Former CEO, Two Associates Sentenced for Tax Fraud
Shelly S. Singhal, Dennis L. Pelino, and Loretta Fredy Bush, formerly of Xinhua Finance Limited (Xinhua Finance), a Chinese company trading publicly in Japan, have been sentenced to prison terms after pleading guilty to a charge of conspiracy to impede the lawful functions of the Internal Revenue Service.
All three defendants pleaded guilty in February 2013 in the U.S. District Court for the District of Columbia. They were sentenced by the Honorable Chief Judge Royce C. Lamberth.
Basically, these three defendants admitted they ran a scheme in which Singhal set up a company and generated paperwork that this company loaned Pelino and Bush approximately $2,153,663 and $1,380,633, respectively. Singhal then - with the knowledge and participation of the other two defendants - made it appear as if company ownership had been transferred to a foreign national residing outside the U.S.
The defendants acknowledged they did not notify and otherwise acted to conceal from the Internal Revenue Service that the nominal owner of Entrée Capital had effectively abandoned its assets, including the principal balances payable to Entrée Capital by Bush and Pelino. Further, they admitted that they did this to delay the payment of any income tax due and owing on those unpaid amounts as forgiven debt.
They also acknowledged discussing among themselves and with others the fact that since the new owner of Entrée Capital was a foreign national, any information in the foreign national’s possession was possibly beyond the authority of the Internal Revenue Service to obtain.
Singhal did not direct his employees to issue Forms 1099-C (Cancellation of Debt) to Bush and Pelino, which would have notified the Internal Revenue Service that Entrée Capital was treating the principal balances payable to Entrée Capital by Bush and Pelino as forgiven debt.
Bush and Pelino acknowledged filing Forms 1040 (U.S. Individual Tax Return) for the tax year 2009, which returns failed to declare any portion of the $2,153,663 and $1,380,633 owed to Entrée Capital as income to Bush and Pelino, respectively.
Singhal, 45, of Newport Beach, California, and Pelino, 65, of Miami Beach, Florida, were each sentenced to nine months of incarceration. Bush, 54, of San Francisco, was sentenced to one month of incarceration. Following their terms, each defendant will be placed on three years of supervised release. Bush will be required to serve the first 150 days of her release period in home confinement. Chief Judge Lamberth also ordered each defendant to pay $20,000 fines.