Scams and Shams — March 2014

News on the scammers who didn't get away with it, including the former Illinois lawyer who US authorities are calling the largest criminal tax fraud in history.

Art Con

A fool and his Monet are soon parted

When selling a famous stolen work of art, should the thief declare the income to the tax authorities? The answer — as a longtime personal assistant to Philippines' former first lady Imelda Marcos discovered the hard way — is yes.

Vilma Bautista, 75, was sentenced in January to six years in New York state prison for conspiracy and tax fraud, after failing to report as income the US$28 million a London gallery paid her in 2010 for a stolen Claude Monet masterpiece. The famed 1899 painting from Monet's water lily series, "Le Bassin aux Nymphéas," had belonged to Marcos and wound up in a New York residence owned by the Philippine government after president Ferdinand Marcos was ousted and the couple fled the country in 1986. In 1995, Bautista helped herself to the Monet and three other valuable paintings adorning the Manhattan town house — but the theft didn't come to light until US tax officials became suspicious when Bautista's tax return made no mention of earnings from the painting's sale.

In addition to the prison sentence for conspiring with her nephews to sell the works on the black market, Bautista must pay US$3.5 million in taxes. Meanwhile, the Philippine government is attempting to recover the paintings.

Liquid Assets

"Booze brothers" sing the jailhouse blues

Lincolnshire brothers Inderjit Singh Mangher, 30, and Amandeep Singh Mangher, 27, have been sentenced to four years and 27 months in jail, respectively, for defrauding UK tax and customs authorities of £6.3 million ($11.3 million) in the illegal sale of alcohol. The pair, known as the booze brothers, sold large quantities of tax-free wine, beer and spirits — stock that had been intended for export — to local off-licences and liquor vendors. Investigators found that the brothers had sold or were intending to sell 4.2 million litres of beer and cider, 250,000 litres of wine and 220,000 litres of spirits. In an attempt to disguise the illegal activities, the brothers stuck counterfeit labels over the bottles' legitimate ones.

Capital Punishment

Chinese woman gets death penalty for fraud

A high court in China rejected the appeal of businesswoman Su Yenyu, 42, who was sentenced to death last year in a $215-million fraud case, the Xinhua News Agency reported. Promising high returns, Su cheated investors out of 1.2 billion yuan, siphoning nearly half the funds for her personal use and putting the rest into "investments" such as lottery tickets. The court said that in cases such as this, where the size of the fraud and resulting harm is significant, the death penalty is mandatory. Last May, another woman in China was sentenced to death for stealing 640 million yuan ($115 million) from investors.

Shelter Skelter

Biggest. Tax fraud. Ever

For Illinois lawyer and accountant Paul Daugerdas, 63, is facing up to 58 years in prison for taking part in what US authorities are calling the largest criminal tax fraud in history. Under Daugerdas' leadership, the Chicago office of Texas-based law firm Jenkens & Gilchrist marketed phony tax shelters to rich clients from 1994 to 2004, resulting in US$8 billion in illegal tax deductions and fake losses that robbed the IRS of US$92 million, prosecutors said. Daugerdas owes US$32 million in taxes on US$95 million in fees he charged clients. He was convicted on seven counts of tax evasion, fraud and conspiracy and will be sentenced later this month.

Navy Steal

"Evil" scammer to spend the rest of his days behind bars

Harvard-trained lawyer John Cody, 67, was sentenced to 28 years in prison for bilking US$100 million from donors in a massive charity scam. Using the alias Bobby Thompson, he solicited contributions to the US Navy Veterans Association, a fake charity, and pocketed the money. Indicted and tried in Cleveland, Cody was convicted on 23 counts, including racketeering, money laundering and theft, and fined US$6 million-plus. "It's horrible when a scammer victimizes people," said Ohio Attorney General Mike DeWine, following Cody's sentencing in December. "But to do it under the cover story of helping veterans is just plain evil."