San Diego, California - A local business owner was sentenced in federal court Monday on charges of bank fraud and tax evasion. David Daughtrey, 60, of El Cajon, was sentenced by U.S. District Judge Larry A. Burns to 18 months in custody and ordered to pay restitution of $1,519,590.63.
In July 2020, Daughtrey pleaded guilty to one count of conspiracy to commit bank fraud and tax fraud, and one count of filing a false tax return. Daughtrey’s illegal conduct spanned for a decade, from 2006 until 2016. For several years, Daughtrey evaded income tax by under-reporting his income and orchestrated an illegal scheme to fraudulently obtain a mortgage for his $1.8 million residence using a third party. The total tax loss to the United States in this case was $1,053,989.63.
“The defendant abused our tax and banking systems for his own financial benefit, and the victims of that crime are ethical taxpayers and bank customers,” said Acting U.S. Attorney Randy Grossman. “Today’s sentence will hopefully remind others that there is a high price to pay for such deception.” Grossman thanked prosecutor Oleksandra Johnson and agents from the IRS and FBI for their excellent work on this case.
“While Mr. Daughtrey achieved business success, he failed in his obligations as an American by lying to our banks and cheating the government,” said Special Agent in Charge Ryan L. Korner, IRS Criminal Investigation. “Today’s sentencing shows that we will hold accountable those who deceive and exploit our people and financial institutions because of their greed.”
“The FBI and our partners at the IRS uncovered David Daughtrey's mortgage fraud and tax evasion scheme using our team's financial and fraud expertise,” said FBI Special Agent in Charge Suzanne Turner. “Today's sentencing serves as a warning to those who attempt to personally gain by deliberately cheating the government and the integrity of the banking system through financial fraud. Our team of fraud experts will bring justice in these white-collar cases.”
According to court documents, from July 2006 until April 2016, Daughtrey conspired with others to commit the crimes to which he pleaded guilty. As part of the bank fraud scheme, Daughtrey directed another individual to submit a mortgage application to a national bank to purchase a $1.8 million five-bedroom residence, and to falsely claim that the funds used as down payment belonged to, and the residence would be used by, the third party.
In reality, Daughtrey provided the funds and the home was intended to be Daughtrey’s primary residence. Daughtrey made monthly mortgage payments of approximately $8,000 for his residence but continued to represent to the bank that the third party owned the house. Daughtrey later submitted a false hardship letter on behalf of the third party in an effort to modify the terms of the loan on the home.
Over several years, Daughtrey conspired to commit tax evasion by filing tax returns listing substantially less income than Daughtrey actually earned. Daughtrey’s tax return for the year 2012, for example, omitted at least $498,612 in income. Daughtrey failed to report his total income in tax years 2013, 2014, and 2015, and did not file timely tax returns for subsequent years. Daughtrey agreed to pay $1,053,989.63 in restitution to the IRS, which includes the total tax loss plus penalties and interest.
DEFENDANTS Case Number 20cr2113-LAB
David Daughtrey Age: 60 El Cajon, CA
SUMMARY OF CHARGES
Conspiracy to Commit Bank Fraud and Tax Evasion, 18 U.S.C. § 371 (count 1); and
Making a False Tax Return, 26 U.S.C. § 7206(1) (count 2).
Five years’ imprisonment and $250,000 fine (count 1)
Three years’ imprisonment and a maximum fine of $250,000 or twice the gross gain or gross loss resulting from the offense, whichever is greatest (count 2)
Federal Bureau of Investigation
Internal Revenue Service