Two CPAs in Trouble for Aiding and Abetting the Filing of False Tax Returns
Marc Berger, CPA. Marc Berger was convicted of three counts of aiding and abetting the filing of false tax returns for his client, Steve Burrill. Burrill1 withdrew $18 million above his authorized management fees from a $283 million venture capital fund that he managed. A jury found that Berger advised and counseled Burrill to classify the withdrawals as loans and to create loan documents accordingly. With income mis-stated, Burrill paid no taxes for the three years under consideration, 2011, 2012, and 2013. The maximum penalty for each count of aiding and abetting is three years in prison and a fine of $100,000.
Cindy Laporta, CPA. Cindy Laporta was the CPA for Paul Manafort. She prepared a draft tax return for him based on information he submitted. Laporta testified at Manafort’s trial that Manafort told her he couldn’t afford the taxes owing and he was resubmitting data reclassifying income to loans. Laporta was given immunity in exchange for her testimony. Lessons learned. Both Berger and Laporta minimized their clients’ taxes by reclassifying what the government claimed was taxable income to loans.
Both Berger and Burrill were high profile cases and perhaps subject to more IRS (and Department of Justice) scrutiny, than our “small” business client. But the issues loom.
- The client pays personal expenses from his corporate check book. When preparing the tax return, do you record the personal expenses as constructive dividends or move the amounts to shareholder loan receivable?
- Has there been a related party loan on the corporate books that’s been unchanged for several years? Have you dealt with the issue or let the loan amount ride from year to year?
- Has the general partner been borrowing from the partnership’s funds each year with no repayments? Have you asked if the loans are authorized by the partnership agreement? Properly documented?
Each scenario has its own risks and each should be addressed with the client and maybe with the client and his or her attorney.