Monday, March 2, 2015

INGERSOLL FRAUD TRIAL RECAP: Miss Fortune's Friday, February 27 Trial Notes

The difference between tax avoidance and tax evasion is the thickness of a prison wall.” - Denis Healey

The federal fraud trial of Steven Ingersoll and four co-defendants kicked off Friday morning with weekly stacks of cold payroll cash, an Internal Revenue Service document examiner, a US Department of Agriculture official and — the cherry on top of this fraud sundae — an IRS Revenue Agent. 

“NOT IN CASH!”: Tammy & Roy Bradley’s Friday Payroll

Susan Hall, an employee of Catholic Federal Credit Union, testified that Tammy Bradley came to her branch weekly to withdraw large amounts of cash. Under direct examination by the prosecution, Hall stated that Tammy Bradley regularly withdrew cash on Fridays for payroll expenses on behalf of Roy Bradley’s construction business.

Authenticating an August 2011 account statement, Hall read weekly Friday withdrawals made by Tammy Bradley:

August 5: $9,600 $5,590
August 12: $14,400; $355
August 19: $5,850; $9,200
August 26: $11,200; $500

Under questioning by the government, Hall admitted that Tammy Bradley had frequently made more than one withdrawal in a day and used multiple credit union branches to transact her business.  When asked by the prosecution whether Tammy Bradley had ever withdrawn more than $10,000 at a time, Hall stated Bradley had done that “two separate times”.

Hall indicated that a cash transaction “one penny above” $10,000 would trigger a federal anti-money laundering Currency Transaction Report, or CTR. A bank or credit union must electronically file a CTR for each transaction in currency (deposit, withdrawal, exchange, or other payment or transfer) of more than $10,000 by, through, or to the bank. 

Cross-examined by Tammy Bradley’s attorney, Robert J. Dunn, Hall agreed that many of her customers also stopped in weekly and used more than one branch out of “convenience”.  Dunn asked whether Hall knew if Tammy Bradley had “knowingly defrauded” the credit union, and Hall said she had not.

However, what turned out to be Dunn’s final question nicely illustrated a maxim in law practice – don't ask a question at trial when you don't know the answer.

After successfully getting Hall to concede that other customers also banked weekly, used multiple branches and often had one spouse conducting business on behalf of the other, Dunn asked Hall if Tammy Bradley’s business involved larger amounts than she was used to.

Hall replied, “Not in cash.” 

A “drop-the-mic” moment even Kanye West would envy!

THE “WRITE” STUFF: IRS Handwriting Examiner

The government alleges that during the last week of May in 2011, Deborah Ingersoll made three $9,000 cash deposits into the personal bank account she held jointly with her husband, Steven, at Fifth-Third Bank. 

Deborah Ingersoll not only “structured” her cash deposits (keeping them under the $10,000 limit that triggers a Currency Transaction Report), she also trotted around to different Fifth-Third branches to make her cash deposits. 

In May 2011, Roy Bradley wrote a $30,000 check, payable to Gayle Ingersoll, against Roy and Tammy Bradley’s construction company’s credit union account. Gayle Ingersoll deposited the check from Bradley, and then wrote a check for $30,000 to his brother, Steven Ingersoll. 

In early June, Deborah Ingersoll deposited that $30,000 check from Gayle Ingersoll and $9,000 cash into the joint, personal bank account she shared with her husband Steven at Fifth-Third Bank.

IRS document examiner Judith Gustafson testified about her examination of “four deposit slips” that the government alleges were completed by Deborah Ingersoll.

The IRS is empowered to compel handwriting exemplars, or samples, to determine handwriting and signature standards. Gustafson explained that a “standard” is simply a known item to which an unknown item can be compared.

Comparing both Deborah and Steven Ingersoll’s handwriting to the deposit slips, Gustafson analyzed the “questioned documents” (bank deposit slips) against their exemplars and determined that while Steven Ingersoll did not write the name, date and dollar amounts on the deposit slips, Deborah Ingersoll did. Gustafson allowed that her determination was not a “positive ID”, as that decision is rare.

While under cross examination, Gustafson stated that while she found “indications that all four were done by the same person”, she could not make a clear cut, positive identification of Deborah Ingersoll because she was working with copies of the documents and not the originals.

Diane Hagen, of Huntington Bank, testified briefly, authenticating Deborah Ingersoll’s 2011 signature on a customer bank profile.

THE TAXMAN COMETH: Mo Money, Lots Mo Problems

IRS Revenue Agent Michael Wisniewski, a former Las Vegas Police officer turned federal agent, testified that he analyzed tax returns and bank accounts of Steven Ingersoll, his brother Gayle Ingersoll, and Roy Bradley during a 12-18 month period.

Wisniewski, a 23-year IRS employee, examined bank account activity for Smart Schools Management and Smart Schools Incorporated to Steven Ingersoll’s personal accounts.

In 2009, $894,500 was transferred from Smart Schools Management and Smart Schools Incorporated to Steven Ingersoll’s personal accounts. Wisniewski subtracted the amount Ingersoll repaid along with a $150,000 consulting fee reported on a Smart Schools Management 1099 and determined that Ingersoll had underreported his 2009 income by $586,643.93.

For 2010, Wisniewski stated his investigation revealed $2,180,113.98 was transferred from Smart Schools Management and Smart Schools Incorporated into Steven Ingersoll’s personal accounts.

Deducting the amounts Ingersoll repaid and consulting fees reported, Wisniewski testified the resulting balance was $1,536,502. Both of those figures were “unreported on Steven Ingersoll’s 2009 and 2010 tax returns”, Wisniewski said.

Wisniewski determined that both Smart Schools Management, Inc and Smart Schools Incorporated are entities completely owned and controlled by Steven Ingersoll.

In addition, Wisniewski reported that while he was able to identify four of Steven Ingersoll’s personal bank accounts, the records did not provide enough information to identify a fourth bank account.

Wisniewski said that Gayle Ingersoll's 2011 tax return indicated $934,000 was transferred from a Chemical Bank loan to Madison Arts LLC, a Steven Ingersoll-owned entity, to one of Roy Bradley's business accounts to Gayle Ingersoll. Gayle Ingersoll reported $934,000 as income on his tax return and  claimed a $934,211 deduction to “pay subcontractors”, Wisniewski testified.

Although Gayle Ingersoll stated on his 2011 tax return that he had made the payments, his bank accounts indicated no such payment occurred. Recomputing Gayle Ingersoll’s tax return, Wisniewski stated that after the claimed “subcontractor” payment was disallowed, Gayle Ingersoll was left with an estimated 2011 tax debt of $335,406.

Wisniewski was briefly cross examined by Jan Geht, who spent the much of the final hour of Friday’s session phumfering and shpritzing (it’s Yiddish…look it up!) his way through a rambling review of Wisniewski’s accounting continuing education credentials and a strained discussion of the tax evasion-related “conduit theory”.

As a crimson flush crept slowly up the back of his neck, Geht played for time, letting the clock run down in an attempt to delay any meaningful cross examination. Although Geht claimed to Judge Thomas L. Ludington he was unprepared the cross, Ludington wasn’t having it and instructed Geht to get with it. 

Reminiscent of the old "how can you tell if someone went to Harvard" joke (you don't have to...they'll tell you), Geht attempted to form a foundation for his "conduit theory" and did a little "what are the factors of a loan" softshoe with Wisniewski. Discussion a short list of IRS loan factors (position to repay, fact of repayment), Geht stated that he knew of "37 factors" for a loan.

The case resumes at 8:30am on Tuesday morning, March 3.

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