BUFFALO, N.Y.- The former sales manager of a retail/commercial dealership has been sentenced to serve 15 months in a federal prison after pleading guilty to operating a scam that defrauded the government of federal excise taxes. John Cesari Jr., 37, also was ordered to make full restitution of about $312,000 to his victim-Dunlop Tire Corp.
Sentencing took place Feb. 13 before U.S. District Judge Richard J. Arcara in U.S. District Court for the Western District of New York, following a lengthy probe conducted by the Criminal Investigation Division of the Buffalo office of the Internal Revenue Service (IRS).
For more than 15 years, Mr. Cesari had worked for Bandag Tire Retreaders Inc., a one-outlet, Buffalo-based business owned and operated by his father, John Cesari Sr. According to the government's case, the dealership's distribution included the sale of new tires, each ``weighing more than 40 pounds,'' that it purchased from Dunlop. Based on weight, the tires were subject to federal excise taxes, which the tire maker was
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responsible for paying.
From 1991 to 1994, the government said, Mr. Cesari submitted false claims to the tire maker for new commercial tires he contended he sold to more than 30 tax-exempt and foreign purchasers.
They included the New York State Department of Transportation and Thruway Authority; a number of cities, including Buffalo, Niagara Falls and Syracuse, N.Y.; various counties, towns and school districts; and fictitious sales to dealers in Canada and Mexico.
The government also charged that Mr. Cesari's false claims included altered purchase orders, fake work orders, and forged signatures of public officials.
As a result of the phony claims, Dunlop then gave credits to Bandag Tire Retreaders' account in the amounts of the excise tax initially charged to the dealership when it obtained the tires from Dunlop. The tire maker then accordingly reduced its payment of federal excise tax to the IRS.
A Dunlop spokesman said the dealership was no longer a customer, but had no further statement concerning the case.
Mr. Cesari matter-of-factly told TIRE BUSINESS: ``It's just something that happened, and I'm paying the price for it,'' as he attempted to get his business and personal affairs in order before beginning this month to serve time in McKean, a federal minimum security prison in Bradford, Pa.
From as far back as his childhood, he recalled working after school and on weekends in the dealership his father acquired in 1959. Following college, he worked his way up to sales manager.
When the business began faltering, he turned to the tax scheme.
``Why did I do it? To help the company. It was in trouble,'' he explained. ``I didn't take the money personally. It all stayed in the business.
``It was a dumb thing to do, but you've got to look at it from sitting in my chair. It was my father's company, and I was just trying to keep it afloat and help keep 45 to 50 people employed. I had no selfish motives whatsoever.''
Almost two years ago, after the fraud came to light, Mr. Cesari left his father's dealership to begin working as vice president of sales for Deronde Casings International Inc., a Buffalo business in which his father was once a partner, now operated by a family friend, Jack DeNijs.
Mr. Cesari's imminent departure will not only be ``a terrible burden on my family,'' but on Deronde, as well, where he said he accounts for more than 50 percent of the firm's sales. In his absence, he said he trained his wife ``to do a lot of the things I do'' there.
Despite his problems, Mr. Cesari said his family, his boss, Mr. DeNijs-``everybody's really supporting me.'' But it was difficult explaining to his 11- and 13-year-old daughters that he was going away.
``I sat down with my wife and family and told them what was going on. Told the kids they would have to help out their mom a lot.
``It was tough, but the kids are at the age when they can understand. But it's still hard on them-we're a close family.''
He described himself as ``a fighter,'' and vowed to do the time, then ``put this thing behind me.''
While clearly acknowledging his guilt, he nonetheless feels he has received ``too stiff a sentence'' for a practice he said is ``rampant'' within the industry.
Paul J. Campana, the assistant U.S. attorney who handled the government's case, disagreed.
He said Mr. Cesari's prison term was predicated upon federal sentencing guidelines that call for incarceration from a year to 18 months, depending on the seriousness of the offense, amount of money involved, ``vulnerability'' of the victim, and the defendant's prior record. (It is Mr. Cesari's first offense.)
The investigation was not part of any special law enforcement initiative or ``nationwide project of any kind'' to uncover similar fraud, Mr. Campana said.
Mr. Cesari ``never equivocated on his guilt,'' the attorney continued. ``The closest thing to an excuse he gave was that others are doing it and going undetected. . . . He said his motive was to preserve a cash-strapped business.''
Those actions gave Mr. Cesari's company ``a huge competitive advantage,'' Mr. Campana said, making ``the playing field uneven.''
``If you can knock down the price of your tires by the excise tax-that's a remarkable advantage, because the tax is substantial.
``So if you sell to companies that actually are paying the tax, but you say you're selling to companies that aren't, you're able to slash your prices.''
That hurts firms that obey the law, he added.
``And although it's a crime against the revenue collection function of the government, it's also a crime against the competitive market by unfairly undercutting other distributors.''
At his sentencing, Mr. Cesari maintained he ``didn't reinvent the wheel-I didn't get this idea all by myself.''
Still, his advice now is emphatic: ``I would strongly recommend to anybody who's doing it-and I know there's a lot of people out there who are-stop!''