Restitution offer backfires on man convicted in tax fraud

Convicted tax schemer Gaetano Fiore is having second thoughts about trying to persuade a federal judge to give him a lighter prison sentence.

On June 20, Fiore's lawyer Michael Gowdey told Senior U. S. District Judge Philip Pro that, on behalf of his remorseful client, he was prepared to hand over a $99,316 restitution check in court to the Internal Revenue Service if the judge showed leniency.

Gowdey asked Pro to sentence Fiore, a 52-year-old Canadian citizen who prosecutors allege has ties to an anti-tax group, to the 15 months he spent behind bars after his arrest in an $850,000 fraudulent tax scheme.

Pro declined the offer and instead handed out a 30-month prison term with the order for $99,316 in restitution sought by the government.

Fiore appeared to faint in court after it became clear that Pro was not going to be lenient with him, and Gowdey did not turn over the restitution check to the IRS.

But two weeks later, the IRS filed notice it intended to seize the $99,316 from Gowdey's client trust account.

That prompted Gowdey to file a motion asking Pro to allow him to return the money to its "rightful owner," Fiore's 87-year-old father, who had mortgaged his longtime Montreal home to come up with the cash.

Gowdey argued that the elder Fiore had agreed to lend the money only if his son got credit for time served and paid it back within 60 days.

Because Fiore will have to remain behind bars, he has no chance of paying back his father, who now is unable to make the $800 monthly mortgage on the $1,400 government pension he and his 84-year-old wife receive, Gowdey wrote.

The couple risk losing the home they have lived in for more than 40 years, Gowdey added.

"The court might recall that when defendant's request for time served was denied, defendant passed out in court," Gowdey said. "That was the result of a panic attack defendant had because he felt he may have just cost his parents their home."

Gowdey argued that the IRS has no legal claim to the $99,316 because the money was never officially "tendered" to the agency.

"The funds are not the property of defendant," he wrote. "The funds were never placed into the possession of defendant, as they have been held in defense counsel's attorney-client trust account with strict instructions that the restitution be paid only if defendant were to receive benefit."

In court papers last week, Assistant U.S. Attorney Gregory Damm was not impressed with Gowdey's arguments.

"Defendant Fiore did not make his conditional offer to pay restitution clear to the court at the time of sentencing," Damm wrote.

"Defendant Fiore's position now concerning restitution seems more akin to extortion than a good faith effort to make the government whole."

Damm argued that Fiore has submitted no evidence showing that his parents mortgaged their home to pay the restitution.

"He provides no documents whatsoever establishing the claim that the home was recently encumbered," the prosecutor said.

Pro also lacks jurisdiction to intervene in the IRS effort to seize the $99,316 because it is a civil matter and not part of the now-closed criminal case, Damm argued. Gowdey has been instructed to hold the funds for 45 days to give Fiore a chance to appeal the "notice of levy" with the IRS, Damm said.

At his sentencing, Fiore apologized to Pro, saying he used "extremely bad judgment" in pulling off the tax scam and was ready to accept responsibility for his actions.

Paramedics treated him in court after his apparent fainting spell but determined that he didn't need any medical attention.

Fiore pleaded guilty in January to two counts of receipt of stolen public money.

He admitted in his plea agreement that he helped two people with Canadian addresses fraudulently obtain tax refund checks totaling more than $850,000. He also admitted filing a fraudulent 2006 tax return seeking a $99,316 refund.

Damm argued in court that Fiore had ties to the anti-government "sovereign citizens" movement. The group's members have declared themselves above the government's jurisdiction and not obligated to pay taxes.