Internal Revenue Service Criminal Investigation Case Nets $6 Million Dollars



On January 27, 2016, the Department of Justice Office of Public Affairs issued a press release announcing its victory in a Virginia federal court where a gas station owner pleaded guilty to a charge of conspiracy to defraud the United States in what appears to be a renewed effort to prosecute tax evasion cases by the Internal Revenue Service (IRS).

In this case, the defendant, Obayedul Hoque, owned a gas station and several Subway franchises in Alexandria and Arlington, Virginia, as well as in Washington, D.C. According to the criminal investigation division, the owner and co-conspirators, admitted to not depositing all of their gross receipts into the company accounts, and thus failed to report and pay taxes on a significant portion of their sales.

From 2008 to 2013, the co-conspirators falsely reported the franchise’s sales at $14,377,696, although the true and correct sales for the franchise were $20,805,667. The defendant admitted that as a result of the false reporting to the IRS, they failed to pay between $1.5 million and $3.5 million in taxes to the IRS.

The prosecution in this case proceeded under 26 U.S. Code § 7201, Attempt to Evade or Defeat Tax and the sentencing of the defendants has been put off to May 2016.  For this charge, the defendant faces a prison term of up to five years and a fine of up to $250,000 and under the plea agreement, he agreed to pay restitution to the IRS for the tax liability.

Under the federal criminal tax code, it is a felony for any person to willfully attempt to evade or defeat any tax imposed by or under relevant federal law. It is also a felony under federal criminal law to fail to collect, account for, and pay any tax imposed under the federal code. Federal tax fraud cases are also prosecuted for underpayment or failure to pay estimated tax as required by law.

The most important and most often cited federal court decisions concerning tax evasion in the United States define tax evasion and tax fraud in the same language. Tax evasion and tax fraud is the purposeful illegal attempt by the taxpayer to evade assessment or payment of any tax imposed by federal law. Tax evasion is different from tax avoidance. Tax avoidance is the legal utilization of the tax and taxation laws to one’s benefit. The reduction of tax liability through tax avoidance is not illegal. It is a federal criminal act to fail to report and or fail to pay taxes which are imposed by law.

Chief Richard Weber of the IRS Criminal Investigation Unit said, “Today’s plea of Obayedul Hoque for conspiracy to defraud the United States sends a clear message to would-be tax cheats.  U.S. citizens expect and deserve a level playing field when it comes to paying taxes and there are no better financial investigators in the world when it comes to following the money.”  And because of this apparent renewed effort by the IRS, regional U.S. Attorney offices, including here in Fort Lauderdale and in Miami, are under increased pressure to prosecute for tax fraud.

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