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Haddow Sentenced to Three Years in Tax Fraud Case

District Court Judge Curtis V. Gomez sentenced David Haddow, 62, of St. Thomas to three years in prison for his conviction of tax fraud conspiracy, U.S. Attorney Ronald Sharpe announced Thursday.

According to Sharpe, the court also sentenced Haddow to three years of supervised release and 300 hours of community service, and ordered him to pay almost $2 million in restitution – $821,094 to the V.I. Bureau of Internal Revenue and $1.1 million to the U.S. Internal Revenue Service.

Haddow was remanded to the custody of the U.S. Marshals Service on Thursday to begin serving his sentence.

The defendant had been convicted of conspiracy to defraud the United States in the collection of taxes and conspiracy to evade and defeat tax due to the Virgin Islands, Sharpe said.

According to Sharpe, the evidence presented during the jury trial of Haddow and co-conspirator Hansel Bailey showed that, in 2004, Bailey incorporated a business on St. Thomas called Compass Diversified and, in 2005, that company was granted Economic Development Commission tax benefits. Bailey, 36, and another co-conspirator marketed a tax-savings plan that would allow clients of Compass Diversified to claim bogus business deductions on their income tax returns by making payments to Compass, allegedly for management or consulting services. The clients would then recoup a substantial portion of the payment made to Compass in the form of a tax-free gift from a Virgin Islands-born resident.

Bailey was sentenced Jan. 9 to five years in prison and was ordered to pay the same amounts in restitution to the IRS and the IRB.

A third co-conspirator, Dwight Padilla, pleaded guilty in June 2013 to conspiracy to defraud the United States and was sentenced to 15 months in prison, three years of supervised release and ordered to pay restitution in the amount of $1.3 million to the IRS.

Sharpe commended the efforts of the Internal Revenue Service, which investigated the case. Assistant U.S. Attorneys Bryan E. Foreman and Kim L. Chisholm prosecuted the case.

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