Twinsburg Man Indicted In Massive $8.8 Million Tax Scheme

A Twinsburg man has been indicted on 31 counts related to a massive $8.8 million tax scheme, according to the U.S. Attorney's Office

Brian D. Krantz, 45, of Twinsburg, will face charges related to a $8.8 million income tax scheme. He was indicted on one count of conspiring to make false claims against the United States and 30 counts of making false claims for income tax refunds.

"This defendant is accused of violating tax laws to enrich himself," said Steven M. Dettelbach, United States Attorney for the Northern District of Ohio. "Those individuals who engage in this type of financial fraud should know they will not go undetected and will be brought to justice."

According to Dettelnach, The U.S. Treasury issued 17 refund checks totaling about $3.6 million payable to Krantz and various corporations controlled by Krantz as a result of the alleged scheme, according to the indictment.

Krantz owned and controlled two corporations engaged in financial services and/or real estate investment business activities, in which he employed McCallum as an accountant.

The indictment names Bryan D. McCallum as Krantz’s co-conspirator. McCallum previously pleaded guilty to a two-count information charging him with the false claims conspiracy and with making the same 30 false claims.

From April 2009 through June 8, 2010, Krantz and McCallum conspired to make false claims for tax refunds using income tax returns filed with the IRS in the names of Krantz, companies formed by Krantz and McCallum, and several “shelf” companies purchased by Krantz. A “shelf” company is a corporate or other formal non-operating business entity established for the purpose of being held for sale to another person. 

From the news release:

The scheme involved the use of fake IRS Forms 2439, titled “Notice to Shareholder of Undistributed Long-Term Capital,” which is a form to be issued by a regulated investment company (RIC) or real estate investment trust (REIT) to report undistributed capital gains and taxes withheld from those gains on behalf of the shareholders. Under federal tax law, RICs and REITs are entities that are not taxed on their earnings but instead pass those earnings to their shareholders who, in turn, have the obligation to report those earnings and any resulting tax liabilities on the shareholders’ income tax returns. The returns filed pursuant to the conspiracy claimed substantial amounts of Form 2439 withholding credits, when, in fact, none of the companies listed on the forms were actually RICs or REITs or had any undistributed capital gains or withheld taxes.

According to the indictment, Krantz used more than $1 million of the refund proceeds to finance a real estate venture he established with other partners, known as Phoenix Ventures Partners LLC. Krantz and McCallum misled Krantz’s real estate partners to believe that a group of Colorada-based hard money lenders had provided the funds.

"Today’s indictment proves that stealing from the government is a serious crime," said Darryl Williams, IRS-Criminal Investigation Special Agent in Charge. "It sends an important message to America’s taxpayers who play by the rules that we have no tolerance for those who make up their own rules."

If convicted, the defendant’s sentence will be determined by the court after review of factors unique to this case, including the defendant’s prior criminal record, if any, the defendant’s role in the offense and the characteristics of the violation. In all cases the sentence will not exceed the statutory maximum and in most cases it will be less than the maximum.

The government’s case is being prosecuted by Assistant United States Attorneys John M. Siegel and Justin J. Roberts, following an investigation by the Internal Revenue Service, Criminal Investigation.

An indictment is only a charge and is not evidence of guilt. A defendant is entitled to a fair trial in which it will be the government’s burden to prove guilt beyond a reasonable doubt.