Bay Area Ponzi scammer Maurice Michael McCant is serving 46 months in prison for stealing about $2 million from investors, and victim Bernice Tingle, 67, is serving a life sentence trying to pay off the resulting state tax bill after a law that would have given her some relief died in the Legislature.
McCant, former president of Billionaire Catt Entertainment, was sentenced in August 2012 for defrauding around 15 investors by promising to use their money to promote rap concerts and pay them a portion of the profits. He did not. Instead, he used the money to pay his mortgage, personal expenses and other investors. He promised returns in excess of 25% and spent none of their money on concert promotion.
Tingle and Velma Chavez, two of four victims who made victim impact statemenets during McCant’s sentencing, both turned over their Individual Retirement Account (IRA) funds to him after he promised to pay the necessary state and federal withdrawal taxes. He did not.
The state billed Tingle $84,000 for back taxes, which has since grown to $135,000 with interest, according to the Los Angeles Times. Tingle, who lost $1 million in the scam, says she doesn’t have the money. The retired former project manager for Pacific Bell told the folks at CNBC’s “American Greed” show, “For a little over a year, monies were coming in like they were supposed to and allowing me to sustain. Then it was cut off and then I was just left there.”
Investors lost approximately $17 billion in the Bernard L. Madoff scandal five years ago, which under state and federal laws could be written off of taxes as capital losses at a rate of $3,000 per year for a limited time. After the Madoff conviction, IRS regulations were rewritten to allow Madoff victims, and his victims only, to write off the losses as business losses and save them significantly more.
Tingle benefitted from other federal laws that forgave almost 85% of her tax liability, which was considered a “theft loss.” But state law did not.
Senate Bill 797 would have applied the Madoff exceptions to all state law Ponzi schemes but it died in the Senate Governance and Finance Committee last week. Democratic State Senator Lois Wolk, the committee chair, told the Times, “I’m not certain that it’s really the role of the state treasury to step in . . . when an investment goes wrong.”
The committee’s analyst warned lawmakers that they “may wish to consider the equity of providing a unique benefit to taxpayers that suffered from one particular investment scam, and whether the precedent created will be cited in the future.”
The bill’s author, Republican State Senator Joel Anderson, said, “The state should not gain from a criminal act perpetrated against the victims of a swindle. . . . This is a simple issue of fairness.”