IRS: Hughes' businesses owe nearly $300 million in taxes

Before he died last year, conservative powerbroker Ralph Hughes fraudulently took millions of dollars of his companies' assets, leaving the businesses insolvent and owing nearly $300 million to the IRS, the federal government says in a new court filing.

Earlier this month, Hillsborough County commissioners removed Hughes' name from the county's Moral Courage Award. Hughes' family asked that his name be taken off the award after The Tampa Tribune and TBO.com reported the Internal Revenue Service claim that Hughes died owing more than $69 million in federal taxes.

Hughes' family has disputed the IRS charges, saying he paid millions in taxes and would not avoid his responsibilities to the government.

"My dad paid tax on every dime he ever took out of that company," Shea Hughes said this morning, adding that his father was not responsible for the corporate books.

"We can provide proof of personal tax returns and show the amount of funds paid to the IRS in the millions that what I say is true in order to restore my father's good name and reputation that he worked extremely hard to earn," he said.

David H. Simmons, an attorney for the beneficiaries of Hughes' estate and trust, said his clients "believe there is no fraud and feel strongly that they will be able to show that."

The beneficiaries, Hughes' widow and two of his three children, also think that the IRS has "significantly inflated" the amount of money that may be owed, while also challenging that there is any liability, according to Simmons and co-counsel Bart R. Valdes.

Now the U.S. Justice Department has filed a lawsuit against Wachovia Bank, which is representing Hughes' estate, giving more details of the tax claims against Hughes and his companies, Cast-Crete Corp. and Florida Engineered Construction Products Corp.

In a separate case in Hillsborough County Circuit Court, Wachovia has sued Cast-Crete and John Stanton, a director and officer of the company, accusing Stanton of responsibility for various "corporate wrongs," including the failure the corporation's failure to file tax returns.

On July 16, the parties entered into an agreement in which Shea Hughes was made Cast-Crete's chief executive officer. The agreement also restricts the company's financial dealings and stock distribution.

Ralph Hughes died June 27, 2008, at age 77. At the time, the IRS was investigating his unpaid federal tax liabilities, according to the lawsuit, which says the IRS filed a claim against the estate in May based on information available at the time.

The new complaint, filed Thursday, says Hughes' two companies have operated as one consolidated enterprise, which has not filed federal corporate income tax returns or paid any corporate income tax for the taxable periods ending Dec. 31, 2003, through Dec. 31, 2007.

"Since at least May of 2005, the Internal Revenue Service has made repeated attempts to secure Cast-Crete and FECP's delinquent returns, to determine the amount of tax due, and to collect any unpaid tax," the complaint states.

The IRS issued document requests and met with the companies' president, employees, officers and shareholders. It sent a letter to Hughes six months before he died about the unfiled returns.

Fervently against taxes and big government, Hughes helped shape the course of county politics. He backed candidates he liked with advice and money. He aggressively supported county Commissioners Jim Norman and Ken Hagan, as well as former Commissioners Brian Blair and Ronda Storms.

Critics accused him of essentially buying a majority of the commission.

The IRS says it used documents it obtained from Hughes' companies to calculate they owe $128 million in back taxes, $117 million in penalties and $54 million in interest.

The IRS "found that during the same period that Cast-Crete and FECP were incurring - but not paying - the federal tax liabilities set forth above, the companies had distributed all or substantially all of their cash to shareholders and/or their controlled companies," the lawsuit states.

Out of $116 million in transferred assets, $61 million went to Hughes, the director and majority shareholder, the government says. The transfers "were made with the actual intent to hinder, delay, or defraud creditors of Cast-Crete and FECP, including the United States," the complaint alleges.

This has left the companies with $11 million in assets to pay toward the $300 million tax liability.

"In an apparent effort to conceal the nature and extent of the distributions that he received," Hughes failed to report $27 million of the money he received on his personal income tax returns, the complaint alleges. "In addition, decedent concealed the nature of the distributions by reporting over $16 million of the distributions as payments of interest by Cast-Crete and FECP where there was no underlying bona fide debt."

The IRS has calculated Hughes owed $2.3 million in unpaid income taxes, as well as $464,000 in penalties and $792,000 in interest.

The companies became insolvent or substantially insolvent as a result of the concealed transfers, the lawsuit alleges.