Between the two them, former couple and Newport Beach socialites Richard and Jolene Engel owed $1.3 million in unpaid state and corporate taxes for failing to report $180 million in income from a power-plant refurbishing business they owned in Huntington Beach.
Each has paid back hundreds of thousands of dollars, still owes hundreds of thousands more and is having trouble raising the full tab because of the Orange County district attorney's office (OCDA), according to Richard Gardner Engel.
High-flyers on the Newport Beach coast social scene, Jolene Engel was president and Richard Engel was the chief financial officer of Powerplant Maintenance Specialists Inc. (PMSI) between 1998 and 2001.
In 1999, PMSI won a $108 million contract from then-owner Southern California Edison to refurbish the AES Corp. plant in Huntington Beach. The contract called for AES to make biweekly $6.13 million payments to PMSI to obtain a discount on the contract price for work estimated to take 90 days from the date the project received the required permits. The contract called for work to be completed by June 1, 2001.
But the OCDA says that in late 2000, a labor union called with allegations regarding possible fraud related to unpaid PMSI workers rehabilitating the AES plant. After two years of investigation by the OCDA and the California Franchise Tax Board that began with a search warrant served on PMSI in January 2001, tax evasion charges were filed against the Engels, who have since divorced.
"This is the first tax-evasion case this office has seen where the money owed to the state is in the eight figures," Orange County District Attorney Tony Rackauckas told reporters at a press conference at the time.
The Engels pleaded guilty to the charges against each of them in December 2011, and the OCDA dutifully issued a press release on the plea deal. After all, there was huge public interest in the Engels and their money woes, which generated headlines not only in Orange County's mainstream and alternative press (here!), but also with labor union sites because PMSI was notoriously a nonunion shop.
In a letter to Orange County Superior Court Judge William Froeberg last fall, Richard Engel blamed his inability to come up with enough scratch to repay what he owes on that OCDA news release, claiming he lost a $400 million project because of the negative publicity it generated.
Engel wrote the judge that, when he agreed to plea bargain, he was banking on the $1.8 million profit the project would have earned.
"My state of mind when signing and agreeing to the terms was that I couldn't wait to bring the money to the court and satisfy my debt to the state of California,'' Engel wrote to Froberg.
Then came the OCDA press release.
"The DA has made it impossible for me to perform based on its malicious, inaccurate press release," Engel claimed.
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Since their guilty pleas, the Engels have been scrambling to repay what they owe so they can avoid going to prison. Jolene Engel could be sentenced to up to five years and eight months in state prison, while Richard Engel faces up to 12 years and eight months inside. He has a sentencing hearing scheduled for Feb. 7.
Jolene Engel, who handed over a check for $200,000 on Friday, now owes a little more than $500,000 under the terms of her plea agreement, but her attorney intends to challenge that figure at a scheduled March 14 hearing, Deputy District Attorney Bill Overtoom told City News Service.
Richard Engel filed amended tax returns for 1998 through 2001 on Friday. He's repaid about $121,000 and still owes just shy of $700,000.