On March 9, 1995, Mark McLaughlin and his brother Russell
were indicted by a federal grand jury in Philadelphia, Pennsylvania on charges of tax evasion in connection with their Holland-based company that performed building inspections for municipalities in Pennsylvania and New Jersey.
On May 11, 1995, a superseding indictment was returned adding their sister, Robin McLaughlin to the case. The indictment, based on an audit by the Internal Revenue Service of their 1988 tax return, alleged they diverted more than $1.5 million from the company, Building Inspections Underwriters, to evade federal income taxes.
They went on trial on February 27, 1996, The prosecution contended that the company had accounts at New Jersey National Bank and First Fidelity Bank and each contained more than $700,000 in corporate receipts that were not disclosed as income on the 1988 federal tax return—a total of more than $1.5 million.
Mark McLaughlin claimed that the failure to report the income was based on either his or his accountant’s belief that the accounts were holding reserves set aside for policies sold to homeowners that guaranteed any repairs needed for defects discovered after homes were sold. To the extent that income not used as warranty reserves, he claimed, it was an unintentional omission by the accountant.
But their former accountant, Melvin Cherry testified that he had no knowledge of bank accounts and the prosecution argued that the existence of the accounts was purposefully hidden.
On March 13, 1996, Mark and Russell McLaughlin were convicted of tax evasion and Russell McLaughlin was convicted of signing a false tax return. Robin McLaughlin was acquitted. Mark and Russell McLaughlin were each sentenced to 24 months in prison and fined $100,000.
On appeal, the U.S. Court of Appeals in 1997 granted Russell McLaughlin a new trial, ruling that his Fifth Amendment right had been violated by admission of evidence regarding his production of subpoenaed documents. The court affirmed Mark Russell’s conviction, but sent his case back for resentencing because the trial judge had applied an enhancement incorrectly.
Mark McLaughlin’s sentencing was postponed pending his brother’s retrial.
In November 1998, Russell McLaughlin went to trial for a second time. By that time, Mark McLaughlin had discovered disbursement journals and bank statements that suggested that the accountant, Cherry, had lied when he said he did not know about the bank accounts. Confronted at this trial, Cherry admitted that he did know about the accounts after all.
Russell McLaughlin was acquitted.
On March 15, 1999, Mark McLaughlin moved for a new trial, citing the failure of the prosecution to turn over evidence that Cherry knew of the accounts, and knowingly allowing Cherry to testify falsely.
On March 16, 2000, Chief U.S. District Judge James Giles granted Mark McLaughlin's motion for a new trial, ruling that McLaughlin had received an unfair trial because of Cherry’s false statements.
On May 5, 2000, the prosecution dismissed the charges.
– Maurice Possley