Above the Law

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50028697 - law and justice concept

Fraudsters tend to think they are above the law. That’s why they plot ways to carry out illegal schemes that fatten their bank accounts without regard for the people and organizations that they victimize. (Well, I have news for them. They are not.) A Cheyenne, Wyoming man, who most likely thought he was above the law, made a substantial amount of money by selling an exercise equipment company he owned and operated. There’s nothing wrong with selling his company, just the part where he committed tax fraud and Medicaid fraud when he neglected to be honest with Uncle Sam about the proceeds he received from the sale.

The owner and operator of the fitness company sold the rights to “Fitwall” exercise equipment to his investors for about $1.5 million in 2013. (What happened next got him into some trouble with the Internal Revenue Service (IRS)). Despite receiving a pretty good sum of money for his company, he did not give the IRS their cut through his personal income tax returns for two years in a row. (The Department of the Treasury missed out on receiving $404,501 because of the fitness company owner’s inaction.)

Tax fraud was not the only illegal thing he committed. During the same year that he sold the rights to his invention, he also prepared a false renewal application with the Wyoming Medicaid program. During 2013 and 2014, he received more than $20,000 Medicaid benefits because he claimed that his household had no income. (I wonder if they hurt themselves working out on the Fitwall.)

The Cheyenne, Wyoming man pleaded guilty to tax fraud and Medicaid fraud. When sentenced, he will be facing a maximum prison sentence of three years, supervised release as well as restitution and monetary penalties. (Do you think that is a reasonable proposed sentence for someone who lied to the government not once, but twice?)

It’s not every day that you get $1.5 million. Perhaps this Wyoming fitness company owner thought he was above the law and justified his illegal actions because he thought he deserved to keep the money for himself. Let’s hope that the court puts this man in his rightful place. For someone who had created what was thought to be the future of fitness at one time, it looks like his future is not so bright anymore.

Today’s “Fraud of the Day” is based on a Department of Justice press release entitled, Creator Of “Fitwall” Exercise Equipment Pleads Guilty to Failing To File Income Tax Returns and Health Care Benefits Fraud,” released on July 18, 2018.

WASHINGTON – A resident of Cheyenne, Wyoming and creator of “Fitwall” exercise equipment pleaded guilty today to two counts of willfully failing to file his income tax returns and one count of making a fraudulent application for health care benefits.  The change of plea was announced by Principal Deputy Assistant Attorney General Richard E. Zuckerman of the Justice Department’s Tax Division and U.S. Attorney Mark A. Klaassen for the District of Wyoming, whose offices are engaged in a joint prosecution of this case.

According to court documents, from 2008-2012, Douglas E. Brendle owned and operated Brendle Climbing Systems, LLC, which sold Fitwalls.  In January 2013, Brendle sold the rights to Fitwall to investors, and in exchange received nearly $1.5 million in payments during the period of 2013-2014.  Despite receiving this income, Brendle failed to file individual income tax returns or pay income taxes in 2013 or 2014.  Brendle’s conduct resulted in a tax loss of $404,501.

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Larry Benson
Larry Benson is currently the Director of Strategic Alliances for Revenue Discovery and Recovery at LexisNexis Risk Solutions. In this role, Benson is responsible for developing partnerships for the tax and revenue and child support enforcement verticals. He focuses on embedded companies that have a need for third-party analytics to enhance their current offerings.