Blue Bell lawyer charged with huge tax scam

In what federal authorities in Philadelphia called one of the largest tax scams in recent memory, a Blue Bell lawyer was charged today with helping a radiologist, a vascular surgeon, a debt collector and seven others avoid paying $4.6 million in taxes.

Authorities described the alleged ringleader, lawyer Bernard Jay Bagdis, as a brash anti-tax proponent who used shell corporations, a fictitious foreign bank, and a basement waterproofing company to hide $23 million worth of income from the IRS.

A few months after federal agents raided his Norristown home and Blue Bell law office in 2004 and seized documents, authorities said, Bagdis was taped by an informant boasting that the government was unlikely to prove its case.

The criminal investigation, he allegedly told an informant wearing a hidden IRS microphone, was "a fight to the death."

At one point, Bagdis also allegedly said, "I'm working on my new book. It's called Federal Tax Fraud, The User's Guide."

U.S. Attorney Patrick L. Meehan said, "Our response to that statement is a 168-page document called an indictment and its title is called U.S. v. Bernard Bagdis."

Bagdis, 58, was arrested at his Norristown home at dawn today.

His lawyer, Peter J. Scuderi, said he had just begun to review the lengthy indictment and therefore could not comment on specifics. But, he said, "We intend to fight the charges and hopefully we will prevail."

Ten IRS and FBI agents and U.S. postal inspectors and four federal prosecutors spent six years investigating Bagdis. Authorities said that they used two undercover IRS agents and that Bagdis helped one agent hide $101,000, taking 2 percent for his services.

"He took 1 percent of the money going in and 1 percent of the money going out," Assistant U.S. Attorney John J. Pease said.

In an August 2003 recorded conversation with an undercover agent, Bagdis allegedly said: "Everybody recognizes there's 50 million non-filers."

Undercover agent: "No, I didn't know that."

Bagdis: "That's kept . . . very, very quiet."

Undercover agent: "I'd like to be [in] the 50 million . . . if I could get away with it."

Bagdis: "You can. Actually, you just have to organize your affairs appropriately."

Bagdis is accused of helping 10 others avoid taxes - all of whom were charged today:

- Bertram R. Russell, a 56-year-old radiologist from Gladwyne, is accused of creating a shell corporation with Bagdis, which he used to receive his earnings and pay his living expenses. From 1998 and 2006, the indictment said, Russell earned $3 million but reported no income to the IRS, dodging $900,000 in taxes.

- John P. Leichner, a 64-year-old vascular surgeon from Newtown, is accused of hiding $1.2 million in income and using some of that money to buy a single-engine plane and a Ferrari.

- Richard J. Frase, a 61-year engineer who lives in a Detroit suburb and works under contract for Chrysler Corp., allegedly worked with Bagdis to hide $1,048,078 in income, avoiding $326,060 in taxes.

- Kenneth W. Klinger, a 57-year-old from Perkiomenville, is accused of hiding $1.3 million and avoiding $393,000 in taxes. Klinger is a part-owner of Basement Doctor Waterproofing Co., the company Bagdis allegedly advised on tax matters. In 2005, he wore a wire for the IRS against Bagdis and recorded what authorities said were incriminating statements, including the alleged one about the "tax fraud" book.

- Stephen Schulz, a 43-year-old Richboro man who was also a part-owner of Basement Doctor, is accused of hiding $927,081, avoiding taxes of $253,590.

- Michael S. Klein, a 36-year-old Warrington, Bucks County, lawyer who once worked with Bagdis, is accused of failing to report $363,425 in income, avoiding about $74,000 in taxes.

- Kathleen Williams, a 46-year-old administrative assistant from Pottstown, who worked for Bagdis, is accused of hiding about $293,000 in income, avoiding about $61,000 in taxes.

- Steven Hedrick, a 36-year-old Dover, Del., man who owned a debt collection service, is accused of hiding $1.3 million to avoid paying $500,000 in taxes.

- William K. Acosta, a 52-year-old Gilbertsville, Montgomery County, businessman, is accused of working with Bagdis to avoid $167,000 worth of taxes by telling the IRS that IRA funds had been rolled over to an account at an Ireland bank that no longer exists.

- Helen M. Gramaski, a 68-year-old owner of a commercial cleaning business, is accused of avoiding $60,000 in taxes with Bagdis' help.

If convicted of the fraud and tax charges, Bagdis faces at least 10 years in prison, according to the advisory sentencing guidelines, Pease said.

If convicted of lesser tax charges, Russell, Leichner, Frase, Klinger and Schulz probably face about two years in prison, while Klein, Williams, Hedrick, Acosta and Gramaski probably face about a year in prison.