Owners of Fake Environmental Companies Imprisoned for Tax Fraud
LOS ANGELES, California, August 5, 2011 (ENS) – Two men who owned companies they falsely claimed had technology to remove oil waste from contaminated soils will each serve four-year prison terms for diverting millions of dollars in company funds to themselves and concealing the income from the Internal Revenue Service.
David Feuerborn, 51, of Camarillo, California was sentenced this morning to 48 months in federal prison.
Thomas Jennings, 55, of Anaheim Hills, California was sentenced Monday to 48 months in federal prison.
Judge S. James Otero (Photo courtesy U.S. District Court Central District California)
Both men were sentenced by U.S. District Judge S. James Otero after they were convicted earlier this year by a federal jury on conspiracy and tax fraud charges.
In addition to the prison terms, Judge Otero ordered the men to pay $1,074,248 in restitution $842,965 to be paid to the IRS, and $231,283 to be paid to the California Franchise Tax Board.
For the past decade, Jennings and Feuerborn owned and operated a series of companies they claimed had developed technology that could separate oil from dirt and other materials without producing any hazardous waste.
They claimed they were in the process of patenting a revolutionary chemical solution that, when used in conjunction with specialized machinery, could quickly and efficiently remove oil from huge volumes of contaminated soil.
All of the companies had names that were variants of ESS, such as Environmental Soil Sciences in Camarillo, ESS Environmental in Placentia, and Environmental Services and Support in Anaheim.
Evidence presented during a two-week trial in U.S. District Court showed that Jennings and Feuerborn used a bank account under a name similar to an ESS vendor to funnel to themselves several million dollars that they used for their own personal benefit, including the purchase of numerous cars, motorcycles, and recreational vehicles, as well as country club payments and interior design work at their residences.
Jennings and Feuerborn also paid themselves large management fees, typically $15,000 each per month, for running ESS.
The defendents instructed ESS’s accountant to falsely characterize these payments as “loans,” to make the payments appear to be non-taxable.
Jennings received at least $1 million, and Feuerborn received at least $2 million, none of which was reported to the IRS.
“In short, defendants concealed millions of dollars of personal income from the IRS by fraudulently disguising such income as the business expenses of defendants’ company, ESS, and by falsely characterizing their salaries as ‘shareholder loans,'” prosecutors wrote in sentencing papers filed with the court.
“In doing so, defendants also defrauded investors by claiming that ESS was spending millions more dollars on the development of its purported oil-separation technology than it actually was; in fact, defendants spent these unreported millions on themselves and their families.”
ESS never generated any significant revenue or profits, and investors lost everything they put into the company, prosecutors said in court documents.