Financial Crime Recap 11/3/24

Tax Shelter Scheme Fallout: CPAs Sentenced for $14M Deduction Fraud

Georgia accountant, Herbert Lewis, was sentenced to 28 months in prison for promoting illegal tax shelters to his wealthy clients, leading to nearly $5 million in IRS losses. From 2014 to 2019, Lewis and colleagues sold units in "syndicated conservation easement" schemes. These conservations syndications are basically partnerships that own land. These partnerships allowed clients to claim substantial tax deductions by donating conservation easements on land. Read more about the benefits of conservation easements here.

As members of the partnership, clients were given a nominal “vote” on land use, the easements were consistently donated to maximize tax benefits. While creating land owning partnerships specifically for conserving land is not illegal … fraud is. Lewis encouraged clients to backdate documents, making it appear they had joined partnerships before the donations, enabling them to claim false deductions totaling nearly $14 million. In addition to prison, Lewis was ordered to pay nearly $5 million in restitution, and he personally profited over $1 million from commissions, which he concealed on his own tax returns.

Read more from the IRS and U.S Department of Justice.

Billion-Dollar Health Fraud: Defendants Plead Guilty in $1.7B Pharmacy Scheme

Hafi Ebady became the seventh defendant to plead guilty in a massive health care fraud and money laundering scheme that involved billing over $1.7 billion in fraudulent prescriptions through more than 50 pharmacies across the U.S.

Ebady and co-conspirators purchased and operated pharmacies, then used call centers to push unnecessary medications on patients, generating fraudulent prescriptions authorized by recruited physicians. These unnecessary medications were prescribed by these selected physicians without ever seeing the patient sometimes. The group laundered hundreds of millions in proceeds through multiple countries and blurred the trail of where these .

The leader, Brian Sutton, remains at large in Russia. The defendants face sentences up to 30 years and significant restitution and forfeiture penalties. Read the full story here.

Raytheon Agrees to Pay $300 Million to Settle U.S. Bribery and Fraud Charges

Raytheon Company, a subsidiary of RTX, has entered into a three-year deferred prosecution agreement with the Department of Justice, agreeing to pay nearly $300 million to resolve charges related to bribery, fraud, and export law violations. The company admitted to conspiring to bribe a Qatari military official to secure defense contracts and to concealing these bribes within export applications. In addition to this Foreign Corrupt Practices Act (FCPA) violation, Raytheon also faced charges of major fraud against the U.S. government for inflating prices on Department of Defense contracts for defense systems like PATRIOT missiles.

To address these allegations, Raytheon will implement significant compliance reforms, retain an independent monitor, and report any future misconduct. The company also settled a separate False Claims Act suit related to contract overpricing and double billing, paying $428 million—the second-largest False Claims Act recovery in defense procurement. Combined criminal and civil penalties bring the total resolution to almost $1 billion, and the company will continue cooperating with ongoing investigations by both the Department of Justice and the Securities and Exchange Commission (SEC).

Investors seem to be content with the outcome of the settlement, as shares only fell 2% during October, with the settlement news coming out on October 16th, 2024.

Read the full story here.