Charles and Mary Bangle own several successful pizza businesses on the boardwalk in Ocean City, New Jersey. Not content with earning a good living and making great Jersey shore pizza, the government says they were pocketing cash from the business and committing tax evasion. The government says that the Bangles pocketed at least $981,000 in cash without paying taxes on the money. The couple is now awaiting trial on 23 counts of money laundering, 1 count of making false statements to the government, 5 counts of tax evasion and 1 count of conspiracy to defraud the United States IRS.
By all accounts, the Bangles operated very successful boardwalk businesses. The IRS says the boardwal pizzerias generated $4.5 million per year in sales, most of that during the short 3 months season between Memorial Day and Labor Day. Why, then, would the Bangles try and skim a few more dollars by pocketing a couple hundred thousand dollars of cash each year? That’s a question that jurors will get to figure out when the case goes to trial next year.
Cash businesses have always created a temptation for owners to evade taxes. Pizzerias appear near the top of that list. While some folks get away with tax evasion for years, many get caught.
Often it is a disgruntled employee who blows the whistle. Sometimes revenue agents are able to audit purchases by the businesses and quickly determine if the business is properly reporting its sales. For example, you can’t go through 500 pizza boxes per day but only report $100 in sales.
During my four year term as Maine’s revenue commissioner, I once observed a popular eatery not ring in cash sales. After suspecting tax evasion and alerting criminal investigations, they found that workers would use a calculator to add up the cost of the meal. If the patron paid by cash, the employee hit “no sale” on the register and opened the drawer to make change. If paying by credit card, however, the proper total was rung into the register.
Today, the IRS and several states including Illinois and New York have whistleblower reward programs that pay whistleblowers for information. Unless one has a strictly family run business, pocketing cash is getting more difficult.
Prosecutors in the Bangle case say that the couple was structuring cash deposits at their bank in a further attempted to shield their activities. Federal law says banks must report currency transactions of $10,000 or more. There isn’t anything illegal about having large amounts of cash and many cash businesses routinely make large cash deposits deposits daily. If there is an explanation, the IRS doesn’t really care. Structure a transaction, however, and you can get find yourself facing five years in prison.
How does structuring work? Although $10,000 in cash requires banks to automatically file a currency transaction report, banks must also report people who engage in suspicious financial transactions. Depositing $9,999 every day or depositing $7,000 in each of three different branches on the same day suggests someone who may be attempting to avoid detection. As a cash business making $4.5 million in just 3 months, we wonder why the Bangles would even bother to engage in structuring.
The couple faces 150 years in prison if convicted of all counts. Federal sentencing guidelines suggest a much shorter sentence, however. (Remember, all criminal defendants are innocent until proven guilty.)
If you are facing tax evasion or other criminal tax charges, seek legal representation from an experienced criminal tax attorney immediately. Even at the audit stage, seek legal assistance. (Accountants don’t enjoy the attorney -client privilege with their clients like lawyers.) The U.S. Department of Justice tax Division boasts a conviction rate of 97%. While that number includes many plea bargains, it is still a very significant conviction rate. Don’t wait until it is too late.
For more information, contact attorney Brian Mahany at or by telephone at (414) 704-6731 (direct). All inquiries protected by the attorney-client privilege and kept in strict confidence. We represent taxpayers worldwide.