Pa. man pleads guilty in bizarre lottery tax case

Sep 28, 2012, 12:45 pm (73 comments)

Pennsylvania Lottery

PITTSBURGH, Pa. — A 70-year-old Pennsylvania man faces up to a year and half in prison for having more than 40 people cash in lottery tickets worth $520,000 so he could avoid paying federal income tax on the winnings.

Sherman Friend, of McClellandtown, faces a sentence of 12 to 18 months in federal prison when he is sentenced Feb. 15 on the tax evasion charge he pleaded guilty to Friday before U.S. District Judge Arthur Schwab in Pittsburgh.

Assistant U.S. Attorney Nelson Cohen said Friend won big when he bought 208 50-cent tickets on the number 1127 for the lottery's mid-day Big 4 drawing on Dec. 17, 2009. Each ticket was worth $2,500, so Friend asked more than 20 friends who, in turn, recruited others, to cash the tickets so the tax liability couldn't be traced back to him.

In most instances, Friend paid the ticket-cashers $250, or 10 percent of each ticket's value, Cohen said.

Friend's attorney, John Cupp Jr., declined to comment about how often Friend plays the lottery or whether he was using a system to place his bets.

"I wish I knew," Cupp said.

Friend had previously won a vehicle in a fire department raffle in Maryland in 2007 and became angry when he learned he owed income tax on the vehicle, which he had given to a relative, Cohen said.

"We would submit that as evidence of his knowledge that if you won a lottery or raffle, you have to pay the tax," Cohen told the judge.

So, when Friend hit big on the lottery, he was determined to avoid the taxes.

"He went on to explain that he didn't feel he owed the taxes on these moneys," Cohen told the judge, referring to a statement Friend gave to Internal Revenue Service investigators.

In all, Friend avoided more than $132,000 in federal income taxes by failing to declare his cut of the winnings, which added up to more than $481,000 in 2009 and 2010, the two years in which he had the others cash the tickets. The lottery winnings were Friend's primary source of income in those years.

Cohen told the judge that Friend has agreed to repay the back taxes and that he may be sued by the IRS for penalties and interest, which have yet to be calculated.

AP

Comments

nanaimo

mr.friend tried his best efforts NOT to pay taxes and now he is caught he should pay the penalty and serve the law ful time in jail he has earned the jail timeSmash

RJOh's avatarRJOh

"Friend's attorney, John Cupp Jr., declined to comment about how often Friend plays the lottery or whether he was using a system to place his bets."

Sounds like they not only wanted to punish him and get the unpaid taxes, but someone wanted to get his system too.

brina5eva's avatarbrina5eva

i know right.

i probably would have tried the same thing. i have played .50 straights before of cash 4 so that i wouldn't have to pay the taxes if i won i still do. i gotta give it to give him for trying. i don't blame him ,i want all my money too. but i havent went to the extreme as 208 tickets. wow. but if he did have a system. he could have gotten away with it, he just went about it all wrong concentrating on that one number like that. he could have play ten and this number . 50 straight, a couple of days later.  ten on that number . 50 straight... and so on and just slowly cash them in with just you and probably 2 other people. he caused to much attention to himself on that number.

RJOh's avatarRJOh

Quote: Originally posted by nanaimo on Sep 28, 2012

mr.friend tried his best efforts NOT to pay taxes and now he is caught he should pay the penalty and serve the law ful time in jail he has earned the jail timeSmash

Sounds like he didn't try hard enough.  He should had set up his system as some kind of investment scheme rather than income, that way he wouldn't have had to pay any more taxes than he paid his friends to cash those tickets for him.  I'm sure he could have found some lawyers like Romney used to get his tax rate to 13% or less.

Set4life's avatarSet4life

<snip> what a win!  Tim Geithner cheated on his taxes and got a job as Sec. Of treasury lol

This post has been automatically changed by the Lottery Post computer system to remove inappropriate content and/or spam.

helpmewin's avatarhelpmewin

Wow, i thought taxes is already taken out as soon as you Win Smiley

Wooddrive's avatarWooddrive

Wow, wish I won more than 500Grand. I'll gladly pay 25% fed tax and keep 375Grand for myself. Better than not winning. Could have sold the strategy and made more money. If there was one. Dropping $104 on one number takes some balls...

Ronnie316

Its my guess that this guy is wealthy...... remember when the IRS showed up at Willie Nelsons house??

rdgrnr's avatarrdgrnr

Quote: Originally posted by Wooddrive on Sep 28, 2012

Wow, wish I won more than 500Grand. I'll gladly pay 25% fed tax and keep 375Grand for myself. Better than not winning. Could have sold the strategy and made more money. If there was one. Dropping $104 on one number takes some balls...

The rate is 35% and the President wants to make it 45% after the first of the year.

Ronnie316

Yeah but thats only on the rich.............. Right????????

rdgrnr's avatarrdgrnr

Quote: Originally posted by Ronnie316 on Sep 28, 2012

Yeah but thats only on the rich.............. Right????????

It'll come out of your jackpot no matter if you're rich or poor.

sully16's avatarsully16

Hello Friend, said the cell mate.

Wooddrive's avatarWooddrive

Quote: Originally posted by rdgrnr on Sep 28, 2012

The rate is 35% and the President wants to make it 45% after the first of the year.

your rate is 35%, mine is 25% buddy.

Artist77's avatarArtist77

Quote: Originally posted by rdgrnr on Sep 28, 2012

The rate is 35% and the President wants to make it 45% after the first of the year.

The "current" president.

Subscribe to this news story