Texan Convicted In Million-Dollar Tax Fraud Scheme.

Texan Lawrence M. Harrison, owner of Hebco Petroleum wholesale fuel distributorship, has been convicted of tax evasion, conspiracy, wire fraud, and money laundering, according to a Justice Department release.

Instead of paying Hebco's federal and Texas state excise taxes on the diesel fuel he sold, Harrison had about $3 million transferred to the Cayman Islands. With this nest egg, he started a fuel excise tax scheme in Belgium in 1991, eventually shut down by the Belgian government. Then in 1994 he started a fuel tax scheme in Washington state for which he was arrested.

Harrison will be sentenced on June 7.

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DALLAS JURY CONVICTS BUSINESSMAN IN

[1] Loretta C. Argrett, Assistant Attorney General of the Tax Division, United States Department of Justice, announced today that a jury in the Northern District of Texas convicted Lawrence M. Harrison of tax evasion, conspiracy, wire fraud, and money laundering charges. After an eight week trial that began January 16, 1996, the jury deliberated for four days before reaching a verdict.

[2] In the late 1970's and early 1980's, Harrison, then known as Lawrence S. Iorizzo, was involved in motor fuel excise tax evasion schemes in the New York area. Those schemes netted Harrison and New York organized crime figures hundreds of millions of dollars in stolen fuel taxes. Harrison was eventually caught and began cooperating with the Government.

[3] Harrison's cooperation with the Government did not last, and before long Harrison again became involved in the motor fuel tax fraud business in Texas. The evidence adduced at trial showed that in 1988, Harrison's two sons, his daughter, and a long time family friend began operating Hebco Petroleum, Inc., a wholesale fuel distributorship in Dallas Texas. Hebco purchased diesel fuel from various suppliers on a "tax-free" basis. Hebco then sold the fuel to various customers, invoicing the required .15 cents per gallon in federal excise tax. Instead of paying Hebco's tax liability to the federal government, Harrison directed the funds be wire transferred to the Cayman Islands. In this manner, in the last half of 1989, Hebco evaded approximately $1.3 million in federal excise taxes and approximately $4 million in Texas state excise taxes.

[4] At trial, the Government proved that Harrison organized Hebco to minimize his exposure in the event of an investigation by federal or state authorities. Harrison stayed away from the office, leaving his three children and family friend in place as the ostensible management team and decision makers. Harrison, however, constructed the Scheme, exercised final approval authority over all company operations and remained in constant contact with the other co-defendants.

[5] Although formed in 1988, Hebco did not begin large scale fraudulent activities until May 1989 when it obtained its fuel supply from Dallas distributor, Fina Petroleum. Fina, unaware of Hebco's illicit activities, provided Hebco with diesel fuel on a "tax-free" basis. Under the tax law, Hebco was able to purchase diesel fuel "tax-free" because it possessed an IRS certificate of tax exemption. When Hebco resold the fuel to its customers, however, Hebco incurred a 15 cent federal excise tax liability on each gallon. Hebco then took affirmative steps to evade and defeat its tax liability to the U.S government.

[6] Evidence established that Hebco was originally designed so that Harrison could skim the excise taxes from sales proceeds, it later evolved, however, into a "crash and burn" operation. By June 1989, Hebco was buying and selling large quantities of fuel and evading its tax liability. Harrison knew it was only a matter of time before the authorities discovered the scheme. In late 1989, Internal Revenue Service agents began investigating Hebco. At Harrison's direction, the co-defendants held investigators at bay with a series of false statements and carefully crafted false documents. Finally, during the first week of January 1990, Hebco closed its doors. However, just weeks before it shut down, Hebco defrauded Fina and its financial backers out of over $400,000.

[7] At trial the Government proved that in an effort to cover Hebco's tracks, Harrison had Hebco stock certificates forged to make it appear that the company was owned by two innocent Louisiana businessmen who had become involved with the company as fuel brokers and financial backers, but were totally unaware that Hebco was operating a criminal enterprise. Harrison then made a series of statements to federal and state law enforcement officers in which he denied any personal involvement in the Hebco fraud and implicated the Louisianians.

[8] Evidence at trial established that $3 million in illegal funds netted from the Hebco operation was transferred to the Cayman islands. This money was then used to start, another motor fuel excise tax evasion scheme in Belgium. Belgian authorities eventually foiled that operation in 1991. In 1994, the Harrison's began yet another fuel tax scheme in Washington State. Harrison was arrested in Washington state in connection with the current case.

[9] The Government's case against Harrison was significantly bolstered when Harrison's children and the family friend pled guilty to related federal charges and agreed to testify against him. Judge Sidney A. Fitzwater has set sentencing for June 7, 1996.