Death and Taxes

“In this world nothing is certain but death and taxes.” – Benjamin Franklin

How true this quote must ring to David Feuerborn and Thomas Jennings.  I have been asked why the United States would indict David and Tom for tax fraud rather than indict them for their chemical fraud scheme.  If you talk to David and Tom I am sure you will hear responses such as, “these are trumped up charges” and, “they are only going after us on tax fraud because they can’t prove our chemical business was a scam.”  One should ignore those biased responses.

Instead it is well known that tax fraud is very easy to prove.  Take for instance the criminal case that brought down the infamous mobster Alphonse Gabriel “Al” Capone.  Al Capone was a ruthless gangster, but the tax evasion charges are what finally put him away for good.  The tax fraud might be the best way for ESS investors to finally get justice.  So the government will need to prove the following in the Criminal Case against David Feuerborn and Thomas Jennings:

1.        Did David file a tax return in the past five years?  If he did it should be on file with the IRS.  If he didn’t then it won’t be on file.  That is very easy for the Government to prove.  I don’t think the excuse “it got lost in the mail” will work this time.

2.       Did Thomas Jennings file his tax returns incorrectly over the past five years?  All the Government needs to show is that he misstated his income based on the forensic accounting of their bank accounts. 

3.       Did Feuerborn and Jennings open a bank account with the name “Ecologic”?  (This is spelled deceivingly similar to a company that built a machine that is currently who-knows-where.  The real company is spelled “Eco-Logic” with a hyphen.)  The government is alleging that they created this “bogus” bank account in order to divert money into their personal accounts without investor knowledge. 

4.          Did Dave and Tom ask their CFO to classify the ESS money paid to them as “loans” so they wouldn’t have to record it as regular income?  I am sure they have sworn testimony of the CFO to validate this allegation.  The IRS doesn’t take kindly to loans that have no term or interest rate.

5.       Did Tom pay for interior decorating at Interiors by KC, Inc. with investor money?  That should be easy to prove.

6.       Did Dave by motorcycles and/or cars at Hahm Motorsports with investor money?  That should be easy to prove.  (Grand Jury Indictment, Page 1-25; Case: CR 10-00346)

Do you see how easy it is to prove tax fraud?

The U.S. Attorney had indicted them for tax fraud, but I am sure he will use a broad brush to paint a picture that includes the chemical fraud as well.  The U.S. Attorney has already used the Civil Case in his motions, and he can continue to use it.  He can also use the sworn testimony and additional discovery gathered in the Civil Case.  Additionally, one has to ask if they paid taxes on the money paid to them by Freestone.  I doubt it.  This shows a continued effort to defraud the U.S. Government.      

Thus, there is little gray area when it comes to tax fraud.  If convicted, one might assume that they will go back to their chemical scam after they get out of prison because that is all they know.  Here is my analysis of that scenario.  If Dave and Tom go to prison they are looking at terms of up to 20-30 years.  If they get the minimum sentence or a decreased sentence and they return to their chemical scam then the Civil Case might be the answer.  Freestone can ask certain questions in their interrogatories and discovery portion of the litigation that can prove that criminal acts took place and even bring the new guy, Larry Shultz, into the mix.  If they try to perpetrate the chemical scam again, then the U.S. Attorney can go after another indictment based on the sworn testimony gathered in the Civil Case.  This may happen anyway if enough evidence is amassed.  Only time will tell.   

- ESS Investor