Locked In with Ian Bick - I Was an IRS Agent — Here’s What They Don’t Tell You | Brian Watson

Episode Date: February 8, 2026

Brian Watson spent over 20 years as a special agent in the IRS Criminal Investigation Division. In this episode, he explains how he got into the IRS, what the job is really like, and how criminal tax evasion cases are built from start to finish. Brian breaks down common myths about the IRS, how payroll tax cases work, what restitution actually means for defendants, and how investigations move from audits to criminal charges. This conversation offers a rare inside look at IRS criminal enforcement from someone who spent decades inside the system. _____________________________________________ #IRS #TrueCrime #GovernmentSecrets #Whistleblower #InsideTheSystem #RealStories #LockedIn #podcast _____________________________________________ Thank you to PRIZEPICKS for sponsoring this episode: Visit https://prizepicks.onelink.me/LME0/IANBICK and use code IANBICK and get $50 in lineups when you play your first $5 lineup! _____________________________________________ Connect with Brian Watson: https://www.linkedin.com/in/brian-watson-625532179 _____________________________________________ Hosted, Executive Produced & Edited By Ian Bick: https://www.instagram.com/ian_bick/?hl=en https://ianbick.com/ _____________________________________________ Shop Locked In Merch: http://www.ianbick.com/shop _____________________________________________ Timestamps: 00:00 How Major Tax Evasion Gets Flagged 00:57 Inside the IRS Criminal Investigation Division 02:57 What IRS Special Agents Actually Do 06:36 An Unlikely Path to Becoming an IRS Agent 12:13 IRS Special Agent Training & Academy Life 16:13 The Reality of Criminal Tax Cases 20:21 How Tax Evasion Cases Really Begin 23:43 Following the Money: Real Case Examples 29:09 Technology, Digital Payments & Modern Crime 31:58 Cash Businesses, Informants & Undercover Work 34:50 Money Laundering Explained Simply 36:33 Crypto, Digital Payments & Financial Trails 39:52 Building & Organizing Financial Crime Cases 43:00 Managing Multiple Investigations at Once 45:44 Payroll Fraud, Cash Wages & Tax Violations 49:47 The $10,000 Rule, Banks & Structuring Crimes 53:38 Casinos, Reporting Requirements & Paper Trails 56:17 Working Joint Cases With Other Federal Agencies 01:00:34 Celebrity Cases, Media Pressure & Reality 01:04:17 Financial Damage & Empathy for Defendants 01:07:39 Asset Seizures, Restitution & What Rarely Gets Recovered 01:10:12 Preventing Internal IRS Fraud & Embezzlement 01:15:04 When Managers or Accountants Commit Tax Crimes 01:18:48 IRS Myths vs. the Human Side of Investigations 01:21:51 Do the Wealthy Actually Pay Their Taxes? 01:24:13 State Tax Agencies & Federal Coordination 01:25:04 Reflections on the Criminal Justice System 01:29:00 Biggest Lessons & Advice for Students 01:31:13 Final Thoughts & Closing Learn more about your ad choices. Visit podcastchoices.com/adchoices

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Shop the full collection on Amazon or visit curad.com to learn more. We're looking for just egregious stuff. Ultimately, you want stuff that's into the hundreds of thousands or even millions of dollars of unreported income. How did these tax evasion cases first come on your radar? The guy wins Survivor, a million dollars, and then somehow files are tax return that doesn't report it. Do you find that juries are more sympathetic to the cases where it's just someone deliberately not paying their taxes and there's no victims other than, say, the government? The biggest money laundering is you've got to have that SUA, a specified unlawful activity. Got to be dirty money.

What do you think is the biggest misconception of the IRS? There's people that are an elected office in this country that don't pay taxes. My guest today spent over 20 years as a special agent in the IRS Criminal Investigation Division. We're breaking down how tax evasion cases actually work, how people get caught, the biggest. myths about the IRS and what really happens once a case turns criminal. This is the inside of the IRS that most people never hear about. So many people, and myself included, had no idea there was even a criminal investigation division in the IRS, let alone agents. I told that clip about how my house was rated by IRS agents, and they said, no, that's not true. That's a lie.

But there are. It's interesting. I spent my whole career trying to tell people who we were. because here's the issue. IRS is a large agency. Anywhere, you know, it fluctuates between 60 and 80,000 employees. An IRS criminal investigation, my former agency, is a law enforcement agency within the IRS. And we have about 2100 special agents right now, a total of maybe 3,000 when you include professional staff. And, but we're just a small sliver of the IRS. Now, there's been talk of always. like separating us, taking us out, we would be the sixth largest federal agency. But, you know, most famous for Al Capone, like that's our heyday. But we are, and I say we, I'm retired, but it's part of my life, part of my fabric, being an IRS special agent, it's hard not to say we, because they just sounds really weird. We were the only law enforcement agency that can recommend tax charges. So if you see criminal tax charges on any federal case, an IRS special agent had to be

involved in that process. Because of the forensic accounting aspect of it? Well, we're the only ones that had the authority. And even with tax cases, there are so many extra layers that it goes through for approval. It even has to go through a final level at Department of Justice. There's a tax division and they have to approve it. It drives us crazy sometimes because when you're working a multi-agency investigation, it seems like you're always waiting on the tax charges because they take a long time. You can get the money laundering charges, the wire fraud charges much quicker, but those tax charges, you have to do a full investigation, a lot of bank records. We do a very detailed special agent report. It's very brutal. It's very brutal.

It's complicated, but it's very thorough. When it finally lands at the desk of an AUSA, it's just a roadmap on how to prosecute the case. But, you know, it's, you have to be very patient. It's, they're tough cases to investigate. And even IRS special agents get tired of tax cases sometimes. They want to move over to money laundering cases, narcotics or things like that are much quick, quicker hitters. How'd you get into this career? Did you want to go down this path as a child?

So I always wanted to be, I was like cops growing up, you know, like I just, when I played with my friends, I always wanted to be the good guy. And I was always intrigued by law enforcement, grew up watching chips. I liked T.J. Hooker, you know, the Shield, New York, NYPD Blue. And I started as an engineering major because I was good at math and science. And then I quickly moved to econ. And there was a business. kind of sub-major economics business where you took accounting. So eventually I was like, I'm going to be an accountant. And I thought about law enforcement, actually stumbled into a career fair at UCLA and FBI had a table. I'm like, okay, what's up? How do I hire? Well, you need to come back after two years of experience at post-college. And I'm like, okay, I'll come back. And while I was in college, I was a community service officer, a CSO at UCLA. So we did building C-C-EU. security. We did special events. We worked the MTV Music Awards. In the early 90s, I met all kinds of famous people. I actually spoke to Cindy Crawford, if people old enough to know who she is.

But I met all kinds of famous people. Dana Carby was there. Mike Meyer, or not Mike Marr. Yeah, Dana Carvey and David Spade. I actually spoke to David Spade. So anyways, we did special events. And the thing that there was one time they hired us. or contracted us to do a surveillance on these vending machines that were getting broken into. These criminals had figured out how to put a, you know, $5 or $10 or whatever it was, into the machine and it had some, it was laminated, and they could pull the dollar out after it registered, and they were draining the machines. So as a CSO, we had the police radio, and the first shift I signed up for, I was in the back

of a van, sitting on a milk carton, or milk crows. crate and just watching and these guys came up to the machine and I kept hearing quarters fall. I'm like, no way. And they did it a few times. So I called into the police station, emergency traffic, you know, described it. Patrol car rolled in and I was like, oh my gosh, we got him. I had to do a police report. And so you know, you get that taste of like getting the bad guy. And so I was intrigued by law enforcement, but I was a real short, skinny kid growing up. Like, I wrestled as a hundred pounder in high school. Probably weighed 115 when I graduated.

So I was like, I can't be a street cop. Like, I'm too little. And I'm not, I'm too nice. And so I kind of just said that's really not a possibility. But then my senior year at UCLA, basically an accounting major, even though we didn't have an accounting major, took all the accounting classes. There was a meeting at student accounting society and said IRS special agent. and I'm like, what?

What's that? And I'm like, I walked in. And I was so impressed by this guy. This guy named Frank, he was a special agent in L.A. And he described how IRS special agents took down this drug organization in L.A. on the financial side, working with L.A. County Sheriff's Office. And I'm like, this is what I want to do.

You know, he basically described it as being across an accountant and a police officer. And I'm like, I can do that because I was like athletic and I could, you know, I could protect myself. But I just, I just didn't see myself as a beat cop, you know? And so I applied and there was a hiring freeze. I just had to wait a little bit. And I got picked up at 24. And it was a perfect career for me. I'm so grateful.

And I absolutely loved it. I was sad when I retired. I retired because other opportunities came up and you can't do a job forever. And I still have a ton of friends there, immense respect for the agency. And I'm very proud. And a lot of great stories. But, you know, it was time for the next generation to take over. Wishing you could be there live for the big game, soaking up the atmosphere in the crowd.

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Real California milk. Time for new challenges. Were your parents in law enforcement at all? Not at all. My dad was a CPA and did a lot of business consulting. Work for a lot of small businesses. And my mom's retired school teacher. And I don't even, I mean, I, there's a lot of business.

There's got to be somewhere in my family where there's law enforcement. But I was always just a big law enforcement fan that the joke in my house was my mom did not like me watching the Dukes of Hazard solely because of the disrespect to law enforcement. Because Roscoe was made to be a buffoon and always made fun of him and they were disrespectful to the police. So that's our house was very pro law enforcement and very patriotic family as well. Did you expect the job to be what it was, like the actual agent side of it? Or did you think it was going to be more of an accountant behind a desk type of job? I was very prepared. I knew what it was. I mean, the thing is every day is different in the fact that you have to be good at so many different things.

And it's not for everybody because I did a lot of recruiting when I was a special agent. And I would tell you, if you were a criminal justice major and you wanted to run and gun every day and get bad guys and arrest them and go to one call to the next, you'd be bored out of your mind because you're pouring through financial records. You know, I had a case that at 25 accounts, you have to go through each one of them. But likewise, we've had people that we've hired that were just pure accounting majors and just were very happy sitting at their desk and just crunching numbers, you know, and going through bank records and going through tax returns and doing Excel spreadsheets, but then they didn't want to go out and do interviews.

They didn't enjoy search warrants. They didn't enjoy traveling or getting evidence, doing surveillance, doing undercovers. So I knew what it entailed, and it was the perfect job for me because it was a nice mixture. I was very content doing the analytical work, but then it was nice to get out at least once a day and go do some police type work. go do what we call a drive-by, go take pictures, go pick up records, go meet with people. You're just, you're constantly, you know, there's a nice variety. And the thing, the best-selling point about the job was we're given a lot of autonomy. You were not told to do what to do on a daily basis.

You led your own cases. You made decisions. You were held accountable. You had to report back to the supervisor. and we had detailed caseloads and you had to document everything. But we were treated like adults. So I'm like 24, like leading investigations and investigating people, you know, two or three times my age.

And so I was very prepared what to expect. And like I said, it was absolutely perfect for me. What was the training aspect? Like where do they send you once you get in? So they send us to the federal law enforcement training center in the acronym is Fletsey. And it's in Brunswick, Georgia. So coastal Georgia.

And I'd never been out there. I was living in California. They fly us out there. We get to Jacksonville, take this bus. It's dark, and all you see is pine trees. There's no mountains. I'm used to mountains, you know? So you have no idea what direction is.

And then we end up at this place and you live in these little, like hotel rooms on the base. And I just remember first thing in the morning, three-hour time difference. We have to be there at seven. or something, and I'm like, it's like four o'clock on my body clock. And all of a sudden, you're there, and you're with these people from all over the country. And it's, they call it special agent basic training.

And that's the first segment. And the second segment is called Criminal Investigator Training Program. That second half is IRS Pacific. So you go there, I went for a total of 19 weeks. Current people going through now have to go for six months, a full 26 weeks. But you go down there, they give you uniforms. but, and you're on a base, and there's a cafeteria, but they don't yell at you. So it's not like military, and it's not like a police academy.

It's kind of like college, but you also go shoot guns, and you do mat room, and you defensive tactics, and you arrest people, and we do simulated search warrants, simulated undercover, simulated surveillance, but you've got to learn all the law, Fourth Amendment, Fifth Amendment. You've got to learn how to interview people. I mean, they literally bring in role players from the community to do these mock interviews, and they can be kind of fun.

And then, like I said, that second half is IRS-specific, how the IRS proves cases, how you document, how we write a special agent report, and it's just more agency-specific. It was great, but then you go back to your field office, your POD, post-a-d-d-d-d-duty, and then you really learn the job by doing investigations. And then you also have a coach on-the-job instructor or what you might call a FTO field training officer. And then you just gain experience by doing investigations.

Do you remember your first case on the job? I do. It was a spinoff of my OJ's case. And it was a guy that was a there was a guy that operated a surgical supply store. and was doing a big tax evasion case. The guy that they had me investigate was a smaller, a salesman that was selling stuff kind of under the table to this bigger guy and then pocketing all the income

and not reporting it. And he claimed that it was just samples he was selling. But when we talked to the company, they're like, he doesn't have that many. I mean, we're talking like over $100,000 of samples. So he was stealing stuff. I don't know how. But he ended up, you know, he took a guilty plea and just, he just got probation, you know, which is very common, especially in California.

It seemed like a lot of our cases on the smaller side just got probation. And that was my first one. I didn't even get to interview the guy because I was at training. But they always want you to have success early on, a small case. And then you start moving on to bigger and better things. How did these tax evasion cases first come on your radar? So we have a wide variety. A lot of them come from across the hallway.

They're an audit's going on. And they'll, they do an audit and they keep seeing more and more like peeling the onion. They keep finding more stuff like more fraud. People aren't being truthful. They're finding extra bank accounts. So they'll, we get a lot of referrals there. We get stuff from the U.S. Attorney's Office. They'll invite us over.

we'll get tips from the public, like anonymous letters, or sometimes someone will literally walk in with a box of records. You could get like former employees, especially controllers or bookkeepers. They're like, yeah, I've had enough. My boss has been cheating the government for years. So if you're going to cheat the government, you better pay your employees well because they're the ones who might turn you in.

And other agencies, we get referrals all the time. I mean, I had this telemarketer case where a guy was soliciting money for these charities. And he did contracts with them. And it was getting a really high percentage. Like he was taking 75 to 90%. And like a local sheriff's office was investigating, but there was a lot of gray area. And so they referred it to us. And then we got the case.

And we started out with their surveillance. We set up a surveillance on this guy's business on a Saturday. Because we knew the day where all of his telemarketers would come into the office and hand over all their checks that they accumulated during the week. They'd call, get people to donate money. They'd go pick up checks. And on Saturday, they'd all come in. So we followed this guy.

And he put a box in his trunk and he started driving off. We followed him. We're like, well, let's follow this guy. guy, threw the box in the dumpster. And we, after he left, we had someone fish out all the stuff. And then we, on Monday, we took all the records. And I laid him out on a table at the office. None of them were in his name.

I'm like, oh, yeah, he's just too cheap to get garbage service or someone else's trash. But then you start looking at it more and all the addresses on the bank accounts and credit card statements and everything had the same address. It was one of those mail drops, like a UPS store. And I figured out it was my guy. And it was homeless guy, deceased brother, just random names. He made up names. So we were able to prove not only was this guy taking his cut,

75 to 90% from the charities. He wasn't even turning over everything he was supposed to. He was pocketing it. So we at IRS, CIA, were able to prosecute husband and wife for a tax. charges, sheriff's office couldn't. So it was a perfect case where, you know, to answer the question that you had posed where we get our cases from, we got it from local law enforcement agency. So a lot of different sources we rely on other people. The big game is almost here and there's no better way to cash in during America's biggest

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going after that person? So we've always been real coy about the exact number because, you know, for a variety of reasons. I mean, I think that the bottom line is we want to work cases where there's a good possibility of someone going to prison. Because if someone you know at the beginning is just going to get probation, you spend a lot of time and money that could be used on other cases, and it could just be handled through an audit. So we try to find the biggest cases. And then you also want to find cases where there's good intent. When I talk about intent, that guy putting bank accounts in the name of a homeless person

and a deceased brother that didn't happen by accident. That's what we're looking for. You know, and there's also jury appeal, you know, like in your, your case, I don't think it was good jury appeal prosecuting a teenager. You know, that's a tough case. But we've also had cases where, here in Arizona, where we prosecuted someone in a wheelchair. We actually offered them like probation and they wouldn't take the plea. And we still got a conviction. But like, that's jury appeal. And then, you know, and if you know a case is going to get more publicity over another, that might be a tipping point from one case to.

another, well, we're going to get more compliance. Because, you know, the reason why we do these cases is we want people to be honest with their taxes. Can't prosecute everybody. You know, our system of taxes relies on people being honest. So when you do see someone getting convicted of tax charges, it causes other people not to do that. You know, because the other thing, too, I always like to point out, is as a special agent, we're investigating that person who's cheating on their taxes. But we're also an ally to the people who are doing things right. Like, there's a lot of people in, like, say, a restaurant business, the margins are real thin. And they're doing everything right.

They're paying all their payroll. Everybody's in the country legally. They're doing insurance right. They're following all the safety guide. And it's expensive. And they're just getting by. and it's good for them to know that if they do things right, you know, like someone else is going to go investigate the person that's doing something wrong. So they're kind of like the forgotten

people. I'm working for those people as well to say, you know what, you're doing it right and, you know, keep doing it. And obviously they sleep better at night too, not cheating on their taxes. Do you find that people that do cheat on their taxes are more blatant, like say they were issued a 1099 and they're just not claiming it or are they more sophisticated and going to to certain levels to hide that. So at CI, we want a lot of intent items. A missing 1099, a mistake, you know, a one-year case, a small dollar amount. No, we're looking for just egregious stuff.

I mean, ultimately, you want stuff that's into the hundreds of thousands or even millions of dollars of unreported income just because we have limited resources. So you've got to pick the best cases. And when I was an agent, we closed way more cases than we recommended. recommended for prosecution. You were always looking for like a fatal flaw on a case, you know, like intent or jury appeal or just not enough money or, you know, a bad witness. You know, let's say you had someone you investigated and they went to a return preparer and that return preparer was just would not make a good witness. They have a criminal history, a bad

reputation. You're like, it's not worth it because it takes so long on a tax case to go from beginning to the end, it's better to close it out, see if there's a way for it to be resolved on the civil side with an audit, and then look for a bigger and better case. Now, we read about some of these cases, say the celebrities, where they just deliberately don't pay taxes for years. What's going through their mind? And what do you guys think when you see this? It just, I mean, me as an outside looker, it just doesn't make sense. Yeah, I don't know. I mean, there's been a lot of celebrities, you know. You could make a who's who list of celebrities with tax evasion.

Yeah, I don't know. You know, I mean, it's crazy. You know, the first winner of Survivor, Richard Hatch, and I think he's actually from your neck of the woods up in New England, the guy wins Survivor, a million dollars, and then somehow files are tax return that doesn't report it. And you're just like, I watched that. I watched the first season.

I watched that guy win. you know he got a 1099 from CBS, you know? So I don't know. Greed's a very powerful thing. Almost every one of our cases was driven by greed. And the fact that, well, I'm paying enough. You know, I shouldn't have to pay anymore. I've paid enough.

And then you factor in a habit like either drugs or gambling or shopping addiction and or just people living outside their means. Nothing surprises me anymore. It's absolutely crazy. And then when you start getting into the world of Ponzi schemes and the affinity fraud and then embezzlements, I mean, it's just not surprised anymore. I mean, my Google News algorithm just is filled with fraud cases.

And then the one that's just blowing me away is the CARES Act stuff. The Paycheck Protection Program, the PPP fraud, the idle loans they call them, where all these people just steal from the government. You see what's going on in Minnesota with defeating our future, you know? I mean, those are the ones that have already been convicted, where you had over 70 people convicted for basically defrauding the government. It's just, I'm not surprised anymore.

It's crazy. Do you find it's easier to convict for, say, wire fraud than it is to say tax fraud? Or are they about equal? or? So, I mean, it all depends on the evidence. Wire fraud is a very common charge, wire fraud and mail fraud, because if you have that, you have to have that underlying like SUA, like, you know, to do money laundering. And wire fraud, mail fraud are a common, common way we would get those because you've probably used a bank account that crossed state lines or males that cross state lines. They're very common charge used by the U.S. Attorney's Office because they're pretty broad. The tax charges can be complicated. And the concern is, too, if the case is really complicated, you don't want to bring it in front of a jury. Because your average jury has a high school degree.

Get some college here or there, but you get very few people with any accounting knowledge or tax expertise. And a good defense attorney is going to make it very confusing. if you're going to have a scheme, you want it to be very clean. I've seen huge cases with, you know, multi-million dollars, but it's complicated. So you don't want to bring it in front of a jury because they're just not going to understand it. And it's not an insult to them. It's just those cases are tough. But yeah, I would say the wire fraud, mail fraud charges, depending on your evidence and what the underlying crime is, those cases are typically easier to prove. Do you find that juries are more sympathetic to the cases where it's just someone deliberately not paying their taxes

and there's no victims other than, say, the government? Well, that's always the challenge. You know, how do you make the government sympathetic? So I went through three trials in my career. And two of them were these gentlemen that had very strong feelings that taxes were not legal, you know, and very headstrong about it. The first one was a very headstrong about it. The first one, was a dentist who I remember interviewing him when I was probably 25 years old. I went to go interview him and he looked at me like I was some little kid. I was 25. I probably looked like I was 21. I didn't have gray hair back then. And we ended up going to trial and he spent most of his adult life fighting the IRS. And but that case was interesting because we had a bench trial.

So no jury. So it was very, that was very, that was very, that was. interesting. And then the last trial I had was an engineer who's extremely intelligent. Also, same thing, had spent a large amount of time fighting the IRS and we got a conviction on that case because we had overwhelming evidence. And we also showed he made a lot of money. And in our, the way we portrayed it, you know, it came off like he just didn't want to pay his fair share. I don't like that term fair share, but what you want on our jury, we wanted people who were like W-2 wage earners, people who worked, had withholdings, had to pay taxes. And he had done a lot of different things to try to avoid paying taxes. And we didn't poll the jury afterwards or interview them, but I think we had no problem getting that conviction.

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This should be tons of fun. Marvel Television's Daredevil, Born Again, now streaming only on Disney Plus. You can put in the stand there and they can testify. Do you think it's harder now than ever for, say, businesses to hide from taxes now that mostly everything is digital? Just with banking, with credit card processing, you see less cash now more than ever. Yes and no. I mean, technology cuts both ways. When I first started as an agent, I mean, we barely had email, you know, and we would get, when we would issue a subpoena, we would get micro-free,

these printouts from the bank and we cut the checks out and mount them on paper. Now we can get it in like OCR format where it's just we get it on a thumb drive or now a lot of times just on a portal and we can load it in and download it. But then everyone else has more options. You have cryptocurrency now. You have offshore banking. So it's sort of a cat and mouse game, but you're right. Credit card processing. We get that. I mean, you'll see people that, and cash is definitely on the decline, but you'll see their gross receipts are, say, a million dollars. And their credit card processing is like almost the same amount.

And we know they have cash at a restaurant. You're like, come on, guys, you've got to report some of the cash, you know. So it is tough because cash is untraceable. You know, there are some certain ways with CTRs when you go to, bank and deposit over 10,000. We can create a paper trail. But all that credit card reporting definitely helps the government. No, when you see a business that, say, is cash only, is that a red flag in the IRS's mind? Because you do see those in some of the tourist cities and whatnot. Yeah, it's, well, and then it involves investigating. And you do some research and, you know, some people

only take cash, but then you look and they're depositing a crazy amount of money. And you're like, there are honest people that still do with cash. A lot of them deal with cash because they don't want to deal with the processing fees at these credit card companies. You know, a lot of, you'll see a lot of it now where you get a cash discount. But I think a lot of that, it was with the credit card processing. But then, you know, also too, we'll send in undercovers on cases. And, you know, especially cases where people are selling. And they'll brag. and they'll say, and they'll literally will have a double set of books. Like, it happens.

Sometimes it's a literal, like, ledger, paper. Sometimes it's an Excel spreadsheet. Sometimes they literally have a cash stash somewhere, and they'll admit everything to our very talented undercover agents. Yeah, I've heard of stories with that when it goes to purchasing a business, like say a deli or a restaurant. You see a lot of those cases, the buyer is an undercover agent, and they're showing a totally different price.

Oh, and absolutely. The case that I love to talk about is this thing called seasoned octopus. I actually shared my students this week. It was a restaurant in San Francisco. And the case went to trial. He was convicted. And at trial, they presented evidence

that this guy had 26 boxes at his restaurant that were labeled seasoned octopus. You're like, what the heck's that? But then when they opened up boxes. So I don't even know how they got it. I'm guessing there might have been a search warrant. Maybe it was, I don't know. Who knows? But inside there were the cash receipts. They showed like showing how many people paid cash, they kept those. And it didn't end up on the tax returns. Why would they keep those 26 boxes? Well, put my IRS thinking cap on. If that business

owner wants to sell his business and fetch a higher price, he can show the prospective devire. Yeah, that's what my credit card say. That's my bank record say that. So my tax returns say, but see these boxes, that's what I really make. And this is what you will make. You can fetch a higher price. So like that's intent. And that's a one way that you can overcome unreported cash. Now, for an investigation, will you guys go as far as, say, doing a stakeout and seeing how many customers actually come in and out of a restaurant? You could. to get like an average an estimate. Yeah, but

that's tricky because then to be accurate you would have to do that for a long time and these tax cases are three to four year cases and they're historical. So you might be investigating something that

is two to six years ago. You could do that but the estimate's not going to fly in court. But you But you could do it just to get a ballpark. I mean, the same thing, too, is like you see like a pizza place in some part of the country where you do a little surveillance and no one's going there.

And actually, they report a lot of money. And in that case, we're thinking money laundering. We're thinking organized crime is or a drug, drug dealers are actually running money through the business to launder it. And they're very happy to pay the tax on it. And in that case, you're like, there's no way they made that much money. It's the complete opposite of tax evasion because tax evasion is from a legal source. And then money laundering is from something illegal.

Where they actually want to pay taxes on it to make it legal. Or that you do. Sometimes they do in that case. So as an IRS special agent, those were the two main things we focused on, tax cases and then money laundering. Can you give us an example of a money laundering case? how that would actually work that process? Not my error of expertise. I did some money laundering investigations

as it related to Ponzi schemes and mortgage fraud, and I never worked any narcotics cases. But most money, the biggest money laundering is you've got to have that SUA, a specified unlawful activity. It's got to be dirty money. So the biggest thing would be narcotics.

I mean, that's your biggest thing. the dilemma for a drug dealer is they have all this cash. What are you going to do with it? If you deposit all in the bank, you know, the government's going to figure it out. They're going to see it in the bank. So you try to hide it, we'll call it smurfing into other bank accounts, just spread it around. You know, there's these things called funnel accounts where other people are moving money and hiding it. You can use nominee names. You buy houses but put it in someone else's name. I could just mention running it through a legitimate business, like a laundromat. If you watch Breaking Bad, there's that whole scene where you talk about the nail, the nail

salon or a laundromat. But the whole point is, and in Monday laundering can be very complicated. There's a lot of different ways to do it. But you basically have it, you want to just disguise it. Sometimes it goes overseas, sometimes not. That's why I'm really jaded towards crypto. and I can't stand cryptocurrency ATMs because they're just, I just don't, I'm jaded by crypto because I've just seen a lot of criminals use it, even though it's obviously illegal and a lot of very normal people and an increasing number use it. But yeah, to answer your question about the money laundering, you know, the whole point is to to launder it through somewhere else, you know, through a nominee or through other people or

just complicated. And then by the time it comes back and then hopefully no one notices it. Now, are all crypto, I guess, accounts now officially required to report to the IRS? Like how do people actually report and pay their taxes on that money? Well, you know, IRS has done a big push. And even at the top of the tax return, it asks you, did you have any, did you buy, sell, trade, you know, anything with crypto, they ask you because the government's realizing a lot of people use it. And the whole point is it's fine to use it, but it's still income. So since I've been retired for two and a half years, I'm not sure what the latest thing is.

But there's a lot more scrutiny on those accounts now. But the point two is it depends on which company you're using. Some are a little more cooperative with the government than others. It depends where they're based. The thing I see, too, what I'm doing now with a nonprofit job that I do is I see these crypto ATMs that are popping up all over the place. And scammers are sending victims to these machines to deposit cash and then they end up losing all the money. So that's where I'm very against these machines just because I've spoken to too many victims. I spoke to some victims in my special agent days, but now the use of these crypto ATMs is just increasing.

And scammers used to send people to buy prepaid gift cards. They're kind of moving away from that. It's just, it's all moving into the crypto ATMs. It must have been a big change, too, when you were working with Venmo, PayPal, all of those third-party sites. Right. But the thing is that creates a paper trail because you can subpoena those records. You know, if the companies, it just is one more company you have to do, like square and like, you know, I've seen, you know, all these, it's, things were a lot simpler back in the day. Like, you just had a certain number of banks and credit unions. Now the options are unbelievable. So as an agent, just means issuing a lot more subpoenas. And it's just, it's just more work. So that's where technology, you know, it, the government has more ways to track.

things down, but then there's more things to track down. How do you even know what to subpoena when a case first comes across your desk? Obviously, you're going after everything in their personal name. But what if they have businesses under them? How do you find those? Well, that's where you get paid to make a lot of decisions. I mean, that's what a special agent has to do is you're just, you're paid to make thousands of small decisions.

And the euphemism we use is follow the money. So let's say you know of one account. So of course, you're going to subpoena it. And then you get those bank records. Then you look at them and you're like, whoa, here's a transfer from this account. So then you got to go get that one. That's why when you watch law and order, you know, and they get the bank records or tax records immediately, we just kind of go, come on. This takes months.

And then they always ask for extensions. They need more time, the real world. But you're just following accounts. And that's why a tax case can take so long. especially if they have multiple accounts. And then right, when you have business, then you've got to bring that in as well. And you want to look at the whole universe

of their financial picture. How do you stay organized in a case like this? And also, is it hard to even bring on other agents? Like, it's not something you can just pass on to someone else once you're assigned to it, right? Right. So big picture, when I was a recruiter, I would tell people, you have to, to be an IRA special agent,

you have to be good at a lot of different things. You don't have to be an expert at everything. So when I say good things, you obviously have to have that, you have to be smart and you have to be a good interviewer and you've got to document things and gather evidence. And then you have to be able to handle a firearm and handle yourself at a search warrant and a surveillance and undercover defensive tactics.

And then you have to be organized. And you've got to be a good writer. And some people struggle with the organization because the stuff just keeps coming in. It used to all be paper. Now it's all digital. But you have to have a filing system on your computer and like, where did you get that dot?

Where did you get it? And you have to, and then on top of that, you have to be driven because there's a lot of people who can start a case. It's all bright, shiny object, and you're running and gun, and you're working with another agency and you're tracking these people down,

but then it gets down to like, doing the work, you know, and you just, you just got to keep going, because I've met people that have left because the hardest part is just every day showing up to work and just moving that case forward. You know, the nice thing about the cases we worked is, you know, it's quitting time, it's dinner. You're like, time to go home, you know, where if you're like a homicide detective, you don't go home. You know, you're working until that case is resolved, but you're like dinner time. I'm heading home. But then you got to show up the next day and just keep that thing moving. And when cases take months or years, it's tough. But no, I've seen agents struggle

with organization because you've got all these records from so many sources and now it's many more and then now you got emails and then you know, place, you know, and then because eventually if you do get that indictment, we have to go through discovery. And for people out there don't know what that means. It's basically government turning over all their evidence to the defense. So they lay all the cards out on the table. This is what we have. And you've got to know where you got everything. You got to make sure you didn't miss something. And because if you miss something and defense finds out about it and you disclose it later, I mean, that could be a mistrial. It could be a closed case. So, you know, that's why I said the job is not for everybody because some people

could handle one or two or three of the things, but you had to just be good at all of them. So we're always looking for a very unique personality, unique set of skills. How many cases do you handle that one time? It depends on how big they are. You want to have things at all, say, at three different stages. You want to have stuff that you're kind of looking at is potential cases. You evaluate them. Sometimes we call them information items or primary investigations, and you're just spending

a cursory amount of time. So maybe in a perfect world, you have one or two, three things you're looking at that are kind of in the hopper. And then you might have two, maybe three, depending on how big the cases are that are subject investigations. And then a certain point, you have stuff that gets in what we call the pipeline. It's been indicted. And now you're just waiting on attorneys, you know, the courts. You're like, oh, you know, because you have no control over it at that point. But you could have one, two, three that are waiting to go to trial or they're bad. been sentenced or they're on supervised release, you know, all these things. So it's like, you know, keeping the plate spinning. One of the times I got in trouble in my career was sort

of ignoring a case. You can't let a case, you can't ignore a case. You either investigate it and move it forward or you close it out. And it was a case that had terrible jury appeal, small dollar amount. And ultimately, we closed it, but my supervisor said, you know, you can't close it. So I would say an agent's table of their caseload could have up to 10 cases if you added everything that was in there. But at one moment, you only might have one or two really big cases that are hot. When you get a referral, can you tell right away as a seasoned agent if there's something there to it? Or does it take some digging in time? You know, a cursory look, you kind of know right away. And sometimes,

are like, oh, this is a dog, or you get it sometime, and you're like, oh, my gosh, I love this case. You know, but sometimes that case you're not super enthralled about could change when you start digging into it more. And likewise, that one you thought was great, you find that fatal flaw. And we're taught to make good decisions. And when you find that fatal flaw, get out. You don't get punished for closing cases. There was a time we were, and they were looking at stashions.

and ratios and things like that. But nowadays, you could just go through closed cases and still get good evaluations because you're making good decisions using our time wisely. How often is the IRS going after people who file appropriately, but they're just not paying it? They're letting it back up and up and up. You know, so those failure to pay cases, those are tough. You know, a lot of those are handled by revenue officers. So they, I think they have the toughest job in the IRS, because they actually have to go out there and deal with people that already have a problem with the IRS. Like, they're behind. And, you know, so they work with them. You know, it's all about, it just helps if the taxpayer has, you know, makes an attempt, just honest

and things like that. It depends on what they're doing with the money. You know, if they're not paying and they're living terribly, it's not a good case. You want to show. You want to show. what they're doing with the money. We do a lot of payroll cases, employment taxes. And the ones that have the best jury appeal are the ones where the employer withholds from their employees, supposed to go in the trust fund and then get paid over to the government. And they don't pay it over. And even worse, they go buy stuff with it. And they see their bank account has all this money and they literally go buy the sports car or they go on exotic trip or you know they just they spend it on stuff they shouldn't be those make great criminal cases um because again as i mentioned

earlier you know there most people are doing things right they are making the payroll payments they're doing everything they're supposed to so we're also working for those people who are doing things right so that was like the barry min cow case uh because he was explained how he floated payroll and he wouldn't pay those taxes and that's what got him hemmed up too. Well, I mean, he had two cases because he had the carpet cleaning case early in his career and then he he had stuff later. He was like two-time offender went to jail more than once. And, oh yeah, I'd love his story. His story's amazing. My first, or not my first, but one of my early supervisors actually investigated that case. And I remember him telling me about it when I was,

a somewhat newer agent and then I had the pleasure. I wrote a little song to remind you, choice hotels, get you more of the experiences you value. The can be a hotel's got it all. A rooftop bar, have a ball. Bring a date, your squad or even your mom. Book direct at choiceotails.com. Meeting Barry last year, you know, and came full circle.

Now, are you seeing less of those payroll types of cases now that everything's so automated? For example, I use QuickBooks and they automatically withdraw that money, so you're not even given the opportunity to sit on it and use it for something else. No, people always find a way to cheat. It's, unfortunately, it's job security out there for anybody at the IRS. Even though the vast majority of Americans do the right thing and want to do the right thing, there's people that just always cheat, you know? They're in its greed.

And they feel like they're paying enough. And so I, the tail end of my career, I didn't see it Wayne at all. Now, from a paying under the table perspective, is it even worth in your eyes for an employer to pay under the table for those tax savings, which are illegal to begin with? But they're not getting the right off then for that employee salary just to save that few extra hundred bucks in payroll taxes? Right. But people just do it and you see it all the time. Restaurants, you know, there's been some cases. I mean, I've seen cases in the news recently where, there's been search warrants and you end up, you know, a lot of times you have people that are here in the country without the legal right to work. And so they're paying them and here's the deal. A lot of times they're paying them well below what they're worth. So they're not even paying them a fair wage. They're paying a below subservient wage. And then you also have instances where people are being trafficked. And they're brought here and they're paying off debts. So they're kind of can't complain. And they get worked to. the bone, work way too many hours. They don't get overtime. They don't get a fair wage. So it's their victims is, we look at those employees as victims. And then, you know,

and then it also, it just, it makes an unfair playing field for anyone else in that industry. Something I've been curious about since I've been a kid is what's a deal with the $10,000 deposit? Oh, for it at the bank. Yeah. You know, you see in movies, don't deposit more than 10 grand. as kids were always told about that. What's the real truth behind that? Well, it's basically to create a paper trail for cash. Because back in the day, before the Bank Secrecy Act, literally drug dealers would walk into banks with suitcases of money and deposit it.

And bank managers knew this wasn't legitimate money. You know, people, they know their customers and they know what they're up to. So at a certain point, the government created the CTR currency. transaction report. So basically, it creates a paper trail for cash. And so you deposit over 10,000, you withdraw over 10,000. It creates the CTR. And nothing wrong with having a CTR filed against you. It's just reporting money. If it's illegal money from dope, you can be charged for the drug proceeds. But then criminal, not criminals, a lot of people, they'll do what's called structuring. So they'll break it up.

And literally I've seen cases where people will deposit $9,900 every day. So then that creates a suspicious activity report, S-A-R. And a lot of people in the government review these things, and we see patterns. And you can get them, and then you can see, like, you know, what's going on? Why are they doing this? And then people try to be creative. They'll do $5,000 at this brand. and then they'll drive across town and do 3,000 here and, you know, whatever it is.

But it creates all kinds of red flags. And then, so a lot of times we'll use that in a criminal case. But, you know, and you can actually be charged for structuring. It's actually a crime. It's a Title 31 crime where if you intentionally break up your deposits to avoid that CTR, you can be charged with it. I never had any cases myself because in reality, the U.S. Attorney's Office still wants an SUA, a suspicious unlawful activity, something to dirty up the money. But then we'd also go

through things called knock and talks, where you would just go visit someone at their house for business and then just ask them. A lot of times they'll tell you, well, I just didn't want to do the CTR. Well, you're kind of like drawing attention to yourself. Don't do this. Just deposit all. Okay. I'll keep doing it. And then some people have actually been pushing to get that number raised. Because with time value of money, inflation, that 10,000, a lot of people are arguing should be much higher. But why did these individuals even deposit it in the bank to begin with? It doesn't really make sense because it's still going to show up on, say, a bank statement if you ever get audited. True. But you've got to get, the problem with like a cash intensive

business is you got to have cash in the bank. So like, let's say you have a cash intensive business, a restaurant that deals on cash. Deposit the cash. Now it's in the business. You know, it's in the bank, pay your bills. No problem. You know, the drug dealer's dilemma is they got all this cash, and what am I going to do with it? You know, I can't go buy, you know, an $800,000 house in cash, like draws all kinds of red flags. When you go down, if you buy a car at a dealership with cash, they have to file a form 8300. And there's also reporting requirements at casinos and things like that. it's, that's just the, um, you have to deposit the cash because you can't carry your cash with you all around and go pay your insurance bill and go pay your cable bill and go pay your,

um, property taxes. It's just a hassle. So eventually you got to get the money in the bank. How do the casinos work with the reporting? Because sometimes you'll go and say you win. You're not given any tax form. It's just cash. Right. Then on other winnings, depending on the amount, they will give you that form. Right. So they have a, they have a minimum. Um, I want to say it's 600. So it does. It creates a paper trail. But the casinos keep really good records.

Like, they're in the money. They're in the business to make money. I mean, look how fancy these places are, you know. People always say, I won, I won. No, most people lose. That's why these casinos exist. But when we would go into casinos and ask for records, but it would also rely on people using those player cards, you know,

because people want the rewards. they really break down to a science. How much comes in, goes out, the play rate, it's amazingly complicated. I don't even understand it. And I thought I kind of understood money pretty well. But I didn't work too many casino cases. I had one case where a guy was an employee at the casino and he was able to create these fake jackpots and stole a lot from the casino and he ended up going to prison. So it was amazing working with their security team

because they had everything. They could provide me all the records. It was all documented. We had the guy on video. He took a guilty plea and went to prison. I know when I used to go to the casino, it would only trigger to have to give the social security number based on that actual bet.

So I think if I bet, say, 600 or 700 and 1 on that, then it would trigger it. But if I did it in small increments, then it doesn't trigger it. So hypothetically, you could sit there all day. in small increments and never be taxed on that money. Oh, absolutely, because it would be just an onerous amount of record keeping and reporting for the casino.

I mean, if every dollar was tracked, it would be just, they would fight back, you know, and the government would have all these, it would just be too much. So a lot of times there is like a threshold. But with those player cards, they do a great job tracking. Yeah, yeah. So, but if you were going to do something. something shady casino, you would avoid the player card and do small dollar amounts. But who wants to do that? You want to get the free rooms and the comps and all that, things like that.

Now, I know they just passed a law about only, you can only write off 90% of the losses. Does that extra 10% even really make a difference from a tax perspective? See, I'm not even familiar with that. Yeah, I'm not familiar with that. Yeah, it was interesting that I guess only 90% now you could claim for losses rather than 100%. Okay. I need to do my research. Find out more about that. Yeah. Well, maybe it's a good thing you don't know if you're not that to get big of a gambler. I'm not a gambler.

Now, in a case like mine, the criminal investigated division, which was your division, gets involved. How does that come about? Because my case had nothing to do with taxes, but they still stayed on the case the whole entire way. Right. So it's honestly either tax or money laundering. and we worked a lot of joint cases with FBI and Postal. Those are, I would say, my two favorite agencies to work with because very similar. Because, you know, even though FBI is much bigger and they investigate a wide range of charges, they still have squads that are focused on white collar and financial cases.

And then Postal, another great agency had nothing but good experience working with. them. You know, they're brought in because a lot of times, you know, they can really help us with any sort of mail fraud charges, but they also just have access to good information. And sometimes it's just good to have three, two or three agencies involved. You're stronger together. We help each other out, just better than one. I worked. And as long, so, so to answer your question, it would be a financial case. And we just would add value with our just financial expertise. I worked a couple joint cases, just IRS FBI on what ended up being like Ponzi schemes. And at first I was a little apprehensive.

I'm like, well, who's the lead? Who's in charge? But it was nice because you always had a partner to go out with. And then at one point when one agent was really busy, I kind of filled in for him. And there was a time during the investigation where I was a little overwhelmed and he kind of filled in for me. So it was actually It was a symbiotic relationship It was great and I was very happy how it worked out

You had touched on this earlier But I was charged with money laundering Too, but it's not the money laundering that people associate money laundering with Right Right, because in that case it was the fraud You know where basically you The argument is you told investors

You know What the money was going to use for and it wasn't So that way in that in your case, it was the underlying was wire fried, correct? Yeah, so they're saying that's the crime, that's the dirty money. And then you go and say, by jet skis, that's the money laundering, or any type of item. Right. And that would be a typical, so money laundering does not have to be, it does not have to be, you know, narcotics. If you look under the list of SUAs that can be charged, it's a, it's a pretty long list of SUAs. What was the case that you'll never forget about

that you kind of always still think about maybe even to this day. Man. So, I mean, we were, IRS was involved in that Balco case, the steroids case in the Bay Area, you know, in San Jose when I was there. And it was just that case you can't forget because there was all these famous people. And that's not why it started, but, you know, it started with this company selling steroids. And then it was that was sort of like, you know, the SIA was the steroids. and there was this money laundering.

And then you started realizing all these Olympic athletes and professional athletes were going to this place to get these illegal drugs. And it was like a who's who of people. And I'm just like, wow. And the media attention was crazy.

You know, because in our world, celebrities and famous people get more ink, you know, just like the Operation Varsity Blues, the scandal with, with the test taking and the scholarships and the false misrepresentations to the universities. The dollar amount in that case is they're pretty small and the sentences were pretty small, but it got a crazy amount of media. And that was an FBI and IRS case.

Because it was money related? It was money related. And the people, a lot of them were putting, claiming these donations is tax deductions. And that got a crazy amount. I mean, probably more than it deserved. But again, in our society, the famous people, you know, get the attention.

You know, when a not so famous person gets sentenced, it's usually a pretty empty courtroom. But when it's someone who's got some notoriety, the courtroom is packed. Do you find that the courts are more lenient on the famous people or less lenient? I don't know. That's, you know, it depends on the judge. Judges have reputations. You know, as an and I always wanted a tougher sentence. And, you know, a good judge when the case ends, both the government and the defense are usually not happy. That's usually a good sentence.

You know, the big thing for me is, you know, not necessarily that person in general, but it's like the message it sends when there's a lenient sentence. You're like, you know, it's almost like, well, it's not going to discourage anybody. You gave them probation or home confinement, and they stole that much money. But that's it.

But I didn't have any famous. My cases were pretty middle of the road. We work a lot of mundane cases that aren't, you know, the Wesley Snipes, you know, or the Richard Hatchez or the situation. You mentioned him today in class. And we don't just work famous people. Do you ever feel for some of these defendants that you're investigating?

Absolutely. Especially as I had older. And this, the one story. I'm glad you brought that up because this one story I like to share. There was a guy who got in trouble, kind of dabbling in penny stocks, because even in the stock market, you can take some risky investments,

and he got in the hole. And then he, very similar to your situation where he owed people money, and then he was probably doing short-term loans at pretty high rates. And I think he was, went he did not go into it he was not he didn't go into his situation with the intent to rip people off these were people he cared about known him for a long time but he just couldn't get out of the

hole and it got worse and worse and worse and eventually he came forward and um with his attorney before we even knew about the case we eventually would the government would have figured it out eventually people were going to come forward um and he looked terrible like horrible I thought the guy was going to stroke out You know, like horrible. And then the first day, he admitted everything. So it was not indictment, not even information. It was like a pre-indictment plea.

And then I like the guy. You know, you could see his situation. Like any of us could have been in that situation, you know. So after he'd plead guilty, we had to work on the restitution numbers. And I'm at his attorney's office with him. and just crunching numbers going through documents because he knew this stuff better than I did. And then it got to be about 11.30 in the morning.

And that's IRS criminal investigation lunchtime. That's our official lunchtime. And I like to eat. If anybody knows me, I get cranky if I didn't get lunch. So I look at him like, hey, you want to go grab a bite to eat? And he looks at me and he goes, you would eat with me? And I'm like, oh, my God. he didn't feel, he felt like, you know, he did something so bad that he doesn't even deserve

to eat with this federal agent. And I was like, no, let's go eat. We had a nice lunch together. But it made me think like, wow, you know, there's a shame. And, you know, it's unbelievable. You know, and I had, so I had a lot of sympathy for defendants, especially if they had, you know, attitude goes a long way. I tried to be very professional with everybody, but some of them just hated me, you know, because I represented the person that was investigating them. But, you know, I had people thank me after court many times. Hey, you treated me like a man. I appreciate it. Like, you know, you won't see me again. I'm not going to do this anymore. And then some, yeah, we will never, we're not going to be friends. Are you like me? Are you ever curious about if they've

ever paid restitution? Like, do you look at a case that was, say, five years ago, they got a million dollar restitution. Are you ever curious about if that money was ever repaid or what it looks like now? A little bit. So when someone's sentenced and they're put on pre or a supervised release, we have to follow it and just make sure they're following the terms that the judge imposed. And a lot of it is paying restitution and paying tax. But it's just let it go. Because I know they're not going to pay. Like I was telling my students with you today, you're not normal. People that most defendants don't want to pay, they don't have the ability to pay. And even if they had the money, they're like, I'm not going to do it. What you're doing is not normal.

And that's why, like, when I heard you talk about that, I was just like, wow, I wish everyone was like, not everyone's in the position to do that. You've found success post-prison. And, But I don't, you know, I'm curious sometimes where they go. I've seen people, like some of the older ones. I'm like, I wonder where that guy's doing now. But usually, you know, you just move on because really you don't have any reason to be looking at them anymore. And you don't want them to come back. I had a guy that, like, we almost had to investigate it again.

And I'm like, no, I'm done. I'm tired of that case. I want something new. Yeah. Something more interesting. But there's always that next case that you're always working on. And they just keep, the cases just keep coming. and you're always going through them, making decisions.

Nope, that's not a good one. Let's close that one out. Let's let this one's a better case. Let's work that. I mean, I think it goes back to greed too. I mean, I meet people that have the ability to pay,

but try to circumvent it and don't pay. Because it's such a big system and they're kind of able to get through that or they different assets or different names. Those are the people that kind of irk me. But then you have the people that genuinely are trying to work a nine to five. don't make that much money, and that was me after prison. Right. The judge had ordered $1,000 a month.

I couldn't pay that after prison. I was paying a couple hundred bucks a month, if that. Right, right. It's just not realistic. Well, when you get out of prison, you're not going to, a lot of times you're not going to have the job you had before. You know, like the classic one is the accountant or bookkeeper who embezzles. And once they're convicted of that,

they're not going to get that job again. They're going to get a job that's lower paying. So the expectation that they would be able to pay that in my money. restitution is just not believable. It's just impossible. That's actually a good topic. Are there safeguards businesses could put into place from that? Because you see it every day, an accountant has taken million and said, I'm just thinking as a business owner, I would never let that happen. Like I wouldn't trust someone to that level or not notice that there's millions missing. Yeah, so that was lesson session three and five this semester. Embezzlement, we start in

white-collar crime, we started with embezzlement just because it's so common and it's actually very easy to understand. The safeguards, the biggest thing is you never want one person to have entire control of the financial situation. And that's the problem. Think about every doctors or dentist office you've been to. There's always the one office manager who handles everything. And what happens is it you give them the opportunity to. steal. And that's why you don't hear about it from a big company. Big companies don't get embezzled from. Well, actually, Mars got a $28 million, but that's another story. Someone has to be very sophisticated to pull it off at a big company. But the little ma and paw operation, they have someone they

trust. You know, in the case, there was a case study in our book that we studied, and it was this construction company in the Midwest, and this lady that they trusted forever, she's super smart. handled everything. And then one day, she didn't make it into the office because of a snowstorm. And the owner opened up the mail. And it was these IRS delinquent tax bills. She's like, what? I thought we paid our taxes every month. And then she started doing more and more digging. And then she called the bank and found out this lady was stealing. And it was just, you know, hundreds of thousands of dollars that was stolen. And she's like, wow. But it's, you basically, it's tough because you have a small business. How are you going to hire more people?

I can't afford two people in the accounting department. But little steps like an owner, you can look at your bank statements. You know, like if you're bookkeeper's writing checks, then you go online once a month and look at every check, the canceled check. Make sure they're not paying for your accountant's credit card bills or mortgage payment or stuff like that. So there's a lot of steps. I mean, the big key is you hire a good CPA.

and the CPA will look at your internal controls. It's just a fancy word for your whole accounting picture and see if there's any flaws or any weaknesses. But it costs money. And a lot of small business owners can't afford it or they don't have time. And if you're like a doctor, you didn't go open up a doctor's practice

to pay your bills and do your accounting. You want to just heal people. And then nonprofits are even worse because not only you have one person running it, but that person's not. People are full of surprises, especially when you travel together. Thankfully, Verbo is not. When you book a Verbo, you get Verbo care and 24-7 live support,

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Yeah, I was at the Mars case is interesting. I think either someone was on the show just telling me about it or I was reading about it where they set up a company that was like that and was invoicing Mars. And it looks so similar. That's how the, I think it was a woman that was running it was able to pull it off. I thought it was a guy. Or it might be a guy. I started, I was going to, I just showed a highlight. I just showed a screenshot of like,

a newspaper article from that case. But that was a massive one. And like we just had, um, a case here in southern Arizona where the county treasure stole $38 million from Santa Cruz County. And Santa Cruz County is a smaller county and just bought like a ran property and just spent crazy, had 20 cars. Um, and 38 million dollars over many years. And you're just like, How does this happen? But I'm never shocked anymore. I mean, every day my news feed gives me these fraud cases. So it's just the human condition where greed is such a powerful thing that controls us.

Now, there's a lot of cases, too, where say it's an entertainer, I see articles or stories, and their manager stole the money or their accountant stole the money, and then they're still on the hook for those taxes. Right. How do you feel about those situations where the person was genuinely robbed, but then is still responsible for the tax aspect. It's tough. And then, you know, there's, I mean, it's tough.

There's ways where, you know, you can take some casualty losses. There are, there's ways the IRS can settle, you know. You hear about these things, these offers and compromise. They can look at the big picture and realize, yeah, that's never going to get paid off. But it's tough, you know. there's financial you know you know the nice thing about being an irs criminal a special agent with irscii is you know i didn't have to see dead bodies i didn't have to go through the trauma that a lot of police officers and firefighters go through and see that kind of stuff but you see the financial carnage

you know i've seen people who've lost their life savings and they're thinking about committing suicide or they're just depressed and or the family's broken up because of money and it's just, it's tragic, you know? Like at a case where a guy lost his life savings through this scheme, and he literally wanted to go kill the guy. And he was capable of it. And the FBI agent and I had to have a little talk with him and said, look, don't do anything stupid.

We're on this case. We have a solid case. We're going to get justice. And we did. And the guy ended up getting paid back, made whole, from a company that had a deep enough pockets to cover it. And so we were able to deliver justice for him and he didn't do anything violent.

But when you lose your life savings, it can be horrible for your health, depression, suicide, wanting to go kill someone. So we would see some of that. So you had to really get to know people and talk to people like building reports. poor is like the biggest thing. Interviewing is the most important part of the job.

I would always argue as a special agent. And then that underlying skill of just being able to talk to anybody from any walk of life and just relate to them. In these fraud cases, how often do you, is it, is the money recoverable where there's assets, there's houses, there's cars and the victim's able to be made whole through forfeiture versus everything's just completely gone? It's very rare. because when people operate a scheme, they live an extravagant lifestyle, and it's just gone.

Ponzi schemes are famous for people bringing the money and just blowing it like crazy. You know, embezzlement cases, the one I just mentioned, $38 million, like, no, that $38 million, some of it was recovered from asset forfeiture and sales. There are rare occasions. There was a case out of Dixon, Illinois, a lady named Rita Crundwell, showed the video to my students in class. She stole millions of dollars. They recouped some of it from selling her assets. But then there was actually a settlement with the accounting company that didn't audit. So insurance proceeds and things like that.

But most of the time with these fraud cases, that money's gone. You know, it just doesn't get paid back. What do you think is the biggest misconception of the IRS? that were like mindless heartless paper pushers you know it's easy to you see an organization and just do a broad brush you know but until you work there you realize it's just normal people and some of my favorite people in this world are IRS employees who are just do a great job and are like treat people really well. And I mean, like I said, I was very, very, I mean, I love that agency.

And it was perfect for me. And just nothing but good memories, you know. Obviously, there's critiques of any job. It wasn't perfect. Trust me, there were things that as a bureaucracy were just silly stuff the bureaucracies do. You can find that at any agency. The bigger the company, you're going to have more bureaucracy and just like, why are we doing this?

because there is no perfect job. But, you know, it's easy to sit there and say, oh, we don't need these IRS agents, you know, fire them, or they just, they're heartless and just want to take your money. No, they're just people. They live in our community. They're all around us, and they're good people and want to do the right thing. And they're very respectful.

And if you respect them and just you're cool, it works out really well. I've had a lot of people come up to me and share positive experiences with the IRS. You know, they'll say, you know what? I got behind of my taxes. I went in there. I was just honest and open with a good attitude, and they worked with me, and we set up a payment plan.

And I like hearing that, you know, because that's the norm. Do you find that most people do carry a payment plan, the high income earners? Oh, I have no idea. I have no idea. I mean, usually the people get a payment plan is they had, you know, like a bad year, their business,

or, you know, some sort of financial crisis. and they got behind and they couldn't pay their taxes, you know. And the key is just to answer the letters, don't ignore it. You get the letter in the mail and you're like throw a file folder somewhere. Like, no, respond to it and just don't work with you. Is it hard to keep your emotions out of it, say, or even in general as an agent to look at, say, accounts where people are making significant amounts of money and you just see the level of greed there.

is it hard to keep your emotions out of it? Well, I mean, it's motivating from an agent point of view because you're like, I know this is a righteous case. So it's harder when someone's just getting by. That's where the jury appeal comes in a place. So like you see someone who's doing something wrong on the financial side, especially on the tax side. Let's stick with taxes.

And they're living in a rough little house. driving old cars, no money in the bank. That's a crappy case. Like, no jury appeal. I, I'm not motivated to work it. I'm much more motivated to work a case where someone's making a lot of money, living a lavish lifestyle, ripping people off, treating their employees bad. That's a much more righteous case. It's going to get better jury appeal. And it's just, it's just a better case all around. I put it into, me and Matt put in the chat, chat, GPT the other day about how many people don't pay taxes, and it's quite a few people. How do you feel about that?

Frustrated. You know, there's people that are an elected office in this country that don't pay taxes. Yeah, there was a big case last year that one, I think it was a senator or something that didn't pay taxes for years, and it got made public and then settled up on a lot. But I just, I just don't get it, you know? I mean, it's frustrating. There's a, there's a thing called the tax gap, which is the amount. of taxes that aren't paid that should be paid. And, you know, the goal with the IRS is to shrink that. And, yeah, it's definitely frustrating, you know.

And, but it's, yeah, I mean, I just pay my taxes. I don't like paying taxes, but it's part of living in a civilized society. And, you know, when you get, it hurts, but it's, we live in the best country in the world, you know. and and it costs money to run the stuff. So it is, it is motivating and on, and you know, as an IRS employee,

you actually, we get like audited every year. Like if you don't file, you could be fired, you know, but then there's some people who get behind and they can, but I'll take, I mean,

I'm pretty sure I'm got IRS compliance for employees. Got to be way higher than the like general public and or Congress, I would guess. Really? Yeah. I don't have numbers to back that up. I mean, Like, I couldn't, I don't have access to those numbers.

But I just know like every year we're reminded, you got to file your tax return when I was working there. You got to get it on time and you could lose your job. Just because I want to make sure the integrity is there. Absolutely. I mean, well, if you're not fine. But, you know, there's always some cases. But that's why there's an agency called Tigda, Treasury Inspector General for Tax Administration, who oversees IRS employees. Just like every, every federal agency has an OIG office of inspector general.

that oversees where people are doing things improperly. You know, federal agents make bad choices too. Federal employees make bad choices and do stupid things, unfortunately, and then they get in trouble. Do you ever see a world where there's no income tax, federal income tax? That would be interesting. So like, you know, like a national sales tax, you know, could it happen? They've been talking about it for years.

You know, right now our tax system is, it's a progressive, tax rate. So the more you earn, the more you pay taxes, but each, it just goes up different levels. So not only do you pay more, but you pay a higher rate. You know, there's with income taxes, there's about 50% roughly, it changes all the time of people that pay no income taxes. They still pay payroll taxes. Your Social Security, Medicare, and things like that. But our system is definitely, the very, you know, top five percent. of earners in this country pay a huge portion of our taxes. So we have that progressive rate. If we did a sales tax, that would go away. I don't know how you would do that. I don't know

what the other options are other than a national sales tax. I think the tariffs, they were mentioning. Oh, tariffs? Well, who knows? I have no idea. I will see. Now, you see some articles of, say, millionaires or billionaires where it says they haven't paid any taxes or they're paying little to none in taxes. What does that mean? Are they actually not paying taxes? Right. Well, it's their,

their situation is a lot more complicated because their, you know, money is, they have a lot of different entities and they're paying taxes with their other entities. They have losses that write off their income, but they're getting appreciation on other stuff. So I would say you'd have to look at each individual, the tax turn with someone who could explain it to you.

because, you know, like someone could be very wealthy, pay very little income tax, but they're paying a lot of sales tax and a lot of payroll tax and they're paying income taxes to states and this and that. It's a very complicated thing. It's a lot of times you'll see a headline, but they don't dig deep enough to give you the actual information. Yeah. I've noticed that, especially as a business owner too, you are still paying some type of tax.

Yeah. And even if there's different entities, if it's through a business and how that business is structured and set up. Right. Well, like people sit there, you know, talking about, you know, raising property taxes. Well, if you raise property taxes in a community, you think, oh, it's only going to affect homeowners. But it'll also affect renters, too, because the people that own the apartment buildings are going to raise the taxes and they'll just get paid off through the, you know, higher rents. So there's hidden costs there as well. You know, there's a lot of different taxes. We pay a lot of different taxes in this country.

Do the state tax departments have the same type of division as the IRS, or do they get referred to you? Yes. So California has a franchise tax board, and they have agents. Arizona Department of Revenue has special agents. There are some states that don't have an income tax. So I'm thinking Texas and Florida and maybe Tennessee. But yeah, we have equivalents over there.

and we would sometimes in California, we would kind of coordinate with them to make sure we weren't work in the same case because even though it would be different charges, it's almost like double jeopardy. You're being charged for the same crime and it's sort of overkill. And the thing with those cases, though,

with states, they have a much lower percentage. So their cases are kind of smaller because if their tax rates only 2 or 3%, it's hard to get your tax numbers up really high. It's easier on the federal side. But then what we would do, too, on a federal tax case, we could actually, at sentencing, could use the information from the state side as relevant conduct and help our numbers on the guidelines. But chances are if there's a federal case, it's probably a state case, if they've cheated on, say, the federal taxes. Right. And you could, right, because there's probably both. But it just doesn't make sense to charge them both. It's just almost like a waste of real. resources where you could use that time to go look at someone else. How do you think your view of the criminal justice system has changed since when you were,

say, a kid versus now after so many years in law enforcement? So I like our system. It's not perfect. The more money you have, the better representation you're going to get. You know, you look at OJ's dream team. you know, you had, it's a who's who of the legal community. And, you know, everyone gets an attorney, but, you know, who are you getting? Are you getting, you know, there's so like on the public defender's side, there's so amazing public defenders.

And there's people who do the panel work where they contract with the government and get a certain rate. But the more money you have the better representation you're going to get. you know and but a good attorney is going to get the best deal for their clients you know most of the cases that we worked pleaded out like i only had three trials in 28 years and two of those guys were going to go to trial no matter what they wanted their day in court and it was only one one guy that didn't fit that but almost every one of my cases they took a guilty plea because the evidence was overwhelming and with the sentencing guidelines you're going to get two to three level reduction, you're going to get a cap on the range. And a lot of times, you know, the government will say,

we'll go at the low end of that range. So it's the best way to mitigate your sentence is to, is to take the plea if you did commit the crime. Has your views of the criminal justice system changed it all since leaving law enforcement? No, it's been too soon. And I mean, it's only been two and a enough years. And I did go back. I went back last year as a contractor just to help out train some new agents and do whatever else they needed to be. But it hasn't changed at all. It's, I still have, it's a good system. And, you know, there's very few things I would change. I would maybe make, I wish the sentencing guidelines were a little tougher. I think they're too easy on, some of the white collar crimes.

You know, if you go rob a liquor store or even threaten to rob a liquor store, I mean, you're looking five or ten years in jail, you do the same, like ten times that amount of money on a tax case or an embezzlement case, and you might just get a slap on the wrist. So those, I would push it night, and I think my students, the last two years, have noticed that they really think the sentences for white collar cases are too lenient. people don't take it serious enough because there's not blood, there's not broken arm, there's not stitches, there's not people landing in the hospital. I was actually surprised with how long the sentences were for the Crisleys and say

the Theranos Elizabeth Holmes just given what normal white collar cases have received in the past. Right, right. It just depends. I mean, it's driven. The biggest driver is the dollar amount. So almost every white collar case, it's the dollar. It's the dollar amount, but then there's aggravating factors that can move it up.

You know, I wouldn't want to be a judge. It's a tough job. And no one's happy. Someone's always, it's a very tough job. You basically are dictating someone's freedom for a long time. And so my job, you know, my job was to investigate and recommend, and then at a certain point it was out of my hands. And at that point, I'm just doing what the U.S. Attorney's Office wants me to do to get it across the finish line. What do you stress the most on your students based on your experience in regards to, like, the biggest takeaway from your career?

I've really pushed the soft skills, you know, how you treat people, just little things. I've been pushing. I do something at the end of every one of my classes, not today because we had a guest. A very fine guess, by the way. But I do something called old man advice. And it's just unsolicited advice that I'm handing out because I feel an obligation to share it. So first week was networking, like the value of networking. It could get you a job, you know, or just help you out.

I talked about doing mock interviews if you're going to do an interview. Upcoming, we're going to do things like pushing saving early, you know. start saving right when you graduate from college. And I show them how they're way more teacher millionaires than doctors because they live a frugal lifestyle. They're saving at an early age. They don't have years of medical school and debt. Teach that.

We teach things like writing thank you cards. And then every week it's just something there. And I tell them it's a little tongue and cheek. If you want to ignore me, you can ignore it. And it's supposed to be a little fun. but it's sort of like this obligation I have because I can teach them all the intricacies of taxes and money laundering investigations,

but what are they going to take away from it? You know, things like the one we're going to do on Monday is just the power of a positive attitude. You know, like the one thing you can control is your attitude at your job, you know. Are you going to be a malcontent? Or are you going to go in there with, you know, a smile and just cheery attitude,

even when you're not 100%, you know, And it goes such a long way. So little things like that. That's what I stress. And I hope that they take away. And then I've been really flattered because a lot of them have asked me to write letters of recommendation for them when they go to law school. And then when they go to law school and they get in, I'm like a proud father, you know,

because I had a small part and contribute a little bit to their growth. Just like a lot of people poured into me in my career. now it's my opportunity to pour into them. I love that. It's fun. Well, Brian, I appreciate you coming on the show today. Thanks, Ian. It was a blast, and I really appreciate you being a guest speaker in my class at the University of Arizona.

It was awesome today. Yeah, it was so fun. Have me back any time for the next, if you end up teaching, continuing to teach. Absolutely.