"Mike the Situation" Charged With New Federal Tax Crimes

Mike Sorrentino, aka "Mike the Situation", who played himself on the MTV reality show Jersey Shore, and his brother Marc were indicted for tax crimes in 2014 in New Jersey. Today, a Superseding Indictment was returned charging him and his brother with additional crimes.

From the DOJ Press Release which notes that an Indictment is just an accusation: [More...]

According to the superseding indictment, Michael was a reality television personality who gained fame on the television show “The Jersey Shore,” which first appeared on the MTV network. Michael and his brother Marc created businesses, such as MPS Entertainment LLC and Situation Nation Inc., to exploit Michael’s celebrity status. The superseding indictment alleges that the brothers conspired to defraud the United States by not paying all federal income tax owed on approximately $8.9 million that Michael earned between 2010 and 2012. It is alleged that the brothers filed or caused to be filed with the Internal Revenue Service (IRS) false tax returns that understated gross receipts, claimed fraudulent business deductions, disguised income payments made to the brothers and to others and underreported net business income. As part of the conspiracy, the brothers also allegedly commingled funds among business and personal bank accounts and used the money from the business bank accounts to pay for personal items, such as high-end luxury vehicles and clothing. The superseding indictment further alleges that Michael evaded his 2011 income taxes – failing to file a personal return, filing a false corporate return for Situation Nation and concealing his cash income.

The superseding indictment also charges that Michael made multiple cash deposits on the same day in amounts less than $10,000, into different bank accounts that he controlled, in an effort to evade the banks’ reporting requirements

The most interesting parts to me are that he allegedly earned $8.9 million in 2 years (2010 - 2012) from endorsements, appearances, licensing deals and the like through companies set up to capitalize on Mike's Jersey Shore celebrity status (the show ran from 2009 to 2012.)

Also interesting is why the case is so protracted (from September, 2014 until now.) Ten continuances have been granted. The brothers' lawyers each moved to withdraw in June, 2015, stating in their almost identical pleadings that they hadn't been paid in accordance with their fee agreements, and there was no likelihood they would be paid in the future. They said that continued representation would require not only significant time, but also substantial out of pocket expenditures personally and for their law firms.

Mike's request was denied, while Marc's was granted. Mike didn't get another lawyer until October, 2015 (his new lawyer also represented Teresa Guidice of the Real Housewives of New Jersey in her tax fraud case.) For the next year, from October, 2015 until October, 2016, a continuance was granted every 60 days upon a joint request by the Government and the defense lawyers. each of which said Mike's lawyer just entered the case and needed more time to prepare. Then, in December, 2016 the grounds for the motions for continuances changed to say plea discussions were underway, and a continuance would save judicial resources if a plea agreement was reached as a trial would be avoided. The same grounds were contained in the 10th continuance request filed in February, 2017.

Obviously, given today's Superseding Indictment adding more charges, negotiations fell though. Either the Government is asking for more prison time than the brothers are willing to accept, or the brothers are not willing to admit guilt to specific allegations or counts the Government is insisting be part of any deal. Since according to the motions for continuance, they were in plea negotiations in December, 2016, I would think it's the former (It doesn't take four months to turn down a deal if your defense is factual innocence (i.e, "I didn't do it") rather than a legal defense such as "what I did wasn't a crime" or "I didn't have the required intent" or "I may have committed a crime, but not the one you charged" or "I relied on the good faith advice of counsel".

I doubt the Government would consider a complete dismissal once the accountant admitted to conspiring with the brothers. It's far more likely they were negotiating pleas and prison time, and couldn't agree.

In a separate case, the Sorrentino's accountant pleaded guilty in December, 2015 prior to being indicted to conspiring with the brothers to defraud the IRS. His sentencing has been continued until June, 2017, but there is no mention of him cooperating in his filed Plea Agreement. The agreement says neither party will ask for a sentence below his guideline range, which assuming he has no significant criminal history, is 30 to 37 months. The accounting firm in Staten Island isn't named, but from google searches and cached websites, it appears the accountant had been with the firm since 1995. The principal of the accounting firm also has a law practice at the same address and has represented Mike Sorrentino.

As to where the $8.9 million of income came from: According to the Superseding Indictment, from companies the brothers formed beginning in 2010 "to exploit [Mike's] celebrity status, including:

... personal and television appearances by defendant MICHAEL SORRENTINO, a partnership interest in a vodka company, ownership of an online clothing business, publication of an autobiography and a comic book featuring defendant MICHAEL SORRENTINO as a superhero, and endorsements of products such as vitamins, DVDs, clothing lines, jewelry, tuxedos, and sunglasses. For tax years 2010 through 2012, defendants MARC SORRENTINO and MICHAEL SORRENTINO earned approximately $8.9 million in gross income.

It seems the entire Sorrentino family now does reality TV, with a new show starting at the end of April. Mike was a contestant on Worst Cooks in America not long ago. Brother Marc and his and his wife were featured on a reality wedding show. Outside of TV, two of the three brothers, one of their wives and their mother have a real estate company in New Jersey (Mike reportedly either couldn't find time to take the brokers' test, or wasn't interested, so he's not involved.)

"The Situation", like several other young reality TV contestants, particularly those on Jersey Shore, were plucked from obscurity for a pilot that no one had any idea would become a hit. They don't come from affluent backgrounds and don't have strings of degrees from colleges or graduate schools. While they may have retained a local lawyer to review their contract when they got signed, since they were probably told this is a pilot or a one season show, and paid little for that first season, I doubt anyone stressed the importance of independent and well-qulaified, ethical advisers at the beginning. By the time they were famous, they were prey to lawyers and agents beseiging them for their business. How are these kids supposed to know who to trust?

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  • Display: Sort:
    Not all that suprising (none / 0) (#1)
    by McBain on Sat Apr 08, 2017 at 11:29:22 AM EST
    I doubt anyone stressed the importance of independent and well-qulaified, ethical advisers at the beginning. By the time they were famous, they were prey to lawyers and agents beseiging them for their business. How are these kids supposed to know who to trust?

    Similar things happen to young professional athletes or people who win the lottery.  

    I like to think I would have handled fame/money better at that age, but who knows?  

    I was wondering about that (none / 0) (#2)
    by Jeralyn on Sat Apr 08, 2017 at 02:21:09 PM EST
    and assumed, perhaps wrongly, because I don't follow sports and probably wouldn't pick up on an athlete being charged or tax evasion even if there was an article about it, that athletes don't have the same problem because by the time they get drafted to their first team, they already have skilled representation.

    I think it's a bigger problem in the NFL (none / 0) (#3)
    by McBain on Sat Apr 08, 2017 at 02:54:46 PM EST
    with high injury risk and fewer guaranteed contracts but it happens in all sports.
    But the stories I've heard from players, agents, trainers, equipment guys and financial planners should serve as a warning for these rooks when they sign their contracts. That money can vanish when you try to live the NFL lifestyle like a 10-year veteran.

    As for tax evasion, sometimes players (young and old) make good money from autograph signing and sports memorabilia events and don't report it. Daryl Strawberry and Pete Rose were both convicted of tax evasion for doing just that.

    and snooki (none / 0) (#4)
    by linea on Thu Apr 13, 2017 at 10:42:11 PM EST
    In October 2016, Polizzi announced she had had a breast augmentation to obtain a C cup.

    two years after marriage, who gets a breast enlargement? that's a marriage waiting to end. in my opinion.