Ahusband and wife from South River who operated a tax preparation business pleaded guilty last week to scheming investors out of nearly $2.5 million and evading the payment of federal income taxes.
Charles Neely, 60, and Janet Neely, 54, who owned a tax preparation business in East Brunswick, pleaded guilty Nov. 6 before U.S. District Judge William J. Martini to mail fraud, conspiring to commit mail fraud, and tax evasion, according to a press release from the office of U.S. Attorney Christopher J. Christie.
The Neelys agreed to forfeit property including seven tow trucks (from a family towing business) and a bank account worth approximately $60,000, as well as a 2002 Pontiac Trans Am and a 2002 Cadillac Deville. All were allegedly derived from proceeds of the fraud.
Bail was set at $500,000 for each defendant.
Through their business, Neely Associates, the Neelys purported to provide investment services to clients, even though neither was licensed by the state to do so, authorities said.
In executing their scheme to defraud, Janet Neely allegedly solicited clients to invest money with Neely Associates under the false representations that their money would be invested in municipal bond funds and would earn tax-free interest on their investments. The Neelys allegedly provided fabricated account statements that made it appear as if the investors’ money had been invested as promised.
From 2002 through last February, the Neelys defrauded approximately 47 investors out of almost $2.5 million, according to federal authorities.
Several of the investors were senior citizens, and many entrusted the Neelys with their life savings, prosecutors said.
Instead of investing the money they stole from investors, the Neelys used it for their personal benefit. According to Christie’s office, they gambled away some of the investors’ money at casinos in New Jersey and elsewhere, and spent some of it on cruises, cars, tow trucks, collectibles, electronics and other items.
In one example, the Neelys acknowledged that they defrauded a 75-year-old investor who resided first in Harrison and later in Lakewood out of approximately $350,000, promising him that they would invest his money and manage his finances to provide him financial security for the rest of his life, authorities said.
They also allegedly failed to disclose the income they were receiving to the IRS and thus evaded the payment of income taxes for tax years 2003 through 2006. They owe the IRS almost $600,000 in outstanding taxes, according to the press release.
This case arose from an investigation begun by the Middlesex County Prosecutor’s Office. After receiving information that the Neelys had defrauded an investor, officials conducted search and seizure warrants and arrested the Neelys on state fraud charges. Upon learning that they had allegedly defrauded numerous other victims, the Prosecutor’s Office contacted the FBI, IRS and U.S. Attorney’s Office.
A joint investigation followed, leading to the guilty pleas.
The Neelys each face a maximum statutory prison sentence of five years on the conspiracy count, 20 years on the mail fraud count, and five years on the tax evasion count. The sentencing court may impose the sentences on each count consecutively. They also face a maximum fine of $250,000.
There is no parole in the federal system, and defendants who are given custodial terms must serve nearly all that time.
U.S. Attorney Christopher J. Christie credited special agents of the FBI under the direction of Special Agent in Charge Weysan Dun; special agents of the IRS Criminal Investigation Division under the direction of Special Agent in Charge William P. Offord; postal inspectors with the U.S. Postal Inspection Service under the direction of Postal Inspector in Charge David L. Collins; and special agents of the Social Security AdministrationOffice of Inspector General, with developing the case. Christie also thanked Middlesex County Prosecutor Bruce J. Kaplan and his investigators.