Man who helped defraud IRS of $1.2M sentenced to 15 months

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ST. THOMAS - The man who was a scout for a bogus economic strategies company in the Virgin Islands was sentenced to 15 months imprisonment Thursday.

Dwight Padilla appeared in District Court to accept his sentence, which also required the payment of restitution in the amount of $1,296,941.

The restitution will be split with the other two defendants in the case, Hansel Bailey and David Haddow, who will be sentenced in District Court on Oct. 17.

Together, the three men defrauded the Internal Revenue Service of about $1.2 million, which later led to their convictions of conspiracy to defraud the United States and conspiracy to evade or defeat taxes.

The fraud was conducted through their company, Compass Diversified, which was created primarily by Bailey and Haddow. The company was incorporated in the Virgin Islands in 2004 and became a beneficiary of the Economic Development Commission.

The men used the company to siphon funds from California residents on the lookout for tax breaks.

Bailey was president of Compass, and Haddow was the chief operating officer.

Padilla's job was to prepare income tax returns between 2005 and 2007 for at least 16 Compass clients that claimed bogus business deductions for services totalling $3.8 million.

Padilla, who pleaded guilty in June to one count of conspiracy to defraud the United States, testified against Haddow and Bailey in early July as part of his plea agreement.

- Contact Jenny Kane at 714-9102 or email

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