Nightmare on the Isle of San Souci: Part VI — Phil Colasuonno Sued by Feds for $2.5 mm in Criminal Tax Case

NEW ROCHELLE, NY — The United States Attorney for the Southern District of New York has filed a civil lawsuit in United States Court for the Southern District of New York against Philip Colasuonno of New Rochelle, NY.

According to the complaint, filed earlier today as of November 30, 2021, Colasuonno (pictured above with Christopher Greco at Greco’s restaurant in Larchmont) owes $2,490,899.32 in penalties, including interest.

The U.S. Attorney brought the case at the request of the Chief Counsel of the Internal Revenue Service, a delegate of the Secretary of the Treasury of the United States.

The IRS made an assessment of a trust fund recovery penalty (“TFRP”) against Colasuonno in 2011. For his admitted conduct in the Criminal Tax Case, Colasuonno was originally sentenced to an incarceratory sentence of time served plus 5 years’ probation, and among other conditions of probation was ordered to “pay restitution in an amount no less than $781,467.00” to the IRS.

The United States may bring suit to recover TFRPs assessed within ten years of the assessment of the penalties. Today’s action is brought within the 10-year limitations period specified in the U.S. Code.

In our Nightmare on the Isle of Sans Souci series, Part IV and Part V introduced Phil Colasuonno, an associate of former Police Association of New Rochelle President and former New Rochelle Police Department Detective, Christopher Greco.

After Part III was published on July 30, 2021, Phil Colasuonno issued an angry statement:

“I want to save you time and inform you that I am a convicted felon and I served my time, and I was and still am a respected member of my community,” he said. “I respectfully request you do not spread rumors about me, or I will consult with my attorney especially if you hit upon a wrong note,” he said. “Please judge yourself accordingly”.

Philip Colasuonno is the Treasurer of both the Sans Souci HOA and the Sans Souci Pool & Tennis Club. Some Sans Souci residents, aware that Philip Colasuonno was a convicted felon who pleaded guilty to serious bank fraud and tax fraud charges, expressed dismay that Colasuonno would be made Treasurer of the Sans Souci HOA and Sans Souci Pool & Tennis Club.

Last month, Colasuonno was elected Treasurer of the Sans Souci HOA and Sans Souci Pool & Tennis Club. Given Philip Colasuonno’s track record as a tax cheat, liar, fraud, and convicted felon, why would Greco want him anywhere near the bank accounts of the Isle of Sans Souci HOA and the Sans Souci Pool and Tennis Club?

Philip Colasuonno was a certified public accountant and a partner in the accounting firm Philip Colasuonno & Co. LLP.

He currently operates his accounting firm out of the basement of a two-family house at 89 Drake Avenue in New Rochelle.

The federal case filed today goes back two decades when Philip Colasuonno and his brother Dominick Colasuonno, owned Prima Checking Cashing, Inc. and American Armored Car, Ltd.

According to a statement issued by the U.S. Department of Justice in 2007, Prima needed a line of credit to operate its check cashing business. The company maintained a banking relationship with Chase Bank and its predecessor banks since the late 1980s. Chase extended various forms of credit to Prima that were critical to Prima’s business and, in turn, required Prima to submit annual financial statements audited by an independent accounting firm. The financial statements were necessary for Chase to decide whether to continue to extend credit to Prima and, if so, how much.

Starting with the financial statements for 2001 and continuing until late 2004, Prima’s annual audited financial statements, which were prepared under the control of Philip Colasuonno, inflated the amount of fixed assets held by Prima by at least approximately $3.9 million.

Chase was falsely told that Prima had spent approximately $3.9 million in, among other things, making improvements to its check cashing locations. In fact, the statements were false and Prima did not make these improvements to its stores.

The Colasuonno brothers also defrauded Chase by artificially inflating the balance in Prima’s primary account at Chase with money obtained from American Armored Car. The balance in Prima’s account at Chase was calculated on a daily basis and Chase used this balance to monitor Prima’s business activity and to make daily lending decisions. By parking cash from American Armored Car in Prima’s Chase account for up to eight days, Prima’s bank balance at Chase was inflated and, thereby, the Colasuonno brothers misled Chase as to Prima’s true financial condition and misled Chase in its lending decisions.

From late 2000 through December 2005, The Colasuonno brothers paid, and caused to be paid, wages to employees of American Armored Car in cash, without withholding various taxes that employers are required to withhold from employee paychecks, and without having paid to the Internal Revenue Service various taxes that employers are required to pay. During that period of time, the Colasuonno brothers failed to withhold more than $390,000, and failed to pay employer taxes in an approximately equal amount. To cover up the cash payroll and their failure to withhold and pay various employment-related taxes, The Colasuonno brothers wrote, and caused to be written, weekly checks from American Armored Car made payable to a security company even though American Armored Car had no ongoing business relationship with this security company. The sole purpose for the checks to the security company was to disguise the payment of cash payroll to employees of American Armored Car. The defendants would then cash, and cause to be cashed, the checks to the security company at Prima, their check-cashing establishment, without the knowledge or involvement of the security company or any representative of the security company. American Armored Car would then fraudulently account for cash payroll to its employees in its books and records as payments for “outside services.”

On November 2, 2006, Colasuonno was found guilty after a jury trial of “substantive and conspiratorial bank fraud”, relating to deceitfully inflated financial statements that Colasuonno and his brother Dominick submitted to J.P. Morgan Chase in order to secure business loans from that institution.

Phillip Colasuonno waived indictment and, on June 18, 2007, pleaded guilty to an information further charging him with conspiracy to commit tax fraud and aiding and abetting the preparation of false tax returns.

These crimes originated in his “off the books” cash payments to certain employees over the course of five years and his resulting underpayment of $781,467 in payroll taxes.

On July 19, 2007, in a consolidated proceeding, the district court sentenced Colasuonno principally to time served (one day) with concurrent terms of five years’ supervised release on the two bank fraud counts and the tax fraud conspiracy count, and to a concurrent five years’ probation on the false tax preparation count.

Dominick Colasuonno was sentenced to 40 months’ imprisonment. Both were ordered to pay restitution based on the $781,467 in unpaid taxes.

In explaining its decision not to sentence Colasuonno within the recommended Guidelines prison range of 46 to 57 months for his crimes, the district court cited Colasuonno’s serious health problems.

The court nevertheless imposed special conditions on Colasuonno’s probation, confining him to his home for 46 months and requiring him to pay restitution to the Internal Revenue Service in the amount of $781,467.

The judgment of conviction directed Colasuonno to cooperate with the IRS in working out a schedule for such repayment.

For almost a year after sentencing, Colasuonno failed to make a single payment toward the restitution ordered by the district court. This prompted the district court to issue a summons requiring Colasuonno to appear and to answer a charge that he had failed to abide by a condition of his probationary sentence.

A number of hearings ensued at which Colasuonno, who had a monthly income of $7,059 dollars from Social Security benefits and private disability insurance, disputed whether he could be compelled to use the insurance payments to satisfy restitution.

This amount does not reflect an additional $6,020 in monthly income being received by Colasuonno’s wife.

The district court resolved this question against Colasuonno and, on December 12, 2008, ordered that, beginning January 15, 2009, Colasuonno pay 15% of his monthly income— $1,058.55—toward restitution. At that rate, not counting interest, Colasuonno would pay off the IRS in the year 2070.

When Colasuonno’s attempted to secure a stay or modification of the IRS payment schedule proved unsuccessful, he started to make the ordered payments, so that by July 15, 2009, he had paid approximately $6,630 in restitution.

On July 24, 2009, without notice to either the district court or the Probation Department, Colasuonno and his wife jointly filed a Chapter 7 bankruptcy petition in the United States Bankruptcy Court for the Southern District of New York. In doing so, Colasuonno violated federal law requiring a defendant on probation to notify the court of any material change in economic circumstances that might affect their ability to pay restitution.

On September 3, 2009, Colasuonno again moved in the district court for modification of his restitution schedule, citing financial hardship, he made no mention of the pending bankruptcy petition, much less did he indicate that it would impact his ability to pay restitution.

On October 21, 2009, the district court denied modification, observing that Colasuonno’s professed financial hardship arose from his “own choices and preferences,” including his expenditures on “unnecessary luxuries.”

That same day, Colasuonno moved pro se for reconsideration, for the first time revealing his bankruptcy filing but not arguing that it relieved him of his obligation to pay restitution on the schedule set by the court.

The district court granted reconsideration on October 27, 2009, and directed Colasuonno to provide further information about his financial condition. Instead, Colasuonno led a notice of appeal, divesting the district court of jurisdiction.

Subsequently withdrawing that appeal, Colasuonno again sought reconsideration of the restitution payment schedule, which the district court denied on January 20, 2010, without prejudice to renewal “after good faith negotiations, providing full knowledge to the bankruptcy trustee.”

Colasuonno continued making full restitution payments through November 2009. Although the district court never reduced the ordered monthly payment, from December 2009 through February 2010, Colasuonno paid only $300 per month toward restitution, after which he ceased paying restitution altogether. In total, he had paid $11,949 toward the ordered $781,467 restitution.

In April 2010, some nine months after filing for bankruptcy, Colasuonno first suggested—to his probation officer—that the automatic stay afforded by the Bankruptcy Code relieved him of any obligation to pay restitution.

On October 20, 2010, the district court issued a summons for Colasuonno to appear and to answer the charge that he had violated his probation by failing to make a good faith effort to pay the ordered restitution.

In defending against the charged violation, Colasuonno’s counsel argued in the alternative that (1) “the automatic stay should allow Colasuonno to forego restitution payments until the bankruptcy court rules on a reorganization,” and (2) Colasuonno did not willfully violate probation because he relied in good faith on his bankruptcy counsel, who advised him that he need not pay restitution while the automatic stay was in effect.

On February 18, 2011, the district court conducted an evidentiary hearing at which both Colasuonno’s wife and his bankruptcy counsel testified concerning the advice provided. The district court rejected Colasuonno’s advice-of-counsel defense, finding that he had failed fully to disclose to bankruptcy counsel relevant facts about his restitution obligation, especially, that payment was a condition of a criminal sentence. The district court further ruled that the automatic stay of the Bankruptcy Code did not operate to halt Colasuonno’s obligation to comply with conditions of his criminal sentence, including the condition of payment of restitution. Accordingly, it found Colasuonno in violation of probation.

On March 17, 2011, after affording the parties an opportunity for briefing and oral argument, the district court revoked Colasuonno’s probationary sentence and re-sentenced Colasuonno on the substantive tax crime of conviction to four months’ imprisonment followed by a one-year term of supervised release.

As a special condition of supervised release, the district court required Colasuonno to pay restitution in the amount of $846,913.61 (as now adjusted for interest) in monthly installments equal to 15% of Colasuonno’s gross monthly income.

In imposing this sentence, the district court found that “cheating” lay at the heart of both Colasuonno’s crime of conviction and his violation of probation; that the victim of Colasuonno’s cheating was not simply the government, but the public at large; that Colasuonno’s failure to pay restitution obligations had been “willful”; that the record revealed Colasuonno’s “efforts to use every single potential advantage not to pay his restitution obligations”; and that, consistent with these efforts, Colasuonno had “used bankruptcy as an excuse” to avoid paying restitution.

Colasuonno filed an appeal.

Failing to secure bail pending appeal from either the district court or this court, he served his four-month prison term and was released from custody on September 15, 2011.

Colasuonno completed his four-month incarceratory sentence.

Philip Colasuonno appealed the four-month sentence after he served it. The case of United States of America v. Philip Colasuonno Docket No. 11–1188–cr was decided in the United States Court of Appeals, Second Circuit on October 12, 2012

According to court records, Colasuonno asked the court to modify the amended judgment to clarify that he was under no obligation to pay restitution while incarcerated. The judge dismissed that part of his appeal as “unripe for adjudication” and found his other arguments to be “meritless”.

In issuing its decision to deny Colasuonno’s appeal, the court wrote “bankruptcy laws are not a haven for criminal offenders, but are designed to give relief from financial over-extension.” The court added, “a failure to recognize enforcement of the conditions of a probationary sentence or proceedings to address violations of probation as a “continuation” of the criminal action that resulted in such a sentence would allow the bankruptcy laws to become a haven for criminal offenders, allowing them to interrupt, if not completely frustrate, their criminal punishment.”

“Upon finding that Colasuonno breached that trust by employing every means available to avoid complying with the restitution condition of probation, the district court carefully reconsidered the statutory factors relevant to the tax crime of conviction and, mindful of Colasuonno’s related criminal conduct as well as his breach of trust, decided to revoke rather than continue probation and to resentence Colasuonno to a term of four months’ incarceration on the crime of conviction.”

“Consistent with our recognition that the purpose of a criminal action is to punish a defendant for offenses against the public, we conclude that Colasuonno’s probation revocation hearing, which could, and did, result in his being resentenced for his tax crime, is properly viewed as the continuation of a criminal action without regard to whether the violation triggering revocation pertained to restitution or some other condition of probation.”

“Colasuonno submits that the district court could not reach this conclusion absent evidence that counsel would, in fact, have given different advice had he known the information Colasuonno failed to disclose. We are not persuaded. No such evidence was required to sustain the district court’s finding that Colasuonno did not ‘fully and honestly lay all the facts before his counsel.’”

“No different conclusion is warranted by Colasuonno’s argument, raised for the first time on appeal, that as a non-lawyer, he should not have been expected to appreciate the relevance of the fact that his restitution obligation was imposed in a criminal case.”

“In finding Colasuonno not to have relied in good faith on the advice of counsel, but instead to have willfully violated the restitution condition of his probation, the district court was entitled to rely on unique insights gained from its direct dealings with Colasuonno throughout the litigation leading to his conviction, sentencing, and enforcement of the sentence.”

These insights prompted the district court to conclude that, since sentencing, Colasuonno had devoted his “efforts to using every single potential advantage not to pay his restitution obligations.”

Not only had he failed to cooperate with the IRS in developing a schedule for payment of restitution, but also, after the district court itself set a schedule, Colasuonno made repeated, if unsuccessful, efforts to stay its operation or to modify its terms.

At the same time Colasuonno claimed financial hardship to support these efforts, he continued to enjoy “unnecessary luxuries.”

The judgment revoking probation and resentencing Colasuonno was Affirmed and the application to modify the written judgment was Dismissed

According to Federal Bureau of Prisons records, Dominick Colasuonno, Inmate 57863-054, was released from Federal prison on October 30, 2009.

According to Federal Bureau of Prisons records, Philip Colasuonno, Inmate 57864-054, was released from Federal prison on September 15, 2011.

As for being a CPA, Philip Colasuonno was issued a Certified Public Accountancy license by the New York State Board of Regents on October 16, 1986. A CPA can lose their license if they are convicted of a crime or face a formal complaint of ethics violation, gross negligence or fraud. Colasuonno surrendered his CPA license following his conviction on bank fraud and tax fraud charges.

The title “accountant” by itself is not limited in New York State — anyone, regardless of the level of their training or experience, can call themselves an “accountant,” whether they have a license or not.

Certified Public Accountant and Public Accountant are titles that may only be used by those who are licensed by the Board of Regents to offer public accounting services in New York State. Only a licensed CPA or PA may perform the attest function in New York State. Unlicensed individuals like Philip Colasuonno may also provide tax planning, financial advisory and management advisory services.

We could not find Philip Colasuonno listed in the IRS Directory of Federal Tax Return Preparers.

Series: Nightmare on the Isle of Sans Souci