GRAND RAPIDS, MICHIGAN – U.S. Attorney Patrick A. Miles, Jr., and Erick Martinez, Special Agent in Charge, IRS-Criminal Investigation, announced today that Paul Douglas Kelly, 53, of Cadillac, Michigan, pleaded guilty to one count of tax evasion. At the plea hearing in the U.S. District Court before U.S. Magistrate Judge Joseph G. Scoville, Kelly admitted that during 2002, his true income was approximately $199,000.00 and his true tax liability approximately $68,000.00. Kelly admitted to evading the assessment of his true tax liability by filing a false tax return in 2002 that indicated his income was only $33,604.00, and his tax liability only $3,926.00.

From 1999 to 2006, Kelly earned approximately $2.2 million in gross income from his chiropractic business yet paid only approximately $23,601 in taxes to the IRS. Kelly admitted in his plea hearing that his true tax liability over the same time period was $279,563.00. “This prosecution represents this Office’s unwavering commitment to vigorous and fair enforcement of the nation’s tax laws to ensure that all citizens fully comply with their tax obligations,” said U.S. Attorney Miles.

Court documents illustrate that from 1992 to the present, Kelly owned and operated a chiropractic business in Cadillac, Michigan, under the names of Kelly Chiropractic Center, and later, Advanced Chiropractic Center. From 1999 to 2006, Kelly willfully evaded assessment of income taxes by under-reporting the amount of his business income and inflating his business expenses. Kelly’s scheme to evade the assessment of taxes included maintaining two sets of books and records and only providing his tax preparers with records that did not accurately reflect his total business receipts, and purposefully claiming personal expenses as an off-set to his business receipts on his federal income tax returns. Kelly also utilized a business bank account in the name of KF Asset Management Trust, as opposed to his true business name, in an attempt to further conceal his true financial affairs from the IRS. “Kelly was extremely bold in his efforts to evade taxes and hide business income from the IRS,” said Special Agent in Charge, Erick Martinez.

A hearing date for Kelly’s sentencing has not yet been scheduled. The maximum penalty for each count of tax evasion is imprisonment of not more than five years and up to a $250,000 fine. Pursuant to his plea agreement, Kelly has agreed to make full restitution to the IRS for his unpaid tax liability from 1999 to 2006.

The investigation of this case was conducted by special agents of the IRS-Criminal Investigation and the case is being prosecuted by Assistant U.S. Attorney Ronald M. Stella..

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