A former California city administrator, described by federal authorities as a symbol of municipal corruption, has agreed to plead guilty to tax charges relating to a rort over his horse ranch.
The US Attorney’s Office for the Central District of California said Robert Rizzo’s tax rorts resulted in hundreds of thousands of dollars in unpaid federal income tax.
In the plea deal filed in the United States District Court, the 59-year-old agreed to plead guilty to conspiracy and filing a false federal income tax return with the Internal Revenue Service (IRS).
The Torrance resident admitted that he created a corporation to fraudulently claim losses on his income tax return, which served to illegally reduce his tax liability on the significant income he was receiving from the city of Bell.
Rizzo pleaded no contest in October in state court to 69 counts of corruption in a scheme in which he and top city officials in Bell, an incorporated city in Los Angeles County, were paid exorbitant salaries and benefits. As Bell’s chief executive, Rizzo was reported to be have been taking in more than $US1 million a year in illegal compensation.
Documents in the case show that in 2002 Rizzo created R.A. Rizzo Incorporated (RARI), used to claim bogus losses in relation to his weekend horse ranch in Auburn, Washington, which he purported to be a rental property. He was reported to have kept racehorses at the property.
RARI’s corporate tax return fraudulently deducted more than $US409,731 in losses for the years 2006 through 2009.
Rizzo was assisted in the scheme by co-conspirators that included his tax preparer, Robert J. Melcher, who has pleaded guilty to aiding and abetting the filing of a false tax return.
Rizzo also admitted in his plea agreement that he used a RARI account to pay for more than $US80,000 in personal expenses in 2009 and $US120,000 in construction work on his residence in Huntington Beach in 2010.
RARI’s tax returns falsely claimed that these expenses were related to rental property.
“It is regrettable that some public officials believe they are above the law,” said IRS official Richard Weber.
“Instead of filing accurate tax returns, Mr Rizzo claimed bogus corporate losses on his income tax return to illegally reduce his tax liability.
“Pursuing public servants who corruptly endeavor to circumvent the tax laws to fund their lavish lifestyles is a top priority for IRS-Criminal Investigation.”
As part of the plea deal, Rizzo agreed to file amended tax returns for the years 2006 through 2010 that will correctly report all income and expenses.
He also agreed to pay all additional taxes and penalties, including the 75 percent fraud penalty.
As a result of their actions, Rizzo and his co-conspirators caused the IRS to suffer losses of more than $US300,000 for years 2006 through 2010 years, according to authorities.
Rizzo faces a maximum statutory sentence of eight years in federal prison.
Melcher, who as a result of his guilty plea faces a sentence of up to three years in prison, is scheduled to be sentenced next year by United States District Judge George King.
The cases against Rizzo and Melcher are part of an ongoing investigation being conducted by special agents with IRS-Criminal Investigation and the Federal Bureau of Investigation.