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Criminal Corner

We are committed to closing California’s $6.5 billion tax gap, defined as the difference between tax that is owed and tax that is paid. Our special agents work cooperatively with law enforcement agencies throughout California to uncover illegal behaviors that contribute to the tax gap. These include underreporting income, overstating deductions, failing to file returns, failing to pay taxes due, and making illegal cash payments to employees.

Tax fraud is not a victimless crime. You can report suspected tax fraud by calling FTB at (800) 540-3453.

Orthopedic surgeon arrested on tax evasion charges

A Modesto doctor was arrested on January 9, 2007, by FTB special agents on felony charges of tax evasion for failure to file state income tax returns.

Thomas Kaschak, 48, a self-employed orthopedic surgeon, also writes medical software under Consolidated Practice Management, Inc. Kaschak was arrested without incident at his Modesto home. According to FTB special agents, Kaschak allegedly failed to file his 2000-2004 state income tax returns. He earned more than $1.6 million during these years and owes nearly $138,000 in unpaid tax.

Each felony tax count carries a maximum term of three years in state prison.

FTB agents seized financial documents related to the business operations, which will point to underreported income. Kaschak claims to be a non-resident of California, with a residence in Reno, Nevada. Investigators allege that he has performed more than 1,100 procedures at Memorial Hospital in Modesto since 1996, and has been issued Form 1099s reporting the income.

Kaschak was booked into the men’s jail in Modesto, with bail set at $250,000.

Alleged con artist couple faces 14 felony charges

Reprinted by special permission from the Contractors State License Board

A Danville couple face more than one dozen felony charges after an investigation led by the Contractors State License Board (CSLB), in cooperation with the FTB, and Contra Costa County District Attorney's Office.

Rick Alvin Powers and Cathy Powers are accused of bilking ten consumers out of more than $100,000. The two were arrested January 12, 2007, when they arrived at their office in Danville. They now face grand theft, elder financial abuse, and charges of failing to file income tax returns. Both are being held in the Contra Costa County Jail. Rick Powers is being held on $500,000 bail.

The charges stem from eight formal consumer complaints to the CSLB that the couple would take huge down payments (as much as 62 percent) for high-end cabinets, then do little or no work at all. They would then con the consumers into believing the cabinets were about to be finished, but additional money would be needed. It's alleged that they also failed to pay suppliers, other vendors, employees, and taxes. Both Rick and Cathy Powers have had a long complaint history with the CSLB, and with the California legal system for violations of contractor's license law, including receiving excessive down payments. Rick Powers has had two contractor licenses (#602480 & #309421) revoked. Cathy Powers has had one contractor license (#723398) revoked. Their criminal convictions include diversion of funds, burglary and insurance fraud.

Due to the license revocations and convictions, the couple is prohibited from having a contractor's license or acting as an officer, director, associate, partner, or qualifying individual of a licensed contractor.

Before hiring any contractor, homeowners should go online at www.cslb.ca.gov or call CSLB's automated phone system 1-800-321-CSLB (2752) to verify that the contractor holds a valid license, has workers’ compensation and liability insurance, and to check out their complaint history.

The FTB played a critical role in the investigation. Their work led to three of the felony charges, for allegedly failing to file their personal state income tax returns in 2001, 2002, and 2003. They earned more than $580,000 in taxable income during this period.

The CSLB's investigation into this case continues. Philip Leech, the licensed contractor who associated with the Powers may face charges. There may also be additional victims who are encouraged to contract CSLB to file complaints.

The Contractors State License Board operates under the umbrella of the California Department of Consumer Affairs. The CSLB licenses and regulates California's 305,000 contractors, and investigates more than 20,000 complaints against contractors annually. In fiscal year 2004-05, the CSLB helped consumers get more than $36 million in restitution.