Credit Union CEO Credited with Shutting Down CBS Credit Union

Longtime CEO of the CBS Employee Credit Union, Edward Rostohar, was sentenced to 14 years in prison for embezzling 40 million dollars over a 20-year period. Rostohar left the credit union insolvent, and it was absorbed by University Credit Union, which took over all 2,800 accounts.

Rostohar claimed that most of the money was either gambled away or put into failed business ventures. Prosecutors painted a different picture and said that Rostohar also spent a large sum on luxury cars, watches and private jets to exotic locations, where the married Rostohar wined and dined women who were half his age.

The fraud was perpetrated in two ways, through online payments Rostohar set up, which directed money into his accounts, or by forging the signature of an employee at the credit union on checks payable to himself. An employee discovered the fraud when she saw a check made out to Rostohar for $35,000. The employee then went back a few months and discovered payments made to Rostohar for nearly four million dollars in that time frame.

Before joining the CBS Credit Union, Rostohar was an administrator for the National Credit Union Administraton, a position he says enabled him to avoid detection for a long time because he knew what examiners looked for when studying a credit union’s finances. The judge gave Rostohar a longer sentence than both the government and the defense had requested.

With a Middle Name Like Prosper…

A Nigerian national living in Missouri was sentenced to four years and three months in prison without parole for filing false tax returns and for his part in various Internet scams that defrauded victims.

Segun Prosper Otaru, 27, was ordered to pay $26,056 in restitution and the same amount to the government. He entered the US on a student visa in 2013 but never took any classes. Since arriving in the US, he has worked with an organized crime network, has had 13 aliases and numerous bank accounts with fake identities. Otaru admitted to fraud through various Internet scams. Among them were listings on Craigslist for rental property that Otaru and his co-conspirators did not control. When victims responded they were asked to send a deposit to hold the property.

Otaru also filed as many as 167 false income tax returns that included stolen identities, false employers, wages and employment taxes paid. He and a partner received $24,356 in illegal tax refunds.

Scammers’ Target Gets Target to Help Catch Them

Two Los Angeles women, Ailing Lu and Ji Hyun Lee, both 25, are in jail and facing criminal charges as a result of an IRS scam that netted them thousands of dollars. The women were caught after one of their victims reported the fraud to the police.

The victim said he received a call from one of the women impersonating an IRS Agent. He was told he had to pay $2,200 in Target gift cards, or he would be arrested. The victim complied, and then reported the incident to the police.

Working with Target’s Loss Prevention Team, the police were able to compare surveillance video with footage from a similar investigation in Indiana and determined the suspects in both cases were the same. A search warrant revealed approximately $900,000 in new goods at two locations. Lu faces charges of theft by false pretenses and conspiracy to commit crime and Lee faces charges of conspiracy to commit crime

This Isn’t Child’s Play; Baltimore Mayor Didn’t Go by the Book

Former Baltimore Mayor Catherine Pugh has been indicted for committing fraud, evading federal taxes and illegally boosting her political campaign in association with a series of children’s books she self-published.

Pugh, 69, is alleged to have sold hundreds of thousands of dollars worth of her Healthy Holly books to a health care company whose board she sat on while a state senator. After she was paid, thousands of the books were never delivered.

The 11-count federal indictment alleges that Pugh formed a company whose sole mission was to accept kickbacks disguised as sales of the books, which feature a young African American girl who promotes the benefits of a healthy diet and exercise program.

The money from the non-existent books was illegally funneled to her political campaign through a straw company, and used for personal items, including a house. For the tax year 2016, Pugh claimed her taxable income was $31,020 and the tax due was $4,168. In reality, her taxable income was $322,365, and she approximately owed $102,444.

The federal government is hoping to seize a house owned by Pugh worth $770,000. Meanwhile, Pugh’s attorney claims that she is so fragile physically and mentally she is unable to make “major decisions.” If convicted, she could serve up to 100 years in prison.

Your IRS Questions Answered Here…

Question: I’m currently separated from my spouse, who owns his own business, and we are in the process of getting a divorce.  I have always filed jointly with my spouse and now the IRS is sending me notices stating I owe $67,000.  I have no idea how they are coming up with this amount as my spouse said he was paying the IRS.

Answer: You may be able to avoid this liability entirely under the IRS’s Innocent Spouse Relief rules.  Under federal law if an income tax return is signed by both husband and wife, both spouses are 100% responsible for the taxes owed.  However, the law permits special consideration where a spouse cannot be held responsible for mistakes that are attributable to the other spouse.

If you meet the following criteria you may be able to apply for innocent spouse relief:  Your spouse didn’t report all their income; and you were not aware of it and no reason to know about it when you signed the tax return; and it would be unfair to hold you liable for the taxes owed due to your spouse’s error. If you feel you were deceived by your spouse or tricked into signing a return you thought was correct this will help your case too.  There are many other ways you may be eligible for relief under the IRS’s innocent spouse rules and we can help sort this out and determine the proper path for resolution.

Unusual Taxes Throughout History All Over the World

In ancient Egypt people were taxed on purchasing cooking oil.  They were also forbidden from using the oil more than once.

During the Middle Ages, European governments taxed soap.  This law stayed in effect for years to come, with Great Britain taxing soap until 1835.

Russian Emperor Peter the Great placed a tax on beards in 1705.  He wanted the men to have the same clean-shaven look as the men in western Europe.  He hoped the tax would encourage Russian men shave to avoid paying the tax.

In the 14th Century the French taxed salt, also known as the gabelle.  It was one of the most unpopular taxes and said to have been one of many issues that contributed to the French Revolution.

Like Father Like Son Land Both in Jail

George Bussanich Sr., and his son George Bussanich Jr., of New Jersey both pleaded guilty in Newark federal court to one count of tax evasion.  Bussanich Sr. also pleaded guilty to one count of bank fraud conspiracy.

Between 2009 and 2012 the Bussaniches’ conspired to defraud mortgage lenders though two sham short sales of properties that were owned by Bussanich Jr.  Bussanich Sr., who controlled medical clinics and surgical centers, recruited his business partner and an employee to pose as straw buyers for the properties.  Bussanich Sr. used his businesses to fund both short sale transactions.  His son negotiated the fraudulent short sales with lenders using false information.  Two years later, the elder Bussanich bought the properties back from the straw purchasers using money he owed his business partner.

Bussanich Sr. also failed to disclose on his tax return the hundreds of thousands of dollars of income he received from his medical clinics and surgery centers.  Besides using money from his businesses to fund the fraudulent short sales, he also purchased high-end luxury vehicles including two land Rovers and a Ferrari Spyder costing over $300,000.

The bank fraud conspiracy charge carries a maximum penalty of 30 years in prison and fines up to $1 million.  The tax evasion charge carries a maximum sentence of 5 years in prison and up to a $250,000 fine.  Sentencing is scheduled for January 2020.

Did You Know…

Most know that the hit Broadway musical Hamilton is based on Alexander Hamilton who was one of the first founding fathers, the first United States Secretary of Treasury and is on the $10 bill.

Here are some fun facts about Hamilton that you might not know:

  • He probably lied about his age.
    • He never lied about the actual day of his birth, January 11th, but he lied about the year he was born saying he was born in 1757.  His official birth records from Nevis, a small island in the Caribbean, state he was born in 1755.
  • He liked to write poetry.
    • A poem he wrote to Eliza Schuyler, who he was courting at the time, won her over so much she placed the poem in a little bag and wore it around her neck.  The two would later marry.
  • George Washington Wrote His Last Letter to Hamilton.
    • Hamilton had argued that a regular Military Academy needed to be established.  Two days before Washington died, he wrote his last letter to Hamilton agreeing and said it would be, “of primary importance to this country.”

Source:  Mental Floss

The Second Time Around Isn’t Always Better Than the First

Self-employed Contractor, Timothy Blackman, formerly from Auburn, New York, pleaded guilty in Federal court in Syracuse to filing a false tax return on October 2019.

Blackman who provided construction and remodeling services to customers, failed to file and pay income taxes for the years 2007 through 2010.  In June 2010 Blackman learned the IRS criminal division was investigating him, so he filed his 2007 tax return, but falsified it by not reporting his total income.

This wasn’t the first time Blackman had been convicted of tax evasion.  In 2004, he also pleaded guilty to felony tax evasion in the Northern District of New York and received a sentence of 15 months’ imprisonment.

Sentencing for Blackman is scheduled for February 2020 and carries a maximum sentence of three years in prison, one year of supervised release, and a fine of up to $250,000.

You Better Watch Out— The IRS (Not Santa) is Coming to Town!

IRS Deputy Commissioner Darren Guillot recently spoke at a conference of CPA’s, Attorneys and EA’s and said, “Enforcement is coming”.  Enforcement is when the IRS can take your belongings by force.  This includes taking the money out of your bank account.  garnishing your paycheck or putting a lien on your house.  As a Tax Resolution Specialist, if you owe money to the IRS, I can help!  Questions?  Contact me at: 610-388-4474