DOJ continues to crack down on tax avoiders

A Chicago-area man who operated a manufacturing business in Wisconsin was sentenced to nine months in federal prison for failing to pay taxes on more than $2.3 million in cash receipts from the sale of scrap metal to a Cicero, Illinois, metals recycling company.

According to the U.S. Department of Justice (DOJ) Northern District of Illinois office, Herbert Watts, the owner and president of Branko Perforating FWD, received more than $2.3 million in cash from the sale of scrap metal. However, the sales were not reported in Branko’s business records and the income was concealed.

In a news release, the DOJ says the case is part of an ongoing investigation into cash transactions in the local scrap metal industry that has resulted in several other convictions. (See below for a list.)

In addition to the prison sentence, Watts was fined $10,000. Prior to sentencing, Watts paid the taxes he owed to the federal government and the state of Illinois.

“Defendant’s conduct was little more than repetitive evasion motivated by greed,” according to Assistant U.S. Attorney Patrick King in the government’s sentencing memorandum. “Evasion feeds on itself, reducing respect for the integrity of the tax system and leading to more cheating.”

Over the past 24 months the DOJ office has brought charges against the following people/companies for attempting to evade taxes through the sale of scrap metal:

• Stuart Muller, who pleaded guilty to obstructing, impairing and impeding the IRS and was sentenced to four months in prison plus restitution of $285,185;

• Tower Alloys Inc., Chicago, which pleaded guilty to aggravated structuring and was fined $250,000 and forfeited $407,911.70;

• Sol Winer, who pleaded guilty to filing a false tax return and was sentenced to two years of probation plus restitution of $43,594. He also forfeited $45,382;

• Michael Ward Sr., who pleaded guilty to tax evasion and was sentenced to three years of probation and fined $75,000, must perform community service and has paid back taxes;

• Michael Brough, who pleaded guilty to filing false tax returns and wassentenced to three years of probation and fined $30,000 plus restitution of $188,976;

• Raphael Bershadsky, who pleaded guilty to filing a false tax return and was sentenced to three years of probation plus restitution of $226,567; and

• Tri State Metal Co. Inc., Chicago, which pleaded guilty to impairing, impeding and obstructing the IRS and aggravated structuring. The company was fined $2.1 million and ordered to pay restitution of $580,907.