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Lawyer Charged With Forging Brother's Will Pleads Guilty to Tax Charges
The Legal Intelligencer
July 07, 2009
Allentown, Pa., attorney John P. Karoly Jr. pleaded guilty Monday to charges of dodging $1.9 million in federal taxes by hiding more than $5 million in income.
In return, prosecutors agreed to drop all charges relating to an alleged fraud scheme in which Karoly, 59, was accused of fabricating wills after his brother and sister-in-law died in a plane crash.
But under the terms of the guilty plea, Karoly also promised that he would drop his claims in the state court battle over the couple's estates and renounce any share in those estates.
Assistant U.S. Attorney Seth Weber said Karoly has also agreed to a non-jury trial to resolve a third category of charges in which Karoly is accused of scheming to get a $500,000 tax deduction for charity by laundering money through a church.
The deal came on the day that jury selection was set to begin in the first of two trials.
In the first, Karoly was to stand trial with his son, J.P. Karoly III, and Dr. John Shane, 72, on charges of conspiring to submit fake wills for Peter Karoly and his wife, Lauren Angstadt, a dentist who died in a plane crash in February 2007. Weber said the government has agreed to drop all charges against Shane and Karoly's son.
In the second trial, John Karoly Jr. would have been the sole defendant facing the tax, fraud and money laundering charges. Now that trial will be non-jury and will focus only on John Karoly Jr.'s legal argument that his handling of charitable donations did not amount to fraud or money laundering.
According to the original indictment, John Karoly Jr. and Peter Karoly had practiced law together until March 1986 when they dissolved their firm, Karoly & Karoly, because of "unhappy differences."
The indictment alleged that Peter Karoly and his wife later drafted wills that "generally divided their estates among their siblings," but which excluded his brother as an heir.
On Feb. 2, 2007, Peter Karoly, 53, and Angstadt, 51, died along with pilot Mike Milot of Germansville, Pa., when their small plane crashed attempting to land in rain and fog in New Bedford, Mass.
The indictment charged that John Karoly Jr. requested a delay in probating the wills, claiming that his brother and sister-in-law had executed updated wills in 2006 that gave John Karoly Jr. a significant portion of their multimillion-dollar estate.
But the new wills were fraudulent, the grand jury charged, and were designed to seize proceeds of the estates from the rightful heirs.
The indictment alleged that John Karoly Jr. had already persuaded Shane to sign both fake wills. Shane is a doctor who had performed expert witness services for both John Karoly Jr. and Peter Karoly and had "a social relationship" with Peter Karoly and Angstadt, according to the indictment.
In a superseding indictment handed up in March, the grand jury added charges of filing false income tax returns, mail fraud, wire fraud and money laundering.
According to the indictment, John Karoly Jr. reported that he had no taxable income in 2002 when he knew that he had more than $834,000 in taxable income. In 2004, the indictment charges, he reported more than $881,000 in income, but failed to report more than $3.3 million in additional income. And for the year 2005, the indictment alleges, he reported $565,000, but failed to report more than $1 million in additional income.
In addition to the tax counts, the superseding indictment also alleged that John Karoly Jr. had concocted a scheme to get a tax write-off for making a $500,000 charitable donation despite later persuading the recipient to transfer it to a non-charity organization that Karoly himself controlled.
U.S. District Judge Lawrence F. Stengel said Monday that he will hold a non-jury trial in September to resolve the three fraud charges and six money laundering charges stemming from the alleged charity scheme.
Weber said that John Karoly Jr. already faces a recommended prison term of 51 to 63 months for the tax charges and that a conviction on the fraud and money laundering charges could add about a year to the recommended guidelines range.
John Karoly Jr.'s lawyer, Robert E. Goldman, could not be reached for comment.
