A cover for his gambling habit.
"Kelly perpetrated a complex tax fraud scheme. As part of his corrupt endeavor to cheat the IRS, Kelly repeatedly made efforts to hide his tax fraud by falsely booking expenditures as legitimate expenses and having fraudulent internal documents produced by his bookkeeper" say federal prosecutors in a Chicago court filing.
Kelly, 50, has pleaded guilty to the tax charges and admits wrongdoing, but has waged a pointed attack on the government concerning how much prison time he should face.
What is not at issue is how Mr. Kelly schemed and connived to cover his tracks. Federal investigators say they found a paper trail of evidence that Kelly, once Gov. Rod Blagojevich's most trusted fund-raiser, altered his company's books to make it look as though wagering debts were legitimate business expenses.
"In 2001, Kelly had his assistant at BCI Roofing issue a check for $147,234 to MIRCO. On the same date, Kelly had his assistant at BCI Roofing produce a 'pay out sheet,' which is an internal document produced by BCI Roofing to track money it paid. In this instance, at Kelly's direction, the BCI Roofing pay out sheet is 'to' Mirco and is for "Job: American Airlines Air Cargo.
"In fact, despite its appearance and Kelly's efforts at subterfuge, the $147,000 check was not related to an American Airlines Air Cargo roofing job being completed by BCI Roofing. Rather, the $147,000 was used to pay off Kelly's personal gambling debt to the Mirage Casino (which accepts checks made payable to MIRCO).
"The payout sheet, however, hid the fact the money was for Kelly's personal use and made the payment appear to be part of a legitimate expense related to BCI Roofing's business."
U.S. authorities say Kelly's use of BCI pay out sheets to hide his tax fraud "was routine and made his fraud particularly difficult to detect."
They say Kelly routinely used BCI Roofing funds to pay for lawn maintenance at his various homes and booked them as contract expenses for roofing jobs that BCI Roofing was completing. In another instance, Kelly purchased a new dining room table with a BCI Roofing check for $23,450.
Kelly had the BCI Roofing check to the company that sold the table booked as a BCI Roofing expense as part of a United Airlines roofing subcontract, thereby hiding the fact that the money was used to purchase an item for Kelly's home and causing BCI Roofing to improperly deduct the expense."
Investigators also say they found that Kelly hid his use of BCI Roofing money to purchase hardwood floors for his family's home in Burr Ridge, drapes for the house and more than $60,000 in home theater equipment.
Kelly's attorney Michael Monico says that "While Mr. Kelly caused false documents to be created to disguise the true nature of various items, we do not believe this was a 'complex' tax fraud scheme as the Government states."
In the defense reply filed in federal court, Kelly's lawyers contend that "tax frauds, by their nature, involve false documents. This case did not involve any offshore accounts or complicated tax shelters."
