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September 30, 2004
SAN MARTIN COUPLE CHARGED WITH TAX EVASION
USING OFFSHORE CORPORATIONS TO CONCEAL INCOME
United States Attorney Kevin V. Ryan and IRS Criminal Investigation Acting Special Agent in Charge Cleve Daniels announced that Michael Watts, 57, and Jan Watts, 52, were indicted yesterday by a grand jury in San Jose for income tax evasion. The Watts are residents of San Martin, California.
The indictment alleges that the couple understated their taxable income for 1997 by approximately $2,000,054.85 and that their tax due and owing for that year was understated by approximately $782,624.00. The Watts established offshore corporations for the purpose of concealing income derived from the sale of stock options and transferred the stock options offshore for the same purpose. Income derived from the sale of the stock options was concealed in offshore bank accounts in the Island of Nevis.
The indictment further alleges that as part of their tax evasion scheme, the defendants hired a third party to falsely pose as president of Fundamental Technology, a separate company they controlled, in order to claim a purported debt owed to that company.
The maximum statutory penalty for the count in violation of 26 U.S.C. § 7201 is five years and a fine of $250,000. However, any sentence following conviction would be dictated by the Federal Sentencing Guidelines, which take into account a number of factors, and will be imposed in the discretion of the Court. An indictment simply contains allegations against an individual and, as with all defendants, Mr. Watts and Mrs. Watts must be presumed innocent unless and until convicted.
This investigation began as a result of an IRS audit where indications arose that the Watts had under-reported their income. The prosecution is the result of a multi-year investigation by agents of the Internal Revenue Service - Criminal Investigation. Jeff Nedrow is the Assistant U.S. Attorney who is prosecuting the case.
A copy of this press release may be found on the U.S. Attorney's Office's website at www.usdoj.gov/usao/can. Related court documents and information may be found on the District Court website at www.cand.uscourts.gov or on http://pacer.cand.uscourts/gov.
All press inquiries to the U.S. Attorney's Office should be directed to Luke Macaulay at (415) 436-6757.
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