Skin Care Owner May Need “Frownies” Cream After 2nd Conviction for Tax Fraud

According to DoJ. a Germantown, Ohio businessman who controlled the operation of an anti-aging skincare business in Dayton, Ohio was sentenced to 33 months in prison following his November 2017 conviction by a federal jury on seven counts of filing false corporate, individual, and private foundation tax returns.

 

According to court documents and evidence presented at trial, James Wright, 63, ran the day-to-day operations of B&P Company, Inc. (B&P), which manufactured and sold an array of skincare products, including Frownies, a wrinkle reduction product endorsed by celebrities.  Wright’s great-grandmother invented Frownies in 1889 and the product has been sold by his family ever since.  Beginning in the late 1990s, Wright formed a series of entities that he used to divert money from B&P to himself and members of his family.

Instead of receiving a salary from B&P, Wright incorporated a company called The Remnant, Inc., to which B&P paid “management fees.” Wright caused the preparation of false corporate tax returns for The Remnant on which he fraudulently deducted personal expenses, including rent, utilities, and pool and lawn care for his residence.  Wright also used funds from The Remnant’s bank accounts to pay rent for one of his daughters in New York and California.  Wright paid personal expenses directly out of B&P’s bank accounts as well.  He directed employees of B&P to use corporate funds to pay for the rent and utilities at an apartment rented by his mother as well as rent for his daughter in New York.

 

In 2004, Wright applied to the IRS for non-profit status for a private foundation called Fore Fathers Foundation.  Wright caused B&P to make donations to the foundation and then used more than $170,000 of the foundation’s funds over a seven-year period to pay for high school and college tuition for all five of his children. 

According to the testimony at trial, these payments constituted acts of self-dealing that Wright was required to disclose on the foundation’s tax returns and pay excise taxes on.  When Wright filed the foundation’s 2003 through 2009 returns however, he falsely reported that he had not engaged in acts of self-dealing and failed to pay the excise taxes due on the distributions.

 

The evidence at trial established that Wright had a long history of interactions with the IRS.  In 1998, Wright pleaded guilty to tax evasion for using trusts to conceal income from the IRS.

 

In addition to the term of imprisonment, U.S. District Judge Walter H. Rice ordered Wright to serve one year of supervised release and pay $146,404 in restitution to the IRS.