Qui Tam

IRS Tax Evasion & Stock Options Fraud Lead to Prison Sentence for Options Administrator

By Finch McCranie, Esq.

On this whistleblower lawyer blog, we have written previously about abuse of stock options--and how the IRS has declared that tax fraud and evasion from back-dating of stock options is a "Tier I" priority. Now, stock option fraud and income tax evasion will send a former stock options administrator to prison for almost four years.

The Securities and Exchange Commission has announced that Vencent Donlan was sentenced in a California federal court to 46 months in prison after pleading guilty to wire fraud and tax evasion charges. He was alleged to have fraudulently obtained stock and stock options from Wireless Facilities Inc.

Between November 2002 and November 2003, Donlan allegedly received more than $7 million by abusing his position as WFI's stock option grant administrator. The SEC alleged that Donlan issued and transferred more than 700,000 shares of the company's stock and stock options to a brokerage account that Donlan held with his wife. Donlan was alleged to have made false entries in WFI's stock options software to hide unauthorized stock option grants he made to his wife, as well as to have provided false information to the company's brokerage firm and transfer agent.

The tax law violations included that Donlan had evaded paying more than $2.2 million in federal income taxes on the income from his sales of this stock in 2002-2003. Donlan had already been ordered to disgorge all of his ill-gotten gains and pay interest and penalties.

We are encouraged by the successes of these government representatives who are working to stop fraud that causes losses to other persons or our public bodies.

Full post as published by Whistleblower Lawyer Blog on October 24, 2007 (boomark / email).