A Newport Beach man was sentenced to seven years in state prison on Friday for his role in a tax evasion case involving the Huntington Beach-based power plant refurbishing business he ran with his former wife.
Richard Engel could have avoided prison time by paying $300,000 in court- ordered restitution he promised to provide in a December 2011 plea deal, but he couldn’t produce the funds. He previously paid another $300,000.
His ex-wife, Jolene Engel, who already has paid more than $1 million in restitution, was put on three years of informal probation and had her charges reduced to misdemeanors.
The Engels pleaded guilty Dec. 16, 2011, to tax evasion involving more than $180 million in unreported gross revenue from Powerplant Maintenance Specialists Inc.
Jolene Engel was the company’s president until June 30, 2001, when Richard Engel took that position.
Under the terms of the guilty plea, the two were given the option of paying the back taxes before sentencing.
By January, Jolene Engel was paid up on her personal tax liability, but still owed more in corporate taxes, Overtoom said.
Richard Engel said in a letter to the judge last fall that he had to borrow money from a friend.
Richard Engel has blamed his money woes on a news release from the District Attorney’s Office that was issued when the Engels pleaded guilty in December 2011.
Richard Engel said he lost a $400 million project because of the publicity about his conviction.
The project would have led to a $1.8 million profit, so Engel said he agreed to the plea bargain because that money would have allowed him to repay what he owed.
“My state of mind when signing and agreeing to the terms was that I couldn’t wait to bring the money to the court and satisfy my debt to the state of California,” he said in the letter to the judge. “The D.A. has made it impossible for me to perform based on its malicious, inaccurate press release.”
Senior Deputy District Attorney Bill Overtoom said Richard Engel should have been able to pay his taxes no matter what.
“He’s had substantial income and he still hasn’t paid his taxes,” Overtoom said. “We all have to pay our taxes whether we like it or not, so state prison is appropriate.”
Overtoom noted Richard Engel still hasn’t even filed his tax returns from 1998-2001, another part of the plea deal.
Bankruptcy protection was sought for the company in 2002.
Jolene Engel said she has been trying to settle her tax dispute since 2002.
“I’ve been asking to pay the money since 2002,” Engel said.
According to Engel, part of the problem was a dispute about the amount owed.
“The DA kept changing their mind about what I owed,” she said.
Jolene Engel left the company in 1998, but said remained its president in name until 2001.
“During those years I thought the taxes were paid,” she said. “My name was on it, but I wasn’t involved.”
Jolene Engel said in retrospect she should have been more involved in the business and not relied on assurances about the tax liability.
The couple had been separated since 1999 and divorced in 2001.
“I feel very badly that he’s going to prison,” Jolene Engel said of her ex-husband. “It’s so hard to see someone you know for so many years go to prison.”
She agreed with her ex-husband that he would have been able to pay the restitution if not for the negative publicity.
“Like he said (in court), his life is gone,” Jolene Engel said. She said her ex-husband also will lose his law license. His license was placed on suspension in June 2012.
Richard Engel pleaded guilty to four felony counts of failing to file tax returns for the corporation, three felony counts of filing false personal tax returns and a felony count of failing to file a personal return.
Jolene Engel pleaded guilty to one felony count of failure to file tax returns for her corporation and a felony count of failing to provide material information in a tax return.
The company had contracted to refurbish a Huntington Beach power plant in October 2000 for about $108 million, an effort projected to take about three months.
— City News Service