Former tax commissioner Louis Willis arrested on tax fraud charges
Published: February 15, 2014
Font size: [A] [A] [A]
ST. THOMAS - Former V.I. Internal Revenue Bureau director Louis "Lo Lo" Willis surrendered to authorities Friday morning alongside the president of a major St. Thomas construction company.
Willis, whose 55th birthday was Friday, sat in V.I. Superior Court with his head in his hands as Magistrate Henry Carr read the charges Willis faces, including one count of conspiracy to evade or defeat taxes and one count of fraud and providing false statements.
Gerard Castor, president of Balbo Construction Inc., sat at the defense table with Willis.
Castor, 68, faces one count of conspiracy to evade or defeat taxes, one count of willful failure to collect or pay over tax and one count of fraud and providing false statements.
"They are serious offenses against the public interest," Carr said.
Willis is accused of understating more than two years of Gross Receipts Tax returns by almost $3 million dollars - creating a tax liability of almost $120,000 - on behalf of Castor.
The judge set bail for each man at $75,000.
Willis' attorney, Treston Moore, said that his client could meet a 10 percent bond to be released from custody.
Castor's attorney, Darren John-Baptiste, said his client could use property and an $11,000 unsecured bond to be released from custody.
Neither was in custody for very long, as both were informed of the charges they faced Thursday evening, though they were not taken into custody until Friday morning prior to their advice-of-rights hearing.
Previous public scrutiny
The arrest is not the first time that Willis, who was executive director of the Internal Revenue Bureau from 2000 to 2006, has been under public scrutiny.
During his time as the executive director of the Internal Revenue Bureau, where he began working in 1983, the bureau was the focus of a scathing audit by the U.S. Office of the Inspector General. Among other things, the audit found that the bureau failed to collect $253 million in owed taxes and used tax clearance letters to circumvent legislation enacted to prevent tax evasion.
In 2010, the V.I. Office of the Inspector General performed an audit of the V.I. Legislature. Though he was not named in the audit, Willis was executive director of the Legislature in 2009 and 2010.
Among other things, the Inspector General's audit found that selection, approval and payment of contracts without competition and internal controls led to overpayment and the absence of documentation of the work that had been performed. The audit specifically cited payments of $409,000 to one vendor and $272,400 to another vendor for services without contracts being issued in either case.
Tax clearance letters
According to the charging affidavit, Willis assisted Castor in evading and defeating the Gross Receipts taxes and corporate taxes for Balbo Construction Inc. repeatedly between 2002 and 2006.
Willis approved tax clearance forms, disregarding delinquent filings and payments from Balbo Construction, and also accepted $5,000 from Castor to turn in tax returns that understated the Gross Receipts Tax returns by almost $3 million, according to the affidavit.
The conspiracy, as told by Internal Revenue Bureau special agent Jasmine Claxton, started in mid-January 2002, when Castor applied for a tax clearance letter, which would establish that the company was up to date in its tax filings and payments.
At the time, the supervisor of the Tax Management Division, Jennifer Creighton, denied Castor the letter.
As far as Creighton could tell, the company was delinquent in its filings and payments, Claxton wrote.
No tax filings
In fact, the company had not filed a corporate tax return from 1997 to 2000 and owed a balance on its 1998 Gross Receipts returns, according to Claxton. The company also had not filed Gross Receipts Tax returns in 1999 and 2000, Claxton's affidavit stated.
Willis knew that Balbo Construction filings and payments were delinquent, yet he signed the tax clearance letter for Castor, according to Claxton. The letter never received Creighton's approval, the affidavit states.
Willis later would sign four additional letters, the last of which he signed in mid-December 2006, according to the affidavit. At that point, Castor still had not filed Gross Receipts Tax returns since 1999, according to Claxton.
Willis then left the Internal Revenue Bureau in December 2006, going into retirement, though he ran unsuccessfully for a Senate seat in 2012, according to the affidavit.
Willis continued to help Castor by preparing Castor's Gross Receipts Tax returns from 1998 to 2007 for a fee of $5,000, which was off the books, the affidavit said.
"Willis was no longer the director of the IRB, thus was unable to furnish Castor with tax clearance letters," Claxton wrote in the affidavit.
Willis did not request the company's bank records, specifically its deposits, when preparing the tax returns - a standard request when preparing tax returns, according to Willis himself in a radio interview he conducted during his senatorial run.
However, in 2007, Castor made two changes: He hired Joseph Aubain to prepare the delinquent corporate tax returns, and he hired bookkeeper and operations manager Carol Brookes, according to the affidavit. Brookes was responsible for preparing monthly Gross Receipts Tax returns for the period beginning in 2008.
Neither Aubain nor Brookes was aware of Willis's work on the Gross Receipts Tax returns, according to the affidavit.
"Brookes came to work one morning at Balbo Construction and found a stack of Gross Receipts Tax returns on her desk, along with a spreadsheet," the affidavit said. "Brookes was not told at the time who prepared the Gross Receipts Tax returns."
Because the name of the company and the employer identification number were not written down, Brookes completed the form, and then Aubain took it to the Internal Revenue Bureau in February 2008.
Willis intentionally understated 27 monthly Gross Receipts Tax returns, which totalled $2,951,683.12, the affidavit said. The understated amount resulted in a Gross Receipts Tax liability of $118,067.47.
The period during which the returns were understated was from January 2004 through December 2007, the affidavit said.
V.I. Assistant Attorney General Denise George Counts and Assistant U.S. Attorney Kim Chisolm are working together to prosecute the case.
- Contact Jenny Kane at 714-9102 or email firstname.lastname@example.org.