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unspecified amount was embezzled by a former employee, but the
only support they cite is the assertion of counsel during trial
that the employee was indicted. There is neither testimony nor
documentary evidence to substantiate the claim, and indictment
alone would not establish anything. (Counsel was warned several
times during trial that such assertions would be given no
weight.) They argue that they are handicapped by the
Government’s seizure of records, but the Court found that the
records were returned to them. They imply that certain witnesses
have grudges and are biased, but they have failed to discredit
the testimony given by those witnesses. They assert that they
did not take additional steps that would have indicated fraud,
such as asking that their mortgages be repaid in cash; these
arguments are unavailing. Presumably the borrowers wanted
evidence of interest payments for their own purposes. In any
event, it is not a defense that petitioners did not do more to
further their fraud.
Petitioners contend that they relied on their accountants to
prepare accurate returns, and reasonable reliance on a competent
agent may be a sufficient defense to fraud. However, such
reliance indicates an absence of fraudulent intent only when the
agent has been provided with complete information from which an
accurate return could have been prepared and there is no other
evidence indicating fraudulent intent. Merritt v. Commissioner,
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