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A cardiologist, Pradeep Srivastava, of Potomac, Maryland, was sentenced to 46 months in prison for evading more than $16 million in income taxes for 1998 and 1999 and filing a false tax return for 2000.
District Judge Roger W Titus ordered him to pay $16,110,160. The sentencing is followed by followed by three years of supervised release.
'Dr Pradeep Srivastava's prosecution should serve as an example for anyone who considers cheating on their taxes,' United States Attorney Rod J Rosenstein said.
'No one is above the law. Doctors and professionals, like workers from all walks of life, have to pay their fair share of income taxes. People who break these laws face serious felony charges, prison time and having to pay back all the taxes owed with interest and penalties,' said Assistant Attorney General John A DiCicco.
According to court papers, Srivastava, 50, conducted a huge volume of trading in stocks and stock options. During the bull market of the late 1990s, the evidence showed that he earned more than $40 million in short-term capital gains, much of it from trading in stock options involving high-technology stocks like America Online, Dell Computer, Yahoo, Qualcomm and Inktomi.
In preparation for filing his tax returns for 1998 and 1999, Srivastava provided his accountant with information about those trades that generated capital losses and omitted the vast majority of his short-term capital gains. Srivastava then filed tax returns understated his tax due by $164,756 in 1998 and $16,179,567 in 1999.
The evidence proved that in 2000, the value of Srivastava's portfolio collapsed and he incurred massive capital losses. Disclosure of the full extent of those losses, however, would have potentially alerted the Internal Revenue Service to his undisclosed short-term capital gains for 1998 and 1999. Therefore, trial testimony showed, Srivastava filed a false tax return which understated his capital losses for 2000.
In a related investigation, in August 2007, Srivastava agreed to pay $476,000 to settle claims that he fraudulently billed Medicare and the Federal Health Employees Health Benefits Program over 42 months.
According to the settlement agreement, the government contended that Srivastava committed multiple billing abuses from November 1, 1999, to May 31, 2003, including billing for services not rendered; 'unbundling', a practice where a provider bills for multiple component parts of a procedure; and 'upcoding' or billing for a service at a higher level than that which was furnished.