On Thursday, January 25, 2018, Judge William G. Young of the United States District Court of Massachusetts sentenced Anthony J. May (“Mr. May”), 63, an insurance agent and life settlement broker from Dover, Massachusetts to eight months in prison and one year of supervised release. In April 2017, after a 13-day jury trial, the jury found Mr. May guilty of filing false tax returns for 2008 and 2009,
Mr. May did not report $735,000 in income from life insurance sales and brokering life settlements
Mr. May owned and operated Clients First Financial Insurance Agency, LLC, through which he sold life insurance products as a broker, and Advantage Life Settlements, LLC, through which he which he served as a broker for insured individuals looking to sell their personal life insurance policies to third party investors. Mr. May operated his businesses out of an office suite in Hingham where he also leased space to other independent insurance agents.
Mr. May filed false 2006 through 2009 individual income tax returns that did not report $735,000 in income that he received from insurance commissions, broker fees and lease rental payments. The indictments he was tried upon, however, involved his 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, broker fees and lease rental payments on his office condominium.
For a fuller description of the charges, See Agency Checklists’ article of June 19, 2017, “Federal Jury Finds Dover Life Agent And Settlement Broker Guilty of Underreporting Income.”
Settlement with the Division of Insurance after conviction but before sentencing
On May 25, 2017, the Division of Insurance (“Division”) opened a case on Mr. May’s licenses after the Division learned he had been convicted on two felony counts involving his having filed false federal income tax returns by failing to report “approximately $400,000 in income in 2008 and 2009.”
The Division elected in Mr. May’s case to allow him to keep his insurance licenses, in consideration of his:
- waiving a hearing;
- paying a $500.00 fine;
- agreeing to file amended income tax returns for tax years 2008 and 2009 with the Massachusetts Department of Revenue;
- agreeing “to immediately cease and desist from the conduct outlined in the Division’s June 15, 2017 correspondence” which were his, “having been convicted of a felony” and “using fraudulent, coercive or dishonest practices in the conduct of business.”
The Division did advise Mr. May the settlement constituted a reportable administrative event which should be included on his next Massachusetts producer license renewal application and reported in other jurisdictions where he held an insurance producer license.
Government sought prison sentence of 33-41 months plus restitution to the IRS
In its 20-page sentencing memorandum, the government sought to convince the judge “The sentence imposed in this case should send a message to other potential tax cheats that imprisonment is a reality for individuals who violate the internal revenue laws.”
The memorandum laid out, from the government’s point of view, that Mr. May’s actions warranted substantial prison time because Mr. May failed to report all of his income for a four-year period, despite being specifically warned by the IRS to report this very type of income.
- In 2007, Mr. May’s 2005 tax return was audited by the IRS. The IRS revenue agent who handled the audit, reminded Mr. May of the requirement that he had report all of his income on his tax returns, regardless of whether he received a Form 1099 from an insurer. At trial, the revenue agent testified Mr. May had acknowledged this obligation and assured her he would do so in the future.
- However, from 2006 to 2009, he failed to report $738,089.44 to the IRS. At trial, he claimed, as his primary defense, that he never received Forms 1099 from insurers to notify him of the income.
To the government, Mr. May’s claimed defense rejected by the jury “demonstrated disdain for the IRS and the nation’s tax laws” and “demonstrated that he thought the law did not apply to him.”
The government’s final recommendation to the sentencing judge was “to sentence the defendant to prison within the guidelines range of 33-41 months, followed by a three-year period of supervised release, and restitution in the amount of $206,665.04 as a condition of supervised release.”
Mr. May’s sentencing submissions asked for probation or home detention and community service.
In his 42-page sentencing memorandum to the sentencing judge, Mr. May’s counsel argued that although the jury had spoken on Mr. May’s guilt, the Court should recognize that “Tony” [Mr. May] was not a “usual defendant, nor is his crime a usual tax crime, and he does not deserve a usual, guidelines sentence.” He asked the sentencing judge to sentence Mr. May to probation or home detention with community service.
The memorandum then listed “three compelling rationales for a sentence below the guidelines: A noncustodial sentence.” These rationales were according to the memorandum:
- [Mr. May]’s history: A modest life of good deeds, charity, and family: This is not a man who suddenly “came to good deeds” once he was convicted. With the exception of this criminal conviction, he has led a charitable, altruistic, exemplary life. His long list of activities serving the poor and disabled all the way from the 1970’s and 1980’s to the present is truly striking.
- [Mr. May]’s health is in great jeopardy: There is no “artifice” here: The problems are real and urgent and cannot be accommodated by the prison system.
- Unusual circumstances mitigate the offense: The jury has spoken, and [Mr. May] has been found guilty of false statements in connection with his tax returns of 2008 and 2009. However, the facts of this case are extraordinary for a tax case, in a number of particulars.
- [Mr. May] did nothing to “set the stage” for failing to report income: That is, [Mr. May] did nothing to discourage or frustrate in any way the (required) issuance of 1099s by the insurance companies.
- The trial revealed a remarkable absence of the “red flags” of fraud. The crime was not aggravated by shell companies, bank accounts in other people’s names, cash transactions, or any of the other typical hallmarks of a tax evasion/white-collar crime.
- [Mr. May] took steps to rectify his chaotic recordkeeping, follow up on the missing 1099 issue, and hire an accountant before any notice by the IRS reached him.
- Once the audit began in the summer, 2011, [Mr. May] cooperated fully with it. There was absolutely no attempt at deception. To the contrary, there was complete disclosure and an eagerness to “set things right.”
- Even pretrial, [Mr. May] made substantial efforts to pay his IRS debt.
- [Mr. May] and his wife have lived a modest, middle-class life. By contrast with virtually every other tax case that is prosecuted, they have not led anything remotely akin to a greedy and grasping lifestyle.
In support of the arguments of Mr. May’s counsel, fifty-seven letters to the judge backed up Mr. May’s good works in charitable, social, and church activities over a number of years. The letters came from persons in all walks of life who Mr. May had met in his professional, public service, and personal life.
Judge deviates downward from federal sentencing guidelines based on Mr. May’s medical condition
As impressive as the outpouring of testimonials in support of Mr. May from his friends and associates was, Mr. May’s significant medical issues tipped his prison sentence downward from what the federal sentencing guidelines provided.
The sentencing judge set Mr. May’s crimes constituted a level 16 offense which under the federal sentencing guidelines would have had Mr. May serving between 21 to 27 months in prison. However, the judge deviated downward on the sentence to 8 months incarceration indicating the deviation resulted from Mr. May’s medical condition.
The sentencing memorandum prepared by Mr. May’s counsel detailed Mr. May’s serious and multiple maladies backed by sealed records provided to the Court documenting Mr. May’s physical condition. In fairness to Mr. May and his family, Agency Checklists will not repeat them here but will say based on the descriptions of his physical ailments even a reduced sentence of 8 months in prison will be extremely hard time for Mr. May to serve. In this case, notwithstanding the seriousness of the crime, based on Mr. May’s age, 63, and physical conditions, justice might have been better served under the totality of circumstances by home detention rather than incarceration.
The prosecution team involved in Mr. May’s case
The prosecution team from the Justice Department and the Internal Revenue Service included United States Attorney Andrew E. Lelling; Principal Deputy Assistant Attorney General Richard E. Zuckerman 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.
Assistant U.S. Attorney Victor A. Wild of Lelling’s Economic Crimes Unit and Trial Attorney Eric Powers of the Justice Department’s Tax Division prosecuted the case.
