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What you need to know for 01/18/2018

Bogus tax return in fraud case draws probation

Bogus tax return in fraud case draws probation

Ronald Simons will avoid jail time despite knowingly submitting a false 2006 tax return for embattle

Ronald Simons will avoid jail time despite knowingly submitting a false 2006 tax return for embattled broker-dealer David Smith and his wife, Lynn.

The 58-year-old accountant from Vestal was ordered to serve a year on probation and pay a fine of $5,000 fine when he was sentenced in U.S. District Court on Friday. In November, he admitted to one count of delivering and disclosing a false income tax return, after agreeing to testify in the trial against Smith and Timothy McGinn, his longtime business partner at the Albany-based McGinn, Smith & Co. Smith and McGinn have been convicted and are facing prison.

In January, Simons testified he willingly submitted a tax return that did not report $407,000 in fees distributed to Smith from TDM Funding LLC in 2006. Instead, he classified the money as loans despite knowing the brokerage firm’s controller initially booked them as fees.

“Despite the clear warning signs that this was not a legitimate loan, the defendant did not require any supporting documentation,” Assistant U.S. District Attorney Elizabeth Coombe stated in court documents submitted prior to Simons’ sentencing.

Prosecutors and Kevin McCormack — Simons’ defense attorney — agreed his crime didn’t deserve jail time.

In a pre-sentence memorandum, McCormack described Simons as someone who took ownership of the crime he committed.

“Mr. Simons is a good man who made only one serious mistake in his life, owned up to it and did everything possible to atone for this mistake,” he stated. “He should be treated with leniency.”

Simons, who could have faced up to a year in prison, was the second key player in the case to avoid jail time. Earlier last week, Brian Shea, the 54-year-old chief financial officer of the brokerage firm, was handed a probation sentence, a $5,000 fine and ordered to perform 100 hours of community service.

Shea pleaded guilty in July to one count of corruptly interfering with the administration of the Internal Revenue Laws as part of a plea agreement. He was facing up to 16 months in jail and a fine of up to $30,000, but was afforded a lesser sentence because of his willingness to cooperate with authorities during the nearly month-long trial that ultimately landed a conviction for both McGinn and Smith.

In 2010, the U.S. Securities and Exchange Commission accused the partners of McGinn, Smith & Co. of operating a complex Ponzi scheme through fraudulent debt offerings.

The civil case against the partners was followed by a 30-count criminal indictment returned in federal court in January 2011, accusing McGinn and Smith of siphoning more than $8 million from investors to fuel their lavish lifestyles. An additional two-count indictment returned in October accuses the two of bilking an additional $1 million.

McGinn was found guilty of conspiracy to commit mail fraud, guilty of conspiracy to commit mail and wire fraud, wire fraud, securities fraud and filing a false tax return — 27 counts in all. Smith was convicted on 15 counts, including many of the same charges.

Both partners face up to 15 years in prison when sentenced in Utica on June 28. They were each released on $100,000 unsecured bond following the verdict.

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