A federal grand jury in Newark, N.J., indicted Alfred Teo Sr., the majority shareholder of a multibillion-dollar plastics manufacturing holding company, for evading more than $61 million in income taxes over a three-year period.
Teo, 74, of Boca Raton, Fla., is charged with three counts of tax evasion and six counts of making and subscribing false personal and corporate tax returns in 2016, 2017 and 2018.
The indictment, which is a formal accusation, follows a June 17 complaint charging tax evasion before U.S. Magistrate Judge Edward Kiel, who set bond at $20 million.
Teo, who founded Lyndhurst, N.J.-based Sigma Plastics Group in 1978, posted the deed to a property to secure the bond following the June court hearing, a spokesman with the U.S. Department of Justice told Plastics News.
The property is a 12-story office building in Little Falls, N.J., described on a rental website as luxurious with a fully landscaped lobby that has waterfalls and marble and brass finishes.
According to documents filed in this case and statements made in court, Teo was the majority shareholder of Alpha Industries Management and he diverted $600 million from Alpha's line of credit to his brokerage accounts to trade and pay off margin calls in the securities markets.
Teo allegedly returned only a portion of the $600 million to Alpha and didn't report the remaining amount as income on his personal tax returns.
Instead, about $167 million was recorded as income to AAST Holding Corp., which is another Teo-owned entity unrelated to his plastics businesses. Through AAST, federal investigators say Teo engaged in numerous acts to conceal the income he received from Alpha in order to evade income taxes.
Investigators with the Internal Revenue Service say Teo provided false deduction information to his tax preparer in the form of fictitious "cost of goods sold" to artificially reduce his income and avoid taxes owed. The tax preparer used the information to report AAST's cost of goods sold in the amounts of approximately $26 million, $51 million and $87 million for 2016, 2017 and 2018, respectively.
Teo's personal IRS Forms 1040 for 2016, 2017 and 2018 included AAST's net business income — as reduced by the approximately $165 million in AAST's false cost of goods sold — as income to Teo. As a result, Teo understated his personal income for those years by approximately $165 million, according to investigators.
The reduction of AAST's net business income with supposed cost of goods sold expenses resulted in a tax loss of approximately $10 million, $20 million and $31 million in 2016, 2017 and 2018, respectively, for a total tax loss of approximately $61 million, according to federal investigators.
The three tax evasion charges in the indictment each carry a maximum potential penalty of five years in prison and a $250,000 fine. The six false tax return charges each carry a maximum potential penalty of three years in prison and a $250,000 fine.
Teo has served prison time in the past. He spent 11 months in a minimum-security facility in West Virginia after pleading guilty in June 2006 to five counts of securities fraud for insider trading in two companies in 2004.
Three fraud counts were connected to the former Musicland Stores Corp., which operated Sam Goody stores throughout the country. Teo was the largest shareholder, and he admitted to buying 45,000 shares of Musicland before electronics retailer Best Buy Co. Inc. publicly announced it would buy the music store company.
The two other fraud counts involved insider trading when Teo was a director of Cirrus Logic Inc.
The U.S. Department of Justice said at the time that Teo's stock trades, and those of people he tipped off about the inside information, generated $1.8 million in profit.
