jhearons broke the news here in the CNC forum a little earlier. Held without bail...serious.
From NY Times
June 20, 2006
Executive Accused of Tax Fraud and Witness Intimidation
By DAVID CAY JOHNSTON
The owner of the nation's largest computerized machine tool maker was arrested yesterday morning at his California home and charged with orchestrating a tax fraud that cost the government nearly $20 million as well as intimidating witnesses and a federal agent investigating the case.
Gene F. Haas, 54, of Camarillo, Calif., the owner of Haas Automation and other companies, was accused in a 52-page indictment of running a bogus invoicing scheme to create fake tax deductions. Mr. Haas was held without bail after his arraignment in Federal District Court in Los Angeles.
In court papers asking that Mr. Haas be held until his trial, the Justice Department said that he could flee the country in his Cessna jet and head for China, where he has business interests. The Justice Department said China did not have a treaty allowing extradition of accused tax cheats. It called him a flight risk, saying he has few ties to the community, is single, has no children and faces about 20 years in prison if convicted.
Haas Automation, in a statement, said that Mr. Haas was not guilty and that the tax issues "revolve around" the company's former chief financial officer, John Phillips. It said the indictment would have no effect on the business.
Last month, Haas Automation won, by default, a lawsuit filed in Ventura County Superior Court accusing Mr. Phillips of cheating the company out of $27.5 million.
The transactions described in that lawsuit are among those listed in the federal indictment, Peter Zierhut, the company spokesman, confirmed.
Mr. Phillips, identified only by his initials in the indictment, went to the F.B.I. in April 2001 and told them that he had been ordered by Mr. Haas eight months earlier to cheat the government out of more than $8.9 million in taxes, the Justice Department said. Mr. Phillips is an unindicted co-conspirator.
The indictment identified Charles W. Todd of Minden, Nev., as the owner of a nonexistent company, Supermill, doing business as American Putter, that was paid $12 million for sham purchase orders and then funneled 98 percent of that back to Mr. Haas. Mr. Todd appeared in Federal District Court in Los Angeles yesterday and agreed to plead guilty to two tax evasion charges, the Justice Department said.
Another man, Kenneth Greene of Simi Valley, Calif., also agreed yesterday to plead guilty over his role in aiding the tax fraud.
Denis A. Dupuis, 51, of Newbury Park, Calif., a former general manager of Haas Automation, and Robert G. Cable, 73, of La Crescenta, Calif., a former salesman for the firm, were indicted, accused of helping fabricate the tax deductions. They were paid about 2 percent of the $23 million in face value of the sham invoices, the indictment said.
The other 98 percent of the money was funneled back to Mr. Haas, according to the indictment. It said Mr. Haas cheated the government out of $12.5 million on his personal tax returns and $7.7 million on Haas Automation's returns in 2000 and 2001.
The indictment also described two other invoicing schemes. One involved a Nascar race team sponsored by Haas Automotive and the other a land title company. The indictment gave few details other than stating that all the money paid in those two schemes was funneled back to Mr. Haas, suggesting that he may have operated them without confederates.
"The tax fraud schemes in this case stem from defendant Haas's dislike of the federal judicial system and anger towards a federal judge (Judge Leonie M. Brinkema) who presided over a patent infringement suit" that Mr. Haas lost in August 2000, according to the court papers. The indictment said that the primary purpose of the "tax fraud schemes was to recoup the patent infringement settlement payment by defrauding" the government.
The Justice Department said that when Mr. Haas learned that Mr. Phillips had gone to the F.B.I., he told him, "Don't make me hurt you." The indictment and related papers cite this as the first of a number of efforts by Mr. Haas and an unnamed private investigator to intimidate witnesses and an Internal Revenue Service special agent, with threats of financial and physical harm for themselves or their families.
The indictment said one witness, a partner with Mr. Phillips in a Kansas flower shop, told the authorities about threats by the private investigator, but she recanted them after developing a "personal relationship" with the private investigator.
Last year, President Bush cited Haas Automation's success in exporting machine tools as a reason to adopt a free trade agreement with Central American countries.