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Utah Couple Defrauds Big Island Company, IRS

February 9, 2020, 11:24 AM HST
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Steven and Melanie Edwards, of St. George, Utah, spent more than a decade defrauding Koyo USA Corporation. They’ll now each spend multiple years behind bars in return.

The two were sentenced in federal court last by Chief United States District Judge J. Michael Seabright for conspiracy to defraud the IRS and conspiracy to commit money laundering. Steve Edwards, 73, was sentenced to 36 months of imprisonment and three years of supervised release. Melanie Edwards, 61, was sentenced today to 30 months of imprisonment and three years of supervised release.

US Attorney for the District of Hawai‘i Kenji M. Price announced that, according to court documents and information presented in court, the Edwards defrauded Koyo USA Corporation, a manufacturer of bottled water on Hawaii Island, for over 10 years. They created sham pass-through companies and held those companies out to Koyo as if they were legitimate or actual manufactures, when in reality the companies were only resellers, with no employees, that only existed to take money from Koyo.

During the fraud, the Edwards used fictitious names to communicate with employees of Koyo, lied about various departments that the sham companies purportedly had and concealed from Koyo the fact that one of its upper-level managers was an owner of the sham pass-through companies.

During the fraud scheme, the Edwards laundered $3.7 million in fraudulent proceeds. The Edwards also defrauded the IRS by filing false tax returns, submitting false books and records to their CPAs, and improperly classifying millions of dollars in distributions to the owners of the pass-through companies as consulting fees. Such conduct allowed the couple to evade paying $1,471,113 in taxes.

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At sentencing, Chief Judge Seabright commented that the Edwards ran a sophisticated fraudulent scheme for more than 10 years and that prison time was warranted for such conduct. Judge Seabright ordered the Edwards to pay $3,752,155.69 in restitution to Koyo USA Corporation and $1,471,113.00 in restitution to the IRS.

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“Prosecutions like these send a message to those who line their pockets by defrauding companies and evading their federal tax obligations, and Defendants Melanie and Steve Edwards will appropriately have time to reflect upon their egregious conduct as they serve time in federal prison,” stated US Attorney Price.

The case was investigated by IRS-CI and the FBI. It was prosecuted by Assistant US Attorney Michael Nammar.

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