Lawyer gets 10 years in prison for role in hiding $24M from IRS

Posted: June 17, 2010

A Norristown lawyer who allegedly boasted to a government informant that he was writing a "user's guide" to federal tax fraud was sentenced yesterday to 10 years in a federal lockup and ordered to pay almost $2.5 million in restitution.

Bernard Jay Bagdis, 60, was the ringleader of a tax-obstruction and -evasion scheme who used shell corporations, a phony Irish bank and a basement-waterproofing company to help himself and his clients hide $24 million in income from Uncle Sam.

Bagdis' scheme enabled him and 11 others to avoid more than $4.5 million in taxes between 1996 and 2008, the government said.

Authorities said that Bagdis, who has not filed a personal income-tax return since 1974, even instructed undercover IRS agents as to how they could structure their financial affairs so they could stop filing federal tax returns.

Before sentencing, Bagdis apologized to U.S. District Judge J. Curtis Joyner, conceded that he had "made a mistake" and promised to abide by the personal income-tax code in the future.

"You're telling me it was just a mistake?" Joyner asked incredulously.

"I have to talk with my counsel," Bagdis replied.

New York-based defense attorneys Alan Lewis and Michael Shapiro had sought a sentence of two to three years, pointing out that Bagdis' crime had been "white-collar" and that the only victim had been the federal government, which had been deprived of tax revenues.

"That's qualitatively different than an old lady who gets beat over the head by a purse-snatcher," Shapiro said.

But Joyner was having none of that argument.

"White-collar crimes are worse than blue-collar crimes because they cost the taxpayers so much more," the judge said. "These are serious offenses. They affect the ability of government to provide adequate services and protection for each of the citizens in the United States."

Court papers said Bagdis carried out his criminal schemes by using false identification - including fake passports and bogus credit cards - and by hiding assets in the names of others.

Assistant U.S. Attorney David Ignall said Bagdis even listed an elderly janitor (who testified at his trial) as an officer on dozens of shell companies so that if authorities tried to find out who the individuals were behind the companies, they would "run into a dead-end."

"This was not a garden-variety case of a taxpayer cheating the government," said Ignall. "This is a case of an attorney systematically cheating the government, engendering the belief that the tax system is a game."

Ignall said the case "screamed out" for a "very severe" sentence.

Bagdis has been in federal custody since he and two others - radiologist Bertram Russell and engineer Richard Frase - were found guilty by a jury in April 2009 of attempting to obstruct the IRS, conspiracy to defraud the United States, income-tax evasion and related offenses.

Nine co-defendants charged in the case pleaded guilty before trial.

Russell, 58, of Gladwyne, and Frase, 64, of Schoharie, N.Y., were sentenced, respectively, to 66 months last month and 56 months in November.

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