Justice Department: South Florida Doctor Pleads Guilty to Tax Evasion and Disability Fraud

WASHINGTON, Nov. 20 -- The U.S. Department of Justice issued the following news release:

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Evaded Paying Taxes on Over $1.6 Million in Income Earned While Claiming to be Disabled

A South Florida doctor residing in Hobe Sound, Florida, pleaded guilty today to tax evasion, wire fraud, and Social Security disability fraud, announced Principal Deputy Assistant Attorney General Richard E. Zuckerman of the Justice Department's Tax Division and U.S. Attorney Ariana Fajardo Orshan for the Southern District of Florida.

According to court documents and information provided to the court, Arthur John Kranz was a doctor specializing in psychiatry. Beginning in 2002, Kranz made a claim on his private disability policy that he was unable to work, and began receiving disability payments from his insurance company. In December 2003, Kranz submitted an application to the Social Security Administration (SSA) for disability benefits, which was later approved. Kranz then began receiving SSA disability payments in addition to the private disability insurance payments. Kranz was required to notify his insurance company and the SSA if he returned to work.

From January 2006 to March 2013, Kranz worked as a psychiatrist at a hospital in Pennsylvania and earned over $1.6 million in income. Kranz did not report his employment to either the SSA or his insurance company. Rather, in order to continue collecting disability benefits, Kranz took steps to conceal his income from the insurance company, the SSA, and the Internal Revenue Service (IRS). He directed that his income be paid to nominee individuals and corporations. Kranz also filed false personal tax returns that did not report the income from his work as a psychiatrist.

Kranz also submitted fraudulent documentation to his insurance company that falsely stated that he was not working.

Sentencing is scheduled for February 6, 2019. Kranz faces a maximum sentence of five years in prison for tax evasion, 20 years in prison for wire fraud, and five years in prison for Social Security fraud. Kranz also faces a period of supervised release, restitution of $451,026 to SSA, $341,032 to his insurance company, and an amount to the IRS to be determined by the court, as well as monetary penalties.

Principal Deputy Assistant Attorney General Zuckerman commended special agents of IRS Criminal Investigation and the SSA Office of Inspector General, who conducted the investigation, and Trial Attorneys Charles M. Edgar, Jr., Michael C. Boteler, and Terri-Lei O'Malley of the Tax Division, who are prosecuting the case with assistance from the U.S. Attorney's Office for the Southern District of Florida.

Additional information about the Tax Division and its enforcement efforts may be found on the division's website. https://www.justice.gov/tax