A former Cortez resident was indicted last week by a federal grand jury in Durango for wire fraud and income tax evasion, the United States Attorney's Office and IRS-Criminal Investigation announced.
Brian K. Shoults, 42, of Mesa, Ariz., was arrested on Feb. 8, and has appeared before a U.S. magistrate judge in Durango.
He was released on a $50,000 unsecured bond and is expected to be back in court on April 19 for arraignment, which will also take place in Durango.
According to the indictment, from April 8, 2008, through Aug. 25, 2011, Shoults executed a scheme to defraud the Copy Shop Inc.(doing business as Office Outpost) in Cortez in an effort to embezzle more than $250,000 from that company.
Shoults, a bookkeeper for Office Outpost, would allegedly electronically wire money from the Office Outpost accounts for his own personal use without the knowledge of any other employees or owners of the Office Outpost.
He is accused of electronically logging into Office Outpost's accounts at Community Banks of Colorado to transfer money from the Office Outpost's accounts into two of his personal bank accounts over which he had signatory authority.
As bookkeeper, Shoults oversaw Office Outpost's payroll, including the calculation and payment of payroll checks to Office Outpost's employees.
He had the authority to access Office Outpost accounts and draw on those funds in order to pay payroll expenses as well as other business expenses incurred by Office Outpost.
Shoults also had sole responsibility for reconciling the Office Outpost's bank statements with its internal books and records. This allowed him to write checks from the Office Outpost's accounts without supervision from or the knowledge of other employees or owners of Office Outpost.
Shoults allegedly committed tax evasion for years 2008, 2009, 2010, and 2011 by willfully failing to report all income he actually received from the business. For each corresponding year, he was required to report all income on his U.S. Individual Income Tax Form 1040 which was required to be filed the following year by April 15.
Using his position at Office Outpost, he manipulated his W-2 form to show less income than he actually received from Office Outpost. Such additional taxable income substantially increases the amount of tax due.
"The old adage, 'Trust but verify,' is particularly important for business' books and financial records," said U.S. Attorney John Walsh. "All too often, leaving one person in charge of bookkeeping opens the door to massive theft as is what happened in this case.
"This case, like most embezzlement cases, is a prime example of how only having one employee overseeing the businesses' banking accounts can end up in a big loss for the business," said Cortez Police Department Detective Lt. Jim Kingery. "The thefts start out small but once they've tested the waters and gotten away with it they generally go for more. Thankfully with the Cortez Police Department and the IRS - Criminal Investigations working together there can be a positive outcome."
Shoults is charged with 123 counts of wire fraud and four counts of attempting to evade or defeat tax, also called income tax evasion.
If convicted of wire fraud he faces up to 20 years in federal prison, and a fine of up to $250,000 for each count. If convicted of tax evasion, he faces not more than five years in federal prison, and a fine of up to $250,000 for each count.
This case was investigated by IRS-Criminal Investigation and the Cortez Police Department and is being prosecuted by Assistant U.S. Attorney James Candelaria.