Don't Mess With Taxes

This long holiday weekend offers us Americans an opportunity to officially, and in as unified a way as we can nowadays, remember and honor those who fought and died for the freedoms we hold sacred.

That somber acknowledgment also is why I’m a bit ticked off today. Last week, a man who was part of the private sectors that’s supposed to support our troops pleaded guilty to tax crimes. And he used the military defense firm to which he formerly belonged to commit the felonies.

Douglas Edelman founded and owned half of Mina Corp. and Red Star Enterprises (Mina/Red Star), a defense contracting business that received more than $7 billion in U.S. Department of Defense contracts to provide jet fuel for the United States’ post-9/11 military efforts in Afghanistan and the Middle East, according to the Department of Justice.

On Wednesday, May 21, Edelman appeared in a federal courtroom and pleaded guilty to concealing his former partial ownership of the firm in order to evade paying taxes on his portion of earnings from the billions in federal contracts.

Long, global tax trail: Court documents and statements made at Edelman’s plea appearance indicate that the years-long tax evasion scheme included, but was not limited to, foreign bank accounts, alleged international collaborators, false corporate documentation, a questionable application to the Internal Revenue Service’s Offshore Voluntary Disclosure Program, unfiled U.S. tax returns, and unpaid U.S. taxes.

Instead of paying the taxes that he knew he owed, law enforcement officials allege Edelman used the money to fund his lifestyle and additional investments. They say he invested in a music television franchise in Eastern Europe, a land venture in Tulum, Mexico, and a farm in Kenya, as well as purchased property around Europe, including a home in Ibiza, Spain, and a townhouse in London.

Those expenditures were why the pursuit of Edelman was global.

U.S. investigators with the Justice Department’s Tax Division and its Office of International Affairs, agents from IRS Criminal Investigation’s International Tax and Financial Crimes specialty group, and the Special Inspector General for Afghanistan Reconstruction investigated, and continue to examine, the case.

In addition, the American law enforcement officials were assisted by His Majesty’s Revenue & Customs of the United Kingdom; the Australian Federal Police; the Joint Chiefs of Global Tax Enforcement (J5), which brings together the taxing authorities of Australia, Canada, the Netherlands, the United Kingdom, and the United States; and authorities from Belize, Cyprus, Gibraltar, Israel, and Singapore.

Their efforts paid off when the government of the Kingdom of Spain arrested and extradited Edelman to the United States.

Shout out to tax investigators: As the international cast indications, in the right screenwriting hands, the tax evasion tale could make for an interesting streaming movie or miniseries. That’s part of the reason why articles on the investigation, charges, and plea earn this weekend’s Sunday Shout Outs.

The Department of Justice’s announcement of Edelman’s plea offers the case basics, earning it the first shout.

Margot Patrick also reported on last week’s judicial proceeding for the Wall Street Journal, but the better read, and second shout out today, goes to Patrick’s March 18 story after Edelman was charged, “The $7 Billion Defense Contractor Who Became One of America’s Biggest Alleged Tax Cheats.”

That newspaper piece begins with his arrest, and then takes us back through the U.S. tax evasion allegations. “Douglas Edelman’s glitzy European lifestyle came to a halt when he was charged with hiding income through companies put in his French wife’s name,” teases the blurb for Patrick’s initial Edelman article.

Similarly, the third and final shout is a deeper dive into what led to the charges against Edelman.

Details are in David Kenner’s May 23 article for the International Consortium of Investigative Journalists website on “How a Pentagon contractor built a global empire — and a massive tax evasion scheme.” Kenner recounts how Edelman rose from owning a bar in Kyrgyzstan to winning $7 billion in defense contracts, and then fell to the tax troubles that led to last week’s guilty plea to hiding his fortune from U.S. tax authorities.

Don’t wait for the theatrical presentation of Edelman’s tax intrigue and travails. Check out this weekend’s Sunday Shout Outs, which also make for a slightly delayed — I’m blaming holiday weekend diversions — Tax Felon Friday entry.

You also might find these items of interest:

• IRS Criminal Investigation’s top 10 cases of 2024
• Tax evasion plea could land former Big Law partner in the Big House
• IRS launches new tax enforcement campaign; focus includes offshore havens, deferred fees, whistleblower information

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