The IRS press office (www.irs.gov/newsroom) is reportingan increase in tax fraudinvolving physicians. During the currentfiscal year alone, 18 individualsin the medical community have beenconvicted of fraud and recommendedto the US Department of Justice forprosecution. These cases vary fromfailure to file personal income taxreturns, to Medicare/Medicaid fraud,to money laundering.
Over the past 31/2 years, the IRShas initiated 225 investigations ofhealth care professionals involved intax- and finance-related crimes.More than 75% of these cases haveled to jail time for the violators. Thefollowing 3 case summaries areexcerpts from public record documentsthat illustrate what can happenwhen doctors get greedy:
• Money Laundering. In February2003, Dr. Wilbert Streeter wassentenced to 21 months in prisonafter pleading guilty to money laundering.Dr. Streeter admitted that heparticipated in a scheme to defraudinsurance companies from January1990 to August 1996. As a specialistin the treatment of terminally ill cancerpatients, Dr. Streeter prescribeddrug treatments not approved by theFDA for the treatment of cancer.
Dr. Streeter admitted that heknew the patients' insurance companieswould not pay for this type oftherapy. He participated in thescheme to defraud the involvedinsurance companies by billingthem for services, such as chemotherapy,that the patients neveractually received. In the end, Dr.Streeter admitted to participating inthe laundering of over $1.5 millionthrough the scheme.
• Tax Evasion. In November2002, Dr. Elliott Schmerler was sentencedto 15 months in prison and a$15,000 fine after pleading guilty to a1995 tax evasion. From 1994 to1998, Dr. Schmerler used his medicalpractice and a Bahamian corporationhe controlled to pay more than$500,000 in personal expenses,which he did not report as income. Asa result, more than $156,000 in individualincome taxes was not paid.
In addition to not paying all ofhis income taxes, during 1997 and1998, Dr. Schmerler failed to paymore than $26,000 in federalemployment taxes (ie, income,social security, and Medicare taxeswithheld from employees' salaries)and related employer payroll andunemployment taxes.
• Tax Fraud. In October 2002,Dr. Rick Shacket was sentenced to33 months in prison for conspiringto defraud the IRS. From February1994 to January 1999, Dr. Shacketparticipated in a tax fraud conspiracywith his former attorney, whichresulted in a criminal tax loss ofover $370,000.
After creating a sham corporationin Oregon and a false identityfor the doctor, the 2 men divertedcorporate funds from the medicalpractice. Dr. Shacket diverted over$540,000 in corporate funds for hisown use. As part of his plea, he paid$370,000 in back taxes. Scam artists and scheme promotersoften prey on busy doctors. If you'rea physician who suspects tax fraud,call 800-829-0433.
This article is based on an IRS press release.