Frowned Upon

44969068 - office work and filling in tax returns close up

The global anti-aging market is growing rapidly and is expected to reach $331.41 billion by 2021. Today’s fraudster from Germantown, Ohio used his great-grandmother’s recipe for anti-wrinkle serum to take advantage of this expanding market. He funded college tuition for his children, paid rent for his daughter in two locations and covered expenses for his mother by using his company’s clients, American taxpayers and the U.S. Treasury to carry out his elaborate tax fraud scheme. (I’m sure that if his great-grandmother had been alive to witness her great grandson’s trial, his illegal actions would have been frowned upon.)

The man at the center of today’s fraud article was responsible for running the daily operations of a company that manufactured and sold skincare products, including Frownies, a wrinkle reduction product invented by his great-grandmother in 1889. The popular product, which is widely endorsed by celebrities in Hollywood, was unfortunately used as a cover-up for the man’s personal expenses.

The article states that during the late 1990s, today’s fraudster formed multiple entities to divert money from the company to himself and family members. Interestingly enough, the company leader didn’t collect a salary, but he used another corporate entity to pay “management fees.” He also caused this company to prepare fake corporate tax returns. He illegally deducted personal expenses like rent, utilities, and pool and lawn care for his home. The corporate leader also paid bi-coastal rent for his daughter, as well as rent and utilities for his mom.

And,that’s not all folks. The elaborate scheme also involved obtaining a non-profit status for a private foundation. He used his company to make donations to the foundation, then used $170,000 over seven years to pay tuition for high school and college for all five of his kids. (When filing tax returns over those seven years, he neglected to report that he engaged in acts of self-dealing,which meant he did not pay excises taxes on the distributions.)

The 63-year-old Germantown, Ohio man was convicted on seven counts of filing false corporate, individual, and private foundation tax returns. He was ordered to serve 33 months in prison for tax fraud to be followed by one year of supervised release. He also has to pay restitution of $146,404 to the Internal Revenue Service. (I’m guessing that while he is serving out his time, he’s going to need more than Frownies to turn his frown upside down.)

Today’s“Fraud of the Day” is based on an article entitled, “Germantown businessman sentenced to prison for tax fraud,” posted on on October 16, 2018.  

DAYTON, Ohio (WDTN) – A Germantown man will serve time in prison for using corporate funds to pay for personal expenses, including college tuition for all five of his children.

63-year-old James Wright ran the day-to-day operations of B&P Company, Inc., which manufactured and sold various skincare products including Frownies, a wrinkle reduction product endorsed by celebrities that his great-grandmother invented in 1889.

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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.