Cincinnati, OH, November 2, 2005--Two former owners of retailer Buddy's Carpet have pleaded innocent to charges that they purchased sham insurance policies to lower their income taxes.
Burton "Buddy" Kallick, 75, of Cincinnati and Leif D. Rozin of Bonita Springs, Florida, were indicted last month on charges related to filing false tax returns, conspiring to obstruct the Internal Revenue Service and attempted income tax evasion. Both men could face up to 13 years in prison if convicted, according to the U.S. attorney's office.
Kallick was known for starring in the company's television commercials, which included the slogan, "You've got a Buddy in the carpet business!"
Kallick did not speak in court Tuesday, but his lawyer, Louis Sirkin, got approval from U.S. Magistrate Judge Timothy Hogan for his client's planned vacation abroad.
"We feel that Mr. Kallick is not guilty of any offense against the United States," Sirkin said as they left the courtroom.
A company Kallick and Rozin owned jointly sold Buddy's Carpet, which operates about 35 stores in Ohio, Kentucky and Indiana, to a group of investors for $8.3 million in 2000. They no longer have ties to Buddy's Carpet, which is based in Franklin, about 30 miles north of Cincinnati.
According to the indictment, Kallick and Rozin's company, Rozin Inc., spent a total of $3.6 million on eight "loss of income" insurance polices from a company in the U.S. Virgin Islands beginning in October 1998. Authorities say the policies were intended to generate tax deductions and reduce the amount the men would have to report on their personal income tax forms.
The policies were a sham, authorities said, because Kallick and Rozin recovered 81% of the premiums. The policies were designed to provide benefits if the men's employment with their own company was terminated involuntarily for a reason other than death or disability.
Kallick and Rozin also were accused of paying an associate to buy a second type of insurance policy that was designed to reduce their taxes by creating an artificial loss they could report when they attempted to sell Buddy's Carpet in 1999. The sale didn't go through, and authorities say the men spent the $625,000 intended for the insurance to buy more "loss of income" policies.
Three associates who also were indicted each face up to 14 years in prison if convicted on four felony charges.
