Federal court in Orange CountyEXPAND
Federal court in Orange County
R. Scott Moxley.

Could Charitable Deeds Save Three Men From Prison For Income Tax Evasion?


More than 100 somber people
squeezed into U.S. District Court Judge Andrew J. Guilford’s courtroom this week to offer support for three ultra-wealthy, Iranian-born Southern California men—two brothers and their brother-in-law—the Internal Revenue Service caught hiding more than $10 million in secret foreign bank accounts.

But the case isn’t a
typical income tax evasion story for Dan Kalili, David Kalili and David Azarian. This one begins with Ayatollah Khomeini’s 1979 toppling of the Shah of Iran and the defendants, Iranian Jews, fleeing to the United States in fear for their lives. After long stints in Georgia, they relocated to Orange County in the 1990s, becoming not just successful businessmen in the housing industry and proud fathers, but also major charitable givers for military veterans, the homeless, battered women, needy Muslims as well as abused gay youth. During the April 24 hearing, an impressed Guilford acknowledged the crowd and held up three notebooks of letters from individuals attesting to the defendants’ generosity.

Could that type of genuine
community service, much of it down without fanfare or seeking tax breaks, keep the men from prison?

For federal prosecutors Jorge
Almonte and Jason M. Scheff the answer was no. Almonte and Scheff argued simple greed inspired the crime. They also noted how the defendants hid the numbered accounts in Switzerland for years and, “with law enforcement closing in,” shifted the money to banks in Israel, which at the time were not cooperating with IRS agents.

“[They] were doing what [they]
could to stay one step ahead [of investigators],” Scheff told the judge.

For robbing the U.S. Treasury of
at least $780,000 in due taxable interest income payments, the prosecutors advocated sentencing guideline punishments of 24 months in prison for Dan Kalili and 18 months for both David Azarian and David Kalili.

But the defendants—who’d already admitted
guilt without trial and paid the back taxes plus exorbitant penalties totaling more than $3.3 million—sought leniency.

They wanted Guilford to ignore
sentencing guidelines, accept that the prosecutors were mistaken about motive, affirm their remorsefulness and allow them to avoid prison entirely in exchange for home confinement punishments.

“I sincerely apologize,” an
emotional, occasionally weeping David Kalili told the judge as some members of the audience wiped tears from their eyes. “My actions were inexcusable . . . I have no one to blame but myself.”

According to defense lawyers, the
secret bank accounts originated with the best of intentions: funds for family protection in the event of unforeseen, anti-Semitic disasters. For example, the Kalili family escaped Tehran, in part, because the patriarch, banker Daniel Khalili, had funneled money to New York in pre-revolution times. Though life in Georgia was undoubtedly safer, the immigrants experienced aggressive bigotry there too, a condition that reinforced the notion of always having a hidden "rainy day" fund to escape.

David Kalili, who was born in
1964 and lives in Newport Beach, told Guilford he was 14 years old when he saw a group of Georgia boys surround and terrorize his 7-year-old sister by making wild gestures and American Indian war noises. “Growing up in the deep South was not ordinary,” he said. “It was like we’d been thrown into a dark, turbulent ocean again. I assure you that [our motive in the secret accounts] wasn’t greed. It was to prepare us for the next storm.”

With a pained look on his face, Guilford
asked: Why not create the special emergency account and report the interest income as required by law?

“It was stupid,” the defendant,
who has been lecturing college students about his mistake, replied. “It was foolish. It was because of our insecurity. It has to do with what the past has taught us . . . It wasn’t from arrogance or greed. We’re not troublemakers.”

Scheff acknowledged the
remarkable immigrant story and “commendable” charitable endeavors, but said prison terms were appropriate for the conduct and a criminal justice necessity as a deterrence to future violators.

After weighing all the factors, Guilford
determined the appropriate federal prison punishments: Dan Kalili, 12 months and one day; David Kalili, eight months; and David Azarian, eight months.

Dan Kalili and David Azarian must
surrender to the U.S. Bureau of Prisons by May 26, 2017.

The judge gave David Kalili, who is suffering medical ailments, more
time to get his affairs in order. He must turn himself in by Jan. 26, 2018.

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