Thomas R. Jennings and David J. Feuerborn each convicted of conspiracy and tax fraud offenses

Source- http://www.justice.gov/usao/cac/pressroom/pr2011/027.html

LOS ANGELES – Two men who owned companies they claimed had technology to remove oil waste from contaminated soils were found guilty this morning of federal tax fraud charges for diverting company funds to themselves and concealing the income from the Internal Revenue Service.

Thomas R. Jennings, 54, of Anaheim Hills, and David J. Feuerborn, 50, of Camarillo, were each convicted of conspiracy and tax fraud offenses.

Jennings and Feuerborn were the owners of companies called ESS Environmental, Inc., of Placentia, and Environmental Soil Sciences, Inc., of Camarillo. The evidence presented during a two-week trial in United States District Court showed that Jennings and Feuerborn used a bank account under a name very similar to an ESS vendor to funnel to themselves several million dollars that they used for their own personal benefit, including the purchase of numerous cars, motorcycles, and recreational vehicles, as well as interior design work at their residences and condominiums in Palm Desert.

To execute the scheme, Jennings and Feuerborn wrote checks made out to the vendor, purportedly for engineering equipment and services. But instead of giving the checks to the real vendor, Jennings and Feuerborn deposited the checks into a bank account they held also in the name of the vendor and then spent the money on themselves by withdrawing cash, buying cashier’s checks, transferring money to their personal bank accounts and writing checks drawn on the account.

In addition to funneling money to themselves through this bogus account, Jennings and Feuerborn also paid themselves large “management fees” – typically $15,000 each per month – for running ESS. Jennings and Feuerborn instructed ESS’s accountant to falsely characterize these payments as “loans,” a designation that was designed to make the payments appear to be non-taxable.

Jennings and Feuerborn received substantial income that they failed to report to the IRS. Jennings received at least $1 million, and Feuerborn received at least $2 million, none of which was reported to the IRS.

The federal jury convicted Jennings and Feuerborn of conspiracy to defraud the United States. Jennings was found guilty of four counts of subscribing to false tax returns, and Feuerborn was found guilty of four counts of tax evasion. The jury acquitted each man of one count.

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