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A tub full of bitcoins

This mama didn’t raise no dumb boys; unfortunately, they weren’t very bright.

By Sandy Weiner, J.D.

Contributing Editor

Okay, I don’t know Mrs. Harmon. I’m not sure she’s even alive or what the family situation is, but reading a recent article about the Harmon brothers definitely made me think about her.

First, let’s start with her son Larry Harmon. He was the CEO of Helix, a multimillion-dollar company. Sounds impressive, right? Until you find out that Helix is a darknet crypto mixing service company where illegal drugs were sold and that he was fined $60 million by FINCEN and is awaiting a prison sentence for the $311 million money laundering scheme.

Clearly, he’s smart, but not very bright if he thought he was going to get away with it, thought the IRS agents that had seized his bitcoins.

But the IRS soon found out that Larry was not the only one with brains in the Harmon family. It turns out his brother Gary, who had been living on unemployment benefits since the family business was shut down, was sitting in the courtroom during his brother’s bail hearings. He learned that the IRS had been unable to access the bitcoins from Larry’s bitcoin wallet that had been “confiscated” by the IRS.

The IRS may not have been able to uncover the passwords to access the coins, but Gary did. According to one news report, “Authorities watched helplessly [while] Harmon swiped 713 digital tokens valued at about $4.9 million.”1

Clearly Gary’s bright, right? But not too bright. Turns out Gary was so happy with his feat that he had to celebrate. What do you do with millions of dollars that you stole from under IRS agents’ noses? You fill up a bathtub in a night club with cash (even though you are supposedly living on unemployment checks), plop yourself in the middle of it, and then take pictures on your cell phone.

A few watts short of a lightbulb.

TGIF Mozzarella sticks bag

Persistence: that’s the ticket

By Kathryn Zdan, EA

Editorial Director

Tungnath Chaturvedi, an Indian attorney, has won a legal battle with Indian Railways that spanned 23 years and over 100 hearings.1 What egregious act could have caused him to relentlessly pursue Big Rail for two decades? He was overcharged 20 rupees when he bought a ticket to Moradabad in 1999. (20 rupees is equal to 25 cents.)

It’s the principle

After complaining twice at the train station and being refused a refund, Mr. Chaturvedi filed a case against Indian Railways on charges of cheating.

Undeterred by the miniscule amount, nor by his family’s urgings for him to give up his case, Mr. Chaturvedi represented himself as the case chugged through the court system, taking it all the way to the supreme court of India after a railway tribunal dismissed the case.

Finally, the court ruled in his favor and ordered the railways to pay a fine of 15,000 rupees ($182), as well as the outstanding amount plus 12% interest. But Mr. Chaturvedi said it was never about the money, “This was always about a fight for justice and a fight against corruption, so it was worth it.”

In good company

For some tax pros, this case may bring to mind another long-lasting legal battle: Gilbert Hyatt and his fight against the California Franchise Tax Board.

In 1993, the FTB began a residency audit questioning Mr. Hyatt’s 1991 change of residence and domicile from California to Nevada following a microchip patent transaction that netted him $40 million. A Nevada jury awarded him close to $400 million in damages from the extremely aggressive residency audit (FTB auditors dug through Mr. Hyatt’s trash and interrogated his neighbors, among other things). That award was later reduced by the U.S. Supreme Court to $50,000 in damages.2 The Nevada Supreme Court then ruled that he will have to pay the FTB for the costs, but not attorney fees.3

In 2017, Mr. Hyatt’s actual appeal of the FTB’s assessment was heard. The ruling was in favor of Mr. Hyatt on the residency issue but held that California could tax the patent income received in 1991 because it was California business income during 1991, but not 1992.4

All aboard, next stop is Eternal Litigation: Mr. Hyatt has appealed.5

Need a biweekly dose of fraud?

Don’t we all. If you’re connected to Spidell on Facebook and LinkedIn, we post our biweekly “Fraud Friday” blurbs there, which cover assorted fraudulent acts, scams, and schemes. Here are a few past posts:

Fraud, 300 B.C.-style

One of the earliest recorded instances of fraud took place in 300 B.C. Two Greek merchants, Hegestratos and Zenosthemis, took out an insurance policy and borrowed money on a cargo ship that was allegedly going to be filled with corn, but their plan was to sink the boat, keep the money, and sell the corn elsewhere. As Hegestratos was attempting to chop a hole in the hull of the boat with an axe, one of the crew members discovered him. Hegestratos tried to escape by jumping off the boat and swimming to shore, but he drowned at sea; Zenosthemis was tried in an Athenian court.1

Livin’ la vida Luna

“Tax redirection” is a form of tax rebellion where the individual pays their tax directly to another source rather than the IRS as a form of protest. Julia “Butterfly” Hill, an environmentalist turned proponent of tax redirection, sent about $150,000 in federal taxes directly to schools, arts and culture programs, community gardens, and other recipients, stating in a letter to the IRS, “I’m not refusing to pay my taxes. I’m actually paying them but I’m paying them where they belong because you refuse to do so.” Hill is best known for her tree sit-in the late 1990s, when she lived in a 180-foot-tall Redwood tree named Luna for 738 days to protect it from being cut down by the Pacific Lumber Company.2

Le Fisc goes splish-splash

France is using AI to find undeclared swimming pools, which so far has generated €10 million in tax. In France, a swimming pool can affect tax because housing taxes are calculated based on a property’s rental value. Since the beginning of the pandemic, and with recent heat waves affecting Europe, the number of pools in France has greatly increased. The AI pool-finding project so far has only covered nine of France’s 96 metropolitan areas, but it has already discovered 20,356 undeclared swimming pools. The French tax office DGFiP (aka, Le Fisc) estimates it can bring in an additional €40 million in tax once it’s finished using AI to analyze the rest of metropolitan France.3

A few fun facts about this week’s writers:

Sandy Weiner, J.D.

Sandy Weiner, J.D., as California editor, loves all things California. Whether it's hiking at Big Sur or playing at the beach in San Diego where she lives, Sandy takes full advantage of all that California has to offer as a way to clear her head after trying to comprehend and explain California's Revenue & Taxation Code.

Kathryn Zdan, EA

Kathryn Zdan, EA, spends her non-Spidell hours on photography and watching horror films (and then sleeping with the light on). She also enjoys hiking, biking, and watching foreign films.

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