A press release from the U.S. Attorney’s Office:
TWO FORMER AREA BUSINESS OWNERS SENTENCED TO PRISON FOR FAILING TO REPORT MORE THAN $22 MILLION IN INCOME THEY SHARED
CHICAGO — A day after together paying more than $10 million in restitution to the Internal Revenue Service, two former business owners were sentenced to federal prison for failing to report as income and pay taxes on more than $22 million they diverted from the business and divided equally.
The defendants, MICHAEL H. MARTORANO and WILLIAM S. SEFTON, were sentenced yesterday to 3½ and four years in prison, respectively, after each pleaded guilty in March to three counts of filing false federal income tax returns.
The defendants were the majority owners of the former Consumer Benefit Service, Inc., or Cbsi, a Naperville business that provided membership and consumer discount programs to businesses and associations worldwide.
Martorano, 66, of Ft. Atkinson, Wis., and formerly of Naperville, who was Cbsi’s president, and Sefton, 62, of Scottsdale, Ariz., and formerly of the Chicago area, who was vice president/secretary of Cbsi, under-reported or failed to report the income they diverted over a period of five years. The government argued at sentencing that both men were motivated by greed, and, despite the payment of restitution, urged incarceration to punish them and deter others from committing tax crimes.
U.S. District Judge Edmond E. Chang yesterday imposed the 42-month sentence for Martorano and the 48-month term for Sefton, and ordered both to begin serving their sentences on Nov. 5. Judge Chang also fined both defendants $12,500 and ordered them to pay the mandatory costs of tax offense prosecution.
In addition, Judge Chang ordered restitution, which both defendants paid on Monday. Martorano paid approximately $1.494 million and Sefton paid approximately $1.441 million for individual income taxes they owed the IRS, and together they paid approximately $7.308 million in corporate taxes owed by their business, for a total of $10,244,144.
The sentences were announced today by Gary S. Shapiro, United States Attorney for the Northern District of Illinois, and James C. Lee, Special Agent-in-Charge of the Internal Revenue Service Criminal Investigation Division in Chicago.
Martorano and Sefton, who were charged in September 2012, admitted that on a number of occasions between December 2005 and December 2009, they caused Cbsi to transfer more than $21.656 million into bank accounts in the name of a consulting firm they controlled. Both defendants used some of this money to pay personal expenses and moved other amounts in approximately equal portions into other accounts they controlled individually. As a result, they each obtained approximately $10.828 million. In 2008, Martorano and Sefton equally divided an additional $641,975 that paid for a “muscle car” for Sefton. Neither defendant disclosed the receipt of any of this money to their individual tax return preparer.
The government was represented by Assistant U.S. Attorneys Kaarina Salovaara and Joseph Stewart.