Ohio Medical Professional Willfully Engages in Tax Fraud, Confesses to Committing a Tax Offense
Ohio Medical Professional Willfully Engages in Tax Fraud, Confesses to Committing a Tax Offense
Previously, we delved into The Optimal Tax Strategy. This tax evasion method involved the taxpayers transferring stakes in their businesses to tax-exempt charities. The objective was for the entities associated with these charities to assume the tax obligations, allowing the taxpayers to later purchase these stakes at a minimal cost and regain ownership of their businesses. In essence, the supposed donation was merely a facade, a paper scheme to shirk taxes.
My article, titled The Promoters of Optimal Tax Strategy: Mike Meyer and Rao Garuda Convicted (May 5, 2024), discussed the trials and sentences of the masterminds behind this scheme, Michael L. Meyer and his colleague Rao Garuda of Ohio, who were jailed for eight and 20 months respectively. However, what about those who participated in this tax evasion scheme?
One such participant was Dr. Suman Jana, an Ohio-based physician, whose involvement was detailed in the Criminal Complaint in U.S. v. Jana, S.D.Fla. Case No. 24-CR-60206 Doc. 1 (Oct. 21, 2024), and the Stipulated Factual Basis in U.S. v. Jana, S.D.Fla. Case No. 24-CR-60206 Doc. 15 (Nov. 18, 2024). Additional information can be found in the DOJ Press Release titled, Participant in Fraudulent Tax Shelter Scheme Pleads Guilty to Obstruction (Nov. 13, 2024).
Dr. Jana, along with his wife, donated 100% of their stake in an LLC to a Meyer-controlled charity called Indiana Endowment Fund. This LLC, created by Meyer for another client in 2012, was falsely claimed to have been owned and donated by Dr. Jana and his wife in 2012, allowing them to claim a 2012 tax deduction. This was the first instance of Dr. Jana backdating documents.
Between 2012 and 2015, the LLC was used by Dr. Jana and his wife to declare fake deductions amounting to $764,350. They also used over $92,000 from the LLC funds to cover their personal expenses, such as purchasing vehicles. It is important to note that by this time, the LLC was officially owned by the Indiana Endowment Fund.
In 2017, Dr. Jana and his wife repurchased the LLC from the Indiana Endowment Fund for a meager $10,000. Nevertheless, Dr. Jana continued to participate in tax fraud, as outlined in the DOJ Press Release.
"On April 3, 2018, the Justice Department filed a civil complaint for permanent injunction against Meyer in U.S. district court. On May 24, 2018, the Justice Department served a civil subpoena on Dr. Jana, requesting that he provide records related to the Optimal Tax Strategy. In response to the subpoena, Meyer and Garuda instructed Dr. Jana to falsely indicate that the buyback did not occur. Meyer prepared backdated transaction documents, acknowledgements, and promissory notes for Dr. Jana to sign and submit in response to the civil subpoena. These false documents were fabricated to suggest that Dr. Jana had signed the promissory notes when he and his wife reimbursed their personal expenses with funds from the purported charity.
"In June 2018, Dr. Jana signed the false documents and sent them to the Justice Department in response to the civil subpoena."
This marked the second instance of backdating by Dr. Jana. His reasons for doing so were revealed in the Criminal Complaint:
"On or about June 27, 2018, JANA sent an email to Fischel stating: 'We are a bit confused about this LLC. It was closed last year and now open again etc. As well as recently I have signed a lot of documents backdated as well as for [my wife], I don't feel good about it. However, we want [Meyer] to come out of this mess. So, we tried to help as much as we can.' "
In the end, although Dr. Jana attempted to help Meyer escape the consequences of his scheme, it was Dr. Jana who was left facing three years in federal prison and paying the taxes he had tried to evade, along with penalties and legal fees.
It is a possibility that all of this could have been avoided had Dr. Jana sought advice from a separate tax attorney regarding the Optimal Tax Strategy. However, it seems unlikely that Dr. Jana was interested in obtaining truthful information about Meyer's scheme, given his repeated involvement in document backdating to conceal the scheme.
There's an age-old saying that "a doctor won't cross the street for a good bargain, but they'll crawl on their belly for miles over broken glass for a bad one." This sentiment often applies to investment deals, but it also rings true for dodgy tax schemes. Time and time again, we see doctors getting drawn into these schemes, whether it's shady schemes like The Ultimate Tax Plan, syndicated conservation easements, 831(b) microcaptives, VEBAs, and pretty much any other shady tax scheme that comes around. In every instance, we see doctors, like Dr. Jana here, missing out on a much-needed second opinion that could have saved them from the severe consequences that followed. They didn't want to hear about the deal's failures, so they chose to ignore it, instead drawn in by the prospect of benefits, even if they were illusory. Moths to a flame, doctors seem to be, when it comes to these deals. I won't speculate as to why this is the case with doctors, but I've witnessed it first-hand for the past 35 years, from my time as a young lawyer digging doctors out of bad oil and gas tax shelters.
Rarely do the participants in tax shelters face criminal prosecution, usually viewed as victims or with the prosecutors considering the steep civil penalties they pay to the IRS to be enough punishment. However, this case is different. Dr. Jana not only used The Ultimate Plan to lessen his tax burden, but he also engaged in two acts of document backdating: first, in 2013, backdating documents to 2012 so he could claim deductions for that year; and second, backdating documents in 2018 as part of a cover-up regarding his purchase of LLC interests from a charity.
Backdating documents is never acceptable and demonstrates a criminal intent. While jurors may become disinterested when presented with intricate violations of charity exemption rules, they can quickly understand that backdating is wrong. In the event that someone is caught backdating documents, they typically act like Dr. Jana did here: pleading out.
If a promoter or adviser ever suggests backdating documents, just do not comply with their request. If the situation appears unclear, with the potential for it to be OK, simply find another independent adviser and let them tell you that it is not OK at all. And unfortunately, like Dr. Jana, you may end up in jail.
- Dr. Jana's involvement in tax evasion was similar to Michael L. Meyer and Rao Garuda's scheme, as they all utilized tax shelters to evade taxes.
- Suman Jana, an Ohio-based physician, was convicted for using a tax shelter called The Ultimate Tax Plan, which involved backdating documents in 2013 and 2018 to claim tax deductions and cover up transactions.
- The $10,000 purchase of the LLC from the Indiana Endowment Fund by Dr. Jana in 2017 was a part of his participation in tax fraud, as outlined in legal documents and DOJ Press Releases.
- Mike Meyers, one of the masterminds behind The Optimal Tax Strategy, was convicted for tax evasion and served eight months in jail, while Rao Garuda was convicted and served 20 months in jail for their roles in the scheme.