Tax

CFO Pleads Guilty to Tax Evasion

Real estate company Douglas Development transferred funds to his personal bank account and disguised them as a company loan repayment.
Stephen TaubFebruary 12, 2007

John E. Brownell, the chief financial officer of Washington, D.C.-based real estate company Douglas Development, pleaded guilty late last week to tax evasion.

According to the U.S. Attorney’s Office for the District of Columbia, Brownell is the fifth individual convicted of a felony arising from an investigation into the relationship between the D.C. government and certain private developers and contractors.

According to the U.S. Attorney’s Office, from mid-1996 through 2004, Douglas Development transferred funds totaling more than $270,000 to a credit line account of Brownell at Potomac Valley Bank. Though Brownell used the funds for personal purposes, alleged the government, Douglas Development disguised this compensation as a loan repayment to the bank.

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Douglas Development provided Brownell with other unreported income, prosecutors also alleged. According to the government, the company issued high-dollar-value checks payable directly to Brownell but recorded on the company’s books as loans, though when applying to borrow from financial institutions, Brownell did not report loans of any sort from his employer. The government also charged that in one instance, Douglas Development distributed money directly from a real estate loan settlement to Brownell himself without accounting for it on the company’s books.

The total tax loss was in the range of $80,000 to $150,000, according to the U.S. Attorney’s Office.

Brownell faces up to five years in prison when he is sentenced in June.

In October 2004, Fernando Villegas, a construction contractor, pleaded guilty to conspiracy to pay bribes, and Michael Lorusso, a former D.C. government official, pleaded guilty to conspiracy to receive bribes from Villegas and from Douglas Development. Sentences are pending for both men.

Last October, Douglas Development president and owner Douglas Jemal was convicted of wire fraud, and the company’s number-two executive, Blake Esherick, was convicted of wire fraud and tax evasion. They will be sentenced in April and March, respectively.