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Brothers from Morris sentenced to 42 months

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News Willmar, 56201
West Central Tribune
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Willmar Minnesota 2208 Trott Ave. SW / P.O. Box 839 56201

Two brothers from Morris were each sentenced to 42 months in prison and both received $250,000 fines for devising a tax-evasion scheme that involved concealing income they and many of their employees received from their road construction business, according to a spokesperson for the U.S. Attorney's Office in Minneapolis.

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Joseph Edward Riley and John Thomas Riley were sentenced in U.S. District Court on Thursday. The brothers pled guilty to one count of conspiracy to defraud the U.S. in November 2009.

The federal criminal justice system does not have parole, so defendants serve virtually their entire sentence in a federal facility. The Bureau of Prisons will work with the U.S. Marshal and the court to determine where the Rileys will serve their sentence, the spokesperson said.

According to the U.S. Attorney's Office, the defendants were indicted on April 15, 2009, and neither entered into a plea agreement with the government.

The indictment filed against them states that from July 5, 1996, through August 2003, the brothers conspired to defraud the U.S. by concealing income earned by Riley Bros. Companies, Inc., a holding company that owns 100 percent of Riley Bros. Construction as well as all or part of a number of other companies.

The conspiracy was intended to evade paying income taxes, Social Security taxes, Medicare taxes, and unemployment taxes to the federal government.

The indictment states the brothers also were attempting to defraud the State of Minnesota by evading the payment of state taxes and facilitating fraudulent claims for unemployment benefits.

To further their scheme, the indictment alleges the defendants converted to their own benefit income for work and materials provided by Riley Bros. This was done primarily by cashing checks made payable to Riley Bros. Construction and not reporting the income on the company's books. The cash was then spent primarily by the defendants.

Also, from 1999 to 2002, the defendants used converted funds to provide employees with more than $95,000 in cash. The cash paid to themselves or as bonuses to employees was never reported to the Internal Revenue Service or the Minnesota Department of Revenue.

The indictment alleged the defendants arranged for Riley Bros. to pay employees for work performed while those employees were collecting unemployment benefits. Those payments were disguised in order to facilitate the fraudulent unemployment claims as well as to evade taxes.

In addition, between 1996 and 2003, the defendants had Riley Bros. pay more than $79,000 in personal expenses while directing company bookkeepers to falsify records and disguise the payments as legitimate business expenses.

As a result of this conspiracy, more than $500,000 in improperly reported money was paid to Joseph Riley, John Riley, and Riley Bros. employees by Riley Bros. Companies, Inc.

From the Morris Sun Tribune, which is owned by Forum Communications Co.

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