Carolinas Assisted-Living Chain CEO and CFO Sentenced for Tax Fraud

February 22, 2013 — In 2006, the IRS Whistleblower Office was set up to reward informants who notify the government about tax fraud and come forward with information that results in the recovery of unpaid tax payments. Under the Tax Relief and Health Care Act of 2006, the reward for IRS tipsters varies from 15 to 30 percent.

When tax fraud involves an individual person, the statute restricts whistleblower rewards to cases in which first, the person’s gross income tops $200,000 for every taxable year at issue and second, the amount the IRS recovers for tax, penalties and interest is more than $2 million. Where the tax fraud is committed by a corporation, collaborators are eligible for rewards regardless of the amount the IRS recovers. When corporations engage in tax fraud, company accounting personnel are often the ones who notify the IRS.

Tax Fraud Results in Hefty Penalties and Serious Prison Sentences

Two men who owned and operated a chain of assisted-living facilities in North and South Carolina have been sentenced to five years in prison after pleading guilty to tax fraud, the Department of Justice has announced. Ronald E. Burrell was the former chief executive officer (CEO) of Caremerica Inc. and his co-conspirator, Michael R. Elliott, was the former chief financial officer (CFO). The two also owned and operated a Leland, North Carolina company that managed all the facilities. Elliott, a former CPA, prepared all the tax returns for the inter-related Caremerica companies.

From 2003 to 2006, Burrell and Elliott filed false forms with the IRS claiming that the companies had completely paid the employment taxes that they owed. In reality, little to none of the taxes had been paid. In just three years, the employment tax liabilities added up to more than $4.5 million. While the IRS was attempting to collect the back taxes, the two conspired to hide money that the men had made through the sale of Partners Pharmacy Services Inc., a company that sold prescription drugs to the Caremerica assisted-living facilities. Burrell had made $1.6 million and Elliott made $1.4 million. Burrell funneled his proceeds into a nominee company set up in his wife’s name and Elliott channeled his share into his girlfriend’s bank account. The two men failed to report the proceeds on their 2005 federal income tax returns and they made false statements in IRS disclosure forms and in bankruptcy proceedings.

Waters & Kraus: Representing Whistleblowers Who Report Tax Fraud

Whistleblowers in IRS tax fraud cases deserve to know their rights before coming forward. Providing aggressive representation of government collaborators in qui tam lawsuits, Waters & Kraus maintains law offices in Texas, California, and Maryland. To find out more about Waters & Kraus, or to speak with one of our whistleblower attorneys about your potential tax fraud case, email us or call 800.226.9880.

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