Criminal Defense Lawyers

This is what tax fraud looks like in Silicon Valley. The executives who understand complex financial systems still steal from employees. The tech money that flows through San Jose creates opportunities for sophisticated fraud – and the Northern District of California responds with federal prosecution.

Sharks Tickets Paid For With Stolen Payroll Taxes

Heres exactly what Valdez and Olson did. Every calendar quarter for more then four years, they withheld federal income tax, Social Security, and Medicare from employee paychecks. The deductions appeared on paystubs. Employees expected that money to reach the government.

But the money never arrived at the IRS. Instead of remitting the withholding, the executives used company funds for personal luxuries. Country club memberships. San Jose Sharks season tickets. The lifestyle of successful tech executives – funded by money stolen from there own workers.

Think about what that means for the employees. They filed tax returns expecting credit for withholding that was never paid. They expected Social Security contributions that never happened. When the fraud was discovered, they faced potential liability for taxes they thought were already handled.

The IRS calls this “trust fund taxes” because employers hold the money in trust for the government. Taking that money for personal use isn’t just tax evasion – its theft from both the government and your own employees. Federal prosecutors treat it accordingly.

And heres the irony that makes this case particularly disturbing. Valdez and Olson ran a health informatics company. There business was healthcare technology. Yet they didn’t pay the healthcare taxes – Medicare withholding – for there own employees. The people who built healthcare technology were having there healthcare contributions stolen by the executives running the company.

The CPA Who Fabricated His Own Tax Payments

A San Jose CPA named Boitano met with an IRS revenue agent in September 2009. During that meeting, he filed federal income tax returns for 2001, 2002, and 2003. On each return, he fraudulently reported making estimated tax payments of $26,000, $38,000, and $57,000 respectively.

He never actually made those payments. They were completely fabricated. Boitano – a certified public accountant – claimed refunds based on payments that didn’t exist.

The federal court sentenced him to 41 months in prison, plus a one-year period of supervised release, plus a $10,000 fine. Nearly three and a half years in federal prison for a CPA who committed tax fraud.

OK so heres what makes this case particularly significant. A CPA is supposed to understand tax law. Thats literally there profession. When a CPA commits fraud, prosecutors can easily prove willfulness – the defendant knew exactly what they were doing because understanding taxes is there job.

Professional credentials dont protect you from prosecution. They make prosecution easier. When the person committing fraud is the same person licensed to ensure tax compliance, the jury has no trouble concluding the conduct was intentional.

And Boitano’s license? The California Board of Accountancy reviews criminal convictions. A tax fraud conviction goes directly to professional fitness. The license that enabled his career – the credential that certified his expertise – became another casualty of his fraud.

$1.2 Million In Fake Medical Expenses

Dwayne Lorenzo Richardson worked as a software engineering manager. He earned over $1.2 million during tax years 2017, 2018, and 2019. Thats serious money – the kind of income that comes from successful tech careers in the Bay Area.

On his tax returns, Richardson claimed he owed only about $28,496 in total tax across all three years. For someone earning over a million dollars, that number is impossibly low. The reason? He declared over $1.1 million in medical expenses.

Those medical expenses were overstated by more then $945,000. Nearly a million dollars in fake medical deductions – fabricated to reduce his tax liability from what it should have been to almost nothing.

A federal jury in San Francisco convicted him on three counts of tax evasion. He faces up to five years in prison and a $100,000 fine on each count. Fifteen years maximum exposure for claiming fake medical expenses.

Heres the thing about fabricated deductions. The IRS can verify them. Medical expenses leave paper trails – receipts, insurance statements, provider records. When someone claims a million dollars in medical expenses, the IRS can check whether those expenses actually occurred. And when they find the claims are false, criminal prosecution follows.

Richardson probably thought the deductions would go unnoticed in the complexity of his returns. He was wrong. The IRS has tools to identify statistical anomalies. A million-dollar income with almost no tax liability triggers scrutiny. And scrutiny reveals fraud.

Silicon Valley’s Complex Compensation Trap

San Jose sits at the heart of Silicon Valley. The tech economy generates enormous wealth through compensation structures that didnt exist a generation ago. Stock options that vest on unusual schedules. Restricted stock units with holding period requirements. Cryptocurrency payments that trigger taxable events. Each creates opportunities for both legitimate planning and fraud.

The Valdez and Olson case shows one pattern – executives who steal from employees while running sophisticated tech operations. The Richardson case shows another – high earners who fabricate deductions to hide income. The Boitano case shows a third – professionals who use there expertise to commit the very crimes they should prevent.

Heres what people in Silicon Valley dont realize. The Northern District of California has adapted its enforcement to the tech economy. The IRS Criminal Investigation Oakland Field Office understands how startup equity works. They know how stock options vest. They can trace cryptocurrency transactions. The complexity of tech compensation dosent protect you from prosecution – it creates more audit opportunities.

And when tech professionals commit fraud, prosecutors have an easy time proving willfulness. Software engineers understand systems. Finance executives understand money flows. CPAs understand tax law. The expertise that built your career becomes evidence that you knew your conduct was illegal.

Manish Lachwani learned this lesson. He founded a Silicon Valley software-as-a-service company. A federal court sentenced him to 18 months in prison for wire fraud and securities fraud. His tech expertise didnt protect him. His startup success didnt shield him. The same skills that built his company became evidence of his criminal intent.

The Sushi Restaurant’s Triple Fraud

David Tai Leung was part-owner of Tomi Sushi and Seafood Buffet in the Eastridge Mall in San Jose. His business served customers. It also served as a vehicle for multiple fraud schemes that eventualy destroyed him.

Leung admitted spending $3.36 million of COVID relief business loan money on personal expenses. He also confessed to stealing more then $893,000 in wages from employees. And he evaded $287,697 in sales tax and $171,821 in employment taxes.

Thats three separate fraud schemes running simultaneously. COVID relief fraud. Wage theft. Tax evasion. Each crime compounded the others. Each investigation revealed additional conduct. What might have been a single prosecution became a cascade of criminal exposure.

Heres the thing about running multiple schemes. Investigators who find one often find the others. The COVID fraud investigation revealed the wage theft. The wage theft investigation revealed the tax evasion. Each thread pulled exposed more criminal conduct. The restaurant that served sushi became evidence of systematic fraud against employees, customers, and the government.

And the employees who worked at Tomi Sushi? There wages were stolen directly. There employment taxes were never paid. The withholding that appeared on there paystubs never reached the government. They trusted an employer who was cheating them in multiple ways simultaneously.

California’s 75% Civil Fraud Penalty

Beyond criminal prosecution, California imposes civil penalties that compound the financial devastation of tax fraud.

Under California law, the civil fraud penalty is 75% of the additional tax owed. So if you evaded $100,000 in California state taxes and the Franchise Tax Board proves fraud, your immediately owing another $75,000 in civil penalties. Plus the original tax. Plus interest back to the original filing date.

The California Franchise Tax Board has its own Criminal Investigation Bureau. These arent regular auditors – there sworn peace officers with full law enforcement powers. They can write and execute search warrants. They can conduct criminal investigations. They coordinate with federal authorities.

Heres what catches people off guard in San Jose. State and federal penalties stack. If your fraud touched both your California returns and your federal returns, your facing civil fraud penalties from BOTH governments. Federal fraud penalty is 75% as well. Combined exposure can exceed 150% of the original tax in penalties alone – before interest, before restitution, before fines.

And California considers tax fraud a crime involving moral turpitude. CIMT convictions trigger professional license consequences beyond any imposed by licensing boards. Immigration consequences for non-citizens. Employment restrictions. The ripple effects extend far beyond the criminal case.

The Northern District’s Approach To Major Fraud

The Northern District of California covers San Jose, San Francisco, Oakland, and the surrounding Bay Area. This is one of the busiest federal districts in the country – and one of the most sophisticated when it comes to financial crimes prosecution.

The IRS Criminal Investigation Oakland Field Office handles cases throughout the region. There agents understand Silicon Valley. They know how tech compensation works. They can follow complex equity transactions. They maintain the 90%+ federal conviction rate that makes federal prosecution so dangerous.

Heres what that means for anyone facing tax fraud exposure in San Jose. By the time charges get filed, the investigation is essentially complete. The evidence is gathered. The financial flows are documented. The willfulness is established through your professional background and expertise. Your not defending against suspicion – your defending against a fully built case.

The Valdez and Olson case demonstrates the coordination. IRS Criminal Investigation investigated. The US Attorneys Office prosecuted. The Justice Departments Tax Division provided additional resources. When the government brings major employment tax cases, they bring substantial firepower.

And the sentences are real. Boitano got 41 months. Richardson faces up to 15 years. Lachwani got 18 months. These arent theoretical maximums – there actual outcomes in Northern District courtrooms.

The Professional License Catastrophe

San Jose has substantial populations of licensed professionals – tech executives with securities licenses, attorneys serving startups, CPAs handling complex compensation, financial advisors managing concentrated stock positions. Many dont realize that tax fraud can destroy there careers independant of criminal penalties.

The California State Bar investigates attorneys convicted of crimes involving moral turpitude. Tax fraud qualifies. A felony conviction can result in disbarment. The bar you passed, the license you earned, the career you built – all destroyed by a tax crime.

The California Board of Accountancy reviews CPA convictions. Boitano’s case demonstrates what happens. A CPA commits tax fraud, gets convicted, serves 41 months in prison, and loses the license that enabled his career. The expertise that built the profession becomes evidence of criminal intent.

For tech executives with securities registrations, FINRA reviews criminal convictions. Tax fraud involving dishonesty goes directly to fitness for the securities industry. Your career in finance ends.

This creates a cascade most professionals dont anticipate. Criminal conviction leads to license revocation leads to career destruction leads to inability to pay restitution leads to continued financial problems. The tax fraud dosent just cost you freedom – it costs you the ability to work in your profession for the rest of your life.

Defense Strategy In San Jose

If your facing tax fraud exposure in San Jose, the calculus involves understanding both the tech-focused enforcement environment and how the Northern District operates.

The Valdez and Olson case shows what happens with employment tax fraud – both executives facing federal prosecution for over $3.5 million in stolen payroll taxes. The Boitano case shows what happens to professionals who commit fraud – 41 months and career destruction. The Richardson case shows how fabricated deductions get caught – conviction on all counts after a three-day trial.

Heres what these cases have in common. By the time defendants faced prosecution, there options had narrowed dramaticaly. The investigations were complete. The evidence was gathered. The financial trails were documented. The only questions were conviction and sentencing.

The time to address tax fraud exposure is before any of that happens. Voluntary disclosure programs exist. Coming forward before the IRS finds you creates opportunities to resolve issues civily – with penalties and interest, but potentially without prison. The IRS actually encourages this approach.

If an investigation has already begun, damage control becomes the priority. Understanding what investigators know. Protecting against self-incrimination. Navigating toward the least damaging outcome possible given the circumstances.

The penalty structure in federal court follows sentencing guidelines that most people dont understand untill there facing charges:

• Tax evasion carries up to five years per count.
• Filing false returns carries up to three years per count.
• Wire fraud carries up to 20 years per count.

When prosecutors stack charges – as they did with Richardson’s three counts – the potential exposure multiplies rapidly.

Restitution orders compound the financial devastation. Valdez and Olson will owe the more then $3.5 million they stole from payroll. That debt dosent disappear after prison. It survives bankruptcy. It attaches to future earnings. The original fraud amount often doubles or triples once penalties, interest, and restitution get calculated.

And the professional consequences extend beyond licensing. Security clearances get revoked. Government contracts get terminated. Employment at major tech companies becomes impossible. The career you built in Silicon Valley ends permanently.

Why San Jose Specifically Creates Exposure

San Jose’s economy creates unique tax fraud exposure. Stock options from tech companies that vest on unusual schedules. RSUs with complex holding periods. Cryptocurrency holdings that the IRS has made an enforcement priority. International income from remote work arrangements with overseas companies.

The concentration of tech wealth in Silicon Valley means more complex returns for the IRS to scrutinize. Complex returns get audited more frequently. More audits mean more discoveries. More discoveries mean more referrals to criminal investigation.

The startup culture creates particular vulnerability. Founders receive equity that vests over years. Employees get stock options with varying exercise prices. Acquisitions trigger taxable events that people dont anticipate. The same complexity that creates Silicon Valley wealth creates opportunities for both mistakes and fraud.

And the cryptocurrency economy adds another layer. Many San Jose tech workers received cryptocurrency as compensation or invested in digital assets during the boom years. The IRS requires reporting of cryptocurrency gains. Many people didn’t report. The enforcement is catching up, and San Jose sits at the center of the crypto economy. If you’ve been trading cryptocurrency without reporting gains, your exposure grows every year as enforcement catches up to technology.

If theres tax fraud exposure in your situation – unreported stock gains, cryptocurrency transactions you never disclosed, employment taxes your company didnt pay, aggressive deductions that crossed the line – the time to address it is before anyone starts looking. Not after the investigation begins. Not after the evidence gets gathered. Not after charges get filed.

The Northern District of California has shown through the Valdez and Olson case, the Boitano case, the Richardson case, and dozens of others that it will pursue tax fraud aggressively. The 90% federal conviction rate means most people who get charged get convicted. The sentences mean most people who get convicted go to prison.

Your exposure persists untill you address it. The question is wheather you address it on your terms or the governments. In Silicon Valley, where complex compensation creates both opportunity and risk, that question becomes more urgent every year.

The Valdez and Olson case proves that even tech executives who understand financial systems commit fraud – and get caught. The Boitano case proves that professional credentials make prosecution easier, not harder. The Richardson case proves that fabricated deductions get discovered. And the 90% conviction rate proves that once charges come, the outcome is essentialy predetermined.

If theres exposure in your situation, the time to address it is now. Not after the IRS-CI Oakland Field Office starts looking. Not after prosecutors begin building there case. Now, while voluntary resolution options still exist. The complexity of Silicon Valley dosent protect you from prosecution. It creates the paper trail that investigators use to convict you.