Two Brothers from Boca Raton, FL Sentenced for Tax Evasion Related to Stock Sales

By | February 8, 2013

(Source: Department of Justice) – Michael Farnell and James Farnell, residents of Boca Raton, Fla., were sentenced to prison terms today for income tax evasion, the Justice Department and Internal Revenue Service (IRS) announced today. Michael Farnell and James Farnell were previously indicted on April 19, 2012.  Judge William P. Dimitrouleas sentenced Michael Farnell to a term of 18 months in prison and his brother James, Farnell, was sentenced to a term of 42 months. Michael Farnell was remanded into custody.  James Farnell was already in custody.

According to statements made in court and publicly filed documents, Michael Farnell and James Farnell sold stock in a privately held Florida-based technology company between 2004 and 2006 and failed to report the capital gains or pay taxes on the capital gains from those stock sales. In 2004, the U.S. Securities and Exchange Commission (SEC) filed suit against the Farnell brothers for securities violations at another company that they operated the year 2000. A majority of the stock sales at issue in this case violated the injunction from the SEC’s lawsuit.

According to public documents and statements made in court, the Farnell brothers held their stock in this Florida-based technology company in the name of nominee trusts. The proceeds of the stock sales were deposited into bank accounts titled in the name of these nominee trusts. Neither brother filed tax returns in 2004 and 2005. James Farnell also failed to file a 2006 tax return. As part of the sentencing, Michael Farnell and James Farnell both agreed that they failed to report additional income paid to them by this Florida-based technology in 2001 through 2003.

Michael Farnell was ordered to pay restitution of $448,128 and James Farnell was ordered to pay restitution of $434,115, both to the IRS.

Kathryn Keneally, Assistant Attorney General for the Justice Department’s Tax Division, and Wifredo A. Ferrer, U.S. Attorney for the Southern District of Florida, thanked IRS – Criminal Investigation for investigating the case, and also thanked the U.S. Securities and Exchange Commission and the U.S. Attorney’s Office for their assistance with the investigation. The case is being prosecuted by Tax Division Trial Attorney Jed Silversmith and Assistant U.S. Attorney Bertha Mitrani.

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