NEWARK, N.J. – A federal grand jury today indicted a Florida man for evading over $61 million in income taxes from 2016 through 2018, U.S. Attorney Craig Carpenito announced.
Alfred Teo, 74, of Boca Raton, Florida, is charged with three counts of tax evasion and six counts of making and subscribing false personal and corporate tax returns in tax years 2016, 2017, and 2018. The indictment follows a June 17, 2020, complaint charging tax evasion, for which U.S. Magistrate Judge Edward S. Kiel set bond at $20 million. Teo will be arraigned at a date to be determined.
According to documents filed in this case and statements made in court:
Teo was the majority shareholder of multibillion-dollar plastics manufacturing holding company Alpha Industries Management (Alpha). During the tax years 2016, 2017, and 2018, Alpha transferred funds directly into trading accounts for Teo’s benefit. Instead of reporting the funds Alpha sent for Teo’s benefit as income on his personal tax returns, a significant portion of Teo’s income from Alpha was recorded as 1099 Income to AAST Holding Corp. (AAST), another Teo-owned entity that was unrelated to his plastics business. Through AAST, Teo engaged in numerous acts to conceal and attempt to conceal the income he received from Alpha in order to evade income taxes.
According to AAST’s corporate tax returns, AAST received 1099 income from Alpha of approximately $27 million, $53 million, and $89 million in 2016, 2017, and 2018, respectively, for a total of approximately $169 million.
However, Alpha did not transfer these amounts to bank accounts controlled by AAST. The money Alpha recorded as 1099 income to AAST was instead money provided for the benefit of Teo and included money that Alpha sent directly to Teo’s brokerage accounts. Instead of reporting the $169 million of income from Alpha on Teo’s personal tax returns in 2016, 2017, and 2018, and paying taxes on that income, the income was reported on AAST’s corporate tax returns. Teo then provided false deduction information to his tax preparer in the form of fictitious “cost of goods sold” to artificially reduce his income and evade the income taxes owed.
AAST was organized as a holding company, and, in reality, AAST did not have cost of goods sold of these amounts for these years.
In 2016, 2017, and 2018, Teo’s tax preparer provided draft AAST corporate tax forms for Teo’s review. Teo then returned the corporate tax forms with handwritten notes that indicated AAST had tens of millions of dollars of cost of goods sold. Teo’s tax preparer used the information that Teo provided to report AAST’s cost of goods sold on AAST’s corporate tax returns in the amounts of approximately $26 million, $51 million, and $87 million for 2016, 2017, and 2018, respectively.
By submitting fraudulent cost of goods sold expenses to his tax preparer for inclusion on AAST’s corporate tax returns, Teo used AAST to avoid paying tens of millions of dollars of income taxes. He reduced AAST’s net business income by approximately $165 million for tax years 2016, 2017, and 2018 combined.
Teo’s personal IRS Forms 1040 for 2016, 2017, and 2018 included AAST’s net business income – as reduced by the approximately $165 million in AAST’s false cost of goods sold – as income to Teo. As a result, Teo understated his personal income for those years by approximately $165 million.
Because Teo’s personal tax returns for 2016, 2017, and 2018 included AAST’s net business income, Teo’s fraudulent reduction of AAST’s net business income with purported cost of goods sold expenses resulted in a tax loss of approximately $10 million, $20 million, and $31 million in 2016, 2017 and 2018, respectively, for a total tax loss of approximately $61 million.
The tax evasion charges in Counts 1 through 3 of the indictment each carry a maximum potential penalty of five years in prison and a $250,000 fine. The six false tax return charges in Counts 4 through 9 each carry a maximum potential penalty of three years in prison and a $250,000 fine.
U.S. Attorney Carpenito credited special agents of IRS-Criminal Investigation, under the direction of Special Agent in Charge Michael Montanez in Newark, with the investigation leading to today’s charges.
The government is represented by Assistant U.S. Attorneys Ari B. Fontecchio and Vijay Dewan of the Economic Crimes Unit in Newark.
The charges and allegations contained in the indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.