A Los Angeles-based accountant and tax preparer pleaded guilty Monday to conspiracy to defraud the Internal Revenue Service and assisting in the filing of a false federal income tax return, according to a release by the U.S. Attorney.
Dennis Duban faces up to eight years in prison and fines of up to $250,000 on each count. Sentencing is scheduled for April 18.
Duban provided accounting and tax planning services to Hawaii residents Charles Alan Pflueger, James Pflueger and some of the Hawaii-based entities they controlled, including Pflueger, Inc. and Pflueger Properties.
Starting as early as 2003, Duban knew that personal expenses of Pflueger, Inc. owner Charles Alan Pflueger were being paid for by Pflueger, Inc. and illegally deducted on corporate income tax returns as business expenses, according to prosecutors.
Prosecutors also say Duban agreed with another co-defendant to file a false Pflueger Properties 2007 partnership income tax return and false individual income tax return in connection with the sale of Hacienda, a San Diego investment property. The tax return falsely reported the gain on the sale of the property, which sold for $27,500,000. Duban reported the basis of Hacienda as approximately $7 million higher than its actual basis.
Prior to the sale of the Hacienda property, Duban and others assisted the same co-defendant in creating a nominee Cook Islands trust and opening a bank account at Wegelin Bank in Switzerland in the name "Southpac Trustee International, Inc., as Trustee of the Vista Pacifica Trust."
Proceeds of the Hacienda sale, over $14 million, were sent to the Wegelin account. Duban and a New York-based firm served as investment managers for the account. Duban and the co-defendant did not timely report the co-defendant’s beneficial interest in the Swiss account on Schedule B of a Form 1040 individual income tax return or by filing a Report of Foreign Bank Account.
Prosecutors say Duban had an interest in other foreign bank accounts that he failed to properly report to the government. For at least 2006 and 2007, Duban failed to report his interest in at least one New Zealand account, held in the name of Lookout Point Limited, on Schedule B of his individual income tax returns or by filing a Report of Foreign Bank Account.
As part of the plea agreement, Duban admitted that the tax loss associated with his criminal conduct is at least $1 million. He agreed to pay a 50 percent penalty for the one year with the highest balance in his undisclosed New Zealand accounts in order to resolve his civil liability for failing to file a Report of Foreign Bank Account.
In May 2012, Charles Alan Pflueger, Randall Kurata, and Julie Kam, who were charged in the same indictment, pleaded guilty to filing false tax returns regarding improper payments of personal expenses by Pflueger, Inc. and another entity.