Former IRS Agent, Son Indicted on Tax Charges : Bribery: Ex-agent and accountant son are charged with taking $400,000 to help wealthy farmer evade taxes.

The U.S. Attorney in San Diego announced the indictment Wednesday of a former IRS agent and his accountant son on 201 felony counts, including bribery, money laundering and allegedly accepting more than $400,000 over the past decade to help a large Imperial County grower evade tax payments.

The IRS agent, Robert A. Morales Sr.--a 30-year IRS employee--helped lettuce grower Mario Saikhon with tax problems in return for money paid to “ghost” employees and funneled to bogus firms set up by Robert A. Morales Jr., the indictment alleges. Saikhon is one of the largest farmers in Southern California.

The indictment, returned Friday and unsealed Wednesday after a two-year investigation, is the largest single bribe case in the history of the Internal Revenue Service, U.S. Attorney William Braniff said at a press conference.

“Morales Sr. was duty bound to help make the system fair. Instead, in exchange for money, he betrayed his position and granted special favors to a few,” Braniff said.

Saikhon remains under investigation and federal authorities decided to proceed with their case against the Moraleses, Braniff said.

“There were no deals. Saikhon’s case is just a more complex side. We’re talking about . . . millions of dollars. There are no deals.”

Reached at his Imperial County office, Saikhon refused to discuss the case after saying: “I don’t know anything about that.”

Saikhon, who owns 3,500 acres in Imperial Valley, also leases large tracts of land for farming. Over the last three years, income from Saikhon’s farming operations has grossed more than $90 million, according to the indictment.

Eugene Iredale, Morales Sr.’s attorney, said the only truthful item in the 48-page indictment was the spelling of his client’s name. Iredale also expressed outrage that the government’s efforts seemed to focus more vigorously on the Moraleses than Saikhon.

“It appears the Department of Justice is using the whip of justice on the little man and letting the large-scale malefactor escape,” Iredale said.

Mike Littman, lawyer for Morales Jr., said: “My client is not guilty of many of the charges. Others it’s too early to tell. My client, if he is involved, is a minor role. I don’t think he’s guilty.”

Morales Sr., 62, an El Cajon resident who retired this past summer, abused his position by “controlling” and failing to properly audit tax returns during the last 10 years, Braniff alleged. In exchange for manipulating returns to help Saikhon evade tax payments, Morales accepted more than $400,000 in bribes from Saikhon, according to the indictment.

Since the 1987 tax year, Morales Sr. listed his own taxable income between $17,000 and $25,000, according to Braniff. Yet during the same period, Braniff said, Morales spent $13,600 on Super Bowl tickets, $10,000 in personal stock, $4,526.41 on a single purchase of liquor, and $16,348 on a new car. He also allegedly deposited large sums of money in foreign bank accounts.

Charges against Morales Sr. include: tax evasion, assisting the preparation of false tax returns, money laundering, conspiracy, defrauding the government, official corruption, and aiding and abetting.

If found guilty of the 200 counts, Morales Sr. faces up to 13 years in prison and up to $50 million in fines, said Phillip Halpern, the assistant U.S. Attorney who directed the investigation.

Morales Jr., 28, who lived with his father in El Cajon, prepares tax returns and has at various times, worked for Saikhon’s accountant, according to the indictment. If found guilty of the 192 counts against him, Morales Jr. faces up to nine years in prison and up to $50 million in fines, said Steve Ward, a trial attorney with the Department of Justice tax division in Washington.

Among his duties as an IRS agent, Morales Sr. was held responsible for reviewing tax returns to determine whether they should be audited. But from 1981 through 1987, with the exception of the year 1983, Morales Sr. failed to audit properly, among others, Saikhon’s personal and business tax returns, the indictment says. Braniff refused to identify the other taxpayers who were involved.

In 1981, Morales Sr. audited Saikhon’s personal and business tax returns--granting a refund of more than $2,000 on Saikhon’s 1979 corporate return, according to the indictment. In 1982, Morales Sr. granted a refund of $46,000 on Saikhon’s corporate return for fiscal year 1981, the indictment says. The trend continued, according to the indictment. In 1984, Morales Sr. granted Saikhon a $65,000 refund, the indictment says.

In exchange, Morales Sr. accepted a new Nissan pickup truck in 1985 and hundreds of thousands of dollars in bribes, including one of more than $400,000, the indictment says.

When officials began to suspect Morales Sr. in 1989--they refused to say how they learned of the possible wrongdoing--they sent an undercover agent to talk with him about the possibility of laundering money that Morales Sr. was led to believe was from the proceeds of illegal drug sales, Halpern said. Morales Sr. laundered more than $100,000 for the agent, according to the indictment.

That aspect of the investigation was similar to the ruse used to indict and convict San Diego financier Richard Silberman on charges related to the laundering of drug money, federal officials said.

Investigators had a difficult time unraveling an elaborate paper chase of phony companies and ghost employees as the Moraleses “took extraordinary steps to disguise and conceal” their actions, Halpern said.

Morales Jr. facilitated the scheme by setting up two sham corporations--J.B. Farms at the address of Morales Sr.’s brother’s Arizona residence, and Cendejas Farms in California--to assist Saikhon in generating false deductions that helped him evade paying tax on millions of dollars of income, according to the indictment.

Under the names of the two farms, the Moraleses opened numerous bank accounts to conceal bribes from Saikhon as well as to facilitate Saikhon’s false deductions, the indictment says. Between June 22, 1987, and Dec. 31, 1988, Saikhon paid out $2.3 million to both farms, the indictment says.

To conceal the scheme during the fiscal year 1988, the elder Morales assisted in the preparation of tax returns for J.B. Farms while the younger man signed and filed a false corporate return for the dummy company, the indictment says.

According to the indictment, there were numerous ruses--often utilizing the names of relatives--to cover the trail of money. Morales Sr., for instance, arranged to have his brother-in-law Reynaldo Cendejas placed on the payroll of Mario Saikhon Inc.--though Cendejas performed no work for the company, according to the indictment. Morales Sr. spent this money, according to the indictment.

The Moraleses were arrested Wednesday and are being held without bail at Metropolitan Correctional Center downtown.