Two West Virginia coal operators sentenced over tax scheme

Two defendants, who were part of a cash selling scheme involving over $10 million in structured transactions which were designed to defraud the Internal Revenue Service, were sentenced Feb. 26 in the U.S. District Court for the Western District of Virginia in Abingdon.

Calling this “a very serious crime,” District Judge James P. Jones sentenced William “Bill” F. Adams Jr., 55, Yukon, W.Va., and John B. Ward, 43, War, W.Va. to imprisonment for a term of 36 months. He also ordered Adams to forfeit $2.1 million and Ward to forfeit $2.2 million. The defendants operated various coal mines near Caretta, West Virginia, including under the names RS Mining, WA Mining and War Creek Mining, said a Feb. 26 statement from the U.S. Attorney for Western Virginia.

At the conclusion of a three-week jury trial in January 2014, both defendants were found guilty of the felony charge of conspiring to defraud the United States in the collection of taxes and structuring cash transactions to avoid reporting requirements. In addition, Ward was found guilty of 24 felony counts of illegally structuring transactions and Adams was convicted of 13 counts of illegally structuring transactions.

Ward and Adams were investigated and prosecuted as part of an investigation titled “Operation 10%.” The name was based on the fact that the people who sell cash to coal operators for purposes of tax evasion typically charge a fee of 10%. The scheme typically involved a coal operator’s company writing a check to a cash seller for a certain amount of money – for example, $77,000. The cash seller, disguised as a mine supply business, would then deposit the check in a bank and then make multiple cash withdrawals of $10,000 or less to avoid reporting requirements. Using this example, the cash seller would provide the coal operator $70,000 in cash and keep a fee of 10%, or $7,000. The coal operator than pockets the cash or uses it to pay his employees in cash. The coal operator deducted the payment to the cash seller as a business expense and did not report the cash he kept as personal income and did not pay employment taxes on the cash paid to employees.

Operation 10% has resulted in seizures and recovery by the United States of over $8.7 million to be forfeited or applied to evaded taxes.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.