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

Terrace Minor Softball closes season with wins

Teams with be competing in nationals in Saskatoon

Malicious Monster Truck Tour returns to Northwest

Crowds gathered at the airport for show

Northern B.C.’s Ridley coal terminal sold, Canada divests, First Nations to own portion

Ten per cent of shares transferred to the Lax Kw’alaams Band and the Metlakatla First Nation

Skeena mainstem closed to recreational sockeye

Escapements expected to be below 800,000 threshold

VIDEO: B.C. MLA Michelle Stilwell takes first steps in nearly 30 years

‘It actually felt like walking. It’s been 27 years… but it felt realistic to me’

Report of dead body in B.C. park actually headless sex doll

This discovery, made at Manning Park on July 10, led police to uncovering two other sex mannequins

Grand Forks fire chief found to have bullied, harassed volunteer firefighter: report

WorkSafeBC, third-party human resources investigation looking into allegations complete

Dog recovering after being drenched in hot coffee, B.C. man charged

Man was taken into custody, charged, and released pending a court date

Taekwondo instructor, 21, identified as B.C. bat rabies victim

Nick Major, 21, an instructor at Cascadia Martial Arts in Parksville

Science expedition to Canada’s largest underwater volcano departs Vancouver Island

Crews prepared for a two-week research mission to the Explorer Seamount

B.C. shipyard to get one-third of $1.5 billion frigate-repair contract

The federal government has promised to invest $7.5 billion to maintain the 12 frigates

Worried about bats? Here’s what to do if you come across one in B.C.

Bat expert with the BC Community Bat Program urges caution around the small creatures

B.C. on right road with tougher ride-hailing driver rules, says expert

The provincial government is holding firm that ride-hailing drivers have a Class 4 licence

Most Read