Posted in Ohio by Anna on: October 9, 2009 - Save & Share - Leave a Comment

Cincinnati – A jury in U.S. District Court in Cincinnati has returned guilty verdicts against the former owner of Buddy’s Carpets, Leif D. Rozin of Bonita Springs, Fla., and Alan W. Koehler, the company’s former in-house counsel, announced the Justice Department today. Both men are former Cincinnati residents, but Koehler now resides in Purcellville, Va. The jury found them both guilty of a conspiracy to defraud the United States. In addition, the jury found Rozin guilty of filing a false corporate income tax return and tax evasion, and Koehler of assisting in the filing of a false corporate income tax return. Buddy’s Carpets was a retail chain with more than 30 stores in Ohio, Kentucky and Indiana.

Another former owner of the company, Burton B. “Buddy” Kallick; their investment and insurance advisor, Milton Liss; and unlicensed financial and insurance salesman Bruce M. Cohen of Louisville, Ky., were also indicted. Kallick passed away in January 2007, and Liss and Cohen pleaded guilty to the charged conspiracy to defraud the United States.

Nathan J. Hochman, Assistant Attorney General for the Justice Department’s Tax Division; Gregory G. Lockhart, U.S. Attorney for the Southern District of Ohio; and Jose A. Gonzalez, Special Agent in Charge, Internal Revenue Service (IRS) Criminal Investigation, Cincinnati, announced the verdicts Wednesday.

During the three week trial, evidence presented proved that Rozin and Koehler conspired with Kallick, Liss, Cohen and others to defraud the United States by having Rozin, Inc., doing business as Buddy’s Carpets, purchase several sham “Loss of Income” insurance policies from an insurance company in the U.S. Virgin Islands. The co-conspirators used these sham insurance policies to evade income taxes in the amount of approximately $784,000 on the 1998 tax returns of Rozin and Kallick. In addition, the co-conspirators intended to evade a similar amount of income taxes for the 1999 tax returns of Rozin and Kallick, but they did not file the returns because the IRS disclosed its criminal investigation.

The evidence presented at the trial showed that prior to selling the business, the defendants caused the firm to spend a total of $3.6 million on eight separate “Loss of Income” insurance policies, the purpose of which was to provide substantial tax deductions to the company and to the owners, Rozin and Kallick. The evidence also showed that these insurance policies were a sham. The evidence further showed that Rozin, Kallick, Koehler, Cohen and Liss attempted to conceal their participation in these sham arrangements by establishing offshore nominee entities in foreign countries, such as Nevis.

During the trial, the evidence revealed that Rozin and Koehler engaged in a series of purchases of these “Loss of Income” insurance policies and took numerous steps to conceal their scheme, including creating backdated documents. In addition, the evidence showed that Rozin, Kallick and Koehler shared the commissions from their purchases of the “Loss of Income” insurance policies, as well as the commissions from others’ purchases.

Cohen pleaded guilty to the conspiracy in May 2007 and is scheduled to be sentenced on May 2, 2008. Liss pleaded guilty to the conspiracy on April 4, 2008, and awaits sentencing.

Both the conspiracy to defraud the United States and tax evasion convictions carry a maximum punishment of five years imprisonment and a fine of up to $250,000. The convictions for filing a false tax return and aiding in the preparation and filing of a false income tax return each carry a maximum punishment of three years imprisonment and a fine of up to $250,000.

“Any plan, arrangement or transaction designed for the purpose of circumventing tax laws and evading tax obligations isn’t tax planning; it’s criminal activity,” said Eileen Mayer, Chief, IRS Criminal Investigations. “IRS will continue to aggressively investigate individuals who move money off-shore or establish sham companies off-shore in an attempt to avoid federal law enforcement.”

“Taxpayers who seek to evade paying their fair share of taxes, whether through sham insurance policies or illegal transfers of money to offshore nominee entities, will be held accountable,” said Assistant Attorney General Hochman. “As this case shows, the government will expend the necessary resources to track down evidence of tax evasion from around the country and around the world. Once caught, tried and convicted, such taxpayers will be branded felons for the rest of their lives, face the potential of going to prison for years, and ultimately have to pay back all the taxes plus huge penalties and interest.”

Hochman, Lockhart and Mayer commended the investigative efforts of the IRS agents involved in this case, as well as Justice Department Tax Division attorneys, Richard Rolwing and Patrick J. Murray, who prosecuted the case.