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Tax Fraud

Eileen J. O’Connor, Assistant Attorney General for the Tax Division, United States Department of Justice; Gregory A. White, United States Attorney for the Northern District of Ohio; and Nancy Jardini, Chief, IRS Criminal Investigation, announced recently that at the federal courthouse in Akron, Ohio, U.S. District Judge John R. Adams sentenced Gary Harris to 151 months imprisonment, to be followed by 3 years supervised release and fine of $95,000. Harris and two Co-conspirators were convicted of using sham trusts and false corporations in order to hide profits from IRS.

The trial lasting over a month, the jury found defendants Harris, Michael Kotula and Tamara Schwentker-Harris guilty of conspiring to defraud the United States (18 U.S.C. § 371). Additionally, the jury convicted both. Harris and Kotula on 3 counts and 1 count of income tax evasion (26 U.S.C. §7201), respectively. Judge Adams sentenced co-defendant Michael Kotula to 70 months imprisonment followed by three years supervised release, a $100,000 fine, payment for the costs of prosecution, and $82,806.83 in restitution to the Internal Revenue Service. Judge Adams also sentenced Tamara Schwentker-Harris to 15 months imprisonment, two years supervised release, and payment of $17,054 as restitution to the Internal Revenue Service.

"Those who attempt hiding income from the IRS by moving it into bogus trusts or by using other fraudulent schemes need to know they risk criminal prosecution," the Assistant Attorney said.

"The long prison sentences imposed in this case are the result of the IRS and the Department of Justice working aggressively to investigate and prosecute tax fraud." "The IRS aggressively investigates those who use abusive trust arrangements to hide the true ownership of assets and income. It is a matter of maintaining public confidence in the fairness of the tax laws," stated the Chief, IRS Criminal Investigation. "If individuals choose to participate in abusive trust schemes, they will be held accountable and sentenced to prison."

During the trial, the evidence proved the defendants used a maze of trusts and corporations to try to hide $18 million in income generated by various businesses they controlled, including historic Conneaut Lake Park in Crawford County, Pennsylvania. Between January 1994, and July 2003, they paid little or no taxes on the income earned. Nonetheless, Harris lived lavishly and acquired, among other things, several homes, a jetway for his ranch in Conneaut, and an antique Mercedes sports car which Harris claimed was worth $250,000.

Mr. Harris had previously been convicted of tax evasion for tax years 1987, 1989, and 1990. In addition, between the years 1998 and 2002, while he was in federal prison after convictions for racketeering and income tax evasion, his co-conspirators Kotula and Schwentker-Harris kept Mr. Harris’s businesses running and continued to operate this illegal conspiracy.

Assistant Attorney General O’Connor and United States Attorney White thanked the prosecutor's of this case, Tax Division Trial Attorney Robert J. Livermore and Antitrust Division Trial Attorney Brian Stack. They also thanked the special agents of the IRS, whose assistance was essential to the successful investigation and prosecution of the case.