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August 21, 2019Cart

Business

by Fairfield County Business Journal
by FCBJ

Ex-broker from Greenwich pleads guilty to numerous tax offenses

A former broker from Greenwich has pleaded guilty to one count of tax evasion and three counts of willful failure to file tax returns.

Richard Josephberg admitted that he deliberately evaded the assessment of hundreds of thousands of dollars in federal income taxes by fraudulently reporting a 2011 commission of approximately $1.5 million as a long-term capital gain, which was taxed at a much lower rate than ordinary income.

In addition, the 72-year-old admitted that he willfully failed to timely file any tax returns for calendar years 2013-15. As part of his plea, Josephberg agreed to pay at least $1,275,624 in restitution to the IRS and the New York State Department of Taxation and Finance.

Josephberg pleaded guilty before U.S. Circuit Judge Richard J. Sullivan in Manhattan.

This was not Josephberg’s first offense. According to the indictment, public filings and other statements made in open court, he was convicted in September 2007 in Southern District of New York of 16 counts of tax fraud and one count of health care fraud, which resulted in a sentence of 50 months in prison and three years’ supervised release. While on supervised release for that conviction, he began engaging in the criminal conduct that formed the basis of the most recent plea.

Specifically, starting in late 2010, Josephberg began working for an investor relations firm (“Firm-1”) in Manhattan. Through the individual who operated Firm-1, Josephberg secured a commission-based arrangement with another investment firm (“Firm-2”), which agreed to pay Josephberg a commission of approximately 15 percent of any profit generated by Firm-2 on financing deals originated by Josephberg. For originating one such financing deal, Josephberg was entitled to commission payments totaling approximately $1.57 million in 2011.

After receiving payments totaling approximately $35,725 in his own name, Josephberg directed Firm-2 to issue the remaining commission payments in the name of a newly formed nominee corporate entity called “Almorli Advisors Inc.” Josephberg opened a new bank account in the name of that firm (“Almorli Bank Account-1”), and deposited payments of approximately $1.53 million into that account.

In March 2012, while preparing to file 2011 federal income tax returns, Josephberg took steps to evade paying hundreds of thousands of dollars in federal income taxes by disguising and concealing the type of income that he had received from Firm-2. On or about March 27, 2012, Josephberg formed a second entity called “Almorli Advisors NY LLC,” which served as a shell company to insulate Josephberg from IRS scrutiny.

Josephberg had his accountant prepare a false 2011 partnership income tax return, Form 1065, in the name of Almorli Advisors NY LLC (the “2011 Form 1065”), listing Josephberg as a 99-percent partner and Josephberg’s son as a one-percent partner.

To evade a substantial part of the income taxes due and owing for 2011, Josephberg’s   2011 Form 1065 falsely reported the commission payments from Firm-2, totaling approximately $1,574,922, as a long-term capital gain, rather than ordinary income. Josephberg’s purported 99 percent share of this false long-term capital gain flowed through to his 2011 individual income tax return, Form 1040.

His fraudulent misclassification of that income resulted in a reported tax liability that was hundreds of thousands of dollars lower than the true tax liability, because individual long-term capital gains were taxed at a significantly lower rate than ordinary income.

Josephberg also engaged in a scheme to evade the assessment of federal income taxes for calendar years 2013-16, during which time he received substantial income from performing consulting and other professional services. Despite earning substantial income, he failed to timely file any federal income tax returns for 2013-16 until after IRS agents informed him in May 2017 that he was under investigation.

In addition to not filing any tax returns in a timely fashion, Josephberg took various affirmative steps to evade the assessment of taxes. Among other things, he routed substantial amounts of income through Almorli Bank Account-1 and another bank account in the name of Almorli Advisors Inc., both of which he controlled and used to pay for his personal expenses.

By using corporate entities to conceal personal income, Josephberg was attempting both to evade paying his substantial outstanding tax liabilities from prior years (1997, 1998, and 2005) and to evade assessment of taxes for 2011 and 2013 through 2016, as charged in the indictment.

Josephberg pleaded guilty to one count of tax evasion for the tax year 2011, which carries a maximum sentence of five years in prison, and three counts of willful failure to file tax returns for the tax years 2013-15, each of which carries a maximum sentence of one year in prison. He is scheduled to be sentenced by Sullivan on July 15.