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Criminal tax evasion offers legal option in targeting dog, puppy mills

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Hundreds of dogs and puppies kept in squalid cages and neglected to the point of being diseased were seized in two separate criminal raids, putting those animals in the hands of rescue workers who could best care for the animals.

The dogs were transported to 10 different shelters statewide and outside Indiana, and more than $10,000 worth of volunteer time and service came to the state for free in addition to court judgments of more than $100,000 against each breeder or seller.

Puppy Mill The Indiana Attorney General’s office used a tax evasion law to stop operators of puppy mills from which hundreds of neglected dogs were rescued. (Submitted photo)

It wasn’t the animal neglect that did in those breeders or sellers, but a little-used provision in state statute that the Indiana Attorney General’s Office refers to as the “Al Capone approach.”

Using the same type of criminal sales tax evasion enforcement law that did in the Chicago crime boss in the 1930s, the Indiana AG’s Office used that legal option to take down dog and puppy mill operators in the past few years, as well as an illegal stereo-selling racket where the person didn’t comply with the tax law.

That tax law has held more of a bite than what state statute historically provided and led to a new law in July 2009 that put more strength behind local prosecutors and state regulators who can now more diligently pursue these types of illegal animal activity.

“This was never about puppies per se, it’s been about tax cheats,” said attorney Andrew Swain in the AG’s tax division. “From a tax law point of view, there’s no distinction between these cases because they were all failing to collect and report taxes. This law had been on the books, but I’d never used it and was just waiting for the right taxpayer (or non-taxpayer) to come along and test it, to see if we could get a bad operator with it.”

That chance arose in late 2008, when under former Attorney General Steve Carter the state agency filed an action against Tammy Gilchrist in Cloverdale who was operating a puppy mill but not paying taxes as required, Swain said. This was the first time the tax evasion law was used against this type of activity, he said, and it paid off. Authorities seized 74 dogs and puppies and also four horses in that case, and in early 2009 the state obtained a guilty plea against Gilchrist on two felony counts of failing to collect taxes and permit examination of tax records. She received two years suspended; 40 hours of community service with the county’s animal welfare league, and was prohibited from having direct contact with animals.

Andrew Swain mug Swain

Another case came in June 2009 against an operation in Harrison County, culminating in guilty pleas last month. Virginia Garwood, 64, and her daughter Kristen Garwood, 27, pleaded guilty to a Class D felony of failure to remit or collect sales tax in connection with their cash-and-carry dog-breeding operation in Mauckport that had been ongoing since 2004. The mother also pleaded guilty to a separate felony count of income tax evasion, while the daughter’s felony was reduced to a misdemeanor.

The AG’s Office charged the two following a raid of their operation during which police and animal-rescue workers seized 244 dogs and puppies that were confined in squalid cages and enclosures and tested positive for disease.

Marion Superior Judge Annie Christ-Garcia accepted the plea agreements and ordered an 18-month and one-year suspended sentence for the mother and daughter respectively, in addition to prohibiting them from breeding or selling dogs while on probation or working in any business not complying with state sales tax laws. Each also had to pay court and probation costs.

Those penalties came on top of a civil tax case seeking $132,440 in unpaid taxes on several of the dog-sale transactions and a consumer-protection lawsuit filed against them in November under the Deceptive Consumer Sales Act because four consumers complained the dogs weren’t healthy as advertised.

Those tax evasion legal options were the only way to go after these operators, according to Swain and animal advocates who lobbied for the new 2009 law. Under the Indiana tax law, the AG’s office assumes a non-traditional role in being able to go after delinquent taxpayers with criminal actions. Swain said that allows the state to essentially seize bank accounts and take any inventory and sell it to apply to the amount owed in taxes.

“This wasn’t common in Indiana, but it can be used as a deterrent factor to enhance civil collections by sending a message to taxpayers that states are going to aggressively pursue this, now more than ever,” Swain said. “Very few tax crimes in Indiana are felonies, but this is and we’re using it in the way it’s intended. Some might think this is akin to public urination, but this is all theft and could be charged that way.”

Linda Lawson mug Lawson

Nationally, states such as New Mexico and New York have had more aggressive tax crime divisions than what Indiana and others have had in going after a problem that results in $2.5 trillion annually in non-reported income, Swain said. He heard about this topic and how it is used when attending national tax administration seminars, he said.

When teaching seminars, Swain said he refers to these cases as being subjects of what he calls the “Al Capone approach.”

“If you allow businesses to get away with this, you’re giving them a competitive advantage and that undermines the law. It undermines legit people trying to play by the rules and creates an uneven playing field,” Swain said.

Litigation spokesman Bryan Corbin for the AG’s Office said the goal of the Garwood and Gilchrist cases was never about them going to prison, it was about making sure they pay the taxes they owe. While animal-cruelty laws have historically been weak in Indiana, the state wouldn’t have targeted these operators if they had been paying their taxes as required by law, Corbin said.

“We’re not the puppy police, and this is not an animal-rights case; it’s a tax case,” he said. “This may be novel from a legal standpoint, but we almost never have the authority to do something like this.”

In addition to the tax crime aspect of what’s happened, the additional animal-cruelty benefit is what many have taken out of these actions in recent years. Animal advocates say the AG’s Office has helped put a stronger law in place, one that’s been long overdue.

Rep. Linda Lawson, D-Hammond, who is also a Humane Society volunteer, championed the law change during the General Assembly last year.

The new law requires commercial dog-breeding operations to register with the state, and it authorizes the AG to take civil actions against those who fail to register. It also requires that caged dogs be allowed out to exercise, increases the penalties for animal cruelty, and gives local prosecutors more ability to pursue those cases.

Until the change, the state’s only requirement for animal owners was that they provided food and water; it didn’t require that animals have shelter or medical care. That meant that when a pit bull in Gary was found chained and frozen to death, the only reason the owner could be prosecuted was if the dog didn’t have food and water.

“Prior to July last year in Indiana, you had more regulation if you owned a barber shop than you did if you had 700 dogs on your property,” said Anne Sterling, Indiana state director for the Humane Society of the United States. “For puppy mills, it’s been extremely difficult to address the most basic needs of the animals, and we desperately needed to strengthen the cruelty code.”•

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  1. Just an aside, but regardless of the outcome, I 'm proud of Judge William Hughes. He was the original magistrate on the Home place issue. He ruled for Home Place, and was primaried by Brainard for it. Their tool Poindexter failed to unseat Hughes, who won support for his honesty and courage throughout the county, and he was reelected Judge of Hamilton County's Superior Court. You can still stand for something and survive. Thanks, Judge Hughes!

  2. CCHP's real accomplishment is the 2015 law signed by Gov Pence that basically outlaws any annexation that is forced where a 65% majority of landowners in the affected area disagree. Regardless of whether HP wins or loses, the citizens of Indiana will not have another fiasco like this. The law Gov Pence signed is a direct result of this malgovernance.

  3. I gave tempparry guardship to a friend of my granddaughter in 2012. I went to prison. I had custody. My daughter went to prison to. We are out. My daughter gave me custody but can get her back. She was not order to give me custody . but now we want granddaughter back from friend. She's 14 now. What rights do we have

  4. This sure is not what most who value good governance consider the Rule of Law to entail: "In a letter dated March 2, which Brizzi forwarded to IBJ, the commission dismissed the grievance “on grounds that there is not reasonable cause to believe that you are guilty of misconduct.”" Yet two month later reasonable cause does exist? (Or is the commission forging ahead, the need for reasonable belief be damned? -- A seeming violation of the Rules of Profession Ethics on the part of the commission) Could the rule of law theory cause one to believe that an explanation is in order? Could it be that Hoosier attorneys live under Imperial Law (which is also a t-word that rhymes with infamy) in which the Platonic guardians can do no wrong and never owe the plebeian class any explanation for their powerful actions. (Might makes it right?) Could this be a case of politics directing the commission, as celebrated IU Mauer Professor (the late) Patrick Baude warned was happening 20 years ago in his controversial (whisteblowing) ethics lecture on a quite similar topic: http://www.repository.law.indiana.edu/cgi/viewcontent.cgi?article=1498&context=ilj

  5. I have a case presently pending cert review before the SCOTUS that reveals just how Indiana regulates the bar. I have been denied licensure for life for holding the wrong views and questioning the grand inquisitors as to their duties as to state and federal constitutional due process. True story: https://www.scribd.com/doc/299040839/2016Petitionforcert-to-SCOTUS Shorter, Amici brief serving to frame issue as misuse of govt licensure: https://www.scribd.com/doc/312841269/Thomas-More-Society-Amicus-Brown-v-Ind-Bd-of-Law-Examiners

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