Michigan hotel manager sentenced to prison for filing false tax return

A former Clare, Michigan, hotel manager was sentenced last Thursday to one year and one day in prison for filing a false tax return. His father, the owner of the hotel, previously pleaded guilty to obstructing the grand jury’s investigation of his son.

According to court documents, Harold Walls, 58, managed the day-to-day operations of a Clare hotel, which his father, Karl Walls, 86, owned. Harold Walls did not report to the IRS any of the income he received working at the hotel from 2013 through 2017. Rather than pay himself wages directly through the hotel’s payroll system, Harold Walls paid himself by other means, including by writing checks to himself from the hotel operating account and using a hotel bank account to pay for personal expenses.

Harold Walls also provided false and incomplete information to the hotel’s tax return preparer for 2012 through 2017, resulting in the hotel’s business income being understated. Specifically, Harold Walls did not disclose to the tax return preparer that the hotel had 11 “off-book” rooms that were not tracked in the hotel’s reservation system. Harold Walls also provided the return preparer documents that overstated the amount of property taxes the hotel had paid to the City of Clare.

After the IRS began investigating, Harold Walls obstructed the investigation by instructing a hotel employee to make false statements to the IRS about the nature and extent of his work at the hotel. He also denied to IRS special agents that he was employed at the hotel.

Karl Walls obstructed the investigation into his son by directing two witnesses to lie to the grand jury. In October 2018, two days before a former hotel employee was scheduled to provide grand jury testimony, Karl Walls instructed the employee to testify that Harold Walls did not work at the hotel. Karl Walls also attempted to convince his tax return preparer to make a similar false statement to the grand jury about his son’s employment status.

In addition to the term of imprisonment, U.S. District Judge Thomas L. Ludington ordered Harold Walls to serve one year of supervised release and pay $254,562 in restitution to the United States.

Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division made the announcement and thanked the U.S. Attorney’s Office for the Eastern District of Michigan for providing substantial assistance in this matter.

IRS-Criminal Investigation is investigating the case.

Trial Attorneys Melissa S. Siskind and Sam Bean of the Tax Division are prosecuting the case.