A former U.S.-based Ferrari executive pleaded guilty to failing to report income to the IRS.

The former chief executive officer of a New Jersey-based importer of Ferraris has admitted that he failed to report income to the IRS he collected kickback scheme steering limited edition “supercars” worth $1.4 million to select customers.

Maurizio Parlato, 58, of Washington, D.C., pleaded guilty in U.S. District in Newark, N.J. to one count of subscribing to a false tax return and one count of failing to file a Report of Foreign Bank and Financial Accounts.

Gigi Knowle, 69, of Miami, Florida, a luxury watch dealer also admitted failing to report to the IRS the commission he received for helping facilitate the unauthorized sale of one of those limited edition sports cars, and pleaded guilty to one count charging him with subscribing to a false tax return.

(Ferrari reports Q2 profit decline, expects strong second half.)

Between 2002 and 2009, while living in Florida, Parlato was the CEO of an Englewood Cliffs, N.J.-based company responsible for distributing Ferraris. According to federal authorities, the issue surrounds the distribution of limited-run Ferraris. Parlato was able to impact the allocation of those limited-edition automobiles.

The scam called for Parlato to allocate limited-edition vehicles away from the originally selected buyers to others not on Ferrari’s approved list.

In 2013, Ferrari announced a “supercar,” limited to only 500 units and carrying a manufacturer’s suggested retail price (MSRP) of approximately $1.4 million and established a formula to determine which customers would be placed on the approved list to buy a supercar, federal investigators said.

After resigning his job with Ferrari, Parlato helped dealers and supercar purchasers in misallocating supercars in exchange for kickback payments, according to investigators.

Between 2015 and 2017, Parlato received approximately $2.8 million from Ferrari dealers and supercar purchasers in exchange for, among other things, assisting them in misallocating supercars to customers who were not on the list of approved purchasers, they said.

(Ferrari pushes back arrival of full-electric vehicle until 2025.)

He also failed to report the additional $2.8 million on his taxes, and didn’t pay the estimated $1.1 million in taxes that were due from the unreported income.

“This defendant admitting rigging access to purchase high-end sports cars to line his own pockets, then failed to pay taxes on the money he made on his deals,” according to Rachael Honig, the U.S. Attorney for New Jersey.

Ferrari vehicles were sent to a variety of buyers who were not originally intended to received them.

“He tilted the playing field to his own advantage, cheating legitimate buyers and the government in the process. Our office remains firmly committed to prosecuting those who defraud the public and the government,” Honig said.

Knowle also received payments in connection with his role in misallocating a supercar in 2015. Knowle assisted Parlato in facilitating the sale of a supercar to another individual who was not on the approved list, according to federal investigators.

Knowle received approximately $560,000 as commission for his role in the sale, some of which Knowle distributed to Parlato and others who were also involved in misallocating the supercar to the unapproved purchaser. Knowle failed to disclose the commission on his personal income tax returns. Knowle admitted that he avoided paying approximately $175,000 in taxes, investigators said.

(Ferrari unveils newest supercar: The Roma.)

The count of subscribing to a false tax return carries a maximum potential penalty of three years in prison and a $250,000 fine, or twice the gross gain or loss from the offense. The count of failing to file a FBAR carries a maximum potential penalty of five years in prison and a $250,000 fine, they said.

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