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U.S. Department
of Transportation
Federal Highway Administration
Volume 6, Number
December 1997
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IN THE NEWS Statistics indicate that the Federal agents continue to crack down on fuel tax crooks. IRS incarcerations will hit an all-time high this year if the current trend continues. To date in 1997, 88.46% of defendants tried for motor fuel tax evasion have been sent to prison, up from 78.4% in 1996 and 83.3% in 1995. Average jail sentences have doubled (22 months to 47 months), but this may be due to the long sentences handed down to Larry Iorizzo (15 years) and Anthony Morelli (20 years). Investigations appear to be declining over the past several years. The IRS launched 147 investigations in 1993, 83 in 1995, and 39 in 1996. This year, 26 have been initiated. Indictments are slightly down from 63 in 1995 to 52 in 1996. So far this year, the IRS has filed 10 indictments. States continue efforts to fight tax evasion schemes. Indiana, Texas, Washington, Montana, Colorado, Massachusetts, and New York have reported convictions for blending, dyed diesel, and bootlegging schemes. US Oil Week 3/17/97 Thomas Reynolds of Hillsborough County, Florida, has been sentenced to 18 months in State prison and ordered to pay $727,548 in back taxes and interest in restitution to the Florida Department of Revenue as a result of charges against him for stealing gas taxes. Reynolds was placed on 14 years probation and permanently barred from the fuel industry. The Department of Revenue investigation found that Reynolds pocketed $639,374 he collected in State and local fuel taxes from his customers at his four gas stations between June 1992 and November 1995. The Tax Enforcer, Winter/Spring 1997 Paul Ludwig pleaded guilty to two counts of fraudulent practices in the Carroll County District Court, Iowa. Ludwig altered diesel fuel invoices from January 1, 1992 through December 31, 1995 in order to obtain refunds from the Iowa Department of Transportation. He also filed false IFTA reports. For the first count, he was sentenced to a suspended 5- year prison term and placed on probation. On the second count, he was sentenced to 1 year in the county jail with all but 30 days suspended. In addition, he was placed on probation, fined $500 and ordered to make restitution of $17,822.95. The investigation was conducted by the Iowa Department of Revenue and Finance, and the Iowa Department of Transportation. The Tax Enforcer, Winter/Spring 1997 |
Kenneth VanderWiele of Essex County, New York, pleaded guilty to grand larceny. A Tax Department investigation revealed that his company, Schroon Lake Oil, filed over 40 false returns which resulted in the theft of $117,675
in collected and unremitted diesel Hovsep "Joe" Mikaelian, self-proclaimed Armenian mafia godfather, was sentenced to 14 years in Federal prison for his involvement in narcotics trafficking, a multi-million dollar daisy chain motor fuel excise tax evasion scheme, and telecommunications, mail and wire fraud. Federal officials arrested Mikaelian and 13 others after a 2-year joint Federal/State investigation know as Operation Gas Gangsters. Mikaelian, from North Hollywood, CA, must pay $2.2 million in restitution to the California Board of Equalization, more than $170,000 to the IRS, and $250 in special assessments. In addition, Mikaelian must forfeit numerous assets including a number of vehicles and his auto repair business that was used as a front for narcotics trafficking. Twelve of Mikaelian's co-defendants have pleaded guilty. Hampartsoum Kouroumlian, operator of the Vegas Truck Stop in Barstow, California, pleaded guilty to one count of an indictment charging him with conspiracy. The guilty plea is a result of a plea agreement between Kouroumlian and the US Attorney for the Central District of California. He will be sentenced on February 23, 1998. Involved in the investigation were the Organized Crime Strike Force of the United States Attorney's Office, the Federal Bureau of Investigation, the Criminal Investigation Division of the IRS, the Department of Defense Criminal Investigation Service, the State of California Department of Justice, the State of California Board of Equalization, the Los Angeles Police Department, and the Long Beach Police Department. Press Release, United States Attorney, LA 3/25/97, 11/19/97, US Oil Week, 3/31/97, OIG Department of Defense 11/17/97 Additional arrests have been made in the 3-year investigation which has led to the arrest of more than 20 people in a fuel bootlegging scheme that had been in operation in the New Jersey/New York metropolitan |
area. The evasion conspiracy involved soliciting truck drivers to haul fuel from New Jersey to stations in Long Island without ever paying the New York State fuel taxes. Approximately 130 stations were involved in the purchase of fuel at "below market rates." Key players previously indicted include William S. Nappo and his son William K. Nappo. The latest indictments were believed to be the masterminds behind the alleged scheme known as "Operation Red Daisy," that skimmed more than $10 million from the State coffers. Arrested were Daljit "Mike" Kumar of the Bronx; Ramesh "Bill" Kumar Four pleaded guilty for their part in a scheme to over bill the Department of Defense by $28 million. John Santana, president of the San Francisco based International Marine Fuels (IMF), Keith Rasquinha, a broker, June King and Andrea McDonald, president and vice president, respectively of Kimac Enterprises, were charged with tax evasion, aiding and abetting, conspiracy, making false statements, and mail fraud. Federal officials also entered civil settlement agreements with King and IMF. King was sentenced in Federal court to 18 months in prison and was required to pay off a civil settlement agreement. King also entered a $4.9 million confession of judgment. McDonald was sentenced to 3 years probation and fined $2,000. Rasquinha got 5 years probation and was fined $3,000. US Oil Week 4/14/97 Jacqueline Plecas, former president of a New York based defense fuel supplier
pled guilty to 5 counts including tax evasion, making false claims, filing
false statements to the Navy regarding fuel overcharging and committing
bankruptcy fraud, for her role in a fuel overcharge scheme to defraud the
US Navy of $20 million. MedAtlantic Petroleum, Plecas's company, was running
2 different schemes--one involving rigging bids on commercial sales of fuel
to the Navy, and the other involving overcharging the Navy for fuel. MedAtlantic
was implicated in April 1995 in a series of guilty pleas by International
Marine Fuels executives (see previous article). MedAtlantic filed for bankruptcy
and was suspended from government contracting as a result of an investigation
by the Department of Defense. Plecas faces a maximum of 5 years in prison
and $250,000 fine for each count in addition to restitution and court costs. Prosecutors in Riverside County, California, charged Baljit Sambi, owner of BD Service in Perris, California, and Jagjit Singh with four counts of felony excise and sales tax evasion, six counts of felony grand theft, and six counts of misdemeanor excise and sales tax evasion. Sambi allegedly evaded fuel and cigarette taxes and filed fraudulent tax returns failing to report more than $242,000 in State excise taxes between |
July 1990 and June 1996. He allegedly forged farmers' exemption certificates to buy diesel fuel at the tax exempt rate and then sold the fuel as tax paid, pocketing the difference. Singh was named as co- defendant. Details of his involvement were unavailable. US Oil Week 4/21/97 Charles W. Fletcher, owner of Fletcher Oil Company of Eight Mile, Alabama,
pleaded guilty to Federal charges of selling diesel fuel without paying
taxes, and conspiring with four other men to distribute the untaxed fuel.
He was charged with 119 counts of mail fraud in connection with the tax
scheme. He pleaded guilty to one, and was sentenced to 3 years probation
and 6 months home confinement. The light sentence is a direct result of
Fletcher's testimony which implicated Gary W. Smith and Raymond L. Pittman,
who had bought about 1.5 million gallons of fuel from Fletcher without collecting
the taxes. Smith and Pittman then sold the fuel to George M. and Edwin G.
Threadgill of Pensacola, Florida. The Threadgills then sold the fuel to
convenience stores in Alabama and Florida. George Threadgill pleaded guilty
in January and was given 5 years probation. Charges against Edwin Threadgill
were dropped. Fletcher said he suspected he was involved in a bootlegging
operation, but "chose to turn a blind eye to the situation." He
stated that the high volume sales helped to alleviate the cash flow problems
of Fletcher Oil. Fletcher also admitted to owing the State $194,703 in back
inspection fees; $275,428 to Mobile County for back taxes; and $104,565
in taxes to the City of Pritchard. Fletcher must also pay back State and
Federal taxes as well as penalties. WANT TO KNOW MORE? |
U.S. Department
of Transportation
Federal Highway Official Business
Administration
(HPP-10)
400 Seventh Street, SW.
Washington, D.C. 20590
Penalty for Private Use $300
