Used Unreported Income to Fund New Business
U.S. Attorney’s Office
March 14, 2012
Northern District of California
CEO of Pleasanton-Based HT Oil Pleads Guilty to Filing False Tax Return
OAKLAND, CA—Sean Brian Higgins pleaded guilty yesterday to filing a false tax return, United States Attorney Melinda Haag and Special Agent in Charge, Internal Revenue Service, Criminal Investigation, Marcus Williams announced.
In pleading guilty, Higgins, 44, of Livermore, California, admitted that from 2001 to 2005, he was the president, chief executive officer, and co-owner of HT Oil, LLC (HT Oil), a business engaged in the exploration and production of crude oil and natural gas. The company’s principal offices were located in Dublin, California (and subsequently moved to Pleasanton, California), while its production operations were located primarily in Kansas. In April 2005, investors learned of allegations that Higgins had commingled the assets of the limited partnerships and paid himself large sums in addition to his salary. The investors subsequently sought the appointment of a receiver to preserve the assets of the limited partnerships. On June 15, 2005, the receivership was perfected pursuant to a ruling from the Contra Costa County Superior Court.
According to court documents, Higgins had signature authority on all HT Oil bank accounts. He made numerous transfers of money from HT Oil accounts to his personal bank accounts, which exceeded his contributions to the business and the amounts that he reported on his income tax returns as income from HT Oil. He paid himself $399,070 in addition to his salary during the years 2002 through 2005, which resulted in an additional tax due and owing of $133,726. Higgins used the money for his personal use, including funding the start-up of a new, unrelated business called Fantasy Garage, LLC. Higgins used Fantasy Garage to acquire exotic cars and motorcycles, which he made available for rent to third parties. In his plea agreement, Higgins agreed to pay a civil fraud penalty in the amount of $100,294.50.
The sentencing of Higgins is scheduled for June 19, 2012, before United States District Court Judge Claudia Wilken in Oakland. The maximum statutory penalty for each count of filing a false tax return, in violation of Title 26 U.S.C. § 7206(1), is three years in prison and a fine of $250,000. However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
Joshua Hill is the Assistant U.S. Attorney who is prosecuting the case with the assistance of Vanessa Vargas. The prosecution is the result of an investigation by the Internal Revenue Service-Criminal Investigation and the Federal Bureau of Investigation.