On September 7, 2017, James Carey, 50, the former owner of a Boston insurance forensic accounting firm pleaded guilty today in federal court in Boston to two counts of making material misstatements on his 2009 and 2010 personal income tax returns by understating his income by approximately $750,000.
United States District Court Judge Allison D. Burroughs scheduled sentencing for Nov. 29, 2017.
Mr. Carey’s firm, Carey & Company, held insurance company funds and estimated claim losses
Mr. Carey, a certified public accountant, owned Carey & Company, a forensic accounting firm in Boston. Carey & Company administered bank accounts on behalf of insurance companies 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. The firm also analyzed financial claims under insurance policies for insurers.
Forensic accountants are a relatively recent addition to the arsenal of professionals that insurance companies may use in assessing complex losses. Loss of business income is the classic area where an insurance company might engage a forensic account to value the projected loss payment. Often, the forensic accountant adds insurance contract knowledge to their accounting and financial analytic skills with an ability to justify their opinions in contested claims before referees, arbitrators or juries.
Mr. Carey’s additional income came in part from embezzling an insurer’s money
Mr. Carey’s company, Carey & Company, which for a number of years had its offices in Faneuil Hall Marketplace in Boston, described itself as
…a multi-service forensic accounting and certified public accounting firm with a staff of professionals who have many years of experience providing insurance support services.”
The firm’s website also stated:
We strive to provide accurate, reliable, and timely service to our clients. We aim to assist our clients in the most cost effective means possible.”
Notwithstanding Mr. Carey’s status as certified public account specializing in in forensic insurance issues, Mr. Carey seemed challenged in managing the debits and credits between his company’s money and his insurance company client’s monies.
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 that Mr. Carey failed to report on his personal income tax return.
Superseding indictment was scheduled for trial September 25
Although original indicted and arrested on December 16, 2016, a federal grand jury issued a superseding two-count indictment on April 26, 2017, charging Mr. Carey with making and subscribing to a false tax return and subscribing to false income tax returns.
The superseding indictment alleged that Mr. Carey:
- Signed his 2009 personal income return swearing under the penalties of perjury he received $200,000 in taxable income from his company, Carey and Company, without disclosing he had received in his personal bank account approximately $500,000 in additional income from his business during that year;
- Signed his 2010 personal income return swearing under the penalties of perjury he received $250,000 in taxable income from his company, Carey and Company, without disclosing he had received in his personal bank account approximately $877,500 additional income from his business during that year.
Because of his failure to report, what was found to be, $750,000 in added taxable income during 2009 and 2010, Mr. Carey underpaid his personal federal income taxes for 2009 and 2010 by approximately $355,000.
In a June pretrial conference, Mr. Carey, through his counsel, advised that Mr. Carey would contest the superseding indictment and a trial date of September 25, 2017, was set by the court. The trial was expected to last a week with the government presenting seven to ten witnesses against Mr. Carey. By September 1, 2017, Mr. Carey had agreed to plead guilty to both counts of the superseding indictment.
Each count Mr. Carey pleaded guilty to has maximum three-year prison sentence
The federal crimes Mr. Carey is charged with provide for a sentence of no greater than three years in prison, one year of supervised release, a fine of $250,000, and restitution of unpaid taxes. The recommendation of the Acting U.S Attorney on Mr. Carey’s punishment, as part of any plea agreement, has not yet been filed with the court. However, federal sentences are imposed by a federal district court judge based upon the U.S. Sentencing Guidelines and other statutory factors.
U.S. Attorney’s Office and IRS Criminal Division investigated and prosecuted Mr. Carey
Mr. Carey’s guilty pleas was announced by 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. The prosecution of the indictment against Mr. Carey is being handled by Assistant U.S. Attorneys Stephen Heymann and Sara Bloom of Acting U.S Attorney Weinreb’s Economic Crimes Unit.
Prior Agency Checklists article
Agency Checklists published before the April 26, 2017 superseding indictment a more detailed article regarding Mr. Carey’s original indictment and civil litigation by insurers against him alleging conversion of funds. See Agency Checklists’ article of December 19, 2016, “Forensic Accountant Indicted For Tax Evasion On Escrow Funds Converted From Insurance Company.”