"Nicrosi's own investigation confirmed the IRS reports, revealing a significant understatement in her client's returns and some questionable expenditures from the business account. All signs pointed to indictment."

Jones Walker attorney Michel Nicrosi went into high gear when she was informed that her client, a businessman who owns a telemarketing business, was under criminal investigation by the Internal Revenue Service ("IRS") for tax evasion regarding his personal and corporate federal returns over a three-year period. Nicrosi's own investigation confirmed the IRS reports, revealing a significant understatement in her client's returns and some questionable expenditures from the business account. All signs pointed to indictment.

Nicrosi, however, still saw a solution. Before the IRS had reached out to the two persons responsible for preparing the tax returns, she was able to interview them. Both preparers' statements corroborated, confirming the client’s lack of criminal intent and lack of knowledge of tax matters. In addition, Nicrosi uncovered a civil lawsuit between the same two tax return preparers, and was able to obtain a copy of the deposition testimony of one of the tax return preparers. In that testimony, one preparer admitted to converting business funds to personal use and other malfeasance. Because the tax returns at issue were electronically filed by the two preparers and not by the client taxpayer, the IRS needed to use both return preparers as witnesses but was faced with significant credibility problems and lack of evidence on the client.

Only seven months later, the IRS notified the client that the criminal investigation had been closed and the matter was being referred to civil examination. Bottom line: the client may have to pay a tax bill but will avoid being indicted.