Introduction
Thomas Forster Gehrmann, Jr., a chiropractor from Colorado Springs, Colorado, was sentenced on April 4, 2019, to 24 months in federal prison followed by three years of supervised release for conspiracy to defraud the United States and filing false income tax returns. The sentencing marked the culmination of a years-long investigation into Gehrmann’s financial misconduct, which spanned from 2007 to 2011. U.S. District Court Judge R. Brook Jackson presided over the case, which had garnered significant attention due to its scope and complexity. A restitution hearing is scheduled for May 23, 2019, to determine the financial penalties owed by Gehrmann.
Background and Charges
Thomas Gehrmann, age 45, managed two chiropractic businesses in Colorado Springs: Atlas Chiropractic Center at Briargate, Inc., and SpineMed Decompression Centers of Colorado, LLC, collectively referred to as the Atlas Entities. These businesses provided chiropractic and spine-adjustment services, and they shared resources such as employees, business bank accounts, an outside bookkeeper, and a Certified Public Accountant (CPA). Gehrmann played a central role in managing these entities, but his financial practices raised red flags.
In July 2015, Gehrmann was indicted for conspiring to defraud the United States and for filing false U.S. Individual Income Tax Returns for the years 2007 through 2010. Following a six-day trial in November 2018, a jury found Gehrmann guilty of all charges. The indictment detailed a scheme involving deliberate omissions of income from business records and personal tax filings, enabling Gehrmann to evade substantial amounts of federal income tax.
The Scheme: Manipulating Income Records
The conspiracy to defraud the United States hinged on Gehrmann’s manipulation of financial records. Patients at the Atlas Entities typically made payments for chiropractic services via check, cash, credit card, or third-party payers such as insurance companies or attorneys. While payments made to Atlas or SpineMed were deposited into the businesses’ accounts, a significant portion of payments was funneled directly to Gehrmann and two other chiropractors in cash or checks made payable to individuals rather than the businesses.
Gehrmann maintained a physical receptacle, colloquially known as the “cookie jar,” in his office. This cookie jar became the repository for cash payments and checks made out to individual chiropractors. Once a week, Gehrmann and his colleagues divided the contents of the cookie jar among themselves, with Gehrmann meticulously recording the distributions in a book titled Secret Records. However, these records were kept hidden from the official bookkeeping process.
Concealing Income from Tax Authorities
The crux of Gehrmann’s tax fraud lay in the deliberate omission of income from official business and tax records. Statements for deposits into the Atlas Entities’ business bank accounts were provided to the outside bookkeeper and subsequently to the CPA. These statements reflected only the income deposited into the accounts, which excluded substantial amounts of cash and checks diverted into the cookie jar. Crucially, Gehrmann did not provide the bookkeeper or CPA with the check binders, “Daily Stats Sheets,” or any other records that documented the full extent of the businesses’ income.
By excluding these records, Gehrmann underreported his income on both the partnership tax filings for the Atlas Entities and his personal income tax returns. This omission allowed him to reduce his taxable income significantly, defrauding the federal government of taxes owed. From 2007 to 2010, this pattern of deception became routine, with Gehrmann and his co-conspirators systematically diverting and concealing income.
Legal Proceedings and Conviction
The investigation into Gehrmann’s activities was spearheaded by IRS Criminal Investigation, a specialized division tasked with uncovering tax fraud and financial crimes. Following years of inquiry, Gehrmann was indicted in July 2015. The trial, held in November 2018, revealed extensive evidence of his fraudulent activities, including testimony about the “Secret Records” and the use of the cookie jar to conceal income.
Assistant U.S. Attorneys Suneeta Hazra, Bryan Fields, and Conor Flanigan prosecuted the case, presenting a compelling narrative of Gehrmann’s systematic efforts to evade his tax obligations. On November 6, 2018, the jury returned a guilty verdict after a six-day trial. U.S. Attorney Jason Dunn and IRS Criminal Investigation Special Agent in Charge Steven Osborne emphasized the importance of holding individuals accountable for tax fraud.
“On this tax day, it is important to remind would-be tax cheats that we will aggressively investigate and prosecute tax fraud cases and that those found guilty can face significant jail time,” stated U.S. Attorney Jason Dunn. Similarly, Special Agent Steven Osborne remarked, “Tax fraud is not a victimless crime. This is an important victory for America’s taxpayers who play by the rules and have no tolerance for those who shirk their tax responsibilities.”
Sentencing and Impact
Judge R. Brook Jackson sentenced Gehrmann to 24 months in federal prison, to be followed by three years of supervised release. While the sentence reflects the seriousness of the crime, it also underscores the court’s recognition of the systemic nature of Gehrmann’s fraud. Additionally, a restitution hearing set for May 23, 2019, will determine the financial penalties owed by Gehrmann, including repayment of the taxes he evaded.
Gehrmann’s conviction sends a strong message about the consequences of tax fraud. The case also serves as a cautionary tale for professionals who might consider manipulating financial records to evade taxes. “The courts have overwhelmingly and consistently shown that you will be held accountable for such actions, and today’s sentencing is a costly reminder,” Osborne said.
The Role of Accountability in Tax Compliance
Gehrmann’s case highlights the importance of transparency and accountability in financial and tax reporting. Tax fraud is not merely a violation of financial regulations; it undermines the integrity of the tax system and shifts the burden onto law-abiding taxpayers. By diverting income and concealing it from tax authorities, Gehrmann not only deprived the federal government of revenue but also violated the trust placed in professionals to act with integrity.
The Atlas Entities’ practice of directing patients to make checks payable to individual providers rather than the business entities exemplifies how seemingly innocuous practices can be weaponized to facilitate fraud. The use of informal record-keeping, such as the “Secret Records,” further underscores the deliberate nature of the scheme.
Broader Implications
While Thomas Gehrmann’s actions led to his conviction, they also serve as a broader reminder of the vigilance required to prevent and detect financial misconduct. Businesses, particularly those that handle significant cash transactions, must implement robust internal controls to ensure accountability. Employees, bookkeepers, and CPAs also play a critical role in identifying and addressing irregularities in financial reporting.
For law enforcement and regulatory agencies, the case underscores the importance of thorough investigations and the role of forensic accounting in uncovering hidden income streams. The collaboration between IRS Criminal Investigation and the U.S. Attorney’s Office was instrumental in bringing Gehrmann to justice.
Conclusion
The sentencing of Thomas Forster Gehrmann, Jr. marks the conclusion of a significant tax fraud case that exposed the risks and consequences of evading financial accountability. Over a four-year period, Gehrmann engaged in a deliberate scheme to conceal income and defraud the federal government. His actions not only resulted in a prison sentence but also highlighted the broader implications of tax fraud on society.
As taxpayers prepare their filings each year, Gehrmann’s case serves as a stark reminder of the importance of honesty and compliance. Tax fraud is not a victimless crime; it impacts every taxpayer who dutifully fulfills their obligations. For professionals and business owners, the case underscores the need for ethical practices and the dangers of succumbing to financial temptation.
With a restitution hearing still pending, the final financial consequences of Gehrmann’s actions remain to be determined. However, his conviction and sentencing stand as a testament to the principle that no one is above the law. As U.S. Attorney Jason Dunn aptly noted, the aggressive investigation and prosecution of tax fraud cases ensure accountability and uphold the integrity of the tax system for all Americans.
