State Crime Reports

Tri State Metal Company, Inc. Charged With Federal Tax And Currency Crimes Involving Millions Of Dollars In Cash Deals

CHICAGO —(ENEWSPF)–December 9, 2014.  A Chicago company dealing in scrap metal has agreed to plead guilty to federal tax and currency transaction charges alleging that it engaged in cash transactions that resulted in underreporting its corporate income and underpaying its payroll taxes.  The defendant, TRI STATE METAL COMPANY, INC., was charged in a criminal information filed today in U.S. District Court in Chicago.  The case is the first prosecution resulting from an ongoing investigation of cash transactions in the local scrap metal industry being conducted by the Internal Revenue Service Criminal Investigation Division.

Tri State Metal, located at 1745 West Fulton St., in Chicago, was charged with one count of corruptly obstructing and endeavoring to obstruct and impede the IRS, and one count of structuring cash transactions in amounts less than $10,000.  Through its attorneys, Tri State authorized the government to disclose that it will plead guilty to the charges.  The company will be arraigned on a date to be determined in Federal Court.

The charges also include a forfeiture allegation claiming that $1.85 million in cash that was seized from a bank account and $118,420 in cash that was seized from Tri State’s offices, both in October 2012, are subject to criminal forfeiture.

According to the charges, between September 2008 and September 2012, Tri State obtained cash by negotiating checks made payable to fictitious individuals and used that cash to pay vendors and cash wages to employees, as well as to provide cash for the personal benefit of the deceased owner and president of Tri State, who was not named and was identified in the charges as Individual A.  The cash transactions were designed to assist the vendors, employees and Individual A in understating their income on federal tax returns, the charges allege.

As part of the corrupt endeavor, Tri State sold scrap to another scrap metal dealer, identified as Business A and, in return, allegedly received approximately 769 checks from Business A, all made payable to fictitious individuals in amounts less than $10,000.  Tri State allegedly failed to record these sales or the receipt of funds from Business A and failed to report the income on its corporate tax returns.

Individual A allegedly directed Tri State employees to issue checks payable to fictitious persons to obtain cash to pay vendors and employee wages.  Tri State paid certain vendors with both cash and checks, with vendors indicating how much they wanted to be paid in cash, and Tri State employees allegedly manipulated documents to conceal the cash payments.  During the four-year period, Tri State paid approximately 15 scrap metal vendors more than $6.17 million in cash, the charges allege.

The company also paid employees a portion of their wages with both cash and checks.  Tri State issued tax forms to its employees and filed quarterly returns with the IRS that allegedly falsely underreported the amount of wages paid by failing to include the amount of cash.  In total, Tri State allegedly paid its employees cash wages totaling more than $1.47 million and failed to collect and pay the IRS federal income tax withholdings, FICA taxes, and Medicare withholdings on the cash wages.

The charges further allege that Tri State cashed more than $6.41 million in checks drawn on its bank account and payable to fictitious payees at an unnamed currency exchange in Chicago.  Tri State also allegedly cashed at the currency exchange more than $2.92 million in checks issued by Business A to Tri State in the name of fictitious payees.

Tri State allegedly filed false federal corporate income tax returns for 2009, 2010, and 2011, that understated its gross receipts or sales by more than $2.92 million.  In addition, Tri State failed to report or otherwise account for approximately $840,720 in cash expenditures for the benefit of deceased Individual A, the charges allege. 

The tax offense carries a maximum penalty of five years’ probation and a $500,000 fine, and the structuring offense carries a maximum penalty of five years’ probation and a $1 million fine, and each count carries an alternate maximum fine totaling twice the loss or twice the gain, whichever is greater.  If convicted, the court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.

The charges were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and James C. Lee, Special Agent-in-Charge of the IRS Criminal Investigation Division in Chicago.  The government is being represented by Assistant U.S. Attorney Patrick King.

The public is reminded that criminal charges are not evidence of guilt.  The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.


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