Society pair hit with tax evasion charges

Deepa Bharath

The district attorney on Friday filed the biggest tax evasion case

ever in the county and the state, against a Newport Beach man and his

ex-wife, who are renowned philanthropists in the community, officials

said.

Richard Engel, 59, owner of Costa Mesa-based Powerplant

Maintenance Specialist Inc., has been charged with five felony counts

of tax evasion and two felony counts of falsifying tax returns. His

ex-wife, Jolene Engel, 52, was charged with seven counts of tax

evasion and one count of filing a false tax return.

Prosecutors say the couple did not report more than $190 million

in income and failed to pay the state about $11 million in income

taxes, penalties and the cost of investigation from 1998 to 2001.

Richard and Jolene Engel pleaded not guilty to all charges at the

Harbor Justice Center in Newport Beach on Friday morning. They both

made bail, which was set at $500,000 each. A pretrial hearing has

been set for Oct. 10.

If convicted, the defendants could each get up to 16 years and

eight months in state prison.

If the corporation is found guilty of evading taxes, it may never

be allowed to do business in the state again, officials said.

Neither Richard Engel nor his attorney, Walter Coal, were

available for comment. Jolene Engel also could not be reached.

But Robert Bachman, an attorney for Engel’s Costa Mesa company,

said he does not believe the company owes any money to the state.

“The company denies there’s any money owed,” he said. “I’ve looked

at the affidavit, and the numbers have been overstated. There are

several misrepresentations there.”

Bachman said he is waiting for 88 boxes of documents from the

district attorney’s office that he needs to review.

“This is the first tax evasion case this office has seen where the

money owed to the state is in the eight figures,” Orange County

District Atty. Tony Rackauckas said in a press conference on Friday.

He said the couple was “living lavishly in Newport Beach, flying

on a Lear jet, driving beautiful cars and charging personal luxury

items, such as jewelry, to the company.”

Rackauckas said his office is “vigorously pursuing” such cases in

the interest of fairness.

“Here is the bottom line: Everyone has to pay his or her fair

share of taxes,” he said. “No one has the right to refuse to pay

their taxes and spend their money on luxury goods.”

The charges came after two years of tedious investigation by tax

officials, said Denise Azimi, a spokeswoman for the State Franchise

Tax Board.

“It started with a search warrant in January 2001, when we seized

bank records, computer records and several other documents,” she

said. “Our investigators painstakingly reconstructed their income.”

The case is significant because of the amounts involved, Azimi

said.

“This is a record for us,” she said. “These people have failed to

report nearly $200 million in income. That’s not small change.”