Khaled Ahmed is nothing if not audacious.
According to the findings of fact in a Tax Court opinion issued today, Mr. Ahmed built a little Medi-Cal fraud business that generated seven-figure income. With only a pharmacy degree, he opened medical clinics in low-income areas of Southern California. He did this by opening them in the name of an acquaintance from New York who knew nothing about the scheme. He then insured the health of the clinics patients in a novel way:
Also, Ahmed established a policy for his medical clinic that each patient was to receive either an x ray, a lab test, or a shot, and each patient was to be provided a prescription. These services and prescriptions were provided to each patient of Ahmedís clinic regardless of the medical necessity and were intended to increase revenue for Ahmedís pharmacies and clinic.
Ultimately Mr. Ahmed ran into non-tax trouble as a result of his unusual patient care approach: a federal indictment alleging $40 million in fraudulent billings. The trial date has been continued to next year.
Not surprisingly, Mr. Ahmed was perhaps less punctilious than might have been desired in fulfilling his tax obligations on his allegedly fraudulent billings. The Tax Court today upheld civil fraud penalties and fraudulent failure to file (75% of fraudulently understated taxes) of over $3.7 million for Mr. Ahmed and his controlled C corporation over a four-year period.
In his opinion, the judge noted:
Ahmed took affirmative steps to conceal from respondent his ownership of various assets. Ahmed repeatedly denied to respondentís agent that he owned interests in the corporations nominally operating the pharmacies, the clinics, and the lab. Ahmed used other individualsí names to perpetuate the concealment of his ownership of the nominee entities.
Maybe he just was a stickler for privacy?
Ahmed withheld from respondentís agent information about Ahmedís personal and nominee entity bank accounts. After the issuance of the notices of deficiency, Ahmed, as determined by the District Court, designed to place assets beyond the reach of the United States.
Asset protection - everybody's doing it!
Ahmedís testimony lacked credibility and was replete with inconsistencies.
But your honor, foolish consistency is the hobgoblin of small minds!
Based on Ahmedís pattern of understating his and K & Mís taxable income and of underpaying his and K & Mís Federal income tax liabilities, and the conduct described above, we conclude that respondent has established by clear and convincing evidence that both Ahmed and K & M acted willfully and with specific intent to underpay their correct Federal income tax due for each year in issue.
Why no criminal tax fraud charges? Maybe with the medical fraud case, it would have gotten in the way. Or maybe it would have seemed like piling on.
Cite: K & M LA BOTICA PHARMACY, INCORPORATED, ET AL., T.C. Memo. 2005-277
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