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Thursday, February 17, 2005

Ind. Decisions - "Must read" series on tax fraud case before Judge Young

"Judge rejects embezzlement plea deal: Defendant didn't face any restitution" is the headline to a story today in the Louisville Courier Journal. Some quotes:

EVANSVILLE, Ind. -- A federal judge has rejected a plea agreement under which an accountant charged with embezzling $370,000 in tax payments from an Evansville business would not have to repay any of the money.

The owner of the paving business from which the money was stolen says he has been unfairly billed by the Internal Revenue Service for nearly $1 million. The [IRS] claims he still owes the taxes, plus penalties, fines and interest.

Michael G. Titzer, 52, had reached an agreement to plead guilty to stealing the money from TD&O paving, and he is in jail awaiting sentencing. The funds were supposed to have been used to pay federal employment tax withholdings.

The plea agreement called for him to spend less than four years in prison and forgo making restitution. That would allow him to keep the $170,000 house that authorities say he bought using the stolen money. It is now listed in his wife's name.

But U.S. District Judge Judge Richard Young rejected the deal after learning that company owner Dennis Owens would be forced to pay the IRS for the tax money that Titzer stole.

"This deal doesn't strike me as fair or just," he said. * * * "I'm trying to put myself in or somebody I know in the position of this paving company," Young said at the hearing. "I'd be darned upset about this (plea deal) if I was driving down the street looking at a $170,000 house that I'm paying for, and somebody's living there off my hard-earned money."

Maureen Hayden of the Evansville Courier& Press broke this story on Sunday, Feb. 13th. Some quotes from that story:
When an Evansville-based asphalt company hired accountant Michael G. Titzer to do its tax work, it likely knew of no reason to worry.

Titzer, after all, had spent 20 years as the owner of a local franchise of a well-known national tax preparation service company, helping hundreds of area individuals and small businesses navigate their way through a sea of tax law. In 1999, when Titzer formed his own tax consulting company, the asphalt company didn't know the real reason for the move. Nor did it know until almost two years into the relationship with Titzer that instead of helping the company meet its tax obligation, Titzer was pocketing the tax money.

By the time he was caught, Titzer had stolen $370,000 that was supposed to have been used to pay the asphalt company's federal employment tax withholdings. Titzer, who recently pleaded guilty to tax and bank fraud charges in federal court, is in jail awaiting sentencing. He says the money he stole is gone, which is bad news for the owners of the asphalt company, because as far as the federal government is concerned, they still owe $370,000 in back taxes.

In a story published yesterday, Feb. 16th, Hayden writes:
Dennis Owens thought he knew what it was like to be victimized after his accountant faked a case of terminal cancer and stole $390,000 in tax payments from Owens' road-paving business, using a chunk of the stolen money to buy a $170,000 house.

But Owens says he didn't know the meaning of victim until the federal government stepped in. Now the IRS is going after Owens for almost $1 million, claiming he still owes them for the stolen tax money plus penalties, fines and interest. But federal prosecutors and the IRS say the accountant - who admitted in court he bilked Owens - can keep the house bought with the ill-gotten gains and won't have to pay back a nickel of stolen loot.

Owens doesn't think that's fair. Neither does U.S. District Judge Richard L. Young. When presented with a plea deal two weeks ago that would have allowed the accountant, Michael G. Titzer, 52, to spend less than four years in prison and forgo making restitution, Young rejected the deal and instructed the federal prosecutor to go back to work. Young also learned that Owens would [not] be forced to pay the IRS for the taxes that Titzer stole.

"This deal,'' said Young, "doesn't strike me as fair or just."

Young ordered the parties back into court today, but just moments before federal court closed Tuesday, federal prosecutors filed a motion, seeking a postponement of the hearing. They requested the delay because they failed to notify Owens of the original plea and sentencing hearing, as required by a new federal law.

Owens found out about the plea agreement by reading about it in Sunday's edition of the Courier & Press. And U.S. Attorney Susan Brooks said she found out that Owens hadn't been notified about the plea agreement hearing until she was informed of it by the Courier & Press on Tuesday.

"She wants to thank you for bringing it to our attention," said Claudia Cummings, a spokeswoman for Brooks' office in Indianapolis. That's the only thing, though, that Brooks' office will say about the case. * * *

Owens said IRS investigators also told him that they weren't going to seek restitution from Titzer, even though they know some of the money went to buy a house that is now listed in Titzer's wife's name. "They told me, 'You're on your own getting any of your money back," Owens said. "They said, 'You can hire a lawyer and file a civil lawsuit.'"

Today's Hayden story is headlined "For love or money: If wife gives up house and cash, tax-cheat husband gets leniency ... if loot kept, he's in prison long time." Some quotes:
The wife of confessed thief and tax cheat Michael G. Titzer faced an interesting proposal from a U.S. District Court judge on Wednesday: love or money.

With her husband sitting in the courtroom, the judge laid out the options: Betty Jutzi-Titzer could voluntarily surrender her $170,000 home and some $34,000 in cash stashed in bank accounts - which would likely get her husband out of prison within a few years - or she could try to hang on to the cash and the home, all obtained through her husband's illegal deeds, and risk sending her husband to prison for up to 30 years.

Would it be door No. 1 or No. 2? Jutzi-Titzer, under pressure from her husband's defense attorney, finally decided to give up the house and cash. But given her considerable reluctance, evidenced by her repeated statements that she'd rather keep the stolen loot, U.S. District Judge Richard L. Young postponed for the second time the sentencing of her husband. * * *

Titzer admitted he used the stolen money to buy a $170,000 house, which he then put in his wife's name. She then used the house to get a loan of $110,000. In the plea deal offered by Shellenbarger's boss, U.S. Attorney Susan Brooks, Titzer agreed to plead guilty to two federal charges in return for a recommendation from prosecutors that he spend less than four years in prison. Titzer was not required to pay back any of the stolen money. Young rejected that deal two weeks ago, after Shellenbarger revealed the IRS was demanding Owens again pay $370,000 in federal employee withholding tax, plus penalties, fines and interest. The total tab being sought by the IRS from Owens stands at more than $1 million.

Young declared the deal unfair and unjust, and instructed Shellenbarger, federal investigators and Titzer's attorney, Chris Lenn, to come up with a better plan. That plan emerged Wednesday, when Lenn called Jutzi-Titzer to the witness stand. * * *

Young then reset the sentencing hearing for March 3, over the objections of the federal prosecutor, who said the government would not take part in efforts to make restitution to Owens.

Noting Shellenbarger's reluctance to cooperate, Young instructed Shellenbarger and federal investigators to make themselves available to Owens and his attorney over the next two weeks.

Federal prosecutors have apparently been reluctant to do that, according to Owens, who also testified in court Wednesday. Owens said the federal prosecutor had failed to notify him that a plea agreement had been reached with Titzer, even though federal investigators had promised that would be done.

Owens found out about the plea agreement and Titzer's Feb. 4 sentencing hearing by reading about it in the Evansville Courier & Press. Before Wednesday's court hearing, Shellenbarger told Owens that he didn't believe a new federal victims-rights law applied to Owens. Shellenbarger told Owens that even though Titzer stole $370,000 of Owens' money, that because Titzer was charged with a tax crime, Owens was not a "direct victim" of the crime and might only be an "indirect victim" of Titzer's crime.

Posted by Marcia Oddi on February 17, 2005 09:10 AM
Posted to Ind Fed D.Ct. Decisions