A Germantown man who inherited the family skin care products business was recently convicted on seven counts of filing false corporate, individual, and private foundation tax returns. His great-grandmother introduced a product called Frownies, an anti-wrinkle cream, in 1889 and built a business from there. In the last 30 years, he began diverting money from the business to his personal debts.
From the Department of Justice press release:
James Wright, 62, ran the day-to-day operations of B&P Company Inc. (B&P), which manufactured and sold the products. Beginning in the late 1990s, Wright formed a series of entities that he used to divert money from B&P to himself and members of his family. Instead of receiving a salary from B&P, Wright incorporated a company called The Remnant Inc. (The Remnant), to which B&P paid “management fees.”
Wright caused the preparation of false corporate tax returns for The Remnant on which he deducted personal expenses, including rent, utilities, and pool and lawn care for his residence. Wright also used funds from The Remnant’s bank accounts to pay rent for one of his daughters in New York and California. Wright paid personal expenses directly out of B&P’s bank accounts as well. He directed employees of B&P to use corporate funds to pay for the rent and utilities at an apartment rented by his mother as well as rent for his daughter in New York.
In 2004, Wright applied to the IRS for non-profit status for a private foundation called Fore Fathers Foundation. Wright caused B&P to make donations to the foundation and then used more than $170,000 of the foundation’s funds over a seven-year period to pay for high school and college tuition for all five of his children. According to the testimony at trial, these payments constituted acts of self-dealing that Wright was required to disclose on the foundation’s tax returns and pay excise taxes on. When Wright filed the foundation’s 2003 through 2009 returns however, he falsely reported that he had not engaged in acts of self-dealing and failed to pay the excise taxes due on the distributions.
The evidence at trial established that Wright had a long history of interactions with the IRS. In 1998, Wright pleaded guilty to tax evasion for using trusts to conceal income from the IRS. This criminal case arose from an audit of Wright’s individual income tax returns. In 2002, the IRS initiated an audit of The Remnant’s income tax returns. During a 2010 audit of B&P’s income tax returns, Wright falsely stated to an IRS revenue agent that he had no prior dealings with the IRS, despite the fact that he had been criminally prosecuted in the 1990s and audited in both the 1990s and early 2000s.
The sentencing date has not been set. He faces a maximum sentence of three years per count as well as a period of supervised release, restitution and monetary penalties.
Anyone who believes they might one day face allegations that they evaded taxes, failed to pay taxes or engaged in tax fraud can contact tax law attorneys to discuss their circumstances and available legal options. The attorneys at Robert J. Fedor, Esq., L.L.C. represent clients across the nation who face these accusations and other serious charges.