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CSX Corp. received a subpoena from the U.S. Securities and Exchange Commission focused on previously disclosed accounting errors and certain non-financial performance metrics. 

The subpoena asked the railroad company to produce documents about accounting mistakes CSX disclosed in its previous quarterly report, according to a regulatory filing on Thursday. The company received the subpoena this month and is cooperating with the probe, CSX said in the filing.

“While the company believes its reporting complied with applicable requirements in all material respects, the company cannot anticipate the timing, scope, outcome or possible impact of the investigation, financial or otherwise,” CSX said. 

The filing didn’t include details about the non-financial performance metrics the SEC was scrutinizing. The Jacksonville, Florida-based company didn’t immediately respond to requests for comment. 

CSX in August disclosed that it had to correct accounting errors for several prior periods tied to engineering scrap and engineering support labor. Miscoding of engineering materials and labor resulted in the company understating purchased services and labor and overstating properties, the company said at the time.

The mistakes weren’t deemed material enough by CSX to trigger a formal restatement of previously published financial statements. It fixed the errors via revision, a correction that companies quietly tuck into their regulatory filings without the fanfare of a special SEC filing.

The concern extended as far back as 2021, and the revisions spilled over into how CSX made pension-related adjustments to other comprehensive income. They also required the company to reclassify certain balance sheet items, according to the August filing.

While the mistakes weren’t material to prior periods, CSX said they would have been significant to 2024’s full-year results if they were repeated in this year’s second quarter.

Unaltered behavior; playing chicken; out on a rail; and other highlights of recent tax cases.

West Palm Beach, Florida: A federal district court has issued a permanent injunction against tax preparer Gregory Salgado, both individually and d.b.a. GMJ Real Investments Inc. and Cuba Salgado Tax & Real Estate.

Salgado is barred from preparing returns, working for or having any ownership stake in a tax prep business, assisting others to prepare returns or set up business as a preparer, and transferring or assigning customer lists to any other person or entity. The court also ordered him to pay $85,000 in gains from his tax prep business. Salgado agreed to both the injunction and the order to pay.

The complaint alleged that Salgado pleaded guilty in 2012 to filing a false personal return and filing a false return for another taxpayer and that the IRS assessed more than $500,000 in civil penalties against him for willfully underreporting tax on returns he prepared for clients.

According to the complaint, neither Salgado’s conviction, 33-month incarceration nor civil penalties altered his behavior. After his release from prison in 2015, Salgado continued to prepare thousands of returns for clients that either reduced their tax liability or inflated their refund claims. He did this largely by falsifying or overstating itemized deductions, fabricating or overstating business income and expenses and falsifying filing statuses and dependents.

Salgado must send notice of the recent injunction to each person for whom he or his business prepared federal returns, amended returns or claims for refund between Jan. 1, 2019, to the present. The court also ordered him to post a copy of the injunction at all locations where he conducts business and on his business’s website.

Cincinnati: Restaurateur Richard Bhoolai, 65, has been convicted of failing to pay taxes he withheld from employees’ wages.

He owned and operated Richie’s Fast Food Restaurants Inc., an S corp used to operate three area fried chicken restaurants since 1991. Bhoolai employed 22 to 34 employees between at least 2017 and 2018 and during that time withheld taxes from employees’ wages but did not pay them over to the IRS. Prior to that period, Bhoolai had not paid over such taxes from earlier years and the IRS had assessed a penalty against him.

Bhoolai instead used money from the businesses for his personal benefit, including gambling.

He faces up to five years in prison for each count of failure to pay taxes.

Bakersfield, California: Miguel Martinez, a Mexican national, has been sentenced to six years in prison for leading a $25 million fraud against the IRS.

From November 2019 through June 2023, Martinez, who previously pleaded guilty, led a scheme to file hundreds of fraudulent returns that claimed millions of dollars in refunds. He used stolen IDs to create fake businesses and report phony wage and withholding information for the businesses to the IRS. He then submitted hundreds of individual federal income tax returns in the names of still other individuals whose identities he had also stolen, claiming that those individuals worked for the fake businesses and were owed refunds based on the phony wage and withholding information.

Martinez used several people to allegedly help carry out the scheme, including a local tax preparer and a former IRS tax examiner who advised Martinez. In exchange, Martinez paid them thousands of dollars and took them out to lavish dinners.

The IRS paid out $2.3 million in refunds. When federal agents arrested Martinez and searched his three homes, he was found with $750,000 in fraudulent refund checks, ID cards for more than 200 individuals and multiple firearms that he could not lawfully possess due to his illegal status in the United States.

He also lied to government agents in the beginning of the investigation, initially saying that he had no knowledge of or involvement in tax prep for others and that he just sold gold and ran a party rental business. He also said that he did not know others who were involved in the scheme and had no relevant evidence.

Kansas City, Missouri: Tax preparer Ebens Louis-Loradin has been sentenced to 20 months in prison and ordered to pay $722,121 in restitution for a fraud in which he filed clients’ federal income tax returns that contained false information.

Louis-Loradin, a tax preparer since 2012 and who pleaded guilty earlier this year, prepared and filed 154 fraudulent returns that inflated his clients’ refunds by a total of nearly $1 million and boosted the fees he charged them.

He admitted that he engaged in the scheme from 2013 to 2020. Phony claims on the returns included dependents, inflated withholding amounts, credits for child and dependent care expenses, American Opportunity Credits and the Earned Income Tax Credit, itemized deductions and business losses.

The fraud caused a total federal tax loss of $953,873. Many of his clients, who told investigators they weren’t aware of the false items he placed on their tax returns, have been paying back the IRS for the refund overpayments.

Louis-Loradin also failed to file personal federal income tax returns for 2016 to 2018 and fraudulently used multiple IDs, including those of children, in his scheme.

Springbrook, Wisconsin: Gregory Vreeland, who owns and operates Wisconsin Great Northern Railroad of Spooner, Wisconsin, which provides recreational train rides and rail car storage and rail switching services, has been sentenced to a year and a day in prison for failure to pay employment taxes.

Vreeland, who previously pleaded guilty and who also co-owned and operated the Country House Motel and RV Park, was Great Northern’s president and the motel’s managing partner and was responsible for the companies’ financial matters, including the filing of employment returns. He failed to file employment tax forms for Great Northern from the end of 2017 through all of 2021 and failed to pay over the associated employee withholdings for that same period. Vreeland also failed to file employment tax forms for the motel from the third quarter of 2015 through the third quarter of 2020 and failed to pay over the associated employee withholdings for that same time. He used the withholdings to instead expand Great Northern’s operations and to buy a personal residence.

Vreeland received civil notices from the IRS for non-payment, which he initially ignored and made no attempt to cooperate with the service until it began levying his bank accounts.

Raleigh, North Carolina: Tax preparer Fwala Serge Muyamuna, 55, of Wake Forest, North Carolina, has pleaded guilty to 24 counts of aiding or assisting in the preparation of fraudulent returns and one felony count of obstructing justice.

Muyamuna was sentenced to 16 to 29 months in prison; the sentence was suspended and Muyamuna was placed on supervised probation for two years. Muyamuna was also ordered to serve four days in custody, pay $34,257.10 in restitution, perform 150 hours of community service and no longer prepare North Carolina tax returns.

Muyamuna, the manager, operator and tax preparer of Tax Experts/D & V Taxes and Accounting/DV Taxes, aided or assisted in the preparation of 24 false North Carolina individual income tax returns for clients for 2018 to 2021. Muyamuna also told a client to not cooperate with the investigation or speak with IRS agents.

Hanson, Massachusetts: Business owner Kenneth Marston has pleaded guilty to failing to pay employment taxes.

From 2015 through 2018, Marston owned and operated Bowmar Steel Industries, which engaged in steel fabrication, and Teleconstructors Inc., which provided installation services on cellular phone towers. During that time, Marston falsely treated his employees as independent contractors and failed to withhold employment taxes on more than $3.8 million in combined wages. Marston avoided reporting and paying $1 million in employment taxes owed to the IRS.

Failure to pay over taxes provides for up to five years in prison, three years of supervised release and a fine of $250,000 or twice the gross gain or loss, whichever is greater. Sentencing is Jan. 3.