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companies and third-party payers; and violating sections 7201
(income tax evasion) and 7206(1) (filing false tax returns).
Petitioner and Dr. Cole were indicted under section 7201 for
attempting to evade and defeat income tax due and owing by the
corporation for fiscal years 1987 and 1988 by signing and filing
false U.S. corporate income tax returns for fiscal years 1987 and
1988, and under section 7206(1) for filing false U.S. corporate
income tax returns for fiscal years 1987 and 1988. The
indictment alleged that petitioner knowingly failed to report
gross receipts from its medical practice.
Dr. Cole was represented by Attorney F. Lee Bailey (Mr.
Bailey). On November 9, 1992, Dr. Cole signed a plea agreement
in which he and petitioner pled guilty to 11 counts in the
indictment, including distributing a controlled substance, mail
fraud, and willfully attempting to evade and defeat the income
tax due and owing by petitioner for fiscal year 1987 under
section 7201. Bailey also signed the plea agreement. The plea
agreement stated that the Criminal Investigation Division (CID)
could release to the IRS Examination Division the special agent's
report and accompanying exhibits, including petitioner's bank
records and day sheets. By signing the plea agreement, Dr. Cole
agreed that the IRS Examination Division could use the
information contained in the special agent's report and
accompanying exhibits to determine any civil tax deficiencies.
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