Mail fraud and honest services mail fraud, in violation of Title 18, United
States Code, Section 1349. Tax Fraud coming soon?
College coaches, celebrities, and others have been charged in a sweeping admissions bribery case unsealed in federal court. The racketeering conspiracy charges unveiled Tuesday were brought against the coaches at several schools.
In all, 50 defendants are targeted by the U.S. Justice Department in an alleged long-running scheme of parents cheating to get their kids into college.
Authorities say the coaches accepted bribes in exchange for admitting students as athletes, regardless of their ability.
Prosecutors say parents paid an admissions consultant $25 million from 2011 through February 2019 to bribe coaches and administrators to label their children as recruited athletes to boost their chances of getting into schools.
Prosecutors allege that fake athletic profiles were also made to make students look like strong high school athletes when they actually weren’t.
Authorities say the consulting company also bribed administrators of college entrance exams to allow a Florida man to take the tests on behalf of students or replace their answers with his.
The tipster who led federal authorities to the biggest college-admissions scam they have ever prosecuted was Morrie Tobin, a Los Angeles financial executive who was being investigated in a securities fraud case, according to a person familiar with the investigation.
Mr. Tobin was being questioned in an alleged pump-and-dump investment scheme—in which people conspire to inflate the price of a stock so they can sell it at a profit—when he offered a tip to federal authorities in an effort to obtain leniency, according to people familiar with the matter.
Mr. Tobin, who attended Yale University, told investigators that the head women’s soccer coach at Yale had sought a bribe in return for getting his daughter into the Ivy League school, a person familiar with the investigation said.
Tax fraud was a pillar of the government’s case, yet none of the parents have been charged with tax crimes so far. But as long as the statute of limitations hasn’t expired, the IRS could decide to audit the parents and send them deficiency notices.
One family cited in court documents filed tax returns that falsely reported charitable gifts in 2016 of more than $1 million. That sum included a contribution to Key Worldwide Foundation, according to court documents.
If the IRS finds the parents claimed deductions on fake charitable contributions to an illegitimate charity, the agency could impose large penalties under tax code Section 6601 and Section 6662, which cover interest payments and penalties for underpayment of taxes. References to an IRS audit of the charity was a key component of the sweeping federal investigation, which has sparked massive fallout over questions of privilege and access in higher education.
Under Section 6662, the IRS can add to the tax an amount equal to 20% of the portion of the underpayment.
The IRS could also impose penalties for civil tax fraud. The civil tax fraud penalty for that is equal to 75% of your underpayment in taxes.
The court documents may also lay the ground work for the IRS to pursue criminal tax charges, since some of the recorded conversations seem to indicate parents knew their contributions didn’t qualify for a charitable deduction.
Eventually it all unravels – remember that according to the ACFE most (more than 40%) fraud cases are uncovered by a tip.
These parents couldn’t possibly been thinking they were helping their children – Right? They were stroking their own egos! The Fraud Pentagon in play again!
Jonathan T. Marks, CPA, CFE