Former Infinity Mortgage Co. Maui owner Michael Eric Stewart is facing up to five years in prison and a $100,000 fine after he pleaded guilty last week in federal court to a charge of attempting to evade paying income tax from 2001 to 2006.
Stewart entered the plea Friday in U.S. District Court in Honolulu.
According to a plea agreement in the case, Stewart failed to file income tax returns for those years while earning "a substantial amount of income from soliciting mortgage loans."
Instead of paying income taxes, Stewart transferred $788,000 in income from the mortgage business into a Nevada bank account for West Pac Financial Inc., an entity he established in Nevada in 1998, according to the agreement.
From February to September 2007, he transferred $345,000 from the Nevada account to his account at Territorial Savings Bank, the agreement says. From June 18, 2007, to November 2007, Stewart withdrew $380,860 from the Territorial Savings account in 34 transactions that prosecutors allege were structured to fall below the $10,000 requirement for reporting currency transactions.
In August 2007, after a Tax Court ruling against Stewart, he filed tax returns for 2001 to 2006, self-reporting that he owed a total of $964,317. He offered to pay $9,273 to settle the tax liability, but his offer was denied by the Internal Revenue Service in 2008.
Stewart, who had been living on Maui, left the U.S. and moved to Panama City in 2008, according to the indictment. Court records show that Stewart was arrested in Panama on July 3 and was arraigned Aug. 3 in Honolulu.
As part of his plea agreement, the U.S. Attorney's Office agreed to dismiss a charge of structuring transactions to evade reporting requirements when Stewart is sentenced Dec. 17. The agreement calls for Stewart to pay restitution to the IRS, with the government setting the amount owed at $476,265.