Restaurant’s Tax Preparer to be Sentenced Later This Year
Los Angeles – LawFuel.com – US Law News Daily – This morning, the owner of Barsac Brasserie, a restaurant located in North Hollywood, was sentenced to spend 24 months in federal prison after previously pleading guilty to two counts of tax evasion for the years 2003 and 2004.
James Saliba, 59, of Los Angeles, appeared before United States District Judge Otis D. Wright who ordered that, in addition to prison, Saliba was to spend 3 years on supervised release upon completion of his prison sentence. Additionally, as a condition of his sentence, Judge Wright ordered Saliba to cooperate with the IRS in the determination and collection of all back taxes that he is liable for.
In his plea agreement, Saliba admitted that he failed to report all of Barsac’s business receipts to the IRS for the years 2001 through 2005. To do this, Saliba underreported the gross sales of Barsac by using an account he called “Accrued Management Fees”, into which Saliba recorded some of Barsac’s sales. The effect this had on the gross receipts of the business was to artificially reduce the sales of Barsac that were reported to the IRS.
Additionally, Saliba admitted that he overstated expenses by writing corporate checks from Barsac to his wife, Lisa Long, and then deducting these payments as expenses on the returns for the restaurant. Saliba also admitted that he overstated Barsac’s expenses by writing checks to “Cash”, and expensing the payments as tips, paying a small potion of these negotiated checks to employees and skimming the balance for himself.
Saliba admitted that he willfully evaded income taxes for the years 2001 through 2005 by failing to report $1,921,646 to the IRS resulting in additional tax due of $442,905. In addition to the tax due, Saliba agreed that he was liable for the civil fraud penalty imposed by the IRS on the tax he owes, which is assessed at a rate of 75% of the tax due to the government. Including interest and the civil fraud penalty, Saliba agreed that he owed the IRS $938,257
In a related case, Irwin Petlak, who owned and operated a bookkeeping and income tax preparation business in Woodland Hills, pleaded guilty in 2007 to aiding in the preparation of a false tax return related to his conduct in the preparation of Barsac’s and Saliba’s income tax returns.
According to Petlak’s plea agreement, Saliba hired Petlak to provide monthly bookkeeping services and to prepare business and personal tax returns. Petlak admitted that he created the false accounting entries using the Accrued Management Fees account to offset the legitimate sales of Saliba’s restaurant, in order to hide the restaurant’s true income from the IRS. Specifically, Petlak admitted that, in 2002, he placed $171,247 of the restaurant’s business receipts into the Accrued Management Fees account and he listed a deduction for management consulting fees, paid to Saliba’s wife, that were not reported to her on a Form 1099 or W-2. Knowing that both the amount paid to Saliba’s wife and the amount included in the Accrued Management Fees account represented additional taxable income, Petlak prepared the 2002 personal tax returns for Saliba and his wife, failing to include these items. Petlak’s failure to include the income on Saliba’s return resulted in an additional tax due to the IRS of $40,346.
Judge Wright ordered Saliba to surrender to the United States Marshals Service and begin serving his sentence on December 29, 2009.
When sentenced later this year, Petlak faces up to 3 years in federal prison followed one year of supervised release and fines of up to $100,000. Petlak is scheduled to be sentenced on October 26, 2009.
The investigation and prosecution of Saliba and Petlak was conducted by IRS-Criminal Investigation in Los Angeles in conjunction with the United States Attorney’s Office for the Central District of California.