Honolulu engineer and CPA convicted in tax fraud scheme

A federal jury in Honolulu convicted the owner of an engineering services firm and an accountant of conspiracy to defraud the United States, attorneys said.

Wagdy Guirguis, who ran GMP Associates Inc. and other businesses, and Michael Higa, a certified public accountant, were accused of running a scheme to divert funds from Guirguis’ business entities for his own personal benefit and to avoid the payment of federal employment and income taxes.

Principal Deputy Assistant Attorney General Richard E. Zuckerman of the Justice Department’s Tax Division and U.S. Attorney for the District of Hawaii Kenji M. Price credited special agents of IRS- Criminal Investigation for uncovering the violations. Tax Division senior litigation counsel John Sullivan and trial attorney Anahi Cortada prosecuted the case.

Guirguis was convicted Tuesday of three counts of filing false corporate income tax returns, one count of failure to file a corporate income tax return, three counts of tax evasion, one count of corruptly endeavoring to obstruct and impede the due administration of IRS laws and one count of witness tampering.

Higa was convicted of conspiracy and one count of aiding and assisting in the preparation of a false tax return for one of Guirguis’ business entities.

“Employers who withhold employment taxes from their employees’ paychecks and choose to pocket those funds violate the trust of their employees and the United States,” said Zuckerman in a news release. “The Department of Justice will continue to identify and prosecute employment tax offenders, ensuring that such businesses and executives are held to account and do not gain an unfair advantage over honest employers who follow the law and pay their fair share.”

According to court documents and evidence presented at trial, Guirguis operated numerous engineering businesses. Higa was the controller of these businesses. as well as an officer of a business entity controlled by Guirguis.

When the IRS determined Guirguis’ businesses owed over $800,000 in federal employment taxes and assessed an $812,000 penalty, Guirguis and Higa took various steps to place income and assets out of the IRS’ reach.

In one instance, the pair used the business entity to fraudulently convey a condominium to Guirguis’ wife. When an IRS revenue officer began questioning her sole ownership of this condominium, Guirguis and Higa instructed a bookkeeper to alter the books and records in an attempt to conceal this transaction from the IRS.

From 2001 through 2012 Guirguis and Higa also used the business entity to divert approximately $1.3 million from Guirguis’ businesses for his personal use. As a result of their diversion, Guirguis’ 2010 through 2012 returns omitted $553,000 in income, resulting in a tax deficiency of $165,000.

In addition, Guirguis filed corporate income tax returns that fraudulently omitted millions of dollars of gross receipts. For one of his businesses, Guirguis simply did not file a corporate tax return, failing to report more than $1.7 million in gross receipts.

Guirguis faces a maximum sentence of five years on each of the tax evasion counts, three years in prison on each of the counts involving false tax returns and corrupt endeavors, and one year in prison for the count of failure to file a tax return, as well as a period of supervised release, restitution and monetary penalties. He faces an additional maximum, 20-year sentence for witness tampering.

In addition to the maximum sentence of five years on the conspiracy count, Higa faces a maximum sentence of three years for aiding and assisting the filing of a false tax return count.