A Rhode Island general contractor pled guilty to two counts of tax evasion and eight counts of wire fraud earlier this week, following an investigation by agents from the FBI Boston Field Office and the Boston office of the IRS’s criminal investigation division.
The contractor is facing up to five years in prison and a $100,000 fine for each count of tax evasion. In addition, he could receive up to 20 years in prison and a $250,000 fine for each count of wire fraud.
Charges Stemmed from Investment Scam
The contractor was allegedly involved in investment scam that took more than $4.2 million from investors.
According to the FBI and IRS investigators, the contractor hired a recruiter to help draw investors to the company. He then gave the recruiter false information regarding the company’s business prospects. For example, he told the recruiter that the company was involved in the construction of a YMCA on Martha’s Vineyard and a casino resort in Mashantucket, Connecticut. The recruiter used this false information to induce inducements.
The contractor admitted to making false claims to investors regarding potential rates of return and to hiring an attorney draft promissory notes that promised returns of 12 to 14 percent. He further admitted to telling customers that their cash was needed to pull the company back from the brink of collapse, which was, in fact, not true.
The contractor says he did not spend the investor’s money on his company, but instead used it to pay personal expenses and fund a gambling habit.
Boston business owners should take heed from the contractor’s example and must understand that using investors’ money to fund personal expenses can have serious consequences.
Source: LoanSafe.org, “RI Steelworks Contractor Pleads Guilty in $4.2M Scam,” Evan Bedard, Jan. 31, 2012.