Sacramento-area lawyer sentenced to prison

A federal judge in Sacramento sentenced a local personal injury attorney Friday to three years in prison for hiding over $1.4 million of income from the IRS.

U.S. District Judge William B. Shubb sentenced Stephen J. Dougan, 57, formerly of Granite Bay, now residing in Utah, after he allegedly made false statements, including falsely representing he was redacting checks to protect client confidentiality when in fact he also redacted his own name from checks he wrote to himself.

"This defendant is a lawyer who refused to obey the law," U.S. Attorney McGregor W. Scott said in a statement Friday. "As determined by the trial judge and jury, he did not make an impulsive error in judgment, but rather his conduct was long-term, complex, and deliberate. This sentence reflects the discredit he brought to the legal profession."

First indicted by a grand jury in 2016 and convicted in January 2019, Dougan also withheld documents from the IRS and provided false and misleading documents that substantially underrepresented his income in 2006 and 2007, according to a statement by the Department of Justice. He also made false statements and provided false and misleading documents to the IRS in order to substantiate various business expenses he claimed on his 2006 tax return, including submitting a false advertising invoice and falsely claiming his personal divorce attorney was his assistant or paralegal.

"The defendant used his legal knowledge and his lies to organize a complex scheme to hide over $1.4 million of income," said Special IRS Agent and Criminal Investigator Kareem Carter. "When the IRS audited his tax returns, he concealed more than $650,000 in back taxes in an effort to obstruct the audit. Today's sentencing sends a clear message that those involved in these types of schemes will be held accountable for their crimes."

According to a Dec. 17 trial brief filed by Assistant U.S. Attorneys Michael M. Beckwith and Chi Soo Kim, Dougan "generally earned income on a contingency fee basis" and brought in over $2.6 million in gross receipts in 2006 and 2007.

In most matters during that period, Dougan charged his clients a 40% contingency fee, but according to the trial brief, "repeatedly represented to his tax preparer ... and his tax lawyers ... that his fee was 33 percent, in fact, claiming that his business income was one-third of the Form 1099s he received in a given year."

Dougan was ordered to begin serving his three-year sentence by Nov. 13 and is currently ineligible to practice law in California.

-- Blaise Scemama