IRS agents are involved because money that entered the practice without being reported as taxable income is money that the federal government can tax, and the failure to report it is a separate federal crime from the controlled substance offense that generated it.
The involvement of IRS Criminal Investigation agents in a DEA opioid fraud investigation is one of the clearest indicators that the investigation has identified a cash component to the practice’s operations. Cash payments for controlled substance prescriptions, unreported income from the prescribing practice, or financial structuring that suggests an effort to conceal income from the IRS are each triggers for IRS CI involvement that transforms a drug distribution investigation into a comprehensive financial crime investigation.
The Income Tax Dimension
A practitioner who received cash payments for controlled substance prescriptions and did not report those payments as income has committed a tax crime independent of the underlying drug distribution offense. 26 U.S.C. 7201 prohibits the willful attempt to evade or defeat any tax imposed by the Internal Revenue Code. The income from the prescribing operations, whether received as cash, as insurance reimbursement, or through any other mechanism, is taxable income that must be reported. The willful failure to report it is tax evasion carrying a maximum sentence of five years imprisonment per count.
IRS CI’s contribution to the opioid fraud investigation is the financial dimension: the reconstruction of the practice’s income from all sources, the comparison of that reconstruction against the tax returns filed by the practitioner, and the identification of the gap between reported and actual income that supports a tax evasion charge. The financial reconstruction is conducted through bank record analysis, through records subpoenaed from payment processors and insurance carriers, through interviews with former employees who handled cash receipts, and through analysis of the lifestyle evidence that reflects spending inconsistent with reported income.
Money Laundering as an Additional Theory
Beyond the tax evasion charge, the financial component of an opioid fraud investigation may support money laundering charges under 18 U.S.C. 1956 and 1957 if the proceeds of the drug distribution or healthcare fraud were laundered through financial transactions designed to conceal their origin. A practitioner who deposited cash from controlled substance prescriptions into accounts structured to avoid currency reporting requirements, who transferred proceeds through shell entities, or who used the proceeds to purchase real estate or other assets characterized as legitimate investments has potentially committed money laundering that is independent of both the tax evasion and the underlying prescribing offense.
Need Help With Your Case?
Don't face criminal charges alone. Our experienced defense attorneys are ready to fight for your rights and freedom.
- 100% Confidential
- Response Within 1 Hour
- No Obligation Consultation
Or call us directly:
(212) 300-5196The money laundering charges add significant sentencing exposure because the guidelines calculate the offense level for money laundering based on the value of the laundered funds, not the net loss from the underlying fraud. A fraud that produced a modest net loss to federal programs may have involved laundering transactions of substantially greater value, and the laundering guidelines offense level may exceed the fraud guidelines offense level significantly.
The Financial Investigation’s Scope
IRS CI’s investigation of the financial dimension of an opioid fraud case is comprehensive and may extend well beyond the tax returns the practitioner filed. Bank accounts, brokerage accounts, real property records, vehicle registrations, business filings, and any other record that reflects the practitioner’s financial position are within the scope of the financial investigation. The net worth method, used by IRS CI to establish unreported income through the analysis of the practitioner’s financial position at the beginning and end of the tax year, may reveal income that was never reported and that is traceable to the prescribing operations.
Todd Spodek
Lead Attorney & Founder
Featured on Netflix's "Inventing Anna," Todd Spodek brings decades of high-stakes criminal defense experience. His aggressive approach has secured dismissals and acquittals in cases others deemed unwinnable.
The IRS agent who is present at the initial meeting with the DEA’s investigative team is not there because the tax return was interesting. They are there because the financial investigation has identified income that was not reported, transactions that suggest concealment, or a lifestyle inconsistent with the practitioner’s declared income. Their presence is a signal about the investigation’s financial dimension that deserves the same immediate attention as the DEA’s controlled substance investigation.
Federal agents execute a search warrant at your medical practice, seizing patient records and prescription logs.
Can they take patient records without patient consent?
A valid federal search warrant overrides HIPAA privacy protections. However, the warrant must be properly scoped. An attorney can challenge overly broad warrants and move to suppress improperly seized evidence.
This is general information only. Contact us for advice specific to your situation.
Tax Counsel
The defense of a DEA opioid investigation with an IRS CI component requires counsel experienced in both federal criminal defense and federal tax controversy. The tax evasion charge, the money laundering theory, and the asset forfeiture that may accompany them are specialized legal areas that require specialized defense. The criminal defense attorney who handles the drug distribution and healthcare fraud charges may or may not have the tax controversy background to address the IRS CI component with equal effectiveness. The representation team in a multi-agency investigation with an IRS component should include counsel who has tried federal tax cases and who understands the specific evidentiary and legal arguments available in the tax dimension of the matter.
