Husband and Wife Plead Guilty to Conspiracy in Relation to Maryland Auto Body Repair Shop’s Fraudulent Tax Returns | USAO-MD
Baltimore, Maryland – Ercin Kalender, 60, of Alexandria, Virginia and Lizette Kalender, 44, of Alexandria, Virginia pleaded guilty yesterday to conspiracy in connection with tax evasion on their income tax returns and business taxes. As part of their plea agreements, the Kalenders were ordered to pay $2,219,602 in restitution.
The guilty plea was announced by United States Attorney for the District of Maryland Erek L. Barron and Special Agent in Charge Darrell J. Waldon of the Internal Revenue Service – Criminal Investigation, Washington, DC Field Office.
According to their guilty pleas, Ercin Kalender owned and operated Butch’s, a highly successful auto body shop in Capital Heights, Maryland. Lizette Kalender worked at the body shop as a manager and accountant. In this capacity, she handled tax filing matters and worked regularly with an outside tax preparation and accounting agency, which prepared Butch’s taxes and Ercin’s and Lizette’s personal tax returns.
For the 2015, 2016, 2017, and 2018 tax years, Butch’s reported its income and expenses to the federal government by filing Forms 1120 with the Internal Revenue Service. During this period, the Kalenders conspired with each other to include materially false information on their 1120 forms filed with the IRS on Butch’s behalf. The false information included on Form 1120 included a significantly lower ratio of gross income to taxable income.
The Kalenders worked together to divert Butch’s earnings and prevent large earnings from being deposited into Butch’s corporate bank accounts and reported to the IRS. As part of the conspiracy, the Kalenders kept two sets of financial records for Butch’s, one showing the company’s actual revenues and profits and a second set showing lower figures which were used for tax purposes. The Kalenders’ conspiracy to submit false tax returns also involved the cashing of checks, received at Butch’s at a check cashing establishment in Prince George (Company A). The checks cashed at Company A were not reported on Butch’s tax returns and resulted in Butch’s annual income for fiscal years 2015, 2016, 2017 and 2018 being underreported by more than $6.6 million. of dollars. The corresponding tax loss to the IRS for the four years was $2,219,602.
As noted in their plea agreements, in August 2018 the Kalendars sought to sell Butch’s. As part of the investigation, an undercover federal agent posed as a potential buyer and had contact with the Kalenders. During their conversations, Ercin and Lizette explained Butch’s profitability and revealed their practices of underreporting Butch’s earnings and earnings. During a conversation, while Lizette was present, Ercin informed the discovery agent that he used to take checks intended to pay for body repair work and cash them at Company A. Some of the checks were made payable to Butch’s while other customer checks were made payable to Butch’s customers or payable jointly to Butch’s and the customers.
Additionally, Ercin explained that while Butch’s tax returns showed $2.2 million in gross receipts, the actual gross receipts were closer to $3.1, 4.2, and $3.9 million for fiscal years. 2015, 2016 and 2017; respectively. He also said his father did this for years before taking over Butch’s operations and that his father used Company A to cash checks for 30 to 35 years. Ercin went on to explain the conspiracy by informing the undercover officer that he regularly collected $50,000 to $60,000 at a time in off-the-books checks from Company A, but felt he had reduced the amounts in recent years at around $30,000 to $35,000 collected per visit to the company. A. Ercin also informed the agent that Lizette also reported significant W-2 income, which helped them escape IRS scrutiny.
While working with the outside tax preparation and accounting agency, Lizette deliberately concealed the money flowing through Company A. Lizette sent bank statements for Company A’s accounts, check stubs, credit card statements, payroll records, and other business documents, but withheld income received via checks cashed at Company A. Thus, underreporting taxable income to the agency tax preparation and accounting.
During conversations with the undercover officer, Lizette showed the undercover officer files showing total sales of $4.3 million and $3.9 million for fiscal years 2017 and 2018. Lizette also talked about removing additional customer invoices from business records to match business records. their bank statements.
As detailed in their plea agreements, the Kalenders knowingly charged a portion of the employee’s salary in cash and falsely reported Butch’s employee salary on Forms 941 filed with the IRS. In a conversation with the undercover agent, Ercin said that he paid cash for all his employees’ additional salaries to avoid tax obligations, except for a secretary who was not paid. in the dark. This system of paying employees in cash deprived the state of Maryland of tax revenue and overturned the tax systems of the IRS and Maryland.
In 2019, after the Kalenders learned of the IRS investigation, Butch’s reported gross revenue of over $4.5 million, an increase of over $2.2 million from the 2018 financial year.
Ercin Kalender and Lizette Kalender face a maximum sentence of five years in prison followed by three years of probation for conspiracy. U.S. District Judge Paula Xinis has scheduled sentencing hearings for Ercin and Lizette for May 26, 2022, at 10 a.m. and 11 a.m.; respectively.
United States Attorney Erek L. Barron commended the IRS-CI for its work in the investigation. Mr. Barron thanked Assistant U.S. Attorney Harry M. Gruber, who is prosecuting the case.
For more information about the Maryland U.S. Attorney’s Office, its priorities, and the resources available to help the community, please visit www.justice.gov/usao-md and https://www.justice.gov/usao-md/community-outreach.
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