Agustin Huneeus, right, a 53-year-old San Francisco resident whose family owns vineyards in California’s Napa Valley and in Oregon, leaves the federal courthouse after a hearing associated with the college admissions bribery scandal, Friday, March 29, 2019 in Boston. Huneeus is accused of paying at least $50,000 to have SAT administrators correct his daughter’s college entrance exam and to have USC officials designate her as a water polo recruit. (Matt Stone/The Boston Herald via AP)

Parents could face tax charges, big fines in admissions scam

Among the 33 prominent parents charged in the case are Hollywood stars Lori Loughlin and Felicity Huffman

A wide-ranging college admissions cheating scheme allowed wealthy parents not only to get their kids into sought-after schools but also a tax write-off on the bribes they paid, federal authorities say.

Now some parents who are already facing possible prison time could be hit with additional criminal charges and stiff financial penalties, experts say.

And a slew of others who paid into the foundation that an admissions consultant used to mask the bribes, but haven’t been charged in the scam, are also sure to face IRS scrutiny.

The IRS has “been known as the follow the money crowd since the days of Al Capone so they will be following those lists and that money very carefully,” said Mark Matthews, a former deputy commissioner of the agency who’s now an attorney at Caplin & Drysdale in Washington.

Consultant Rick Singer funneled millions of dollars from parents through his tax-exempt organization and then used it to pay coaches and other insiders to designate applicants as athletic recruits or cheat on entrance exams, prosecutors allege.

Among the 33 prominent parents charged in the case are Hollywood stars Lori Loughlin and Felicity Huffman, who haven’t publicly commented on the case. The actresses and others are scheduled to make their initial appearances this week in Boston federal court.

READ MORE: Wealthy parents appear in court in U.S. college admissions scam

The parents’ bribes were disguised as “donations” to the Key Worldwide Foundation, which purported “to provide education that would normally be unattainable to underprivileged students, not only attainable but realistic.”

Singer’s foundation sent the parents letters thanking them for the donation that claimed “no goods or services were exchanged,” allowing many of them to deduct the payments from their taxes as charitable contributions, prosecutors say.

After Singer began co-operating with investigators in September in the hopes of getting a lenient sentence, the FBI had him call the parents and pretend that his foundation was being audited by the IRS in an attempt to get them to admit their involvement in the scheme.

“So what I want to make sure is that you and I are both on the same page because what I’m going to tell them is that you made a 50K donation to my foundation for underserved kids and not that (the proctor) took the test for (your daughter)…” Singer told one parent, according to court documents.

“Dude, dude, what do you think, I’m a moron?” Agustin Huneeus, Jr. a Napa Valley, California, vintner, replied. An email was sent to Huneeus’ attorney on Monday.

The IRS, which has been investigating the criminal case jointly with the FBI, has said it is looking into the parents’ payments.

Though prosecutors outlined the tax deduction scheme when the parents were arrested last month, none of them have been charged with tax evasion. Some experts suspect officials are holding the additional charge, among others, over the parents in an attempt to convince them to quickly plead guilty.

To convict them of tax crimes, prosecutors would have to prove that they not only purposely underpaid, but knew they were breaking the law when they did. If may be a difficult sell, but parents could try to argue that their statements on the phone calls don’t prove that they knew the deductions were illegal.

“Ignorance is no excuse for breaking the law, but in the tax area is it,” said Philip Hackney, who worked in the IRS’ office of the chief counsel and now teaches at the University of Pittsburg School of Law.

But parents are sure to pay harsh penalties to the IRS, experts say.

READ MORE: ‘Full House’ to big house in college scheme? Experts differ

In addition to paying back the taxes they owe, parents could get hit at a minimum with a 20% penalty for claiming a deduction when they shouldn’t have, said Lloyd Hitoshi Mayer, a professor at the University of Notre Dame Law School. Some could be on the hook for a civil tax fraud penalty that’s equal to 75% of the amount they underpaid, Mayer said.

“Certainly the exchanges that (Singer) had with those parents are enough to support a fraud penalty,” he said.

Some parents are accused of paying Singer’s charity through their own family foundations, which could face their own set of civil penalties and lose their tax-exempt status, experts say.

Key Worldwide Foundation should have reported to the IRS all contributions over a certain threshold, said Meghan Biss, who spent a decade with the IRS before joining Caplin & Drysdale.

That means that in addition to clawing back taxes from the parents who’ve been charged, the IRS will likely be going through those names to determine whether the other donations were legitimate, she said.

“Are there more people who have potential criminal charges or just civil fines out there?” she asked.

____

Alanna Durkin Richer, The Associated Press


Like us on Facebook and follow us on Twitter.

Just Posted

Sylvan Lake Yettis warned to not get a big head after massive first win

The Yettis won over the Olds Stingers 23-1 at the home opener, April 23

Strathcona County RCMP charge Eckville man for firearms, drugs

RCMP found the suspects at a high risk traffic stop on April 11 as a result of a 911 complaint

Sylvan Lake Town Council approves a 2019 supplementary tax

The Town expects to see roughly $40,000 in revenue from the supplementary tax in 2019.

Alberta’s 47 legislature newbies meet under the dome for orientation day

Most new members are with the United Conservatives, who won a majority government

Annual Home and Lifestyle Show coming to Sylvan Lake

The inaugural event will showcase local businesses at the NexSource Centre’s curling rink on May 11

VIDEO: Police dog in Oregon struck by 200 porcupine quills during pursuit

The German shepherd had to be sedated and was in treatment for more than two hours

Calgary woman killed in B.C. highway crash

Crash closed highway for hours

Assessment says Alberta woman facing animal abuse charges fit to stand trial

April Dawn Irving, 59, is charged with 13 counts of cruelty to animals

Canadian privacy watchdogs find major shortcomings in Facebook probe

The probe followed reports that Facebook had let an outside organization use an app to access users’ personal info

Provinces, Ottawa talk 50/50 split on abandoned bus-route service

B.C. has paid $2 million on a bus service for the northern part of the province

Wilson-Raybould: Feds want to just ‘manage the problem’ of Indigenous Peoples

Former federal justice minister speaks at First Nations Justice Council meeting in B.C.

Oil and gas company confirms death of one of its employees in Yoho avalanche

Dana Coffield died when he was skiing in the Rocky Mountains

Cenovus CEO estimates production curtailments will deliver billions to taxpayers

The curtailment program started Jan. 1 was designed to keep 325,000 barrels per day off the market

Robbery in Leduc County estimated at $40,000

Leduc RCMP investigate break and enter and theft of firearms

Most Read