Honolulu Tax Fraud Lawyers

Honolulu Tax Fraud Lawyers: When Corporate Massages Become Consulting Fees

Albert Hee was a Kailua businessman who ran Waimana Enterprises, a telecommunications holding company based in Honolulu. He also helped “tons of people” according to the federal judge who sentenced him. For over a decade – from 2002 through 2012 – Hee caused Waimana to pay more than $2 million of his personal expenses. The expenses included $90,000 for personal massages – deducted on corporate tax returns as “consulting fees”. They included a $1.3 million house in California where his children lived rent-free while attending college. They included family vacations to Disney World, Tahiti, France, and Switzerland – and a $17,000 trip to Mauna Lani Resort on the Big Island that Hee called a “stockholder meeting” even though he was the only stockholder. His sentence: 46 months in federal prison. The court ordered $431,793 in restitution to the IRS.

The District of Hawaii has seen tax fraud at scales that destroyed careers and families across the islands. A Kauai woman who received 17 years for running a “one-woman criminal enterprise” through her tax preparation business. A conspiracy that generated over $1 million in fraudulent refunds using fake mortgage lender forms. When federal prosecutors in Honolulu bring tax charges, the defendants often include the people trusted to prepare returns – and their sentences reflect the depth of that betrayal.

The Businessman Who Called Massages Consulting Fees

From 2002 through 2012, Hee caused Waimana to pay more then $2 million of his personal expenses. He then falsely characterized these personal expenditures as business expenses on Waimana’s corporate income tax returns. Every dollar the company paid for Hees personal life was a dollar the IRS should have taxed.

The massages alone tell the story. Hee spent over $90,000 on personal massages and deducted them on corporate tax returns as “consulting fees.” The massage therapist wasnt consulting on telecommunications strategy. The deduction was completly fabricated.

Think about the California house. In 2008, Hee purchased a $1.3 million home in Santa Clara, California, with corporate money. He told his accountants the property would be used by Waimana employees. Instead, his children lived in the home during and after college – and they paid no rent.

U.S. Senior District Judge Susan Oki Mollway described Hee as a person who helped “tons of people” but also engaged in a well-organized, long-term pattern of cheating on his taxes. Nearly four years for the businessman whose personal expenses became corporate deductions for a decade.

Seventeen Years For A One Woman Criminal Enterprise

Leihinahina Sullivan of Lihue, Kauai was sentenced to 17 years in federal prison. The judge called her a “one-woman criminal enterprise.” Sullivan ran a tax preparation business that was actualy a fraud operation at industrial scale.

Between January 2011 and July 2019, Sullivan executed a tax fraud scheme that caused $2.8 million in losses. She prepared and filed hundreds of false state and federal returns. She didnt review these returns with clients before filing. She forged there signatures on many of them.

But Sullivan didnt stop at tax fraud. She also ran an educational fraud scheme targeting college-bound students. She used personal identification information from clients to apply for approximately 40 credit cards in other peoples names. She spent over $1 million on these unauthorized cards.

U.S. District Judge J. Michael Seabright sentenced Sullivan to 17 years in federal prison. The court ordered $3,396,035 in restitution to victims including the IRS ($1.93 million), Hawaii Department of Taxation ($790,000), and multiple financial institutions. Seventeen years for the tax preparer whose business was basicly an identity theft operation.

The Million Dollar Refund Conspiracy

Rosemarie Lastimado-Dradi owned the Gimmel Group LLC, a domestic limited-liability company in Hawaii that purported to be a personal investment business. It wasnt an investment business. It was a fraud operation that generated over $1 million in fraudulent tax refunds.

From January 2015 through September 2018, Lastimado-Dradi and her co-conspirators filed fraudulent individual tax returns that reported false withholdings from mortgage lenders. They created fake 1099 forms showing withholdings that never happened.

The conspiracy involved six defendants. Four were convicted at trial. Sook Young Jung, the sixth person charged, received a single fraudulent refund of $1,147,036 – over one million dollars in one fraudulent return.

Hawaiis Highest In Nation Tax Exposure

Hawaii has one of the highest state income tax rates in the nation – up to 11% for high earners. When combined with federal rates, this creates dual prosecution exposure that compounds penalties.

The Sullivan case demonstrates this dual system. Her $3.4 million restitution included $1.93 million to the IRS AND $790,000 to the Hawaii Department of Taxation. Two agencies victimized by the same scheme. Two jurisdictions with fraud penalties.

State and federal agencies coordinate there investigations. A state audit can trigger federal prosecution. A federal investigation can generate state charges. The dual system means defendants face exposure from multiple directions.

Defense Strategy In Honolulu

If your facing tax fraud exposure in Honolulu, the calculus involves understanding how the District of Hawaii operates.

The Hee case shows that corporate expense fraud generates prison sentences even for businessmen who helped “tons of people.” The Sullivan case shows that tax preparer fraud generates extraordinary sentences – 17 years. The Lastimado-Dradi case shows that false 1099 schemes involving multiple conspirators result in multiple convictions.

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 potentialy without prison.

If theres tax fraud exposure in your situation – corporate expenses you didnt report as personal income, returns prepared by someone you no longer trust – the time to address it is before investigators start looking. Appeals go to the Ninth Circuit Court of Appeals. The 90% federal conviction rate means most people charged get convicted.