Paul Disidoro, 64, of Georgetown, Mass., a former insurance agent for Sun Life Financial (“Sun Life”) was arrested and arraigned in United States District Court in Boston on September 4, 2015, on a criminal complaint arising out his conversion of approximately $515,000 from three of his insurance clients.
Insurance agent did not report to the IRS the money he stole from his insurance clients
Mr. Disidoro had first been licensed as an insurance producer in 1983. Over the years he had operated his businesses in Haverhill, Allston and from 2007 through 2010 at his home address at 2 East Street Georgetown, MA, ostensibly selling fixed annuities for Sun Life Financial (“Sun Life”).
An affidavit filed by a Special Agent of the Internal Revenue’s Criminal Investigation Division, Jonathan Wlodyk, in support of Mr. Disidoro’s arrest warrant alleges that from 2007 through 2010, Disidoro stole $515,597 from three of his clients and used the money for his personal benefit, including spending more than $100,000 for online horse race betting. Mr. Disidoro did not report any of the stolen funds as income on his federal income tax returns and thereby, according to the affidavit, Mr. Disidoro willfully evaded more than $160,000 in taxes.
Internal Revenue Service considers embezzled funds income
It may sound strange but the Internal Revenue Service requires the reporting of money required by illegal means such as, in Mr. Disidoro’s case embezzlement on the embezzler’s tax return. IRS Publication 17, that advises tax payers on what and how to report their income, has an extremely detailed section on “Other Income” that lists a number of items for other income such as: “bribes”, “dealing illegal drugs” or “stolen property.
The IRS publication advises that:
If you steal property, you must report its fair market value in your income in the year you steal it unless in the same year, you return it to the rightful owner.
The publication then helpfully advises that these illegal activities should be placed on Item 21 of a person’s 1040 tax return as “Other Income (See IRS Form below).” Unfortunately, the IRS does not publish any indication of how many criminally inclined taxpayers fess up and pay taxes on their ill-gotten gains.
Convinced Victims to give him control over accounts and annuities
In Mr. Disidoro’s case, he used his position as a trusted advisor to pilfer his clients’ accounts.
The first victim of Mr. Disidoro’s, lost almost $275,000.00, when Mr. Disidoro convinced him to move his money to Sun Life and to allow Mr. Disidoro access to his other accounts. Mr. Disidoro was then able to direct Sun Life to issue checks to the victim, but then have those checks mailed directly to Mr. Disidoro’s residence business address. Mr. Disidoro then deposited these checks to his personal or business account. Besides stealing from his victim’s Sun Life annuities, Mr. Disidoro used this victim’s credit cards funds for personal purchases and cash advances. This victim only became aware of the conversions when the IRS sent him a notice indicating that funds had been withdrawn from his retirement accounts.
In July 2010, the client sued Mr. Disidoro, Sun Life and a general agency in Middlesex superior court. The claims against Sun Life and the general agent were subsequently dismissed by agreement two months after a judgment was entered against Mr. Disidoro, personally, for approximately $575,000. That amount included punitive damages, attorney fees, interest and compensatory damages for monies received or misappropriated.
The second victim of Mr. Disidoro had been a client of his from 2007 through 2011. Based on advice from Mr. Disidoro, this client transferred her retirement funds to an account at Sun Life. From 2007 through 2009, Mr. Disidoro stole more than $150,000 from her, by converting over $60,000 in checks payable either to her or to Sun Life issued by her prior account holders. Mr. Disidoro also had Sun Life send to him three checks totaling almost $90,000 payable to his client, that he subsequently deposited into his business and personal bank accounts.
In May 2011, this second victim sued Mr. Disidoro, Sun Life, TD Ameritrade and one of its stock brokers. The claims against Ameritrade and its broker went to arbitration and eventually were dismissed. A December 6, 2012, entry on the case docket notes relating to the case against Sun Life states that: “It is the court’s understanding that plaintiff has settled with defendant Sunlife (sic).”
In August 2013, this second victim recovered judgment of approximately $220,000 against Mr. Disidoro that included punitive damages, attorney fees and compensatory damages for the money misappropriated.
The third victim met Mr. Disidoro through friends when she was interested in purchasing disability insurance. Mr. Disidoro convinced her to transfer her retirement accounts to Sun Life after promising her that he could double her money.
From 2008 through 2010, Mr. Disidoro embezzled approximately $90,000, from her retirement accounts that he deposited into his personal and business bank accounts.
IRS agent’s affidavit details thefts from insurance clients to feed gambling habit
Agent Wlodyka’s investigation showed that between 2007 and 2010, Mr. Disidoro spent a total of $107,445.11 in payments to TVG Network, a cable/satellite television network dedicated to horse racing. The network permitted account holders to bet on horse racing online or by telephone. Mr. Disidoro paid for these bets by withdrawing significant sums by checks written to cash, through ATM withdrawals, including many such withdrawals near or at casinos, and had made ATM withdrawals or wrote checks to cash totaling $556,760.64.
In April 2015, during the course of his investigation, Agent Wlodyka monitored a telephone conference between the second victim’s daughter and Mr. Disidoro. In this call, the daughter reminded Mr. Disidoro of an earlier conversation they had had about her mother’s money. During that conversation, the victim’s daughter had said to Mr. Disidoro: “[T]his is the money that you told me that you stole from my mother—remember the gambling and all that?” Mr. Disidoro responded: “Yeah. Yeah.” The daughter also stated to Mr. Disidoro that he had stolen $150,000.00 from her mother, but Mr. Disidoro responded that “it was more like $50…it was more like around $50,000.00.”
According to the affidavit, Mr. Disidoro had also said that he had not made any restitution to anyone because he was not in the position to do so. The daughter stated: “You said that you stole it (money) because you were gambling; you had a gambling habit. Is that correct? Do you remember that?” Mr. Disidoro responded: “Yeah” When the daughter asked Mr. Disidoro why he stole the money, Mr. Disidoro said: “Because I was desperate. I was in a jam. I was in a jam situation. And when you do that, it’s hard to explain.” Mr. Disidoro also said “I’ll pay it back as soon as I–I get a job. I’ll make an accounting to you of the money… And why I stole the money, I don’t know why. I had a gambling problem. It was like having a drug problem. The money is irrelevant. It doesn’t matter where it comes from, just like drinking or anything else. It’s a situation that—I just—you know, if I could undo it, I’d undo it.” Mr. Disidoro later stated “I’m sorry; I’m sorry for all I did.”
After his arrest and at his arraignment, one of the written conditions of release from custody that the magistrate judge imposed on Mr. Disidoro was: “Do not frequent establishments whose primary purpose is gambling. [Do n]ot participate in any gambling activities, including casino on-line gambling, lotteris (sic), instant scratch tkts, Keno,& any activities similar in nature. Attend gambling specific treatment program/meetings as directe[d].”
Probable cause hearing continued for possible guilty plea
A probable cause hearing on the complaint filed by the IRS agent against Mr. Disidoro had been scheduled before a United States magistrate judge for September 15, 2015. Pursuant to a joint motion filed by the United States attorney and Mister Disidoro’s counsel to continue the probable cause hearing, Mister Disidoro’s hearing was continued until October 14, 2015.
The stated reason for the request was, “the parties…have engaged in negotiation concerning the disposition of this matter, possibly by way of information, and require additional time to complete negotiations.”
In the federal system, an “information” is “a formal accusation by a government attorney that the defendant committed a misdemeanor.” However, an information is often used when the defendant intends to waive a grand jury indictment and plead guilty.
Under the circumstances of Mister Disidoro’s charge, this continuance would seem to imply that he is contemplating waving a grand jury indictment and pleading guilty.
The charge of tax evasion provides a sentence of no greater than five years in prison, three years of supervised release, a fine of $250,000, or twice the gross gain or loss, whichever is greater. Actual sentences for federal crimes imposed by a federal district court judge tend to be less than the maximum allowed by the law this and the U.S. Sentencing Guidelines.