Jury Clears South Florida Couple In 15-Count Tax Case

Daily Business Review, Miami
Monday, June 21, 2004
VOL. 79, NO. 8


by Dan Christensen

A South Florida couple accused by the Internal Revenue Service of evading taxes on $10.1 million in income from their apartment painting business is free after a jury acquitted them of every charge in a 15-count federal indictment.

Florynda and Demetrios “Jimmy” Armadoros each had faced substantial prison terms if convicted.

Miami defense attorney Dennis G. Kainen, who represented Florynda Armadoros, attributed the 12-member jury’s sweeping and unusual rejection of the government’s tax case Thursday to a poor investigation by the IRS.

“The IRS never thought it through. They didn’t care what actually happened,” said Kainen, a partner in WEISBERG KAINEN MARK, PL PL. “The prosecutor did an excellent job. The facts just were not with him.”

Assistant U.S. Attorney Stephen Stallings, who tried the case for the government, did not return telephone messages seeking comment.

Kainen said the jury was also “outraged” by the conduct of some IRS agents. “They intimidated some witnesses,” Kainen said.

Co-defense counsel David M. Garvin, who represented Demetrios Armadorcis, blamed the government’s Byzantine income tax system.

“I am a board certified tax attorney … and a CPA and I had to go through the books four or five times before I realized the proper [tax] treatment,” said Garvin, a Miami solo practitioner.

“Imagine a poor guy like my client, who dropped out of school when he was 13 years old and worked in hard labor his life, what chance does he have?”

Besides its outcome for the defense, the case was unusual for its swiftness. From indictment to acquittal, it lasted 11 weeks. Garvin said that was because the defense did not seek any continuances.

A federal grand jury indicted the couple on March 30. All of the alleged offenses occurred in Miami-Dade County, the government said.

Since 1996, the couple had maintained a residence in South Florida, which is also where their businesses are based. They recently moved to Hobe Sound from their home in Bal Harbour.

Florynda, 59, the bookkeeper was charged with five counts of income tax evasion and 10 counts of making false statements to the IRS. Demetrios, 64, was charged only with the same five counts of income tax evasion.

Federal statutes carry a five-year prison term for each count of tax evasion. The penalty for false statement counts was three years each. Under federal sentencing guidelines, the husband and wife each faced an estimated seven years in prison if convicted.

The bare bones indictment accused the Armadoros’, married 30 years, of evading taxes from 1997 through 2001. During that time, it alleged, the couple’s joint tax returns reported a little more than $1 million in income when their actual income was “substantially greater.”

During the same period, Florynda Armadoros was alleged to have knowingly filed corporate tax returns that grossly under-reported income for three of the couple’s companies, Bayside Maintenance Corp. and Bayside Painting & Maintenance Corp. and D.A. Painting.

In all, Kainen said, the government alleged the couple hid $10.1 million in income from their businesses, which mostly work for real estate management companies with apartment buildings in New York City.

About $8.2 million of that money involved unreported cash obtained from checks for painting work cashed at Broward check cashing stores. Kainen acknowledged that the cash wasn’t reported, and that it should have been reported. But he described what happened as a “no harm, no foul” kind of violation.

“The evidence at trial was that the cash was sent to New York to three foremen to pay day laborers, to pay expenses,” Kainen said. “They didn’t understand how to report it, but the net effect was whether you reported it or not there wouldn’t be any extra tax owed.”

The other part of the dispute involved $1.9 million deposited into two bank accounts that the Amadoroses also failed to report. But those deposits, it turned out, were actually made to repay loans the couple had made to their company over the years, Kainen said. In fact, he added, the couple overpaid their taxes in earlier years because the loans were not properly booked.

The trial began May 24, less than two months after the indictment, and involved tens of thousands of pages of documents, Garvin said.

Kainen said some witnesses testified about how IRS agents tried to unfairly implicate the Amadoroses by failing to fully inquire about what had happened. “I think the government saw a lot of checks cashed and essentially stopped their investigation. Our clients tried to explain, but they just didn’t get it,” Kainen said.

They jury deliberated for less than two days.

After the case was over, Kainen said, U.S. District Judge Cecilia M. Altonaga, who presided over the case, descended from the bench to the defendants’ hands and congratulate them.