Local Business Owner Sentenced To Federal Prison For Tax Evasion And Ordered To Pay $409,958.99

Fayetteville, AR – Duane (DAK) Kees, United States Attorney for the Western District of Arkansas, announced today that Derek E. Sands, age 37, of Lincoln, Arkansas, was sentenced to serve 9 months in federal prison followed by another 9 months of home detention while under electronic monitoring and a term of supervised release for 27 months.  He was further ordered to pay a total of $409,958.99 in restitution for his conviction on one felony count of Attempt to Evade or Defeat Tax.  The Honorable Timothy L. Brooks presided over the sentencing hearing in the United States District Court in Fayetteville.      

According to court records, Sands owned and operated a fencing business in Northwest Arkansas using the business names Sands Fencing, Sands Fencing & Outdoor Living Areas, and Sands Enterprises, Inc.  The Internal Revenue Service Criminal Investigation Division began investigating Sands after receiving information that he was, among other things, cashing thousands of dollars of his customer’s checks instead of depositing the checks into a bank account.  The investigation revealed that Sands last filed a personal federal income tax return for the tax year 2009, and thus has not filed personal federal income tax returns for tax years 2010-2017, even though he earned income and was required to file a return during each of those years. 

The investigation revealed that Sands willfully evaded payment and assessment of income tax.  He paid his employees in cash and converted customer’s checks to cash.  Sands also gave a family member out-of-state customer’s checks to deposit into the family member’s bank account and then had the family write Sands a check for the same amount so he could cash it at his local bank.  When customers paid Sands by credit card, he ran the credit card through his company’s material supplier’s bank account and then had the credit applied to his materials account.  As a result of Sand’s actions, the tax loss to the United States is $409,958.99.   

Sands was named in a one-count Information filed in the Western District of Arkansas, Fayetteville Division, in June 2019.  United States Magistrate Judge Erin L. Wiedemann accepted Sands’ guilty plea in June 2019. 

The investigation was conducted by IRS Criminal Investigations Division. Assistant United States Attorney Kimberly Harris prosecuted the case for the United States.