McHenry County Blog

A press release from the U.S. Attorney’s Office:

BARBADOS MAN SENTENCED TO 9½ YEARS IN PRISON FOR USING STOLEN IDENTITIES TO FRAUDULENTLY OBTAIN TAX REFUNDS

CHICAGO — A Barbados national who lived in cities across the United States was sentenced today to 9½ years in federal prison for using stolen identities to file approximately 645 false federal income tax returns in the names of deceased individuals and seeking refunds totaling more than $120 million.

The defendant, Andrew J. Watts, was ordered to pay restitution of more than $1.6 million that he actually obtained and used from the scheme.

Watts, 35, whose last known residence was in Los Angeles, was sentenced to 7½ years for mail fraud, followed by a mandatory consecutive term of 2 years in prison for aggravated identity theft. U.S. District Judge Joan Gottschall, who imposed the sentence in Federal Court in Chicago, also ordered Watts to pay $1,676,399 in restitution and ordered forfeiture of the same amount.

Watts, a permanent resident alien who resided previously in Chicago, New York, and Beverly Hills, Calif., was arrested in April 2011 in Kansas City. He pleaded guilty in July 2012.

Gary Shapiro

The sentence was announced by Gary S. Shapiro, Acting United States Attorney for the Northern District of Illinois; Kathryn Keneally, Assistant Attorney General, Department of Justice, Tax Division; Richard Weber, Chief of the Internal Revenue Service Criminal Investigation; and Thomas Jankowski, Acting Special Agent-in-Charge of the IRS Criminal Investigation Division in Chicago.

“IRS-Criminal Investigation has made investigating refund fraud and identity theft a top priority and we will vigorously pursue those who undermine the integrity of the U.S. tax system,” Mr. Weber said. “Individuals who commit refund fraud and identity theft of this magnitude deserve to be punished to the fullest extent of the law.”

Watts fraudulently obtained more than $19 million in tax refunds by filing hundreds of bogus tax returns claiming refunds between 2007 and 2011.

Watts prepared and submitted false federal tax returns using the names and social security numbers of actual taxpayers who were deceased and in the names of deceased individuals who were falsely represented to be alive at the time the returns were filed.

He then directed that the false tax refunds be mailed to addresses he controlled and electronically deposited into bank accounts under his control, including an address and a bank account in Chicago.

According to court documents, Watts used more than $1.6 million in tax refunds

• to rent apartments in various cities,
• to purchase luxury automobiles, jewelry, airline tickets between California and New York, as well as
• for gambling and
• to provide cash to his girlfriend.

Approximately $17 million that Watts obtained in fraudulent refunds was frozen in various accounts and recovered by the IRS.

The government is being represented by Assistant U.S. Attorney Patrick J. King, Jr., and Michelle M. Petersen, Trial Attorney in the Justice Department’s Tax Division.

A press release from the U.S. Attorney’s Office:

FATHER AND SON OPERATORS OF ELGIN ADULT ENTERTAINMENT CLUB AND INTERNET GAMBLING BUSINESS SENTENCED TO PRISON TERMS FOR CONCEALING MORE THAN $4.6 MILLION OF INCOME FROM THE IRS

The billboard for Blackjacks on Route 14 between Crystal Lake and Woodstock.

CHICAGO — The father and son operators of an adult entertainment club in Elgin were sentenced today to serve federal prison terms for conspiracy to impede the Internal Revenue Service in the collection of federal taxes, as well as separately operating an illegal Internet gambling business, in connection with diverting more than $4.6 million in unreported income to themselves from the two businesses.

The cash diversion caused a federal tax loss of more than $1.3 million.

One defendant, ANTHONY BUTTITTA, was sentenced to 30 months in prison, and his father, DOMINIC BUTTITTA, was sentenced to 18 months prison.

Both men pleaded guilty last February to two felony counts filed against them in U.S. District Court.

Anthony Buttitta, 43, of St. Charles, and Dominic Buttitta, 69, of South Barrington, who operate Blackjacks Gentlemen’s Club in Elgin, were also ordered to pay $1,306,187 in restitution to the IRS, and forfeit an additional $400,000 to the United States.

Both men were ordered to begin serving their sentences on Jan. 8, 2013, by U.S. District Judge Milton Shadur.

The sentences were announced by Gary S. Shapiro, Acting United States Attorney for the Northern District of Illinois; Thomas Jankowski, Acting Special Agent-in-Charge of the Internal Revenue Service Criminal Investigation Division in Chicago; and William C. Monroe, Acting Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation.

According to court documents, the Buttittas operate and manage Blackjacks through Elgin Entertainment Enterprises, Inc. Between 2005 and 2009, they also ran an Internet gambling business, including the websites Skybook.com, Largejoe.com, Theredhotel.com., and others based in Costa Rica.

According to their guilty pleas, both Buttittas filed false federal corporate tax returns for calendar years 2002 through 2009, and false federal individual income tax returns for calendar years 2002 through 2008 that under-reported by $4,664,959 the total income they received from the operation of Blackjacks and the gambling business.

They concealed the diverted funds from their tax preparers and the IRS and used the unreported income to acquire personal property and to pay personal expenses. The diversion resulted in a federal tax loss of more than $1.3 million.

The defendants admitted that they skimmed approximately $3,704,959 in cash from the operation of Blackjacks, and later destroyed records of the cash they diverted from the business.

They also placed agents of their Internet gambling business on the payroll of another company to provide the employees with the appearance of a legitimate source of income and benefits. In return, they solicited and received kickbacks in the form of cash from the agents and concealed the payments from their tax preparers, bookkeepers and the IRS.

The defendants admitted they received approximately $1 million in gross wagers from the gambling business between 2005 and 2009, and made approximately $400,000 in net profits, which is the amount of the forfeiture judgment.

In addition to the sentence imposed today, defendants remain liable to the IRS for any and all back taxes, as well as a civil fraud penalty of 75 percent of the underpayment plus interest.

The government is being represented by Assistant U.S. Attorney Patrick King.

Those involved with the so-called Gentleman’s Club in Elgin have run into Internal Revenue Service problems, as you can see from the press release below.

So, Grafton Township is not the only local entity with Federal tax problems.

Grafton Township’s problems are small compared to these, however.

OPERATORS OF ELGIN ADULT ENTERTAINMENT CLUB AND ALLEGED INTERNET GAMBLING BUSINESS CHARGED WITH CONCEALING MORE THAN $4 MILLION OF INCOME FROM THE IRS

CHICAGO — The operators of an adult entertainment club in Elgin were charged today with

• conspiracy to impede the Internal Revenue Service in the collection of federal taxes, as well as separately
• operating an illegal Internet gambling business,

in connection with allegedly diverting more than $4 million in unreported income to themselves from the two businesses.

Patrick Fitzgerald

The defendants,

• Anthony Buttitta and
• his father, Dominic Buttitta,

were charged in a two-count criminal information filed in U.S. District Court, announced Patrick J. Fitzgerald, United States Attorney for the Northern District of Illinois; Alvin Patton, Special Agent-in-Charge of the Internal Revenue Service Criminal Investigation Division in Chicago; and Robert D. Grant, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation.

Anthony Buttitta, 42, of St. Charles, and Dominic Buttitta, 69, of South Barrington, were each charged with one count of conspiracy to defraud the United States by obstructing the IRS in the collection of taxes and one count of operating an illegal gambling business. They will be ordered to appear for arraignment at a later date in U.S. District Court. The Buttittas operate Blackjacks Gentlemen’s Club in Elgin through Elgin Entertainment Enterprises, Inc., which manages Blackjacks. Between 2005 and 2009, they also ran an Internet gambling business, including the websites

• Skybook.com,
• Largejoe.com, and
• Theredhotel.com.

The Blackjack's Gentlemen's Club billboard on Route 14 near Lily Pond Road.

According to the charges, both Buttittas filed false federal corporate tax returns for calendar years 2002 through 2009, and false federal individual income tax returns for calendar years 2002 through 2008 that substantially under-reported the total income they received from the operation of Blackjacks and the gambling business.

They allegedly concealed the diverted funds from their tax preparers and the IRS and used the unreported income to acquire personal property and to pay personal expenses.

The charges allege that the defendants received approximately $3,704,959 from “house” fees they collected from women for each shift they worked as dancers at Blackjacks.

Anthony Buttitta directed club employees to maintain logs of the house fee collections, and both defendants later destroyed and caused the destruction of the log sheets, the charges allege. They also placed agents of their Internet gambling business on the payroll of another company to provide the employees with the appearance of a legitimate source of income and benefits. In return, the charges allege that they solicited and received kickbacks in the form of cash from the agents and concealed the payments from their tax preparers, bookkeepers and the IRS.

The defendants allegedly received approximately $1 million in gross wagers from the gambling business between 2005 and 2009, and made approximately $400,000 in net profits.

The charges seek forfeiture of $400,000 as illegal proceeds.

At various times between 2005 and 2008, the defendants allegedly obtained unreported income from individuals as payment of losing wagers in the form of direct payments toward the purchase of a $2.9 million condominium in Las Vegas and a condominium in Costa Rica, as well as personal credit card payments.

In 2005 and 2006, Anthony Buttitta used approximately $400,000 in cash to pay for building and acquiring his home in St. Charles, according to the charges.

Each count carries a maximum penalty of five years in prison and a $250,000 fine, and restitution is mandatory. In addition, defendants convicted of tax offenses must pay the costs of prosecution and remain liable for any and all back taxes, as well as a civil fraud penalty of 75 percent of the underpayment plus interest. If convicted, the Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.

The government is being represented by Assistant U.S. Attorney Patrick King.

The public is reminded that an information contains only charges and is not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.

A press release from the U.S. Attorney’s Office in Chicago:

BARBADOS MAN INDICTED FOR ALLEGEDLY OBTAINING MORE THAN $10 MILLION BY FILING HUNDREDS OF FRAUDULENT FEDERAL TAX RETURNS

CHICAGO — A Barbados national who has lived in cities across the United States, was arraigned today on federal charges alleging that he fraudulently obtained more than $10 million from the United States in federal income tax refunds by filing hundreds of bogus tax returns claiming refunds totaling more than $120 million between 2007 and 2011.

The defendant, Andrew J. Watts, allegedly prepared and submitted false federal tax returns using the names and social security numbers of actual taxpayers who were deceased and in the names of deceased individuals who were falsely represented to be alive at the time the returns were filed. Watts then directed that the false tax refunds be mailed to addresses he controlled and electronically deposited into bank accounts under his control, including an address and a bank account in Chicago, the charges allege.

Watts, 34, whose last known residence was in Newark, N.J., was arrested on April 29, 2011, in Kansas City and returned to Chicago to face prosecution.

A federal grand jury returned a 27-count indictment on May 26 charging Watts with

• 14 counts of filing false claims against the United States,
• 9 counts of aggravated identity theft, and
• four counts of mail fraud.

The indictment also seeks forfeiture of at least $10 million. Watts, a permanent resident alien, has resided previously in Chicago, New York, Los Angeles, and Beverly Hills, Calif.

Watts pleaded not guilty at his arraignment today before U.S. District Judge Joan Gottschall, who ordered that he remain detained in federal custody without bond. A status hearing was set for Aug. 10.

The charges were announced Patrick J. Fitzgerald, United States Attorney for the Northern District of Illinois, and Lucy Cruz, Acting Special Agent-in-Charge of the Internal Revenue Service Criminal Investigation Division in Chicago.

“At the IRS, protecting taxpayer money is a matter we take extremely seriously. We are determined to put a stop to alleged false tax refund schemes,” Ms. Cruz said.

According to the indictment, between February 2007 and April 2011, Watts prepared and submitted false income tax returns and made them appear to be legitimate by creating false W-2 Forms for the deceased taxpayers.

Watts allegedly signed the returns, falsely claiming to be the deceased taxpayers’ authorized representative and forged the deceased taxpayers’ signatures to the returns in which the deceased taxpayers were represented to be still living.

In total, Watts filed more than 470 false federal tax returns claiming refunds in excess of $120 million and caused the IRS to issue refunds totaling more than $10 million, the indictment alleges.

The government is being represented by Assistant U.S. Attorney Patrick J. King, Jr.

Each count of mail fraud carries a maximum penalty of 20 years in prison; each false claims count carries a maximum prison term of 5 years; and each count of aggravated identity theft carries a maximum of 2 years in prison, which may run concurrently to each other but must be served consecutively to any sentence imposed for other crimes. In addition, each count carries a maximum fine of $250,000 fine, and the mail fraud counts carry an alternative maximum fine of twice the gain or twice the loss, whichever is greater. If convicted, the Court, must impose a reasonable sentence under the advisory United States Sentencing Guidelines.

The public is reminded that an indictment contains only charges and is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.

Chicago Tribune article 2-5-11. Click to enlarge.

The Feds have gotten a suburban sex club operator the same way they got Al Capone.

On tax charges.

Here’s the press release.

OWNER OF SUBURBAN ADULT ENTERTAINMENT CLUBS SENTENCED TO 12 MONTHS IN JAIL AND SIX MONTHS HOME CONFINEMENT FOR FEDERAL TAX OFFENSES

CHICAGO — A Libertyville man who diverted more than $12 million in cash from three adult entertainment clubs he owned and operated in Chicago suburbs was sentenced to serve 18 months in confinement for obstructing the Internal Revenue Service and filing a false individual income tax return to impede the collection of federal taxes, Patrick J. Fitzgerald, United States Attorney for the Northern District of Illinois, and Alvin Patton, Special Agent in Charge of the Internal Revenue Service Criminal Investigation Division in Chicago, announced today.

The defendant, Michael G. Wellek, was charged in a two-count criminal information filed in U.S. District Court in October, 2010, and pled guilty last fall to one count of obstructing the IRS in the collection of taxes and one count of filing a false federal income tax return for 2000.

From the Harvey "gentlemen's" club web site.

Wellek was the owner and operator of three “gentleman’s” clubs:

• Heavenly Bodies in Elk Grove Village
• Skybox in Harvey
• Cowboys in Markham

In May 2003, IRS agents seized approximately $12 million in cash from a warehouse in Elk Grove Village where Wellek conducted business.

The cash was stored in bags marked with a date and location indicating from which adult club the cash was earned. Operating the businesses as sole proprietorships, Wellek was required to report their gross income and expenses on self-employment schedules attached to his federal income tax returns, and include their net income in calculating his annual individual gross income, taxable income and income tax.

According to the charges, from 1989 through 1999, Wellek did not file any personal income tax returns despite operating profitable businesses that generated substantial taxable income.

Between February 2000 and May 2003, Wellek endeavored to obstruct and impede the IRS in collecting taxes on his business income. Specifically, between February 2000 and October 2002, Wellek engaged in a pattern of false and misleading conduct, including making false representations about his assets and income, to obstruct and impede an IRS audit for the tax years 1989 through 1999.

Wellek was ordered to begin serving the sentence on June, 1, by District Judge Joan H. Lefkow. Under the terms of the sentence, Wellek will serve 12 months in the custody of the Bureau of Prisons, followed by 6 months home confinement in combination with one year of supervised release. Judge Lefkow also ordered Wellek to pay a fine of $75,000 and perform 200 hours of community service. Taxes owed to the United States Government have been paid.

Judge Lefkow noted the importance of deterring other people from committing tax offenses in imposing the sentence.

The government was represented by Assistant U.S. Attorney Patrick King.

= = = = =

The Tribune reports Wallek is cooperating with authorities.

A sentence has been imposed on Operating Engineers Local 150′s retired President William Dugan. You can read the details in the U.S. Attorney’s press release below:

RETIRED HEAD OF OPERATING ENGINEERS LOCAL 150 SENTENCED FOR

ILLEGALLY OBTAINING EQUIPMENT FOR HIS MARYLAND BUFFALO FARM

CHICAGO — The retired leader of a regional labor union local was sentenced today to three years of probation for violating federal labor law by demanding and accepting custom-made livestock feeders for his buffalo farm in Maryland from a company that employed the union local’s workers, as well as other similar related conduct.

The defendant, William E. Dugan, was president and business manager of the International Union of Operating Engineers Local 150, headquartered in Countryside, from 1988 through 2005.

Dugan was also fined $30,000 and ordered to pay restitution and the costs of his supervision while on probation, announced Patrick J. Fitzgerald, United States Attorney for the Northern District of Illinois; James Vanderberg, Special Agent-in-Charge of the U.S. Department of Labor Office of Inspector General in Chicago; and Robert D. Grant, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation.

The sentence was imposed by Magistrate Judge Michael Mason in U.S. District Court. Dugan, 77, of Hancock, Md., and formerly of Mt. Prospect, Ill., has already paid restitution of $4,800 to Local 150 and $6,000 to the Apprenticeship Skills Improvement Program (AISP.)

Dugan pleaded guilty to the misdemeanor charge of violating the U.S. Labor-ManagementRelations Act in March shortly after he was charged.

Under federal law, Dugan’s conviction bars him from participating in any union activities for 13 years.

Local 150 represents approximately 23,000 members working in construction and a variety of other industries in Indiana, Illinois and Iowa.

In pleading guilty, Dugan admitted that in 2005 he demanded and accepted several concrete buffalo feeders valued at approximately $500 apiece from a company in Elgin, whose workers were represented by Local 150.

In addition, Dugan admitted the following related conduct:
in 2002, he accepted the rental and delivery at his Maryland farm of a front-end loader, with a value of $7,265, from a company unionized by Local 150 workers;

• in 2004, this same company provided Dugan with a skid steer (small four-wheel drive engine-powered machine with a lift arm capable of being fitted with various attachments) at a price several thousands of dollars below market value;
• between 2003 and 2005, he accepted two 400-bushel truckloads of feed corn each year that, together with cash payments to Local 150, comprised the “rent” that a farmer paid to cultivate land the union owned in Will County;
• in 2003, he converted a front-end loader belong to the union apprentice program for his own benefit at his Maryland farm, and
• between 2001 and 2006, he misused a semi-tractor and trailers belonging to the apprentice program, while serving as the program’s board chairman; and
• in 2005, he filed false reports with the Labor Department failing to disclose the benefits he obtained from companies whose workers were represented by Local 150.

The government was represented by Assistant U.S. Attorney Patrick King. Other Labor Department branches that participated in the investigation were the Employee Benefits Security Administration and the Office of Labor Management Standards.