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October 13, 2019Cart

Business

by Westchester County Business Journal
by WCBJ

White Plains CPA gets 22 months in prison for tax fraud

A White Plains CPA was sentenced on Wednesday to 22 months in prison for obstructing the IRS in a $23.5 million fraudulent tax credit scheme.

Joseph Cervone, 64, had pleaded guilty to filing bogus tax credit claims for clients and for concealing $500,000 in personal income.

Federal Judge Nelson S. Roman also sentenced him to one year of supervised release and fined him $15,000.

Cervone’s attorney, Glenn H. Morak, asked for leniency: probation and 12 months of home confinement.

He argued in a sentencing memorandum that Cervone did not know that the energy and coal credits were fraudulent. But he knowingly took the credits for his clients and declared losses on their tax returns when the credits had yet to be purchased.

Cervone is deeply ashamed of his conduct, Morak said, and has accepted responsibility. The Internal Revenue Service has received $17.25 million in restitution.

“Mr. Cervone is an ordinary, simple family man with a storefront practice in White Plains,” Morak said. “The tax shelter and subsequent tax fraud is so out of character for Mr. Cervone’s humble and otherwise honest accounting career.”

Such a man would not abuse his position again, Morak argued, so a long prison sentence would not serve as a deterrence.

“He prays for a second chance to atone for his criminal behavior.”

The government asked the court to impose a harsher sentence: 57 to 71 months in prison.

Cervone created 66 partnerships and prepared fraudulent tax forms for clients, for 2010 and 2011, to enable $23.5 million in refundable energy credits and $8.4 million in net operating losses. He under-reported his own income by $506,600 for those two years.

His clients never saw the partnership tax returns, did not fully understand their roles and relying on Cervone believed the credits were legitimate, Assistant U.S. Attorney John P. Collins Jr. said in the government’s sentencing memorandum.

Cervone was supposed to keep 5 percent of the tax credits and he expected to earn more than $1 million from the scheme, Collins said. The $17.25 million restitution was actually tax credits seized by the government.

He said Cervone should be viewed in the proper context, “as an individual who committed fraud because of greed and then was caught.”