El Toro Man Pleads Guilty to Evading Tax in 1982-83

LOS ANGELES —  A self-employed El Toro businessman admitted Thursday that he falsely reported having no income for two years in which he earned at least $391,000.

Huey P. Savage, 49, controlling shareholder of Data Circuits Inc. of Orange, entered guilty pleas to tax evasion in 1982 and 1983 before U.S. District Judge Harry L. Hupp.

Savage faces up to 10 years in prison, a fine of $200,000 and full restitution.

A federal grand jury charged last April that Savage skimmed profits from Data Circuits and another firm he controlled, Western Circuits Inc. of Venice. He failed to report that income to the Internal Revenue Service.

The IRS investigation began when Savage’s sister, who had an interest in Data Circuits, filed a lawsuit in Orange County, claiming that Savage had improperly withheld money due to her.

“Greed not only compelled him to violate the law, but broke his family apart,” said the prosecutor, Assistant U.S. Atty. Mark J. Werksman.

The indictment alleged that Savage not only owed at least $485,000 in taxes for the period 1981-83, but that his profit-skimming operation dated back as far as 1973.

He earned more than $1 million in those three years but reported negative income on his tax returns, according to the indictment. His guilty pleas apply only to the years 1982 and 1983, however.

Earlier this week, corporate accountant Melvin C. Walter entered guilty pleas to aiding and abetting the tax evasion scheme. A third defendant, Lewis Thorsen of Yorba Linda, pleaded guilty earlier this year to assisting Savage.

Savage pleaded guilty to ordering his firms to issue checks that appeared to be for the purchase of goods. In fact, the checks went to confederates of Savage, such as Thorsen. They would cash the checks, deduct 5% for themselves, and return the balance to Savage, according to the indictment.

In 1983, Data Circuits, which produces printed circuit boards for the electronics industry, reported gross receipts of $3,114,000, and Western Circuits reported $3,836,000.

Werksman said the government relies on the honesty of self-employed businessmen such as Savage, who are not subject to federal income tax withholding laws. Savage will learn “there’s a price to pay for income tax evasion,” the prosecutor said.

Sentencing for Savage is set for Nov. 7.