Lansing Real Estate Developer Sentenced To Prison For Tax Evasion

Scott Chappelle Concealed Income and Assets to Avoid Paying More than $1.6 Million in Taxes, While Maintaining a Lavish Lifestyle

          GRAND RAPIDS, MICHIGAN — Scott Chapelle, 61, of Okemos and East Lansing, was sentenced to 38 months in prison today after engaging in a sophisticated, nearly decade-long effort to prevent the Internal Revenue Service (IRS) from collecting unpaid taxes from him and his businesses – including employment taxes withheld from the wages of his employees – all while funding a lavish lifestyle that included multiple houses, a yacht, and plastic surgery.

          “Rather than working hard and playing by the rules, Scott Chappelle broke the law,” said U.S. Attorney Mark Totten. He continued: “Chapelle spent cash that wasn’t his – funds withheld from his workers as employment taxes, which he then hid from the IRS – to support an extravagant lifestyle he didn’t earn. Now and always, my office will hold individuals and businesses accountable who refuse to follow the rules.”   

          “Scott Chappelle spent nearly ten years evading taxes he owed to the IRS,” said Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division. “At the same time he was falsely claiming financial hardship, Chappelle was spending money on multiple homes, payments toward a luxury yacht, and elective plastic surgery. His prison sentence imposed today reaffirms a fundamental principle – those who lie to IRS collection agents and criminal investigators will be held accountable.”

          According to court documents, Chappelle was an attorney and former CPA who operated Terra Management Company, Strathmore Development Company Michigan LLC, and Terra Holdings LLC, all of which were involved in real estate development and property management in the East Lansing area. Chappelle admitted as part of his guilty plea that he failed to pay over to the IRS employment taxes that were withheld from the wages of the companies’ employees. After the IRS began trying to collect the unpaid taxes, Chappelle attempted to evade the payment of those taxes by making false statements to the IRS about his and his companies’ assets and income, concealing his vacation house on Lake Michigan, and purchasing real property in the names of companies instead of his own name to hide them from the IRS.

          Court documents also reveal that Chappelle falsely told IRS employees that he and his companies could not afford to pay their tax debts because of financial hardships, all the while paying substantial personal expenses from bank accounts in the names of at least six different businesses he controlled, including mortgage payments on three houses and a condominium, payments toward the purchase of a yacht, college tuition for his children, plastic surgery, personal credit card bills, life insurance premiums, car payments for himself and one of his children, and expenses associated with boats he owned.

          Chappelle also admitted as part of his guilty plea that he made false statements to special agents of IRS Criminal Investigation who were investigating his misconduct. Chappelle failed to tell the agents about real property that he purchased – including a house in Ohio he had purchased just one month earlier – and he concealed the source of the funds used to pay a mortgage on a condominium in East Lansing. Also during the criminal investigation, Chappelle filed a false employment tax return for one of his companies on which he claimed that the company had no employees and paid no wages during the time period covered by the return. In fact, Chappelle knew the company had employees and paid wages during that period because he approved submissions to the company’s payroll provider.

          Chappelle further admitted to making false statements on a loan application when he refinanced the mortgage on his Lake Michigan vacation house in Harbor Springs. According to court filings, Chappelle submitted fabricated bank statements to the mortgage company to make it appear as if his company had substantially more money in its account than it actually had, and then falsely blamed another employee of his company for fabricating them.

          In addition to the term of imprisonment, U.S. District Judge Jane M. Beckering ordered Chappelle to serve three years of supervised release and pay a fine of $150,000 and $1,233,836 in restitution to the United States.

          This case was investigated by IRS-Criminal Investigations.  Prosecution was handled by Assistant U.S. Attorney Timothy P. VerHey and Trial Attorney Melissa S. Siskind of the Justice Department’s Tax Division.

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