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John H. Durham, United States Attorney for the District of Connecticut, and Kristina O'Connell, Special Agent in Charge of IRS Criminal Investigation in New England, announced that David Adams, 58, of Old Saybrook, was sentenced today by U.S. District Judge Vanessa L. Bryant in Hartford to 90 months of imprisonment, followed by three years of supervised release, for failing to pay more than $4.8 million in federal income taxes.
"This defendant engaged the IRS in a decades-long wild goose chase to prevent the agency from collecting the taxes he was required by law to pay," said U.S. Attorney Durham. "He hid income, repeatedly lied to IRS collections officers, filed frivolous claims for due process hearings, and bounced numerous checks. He also misled, and then attempted to implicate, his accountant. All the while, he had the ability to pay and lived more lavishly than the vast majority of Americans. Our nation's tax collection system requires all of us to pay what we owe, or else our society cannot function. This is an appropriate sentence for an individual who failed to pay his taxes for a good portion of his working life, and likely will never pay all that he owes the citizens of this country."
"For years, Mr. Adams obstructed IRS efforts to collect back taxes through a series of criminal acts," said IRS Criminal Investigation Special Agent in Charge O'Connell. "As a successful entrepreneur, he earned millions and amassed significant wealth, yet willfully chose to evade his significant tax obligations. Honest taxpayers bear the brunt of this crime, through reduced government services and a greater tax burden. IRS-CI and the U.S. Attorney's Office will continue to hold tax cheats accountable, by prosecuting those who undermine the integrity of our tax system."
According to court documents and statements made in court, in the early 1980s, and then continuing from 1996 onward, Adams was substantially delinquent in filing his tax returns and paying amounts owed to the IRS. Starting at least as early as the 1982 tax year, Adams repeatedly engaged with IRS collections officers tasked with trying to get Adams into compliance with the tax laws. Although IRS collections officers repeatedly advised Adams about his obligations to pay estimated taxes, he continually failed to pay those taxes on time or in sufficient amounts.
As part of this tax fraud scheme, Adams engaged the services of a certified public accountant to prepare his personal tax returns beginning in approximately 1993, and then gave the accountant false information about his estimated payments, about his income, and then blamed the accountant for making errors on his returns as an excuse for why he should not be required to pay the tax due.
In 2002, Adams sold an online floral business, for which he owed over $1.3 million in tax. Adams failed to pay that tax liability and instead hung the return up in collections, in a collections due process hearing, and in tax court, while blaming his accountant for purported "errors" when none were made. As of today, Adams still has a seven-figure balance on that tax year.
In June 2011, Adams sold his partnership interest in another online floral business and received $4,708,419.20 wired into his personal bank account as part of the net proceeds owed to him as a result of the sale. Although he knew that he owed substantial taxes on that amount, Adams concealed the income from his accountant and failed to declare the income on his 2011 tax return. At the same time, Adams represented to an IRS revenue officer who was responsible for collecting Adams's delinquent tax payments and securing Adams's overdue tax returns, that he had hoped to have funds to pay down his back tax liability (including tax liability associated with the 2002 sale), but that nothing had been "panning out." Adams failed to disclose to the revenue officer that he had received $4,708,419.20 in cash less than three weeks earlier.
In June 2012, Adams received an additional $1,320,609.59 into his personal bank account as net proceeds of the 2011 sale. Although he knew that he owed substantial taxes on that amount, Adams failed to disclose the income to his accountant, and failed to declare it on his tax return for that year.
Adams also misled the U.S. District Court and U.S. Probation Office in the case by failing to disclose on his financial affidavit a bank account containing more than $500,000.
In total, Adams engaged in a more than 20-year effort to inhibit the IRS's efforts to collect back taxes from him. Among other things, he bounced checks to the IRS; told IRS collections officers that payment had been sent when it had not; promised to pay delinquent tax liabilities in full and then delayed payment, made only partial payment, failed to pay at all, or paid off one liability while leaving another liability unpaid; claimed that he lacked funds to pay his delinquent tax but failed to disclose that he had access to enough cash to fully pay back his tax liabilities; filed false and fraudulent returns with the IRS; overstated the amounts of estimated taxes paid to the IRS, and failed to declare more than $6 million in income to the IRS.
Adams was arrested on a federal criminal complaint on April 14, 2016. On October 10, 2017, he pleaded guilty to two counts of tax evasion, three counts of making and subscribing a false tax return, and one count of attempting to interfere with the administration of the IRS laws.
Judge Bryant ordered Adams to pay back taxes, interest and penalties for tax years 2002, 2006, 2007, 2008, 2009, 2011, and 2012, which total $4,872,172.91. Interest and penalties will continue to accrue until his tax obligation is paid.
At the conclusion of today's sentencing proceeding, Adams, who had been released on bond, was remanded to the custody of the U.S. Marshals Service.
U.S. Attorney Durham noted that federal prisoners are required to serve at least 85 percent of their sentenced term of imprisonment and are not eligible for parole.
Adams's criminal history includes two prior federal convictions. In 1986, he was convicted of credit card fraud for submitting more than $588,000 in fraudulent credit card sales drafts through his floral business over a three-month period in 1985. In 1992, he was convicted of two counts of failure to file tax returns, relating to his failing to file federal income tax returns for the 1984 through 1986 tax years.
This matter was investigated by the Internal Revenue Service – Criminal Investigation Division. The case was prosecuted by Assistant U.S. Attorneys Susan L. Wines and Jennifer R. Laraia.
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