Opinion ID: 1253249
Heading Depth: 1
Heading Rank: 2

Heading: The Fraudulent 1997 and 1998 Returns, the Subsequent Failures To File Timely and To Pay, and the Health Care Fraud

Text: For the 20 years spanning 1979-1998, Josephberg claimed and carried forward on his individual tax returns a substantial net operating loss (or NOL) stemming from Cralin's tax shelter activities. The IRS's 1993 notice of deficiency informed Josephberg that his claimed losses from the Cralin tax shelter transactions were disallowed because they were not bona fide economic transactions, but rather were pre-arranged, manipulated, fixed, rigged & risk-free transactions that generated artificial tax losses and because it had not been shown that the partners or the partnership entered into the transactions primarily for profit. (GX 152.) Josephberg nonetheless continued to carry the NOL forward and claimed it on his returns for tax years 1993 through 1998, signing and filing those returns under penalty of perjury. ( See Tr. 970-72, 988-89, 999-1000; GX 116, GX 117, GX 118, GX 119, GX 120, GX 121.) The NOL carried over was substantial. On Josephberg's 1997 return, for example, it was more than $1.5 million ( see GX 120); on his 1998 return, it was more than $1.2 million ( see GX 121); and on each such return, except for his Social Security self-employment tax, the NOL deduction resulted in a claimed tax liability of zero. In addition, on his returns for 1997 and 1998, Josephberg failed to pay withholding, Social Security, and Medicare taxes (collectively employment taxes) for Norma Grant, who resided with the Josephbergs, was nanny for their daughter Jessica, and did housekeeping chores. For the tax years 1999-2002, Josephberg failed to file timely tax returns; and he made no payment of taxes for the years 1999-2003. As to the charge of health care fraud, the record showed that in the fall of 1998, Josephberg submitted to Oxford Health Plans (Oxford), his health care provider, two false documents designed to induce Oxford to provide coverage for Mrs. Josephberg and to charge a group insurance rate to Josephberg's company. ( See Part II.B.4. below.) The documents were false tax forms prepared by Fox, who testified that he prepared the first after Josephberg asked me to prepare a phony Schedule C showing Mrs. Josephberg as an employee of Josephberg-Grosz (Tr. 985). Josephberg had Fox prepare a second false tax form in response to a request from Oxford for further documentation. ( See id. at 986-88.) Prior to trial, Fox had pleaded guilty to tax fraud with respect to Josephberg's returns, to health care fraud with respect to the documents submitted to Oxford, and to conspiring with Josephberg to commit those frauds. ( See id. at 922-23.)