On June 13, 2017, Judge William G. Young of the United States District Court of Massachusetts scheduled an October 2, 2017 sentencing hearing for Anthony J. May, 62, a life insurance agent and life settlement broker of Dover.
On May 23, 2017, a federal jury convicted Mr. May on an indictment charging him with filing false income tax returns for 2008 and 2009 by knowingly omitting from his returns $396,554 in income he had received from insurance commissions, life settlement brokerage fees and lease rental payments on his office condominium.
Income from life insurance sales and life settlement contract brokerage
Mr. May sold life insurance through a limited liability company, Clients First Financial Insurance Agency. (“Clients First”). Clients First has Mr. May’s wife listed as the LLC’s manager and Mr. May claimed during court proceedings that Clients Firs had brokerage contracts with over 50 insurers including John Hancock, Banner Life, and Mutual of Omaha.
Mr. May also operated a life settlement brokerage business under the name Advantage Life Settlements. Life Settlement brokers at as intermediaries in an informal secondary market where life insurance owners can sell, rather than surrender for cash value or lapse, unwanted policies to investors. Advantage Life Settlements’ website lists “Actual Case Examples” with claimed transactions such a 77-year old man with $1.5 million policy who had paid $86,000 into the policy but sold the policy for a life settlement payment of $703,000. None of the examples on the site give the brokerage commission Mr. May charged, however.
Resident Massachusetts insurance producers licensed with a life line of authority for at least one year or licensed nonresident producers meeting the same requirements as resident producers can obtain authority from the commissioner of insurance, under M.G.L. c. 175, § 213(c), to act as a life settlement broker by notifying the commissioner and paying a required fee.
Both business operated out of an office condominium Mr. May owned at 72 Sharp Street Hingham. Mr. May also leased space in his office condominium to other life insurance agents.
Audit of Mr. May’s 2005 tax return begins Mr. May’s tax problems.
Mr. May’s troubles with the Internal Revenue Service began with an audited of his 2005 tax returns. The IRS Revenue Agent conducting the audit found that Mr. May failed to report as income a refund of $34,366 in attorney’s fees that Mr. May had apparently deducted from his taxes but that been refunded to him by his lawyer. This audit resulted in Mr. May’s gross income and his corresponding taxes being adjusted upward based upon the omitted amount.
Later investigations led to claims that in not only in calendars year 2005, but that for calendar years 2006 and 2007, Mr. May failed to report income from insurance commissions and office rent.
Mr. May’s income tax returns for 2008 and 2009 also became a subject of the IRS investigation of Mr. May’s tax returns.
After various audits, conferences, meetings, and recorded statements, Mr. May met in January 2014, with an IRS Special Agent on discrepancies the IRS found in Mr. May’s 2006, 2007, 2008, and 2009 income tax returns. IRS special agents conduct criminal tax investigations. During this interview, the special agent discussed ten specific items of unreported income, aggregating $520,000 of income, for 2006 through 2009.
Mr. May’s explanations left the IRS unsatisfied and it referred Mr. May’s file to the United States Attorney for prosecution.
In March 2015, hoping to avoid an indictment, Mr. May’s attorney, met with the U.S. Attorney’s Office’s approval, a preindictment conference with Department of Justice’s Tax Division counsel. The meeting allowed Mr. May’s attorney to present Mr. May’s claimed defenses for his underreporting of income. Following the meeting, Mr. May’s attorney sent an 11-page letter to the Government detailing his client’s various defenses and acknowledging:
I further understand that the IRS used the specific items method of proof to establish that Mr. May underreported approximately $260,000 in gross income in 2008 and approximately $170,000 in gross receipts in 2009 and that the resulting tax loss is approximately $151,000.
Mr. May’s main defense for the underreporting his income was that, for many reasons, it was not willfully or knowingly done.
In meetings in September 2015, and April 2016, with the Assistant U.S Attorney assigned the IRS referral, Mr. May’s attorney attempted to convince the Government to decline charges against Mr. May unsuccessfully.
Two count indictment against Mr. May for filing false income tax returns
On April 13, 2016, a federal grand jury indicted Mr. May on two counts of violating Title 26, § Section 7206(1), which punishes anyone who, “Willfully makes and subscribes any return, statement, or other document, which contains or is verified by a written declaration that it is made under the penalties of perjury, and which he does not believe to be true and correct as to every material matter.”
The indictment alleged that Mr. May signed his 2008 and 2009 federal tax return Forms 1040 declaring under penalty of perjury that the information submitted in each return was true, correct and complete but that the returns were materially false because:
- Mr. May failed to report to the IRS significant amounts of the commissions he received from insurance carriers on his 2008 and 2009 returns;
- Mr. May failed to report to the IRS significant amounts of the brokerage fees he received from life settlement agreements on his 2008 and 2009 returns; and
- Mr. May failed to report to the IRS the rental income he received from independent insurance agents renting in his office suite at 72 Sharp Street, Hingham, on his 2008 and 2009 tax returns.
Although not alleged in the indictment, the unreported income Mr. May did not declare, according to the Government, amounted to $396,554 for 2008 and 2009.
The indictment did not charge for unreported income for 2005, 2006, or 2007, but the Government asserted in pretrial proceedings it had the right to introduce evidence relating to Mr. May’s underreporting of income in those years to show Mr. May’s “motive, intent, knowledge, plan, lack of accident, and modus operandi” in filing his inaccurate 2008 and 2009 tax returns.
No plea by Mr. May leads to 13-day jury trial
Although 97.1% of federal criminal defendants dispose of the charges against them by a guilty plea, Mr. May exercised his right to a jury trial.
His trial commenced on May 4, 2017. On May 22, 2017, the jury received the case. The next day, after three questions to the judge and nine hours of deliberations over the two days, the jury found Mr. May guilty on both counts of filing false tax returns.
The trial judge set October 2, 2017 for sentencing. The statute which the jury found Mr. May guilty of violating provides a sentence on each count of no greater than three years in prison, one year of supervised release and a fine of $250,000.
Mr. May will receive his sentences from the presiding federal district judge based on the U.S. Sentencing Guidelines and other sentencing factors. While the Government has not submitted its sentencing recommendation yet, earlier communications during the pretrial phase of Mr. May’s case indicated the Government’s recommendation would involve incarceration within a range of 27 to 33 months based on the Sentencing Guidelines.
Justice Department team involved in Mr. May’s prosecution
The prosecution team in Mr. May’s case involved Acting United States Attorney William D. Weinreb; Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division; and Joel P. Garland, Special Agent in Charge of the Internal Revenue Service’s Criminal Investigation in Boston with the actual prosecutors, Assistant U.S. Attorney Victor A. Wild of the U.S. Attorney’s Economic Crimes Unit and Attorney Eric Powers of the Justice Department’s Tax Division.