United States Department of Transportation - Federal Highway Administration FHWA Home Feedback

Fuel Tax Evasion Highlights, July 1995

Volume 4, Number 2 July 1995


IN THE NEWS

Lawrence Iorizzo, key figure in the New York bootleg gasoline market in the 1980's who turned government informant and was subsequently booted out of the witness protection program, was arrested in Bellevue, Washington by agents of the IRS Criminal Investigation Division. Iorizzo, a/k/a Lawrence M. Harrison, his sons Lawrence J. Harrison, Joseph M. Harrison and his daughter, Susie Mulry, and Peter F. Raneri were indicted in U.S. District Court in Texas on charges of tax evasion, wire fraud and money laundering in a scheme to defraud the Federal Government of more than $1.3 million in diesel taxes during 1989 and 1990. Iorizzo waived an extradition hearing. Dept. of Justice Press Release, 1/27/95. Seattle Post, 1/27/95; Bellevue Journal American, 1/30/95; The News Tribune, 1/28/95; Dallas Morning News, 1/28/95

Gary and Divine Grace Lazar, who operated 200 Southern California service stations were sentenced to 8 years in State prison and were ordered to pay $162 million for selling adulterated gasoline and failing to pay nearly $25 million in State gas, sales and cigarette taxes. The Lazars had entered no-contest pleas to 54 felony counts. Washington Post, 2/23/95

Kenneth V. Dash, owner of an Ocala, Florida truck stop, was arrested and charged with stealing more than $930,000 in local option fuel taxes. Dash is in jail on a $1.5 million bond. Ocala Star Banner, 3/3/95

An article profiles the activities of "Smokin'" Joe Anderson. Anderson, who owns several gas stations and smoke shops in western New York, uses his status as a member of the Tuscarora tribe to sell gasoline and cigarettes without the New York State tax. Anderson and others operating similar stations and shops are estimated to cost the State $200 million annually. To avoid a recent Supreme Court ruling authorizing New York State to collect taxes from tobacco and gasoline wholesalers, Anderson obtained a license to manufacture cigarettes himself. Since he is not reselling a finished product, he asserts he is not liable for the State tax. He is also currently building a gasoline blending facility. He says that if the State tries to tax the wholesalers of his blending components, he will then upgrade his facility into a mini-refinery, ship in the crude oil, or use corn grown on the reservation to make gasohol. Anderson is quoted as saying "if I manufacture my own gas, I can get around paying any State taxes at all." Washington Post, 4/15/95

Anthony (Fat Tony) Morelli was found guilty in U.S. District Court in Newark, on 15 counts of racketeering, extortion and fraud in connection with a scheme which cheated the government out of more than $100 million in fuel taxes. Authorities said that Morelli helped oversee the bootleg fuel operation in which the Russian mafia paid a mob tax or "tribute" to members of the New York organized crime families, including mafia godfather, John Gotti. Convicted along with Morelli, were Gregory Federico, owner of Capitol Fuel Service, Inc. of Cranford. Federico was found guilty of 35 counts of racketeering, extortion, fraud and tax evasion. A third defendant, "Little" Igor Roizman, was also convicted of 5 counts of racketeering, extortion and fraud. Mob influence in the fuel business was exposed as the result of a joint investigation by the IRS, FBI, DOT Office of Inspector General, the New Jersey Division of Taxation, and the Pennsylvanua Department of Revenue, code-named operation "Red Daisy". To date, 20 other individuals have pled guilty to related charges. Newark Star Ledger, 5/27/95

Anthony A. Barone pled guilty in Cook County Circuit Court to 32 counts of tax fraud. Barone, owner of Barone Fuels, Tone Trucking and AB Development, was a Chicago police officer at the time of his arrest. He was charged with understating fuel sold to avoid paying Illinois motor fuel taxes in 1988, 1989, 1990 and 1991. Barone was sentenced to 3 years probation and ordered to pay $123,400 in restitution. Illinois Department of Revenue Press Release, 1/18/95

The March 27, 1995 meeting of the Steering Committee for the Joint Federal State Motor Fuel Tax Compliance Project was covered in a recent BNA report. The article describes the IRS fuel tracking system known as the Excise Fuel Information Reporting System (EXFIRS), and also details IRS initiatives involving the taxation of waste fuel, and tribal sales of tax-free fuel. The decrease in criminal cases due to industry cooperation and increased enforcement is also noted. Bureau of National Affairs, 3/28/95

A lengthy article describes the activities of employees of the Defense Fuel Supply Center (DFSC) and Defense Criminal Investigative Service in disclosing a major fuel fraud scam perpetrated by Gerald Grey through his Oakland and San Francisco companies, Issca Rusha Oil Company and Troy Fuels. In addition to defrauding the DFSC on Small Disadvantage Business (SDB) premiums, Issca Rusha had evaded more than $2.5 million in corporate income and diesel fuel excise tax. Grey faces up to 70 years in prison and $3.5 million in fines and has been debarred from government contracting. Fuel Line, Spring 1995

Three Pennsylvania truck stop businesses, whose corporate officers/owners were found guilty of evading diesel fuel taxes or oil franchise taxes, have had their licenses revoked. Without a license, Snow Shoe Auto Truck Stop, JP Auto Truck Centre Inc., and Manvir Inc./The Pit Stop can no longer sell fuel to the public. PA Revenue Dept. Press Release, 6/2/95

Tax cheating by consumers using cardlocks is perceived as a growing problem according to State officials in Montana. Cardlocks generally cater to commercial and government customers, often with a pump for ex-tax diesel. In spite of signs warning of penalties for using the untaxed fuel for a taxable use, many consumers appear to use the unattended cardlocks to regularly buy tax-free diesel for on-road tax-included purposes. U.S. Oil Week, 1/20/95

Michael Vax was sentenced to 41 months in prison by the U.S. District Court in Atlanta, Georgia for his part in a racketeering enterprise which defrauded the government of $1.6 million in motor fuel excise taxes. Ilia Miller, who also pled guilty, received a 15 month sentence. The case stemmed from a 7 month undercover investigation by the IRS and Georgia Bureau of Investigation. Dept. of Justice Press Release, 3/15/95

DYED DIESEL ENFORCEMENT

The North Carolina Department of Revenue reports that on-road compliance checks appear to be working. In recent inspections, less than 1% of trucks tested were found to be using untaxed fuel, down from the 15% found in a 1994 check. Tarheel Tax Review, Jan/Feb 1995

Several recent news articles detail the experiences of State and IRS inspectors during "Operation Red Alert" and subsequent on-road enforcement operations. USA Today, 2/16/95; San Francisco Chronicle, 1/26/95; Ventura County Star, 1/95; U.S. Oil Week, 1/30/95 and 5/1/95; Baltimore Sun 1/26/95, Topeka Capitol Journal, 2/27/95; North Platte Telegraph, 2/10/95; Lincoln Journal Star, 2/11/95; Grand Island Independent, 2/11/95; Providence, RI Journal Bulletin, 1/24/95; Dennis K. Burke Bulletin, Spring/95

CORRECTION

The correct citation on the indictment of Jerry Radney and Cheryl Green Radney reported in the March 1995 edition of Fuel Tax Evasion Highlights is the Valdosta, GA Times, 10/8/94.

WANT TO KNOW MORE?

For more information or updates to the mailing list, call Linda Morris, (202) 366-0570, FHWA (HPTS), 400 7th Street, SW, Washington, DC 20590.


FHWA Home | Policy Home | HPTS Home | Feedback

FHWA

United States Department of Transportation - Federal Highway Administration