Two
plead guilty to tax conspiracy cover-up
Two men pleaded guilty in federal court today to conspiring
to file false tax returns as part of a cover-up of a kickback
payment scheme.
Michael Roman Afremov, 52, St. Louis Park, and Frederick James
Fischer, 59, Lino Lakes, entered guilty pleas March 19 before
United States District Court Judge John Tunheim in Minneapolis.
Afremov pleaded guilty to three counts of false tax returns and
one count of conspiring to file false tax returns. Fischer pleaded
guilty to one count of conspiring to file false tax returns.
Both Afremov and Fischer have agreed to cooperate with law enforcement
in its ongoing investigation.
According
to the plea agreements and Afremov’s testimony
in court, the conspiracy to file false tax returns was part of
a scheme to cover up more than $1.8 million in improper payments
that Afremov received as an officer and shareholder of medical
device company AGA Medical Corp., Inc. (AGA Medical) from Fischer
and another unidentified individual, both of whom were suppliers
to AGA Medical. At the time he received the payments from 1998
through 2002, Afremov claimed the payments as income and paid
income taxes.
The
kickback payments came to light in the fall of 2002 as the
result of a dispute between Afremov and AGA Medical’s
other shareholders. In response to a civil lawsuit filed by Afremov,
the other shareholders filed counterclaims against Afremov, alleging
that he had received improper benefits from the suppliers.
According
to the plea agreements and Afremov’s testimony
in court, in 2003, in response to the defendants’ counterclaims,
Afremov filed amended federal tax returns, removing from his
taxable income the monies received from the two suppliers in
order to support a claim that these monies were not improper
kickbacks to Afremov, but were advances from the suppliers for
Afremov to purchase Persian rugs on their behalf. As a result
of the false tax returns, the government contends a tax loss
in excess of $400,000. As part of the conspiracy, the suppliers,
including Fischer, also filed false tax returns to support Afremov’s
claim regarding the payments.
“This case presents a special concern for this office
in the way false tax returns were used as part of a cover-up
in civil litigation,” Acting U.S. Attorney Frank Magill
said after the plea hearing. “Filing false tax returns
is a crime and will be aggressively investigated.”
Afremov’s
plea agreement contemplates an advisory guideline range of
30-37 months imprisonment. The plea agreement also provides
for a fine of $1 million, a forfeiture of $1,914,139.36 and restitution
to the Internal Revenue Service.
Fischer’s
plea agreement contemplates an advisory guideline range of
12-18 months imprisonment and a guideline fine.
Judge Tunheim will determine the sentences at a future date.
This case is the result of a continuing investigation by the
Internal Revenue Service-Criminal Investigation Division and
the Federal Bureau of Investigation, and is being prosecuted
by Assistant U.S. Attorney Joe Dixon and Special Assistant U.S.
Attorney Hank Shea.