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 behaviors 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.
Former collections manager guilty in embezzlement scheme
On February 26, a former collections manager pleaded no contest to embezzling more than $323,000 from his former employer.
Patrick J. Roche, 33, was found guilty of felony counts of grand theft, with a special enhancement for a loss involving more than $150,000. He was also found guilty of two state income tax charges: tax evasion for failing to file his 2004 tax return, and tax fraud for filing a fraudulent 2006 income tax return. According to court documents, Roche created a fictitious company, Cal Computer Consulting Group, to embezzle from his former employer, a Santa Barbara-based temporary employment agency, from 2001 – 2007.
Roche issued fraudulent invoices from his company, then authorized payment as collections manager. He cashed the checks and used the money at restaurants, bars, adult entertainment, a kickboxing gym, online gaming, and stock purchases. In addition, Roche failed to report the $314,000 in illegal income on his state income tax returns. All income is taxable including income from illegal sources. The embezzlement was discovered during an audit of the company's books.
Roche was ordered to pay restitution of $323,962 to his former employer, and $59,577 to FTB representing the unpaid tax, penalties, interest, and the cost of the investigation.
Roche faces up to four years in state prison.
Emergency room physician arrested on state income tax evasion charges
FTB special agents arrested a Big Bear City physician on numerous felony charges of state income tax evasion, on February 29.
Norman E. Johnson, 60, a.k.a Eric N. Johnson and N. Eric Johnson, is employed as an emergency room physician by a Victorville hospital. Secretary of State records show Johnson is also listed as the corporate executive officer of N. Eric Johnson, M.D., M.P.H., A Professional Corporation. This corporation is currently suspended for failing to file its state income tax returns.
According to FTB special investigators, Johnson allegedly failed to file his 2001 – 2005 state income tax returns on the more than $1.8 million income he earned. In addition, Johnson allegedly failed to file his 2001 – 2005 corporate income tax returns reporting the more than $1 million in income his corporation earned. Johnson owes the state more than $157,000 in personal income tax and $16,000 in corporate tax. Penalties, interest, and the cost of the investigation will be added to these figures. Each count of failure to file carries a maximum sentence of three years in state prison.