Saturday, October 31, 2015

Director of Company that Used Its NOL's to Offest FIRPTA Gains from Acquired Target Co.'s Cleared In $200M Corporate Tax Fraud Charges

According to Law360,  an ex-managing director at corporate acquisition business MidCoast Financial Inc. was found not guilty by a Pennsylvania federal jury on Wednesday over his alleged involvement in a complex $200 million corporate tax fraud scheme.

Donald Stevenson of North Palm Beach, Fla., 58, was cleared after a six-day trial on charges that he conspired to defraud the U.S. and corruptly endeavored to obstruct and impede the due administration of Internal Revenue Service laws. Stevenson, the only defendant to be acquitted in the scheme, faced 8 years in prison.
Federal prosecutors alleged that Stevenson and others conjured up and participated in an elaborate scheme between 2003 and 2011 to evade more than $200 million in corporate taxes by buying companies with taxable gains and using fraudulent losses to wipe out the gains.

The group pocketed the companies’ cash, filed fraudulent returns and, in some cases, sought and received IRS refunds for prior years, prosecutors claimed. To implement the tax scheme, the U.S. Department of Justice said that the defendants used a four-step process.

The initial purchasers, including MidCoast Financial, owned by Chandrakant Shah and Samyak Veera, bought target companies with cash assets and huge anticipated corporate income tax liabilities, then transferred the companies to straw buyers controlled on paper by Andrew Ahn and Aviel Faliks.

The group then evaded income taxes by using fraudulent transactions designed to create the illusion that the companies had incurred capital and ordinary losses and ultimately distributed the proceeds through hidden means, according to the DOJ.

As part of the scheme, prosecutors alleged that Stevenson, as the head of MidCoast Financial’s acquisition team and the company’s successor, Private Capital Resource Group, Inc., led the effort to identify target companies. Others involved in the scheme have either pled guilty or are fugitives.
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