IRS Commissioner Chuck Rettig told the Senate Finance Committee his agency anticipates that “numerous other individuals” will be charged with criminal tax violations as a result of the investigation into alleged brides paid to test examiners and college sports coaches to guarantee spots for students at elite U.S. universities.
People charged with criminal tax violations could be required to correct their tax returns and pay back taxes, plus interest and penalties, Rettig told the panel Wednesday.
Many tax crimes carry a maximum five-year prison term and a fine of $100,000. Fines for civil tax violations can run as high as 75 percent of the unpaid tax, plus interest.
Last month, 33 parents were charged with conspiring with college admissions strategist and confessed ringleader William Rick Singer to pay $25 million in bribes to entrance exam administrators, a surrogate test-taker and university sports coaches to get their children into Yale, Georgetown, Stanford and other exclusive schools.
The U.S. alleges that some parents made payments to Singer through the nonprofit Key Worldwide Foundation, which they claimed as charitable contributions to get a tax deduction.
Singer has admitted to offering wealthy parents a smorgasbord of illicit entry points into top universities, from rigged entrance exams to college coaches who would recruit the children of his clients for six-figure bribes.
Singer, Newport Beach, Calif. college consultant, also pleaded guilty and agreed to cooperate with the government, secretly recording conversations he had with the parents to help prosecutors build their case.
The IRS’s criminal investigations unit initiated about 3,000 cases in 2017, according to agency statistics. About 66 percent of the cases it completed that year resulted in jail time for the defendant.
Fifty people have been charged in the scheme. Among the parents charged in the case were actors Felicity Huffman and Lori Loughlin, and lawyer Gordon Caplan, the former co-chairman of Willkie Farr & Gallagher.
Loughlin and 15 other parents have been indicted on charges of money laundering and fraud conspiracy, federal prosecutors said Tuesday.
The indictments came one day after 13 parents and one coach said they would plead guilty in the far-reaching scheme. Huffman and Caplan are among parents who have said they will admit guilt.
The indictments unsealed Tuesday do not preclude deals for the holdouts. But unlike the parents who agreed to plead guilty a day earlier, the group indicted Tuesday — which also includes Loughlin’s husband, designer Mossimo Giannulli, financier Douglas Hodge and Hot Pockets heiress Michelle Janavs — now face two charges: fraud conspiracy and money laundering conspiracy.
If convicted, the indicted parents will likely face weightier sentences than those who have agreed to plead guilty.
Huffman said Monday she would plead guilty to one charge of fraud conspiracy and apologized to her daughter, saying she had “betrayed” her “in a misguided and profoundly wrong way.” Prosecutors said Huffman paid $15,000 to have her daughter’s SAT score doctored; Huffman said the girl “knew absolutely nothing” about the scheme.
With one exception, all 33 parents charged in the scheme have either signed plea agreements or been indicted. Three parents had previously been indicted, and prosecutors asked a judge on Monday for more time to discuss a deal with Toby MacFarlane, saying that MacFarlane, a San Diego parent, would probably plead guilty without being indicted.
The joint request by prosecutors and MacFarlane’s legal team is significant. By law, prosecutors must secure an indictment from a grand jury within 30 days of charging a defendant or, if the defense agrees, they can ask a judge to push back that deadline.
If the 16 parents who were indicted Tuesday had been close to a deal, their lawyers and prosecutors could have asked for more time. Instead, they were saddled with another charge.
Prosecutors said the money laundering conspiracy charge stemmed from payments the parents allegedly made to a charity controlled by Singer, the scheme’s admitted mastermind, which allowed them to conceal money for bribes as charitable donations.
For the testing and athletic recruiting scams, the parents allegedly paid sums of between $25,000 and $400,000 to Singer’s charity, whose stated mission was to help “underprivileged students.” In truth, prosecutors say, it was Singer’s slush fund, which he tapped to bribe university coaches, administrators and test proctors.
Some of the parents wrote off the payments as donations on their taxes and assured Singer, in phone calls recorded by the FBI, that they would tell the Internal Revenue Service the money went toward “underserved kids,” according to the indictment unsealed Tuesday.
Money laundering is an elastic charge that can be stretched to fit most crimes where money changes hands, said Rory Little, a University of California, Hastings College of Law professor and former federal prosecutor.
In this case, Little sees prosecutors wielding it for “plea pressure,” to induce parents to plead guilty and avoid the risk of incurring more prison time.
Prosecutors could drop the money laundering charge if the indicted parents agree to cooperate, said Louis Shapiro, a Los Angeles criminal defense attorney.
“This is sending a clear message to the defense they better make a decision quickly in what direction they want the prosecution to go,” Shapiro said.
A Palo Alto, Calif., couple, Gregory and Amy Colburn, had been indicted last month after balking at an offer from prosecutors. The couple’s lawyers said the deal would have required them to plead guilty to a felony without seeing all the evidence against them.
That indictment was a shot across the bow for the other parents, Little said.
“There’s a side to this that’s kind of unseemly,” he said. “They’re playing very, very aggressively here. I’m not saying it’s wrong, but it’s aggressive.”
Attorneys for some of the indicted parents have begun assailing the government’s case.
Prosecutors say Bill McGlashan, who until last month led a private equity fund in northern California, paid $50,000 to doctor his son’s ACT and agreed to pay another $250,000 to have him admitted as a recruited punter on the University of Southern California football team, despite his son never having played football competitively and his high school not fielding a team.
His attorney, John Hueston, said that account was “deeply flawed and ignores important exculpatory facts.”
An attorney for Gamal Abdelaziz, a Las Vegas casino executive, said in court that the government’s case rested on one “deeply compromised” witness — Singer. In hopes of a lighter sentence, Singer cooperated with investigators and, with the FBI listening in, discussed bribery and cheating arrangements with many of the parents implicated in the case, according to court documents.
With exaggerated credentials and a $300,000 payment, prosecutors allege, Abdelaziz’s daughter was recruited by USC as a basketball player and admitted to the university in 2017.
His attorney, Brian Kelly, said in court that “it’s not a strong case.”
But prosecutors have buttressed their account with hundreds of pages of transcribed phone calls, emails and financial records it amassed with Singer’s cooperation. In an unusual twist, the man at the top flipped and agreed to help investigators amass evidence incriminating lower-level offenders.
“The mafia don,” said David Levine, another UC Hastings law professor, “is not usually wearing the wire.”
EDITOR’S NOTE: Matthew Ormseth, Joel Rubin and Richard Winton of the Los Angeles Times (TNS) contributed to this article.
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