Bloomberg News

Ex-BDO Seidman Partner Favato Convicted of Tax Crimes

August 26, 2010

Stephen A. Favato, a former partner at New York-based auditor BDO Seidman LLP, was convicted by a federal jury in Newark, New Jersey, of two U.S. tax crimes for helping a client falsify his returns.

He was found guilty today of one count of obstructing the administration of Internal Revenue Service laws and one count of aiding the preparation of a false tax return. He faces as many as three years in prison on each count. He was acquitted on one count of tax evasion at a trial that began Aug. 17.

Prosecutors showed jurors that Favato, 36, formerly a partner in BDO Seidman’s office in Woodbridge, New Jersey, advised client Daniel Funsch to include false items on joint tax returns in 2002, 2003 and 2004, according to a Justice Department statement. Favato gave advice that “enabled Funsch to fraudulently deduct his personal yacht expenses as business expenses,” according to the statement.

Funsch, chief executive officer of Intarome Fragrance & Flavor Corp. in Norwood, New Jersey, pleaded guilty in 2006 to conspiracy and tax evasion, court records show. Funsch, who has not been sentenced, testified as a prosecution witness against Favato, according to his attorney, Robert Mintz of McCarter & English LLP in Newark.

“I was very disappointed in the verdict,” said Favato attorney Alan Zegas. He said he will ask the judge for a new trial and appeal if he is denied.

‘Called Into Question’

Zegas also said that the answers given by Funsch on cross-examination “called into question his credibility.”

After Favato’s indictment in April 2009, he was placed on a leave of absence, BDO Seidman spokesman Jerry Walsh said in an e-mailed statement. A month later, his partnership interest was terminated, Walsh said.

“BDO cooperated fully with the investigation of this matter, which involved the preparation of income tax returns containing false deductions primarily relating to a yacht which the taxpayer maintained for personal use,” Walsh said.

U.S. District Judge Stanley Chesler set sentencing for Dec. 15, court records show.

The case is U.S. v. Favato, 09cr237, U.S. District Court, District of New Jersey (Newark).

To contact the reporter on this story: David Voreacos in Newark, New Jersey at dvoreacos@bloomberg.net.

To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net.


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