AGenda: fraud issues

16 Pages·1995·1.1 MB·English

by  Massachusetts. Attorney General's Office

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AGenda:
Update from Attorney General Scott Harshbaigur
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University July, 1998
Dear Colleague:
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In June, I had the honor of addressing members of the International Association of Insurance Fraud Agencies at
their annual meeting in Boston.
Addressing this association gave me the opportunity to reflect on how far we have come in the areas of fraud
J srevention, detection, and prosecution. Eightyears ago,whenIwascampaigningtobeyourAttorneyGeneral, the
StateofinsurancefraudinMassachusettswas anembarrassment. Fromauto, healthandunemploymentinsurance
workers' compensation, costs were spiraling out of control. A key factor to those out-of-site rates was fraud.
low, eightyears later, we areseeingincrediblechange. Overthelastfouryears, autoinsurancerateshave dropped
19 percent Unemployment insurance is down 21 percentthis year alone. And workers' compensation rates have
.
jlunged more than 48 percent since 1993 — saving Massachusetts employers more than $1.2 billion per year!
lere are several key factors responsible for this progress, including some critical changes by the Legislature.
lotherfactor is the revolutionary approachwehave takeninthis state to
lighting insurance fraud — our partnership with the insurance industry. On the AGenda:
lr partnership is a national model for law enforcement and private
idustry working together to protect consumers and businesses alike.
TelemarketingFraud
lat makes our approach effective is thatall components work together: 2
police cooperation, industry action, public awareness and active MedicaidFraud
rosecution. 3,4
Prevailing Wage Violations
terms of prevention, one can look at the progress made in Worcester,
5,6
Irhere auto insurance rates were among the highest. Working as a HarshbargerAnnounces
partnership, we identified fraud patterns and changed the way collisions HotlineforConsumers in
were being reported; we changed traffic patterns atkey intersections, and HancockInsurance Case
me campaigned to educate the public aboutthe real costs of fraud. 6
Down
aggressive prosecutionis, ofcourse, a deterrentitself. Peoplewhocommit HarshbargerShuts
BogusInsurance Operation
Hiekind offraud are likely to be doing another kind, too. If the pressure's
6
Ininone area,theywillswitchtheirfocus tosomethingelse. Tostopthese
Economic Crimes
Jrequentfliers/' wemustlookatthewholepictureandgoaftertheproblem
in an integrated way. To do so, my office created a whole bureau to 7,11
TaxEvasion
institutionalizethatintegratedstrategyandprosecuteallplayersatalllevels
8
in the system.
SweepNets 18
Again, none of this could have been possible without the valuable Tax-ORelatedIndictments
partnership developed between my office and private insurers. Our 8
relationshipwiththe InsuranceFraud Bureau (IFB) is a perfectexample of Auto InsuranceFraud
iour effectiveness. The IFB is a not-for-profit organization, funded by the 9
-
insurance industry. Ithas 45 investigators and research staff plus 13 of Harshbarger, City ofWorcester
rany lawyers who actually prosecute the cases. This comprehensive fraud- LaunchInitiative to Lower Car
We
fighting partnership has resulted in rate decreases across the board. Insurance Costs
we
havemadetremendous progress inthefightagainstfraud and, as look 9
toward future challenges, I am certain it will be the strength of this and Workers' Compensation
tother important partnerships thatwill bring us results. and Unemployment
InsuranceFraud
10
AGO
andIFB Co-Sponsor
Seminaron StagedandJump-In
AutoAccidents
12
Scott Harshbarger
Office of the Attorney General One Ashburton Place Boston, MA 02108-1697
July 1998
TELEMARlK^ Stoneham Telemarketer
Ordered to Pay $500,000
Swampscott Telemarketer Charged Civil Penalty
with Mail and Wire Fraud
A Stoneham telemarketer who was
Nationwide Scheme Uncovered by
sued as part of a nationwide federal
JointFederal and State Investigation and state sweep of so-called badge-
related fundraising fraud was
Earlier this year, United States Attorney Donald Stern and ordered to pay a $500,000 civil
Massachusetts Attorney GeneralScott Harshbarger announced the penalty and is permanently barred
arrest of a Swampscottman on federal charges of mail and wire fraud from sohciting Massachusetts
in connection with a nationwide telemarketing scheme to sell donors.
"business opportunities" in the pay telephone business.
The telemarketer allegedly violated
The man, formerly ofNewburyport, Haverhill, Lynnfield, and Florida, Massachusetts laws while raising
was charged in a 35 countindictmentwith engaging in a scheme to money on behalfof the California-
defraud approximately 70 investors of $700,000. based Disabled Peace Officers
Association and the Texas-based
Advertising in papers across the nation, the man pitched investors, American Veteran's Relief Fund.
who typically paid$14,500forfive payphones, statingthathis company Prospective donors were led to
wouldfind locations withproven income streams and would install the
believe that the solicitors calling
payphones. Healso promised a "0" percentfinancingprogram for were veterans or police officers
additionalphones and utilized phony references, who posed as
instead ofpaid fundraisers.
successfulinvestors, to seal the deals. Ultimately, after sending certified Employees of the telemarketer
bank checks and wiringfunds directly to the man's company, the phoned residents in 45
customerseither did notreceive telephones or received old, unusable
Massachusetts communities to
telephones withoutthenecessary circuitry to make the phones operable.
solicit donations for the purchase of
crutches, wheelchairs and other
Citing the case as a prime example of one where state and federal law
items for veterans in local veterans'
enforcementwork in partnership to protectconsumers, the Attorney
hospitals. The complaint alleged,
General noted mattheinvestigationleadingto the indictmentstemmed
however, that the charity only
fromcomplaintsfiled withhisConsumer Hotline. Ifconvicted, the
defendantcould face a maximum penalty offive years imprisonment, provided a few food baskets, books
and games worth approximately
a fine of$250,000, and restitution on each ofthe 35 counts.
$650 to veterans' hospitals in the
Commonwealth over a two-year
/? S\ period. Additionally, callers led
potential donors to believe they had
This publication is available in alternative made previous donations, when
formats for people with disabilities. For thatwas almostnever the case.
your copy, please call or write: Finally, telemarketers asked
merchants to buy advertising in a
law enforcementpublication, telling
Denise Snyder
them their donations would benefit
Publications Coordinator local departments and aid injured
or disabled officers and their
Office of the Attorney General families, when this was not the
One Ashburton Place case. They also told potential
MA donors that, inexchange for a
Boston, 02108
donation, they would receive police
decals for car and store windows,
implying thatthose donors would
[phone], ext. 2674 receive preferential treatment from
local police.
^
AGenda: Fraud Issues Page 2
July 1998
MEDICAID FRAUD
Dentist Pleads Guilty
I'liiMii. Hiillinilllllllllll
to Medicaid Fraud
Formed in 1978, theAttorney General's Medicaid Fraud Received over $400G in
Control Unit (MFCU) is currently celebrating20 years of Medicaid Funds
fighting health carefraud, waste and abuse in Massachusetts.
MFCU In May, a dentist with a practice
is charged with the oversight ofallMedicaid providers in Swampscottpled guilty to
in the Commonwealth Nationally recognizedfor its law charges thatshe stole thousands
enforcmentefforts, theMassachusetts MFCU has returned of dollars from the state's
over the last20 years $43 million to the state's Medicaid Medicaid program, as well as
received welfare benefits to which
system. In the last eightyears alone, under the leadership of
she wasn't entitled.
MFCU
Attorney General ScottHarshbarger, has recovered
$28 millionfor the state and has obtained 332 convictions. The dentist, who is a resident of
Marblehead, was sentenced to one
Medicaid Fraud Control Unit Collects $450,000 year in the House of Corrections
suspended, and was ordered to
through Amnesty Program
pay $30,000 in fines and $30,000
restitution. She is also excluded
Last month, Attorney General Scott Harshbarger announced thathis from seeking funds from the
Medicaid Fraud Control Unit (MFCU) has recovered in excess of Medicaid program, and is barred
$450,000 as part of an amnesty initiative involving more than 600 for five years from working in the
pharmacies that overcharged the Massachusetts Medicaid program for Medicare program.
prescriptions.
The dentisthad been a Medicaid
The Attorney General's "Voluntary Disclosure Program" was created provider in the state sinceJune
following a six-month MFCU investigation thatfound more than 600 1995. Since that time she had
Massachusetts pharmacies had charged the state Medicaid program full received more than $400,000 in
price for partially filled prescriptions and prescriptions that were Medicaid funding; however, after
ordered butnever delivered. a review ofherbillingby the
AttorneyGeneral's Medicaid Fraud
MFCU investigators found thatpharmacies were dispensingpartially ControlUnit, itwas revealed that
filled prescriptions to customers when they lacked sufficientstocks of a only afractionofthe workthe
drug. After receiving the partial prescriptions, the pharmacies would dentisthadclaimed to perform
request that patients come back for the remainder of their prescriptions. was infactdone. Inone instance,
In many instances the patients would not return, but the pharmacies' the provider claimed to have
automatic computer billing system continued to charge the Medicaid performed 37 dental restorations
program the cost offull prescriptions. The investigation focused on for a particular client; the patient,
billing dates submitted to Medicaid betweenJanuary 1994 and January however, stated that only five
1998. fillings had been done by the
doctor.
In February, all ofthe state's 1,100 pharmacies were notified that they
were required by state law to review and report any potential In addition to the Medicaid fraud
overcharges thatmay have occurred as a result ofprescriptions billed to charges, the dentist was also
Medicaid butnot dispensed. They were charged with receiving welfare
also asked to detail how they refund the benefits from 1993 to 1994 when
Medicaid accountfor such overcharges. she was not eligible to receive
them. The defendant was
Under the amnesty initiative, MFCU has employed during partof that time
reached civil settlement agreements with, or and only reported $385 of the
obtained reimbursement plans from, atleast combined income of$16,750 she
90 percent ofthe pharmacies in received over that period of time.
Massachusetts, and has collected $453,000 in
Medicaid overcharges for the
Commonwealth.
AGenda: Fraud Issues Page 3
July 1998
Delaware Pharmaceutical Co. to Pay $100,000 to Quincy Doctor Indicted
Settle Kickback Allegations in Medicaid Fraud Case
Allegedly ordered thousands
A
national drug manufacturer has agreed to a $100,000 settlement over ofunnecessary tests to collect
claims that the company violated Massachusetts Medicaid anti-kickback
benefits
statutes. The Delaware-based manufacturer and distributor to
Massachusetts chain pharmacies and others allegedly offered rebates up A
Quincy orthopedic surgeon was
to $2 million to Walgreen Corporation, and $1.5 to CVS Corporation if May
indicted in for allegedly
they converted from competitors' products to their product line.
subjecting 19 patients, who were
Medicaid recipients, to nearly
The agreement settles allegation that the Delaware company's
2,000 unnecessary medical tests
promotional practices violated Massachusetts anti-kickback laws. The
and procedures in order to
company will discontinue its rebate program and will not engage in
fraudulently collect over $100,000
agreements in which it offers a lump-sum paymentunrelated to the
in Medicaid reimbursements.
volume ofproduct ordered or because a pharmacy converts to its
product line. The company has also agreed to distribute a corporate
The doctor allegedly devised a
compliance plan addressing health care fraud and abuse in an effort to
plan in which, over a three year
ensure future compliance with federal and state laws.
period, he performed
unwarranted medical procedures
ThiswastheeighthMedicaidFraudControlUnitanti-
on his patients. He is charged
kickback enforcement effort involving drug makers
with repeatedly subjecting
since 1994, resulting in over $1 million returned to
patients to unnecessary x-rays and
theMedicaidprogram.
steroid injections, creating a
substantial risk ofharm to them
without any medical benefit.
Fitchburg Pharmacist Pleads Guilty to Medicaid Some patients received as many as
Fraud and Larceny 50 unwarranted x-rays, along with
over 80 injections, throughout
their treatmentperiod. The
In March, a Fitchburg pharmacy and its owner pleaded guilty to 30 investigation by Attorney General
counts of defrauding the state Medicaid program. Investigators from Harshbarger's office uncovered 19
Attorney General Harshbarger's Medicaid Fraud Control Unitfocused
patients whose treatmentresulted
on pharmacy claims submitted to the Division of Medical Assistance by in a total of 710 x-rays and over
the pharmacy owner for medications and supplies not delivered or
1,100 "trigger point" injections.
administered to at least eleven residents of the Grand View Rest Home Reports show that Medicaid paid
in Fitchburg.
the doctor over $104,000 for these
treatments.
The pharmacy owner, who is from New Hampshire, was sentenced to
one year in the house ofcorrection suspended, two years probation, and Ifconvicted, Dr. Goodman faces
assessed fines and restitution totaling $5,000. In addition, the owner up to 5 years in state prison, along
losthis right to participate in the state and federal Medicaid and with a maximum of$10,000 in
Medicare programs.
fines for each of 76 counts of
Medicaid fraud.
The Grand View Rest Home cooperated fully in the investigation, with
investigators citing the high quality ofrecord keeping as instrumental in
obtaining the guilty pleas. The DEA's Drug Diversion Unit also assisted
in the investigation.
AGenda: Fraud Issues Page 4
July 1998
WAGE
PREVAILING VIOLATIONS Hi Road Repair Firm to Pay
iiiiis
$200,000 in Back Wages
&
Infiscal year 1998 alone, theAttorney General's Fair Labor Business Practices
Division recovered nearly $1.5 million owed to working men and women.More Earlier this year, a Peabody
than $9 million in wages has been returned to thousands ofworkers in construction company that
Massachusetts through enforcement ofthe state wage laws since September 1993, specializes in road repair projects
when the Legislature gave the Attorney General the responsibilities oftheformer agreed to a settlement over alleged
Division ofLabor and Industries. prevailing wage law violations that
calls for payment of nearly $200,000
in back wages, benefits and interest
to approximately 40 present and
Grand Jury Returns 90 Indictments Against former employees.
CA/T Trucking Firms for Wage law Violations
The company, which worked on
Firms allegedlyfailed to pay more than $500,000
road repair projects throughout the
to Big Dig workers Commonwealth, allegedly failed to
pay workers the prevailing wage,
Sixteen individuals and seven corporations work- arguing that because they use a
ing for the Central Artery/Third Harbor Tunnel different repair technique than
Project(CA/T) were indicted in May on wage law violations. The other road construction firms, they
indictments alleged thatthese individuals and companies failed to pay were notsubject to the prevailing
more than$500,000 in wages and benefits to 60 truck drivers. wage rates. A unanimous decision
by the SupremeJudicial Court
The indictments are part of an ongoing effort by Attorney General reaffirmed the validity of the State
Harshbarger's office to protect Big Dig workers and to deter potential Prevailing Wage Law, saying that
waste, fraud and abuse within the Project. the company's employees were
subject to prevailing wage rates.
State law requires thatworkers on public construction projects be paid
the prevailing wage, a minimum hourly rate ofpay for the type ofwork
they perform. The rate applies to truckers working on the Big Dig, Sunderland Man
where truck drivers comprise a significant portion ofthe project's work
Sentenced to 80 Days
force. The AG's office alleges that the indicted CA/T contractors
maintained phony payroll records thatfalsely portrayed their drivers as for Withholding $4,000
receiving the proper rates ofpay. They also allegedly failed to provide in Workers' Wages
workers compensation coverage for their employees and did notmake
required contributions to the UnemploymentTrustFund on their behalf.
In May, a Sunderland man who
runs a landscaping company was
sentenced to serve 80 days injail for
Springfield Woman, Company Plead Guilty to failing to pay his employees over
Wage Violations; Owe employees more than $25,000 $4,000 in overtime and failing to
pay unemployment tax
contributions to the Division of
A Springfield woman and her construction company pled guilty to Employment and Training (DET).
charges they failed to pay employees more man $25,000 owed them for
construction work atthe AmherstTown Hall. The charges arose when one of the
man's former employees filed a
The woman and hercompany pled guilty to 14 counts offailing to pay
complaintwith the Attorney
the prevailing wage rate fromJune to August1996, and eightcounts of
General's office accusing his former
failing to payunemploymenttaxes fromJanuary 1995 to January 1997. boss ofrefusingto pay him the
time-and-a-half wage rate for
Both were ordered to pay up to $25,737 in backwages to the employees working over forty hours a week.
and more than $19,000 to the Commonwealth in back unemployment
Investigations into the payroll
taxes. The defendants were also placed on three years probation and records ofthe landscaping company
debarred from public works construction for six months.
revealed thatfor nearly a year-long
Continued, nextpage.
AGenda: Fraud Issues Page 5
July 1998
period the man neglected to Harshbarger Announces Hotline for Consumer in
pay proper overtime
Hancock Insurance Unfair Sales Practices Case
compensation to up to 16 of
his employees. Total Statewide reliefcould reach $40 Million
Attorney General Harshbarger has set up a toll-free hotline for state consumers
Woburn Construction whomaybe eligible forreliefundera multi-milliondollaragreementhis office
Company Agrees to negotiated with theJohn HancockLife insurance Co. The agreement settles
claimsthat Hancockand its agents engaged in deceptive sales practices that
Pay $75,000 for Wage resulted in thousands ofMassachusetts consumers not getting the insurance
Violations coverage they though they had bought.
Under the settlement, thousands ofMassachusetts policyholderswho may have
A Woburn construction firm beenharmed will receive reliefworth asmuch as $40 millionstatewide. The
agreed to pay $75,000 for wage settlementis a result ofa major investigationby theAttorneyGeneral's Regulated
violations and entered pleas on
Industries Divisioninto consumerallegations ofunfairanddeceptivelifeinsurance
several other charges stemming
salespracticesbyHancock. TheHotline number is 1-888-514-MASS.
from fair labor violations that
allegedly occurred during The settlementprovides foravariety ofreliefto harmed policyholders, including
public constructionprojects possiblecashrefunds, premiumwaivers and reinstatementoflapsed policies.
from 1993 to 1994. The charges
include failure to pay prevailing More than 300,000 of Hancock's Massachusetts policyholders who purchased
wages on publicworks projects, whole life polices between 1979 and 1996 were notified of their opportunity to
failure to payworkers' participate in a remedy for the alleged misrepresentationsmade by agents.
compensation premiums, and Typical claims include:
failure to pay unemployment
• Churning or Replacement convincing a customer to turn in an old policy
taxes. :
for a new one, without fully disclosing all the risks and costs of doing so;
The firmpled guilty to the • Vanishing PremiumSales leadinga customerto believe he orshewill haveto
:
charge of failing to pay pay fewerpremiums than actually required by the termsofthe policy;
unemployment taxes and a • Selling life insurance as something other than insurance for example, as a
:
judge continued without a
retirement plan or pension option.
finding the prevailingwage and
workers' compensationcharges. In February 1997, Harshbarger announced a multi-million dollar settlement
with Prudential Insurance Company to settle similar claims ofunfair and
The company agreed to pay deceptive sales practices.
$75,000 in restitution for back
Down
wages, unemploymenttaxes, Harshbarger Shuts Bogus Insurance Co.
and reimbursement to the
insurance pool. In addition, it AttorneyGeneral Harshbarger obtained acourt orderprohibitinga Fall River
will submit to a three month insurancegroup fromconductingbusiness intheCommonwealth. Thecompany
debarment frombiddingon wasallegedlysellingphonyhealthinsurancetohundredsofunsuspectingclients.
state and local public works
projects. The court orderprohibits the company and its Wareham owner from providing
health insurance, sellinghealth insurance as an agent, broker or intermediary,
The company owner was placed and or collecting insurance premiums.
on pre-trial probation for the
same charges and, as a The order stems from incidents that occurred over the last two years including
conditionofprobation, he will the alleged improper sale ofhealth insurance to more than 300 clients, the
regularly submitweekly majority ofwhichwere self-employed, employees ofsmallbusinesses, and
certified payroll records to the retirees fromtowns ineasternMassachusetts. The companywas not licensed to
Attorney General's office for provide health insurance in this state and allegedly misrepresented its abilitytc
monitoring. pay claims for clients. The alleged scheme allowed the company to collect
hundredsofthousandsofdollars in insurance premiums,which were appar-
ently used for the owner's personal expenses and other business ventures.
The Attorney General is seeking full restitution and penalties of up to $5,000
for each sale ofthe insurance.
AGenda: Fraud Issues Page 6
July 1998
ECONOMIC CRIMES
HI Financial Advisor Pleads
IPIII
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Guilty to Stealing $2
Operator of Bogus Securities Co. Convicted, Million; Sentenced to 5
Sentenced to 4 Years for Stealing $1.5 Million 1/2 Years in Prison
from Immigrant Victims
Late lastfall, a former stock broker /
The operator ofa bogus, Boston-based "investmenthouse" that catered financial advisor pled guilty to
to individuals seeking to engage in trading on the foreign currency charges he stole approximately $2
market, has been sentenced to four years in prison and ordered to pay million from at least 30 clients, many
$93,000 in restitution. Earlier in the case, the company was ordered to of whom were elderly and had
pay $132,000 in restitution to its victims. entrusted the defendant with their
life savings.
Stealing from mostly immigrantvictims in Chinatown, the defendant
had the primary role in an elaborate scam that duped at least 150 The financial advisor ran two
investors into believing they were buying and selling foreign currency
elaborate schemes in which he urged
on the margin through accounts atthe Bank of England. About two clients to invest money in phony tax
years ago, the defendant and five others, along with the company itself, exempt funds as well as in a dinner
were indicted on charges including larceny, securities fraud, running a
club thatfailed within a year of
bucket shop (bogus operation), fraudulently overstating a company's
opening. The thefts and securities
assets, and conspiracy. One of the other defendants has also been found
violations involve former clients of
guilty (see related story) and charges are still pending against the others. the defendant's during his tenure
Through misrepresentations, the as a registered financial represen-
Manager of Bogus
defendant and others induced tative with two different Boston-
individuals to invest in what Company Convicted for based firms, for which he managed
appeared to be the foreign currency Involvement in Scheme and owned several branch offices
spot market. Victims included that Stole $1.5 Million in Massachusetts and Florida.
Chinese immigrants, college-age
students seeking to learn how to The manager of a bogus Several ofthe defendant's clients
make investments, Russian international investment were elderly, and many of them
immigrantsand others. The scheme thatstole more than losttheir life savings. The defen-
company allegedlysetup seminars $1.5 millionfrommostly dantused much ofthe money he
for peopleto learnhowto trade immigrantvictims inChinatown stole for personal use, including
foreigncurrency. The defendant wasfound guiltyby ajury paying offmortgages for offices he
held himself outas a "trading followinga threeweektrial. kept in Boston and Florida, paying
expert" for homes in both states, investing
The defendant,whowas the in a failed dinner club in Boca
The defendantlater admitted that chiefmanager oftheBoston Raton, Florida, and flyingback and
the company had no accountwith office, incharge ofadvertising, forth between the two communities.
the Bank ofEngland nor did ituse recruitmentand trading, was
the money from investors to convicted oflarceny,securities The defendantwas sentenced to 66
purchase foreign currency. Instead, fraud, filingfalse corporate months ofcommitted time and 250
he and the company allegedly assets andrunninga bucket hours of community service. He
altered quotes on foreign currency shop — all in connection with was also ordered to stay out of the
rates and charged commission the bogus investmentcompany securities business for the rest of
structures guaranteed to result in a with which he was involved. his career and to pay $650,000 in
loss to investors on "paper only" restitution.
trades. They then allegedlyused the Sentencing ofthe defendantis
funds theyreceivedfrom investors forthcoming. He faces The Securities Division of the
fortheir personaluse. Individual deportation to his native Brazil, Secretary ofthe Commonwealth
victims lostanywherefrom$1,000 to as well as a prison sentence. worked with the Attorney
tens ofthousands of dollars. The guilty verdictfollows a General's office in investigating
guilty plea by a co-conspirator
this case.
The defendantis allegedly who was one of the founders More on
connected to similar schemes and the principal operator of Economic
previously perpetrated in London,
the scheme. Crimes,
Vancouver, and Toronto.
page 11
AGenda: Fraud Issues Page 7
July 1998
TAX EVASION
iiii Former President of
BIIIIIIIIIIII!!!
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Pharmaceutical Co. Pleads
AG
Harshbarger, Department of Revenue Guilty to Tax Charges
Indict 18 in Tax Sweep
The former president and CEO ofan
In April, Attorney General Scott Harshbarger and Revenue internationalpharmaceutical company
Commissioner Mitchell Adams announced that 18 indictments were pled guilty tofiling falsefederaltax
returned by a Grand Jury for criminal tax charges. The indictments, of returns which failed to reportover
both individuals and corporations, cover more than $19 million in $1,000,000 in income he received from the
—
unreported income including income from video poker machines Westboro-based company. The tax loss
allegedly found in taverns in the western part ofthe state. agreed to in the plea includes the amount
owed bythe former companypresidentto
The targets ofthe sweep were spread across the Commonwealth, the Massachusetts Departmentof
stretching from Nantucket to Berkshire County. Collectively, the Revenue for failingto fully declareincome
criminal indictment charges represented some $19 million dollars in for threeyears onhis state income tax
unreported income and taxable receipts on which almost $750,000 in
returns.
taxes are owed to the state.
Pleading guilty to three counts of
Included in the indictments were charges against: willfully filing false income tax returns
for calendar years 1993 - 1995, the
• A Dalton man who owns a video arcade in Pittsfield and allegedly defendant was sentenced to 21 months
failed to report approximately $7 million in taxable receipts. The in federal prison.
defendant also allegedly leases video and other vending machines
to area bars, for which receipts were allegedly notreported by the As President and CEO, the defendant
vendor or several of the bars in which his machines were installed. used the company to pay for more than a
million dollars in personal expenses
• A Dalton bar owner who allegedly received more than $116,000 in above and beyond his salary. Those
video poker profits for which he failed to pay income taxes. expenses,which should have been
considered income, includethe costs for
• A Pittsfield bar owner who allegedly received more than $28,000 repairs and renovations forhis three
in video poker profits for which he failed to pay income taxes. homes. Employing thesamecontractorsas
• A Monterey man who owns a restaurant in Sheffield who usedbyhiscompany, the defendant
instructed theworkers to include the cost
allegedly received more than $27,000 in video poker profits for
ofthe homerepairsinthebillssubmittedto
which he failed to pay income taxes.
thepharmaceuticalcompany. The
• A NorthAdamsbar ownerwhoallegedly received more than defendantalsocausedthecompanytopay
$22,000invideo poker profits forwhich he failed to payincome forpersonalvacationsand thehiringof
prostitutes.
taxes.
• A Nantucketcouple for failing to file income tax and corporate Fearing the scheme would be
excise tax returns for theirjewelry store, allegedly failing to report discovered, the defendantand another
more than $1.26 million in taxable income over a five-year period. company executive destroyed records
and requested that third parties destroy
• A Harvard man for willful failure to file and pay state income records relating to the work done on the
taxes in the amount of$22,757 on approximately $400,000 of defendant's homes. The executive that
income earned over a five-year period. aided in destroying records has pled
guilty to felony charges.
A
• retailbeddingand furniturechainand its bookkeeperforfailureto
paysales tax owedbythecompany. Itis alleged thatthe amountof Thecasewas investigated by theFederal
sales tax owed is approximately$115,000 onsales ofover$2.3 Bureau ofInvestigation, InternalRevenue
million dollars. Service, PostInspectionService, and the
Massachusetts DepartmentofRevenue. It
The Attorney General's Economic Crimes Division works closely with wasjointlyprosecutedbytheUS.
the Department ofRevenue's Criminal Investigation Bureau which has Attorney's Office and
about a dozen investigators who workyear-round concentrating on
the Office ofthe Attorney
criminal tax investigations across the state.
General.
AGenda: Fraud Issues Page 8