Local Businessman Pleads Guilty to Bank Fraud and Tax Evasion Charges

Assistant U. S. Attorney Oleksandra Johnson (619) 546-9769    

NEWS RELEASE SUMMARY – July 22, 2020

SAN DIEGO – A local business owner pleaded guilty in federal court today to bank fraud and tax evasion charges, admitting that over the course of several years he evaded taxes by failing to report $498,612 of income to the IRS, and also orchestrated an illegal scheme to fraudulently obtain a mortgage for his $1.8 million residence using a third party.

As part of his plea agreement, David Daughtrey also agreed to pay over $1 million in restitution to the Internal Revenue Service. He is scheduled to be sentenced on November 16, 2020, before U.S. District Judge Larry A. Burns.

“People who cheat on their taxes are cheating all other law-abiding tax payers,” said U.S. Attorney Robert Brewer. “Mr. Daughtrey blatantly disregarded his tax obligations for years.  The defendant not only abused the tax system for his own financial benefit, but conspired to commit bank fraud in order to maintain this lifestyle.” Brewer commended the excellent work of prosecutor Oleksandra Johnson and FBI and IRS agents.

“The FBI is dedicated to ensuring that white collar crimes are uncovered and prosecuted,” stated FBI Acting Special Agent in Charge Omer Meisel. “Today, David Daughtrey has admitted to mortgage fraud and tax evasion.  This case illustrates that the FBI will continue to investigate those individuals that engage in fraudulent financial schemes that cause harm to our banking industry and defraud the government of tax revenue.”

“Our Nation’s tax system funds critical infrastructures and vital programs, including supporting our citizens and small businesses during the ongoing pandemic,” Ryan L. Korner, Special Agent in Charge, IRS Criminal Investigation. “Honest Americans’ compliance with the tax laws is imperative. Rather than pay his fair share, David Daughtrey chose to live lavishly, while intentionally failing to report his true income and evading the payment of over $400,000 in taxes.  Today’s guilty plea demonstrates that the IRS will diligently continue our important enforcement efforts despite the ongoing challenges posed by Covid-19.  We will work alongside our law enforcement partners in a collective effort to enforce the law and ensure the public trust.”   

Daughtrey admitted that from July 2006 until April 2016, he conspired with others to commit bank fraud and tax evasion. As part of the bank fraud scheme, Daughtrey directed another individual to submit a mortgage application to Wells Fargo to purchase a $1.8 million five-bedroom residence, and to falsely claim that the funds used as down payment belonged to the third party and the residence would be used by the third party.  In reality, Daughtrey provided the funds, and the home was intended to be Daughtrey’s primary residence. Daughtrey made monthly mortgage payments of approximately $8,000 for his residence, but continued to represent to the bank that the third party owned the house.  Daughtrey later submitted a false hardship letter on behalf of the third party in an effort to get the bank to modify the terms of the loan on the home.  As part of the plea agreement, Daughtrey admitted he was the true owner of the residence at all relevant times, and promised to make a good faith effort to transfer the legal ownership of the home into his own name.

Daughtrey also admitted as part his plea that over several years, he and his spouse (who is not charged in the case) conspired to commit tax evasion by filing tax returns listing substantially less income than Daughtrey actually earned.  Daughtrey’s tax return for the year 2012 omitted at least $498,612 in income.  Daughtrey failed to report his total income in tax years 2013, 2014, and 2015, and did not file timely tax returns for subsequent years.  According to the plea agreement, the resulting tax loss to the IRS for the years 2012-2014 was $456,536.   Daughtrey agreed to pay $1,016,457.91 in restitution to the IRS, which includes the total tax loss plus penalties and interest.

DEFENDANTS                                            Case Number 20cr2113-LAB                                             

David Daughtrey                                            Age: 60                                   El Cajon, CA

SUMMARY OF CHARGES

Conspiracy to Commit Bank Fraud and Tax Evasion, 18 U.S.C. § 371 (count 1); and

Making a False Tax Return, 26 U.S.C. § 7206(1) (count 2).

Maximum penalty:

Five years’ imprisonment and $250,000 fine (count 1)

Three years’ imprisonment and a maximum fine of $250,000 or twice the gross gain or gross loss resulting from the offense, whichever is greatest (count 2)

AGENCY

Federal Bureau of Investigation

Internal Revenue Service