Prosecutors believe that Michael G. Magnaldi”™s “brazen and selfish” tax frauds deserved a long prison sentence, but in a significant departure from their usual tough sentencing proposals they recommended leniency.
Magnaldi, 55, formerly of Pelham, has stage 4 prostate cancer, and by one calculation, might have a year to live.
“Magnaldi”™s need for medical care is an exceptionally compelling factor that, in this case, outweighs the other sentencing factors, which all cut the other way,” acting U.S. Attorney Audrey Strauss and assistant prosecutor David R. Felton stated in their recommendations to the court.
U.S. District Judge Vincent Briccetti sentenced Magnaldi on Aug. 26 to time served ”“ one day ”“ plus a year of supervised home confinement, and ordering him to pay $476,184 to the IRS and a $25,000 fine.
Magnaldi had operated MGM Tax Solutions in the Morris Park neighborhood of the Bronx and had catered to blue-collar clients in the Bronx and Westchester County.
In February, he pleaded guilty to two charges of falsifying tax returns from 2014 to 2017.
Prosecutors described him as a “ghost preparer.”
He inflated refunds and reduced taxes by filing phony information about capital losses, IRA contributions, various tax credits and donations to charities and other deductions.
The “ghost” part of the scheme was the concealment of his role. He did not list his name as the preparer, making it seem as if the clients had filled out the forms.
When the Internal Revenue Service audited his clients, Magnaldi charged an extra fee to respond on their behalf and created more false forms to back up bogus deductions and credits.
The scheme shorted the IRS by $232,767.
He also misrepresented MGM Tx Solutions”™ income and his own income on 2016 tax returns, using $243,417 that should have been paid in taxes to buy a $705,000 home in Pelham, with no mortgage. Last year, he moved to Florida.
Manhattan defense attorney Patrick A. Mullin stated in a sentencing memorandum that a significant part of the fraud happened in 2017, “when Mr. Magnaldi was coming to terms with his cancer diagnosis and undergoing intensive cancer treatments.” His condition took a serious toll on his “mental health and ability to focus on his work as a tax preparer, as well as his ability to make responsible decisions.”
Mullin asked the court for “utmost leniency,” citing Magnaldi”™s dire condition. He needs chemotherapy every three weeks. A prison sentence would put him at high risk for infections, particularly now with the Covid-19 pandemic. He also suffers from cardiac issues and might need surgery to repair an aortic valve.
This is a “very uncommon case,” the prosecutors conceded in their sentencing memo, “given the defendant”™s extraordinary, serious, and well-documented medical conditions.”
But his conduct was “quite troubling,” they stated, and typically would warrant 24 to 30 months in prison, under federal sentencing guidelines.
He committed two, distinct tax fraud schemes over several years. The fraud began before he was diagnosed with cancer and, they note, he had worked for 15 years as a public servant auditing taxes for the New York City Department of Finance.
He took advantage of clients who were unfamiliar with the tax system. He concealed his role. When the IRS audited his clients, he doubled down and filed new rounds of false forms.
“He chose,” the prosecutors argued, “to line his pockets.”
But Magnaldi”™s health conditions are extraordinary, prosecutors stated. Progressive, metastatic stage 4 prostate cancer patients have a five-year survival rate of 28%. “Magnaldi is approaching almost four years since his diagnosis.”
Mullin made a more optimistic pitch.
“A noncustodial sentence,” he stated, “would allow Mr. Magnaldi to obtain the critical medical treatment necessary to help save his life.”
