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The National Legal and Policy Center published an article yesterday (nlpc.org/2016/03/28/ex-sag-benefit-plan-official-pleads-guilty-700k-tax-evasion/) on the guilty plea of Nader Karimi. According to that article he pleaded guilty to tax evasion, omitting more than $700,000 of income on returns for 2005 through 2008. The article is a good read on how the internal ongoings, including allegations of corruption by another recently promoted SAG official, led to complaints to the Department of Labor and investigations by various arms of the government. In these cases, the IRS is often happy to get referrals once the muck is being raked.
The 2015 DOJ press release about Karimi’s guilty plea can be found by clicking here. According to the release:
Karimi was responsible for modernizing PPHP’s computer systems, and in that capacity he had the authority to enter into contracts on behalf of PPHP. Over a four-year period, Karimi entered into agreements with vendors that agreed to pay a portion of the money they received from PPHP to a company affiliated with Karimi, Enterprise Technology and Management Services. The payments to ETMS totaled $711,000, and Karimi used the sums for personal expenses while not declaring them as income on his tax returns.
Essentially, the misappropriation of funds from the company is considered income, even if it does not show up on a W-2. Much like Al Capone, sometimes they can get you for the returns even if they can’t for the underlying activity.
Daniel Layton, the author of this post, is the principal of Tax Attorney OC.