Kermit Washington sentenced to 6 years in prison

Rudy T >


https://www.ice.gov/news/releases/f...i-6-years-federal-prison-charity-fraud-scheme
Former NBA player sentenced in Missouri to 6 years in federal prison for charity fraud scheme, filing false tax returns

KANSAS CITY, Mo. — A former professional basketball player was sentenced to six years in federal prison Monday on charges related to an extensive charity fraud scheme.

This sentence resulted from an investigation by U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI), and the IRS’s Criminal Investigation division.

Kermit Alan Washington, 66, of Las Vegas, Nevada, was sentenced by U.S. District Judge Greg Kays to six years in federal prison without parole. The court also ordered Washington to pay $967,158 in restitution. Washington was taken into federal custody at the conclusion of the sentencing hearing.

“This former NBA player abused his fame and status to promote a charity scam by which he raised hundreds of thousands of dollars that he diverted to personal spending on lavish vacations, shopping sprees, and even plastic surgery for his girlfriend,” said U.S. Attorney Timothy Garrison, Western District of Missouri. “Although he told his donors that 100 percent of all donations would go to support charitable work in Africa, including a medical clinic for needy families and HIV-positive children, in fact he spent most of the donated funds on himself. His fraud scheme also victimized law-abiding taxpayers by stealing from the public treasury rather than paying taxes owed.”

On Nov. 30, 2017, Washington pleaded guilty to two counts of filing a false tax return and one count of aggravated identity theft. Washington is among 11 defendants who have been convicted in several cases arising from the investigation of one of the largest software-piracy schemes ever prosecuted by the U.S. Department of Justice. Investigators seized more than $20 million in assets from conspirators estimated to have sold more than $100 million worth of illicit, unauthorized and counterfeit software products to thousands of online customers.

Software piracy fraud scheme
Washington’s charity, The Sixth Man Foundation, doing business as Project Contact Africa, operated an eBay store and used a PayPal account to facilitate payments. About $12 million in items, including unauthorized, illicit, and counterfeit software and software components were sold on the Project Contact Africa eBay store.

In a separate but related case, Reza Davachi of Damascus, Maryland, previously pleaded guilty to a fraud scheme for abusing the benefits afforded a charity in these sales on Project Contact Africa’s eBay store.

Customers of the charity’s eBay store were under the impression that “100 percent” of the proceeds of sales were intended to go to the charity. However, only a portion of the proceeds actually went to the charity. Washington admitted that he diverted funds from the charity’s bank account to pay himself or for personal spending, such as rent, credit card payments, vacation trips and plastic surgery for his then-girlfriend. Washington claimed to pay the rent and school fees for a family in Africa when, in fact, these payments were sent to a former prostitute.

By using the charity’s account to sell items through the eBay charity store, conspirators saved thousands of dollars per month that would have otherwise been paid to eBay in the form of various fees. As a result, eBay/PayPal sustained losses of about $908,231 due to the waived fees.

Workers’ compensation referral scheme
Washington also admitted that he referred professional athletes to attorney Ronald Jack Mix, 80, of San Diego, California, so that Mix could file workers’ compensation claims in the state of California on behalf of the athletes. Mix then agreed to make donations to Washington’s charity.

Washington accepted about $155,000 in donations to his charity, which were actually illegal referral payments from Mix and his law firm. Washington diverted those funds from the charity’s bank account to pay himself or for personal spending. Washington admitted that he failed to account for this income to the charity on Project Contact Africa’s IRS filings during those years.

In a separate but related case, Mix pleaded guilty to filing a false tax return. Mix admitted that he made donations ranging from $5,000 to $25,000 for referrals of athletes, some of whom lived in the Western District of Missouri. Mix then claimed those payments as charitable contributions on his individual tax returns from 2010 to 2013. Mix was sentenced to time served and ordered to pay $49,543 in restitution.

False tax returns, identity theft
According to court documents, Washington diverted charity proceeds and failed to declare this income on federal income tax returns from 2010 to 2014. During this time, Washington also improperly claimed tens of thousands of dollars in personal charitable deductions. Washington’s additional tax due for his underreported income is $90,181.

Additionally, Washington is assessed $876,977 in excess benefit taxes related to the payment of excess benefits to a disqualified person (the use of charity funds for personal purposes by an officer of a charity). Washington’s accumulated tax loss for 2010 through 2014 totals $976,158.

Washington specifically pleaded guilty to filing a materially false individual tax return on Feb. 18, 2014, and to filing a materially false Form 990-EZ for his tax-exempt organization on Aug. 20, 2012.Washington also specifically pleaded guilty to using the name, personal address and business address of another person without lawful authority in numerous state and federal filings on behalf of the charity. The identity-theft victim, identified in court documents as “T.G.,” was a resident of Oregon. Washington admitted that he used her identity information so that Project Contact Africa could maintain its active status within the state of Oregon, which enabled the charity to receive the charitable donations and to maintain the charity store on eBay.

This case was prosecuted by Assistant U.S. Attorneys Patrick Daly and Curt Bohling in the Western District of Missouri, and Assistant U.S. Attorney Ryan Raybould of the Middle District of Tennessee (formerly of the Department of Justice’s Tax Division).