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May 2, 2008

Bristol man pleads guilty to business kickback scheme

A Bristol man today pleaded guilty in federal court in Connecticut to filing a false tax return in connection with what prosecutors say was a kickback scheme involving his Pawtucket business.

Louis G. Xifaras, 57, waived his right to a grand jury weighing whether to indict him and pleaded guilty before U.S. Magistrate Judge Thomas P. Smith in Hartford, according to a news release from Connecticut acting U.S. Attorney Nora R. Dannehy. The IRS's Criminal Investigation Division and the Federal Bureau of Investigation investigated.

Xifaras owns Innovative Network Solutions of Pawtucket, a provider of Internet services including server installations. In 1999, a Southwestern Bell Communications employee approached Xifaras with a proposal to ensure Innovative Netowrk Solutions got subcontracting work from SBC in exchange for kickbacks being paid to the SBC employee, the new release says.

The kickbacks were paid to the SBC employee by putting the employee's wife on Internet Network Solutons' payroll as a “no-show” employee.

Innovative Network Solutions falls under a ccorporation category that means the company pays no income tax, the U.S. Attorney's Office said. The company’s income and expenses are reported on the owner’s income tax return. Xifaras in 2002 reported $968,070 income, deducting $272,882 that INS paid to the SBC employee’s wife. But kickbacks "disguised as salary for a no-show job are not deductible business expenses," the news release said, so Xifaras should have reported taxable income of $1,240,952, not $968,070.

Xifaras is slated for a July 21 sentencing and faces a maximum of three years in prison and up to a $100,000 fine. He must cooperate with the Internal Revenue Service and pay all taxes, interest and penalties for 2000 through 2004.

-- projo.com staff writer Michael P. McKinney

Posted by Mike McKinney  at 5:38 PM | Permalink

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