LAWFUEL – The Legal Newswire – MICHAEL J. GARCIA, the United States Attorney for the Southern District of New York, announced that investment banker RICHARD JOSEPHBERG was sentenced today in White Plains federal court to 50 months’ imprisonment based on his involvement in a
scheme to evade payment of a multimillion-dollar tax debt owed by
JOSEPHBERG to the Internal Revenue Service (“IRS”) as a result of
his participation in tax shelter transactions.
JOSEPHBERG, 60, of Greenwich, Connecticut, and formerly
of Armonk, New York, was convicted after a four-week trial in April
2007 of all 17 counts of an Indictment charging him with tax
evasion, conspiracy, filing false income tax returns, failure to
file tax returns, failure to pay taxes, obstructing the IRS, and
health care fraud.
According to the testimony and proof at trial,
JOSEPHBERG, a former securities analyst at Goldman Sachs, was a
founding partner of J.R Cralin & Co., a company that promoted and
sold various tax shelter transactions between 1977 and 1985. Those
tax shelter transactions — which were carried on with tax shelter
promoters such as Bernard “Fred” Manko and Charles Atkins, both of
whom were later convicted in the United States District Court for
the Southern District of New York for selling fraudulent tax
shelter losses — resulted in hundreds of millions of dollars of
bogus losses being claimed by investors in the Cralin tax shelters.
JOSEPHBERG and his Cralin partners also claimed the bogus losses on
their own tax returns.
Two of JOSEPHBERG’s co-workers at Cralin – Jeffrey
Feldman and Paul Foont – were also convicted, in 1990. Following
the IRS’s challenge to the Cralin-based losses claimed by
JOSEPHBERG and others, and the criminal conviction of Feldman and
Foont, the IRS issued notices to JOSEPHBERG for more than $1.5
million in taxes JOSEPHBERG owed for the period 1977-1985. Those
taxes were based on the $3.6 million of fee and other income
JOSEPHBERG was paid between 1977 and 1985 for selling the Cralin
tax shelters, and his payment of less than 1% of that amount in
taxes during that time period.
According to the proof at trial, JOSEPHBERG took various
corrupt steps between 1994 and 2004 to evade payment of his tax
debt stemming from 1977-1985, which, by 1995, had grown, with
interest and penalties, to approximately $17 million.
Those corrupt steps included:
(a) directing income (in the form of stock he received in
exchange for his investment banking services) and assets to be paid
not to himself but, instead, into nominee bank accounts established
in the names of his children (one of whom was an infant at the
time) for the purpose of concealing and attempting to conceal his
true income and assets;
(b) directing the hundreds of thousands of dollars of income
he was receiving between 1995 and 2003 to be paid to a newlycreated
corporation and partnership he created and controlled and
thereafter diverting that income to pay various personal expenses
(including hundreds of thousands of dollars of country club dues
and rent on homes in Armonk, New York, and Greenwich, Connecticut),
again in order to create the appearance that JOSEPHBERG had little
or no income;
(c) causing false information regarding his income and assets
to be submitted to an IRS Revenue Officer for the purpose of
concealing and attempting to conceal his income and assets; and
(d) causing bankruptcy petitions to be filed for himself and
his wife, resulting in false and misleading claims and statements
being made by JOSEPHBERG and his wife when questioned, in written
interrogatories and during depositions, about JOSEPHBERG’s assets
and liabilities.
Also according to the proof at trial, JOSEPHBERG
committed a host of other tax crimes during the period from 1997 to
2004 including: (I) tax evasion and filing false tax returns for
the tax years 1997-98, in which JOSEPHBERG — in order to evade
assessment of his tax liabilities for those tax years — claimed
falsely that his substantial income for those years was offset by
a multimillion-dollar net operating loss, and failed to report
taxes due from his employment of a live-in household employee, whom
JOSEPHBERG paid in cash to clean and cook in JOSEPHBERG’s home, as
well as serve as a nanny for his youngest child; (ii) failing to
file timely Individual Income Tax Returns for himself for the
period 1999-2002, including for periods when he was under criminal
investigation; (iii) willfully failing to pay taxes due for the tax
years 1999-2003, notwithstanding that he had ample funds in
personal bank accounts to pay some or all of the liabilities; and
(iv) conspiring with the accountant who prepared his tax returns
for the period 1977-97 (who pleaded guilty and testified at trial)
to file false tax returns and to defraud JOSEPHBERG’s health care
insurer, Oxford Health Plans, by falsely representing that
JOSEPHBERG’s company had multiple employees and thus was entitled
to a group health-care policy, when in truth JOSEPHBERG was the
sole employee of the company.
United States District Judge CHARLES L. BRIEANT directed
JOSEPHBERG to pay restitution in the amount of $21,000 for the
health care fraud conviction, and to serve a 3-year term of
supervised release after his release from prison. JOSEPHBERG is
scheduled to surrender to the Bureau of Prisons on October 23,
2007.
Mr. GARCIA praised the IRS and the Federal Bureau of
Investigation for their efforts in this investigation and
prosecution.
Assistant United States Attorneys STANLEY J. OKULA, JR.,
and Special Assistant United States Attorney ANDREW KAMEROS are in
charge of the prosecution.
