Middletown man defrauds IRS; owes $725K and is sentenced to prison

Potter Stewart United States Courthouse, Cincinnati.

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Potter Stewart United States Courthouse, Cincinnati.

A Middletown man will have to pay more than $725,000 in restitution to the IRS and will spend time in prison after pleading guilty to tax fraud.

David Keith Fraley, 55, was sentenced in U.S. District Court. The sentence includes 30 months behind bars.

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The Department of Justice said Fraley halted deposits of his income once the IRS started levying his bank accounts. He evaded taxes from 2009 to 2012, documents show.

“Fraley did not file his 2009 income tax return timely and a substitute for returns,” the DOJ said. “Later, the IRS issued Letter 1058, ‘Final Notice, Intent to Levy and Notice of Your Right to Hearing’ to Fraley for the 2009 income tax year. The SFRs were assessed for 2007, 2008 and 2009 for a total of $1,071,382 in tax due and owing (excluding penalties and interest). Fraley spoke to the IRS Revenue Officer and asked for an extension to file the 2009 tax return. Based on the Letter 1058, Fraley understood that the IRS would institute levies toward the funds held in his bank accounts to recover the tax due and owing.”

Fraley transferred ownership of income to his business and brother in order to defraud the IRS from 2009 to 2012.

“Initially, Fraley called his contractor and told them not to issue any income in his name and Social Security number,” the DOJ said. “Then the levies against the bank accounts were ordered, which began the IRS’s levying of wages from Fraley’s account.”

Fraley also stopped making deposits into his business bank account, which was being levied, and started making deposits into his brother’s bank account, the DOJ reported.

“He even called his contractor a second time and asked the contractor to not issue any more income in his business name and EIN and to issue the income in his brother’s name and SSN,” the DOJ said.

“David Fraley took extensive measures in an effort to hide his income and to defeat his tax liabilities,” said Stephen Wajert, Acting Assistant Special Agent in Charge, IRS Criminal Investigation, Cincinnati Field Office. “His sentence is a warning that those who intentionally hide income from the IRS will be held accountable.”

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