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Tax Fraud Blotter: For the birds

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Disunion; cell phones; only the lonely; and other highlights of recent tax cases.

Boston: Frank Loconte, of Beverly Farms, Massachusetts, has been sentenced to 20 months in prison and three years of supervised release in connection with underreporting of overtime hours for his union employees and failing to collect and pay payroll taxes.

From 2009 to 2022, Loconte was the president of NER Construction Management Corp., a Wilmington, Massachusetts, construction company that employed union workers. He was also the president of the company’s employment management company, NER Management. Loconte was responsible for collective bargaining with multiple unions and was bound by agreements with the unions that governed the transfer of worker benefit contributions to employee welfare and pension benefit plans, each of which was subject to ERISA provisions.

From around January 2014 and May 2022, Loconte defrauded the union benefit funds and the IRS by paying certain of its union workers for overtime hours without reporting these hours to the union benefit funds and without making payroll tax withholdings and payments. He caused NER to file fraudulent remittance reports with the benefit funds and the unions that underreported the overtime hours worked by these employees, depriving the benefit funds and unions of contributions. He also caused NER to file IRS payroll taxes that underreported the wages paid.

Loconte used NER business accounts to pay for personal expenses, including vehicles, personal property taxes, household improvements and golf memberships, and failed to report these benefits to the IRS.

He defrauded union workers of more than $1 million for overtime work and defrauded the IRS of more than $3 million.

Loconte, who pleaded guilty in September, was also ordered to pay more than $4.5 million in restitution and a $15,000 fine.

Key West, Florida: Petr Sutka, operator of several staffing companies, has been sentenced to four years in prison for tax and immigration crimes.

Between January 2011 and January 2021, he and others helped run companies that facilitated the employment in hotels, bars and restaurants of non-resident aliens who were not authorized to work in the U.S. These companies did not withhold federal income taxes and Social Security and Medicare taxes from these workers’ wages and did not report the wages to the IRS.

Sutka was also ordered to serve three years of supervised release and to pay $3,551,423.84 in restitution to the United States. His co-conspirators, Vasil Khatiashvili and Zdenek Strnad, will be sentenced on April 22.

Kansas City, Missouri: Tax preparer Ebens Louis-Loradin, 44, has pleaded guilty to a wire fraud in which he filed federal income tax returns that contained false information.

He pleaded guilty to one count of wire fraud and 10 counts of aiding in the preparation of false returns.

Louis-Loradin, a tax preparer since 2012, defrauded the IRS by preparing and e-filing federal returns containing false items from March 2013 to April 2019. He claimed undeserved items on his clients’ federal returns, including dependents, inflated income tax withholding amounts, credits for child and dependent care expenses, American Opportunity Credits and Earned Income Tax Credits, itemized deductions and business losses.

He faces up to 20 years in prison for wire fraud and up to three years for each of the 10 counts of aiding in preparing false returns. Sentencing is Aug. 1.

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Fort Myers, Florida: Timothy Meade, who operated a prison phone service under several business names, has been sentenced to 30 months in prison for failing to pay over taxes that he withheld from his employees’ paychecks.

From 2011 through 2021, he withheld taxes from his employees’ paychecks but did not pay over to the IRS the full amount withheld. He also did not pay the business’ portion of his employees’ Social Security and Medicare taxes. The IRS attempted to collect the taxes, but Meade changed the call service’s names and bank accounts to thwart collection.

He caused a federal tax loss of $971,130.

Meade was also ordered to serve three years of supervised release and pay $971,130 in restitution to the United States.

Frankfort, Kentucky: Jeremy Clay Guthrie, 45, of Boaz, Alabama, has been sentenced to 27 months in prison for wire fraud and aiding and assisting in the preparation of false returns.

Guthrie managed a branch of a privately owned aviary supply business until he was fired in September 2017.  During his last two years as a manager, he stole more than $550,000 from his employer and customers by charging customer credit and debit cards for products but diverting payment for those products to his own company. He also altered the pay-to lines on checks from customers and routinely offered customers unauthorized discounts in exchange for cash payments, embezzling much of the cash he received, among other schemes.

He failed to disclose all the income he received from this fraud to his tax preparer or to the IRS for 2016 and 2017. Guthrie underreported his income by $325,543 and admitted that he intentionally concealed a significant portion of his company sales and other stolen money to fund a drug addiction.

Camden, New Jersey: Three persons have pleaded guilty to tax evasion and other charges related to their roles in accepting millions of dollars in a romance fraud.

Martins Friday Inalegwu, formerly of Maple Shade, New Jersey, pleaded guilty to one count of conducting an unlawful money transmitting business and four counts of tax evasion. Inalegwu’s wife Steincy Mathieu, also formerly of Maple Shade, pleaded guilty in November to two counts of tax evasion. Oluwaseyi Fatolu, of Springfield, New Jersey, pleaded guilty in January to a count of operating an unlawful money transmitting business.

From October 2016 to May 2020, Inalegwu, Mathieu and their conspirators, several of whom reside in Nigeria, participated in an online romance scheme, defrauding more than 100 victims nationwide. The conspirators made initial contact with victims through online dating and social media websites, corresponded via email and phone, pretended to strike up a romantic relationship with victims and then requested that victims send money to them or to their associates for fictitious emergency needs.

Victims wired money to bank accounts held by Inalegwu and Mathieu in the U.S. and mailed checks directly to Inalegwu and Mathieu. Some victims transferred money to Inalegwu and Mathieu via money transfer services and others wired money to bank accounts held by conspirators overseas. Federal agents have identified more than 100 victims, who sent more than $4.5 million directly to Inalegwu and Mathieu and several million more to conspirators.

Inalegwu and Mathieu failed to pay taxes on the money from victims.

Each count of tax evasion and each count of conducting an unlawful money transmitting business carries up to five years in prison and a $250,000 fine.

Tampa, Florida: A federal court has permanently enjoined tax preparer Kenia Rodriguez from preparing returns for others and from owning, managing or working at any tax prep business in the future.

The complaint alleged that she, through a fictitious entity called Rodriguez Tax Services, reportedly in Lakeland, Florida, claimed fraudulent deductions and credits on clients’ returns to underreport tax liabilities and claim undeserved refunds. The complaint also alleged that Rodriguez did not identify herself on the returns she prepared.

Rodriguez, who consented to the injunction, must send notices of the injunction to each person for whom she prepared federal tax returns after Jan. 1, 2016, and post copies of the injunctions where she conducts business, including social media and websites. The U.S. may conduct post-judgment discovery to monitor compliance and will continue to pursue its claim for disgorgement.  

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Accounting

BPM to merge in WBM Partners in Canada

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BPM LLP, a Top 50 Firm based in San Francisco, is expanding further in Canada by adding WBM Partners LLP, a firm with offices in the greater Toronto area and Calgary, with the deal expected to be completed by June 1.

WBM provides accounting, auditing, and business advisory services to individuals and organizations across industries such as real estate and land development, hospitality, transportation, and professional services. In addition, WBM’s family office offers a variety of services including tax planning, estate planning, tax services and family governance. 

Financial terms of the deal were not disclosed. BPM (formerly known as Burr Pilger and Mayer) ranked No. 33 on Accounting Today’s 2025 list of the Top 100 Firms, with $260 million in annual revenue, 79 partners and 1,462 employees. BPM will add 37 professionals, bringing the firm’s total Canadian locations to three and total colleagues to 125.

“WBM’s dedication to excellence, integrity, and value-added service aligns perfectly with BPM’s mission and values,” said BPM CEO Jim Wallace in a statement Monday. “We are thrilled to welcome WBM to the BPM community. Together, we’re well-positioned to help clients achieve their goals and bring a full suite of services to the Canadian market.”

The deal comes at a fraught time for U.S.-Canada relations as tariff threats accelerate across both sides of the border. At least in the accounting profession, deals can still be made.

“Joining forces with BPM marks an exciting chapter for our clients, partners, and employees,” said WBM managing partner Al Karim Moloo in a statement. “BPM’s emphasis on professional development and innovation provides unparalleled opportunities for our team and ensures we can deliver even greater value to our clients. We are excited about the possibilities this combination brings.”

Last month, BPM announced it would be creating a global network dubbed BPM Global Ltd., with its first network member firm, Enspira Financial, with offices in Sydney and Melbourne, Australia. In 2023, BPM added two Las Vegas-based firms, Fair, Anderson & Langerman and RiMo Consulting, as well as O&S CPAs and Business Advisors in Long Beach, California. 

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Accounting

AICPA proposes independence rule changes for PE funding

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The American Institute of CPAs has issued a set of recommendations from a special task force on changing some of the independence rules related to alternative practice structures at accounting firms, given the large number of deals involving private equity investments.

The recommendations come from an Alternative Practice Structures Task Force that was set up two years ago by the AICPA’s Professional Ethics Executive Committee. They’re in a discussion memo and the AICPA is asking for comments on the preliminary conclusions and two possible interpretation options. Feedback should be emailed to [email protected] by June 15. The AICPA said last month it planned to revise the rules.

One of the revision options includes a specific private equity-related example, while the other is more general. Under both options, the draft interpretations would provide a three-step process:

  1. Determine which entities associated with the alternative practice structure are network firms (a term which is defined in the ethics code). Network firms are subject to independence requirements for financial statement audit and review clients.
  2. Determine which individuals associated with the alternative practice structure are covered members subject to independence requirements.
  3. Determine which additional relationships and circumstances associated with the alternative practice structure create threats to independence, and then identify relationships and circumstances where independence would be impaired, and apply the “Conceptual Framework for Independence” (ET sec.1.210.010) to any other relationships and circumstances that the member knows or has reason to believe may exist.

When evaluating the first step, the non-attest entity would be considered a network firm of the attest firm. Alternatively, a private equity investor, its funds and other portfolio companies would generally not be considered network firms, so portfolio companies could conceivably provide non-attest services to any attest clients. However, there may be circumstances where a portfolio company could be defined as a network firm for other reasons that will be spelled out in the task force’s discussion memorandum.

After the comment period closes, the committee intends to use the feedback to supplement its research and develop a formal exposure draft.

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Accounting

Financial empathy for CPAs isn’t an oxymoron

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Deep in the heart of busy season, probably the last thing on your mind is feeling empathy for your clients when they’ve been procrastinating and are so disorganized. But in an increasingly competitive business climate, if you’re not able to make a true connection with your clients, they could easily move to a more empathetic firm, even one lacking your experience and technical acumen.

The word “empathy” gets thrown around a lot these days, but quite simply empathy is the ability to see the world through someone else’s eyes, to walk in their shoes and to understand their emotions and connect with them on a deeper level — without judgement. When you do that, clients will feel like they are the most important person in your life. Don’t underestimate the power of empathy.

Taking it a step further, “financial empathy” is about understanding and recognizing the emotional impact that money issues have on someone’s life. It’s about understanding the story beneath the numbers. It’s about acknowledging that money problems can be incredibly stressful and anxiety-provoking for clients, which affects their overall sense of wellbeing. 

While financial empathy isn’t covered in most accounting curricula or CPE courses, high-performing CPAs are increasingly incorporating into their practices. Dr. Michael Thomas, a former auditor with a degree in accounting, now an author, TEDx speaker, and financial planning educator at the University of Georgia, told me on my podcast thatFinancial empathy incorporates the three elements of empathy: 1. Cognitive empathy;2. Affective empathy (i.e., emotional empathy); and,

3. Compassionate empathy. The goal, he said, is to move through understanding and emotional connection to reach a compassionate response.

Real-world example

David, a newly divorced business owner, was filing taxes alone for the first time as a single. His ex-wife had always handled their finances, leaving him overwhelmed by investment losses, business deductions, and estimated tax payments.

David’s conversation with his CPA began with: “I messed up, I should have known.” Using cognitive empathy, his accountant reassured him that many business owners face similar challenges, and he explained David’s tax situation in simple terms. With affective empathy (i.e., feeling the same emotion that another person is feeling), his CPA created a safe space for questions, validating David’s concerns without judgment. Through compassionate empathy, the CPA helped David create a tax plan that he fully understood. It was the first step in a holistic financial plan, giving the client peace of mind and a path toward financial stability.

By replacing shame with understanding, the CPA empowered David to take control of both his personal and business finances.

Benefits of being an empathetic CPA

  • It helps you move clients away from financial shame toward vulnerability and openness.
  • It enables clients to share complete information needed for effective financial planning.
  • It builds lasting trust and long-term relationships.
  • It creates mutual growth for both advisor and client.
  • It allows money to serve as a conduit to a client’s authentic goals and joy.

Implementing financial empathy in your practice

  • Financial empathy involves active listening beyond just hearing words —- understanding the interaction of communication and emotion.
  • Financial empathy requires advisors, including CPAs, to self-regulate their own emotional responses while engaging with clients.
  • Financial empathy slows down the process so you can hear clients’ needs more effectively.

“As advisors, we get so excited when we use our technical skills to solve a client’s problem, but clients don’t always see it that way” if it’s just numbers, formulas and regulations, Dr. Thomas noted. “Financial empathy is going through the process of understanding the emotional experience, so the client feels seen and feels heard,” he added. 

Thomas said that’s when the NURSE algorithm can be very impactful for accountants and other financial advisors: Name the thing. Understand it. Respect the experience. Support the individual. Explore solutions collaboratively with your client.

Let’s look at how the NURSE framework can help a business owner like David whom we met above:

  • Name the thing. Acknowledge his feelings of overwhelm, uncertainty and difficulties of divorce. “David, it sounds like you are feeling overwhelmed and uncertain about your finances.”
  • Understand it. Take the time to listen to your client’s concerns, their fear of making mistakes, confusion over investment losses, and anxiety about taxes, before offering solutions: “David, many people in your position feel the same way. Walk us through the situation and let us know what’s on your mind.”
  • Respect the experience. Rather than focusing solely on technical fixes, recognize the emotional weight David feels about managing finances post-divorce. Often this is where advisors go immediately into problem-solving mode. Instead, take time to acknowledge your client’s feelings, before getting into the facts. “You’ve had a lot on your plate, David. Handling this alone for the first time is a big adjustment.”
  • Support the individual. Create a safe, judgment-free space where your client feels comfortable asking questions, ensuring they fully understand their new tax obligations and how those obligations fit into their business operations: “David, you don’t need to have it all figured out today. That’s what we’re here for. We can break it down one step at a time.”
  • Explore solutions collaboratively. Instead of simply prescribing a planning strategy, work with your client to develop a tax plan collaboratively — a plan they understand and feel confident implementing: “David, we’ve made great progress today, and now you have clear next steps for both your business and personal finances. This should give you a path toward greater peace of mind and financial confidence.”

By integrating financial empathy with structured guidance, David’s CPA helped him replace stress with confidence, ensuring he felt both clarity and control over his personal and business finances.

Still not convinced? Well, according to Dr. Thomas, there are four main risks for accountants and financial advisors who don’t develop their empathy skills and overall soft skills:

  1. “Pseudo-empathetic response.” This is when advisors default to technical expertise when emotionally challenged.
  2. Reverting to sympathy (“feeling bad that you feel bad”) rather than true empathy.
  3. Forgetting that while you may be comfortable with numbers, clients may have an aversion to numbers and advanced math.
  4. Rushing to solutions without understanding emotional context. That’s the evil Advice Monster at work.

As Dr. Thomas explained, all humans understand basic emotions like fear, even if contexts differ. Clients won’t share vulnerability unless they feel seen and heard. The empathy process can change you as much as the client. Technical solutions should not be delivered with emotional awareness.

Financial empathy isn’t about being overly emotional or sacrificing technical expertise; it’s about creating a framework for more effective client relationships. That’s why I originated the Advis-ROR methodology (Return on Relationships).  After all, isn’t that why you are your clients’ most trusted advisor?

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