According to evidence presented at trial and statements made in court, James Rice, an orthopedic surgeon, and his wife Susan Rice, who worked for his medical practice, conspired to defraud the IRS, evaded payment of taxes, failed to pay over employment taxes and failed to file tax returns. In total, the Rices did not pay more than $2.4 million in personal, corporate and employment taxes that they owed.
From 1992 to present, James Rice owned and operated Sandhills Orthopaedic, a medical practice located in Pinehurst, North Carolina. Susan Rice handled the practice’s administrative operations. Between 2007 and 2016, the Rices conspired to defraud the United States with respect to Sandhills Orthopaedic’s employment taxes and their individual income taxes. To accomplish this, the Rices transferred approximately $1 million from Sandhills Orthopaedic’s business bank accounts to other accounts they controlled, including personal bank accounts and a business account related to an unrelated truffle company owned by Susan Rice. The Rices also used Sandhills Orthopaedic’s business bank accounts to pay for personal expenses, including a country-club membership and dog kennel boarding.
The Rices also withheld nearly $580,000 in taxes from the paychecks of the medical practice’s employees, then used those withholdings for their own personal gain rather than paying them over to the IRS as required by law. Finally, from 2014 to 2016 the Rices did not file individual tax returns, and James Rice did not file corporate taxes for another entity he owned, even though they were respectively required to file returns for all of those years.
“As a result of today’s sentence, James and Susan Rice’s prolonged effort to evade paying their taxes has come to an end,” said Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division. “Each year, the vast majority of Americans and businesses follow the tax laws and pay their fair share. Those who willfully evade such obligations should fully expect to be held accountable for their criminal conduct.”
“Failure to pay over withheld taxes is a serious offense,” said Special Agent in Charge Donald “Trey” Eakins of the IRS Criminal Investigation, Charlotte Field Office. “Employment tax evasion results in the loss of tax revenue to the U.S. government and the loss of future Social Security and Medicare benefits for those employees. The investigation of employment tax fraud is a priority for IRS Criminal Investigation, and our special agents will vigorously pursue anyone who collects these taxes and then uses the funds for their own personal gain.”
On Sept. 20, 2021, a federal jury convicted the Rices of one count of conspiracy to defraud the United States, one count of tax evasion, two counts of failure to pay over employment taxes and three counts of failure to file tax returns. The jury also convicted James Rice of three counts of failure to file corporate tax returns. In addition to the term of imprisonment, U.S. District Judge Catherine C. Eagles ordered the Rices to serve three years of supervised release and to pay approximately $2.4 million in restitution to the United States.
