Indictment Alleges Tax-Evasion Scheme

A 57-year-old Rancho Santa Margarita man was arrested Monday on a U.S. indictment charging him with failing to pay federal income taxes on more than $3.4 million in income.

The indictment accuses Walter James Hulsey of trying to conceal income that he earned in 1993 and 1994 by conducting financial transactions through bank accounts that were in other people’s names, said Thom Mrozek, a spokesman for the U.S. attorney’s office.

Hulsey, who appeared Monday in federal court in Santa Ana, is scheduled to be arraigned on two felony tax-evasion charges next Monday, when a bail hearing will be held. He is expected to remain in federal custody until then.

“For an individual taxpayer to be involved in a failure to report more than $3 million makes this a rather large tax case,” Mrozek said.

If convicted, Hulsey could be sentenced to a maximum of five years in prison for each of the two counts and could face a total of $500,000 in fines.

Also in federal court on Monday, a Huntington Beach man was sentenced to five months in prison for preparing false tax returns for 15 clients, which resulted in the Internal Revenue Service paying more than $112,000 in bogus refunds, Mrozek said.

Frank Foreman, 56, pleaded guilty to two counts of aiding and assisting in the preparation of a false tax return. He admitted to claiming larger deductions for real estate taxes, mortgage interest, charitable contributions and job expenses for the clients in 1995 and 1996.

Following his prison term, Foreman must spend five months in a halfway house.