By DONNA KENNY KIRWAN

PAWTUCKET — A 58-year-old Bristol man who had owned and operated a Pawtucket business called Innovative Network Solutions (INS) was sentenced earlier this month to federal prison for tax fraud related to a kick-back scheme.

Louis G. Xifaras, was sentenced on Oct. 16 by U.S. District Judge Vanessa L. Bryant in Hartford, CT to 12 months and one day of imprisonment, followed by one year of supervised release on home confinement, according to an announcement by Nora R. Dannehy, Acting U.S. Attorney for the District of Connecticut. Bryant also ordered Xifaras to pay a fine of $50,000.
According to Dannehy, on May 2, Xifaras pleaded guilty to one count of filing a false income tax return.
According to documents filed in court and statements made in court, Xifaras formerly owned and operated Innovative Network Solutions, a company that provided computer Internet services including server installations. In 1999, an employee of Southwestern Bell Communications (SBC) approached Xifaras with a proposal that he would ensure INS received subcontracting work from SBC in exchange for kickbacks being paid to the SBC employee. The method by which the kickbacks were paid to the SBC employee was to put his wife on the INS payroll as a “no-show” employee.
INS was an “S” corporation, which means that the company paid no income tax. Rather, the company’s income and expenses were reported on the owner’s income tax return. In 2002, Xifaras reported income of $968,070, deducting $272,882 that INS paid to the SBC employee’s wife. However, kickbacks disguised as salary for a no-show job are not deductible business expenses, so Xifaras should have reported taxable income of $1,240,952, not $968,070.
On Oct. 16, Xifaras was ordered to pay the $50,000 fine and $222,078 in back taxes within thirty days. Xifaras also must pay to the IRS $166,558.60 in penalties and $164,142.12 in interest.
This case was investigated by the Internal Revenue Service--Criminal Investigation Division and the Federal Bureau of Investigation. The case was prosecuted by Assistant U.S. Attorney Calvin B. Kurimai.