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income tax returns. Petitioner and Ms. McNamara deducted the
Clairol payments on their Federal income tax returns.
To facilitate his various schemes, petitioner cashed checks
at several locations. Maximilian Segich, a friend of
petitioner’s during the years in issue, operated a bar and
restaurant that generated a substantial amount of cashflow.
During 1988 through 1990, Mr. Segich often cashed the fictitious
expense checks for petitioner. Some of the checks that Mr.
Segich cashed were payable to Ronald Hudecheck, Guy Long, and
Sebastiani Sprinkler Design, Inc., among others; however, none of
the checks were made payable to either petitioner or Ms.
McNamara. Petitioner also cashed diverted corporate checks
through his bookie, James Pirollo, and his friend, John DeLio,
who managed a business known as Jetro Cash & Carry.
During the years in issue, petitioner and Ms. McNamara
engaged in a horse racing business as proprietors. From 1988
until sometime in 1989, petitioner and Ms. McNamara retained
Hunter L. King to train their horses. Petitioner and Ms.
McNamara issued checks payable to Mr. King totaling $63,075.55.
After terminating Mr. King in 1989, petitioner and Ms. McNamara
retained Pam Shavelson to train their horses. Petitioner and Ms.
McNamara issued checks payable to Ms. Shavelson totaling $86,178.
During the years in issue, petitioner gambled regularly. He
played cards with a group of friends weekly. On average, a
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