HATTIESBURG, MS (WDAM) - The trial for Carl Nicholson, a Hattiesburg accountant charged with tax-related crimes, continued into its third day Wednesday.
Nicholson is charged with 11 felony counts, including conspiracy to defraud the U.S. government, false statements on income tax returns and willfully aiding and assisting in preparation of false tax returns while working at the Nicholson and Company firm. Nicholson is also accused of falsifying thousands of dollars as expenses which he received for consulting work from Forrest General Hospital over four years. He pleaded not guilty to all counts in July 2018.
Wednesday’s testimony included that from former Hattiesburg attorney John Lee, who prosecutors say was part of the illegal filings. Lee pleaded guilty back in 2017 to filing a false tax return. Lee told the court he knew for years Nicholson was cheating on his taxes and that a corporate tax return filed in 2013 was fraudulent.
“A first grader would know they are wrong,” said Lee during testimony, regarding the alleged fraudulent return.
Other witnesses included Frank McWhorter, a Hattiesburg CPA, who worked with Nicholson and has a cooperation agreement with the federal government. McWhorter told the court Nicholson got physically violent with him after he brought questionable transactions to Nicholson’s attention.
“He grabbed me and pinned me against the wall and started screaming,” McWhorter told the court.
McWhorter testified Nicholson got a $2.5 million payment as a buyout from the firm in December 2015. McWhorter said $2 million was a lump sum and the rest was to be paid out over ten years.
McWhorter told the court Nicholson had an individual consulting agreement with Forrest General Hospital in 2012 and was getting paid just more than $2,000 a month. McWhorter testified that from then until August 2015, Nicholson would cash the checks and give him half. McWhorter said he asked Nicholson to stop giving him the money because he didn’t feel he did anything to earn it.
McWhorter went on to say he went back and paid taxes on that income, but the firm never paid taxes on the portion Nicholson received, which other testimony claimed wasn’t paid on Nicholson’s personal tax return either. WcWhorter said questionable reimbursement reports, submitted by Nicholson to the firm, became a topic of discussion among the other partners in the firm, creating tension and adding to the decision to offer Nicholson a buyout to leave.
“We had a great business marriage that unfortunately ended in a difficult business divorce,” McWhorter said.
Another CPA, Marcia Wright, who also worked with Nicholson, testified to his temperament, saying he once threw a phone book at a secretary. Wright also testified she prepared Nicholson’s 2015 tax return without documentation showing a $300,000 claim and did so at the direction of Nicholson. Wright said she wouldn’t normally file a return without that documentation, but since Nicholson was a CPA, he knew what documents to have so she took his word.
In the first two days of the trial, jurors heard testimony from a representative with the Internal Revenue Service and a former colleague of Nicholson.
Prosecutors allege Nicholson used money from his business to pay for personal expenses like a visit to the dentist and then filed those expenses on his business income tax returns to avoid paying taxes he owed to the federal government.
Trial continues Thursday morning at 9 o’clock in downtown Hattiesburg.