A C-Suite executive is heading for prison for almost three years after committing tax fraud that netted him $1.7 million at the expense of his company.
Rhode Island resident Michael Lynch worked as a national sales representative for Dr. Pepper/Seven Up, Inc., according to the Department of Justice. Dr. Pepper is a subsidiary of Dr. Pepper Snapple Group. Mr. Lynch, at 53 years of age, had a longtime association with the company but the relationship did not prevent him from developing a scheme to defraud the company.
In 2003, Mr. Lynch incorporated a company in the maiden name of his wife. Although his wife, Tanja Melendez, was identified as the registered agent of the Seacoast Unlimited Marketing and Promotions, LLC, it is unclear if she was also the target of the IRS criminal tax investigation.
The strategy developed by Mr. Lynch was simple. Mr. Lynch marketed promotional material like banners, signs, and collateral marketing products to stores and other vendors. Mr. Lynch provided samples and discounted pricing, but he delivered no products.
Mr. Lynch submitted more than 200 phony invoices to Dr. Pepper and was paid approximately $1,716,949 during the tenure of the scam between 2007 and 2017. He also filed fraudulent tax returns jointly with his wife, never reporting the money he was earning on his sidebar scheme. Ultimately, he pleaded guilty to filing a false tax return and wire fraud.
A couple of questions come to mind about risk assessment and loss prevention. Mr. Lynch conducted his scheme for close to a decade. Perhaps owing to long-term trust and relationship, the scam was not revealed during any financial or tax audit conducted by Dr. Pepper. For business owners and managers, it is essential to put checks and balances in place during the invoicing process to ensure money paid is for products that are actually delivered.
Although Mr. Lynch was actively working to defraud his employer, there was a substantial period of time within which Mr. Lynch could have contacted an experienced criminal tax defense attorney. In these types of cases, our firm works confidentially to defuse criminal tax charges and reduce and mitigate the impact of wrongdoing for all parties.
After pleading guilty, Mr. Lynch will serve almost three years in prison and will see two years of probation in addition to reimbursing Dr. Pepper for its losses and the IRS for taxes due of approximately $386,320.
As a manager or owner, best practices include auditing even your most trusted employees. For C-Suite execs or others who find themselves in the middle of a tax crime for which there seems no exit, an experienced IRS tax lawyer can help.
Skilled criminal tax defense in Cleveland and Chicago
Robert J. Fedor, Esq., LLC provides confidential, strategic legal representation if you are facing or involved with a criminal tax matter. In Chicago, Cleveland, or internationally, we provide responsive, knowledgeable legal advice. Contact us or call 800-579-0997 today.
