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Miami Tax Law Blog

Madoff fraud scheme defendant sentenced to 2-1/2 years

Miami investors may be interested to learn that on Dec. 10, a man who reportedly worked as a computer programmer in Bernard Madoff's multibillion dollar Ponzi scheme was sentenced to less than three years in prison. Additionally, the man was also required to symbolically forfeit approximately $19.7 billion jointly with the other defendants who played a part in the fraud scheme.

The 48-year-old man was convicted on charges that included conspiracy and securities fraud in March. Prosecutors stated that the man and the other employees who were also facing charges knowingly played a part in the scheme by creating fake documents. The convicted computer programmer reportedly developed and maintained the computer programs that allowed the fraud scheme to operate. He was believed to have played a part in the fraud scheme from 1991 until the firm collapsed in 2008.

Student accounts frozen in Florida financial aid fraud case

At least 1,000 students' bank accounts were frozen by federal authorities recently in connection with alleged fraudulent tax activity. According to authorities, the fraud is tied to kickbacks received by students who allowed their financial aid accounts to be used for depositing fraudulent tax returns. Stolen identities are alleged to have been used to generate the returns in question, and at least 18 students face charges for their roles in the scheme.

Purportedly, much of this illegal activity occurred at Miami Dade College. However, in response to the federal authorities' investigation, the school stated that those coordinating the fraudulent activity were not connected with the institution. Rather, vulnerable students were recruited, reportedly.

Pyramid and Ponzi schemes

In Florida and in the rest of the United States, pyramid schemes and Ponzi schemes are illegal. However, people still try to get away with both pyramid schemes and Ponzi schemes by hiding their activities behind non-existent products or behind investment practices that appear legitimate.

In a pyramid scheme, a person can earn income by becoming a member of the scheme by making an initial payment. They then are repaid this initial investment when they recruit new members to join under their name. In some cases, there is no real product that is being sold, or the product only exists in order to recruit new distributors. The fees that new recruits pay to become distributors is often doled out to those who referred the new recruits. The more new recruits a promoter brings into the scheme, the more pay they receive.

Florida copyright protections

While almost all people in Florida have probably heard of copyrighted work, people may not be certain exactly what types of works are protected under copyright laws and what types of works are not. Generally, in order to be protected under applicable copyright laws, works must be either written or recorded.

Copyright laws utilize broad categories of definitions, allowing copyright protection for certain types of work that may not at first be obvious. For example, since an architectural plan involves written planning and pictorial information, it may be registered as a pictorial, graphical or sculptural work. Copyright protections extend to original work that is written or recorded in a tangible form. The form may not necessarily need to be tangible as long as it can be communicated using a device or machine. Copyright categories include literary works, musical works and lyrics, dramatic works along with music used in them, architectural works, sound recordings, audiovisual works, pantomimes and choreography and pictorial, graphical or sculptural works.

Tax evasion trial delayed for Mike Sorrentino

Florida residents might be interested to learn about the tax evasion case of TV personality Mike 'The Situation" Sorrentino. The reality television star of 'Jersey Shore" and his brother have both been granted a delay in their tax evasion trial. Although the brothers were scheduled to stand trial on Dec. 2, they will now have until March 2015 to prepare their defense.

After they were indicted for filing false tax returns, the brothers were released from jail on $250,000 bail. According to the indictment, the brothers failed to report $8.9 million in income on their business and personal tax returns from 2010, 2011 and 2012. Mike Sorrentino is facing two felony counts for filing false tax returns, but his brother is facing three felony counts for the same charge. Mike only faces two felony counts because he failed to file a tax return altogether in 2011, and failing to file a tax return is only a misdemeanor.

What is tax evasion?

Taxpayers in Florida could find these facts about what actually constitutes tax evasion interesting. Tax evasion is the intentional underpayment of personal or business income taxes by a company or an individual.

Mistakes on a tax return, however, are not always the result of tax evasion. To prosecute a taxpayer for tax evasion, the IRS must prove deliberate intention to underpay taxes. Making an error could result in additional payments and a possible penalty but not prosecution for tax fraud.

What is embezzlement?

As Florida residents may know, the theft of assets placed in an individual's care that belong to another business or person is typically considered embezzlement. This type of financial fraud involves misappropriating funds that the perpetrator has a fiduciary duty to protect. In Florida, embezzlement may be charged as theft, and the property may initially be entrusted voluntarily.

In this situation, an individual is asked to manage, use or monitor assets belonging to someone else. In order to accomplish such tasks, the individual must have access to the assets. If the individual takes some portion of the assets and uses them for his or her personal gain, this may be considered embezzlement.

What is a Ponzi scheme?

People throughout Florida have likely heard about Ponzi schemes on news broadcasts over the last several years. Several high-profile criminal cases involving Ponzi schemes have made national headlines. This type of white-collar crime is deceptively simple and is designed to steal large sums of money from unsuspecting investors.

At its core, a Ponzi scheme is a type of investment fraud. In a typical Ponzi case, a person who may or may not be a financial professional will approach new potential investors with the promise of an investment that offers big payouts with a very small or nonexistent chance that invested money will be lost. However, instead of using investors' funds in the promised fashion, the fraudster will instead use funds from each new investor to pay "dividends" to the original investors. Of course, there are no actual payouts because no money was ever actually invested.

An overview of mortgage fraud

Florida homeowners and real estate professionals may be aware of the prevalence of mortgage fraud situations. There are various schemes that can be considered illegal in this area. White-collar offenses involving mortgages are typically related to misrepresentation of information on documents.

Mortgage fraud normally involves at least two parties as one provides incorrect information on purpose while the other uses that information for the purpose of completing a transaction. Although mortgage fraud is not directly referenced in federal law, this type of crime may be considered conspiracy, bank fraud or wire fraud. Through an investigation of this type of crime, officials might also pinpoint additional white-collar crimes like tax fraud. Unfortunately, unplanned errors can result in an investigation and even detention if incorrect information is submitted by an individual attempting to obtain a mortgage.

Role of the IRS in criminal tax cases

The IRS may investigate criminal tax cases involving Florida taxpayers or taxpayers in any other state. While other government agencies may help in an investigation, only the IRS is authorized to investigate criminal violations of the Internal Revenue Code. The Criminal Investigative (CI) unit is comprised of 2,800 special agents who are trained in computer forensics and other specialized methods of obtaining evidence in criminal tax cases.

The purpose of a financial investigation is to determine if money is being moved for criminal purposes. During an investigation, records will be scrutinized to figure out where the money originated, who may have had access to it and which person or entity may ultimately take possession of it. Records that may be examined include bank account records, motor vehicle records and any record of property sales.

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