COLVIN + HALLETT BLOG

Mike Sorrentino (“The Situation”) Has More on His Agenda Than Gym, Tan, Laundry: Tax Evasion & Structuring Charges Create a Legal Situation

by | Jun 5, 2017 | Criminal Tax Defense

Michael Sorrentino, better known as “The Situation” on MTV’s popular reality show The Jersey Shore, was recently hit with a superseding indictment issued by the grand jury on April 7, 2017. The Situation had previously been charged, along with his brother, on September 24, 2014 with tax evasion and conspiracy to defraud the IRS. Prosecutors allege that Sorrentino and his brother set up multiple businesses to profit from The Situation’s celebrity status during the heyday of The Jersey Shore phenomenon, and that they conspired to avoid paying tax on nearly $9 million earned just in the 2010-2012 period. According to the indictment, The Situation and his brother filed false returns claiming fraudulent deductions and underreporting business income, particularly by using S-corporations and non-issuance of 1099s to hide income, all the while using income from those businesses to fund their extravagant lifestyles, including the purchase of luxury vehicles.

This echoes charges against another famed reality TV star who ultimately was sentenced to 51 months in prison for tax evasion: Richard Hatch, winner of the first ever Survivor. Problems started for him when he deposited his $1 million cash prize without reporting and paying taxes on it, then parlayed his celeb status into endorsement contracts and other gigs (receiving payments in an S corporation) and underreported the income. Obviously the celeb status did not turn out so well for Hatch at the end of the day, and that could well be true for The Situation, another highly visible defendant.

The recently issued superseding indictment added new charges, including: an obstruction of justice charge against the Situtation’s brother Marc, alleging that he tampered with and altered records during the grand jury investigation before producing them; and a structuring charge, i.e. that the Situation earned substantial cash income that he sought to conceal by making cash deposits just under $10,000 multiple times a day to evade currency reporting requirements imposed on banks and other financial institutions. By way of background, the Bank Secrecy Act requires banks to report to the U.S. Treasury cash deposits over $10,000.

Sorrentino now faces a structuring charge under 31 U.S.C. § 5324. The mere fact of making cash deposits under $10,000 is not illegal, but it becomes a crime when prosecutors can prove a defendant made the deposit for the purpose of evading the currency reporting requirements. After a change to the statute in 1994, the government does not have to prove that a person intended to commit a crime, but rather just that the defendant intended to dupe the financial institution into not filing the report. The government must, however, prove that Sorrentino had knowledge that the financial institution was legally obligated to report currency transactions in excess of $10,000, but circumstantial evidence can satisfy this burden as well as the intent to violate currency reporting requirements element. See, e.g., U.S. v. MacPherson, 424 F.3d 183, 189 (2d Cir. 2005).

Unfortunately, the absence of a willfulness element means prosecutors have an easier time proving this charge than in the past. And many unsuspecting people can unwittingly get swept up in the net of structuring, because it does not matter whether the cash was earned legally/from legitimate sources, whether it was reported on a tax return, or whether tax was paid on it. Further, where structuring does exist, the asset forfeiture statutes may allow the government to seize the cash. This is all the more reason to be aware of such charges and seek guidance from experienced counsel if you are facing such allegations or may be at risk of such charges. As for The Situation, he has managed to delay trial until February, 2018, so it remains to be seen how he will fare on the structuring charge and whether his path as reality TV breakout star will be more favorable than Hatch’s.

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