Tuesday, November 27, 2001

Jury weighs $10 mil
tax fraud case

At issue is whether a
businessman got bad advice
or purposely hid $10 million

By Debra Barayuga

Isle businessman Michael Boulware's defense that he relied on the advice of accountants and attorneys when he failed to report nearly $10 million in taxable income does not hold water, say federal prosecutors.

"If your corporation grosses $80 million a year, you're no country bumpkin," Assistant U.S. Attorney Les Osborne said yesterday during closing arguments in Boulware's tax evasion trial.

Jurors were to resume deliberating today on charges that Boulware, president of Hawaiian Isles Enterprises, a major distributor of wholesale coffee, tobacco, bottled water and vending machines, lied on his tax returns from 1989 to 1997. He is also accused of conspiracy and bank fraud, making false statements to obtain loans for leases on vending machines that the company already owned.

Prosecutors said Boulware allegedly diverted money from his company to himself through phony overseas entities and sophisticated schemes to avoid personal tax liability. The money was allegedly used to line his own pockets, support his wife, a pending divorce and a girlfriend with whom he fathered two children.

"This is a case about theft from Hawaiian Isles Enterprises and the United States and the betrayal of all U.S. taxpayers who pay their fair burden of income tax," Osborne said.

Defense Attorney Vincent Marella denied Boulware diverted funds or concocted schemes to defraud the IRS to line his pockets or support a lavish lifestyle.

Marella said that of the nearly $10 million the government accuses Boulware of hiding, $3.1 million in cash and checks went to girlfriend Gin Sook Lee to hold in trust for the company, $3.1 million went to wife Mal Sun Boulware for claims she had against Hawaiian Isles Enterprises, and $3.8 million went to Lee to hold for the company or for legitimate business purposes, including coffee purchases.

Boulware relied "in good faith" on the advice of counsel when he set up a trust with his girlfriend as sole trustee to hold half the company's stock until enough money was saved to satisfy his wife's claims and meet her demands for $5 million and a $1 million home, he said.

Boulware relied on the same counsel's advice that the money going to his wife was not taxable because it was to satisfy her claims against the company.

Boulware did not know he had to report the money transferred as personal income because he believed the money was the company's and not his, Marella said.

In 1994, when Lee refused to return the money to the company, he successfully sued her to get the company's money back, affirming his belief that the money did not belong to him.

But federal prosecutors said Boulware knew what he was doing when he signed those tax returns and perjured himself.

In divorce documents submitted to help the state court determine how much support he could provide to his future ex-wife, Boulware reported his monthly income as $3,896 in 1994.

The year before, he had reported wages, salary and tips as $1.4 million, and in 1994 he reported $1.09 million, Osborne said.

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