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

Storm causes blackout across northern B.C.

Lightning and downed trees knocked out power for more than 4,000 Terrace customers

Skeena Voices | No villager left behind

Business owner Boota Singh uses 10 per cent of his profit to fund cancer and eye care in India

Wet’suwet’en clan launches civil lawsuit against Coastal GasLink

Gidimt’en seeking damages and costs over destruction of logging road encampment and gate

RCMP searching for missing Lax Kw’alaams resident

Public urged to help in search for 42-year-old Lawrence Maitland

Coast Tsimshian sign historic stewardship agreement

Lax Kw’alaams and Metlakatla plan to work as one to preserve traditional lands

VIDEO: Missing teens named as suspects in three northern B.C. killings

Kam McLeod and Bryer Schmegelsky are wanted in the deaths of Lucas Fowler, Chynna Deese, unknown man

Provincial health body refuses to release full findings of cancer triage system audit

Information and Privacy Commissioner asked to review redactions

Southern resident killer whale died of blunt trauma, likely from ship

J34 was found more than two years ago near Sechelt, but the necropsy findings have now been released

B.C. rail crossing death highlights risks for people in wheelchairs: watchdog

Transportation Safety Board points to ‘persistent risks faced by persons using assistive devices’

B.C. teens wanted in double homicide, suspicious death spotted in Manitoba

Kam McLeod and Bryer Schmegelsky were thought to have been seen in the Gillam area

Memorial bench painted by Vancouver woman to stay in park for now

Park board to look at options for artistic enhancements on commemorative benches

VIDEO: Man found dead near B.C. teens’ truck could be linked to a double homicide

RCMP said they are looking for Kam McLeod, 19, and Bryer Schmegelsky, 18, of Port Alberni

VIDEO: Young couple found dead in northern B.C. had been shot, police say

Chynna Noelle Deese of the U.S. and Lucas Robertson Fowler of Australia were found along Highway 97

Wrestling legend finds his wedding dance groove in B.C.

Professional wrestler Chris Jericho posted on social media that he was in Penticton recently

Most Read