Pflueger exonerated on charges of tax fraud

A federal judge acquitted retired car dealer James Pflueger Wednesday of tax fraud and related conspiracy charges related to a failure to report certain income on his tax returns.

U.S. District Judge Leslie Kobayashi said the federal prosecutor didn’t prove beyond a reasonable doubt in a nine-day trial last month that Pflueger, 87, willfully filed false income tax returns. Kobayashi also said the government didn’t prove that Pflueger conspired with anyone to file the false tax returns.

The charges stem from Pflueger failing to report as income money his family’s car dealership used to pay for his personal expenses and his underreporting of the capital gains on the $27.5 million sale of a commercial property in San Diego in 2007.

Pflueger smiled as he left the courthouse Wednesday. He limited his comments to,"Happy day," "I am overwhelmed with everybody," and "I am lucky to be here."

Later Pflueger asked, "Who do I call to get my reputation back?"

Pflueger still faces criminal charges in state court on seven counts of manslaughter and one of reckless endangering in connection with the 2006 deaths of seven people swept away by hundreds of millions of gallons of water that breached the Ka Loko dam on Kauai’s North Shore.

First Assistant U.S. Attorney Elliot Enoki said while the government is disappointed with the court’s decision in the tax case, the U.S. Attorney’s Office respects it and understands that it’s part of the judicial process.

"The prosecution involved five defendants," Enoki said. "Although the court acquitted one, James Pflueger, four others have pleaded guilty."

The others are Pflueger’s son Charles Alan Pflueger, who took over the car dealership operations from his father in 2002; Alan Pflueger’s secretary, Julie Kam; company Chief Financial Officer Randall Kurata and Dennis Duban, the Pfluegers’ Los Angeles accountant.

Of the four, only Duban testified in the trial. He was the prosecutor’s main witness.

Duban testified that he falsified James Pflueger’s tax return and created a phony sales agreement for the sale of the San Diego property because the retired car dealer needed money to hire lawyers, engineers and experts in the wake of the 2006 Ka Loko dam disaster.

Steven Toscher, Pflueger’s Beverly Hills, Calif., lawyer, said there were a number of things Duban said that were not credible and that the court reached the right verdict.

"The evidence was overwhelming in our favor," Toscher said.

Pflueger is still responsible for the taxes due on income he failed to report from 2003 through 2007.

An IRS auditor testified that Pflueger owes the federal government, Hawaii and California $1.8 million in taxes for failing to report income of more than $3 million during that span.

Toscher said that’s a civil, not a criminal, matter.

As for the Ka Loko manslaughter case, a hearing before Circuit Judge Randal Valenciano is scheduled for April 18 on a proposed plea agreement that would resolve the case.

Deputy Attorney General Vince Kanemoto, who is handling the state’s prosecution, said it’s up to Pflueger and his lawyer in that case, William McCorriston, to decide whether they will accept the proposed agreement or go to trial.

Each manslaughter count carries a maximum penalty of 20 years in prison.

Kanemoto said the state is prepared to go to trial if a plea agreement isn’t reached.

McCorriston attended the hearing before Kobayashi. "I’m just delighted that Mr. Pflueger was found innocent of all charges in this matter," McCorriston said of the tax case. "The court’s conclusion was definitely justified by the evidence in the case."

Kanemoto and McCorriston declined to disclose the terms of the proposed agreement in the Ka Loko case.

But sources knowledgeable about the case say it involves Pflueger being found guilty of reckless endangering, a felony punishable by up to five years in prison.

The manslaughter charges against him would be dropped, but his company would be found guilty of the seven counts of manslaughter.

Under state law, a company found guilty of manslaughter could face a fine of up to $50,000 for each count.

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Star-Advertiser reporter Ken Kobayashi contributed to this report.