Two owners of a Brooklyn-based plumbing company, Liberty Water & Sewer (Liberty Water), have been charged with tax evasion and conspiracy to defraud the United States. Alexander Figliolia, Jr., and Kenneth Sutherland operate Liberty Water as a partnership. Figliolia, Jr., and Sutherland were arrested earlier today.
“Business owners like everyone else have an obligation to pay their fair share of taxes,” said Breon Peace, United States Attorney for the Eastern District of New York,. “As alleged, the defendants made millions of dollars repairing water and sewer lines for New York City residents, but instead of dutifully paying the taxes they owed, they improperly classified more than $10 million of personal expenses as business expenses. Their greed drained the government’s coffers of nearly $4 million in tax revenue.”
Between January 2017 and June 2020, the defendants allegedly evaded personal income taxes by issuing checks and wiring money from Liberty Water’s bank account to pay for personal expenses. The defendants classified these payments of their personal expenses as business expenses of Liberty Water, thereby reducing Liberty Water’s profits and reducing the defendants’ personal income tax burdens.
Figliolia, Jr., and Sutherland classified more than $1.75 million of personal credit card expenses, including home renovations, a family trip to Disney World, jewelry and clothing, as business expenses. Figliolia, Jr., issued more than $4 million in checks from Liberty Water’s bank account to a law firm for the payment of personal expenses, including the purchase of multiple properties and a yacht, but classified them as business expenses of Liberty Water.
Figliolia, Jr., and Sutherland obtained loans of more than $2.8 million on personal life insurance policies, and repaid the loans using Liberty Water funds, allowing them to siphon that money out of the business without paying taxes. In total, Figliolia, Jr., and Sutherland intentionally diverted approximately $10,225,213 from Liberty Water between tax years 2017 and 2019, resulting in the evasion of approximately $3,933,046 in federal taxes.
“The defendants, as charged, evaded taxes on millions of dollars of income from the business they conducted in New York City, by misclassifying lavish personal expenses as business expenses to reduce their tax burden,” said Jocelyn E. Strauber, Commissioner, New York City Department of Investigation.
The charges in the indictment are allegations, and the defendants are presumed innocent unless and until proven guilty. If convicted, the defendants each face a maximum sentence of five years’ imprisonment on each count.