Developer sentenced for tax evasion | U.S. District Court

Instead of paying his taxes, Thomas R. Hazelrigg, III, 68, spent millions on gambling, thoroughbred horse racing, private aircraft, country club fees, a Bellevue penthouse, and two homes in the Palm Springs, California area by hiding his income and assets in the names of other people.

March 22, 2015 5:28 pm

A former Bellevue based developer and lender who spent millions on personal luxuries while evading a tax obligation of over half a million dollars, was sentenced today in U.S. District Court in Seattle to 54 months in prison and three years of supervised release announced Acting United States Attorney Annette L. Hayes.

Instead of paying his taxes, Thomas R. Hazelrigg, III, 68, spent millions on gambling, thoroughbred horse racing, private aircraft, country club fees, a Bellevue penthouse, and two homes in the Palm Springs, California area by hiding his income and assets in the names of other people.  Hazelrigg was indicted in July 2013.  In December 2014, a jury found Hazelrigg guilty following a nine-day trial.  U.S. District Judge Thomas S. Zilly ordered Hazelrigg to pay $1,082,249 in restitution to the IRS which includes taxes, interest and penalties. “You went to extremes to keep money from the IRS,” Judge Zilly said.  “You manipulated family members and friends to accomplish this goal.”

“This defendant used family members and friends in a wide ranging scheme of deceit and manipulation all to avoid paying taxes he knew he owed,” said Acting United States Attorney Annette L. Hayes.  “His greed was enormous – he had all the means to pay but instead chose to embark on a sophisticated effort to evade his obligation to pay taxes.  As we approach April 15th, this case serves as a reminder that everyone has an obligation to pay their fair share of taxes and those who don’t – no matter how devious their attempts at evasion are – will be held accountable.”

“We are all taught from a young age that the lie is often worse than the original offense,” said Special Agent in Charge Teri Alexander of IRS Criminal Investigation.  “Thomas Hazelrigg cheated on his taxes and then spent many years and a great deal of effort trying to cover it up.  The truth finally caught up with him.”

Evidence presented at trial described how Hazelrigg first agreed to pay $533,454 in taxes owed for tax years 1989, 1990 and 1991 and then failed to pay the tax debt while living a lavish lifestyle that included multi-million dollar property purchases and remodels, and expensive artwork.  Hazelrigg also evaded payment of his taxes owed for 1994, for which he had filed a return showing tax owed, but for which he made no payments.  According to testimony at trial, between 1997 and 2007, Hazelrigg illegally funneled income from his businesses into accounts that he controlled but that he kept secret from the IRS.  Hazelrigg used these accounts to pay for the multi-million dollar purchase and remodel of a Bellevue penthouse, two Chihuly glass chandeliers worth more than $460,000, and two luxury homes in Palm Springs, California.  He also used these secret accounts to pay various household expenses including the services of a butler.

Hazelrigg hid his assets for ten years, until the IRS collection statutes expired.  After one of the IRS liens were removed, Hazelrigg sent an email saying he was “legit again.”  Following that email, Hazelrigg once again took out loans in his own name, and purchased property in his own name.

In their sentencing memo prosecutors noted that Hazelrigg’s tax evasion scheme “is particularly egregious because he was convicted of evading an agreed obligation that he could well afford to pay.  In 1997, after litigating the issue with the IRS for several years, Hazelrigg settled the IRS audit for less than a third of what the IRS initially assessed through its audit.  Realizing that he got a good deal, Hazelrigg… pledged to pay what he owed.  By 2005, there is no question that Hazelrigg had enough money to easily pay what he had promised the IRS.  But instead, Hazelrigg went back on his promise and continued to evade and cheat the IRS out of what he owed.”

The case was investigated by the Internal Revenue Service Criminal Investigation (IRS-CI). The case was prosecuted by Assistant United States Attorneys Matthew Diggs and Brian Werner.