The Office of the United States Attorney for the District of Vermont announced that John R. Canney III, an attorney in Rutland, Vermont, pleaded guilty today in United States District Court in Burlington to charges of filing false tax returns. Chief U.S. District Judge Christina Reiss released Canney on conditions pending sentencing, which has been set for Sept. 21, 2017.
1. May 15, 2017, the United States filed a criminal information charging Canney with one count of filing a false individual income tax return for tax year 2011, and one count of filing a false corporate tax return for tax year 2011, the charges which he admitted today.
Mr. Canney is the sole owner of John R. Canney III, P.C., a Rutland law firm. The firm has two principal bank accounts: an operating account and a client trust account, also known as an IOLTA account. Mr. Canney used the trust account to maintain client retainer fees and funds held in trust. Upon earning fees through legal services, rather than transferring his professional remuneration from the IOLTA account to the operating account where it would be subject to accounting oversight for tax purposes, Mr. Canney instead transferred this earned income from the client trust account to his personal bank account.
1. preparation for filing both the corporation income tax return and his personal income tax return for tax year 2011, Mr. Canney provided his return preparer with documentation of transactions from the firm’s operating account, but not transactions from the client trust account. Because the return preparer used only operating account financial records to determine the firm’s net income, and because those records excluded the IOLTA diversions, the corporate tax return did not include the diverted funds as corporate gross receipts. Therefore, the gross receipts of the corporation for tax year 2011 were substantially higher than the gross receipts listed on the filed corporation income tax return. Likewise, the operating account financial records did not reflect the deposits from the IOLTA account into Mr. Canney’s personal bank account. Therefore, the personal tax returns that the preparer completed for Mr. Canney omitted the income derived from the IOLTA account. Consequently, the adjusted gross income for tax year 2011 was substantially higher than the adjusted gross income listed on the filed individual income tax return.
Canney faces up to three years of imprisonment and a fine of up to $250,000. The actual sentence will be determined with reference to the federal Sentencing Guidelines.
This case was investigated by the Internal Revenue Service. Canney is represented by Tristram J. Coffin of Downs Rachlin Martin PLLC in Burlington. The prosecutor is Assistant U.S. Attorney Kevin J. Doyle.
Source: U.S. Department of Justice, Office of the United States Attorneys
