December 18, 2017—The former owner of a Boston forensic accounting firm focused on representing insurance companies was sentenced on December 18, 2017, in federal court in Boston for failing to report hundreds of thousands of dollars he had embezzled from an insurance company as income on his personal income tax returns.
Eighteen months jail time, restitution and one year of supervised release
Mr. Carey, formerly a certified public accountant, had owned Carey & Company, a forensic accounting firm in Boston. In the ordinary course of its insurance company related services, his company administered bank accounts into which the insurance companies and their clients could make deposits, and from which payments could be made on behalf of and to the insurance companies.
In November 2009, a customer of one of the insurance companies sent Carey & Company a payment of $594,217 intended for the insurance company, but during the months that followed, Mr. Carey transferred almost all of that money out of the account and used it for his own purposes. The money Mr. Carey misappropriated from the insurance company was taxable income, which Mr. Carey failed to report on his personal income tax return. In addition, in 2010, Mr. Carey reported less than one-third of his business’s actual income on his personal income tax return.
After written submissions by Mr. Carey’s counsel and the prosecuting assistant United States attorneys, U.S. District Court Judge Allison D. Burroughs sentenced Mr. Carey to 18 months in prison, one year of supervised release and ordered him to pay restitution of $355,535.00.
Competing views at sentencing of Mr. Carey
In written sentencing memoranda submitted to the judge by Mr. Carey’s counsel and by the United States Attorney’s Office, two contradictory views of Mr. Carey and his actions emerged.
Mr. Carey, through his counsel, asked the Court to impose a sentence on his guilty pleas “deviat[ing] from the…guideline sentencing range…of 24 to 30 months [in prison]…and impose a sentence of one day imprisonment (deemed served) followed by three years of supervised release.”
In support of this substantial reduction in punishment, Mr. Carey’s counsel’s memorandum argued:
- Mr. Carey was 50 years old and has been a lifelong, law-abiding resident of Massachusetts.
- He shared custody of his three young children, Cecilia (9), Anna (6), and Caroline (4).
- He has an undergraduate degree from Northeastern University and an MBA from Boston College.
- He previously held a CPA license for thirteen years until the commission of the instant offense.
- For approximately 14 years, he owned and operated Carey & Company, a forensic accounting firm located in Boston.
- His company at its peak employed approximately 30 people and generated $5-$6 million in annual revenue.
- After many successful years, his business ultimately collapsed following the filing of a lawsuit by one his largest insurance company clients.
- The business’s collapse was catastrophic to Mr. Carey.
- In addition to losing the business, he was financially ruined.
- The resulting stress on Mr. Carey and his wife contributed to their divorce.
While compelling, perhaps, as far as the statement went, the United States Attorney’s Office had a contrary and perhaps more compelling take on Mr. Carey’s actions. This memorandum began with the statement: “[Mr. Carey’s] sentencing memorandum….suggests that Mr. Carey was an honest and successful small business owner and husband until a major client unexpectedly sued him without justification, causing things to turn bad for him.”
The memorandum then contradicts Mr. Carey’s claims stating, in part:
- Mr. Carey’s major clients dried up and Mr. Carey was sued after his clients discovered that he could not account for large amounts of funds with which they trusted him.
- The fate of Mr. Carey’s second marriage did not hinge on an unmerited lawsuit by a fickle client of his firm. Rather, [records in the confidential probation presentence report (PPR)] reflect that the marriage ended as a result of far more troubling problems…”
- Mr. Carey did reach a settlement with the insurance company that had been his principal victim, however, he only reimbursed his victim a fraction of the funds he embezzled, even when he was caught.
- The PPR not only reflects Mr. Carey’s continued dishonesty and lack of candor with clients, his family and the government, as touched briefly on above, but with Probation, an arm of the Court.
- Two weeks after Mr. Carey changed his plea in this case and as Probation was beginning its independent investigation, Mr. Carey requested that his credit report be locked, well-knowing this precluded Probation from confirming critical claims he was making about his assets, including the disposition of the approximately $500,000 difference between the $1,025,000 for which his property in Boston sold in June 2017 and the $615,000 in mortgages and unreported amount of liens Probation reports there were on it.
- Mr. Carey leaned heavily in his Memorandum on his partial custody of some of his children…[but] far from providing financial support for his children, he is in arrears in all of his child support payments…notwithstanding owning at least $180,000 in unencumbered properties in Maine.
The memorandum for the United States ended stating to the Court, “For these reasons, there is no basis for the Court departing or varying from the advisory Guideline range. A meaningful period of incarceration is wholly appropriate in light of all of the factors in this case, including the size of the tax loss and that the tax loss arose from hundreds of thousands of dollars Mr. Carey embezzled from clients (and only repaid, to the extent he did, when he was caught).”
Members of the prosecution team involved in Mr. Carey’s case
Acting United States Attorney William D. Weinreb and Joel P. Garland, Special Agent in Charge of the Internal Revenue Service’s Criminal Investigation in Boston, announced the Court’s sentencing decision. Assistant U.S. Attorneys Stephen Heymann and Sara Bloom of Acting U.S. Attorney Weinreb’s Economic Crimes Unit prosecuted the case.
For more details
Agency Checklists has previously published two articles on Mr. Carey’s problems with the law. These articles have more details. See Agency Checklists’ article of December 19, 2016,”Forensic Accountant Indicted For Tax Evasion On Escrow Funds Converted From Insurance Company” and See Agency Checklists’ article of September 12, 2017, “Insurance Accounting Firm Owner Pleads Guilty to Tax Evasion.”