Attorney General Eric Schneiderman says “Mohan” Ramchandani will plead guilty to felony tax fraud after failing to pay New York sales and income tax for almost 10 years.
Attorney General Eric Schneiderman announced today that Mohanbhai “Mohan” Ramchandani, known as the “tailor to the stars,” and his business corporation, Mohan’s Custom Tailors, Inc., has chosen to plead guilty to felony charges for evading the payment of New York sales and income tax for nearly a decade. Ramchandani reportedly owes at least $2 million in taxes dating back to 2002.
Ramchandani also agreed to pay $5.5 million in fines to settle civil suits alleging tax fraud filed by a whistleblower under New York State’s False Claims Act. On Tuesday, Ramchandani pleaded guilty to felony tax fraud charges, according to authorities.
Ramchandani owns and operates “Mohan’s Custom Tailors,” which provides men’s custom clothing and tailoring services to high-end clients. Ramchandani claims to outfit multiple celebrities and sports stars. Former celebrity clients include figures such as former Mayor Rudy Giuliani and basketball stars Patrick Ewing and Clyde Frazier. The business is located on East 42nd Street in Manhattan and is still in operation.
“There are no excuses for tax cheats – regardless of how prominent they are. Mr. Ramchandani’s conviction for orchestrating this multi-million dollar scheme to defraud taxpayers sends a clear message that those who rip off the public will be held accountable for their crimes,” said Attorney General Schneiderman.
“Honest citizens are harmed by people who break the law to avoid paying their fair share, making it harder for New York State to provide essential services. This office will continue to bring aggressive action against tax evaders who believe they are above the law.”
Details of the Tax Fraud Case
According to evidence gathered during the Attorney General’s investigation, going back to at least 2002, Ramchandani and his business failed to pay at least $1.7 million in state and local sales taxes that were charged to customers. In addition, during the tax years of 2007, 2008 and 2009, Ramchandani failed to pay at least $256,000 in state and local personal income taxes.
Attorney General Schneiderman’s office began their investigation on a tip that was received from a credible whistleblower with inside information about Ramchandani and his Custom Tailor business’ illegal tax practices. The Attorney General’s office came to a resolution in this case by using the Taxpayer Protection Bureau and the Criminal Prosecutions Bureau, with additional aid from the New York State Department of Taxation and Finance.
As part of the plea agreement, Ramchandani gave a detailed confession, admitting that he willfully and knowingly defrauded the government out of nearly $2 million in sales and income taxes. Ramchandani also admitted that between September 2002 and June 2012, he fraudulently reported only $5,674,738 in retail sales on the tax returns, although the business made at least $28,046,064 million in taxable income.
In exchange for pleading guilty to tax fraud, Ramchandani will receive a prison term of at least one to three years. He and his business must also pay $5.5 million dollars in damages and fines as part of the settlement.
A First for the False Claims Act
This multi-million dollar settlement is unique, in that it is the first time the False Claims Act has been used to resolve a tax fraud case. The law requires that defendants pay treble damages and civil penalties if they are found liable. In an attempt to strengthen the law, Attorney General Schneiderman authored several amendments to New York’s False Claims Act in 2010. One of those amendments makes it possible for whistleblowers to sue substantial tax law violators on behalf of the government, and be protected and rewarded for coming forward with the information. Early in his term, Attorney General Schneiderman created the Taxpayer Protection Bureau as a way to combat fraud against the government and handle cases under the False Claims Act. The False Claims Act entitles those whistleblowers that come forward and report fraud against the government to receive a share of the money recovered.