significantly reduce the salary payments that Funsch was receiving from his corporation and to instead have this compensation paid to Funsch’s limited liability company, Great Escape Yachts LLC, in the form of purported lease payments for Funsch’s yacht. However, his corporation had not leased the yacht. This course of action recommended by Favato enabled Funsch to fraudulently deduct his personal yacht expenses as business expenses. In addition, the evidence presented showed that Favato advised Funsch on how to falsely increase his expenses in order to fraudulently eliminate a portion of the gain on three properties that Funsch sold in 2002 and 2004. Finally, the evidence showed that Favato advised Funsch to report inflated charitable contributions on Funsch’s 2003 tax return.

The charges of corruptly endeavoring to obstruct and impede the Internal Revenue laws and aiding and assisting in the preparation and filing of a false return each carry a maximum punishment of three years and a fine of up to $250,000. In addition, Favato was acquitted of one count of tax evasion.

John A. DiCicco, Acting Assistant Attorney General for the Justice Department’s Tax Division; Paul J. Fishman, U.S. Attorney for the District of New Jersey; and Charles R. Pine, Special Agent in Charge, IRS Criminal Investigation, Manhattan, commended the IRS agents who investigated the case, as well as Tax Division Trial Attorneys Patrick J. Murray and Sean Delaney, who prosecuted the case.

http://www.justice.gov/opa/pr/2010/August/10-tax-970.html

Tags: criminal investigation, corporation,