Businessman pleads guilty to obstructing IRS over taxes of $6.4 million
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Michael P. Carlow, who served six years in prison for masterminding a $31 million check-kiting scheme that victimized PNC Bank, pleaded guilty Friday to obstructing IRS efforts to collect about $6.4 million in unpaid taxes after federal prosecutors agreed to drop more serious charges against him.
Mr. Carlow, 61, entered his plea during a 40-minute hearing before U.S. District Court Judge David S. Cercone.
As part of the plea agreement, federal prosecutors agreed to dismiss charges brought in a six-count indictment filed in April 2011. Those charges, based on much of the same evidence that prosecutors cited in documenting the obstruction charge, could have put Mr. Carlow in prison for as long as 22 years. He faces a maximum sentence of three years for pleading guilty to the lesser charge and up to a $250,000 fine.
Judge Cercone honored Mr. Carlow's request not to be sentenced before October, setting the sentencing hearing for Oct. 4. Prosecutors did not object to the delay.
"It's a far cry from putting him in jail for the rest of his life," said Martin A. Dietz, one of Mr. Carlow's attorneys. "It's pretty clear the government made a pretty big concession in this case."
The plea agreement came after Mr. Carlow sought to have the indictment thrown out because of a conflict over a former white-collar defense attorney who took a job as a federal prosecutor in Pittsburgh and was then assigned to Mr. Carlow's case. Mr. Carlow contended prosecutors could have used information the attorney learned about his case while in private practice against him, violating his attorney-client privilege.
Mr. Carlow declined comment.
Jeffrey A. McLellan, one of the federal prosecutors present at Friday's hearing, declined to comment on why the government agreed to accept the plea.
A court document prosecutors filed late Wednesday accused Mr. Carlow of obstructing IRS efforts to collect federal income and payroll taxes, interest and penalties owed dating back to 1990; and of concealing income and assets from the IRS. It said Mr. Carlow underreported his income on federal tax returns for 2003 through 2006.
According to the document, he diverted income earned at a series of companies that he formed to his longtime girlfriend, Elizabeth Jones of Upper St. Clair.
Ms. Jones was also indicted in April 2011 for conspiracy and two counts of filing false tax returns. She pled guilty to the conspiracy charge in August 2011 and faces up to a five-year prison sentence. Ms. Jones has not been sentenced and remains free on $25,000 bond.
Mr. Carlow also has been free on bond since his indictment. Judge Cercone continued terms of the bond at Friday's hearing.
Prosecutors said that in 2004, 2005 and 2007, Mr. Carlow failed to disclose: that he was a president of Marie Corp., a company named after his mother; that he owned Endura Corp., which had interests in oil and gas leases in Stark County, Ohio; and that he received income from businesses he started after being released from prison in 2002.
The businesses failed a short time after Mr. Carlow took control, leaving a string of unpaid bills reminiscent of damage done at companies he owned prior to pleading guilty to bank and tax fraud charges in 1996.
The $6.4 million in unpaid taxes cited by prosecutors stems from Mr. Carlow's enterprises from the 1990s, ventures that included Pittsburgh Brewing, Clark bar maker D.L. Clark and City Pride Bakery.
In June, Mr. Carlow sought to have everyone in the office of U.S. Attorney David Hickton, the federal prosecutor in Pittsburgh, disqualified from trying his case because Mr. Hickton had assigned Tonya Goodman to the case. Ms. Goodman joined Mr. Hickton's office after previously working at Reed Smith, one of the firms Mr. Carlow interviewed when he was seeking a defense attorney. He did not hire the firm.
Mr. Carlow argued that Ms. Goodman sat in on discussions he had with Reed Smith partner Efrem Grail and could use anything she learned about his case against him as a federal prosecutor. In a Nov. 21 court filing, federal attorneys said Mr. Carlow had handwritten notes that Ms. Goodman made during one of those meetings.
Ms. Goodman was assigned to Mr. Carlow's case May 29 and withdrew June 15. Mr. Hickton later excused his entire office from handling the prosecution and the case was turned over the prosecutors from the U.S. Justice Department's tax division. They negotiated terms of the plea agreement with Mr. Carlow's attorneys, Mr. Dietz and Tina O. Miller.
Despite that change, Mr. Carlow asked the court to dismiss all of the charges, alleging Ms. Goodman's involvement violated his rights. His attorneys subpoenaed Mr. Hickton and Ms. Goodman, who could have been forced to testify in court.
A hearing on Mr. Carlow's motion to throw out the indictment had been postponed because of disputes between his attorneys and federal prosecutors over the exchange of documents.
The plea agreement caps the latest chapter in the history of one of Pittsburgh's more enduring white collar criminals. Many longtime acquaintances say the former Uniontown High School quarterback is more persistent than most creditors and law enforcement officials he comes up against, frustrating them by shifting assets around to corporate entities in the manner that prosecutors outlined in their filing Wednesday.
Mr. Carlow's ability to persuade business owners and government officials unfamiliar with his background to do business with him prompted one former associate to say that Mr. Carlow is always trying to "sneak the sun up past the rooster."
In an interview one month before the April 2011 indictment, Mr. Carlow had said that IRS officials were watching him closely after he was released from prison and that if he owned anything, the IRS and other creditors would have come after him to collect.
"I had the U.S. cavalry on me. I couldn't move," he said. "Everyone thinks I have millions stashed away. That's b.s."
Mr. Dietz said Mr. Carlow intends to address the unpaid federal taxes that he owes. Prosecutors told the judge the plea agreement does not prevent them from filing civil proceedings against Mr. Carlow and his property.
First Published January 5, 2013 12:00 am