West Lynn Creamery Agrees to Plead Guilty to Criminal Tax Conspiracy and Pay Record $7,200,000 Fine, Reports U.S. Attorney

Apr 02, 2001, 01:00 ET from U.S. Attorney

    BOSTON, April 2 /PRNewswire/ -- A local dairy has agreed to plead guilty
 to a criminal tax conspiracy to defraud the U.S. Internal Revenue Service and
 pay a $7.2 million fine, the largest criminal tax fine in New England history.
     United States Attorney Donald K. Stern, and Michael P. Lahey, Special
 Agent in Charge of the U.S. Internal Revenue Service, Criminal Investigation,
 announced today that WEST LYNN CREAMERY, INC., of Lynn, Massachusetts, has
 agreed to plead guilty to a charge that the company conspired to defraud the
 IRS and pay a $7.2 million fine.  The agreement is subject to Court approval.
     "West Lynn Creamery provided hundreds of customers inflated invoices for
 use in preparing tax returns and concealing income from the IRS," said U.S.
 Attorney Stern.  "To keep customers' business, West Lynn Creamery delivered
 cash as well as cream.  The $7,200,000 fine, the largest criminal tax fine in
 New England history, is a reflection of the immense size of this tax
 conspiracy."
     According to the information filed with the Court today, from at least
 1992 through December, 1997, West Lynn Creamery agreed with certain Dunkin'
 Donuts franchise owners and other customers to defraud the U.S. Treasury of
 income taxes through a false invoicing scheme, which was known as the "rebate
 program."  The "rebate program" was designed to retain and expand West Lynn
 Creamery's business and induce customers, particularly Dunkin' Donut
 franchisees, to remain loyal to West Lynn Creamery in a highly-competitive
 marketplace.
     In court papers filed this morning, West Lynn Creamery admitted that it
 provided certain Dunkin' Donuts franchise owners, and others, with: (1)
 materially false and inflated invoices, which enabled the franchise owners to
 inflate their expenses and under-report the net income of their franchises to
 the IRS; (2) loans, which West Lynn Creamery encouraged the Dunkin' Donuts
 franchise owners to pay back through a stream of "rebate" payments from West
 Lynn Creamery, which was not reported to the IRS as income; and (3) "rebate"
 payments, in the form of checks and U.S. currency, which the Dunkin' Donuts
 franchise owners were able to pocket personally and not report to the IRS as
 income.
     "It is our hope that the charges and record fine brought against West Lynn
 Creamery today will help maintain the public confidence in our tax system and
 help to promote voluntary compliance with the tax laws," commented Special
 Agent in Charge Lahey.
     The Information charges that customers could choose among prices they
 wanted to pay to West Lynn Creamery for cream and other dairy products.  For
 participants in the "rebate" program, West Lynn Creamery inflated the invoice
 prices for goods, obtained full payment from customers, and returned to
 customers the difference between the invoice price and the real price
 approximately 30-45 days later.   For example, during an extended period,
 certain Dunkin' Donuts franchise owners, who participated in the "rebate
 program," paid $4.28 for one half-gallon of light cream and received a $2.00
 per unit "rebate" from West Lynn Creamery for a net payment to West Lynn
 Creamery of $2.28.  By contrast, Dunkin' Donuts franchise owners, who did not
 participate in the "rebate program," paid $2.28 for the same one half-gallon
 of light cream (and received no "rebate").
     West Lynn Creamery fed the difference between the inflated invoice price
 and the real price of goods back to its customers through "rebate" checks
 which customers often "cashed" at their shop registers by substituting the
 checks for cash.  When customers preferred, West Lynn Creamery employees
 "cashed" customers' "rebate" checks at a "cash room" at West Lynn Creamery and
 delivered U.S. currency to customers, in increments up to $12,000 to one
 Dunkin' Donuts owner, which was pocketed and not reported to the IRS as
 income.
     Between 1992 and 1997, West Lynn Creamery paid out approximately $14.2
 Million in "rebates" to its customers, which resulted in a "tax loss" to the
 U.S. Treasury of approximately $4.0 Million.
     The investigation is continuing.
     The case is being investigated by Special Agents of the U.S. Internal
 Revenue Service, Criminal Investigation.  The prosecution is led by Assistant
 U.S. Attorney John M. Hodgens, Jr., Chief of Stern's Worcester Branch Office,
 and Assistant U.S. Attorney Stephen P. Heymann, Deputy Chief of Stern's
 Criminal Division.
 
 

SOURCE U.S. Attorney
    BOSTON, April 2 /PRNewswire/ -- A local dairy has agreed to plead guilty
 to a criminal tax conspiracy to defraud the U.S. Internal Revenue Service and
 pay a $7.2 million fine, the largest criminal tax fine in New England history.
     United States Attorney Donald K. Stern, and Michael P. Lahey, Special
 Agent in Charge of the U.S. Internal Revenue Service, Criminal Investigation,
 announced today that WEST LYNN CREAMERY, INC., of Lynn, Massachusetts, has
 agreed to plead guilty to a charge that the company conspired to defraud the
 IRS and pay a $7.2 million fine.  The agreement is subject to Court approval.
     "West Lynn Creamery provided hundreds of customers inflated invoices for
 use in preparing tax returns and concealing income from the IRS," said U.S.
 Attorney Stern.  "To keep customers' business, West Lynn Creamery delivered
 cash as well as cream.  The $7,200,000 fine, the largest criminal tax fine in
 New England history, is a reflection of the immense size of this tax
 conspiracy."
     According to the information filed with the Court today, from at least
 1992 through December, 1997, West Lynn Creamery agreed with certain Dunkin'
 Donuts franchise owners and other customers to defraud the U.S. Treasury of
 income taxes through a false invoicing scheme, which was known as the "rebate
 program."  The "rebate program" was designed to retain and expand West Lynn
 Creamery's business and induce customers, particularly Dunkin' Donut
 franchisees, to remain loyal to West Lynn Creamery in a highly-competitive
 marketplace.
     In court papers filed this morning, West Lynn Creamery admitted that it
 provided certain Dunkin' Donuts franchise owners, and others, with: (1)
 materially false and inflated invoices, which enabled the franchise owners to
 inflate their expenses and under-report the net income of their franchises to
 the IRS; (2) loans, which West Lynn Creamery encouraged the Dunkin' Donuts
 franchise owners to pay back through a stream of "rebate" payments from West
 Lynn Creamery, which was not reported to the IRS as income; and (3) "rebate"
 payments, in the form of checks and U.S. currency, which the Dunkin' Donuts
 franchise owners were able to pocket personally and not report to the IRS as
 income.
     "It is our hope that the charges and record fine brought against West Lynn
 Creamery today will help maintain the public confidence in our tax system and
 help to promote voluntary compliance with the tax laws," commented Special
 Agent in Charge Lahey.
     The Information charges that customers could choose among prices they
 wanted to pay to West Lynn Creamery for cream and other dairy products.  For
 participants in the "rebate" program, West Lynn Creamery inflated the invoice
 prices for goods, obtained full payment from customers, and returned to
 customers the difference between the invoice price and the real price
 approximately 30-45 days later.   For example, during an extended period,
 certain Dunkin' Donuts franchise owners, who participated in the "rebate
 program," paid $4.28 for one half-gallon of light cream and received a $2.00
 per unit "rebate" from West Lynn Creamery for a net payment to West Lynn
 Creamery of $2.28.  By contrast, Dunkin' Donuts franchise owners, who did not
 participate in the "rebate program," paid $2.28 for the same one half-gallon
 of light cream (and received no "rebate").
     West Lynn Creamery fed the difference between the inflated invoice price
 and the real price of goods back to its customers through "rebate" checks
 which customers often "cashed" at their shop registers by substituting the
 checks for cash.  When customers preferred, West Lynn Creamery employees
 "cashed" customers' "rebate" checks at a "cash room" at West Lynn Creamery and
 delivered U.S. currency to customers, in increments up to $12,000 to one
 Dunkin' Donuts owner, which was pocketed and not reported to the IRS as
 income.
     Between 1992 and 1997, West Lynn Creamery paid out approximately $14.2
 Million in "rebates" to its customers, which resulted in a "tax loss" to the
 U.S. Treasury of approximately $4.0 Million.
     The investigation is continuing.
     The case is being investigated by Special Agents of the U.S. Internal
 Revenue Service, Criminal Investigation.  The prosecution is led by Assistant
 U.S. Attorney John M. Hodgens, Jr., Chief of Stern's Worcester Branch Office,
 and Assistant U.S. Attorney Stephen P. Heymann, Deputy Chief of Stern's
 Criminal Division.
 
 SOURCE  U.S. Attorney