One of the first blog posts I ever wrote concerned the City of Bell, California. In 2010, we reported that the Los Angeles County District Attorney had much of Bell’s city government arrested for ripping off city taxpayers. Three years later and we learned that last week the FBI and IRS also jumped into the fray. As of last week, former city administrator Robert Rizzo has agreed to plead guilty to filing a false tax return and conspiracy to defraud the IRS. Both are federal felonies.
This story begins in 2010. Back then, the D.A.’s office accused city officials of bilking taxpayers out of $5.5 million.
That sounds like a lot of money for a small town of just 37,000 mostly blue collar residents and it is. Instead of simply embezzling the money, city officials are accused of conspiring to pay themselves outrageous salaries and then hide that fact from voters. If the big salaries were not enough, at least one official simply “loaned” himself additional monies from city coffers.
How high were the salaries? The city manager earned $1.1 million per year. The part-time city council members – $96,000 to $110,000 per year. And the police chief, a paltry $457,000. So many city officials were arrested by county prosecutors that Bell was left with just one sitting council member.
In addition to the criminal charges, the state also brought a civil suit to recover the pay, loans and benefits.
Fast forward 3 years and now we learn that the feds also charged the city administrator. Prosecutors say that his outrageous million dollar salary apparently wasn’t enough. In addition to deceiving taxpayers about his high salary, the IRS says that Rizzo created a corporation to claim phony rental property deductions. His return preparer, Robert Melcher, already pleaded to his role in the scam.
When sentenced next year, Melcher could receive 3 years in prison. Rizzo is facing 8 years.
After the plea deal was inked, IRS’s Criminal Division Chief Richard Weber said, “It is regrettable that some public officials believe they are above the law. Instead of filing accurate tax returns, Mr. Rizzo claimed bogus corporate losses on his income tax return to illegally reduce his tax liability. Pursuing public servants who corruptly endeavor to circumvent the tax laws to fund their lavish lifestyles is a top priority for IRS Criminal Investigation.”
The motto of the City of Bell is “Bell believes in promoting a healthy, balanced and moral lifestyle.” Unfortunately, many of the city’s elected officials never grasped the “moral lifestyle” concept.
Normally, inflated deductions don’t lead to criminal charges. The normal IRS remedy for questionable returns is the imposition of a 75% fraud penalty. Become too greedy or too high profile and you might just go to jail, however.
As experienced tax audit defense lawyers, we know how to resolve cases quickly and quietly and keep audits from becoming criminal prosecutions. Our team of IRS tax attorneys have decades of experience ready to help you stay out of trouble.
If you are charged with a white collar crime by the IRS, having an experienced criminal tax attorney is critical. The rules regarding tax evasion and money laundering cases are very complex and unique. We handle all types of tax crimes including filing false returns, tax evasion, conspiracy to defraud the IRS, or willful failure to file tax returns.
For more information, contact attorney Brian Mahany at or by telephone (414) 704-6731 (direct). All inquiries are protected by the attorney – client privilege and kept in strict confidence. We handle IRS criminal cases nationwide.