Encinitas osteopath Dr. James Francis Murphy today (January 13) was sentenced to four years in prison and his wife, Denine Christine Murphy got a year under house arrest for paying almost no federal income taxes for ten years, despite regular warnings from the Internal Revenue Service (IRS). He was ordered to pay almost half a million dollars to to the IRS, and she is to pay almost $150,000.
Evidence at trial showed that the Murphys used a bogus trust and filed false returns concealing their actual income, which was as much as $1 million a year. When confronted by the IRS, the Murphys used a series of dodges: falsely claiming they were not citizens of the United States; claiming that federal tax laws did not apply to them; fraudulently presenting fictitious documents such as so-called "Indemnity Bonds" and "Bonded Promissory Notes," which they claimed to be worth hundreds of millions of dollars, as payments to the IRS; and fraudulently claiming that the hundreds if thousands of dollars they paid to credit card companies, utilities, and others were actually withholdings of federal income taxes.
Despite their million-dollar annual income, the Murphys exploited the earned income tax credit, which is intended for low-income families, to get refunds.