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Handcuffs on a 1040 tax form

Regulation and Compliance > Litigation

Former Broker Pleads Guilty to Filing False Tax Return

By Jeff Berman

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What You Need to Know

  • An ex-broker waived his right to be indicted and pleaded guilty on Thursday in U.S. District Court for the District of Connecticut in Hartford.
  • The offense carries a maximum prison term of three years.
  • Sentencing is scheduled for April 6.

A former broker waived his right to be indicted and pleaded guilty on Thursday in U.S. District Court for the District of Connecticut in Hartford to one count of filing a false tax return, according to the Justice Department, Internal Revenue Service and court documents.

Thomas Pacilio, 64, of Westport was released on $350,000 bail, pending sentencing. U.S. District Judge Sarala V. Nagala scheduled sentencing for April 6.

The offense carries a maximum prison term of three years, Vanessa Roberts Avery, U.S. attorney for the District of Connecticut, and Joleen D. Simpson, special agent in charge of IRS Criminal Investigation in New England, said in announcing the plea.

Pacilio is no longer a registered broker but is still registered as an investment advisor, according to his report on the Financial Industry Regulatory Authority’s BrokerCheck website.

He worked for nine firms over the course of his 22-year career in the sector. Those companies included Lehman Brothers (1992-1993), Smith Barney (1993-1995), Merrill Lynch (1995-2006), Morgan Stanley (2006-2012) and LPL Financial (2012-2014).

According to court documents and statements made in court, in 2011, Pacilio and his partner started Clapboard Hill Advisors, a financial services business headquartered in Westport. In 2013, Pacilio created Alcamo Holding Corp., an 1120-S corporation, and transferred his Clapboard Hill partnership interest to Alcamo.

In 2014, Pacilio, via Alcamo, and his partner, through a separate 1120-S corporation, sold Clapboard Hill Advisors to McGladrey Wealth Management. Under the sale agreement, McGladrey agreed to make a lump sum payment at closing, according to the Justice Department and IRS.

Pacilio was to become an employee of McGladrey for three years subject to a non-competition provision. In addition to being paid a salary by McGladrey, if Pacilio remained an employee, Pacilio would receive a $350,000 payment on each anniversary of the sale for three years, according to the terms of the deal.

Pacilio would also receive a portion of McGladrey’s annual gross revenue of up to $150,000 for the first year, $350,000 for the second year and $450,000 for the third year.

In pleading guilty, Pacilio admitted that, for the 2015 through 2018 tax years, he filed individual income tax returns that omitted installment payments related to the sale of Clapboard Hill Advisors to McGladrey.

In all, he omitted a total of about $1.5 million that should have been reported either as ordinary income or as capital gains, which resulted in a tax loss of $286,328 to the IRS, according to the IRS and Justice Department.

According to the information filed on Jan. 5, the 2017 Form 1040 filed by Pacilio with the IRS omitted about $545,000 in capital gains on line 13, resulting in approximately $506,020 less taxable income on line 43, upon which the defendant was required to pay income tax.

One of his attorneys at law firm Day Pitney provided a comment by Pacilio to ThinkAdvisor on Tuesday in which he said: “I failed to include my income from the sale of my business … on my tax returns. I am responsible for this and am truly sorry. However, this had nothing to do with my work on behalf of my clients at Clapboard Hill.”

Jeff Berman

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