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Madison woman gets year in prison for $3M in tax evasion skimming video gambling machine money

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Scales of Justice

A Madison woman was sentenced Friday to a year and a day in federal prison for avoiding paying more than $3 million in taxes on money skimmed from the proceeds of video gambling machines in bars.

Mary Lavine, 65, pleaded guilty to conspiring to defraud the Internal Revenue Service and to filing a false 2018 corporate income tax return for Bullseye Inc., a business she co-owned, Scott Blader, U.S. attorney for the Western District of Wisconsin, said in a statement.

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U.S. District Judge James Peterson also fined Lavine $75,000, ordered her to serve two years of supervised release after prison and ordered her to pay restitution of $834,770 to the IRS and $1,927,853 to the Wisconsin Department of Revenue.

According to a sentencing memorandum filed by prosecutors in January, the year and a day sentence was sought by both prosecutors and Lavine’s attorney.

Bullseye is a Madison-based coin-operated music and amusement game vending business that Lavine admitted had contracted with bar owners to place video gambling machines in their businesses, then split the profits with the bar owners, Blader said.

Different bar owners had different profit-sharing agreements with Bullseye, and Lavine admitted that some agreed to skim funds generated by the machines and not report all of the funds to the IRS or state Department of Revenue. The underreporting caused Bullseye to evade its corporate income taxes, as Bullseye and bar owners evaded Wisconsin sales taxes and income taxes, Blader said.

Blader said that between 2015 to 2018, Bullseye evaded $3,028,930 in federal and state taxes.

At her sentencing hearing, Lavine apologized for her criminal conduct and told Peterson she went along with the tax evasion scheme of Bullseye’s other owner for so long because he promised to make her the majority owner of the business, but he reneged on that promise, Blader said. Majority owner Terry Volk died in 2018. Prosecutors wrote in their sentencing memo that Lavine lost her position as the company’s president and Volk’s estate had a receiver appointed to run Bullseye and appraise it for liquidation.

Peterson told Lavine that her quest to be the majority owner was a “drug that caused her to compromise her basic values and commit tax evasion to achieve her end goal.” Peterson also told Lavine the size of the tax evasion scheme, the large tax loss and the long period of criminal activity all justified a prison term, Blader said.

Peterson said the sentence “will send the message to the business community that no special rules apply to cash businesses. It’s easy to cheat and skim cash, but it is still taxable.”

“Business owners need to be aware that this type of conduct will not be tolerated and will lead to incarceration,” Peterson added.

Five people now have pleaded guilty as part of the tax evasion investigation and Lavine is the fourth to be sentenced.

Middleton Sport Bowl owners Dudley Hellenbrand and Cherie Hellenbrand each were sentenced to six months in prison, vending company owner Thomas Laugen was sentenced to a year and a day in prison, and Colin Albany, who was Bullseye’s general manager, is scheduled to be sentenced on May 6.

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