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News for Norther Colorado and the world

Sunday, November 23, 2014

Woman sentenced to 3 years in prison for failing to report income to the IRS

Monument woman sentenced to 3 years in prison for failing to report $1.6 million in income to the IRS

 

DENVER – Linda Abramson-Schmeiler, age 52, of Monument, Colorado, was sentenced on March 17, 2011 by U.S. District Court Judge Robert Blackburn to serve 36 months in federal prison for filing a series of false individual and corporate income tax returns for the years 2003 through 2005, in connection with failing to report $1.6 million in gross business receipts to the IRS for the years 2002 through 2005, United States Attorney John Walsh and IRS Criminal Investigation, Denver Field Office, Special Agent in Charge Sean Sowards announced. The failing to report, according to uncontested government calculations, allowed Abramson-Schmeiler to avoid paying more than one-half million dollars in federal taxes.

Judge Blackburn further ordered Abramson-Schmeiler to pay a fine of $7,500 and to pay $709,672 in restitution to the IRS as a special condition of a one year supervised release term to be served by Abramson-Schmeiler following her imprisonment.

The sentence follows Abramson-Schmeiler’s indictment by a federal grand jury in Denver on August 11, 2009 on five counts of filing false income tax returns and a jury trial which took place on the indictment over the course of October 19, 2010 through October 28, 2010. The jury found Abramson-Schmeiler guilty on all five counts of the indictment.

As recounted in the government’s post-trial sentencing statement as well as the evidence presented at the trial:

For a number of years prior to the events at issue in the case, the defendant had been employed primarily as a hair stylist who owned and operated a hair salon called Hair Drama in Colorado Springs, Colorado. The defendant’s hair salon stocked brand name professional hair care products.

Beginning no later than 2000, Linda Abramson-Schmeiler began buying these brand name professional hair care products from various distributors in large volumes and reselling them to others besides her salon customers; her purchases and resales of these products were outside the authorized distribution channels for the products which over time became the primary focus of the defendant’s business activities, and the defendant essentially functioned as a “collector” or product diverter in unauthorized parallel distribution markets for these products, commonly known as “gray markets.”

Beginning in or about late July 2000, the defendant became a regular supplier of these brand name professional hair care products for a large gray market wholesale business operating out of New York, initially under the name Quality King Distributors, Inc. and later primarily under the name Pro’s Choice Beauty Care, Inc. (hereinafter collectively, “ PCB/QKD”). After securing a product order from PCB/QKD, Linda Abramson-Schmeiler arranged to have the products transported to Denver, Colorado by vehicle, often driven by her spouse, where the products would be delivered to a truck dispatched from PCB/QKD. Upon receiving and inventorying these products in New York, PCB/QKD sent payment to the defendant, primarily through large wire transfers to bank accounts specified by the defendant but also occasionally through check. Over time, PCB/QKD became the defendant’s predominant customer in this gray market professional hair care product distribution business.

The federal individual and corporate income tax returns that Linda Abramson-Schmeiler had prepared through her accountant and filed with the IRS for years 2002 through 2005, grossly understated the business receipts that the defendant derived from her hair care product and hair salon businesses for those years and, as a consequence, grossly understated her net profits and income from the businesses. Although Abramson-Schmeiler received product payments from PCB/QKD that alone totaled more than $7.7 million, she reported on her income tax returns sales receipts from all customers that totaled no more than $6.1 million.

Linda Abramson-Schmeiler maintained at trial that she did not believe that she had to report the $1.6 million in receipts because the payments were offset by her product purchases and so were part of transactions that resulted in no net profits.

Principally through her own testimony and the testimony of her spouse (a Colorado Springs police officer), sought to establish that the offsetting product purchases were cash payments that she had made to her suppliers and were funded from a large inheritance that she had received from her parents, after her mother died in 1989. Although she and her spouse acknowledged using some of this inheritance money as a down payment for the couple’s residence in Monument, Colorado, most of the inheritance, the defendant claimed, had been maintained over the course of the years in U.S. currency that she hid in her house in metal boxes. Linda Abramson-Schmeiler variously claimed at points during her trial testimony that her total inheritance was approximately $1 million or, alternatively, that the cash component of her inheritance was approximately $1 million. Although she acknowledged having funds in multiple bank accounts and brokerage accounts over the course of these years, the defendant indicated in her testimony that she was reluctant to deposit this purported inherited cash into bank accounts and stated that she only started spending the cash when she saw an opportunity to use it in her gray market hair care product distribution business. The defendant’s spouse, in his testimony, sought to corroborate the defendant’s assertion that she kept large sums of currency in their residence and that she used this cash to pay her suppliers for the hair care products that she resold to PCB/QKD.

In the course of pronouncing sentence on March 17, Judge Blackburn condemned this defense as feckless and stated that he believed that Abramson-Schmeiler had perjured herself in her testimony and had suborned perjury from others in her immediate family.

“As tax season approaches, this case demonstrates that fraudulently attempting to evade taxes results not only in severe financial consequences, but can also result in going to federal prison,” said U.S. Attorney John Walsh.

“This sentence should send a clear message; hiding income from the IRS is a crime and the consequences of such acts can and will result in jail time”, said Sean Sowards, Special Agent in Charge, IRS Criminal Investigation, Denver Field Office.

This case was investigated by IRS Criminal Investigation and prosecuted by Assistant U.S. Attorney Kenneth M. Harmon.

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