Investment banker gets 50 months in prison

The chairman of Manhattan investment bank Josephberg Grosz & Co. was sentenced to four years and two months in prison for evading U.S. income tax payments on the sale of tax shelters, according to Crain's New York Business. Today's sentencing, in a White Plains federal court, concluded a month-long jury trial on all of the counts filed against Richard Josephberg, including tax evasion, conspiracy, filing false income tax returns, failure to file tax returns, failure to pay taxes and other fraud charges. Mr. Josephberg was the founding partner of The Cralin Group, a company that promoted and sold tax shelters in the late 1970s and early 1980s. Shelters sold by Mr. Josephberg between 1977 and 1985 resulted in hundreds of millions of dollars in bogus losses being claimed by the shelters’ investors, Mr. Josephberg, and his associates. After Cralin Group co-workers Jeffrey Feldman and Paul Foont were convicted of tax fraud in 1990, the IRS told Mr. Josephberg that he owed $1.5 million in taxes on the $3.6 million in fees and other income he received between 1977 and 1985. During that time, Mr. Josephberg had paid less than 1% in income tax. From 1995 to 2004, Mr. Josephberg took a series of steps to avoid paying up, including directing income into bank accounts set up in his children’s names, submitting false information to the IRS and funneling money into a separate corporation to give the appearance of having little personal income. By 1995, Mr. Josephberg’s owed $17 million in back-taxes. United States District Judge Charles Brieant ordered Mr. Josephberg to serve a three-year term of supervised release after his prison sentence is complete.