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WILL THIS ONLY INCREASE HIS THIRST FOR VENGEANCE?

June 21, 2006

Injustice happens. Maybe you got caught shoving back back the class bully, while the bully gets away with it. Maybe you got blamed for the spitball the kid behind you shot at the teacher. When you grew up, maybe you had to settle a bogus lawsuit because it was too expensive to defend. You grumble and get on with life.

Gene Haas, the owner of "the nation's largest computerized machine tool maker," apparently couldn't just let it go. According to court papers, Mr. Haas was angry at losing a patent lawsuit and decided to get even with the government by evading taxes. From the New York Times:

"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.

This is turning out to be a really bad idea. The government has now accused Mr. Haas of evading nearly $20 million in taxes by a phony invoice scheme. According to the charges, a sham company sent invoices to Mr. Haas's company, Haas Automation:

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.

If I correctly read the federal sentencing guidelines, evading nearly $20 million in taxes using "sophisticated means" is worth 78 to 97 months of prison time for a first offender. Keep in mind that Mr. Haas has not been convicted of anything, and is presumed innocent by the courts. If he is convicted, however, he'll probably have over six years to ponder whether getting even with the government was a good idea.

(Hat tip: TaxProf Blog)

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