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Originally published February 11, 2011 at 11:51a.m., updated February 11, 2011 at 09:09p.m.

IRS could end up with forfeited funds from those convicted in KU ticket scandal

Seat backs await fans at Allen Fieldhouse before the Kansas Jayhawks' home opener against the Longwood Lancers Nov. 12, 2010.

Seat backs await fans at Allen Fieldhouse before the Kansas Jayhawks' home opener against the Longwood Lancers Nov. 12, 2010.

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Three former employees of Kansas Athletics Inc. must pay up to $2 million for scamming to steal, sell and profit from the diversion of tickets to Kansas University football and basketball games, a federal judge has ruled.

And the IRS could end up with some or all of the money.

U.S. District Judge Wesley Brown ordered Thursday that the three — Charlette Blubaugh, former head of the KU ticket office; her husband, Tom Blubaugh, a former consultant to Kansas Athletics Inc.; and Rodney Jones, former assistant athletic director for the Williams Fund — each must pay the “monetary judgment” they’d already agreed not to contest as part of pleading guilty to conspiracy to commit wire fraud.

The pleas had come in connection with a tickets scam that prosecutors say ran from 2005 to 2010, involving the channeling of tickets through ticket brokers and others. A separate investigation conducted for Kansas University determined that more than 19,000 regular-season tickets had been diverted for personal gain.

Brown’s orders mean that the Blubaughs and Jones are responsible for up to $2 million, a total calculated to cover all or a portion of illegal gains. The orders also permit the government to use property to satisfy all or part of the monetary judgments.

Brown’s orders do not include any mention of restitution, considered a separate issue and one typically addressed at sentencing.

“Forfeiture puts money in the hands of the government,” said Jim Cross, a spokesman for the U.S. Attorney’s Office. “Restitution deals with putting money in the hands of the victim.”

Kansas Athletics is a victim, one that would be eligible for any restitution and, potentially, forfeited assets.

“There is one other victim,” Cross said. “The IRS.”

As part of their pleas, the Blubaughs and Jones admitted defrauding the IRS in two ways: first, by failing to report the scam’s revenue as income; and second, by not paying taxes on the money.

Kansas Athletics already has filed a claim seeking payment on a $250,000 insurance policy against employee theft, and plans to weigh its options for seeking money through forfeiture or restitution once the judicial process is complete.

The Blubaughs and Jones await sentencing in the coming weeks, along with Kassie Liebsch, a former systems analyst and tickets administrator who also has pleaded guilty to conspiracy.

Prosecutors filed a motion Friday, requesting that Brown require Liebsch join the others in paying up to $2 million through forfeiture. Liebsch already has forfeited a 2008 Toyota Camry purchased with illegal proceeds from the scam,

Ben Kirtland, former associate athletics director for development, is scheduled to plead guilty to conspiracy Feb. 24.

In the end, Brown will be the one determining where the money goes — or at least who might be able to gain access to it.

“If a judge so orders, money taken in forfeiture can be used as reimbursement for victims,” Cross said, explaining the process in general terms. “It would not be unexpected for the IRS to get money.”

Comments

Marc Frey 8 years, 6 months ago

It's all fun and games until the IRS gets involved. They have NO sense of humor at all.

Tony Bandle 8 years, 6 months ago

I.R.S. - Instigators Royally Screwed I.R.S. - Internal Reaming Service I.R.S. - It'll Really Suck I.R.S. - It's Revenge Showtime "I" own you"R" as"S"

kureader 8 years, 6 months ago

So if I robbed a bank and failed to pay income taxes on the loot, the IRS could conviscate a bunch of the bank's money ... claiming they are owed taxes and penalties?

Carter Patterson 8 years, 6 months ago

No, but you would be convicted of stealing money, not reporting the income, and not paying taxes on that income.

kureader 8 years, 6 months ago

It's not income, it's theft. There's no blood in the turnip (extra money) So when I get caught (assuming I still have the money) does all the money go back to the bank or does the IRS conviscate some of it?

jjarmstrong 8 years, 6 months ago

I guess so if you had already spent it all..

KGphoto 8 years, 6 months ago

The IRS as a victim. Hilarity!!

Considering that the IRS has been illegally taxing labor and wages since it's inception, maybe they can donate that money to some worthy causes. Like season tickets for a Colorado resident.

http://www.reddit.com/comments/1z2x0/the_united_states_constitution_strictly_forbids_a

KGphoto 8 years, 6 months ago

Hey, while we are on the subject, I beg any American citizen to take a little time and watch a movie. It's called America, Freedom to Facism directed by the late Aaron Russo, and it's available on Google or YouTube.

"This film which is neither left, nor right-wing is a startling examination of government. It exposes the systematic erosion of civil liberties in America since 1913 when the Federal Reserve system was fraudulently created. Through interviews with U.S. Congressmen, a former IRS Commissioner, former IRS and FBI agents and tax attorneys and authors, Russo connects the dots between money creation, federal income tax, and the national identity card which becomes law in May 2008. This ID card will use Radio Frequency Identification (RFID) chips which are essentially homing devices used to track people. This film shows in great detail and undeniable facts that America is moving headlong into a fascist police state. Wake up!"

Mike Ardis 8 years, 6 months ago

Before anyone spends time watching the movie you might want to consider the following review... "America: Freedom to Fascism contains a long series of wholly mistaken arguments about the legal duty to pay income taxes. Most prominently, it relies on the false assertion that "there is no law" that requires most Americans to pay income taxes. It repeats this tired, incorrect claim again and again." http://docs.law.gwu.edu/facweb/jsiegel/Personal/taxes/F2F.htm

Or read what others have said.. Facts Refute Filmmaker’s Assertions on Income Tax in ‘America’ http://www.nytimes.com/2006/07/31/movies/31russ.html?_r=2&oref=slogin&pagewanted=print

Vroo 8 years, 6 months ago

Counting stolen money as income and assessing taxes on it has a long tradition dating back at least to Al Capone.

But stolen goods are not the property of the thieves -- FIRST you return the stolen property, THEN you assess other penalties.

Maybe that's not the law but it should be. Something good would come out of this if it draws attention to cases like this where the government effectively makes off with the stolen property.

kureader 8 years, 6 months ago

I'm under the impression that the KU employees didn't usually sell the tickets to the end users. It seems the people with the IRS problems will be the outsiders who purchased the stolen tickets from KU employees and sold them at a profit. The six or seven KU employees certainly know who they worked with outside the athletic department. I keep thinking these names will be made public soon.

mikehawk 8 years, 6 months ago

The question that remains is whether those that received these stolen tickets are open to charges, or not. I would suspect it would have to be proven they knew they were obtained illegally, therefore something like "knowingly receiving stolen goods" and while they did probably know, it may be hard to prove. Does anyone have any knowledge about this aspect of the investigation?

I hate to say it, but the IRS will get theirs, and KU will stand in line behind them, like it or not. They are very consistent about this approach. The IRS won't say it, as they don't have to, but behind closed doors in candid moments, they would say,"hey, KU should have had sytems in place to to prevent this type of thing from happening." And you know, we should have. It would be interesting to know if the KU auditing firm ever addressed check and balances in the athletic department. I would bet they did and they were circumvented by an old fashioned cabal.

rockchalkjjjhawk 8 years, 6 months ago

This is nonsense. KU should be getting ALL of the money and then they should be the ones who pay a PORTION of that in taxes, just as any other corporation does. The folks who stole the money should be drained of those amounts as they apparently are. But that money should be going directly into KU's pockets. Period. Something just isn't right here. What ever happened to the Oklahoma connections that were part of this?

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