Friend’s money springs former executive from prison in tax fraud case

Despite receiving a seven-year prison sentence two months ago for dodging more than $1 million in taxes, a former Newport Beach energy company executive is home.

Thanks to a friend’s $300,000 contribution toward his tax debt, Richard Engel, 70, spent about seven weeks behind bars for not reporting more than $180 million in income from his power plant refurbishment business.

In 2011, Engel agreed to pay a portion of his back taxes to avoid prison time, but when it took him three years to hand over $265,000, the court decided he had run out of time, prosecutor Bill Overtoom said.

Orange County Superior Court Judge William Froeberg imposed the prison sentence Sept. 19. But it didn’t last long.

“A couple of weeks later, a new attorney came in and said now [Engel] magically has $300,000,” Overtoom said.

A family friend came up with the money and offered to put it toward Engel’s debt, defense attorney Dennis Perez said. Perez declined to identify the friend.

With the new cash in hand, Engel’s lawyers asked Froeberg to reevaluate his sentence.

“I strongly felt the punishment was well in excess of the crime,” Perez said.

On Nov. 5, the judge vacated Engel’s prison term and instead ordered him to serve a year under electronic supervision at home, along with five years’ probation, according to court records.

Overtoom objected, saying that after years of “shenanigans” and little cooperation in paying the tax debt, Engel deserved the prison time.

Engel lived lavishly between 1998 and 2001 when his company, Powerplant Maintenance Specialists Inc., was pulling in hundreds of millions of dollars, according to the Orange County district attorney’s office.

Prosecutors said Engel either didn’t file tax returns or severely underreported how much money he and his business were making in those four years.

In 2000 alone, Engel and his then-wife, Jolene Engel, siphoned $24 million from the company for extravagant personal items such as a Learjet, jewelry and cars, according to prosecutors.

Officials started investigating the couple in 2001, and a decade later, Richard Engel pleaded guilty to eight counts of felony tax fraud.

Jolene Engel also was an executive at the company and faced related accusations.

In a plea deal with prosecutors, the couple could reduce their charges if they paid $1.2 million, which is just a portion of what they owed in personal and corporate taxes.

Jolene Engel paid almost $1 million, Overtoom said, meeting her obligation for the deal. Froeberg sentenced her in September to three years’ probation.

When Richard Engel failed to pay enough, he was dropped from the agreement in September and sentenced to prison, Overtoom said.

Now, even with the new $300,000 contribution, Richard Engel has paid only about $565,000 of what he owes the California Franchise Tax Board, prosecutors said.

Overtoom estimated that Richard Engel’s debt still exceeds $1 million. The exact amount would have to be calculated by the Franchise Tax Board.

As part of his five-year probation, Engel will be required to make payments toward that sum but won’t necessarily have to pay off the entire amount.

“If at the end of the five years he’s been making payments toward it, his probation would end,” Overtoom said.