Sentenced to 6 mos. for tax fraud, ex-judge Keith Bee is ‘indigent’ but still owns $3 million in luxury homes
Posted Mar 19, 2022, 2:10 pm
Keith Bee, a former justice of the peace for Pima County, was sentenced Wednesday to six months behind bars after pleading guilty to filing a false income tax return. In addition to his IRS troubles, he may not have been legally qualified to be a judge, according to court filings by his attorney. Described as “indigent,” Bee still has luxury homes valued at more than $3 million in his name.
In what his own lawyer described as a “massive fall from grace,” the ex-judge faced up to 10 months, under a plea deal reached last August. Bee pleaded guilty to one felony count in the tax fraud case, must pay $343,000 in restitution, and serve a year of supervised probation after release from prison.
With additional civil litigation pending, Bee may end up paying the federal government even more.
Despite his attorney describing the 56-year-old Bee as “indigent” and living in a single-wide trailer in the San Tan Valley of Pinal County, relying on a food bank to help provide for his family, the ex-judge is still listed as the owner of multiple luxury homes in the Tucson area assessed at more than $3 million.
And statements made in court filings by his lawyer appear to indicate
that Bee did not meet the residency requirements to serve as a justice of the peace, although
the attorney hedged on those claims when questioned by the Tucson
Sentinel after the hearing.
6-month sentence in federal prison
U.S. District Judge James A. Soto sentenced Bee in the federal courthouse in Downtown Tucson on Wednesday afternoon. The criminal case, which began nearly four years ago, followed an IRS audit that started in 2014.
A pre-sentence investigation report had recommended that Bee serve 5 years on probation, without any time incarcerated. But in court Wednesday, Assistant U.S. Attorney David Zipps successfully argued that “it’s important to show the public that if you’re caught, you’ll be punished severely.”
“Instead of coming clean, he doubled down, and a prison sentence is appropriate,” Zipps told the judge.
Soto agreed that it would “send the wrong message” to just sentence Bee to probation.
“The fact that you are a judge is an aggravating offense,” Soto told the defendant in court Wednesday. “You took an oath of office.”
“This was not a lapse in judgment for a day or a week. It went on so long,” Soto said. “The purpose of the fraud was to promote a lavish lifestyle.”
Bee also faced a potential fine of $250,000, but the judge found he “does not have the ability to pay a fine” and ordered it waived. After his release, Bee will be barred from signing any contracts for more than $5,000 without the approval of his probation officer. So that he can continuing operating his school bus company for the remainder of the academic year, in order to earn money toward his restitution, he has until June 15 to report to the federal Bureau of Prisons in Tucson.
Bee,
a former state legislator who became a justice of the peace in 2007,
was indicted by a federal grand jury in September 2018 on three counts of filing false statements
on tax returns for his business, Bee Line Bus Transportation, and on one
count of attempting to impede an investigation.
He abruptly retired from the bench two days after the indictment, the Green Valley News reported at the time.
Bee’s attorney, Michael Piccarreta, told the court Wednesday that the defendant was spending “so much time with court (as a sitting judge), he was mis-managing his business.”
“I don’t want this event to define who I am,” Bee told the court. “I want to return to the good graces of the community.”
Zipps, the prosecutor, who said he was “baffled” by Bee’s actions, at one point became so impassioned in his statement during the sentencing hearing that the judge asked if he needed a moment, and the assistant U.S. attorney stepped out of the courtroom to regain his composure.
“What truly resonates about the criminal conduct in this case is the repeated acts of dishonesty by someone who not only knew better, but was obligated by an ethical code to act better, and had no need whatsoever to cheat,” Zipps told the court. “Keith Bee was a wealthy man who worked as a judge and owned a bus company that had multi-million-dollar gross receipts during the years in issue. And despite his willingness to take taxpayer money to provide school bus transportation in Tucson and around the state, he refused to pay his fair share of the taxes he owed on the profits he made. Then, when the IRS came calling to conduct an audit in 2014, defendant didn’t come clean, and he didn’t offer many explanations he is offering now. Instead, he doubled down, providing false and dubious information to the IRS revenue agent during the audit to conceal his misdeeds.”
The
plea deal dismissed the other counts at sentencing in exchange for the guilty
plea to Making and Subscribing a False Income Tax Return. According
to the deal, Bee knowingly and willingly “caused to be made and filed
on his behalf” a tax return that contained false information.
Under
the deal, he faced “0 to 10 months” in prison, to be determined by the judge, and must repay $214,414 in lost tax revenue for tax
years 2011, 2012 and 2013, and interest of nearly $129,000, for a total
of $343,133.05. He also faced a fine of up to $250,000, but none was imposed by the judge.
In
the plea deal, Bee described how he reduced his tax liability for three
years by reducing his net profit through overstating his expenses in
tax filings. He acknowledged using personal expenses and the
depreciation of assets, “including payments for and the depreciation of
automobiles that were not used in the ordinary course and scope of my
business.”
According to the
2018 indictment, the expenses included payments for sports cars,
including six Ford Mustangs, two Corvettes and a 911 Porsche Carrera.
Questioned expenses
also included “construction, renovation or improvement” to residential
properties in Arizona and Washington state, including a custom garage
for his cars, a pool and spa, landscaping and custom window treatments
and concrete work, according to a court filing. Those expenses were not included in the charge to which Bee pleaded guilty, but may be the subject of a civil lawsuit by the IRS.
‘Massive fall from grace’
Piccarreta, the defense attorney, told the judge before the hearing that “the government is urging this court to base its criminal punishment upon these matters that were not contained in the agreed-upon factual statement, and have never been determined to be criminal in nature. Not only is that not fair, it is not accurate, and therefore violates Mr. Bee’s due process rights.”
“The government attempts to portray Mr. Bee as some sort of cartoon villain who has spent decades engaged in charitable works, kind acts, and acting as a fair, compassionate, understanding, and even-handed justice of the peace, only to return to his nocturnal lair where he ‘lived in the dark and sought to conceal,’ his elaborate criminal schemes to improperly depreciate assets and mischaracterize expenses,” Piccarreta wrote in a pre-sentencing memo. “Such a portrayal of Mr. Bee is not only hyperbole but absurd.”
Bee “has an exemplary record of public service and charitable works. He has no criminal history. He has worked essentially all of his life, beginning on his family’s farm in Tucson and then working at the age of 12 in his school’s print shop. He is a man of faith,” the attorney wrote.
“Mr. Bee’s current circumstances thus represent a drastic departure from this history. While Mr. Bee accepts full responsibility for his actions, it cannot be denied that the circumstances of this case involve a massive fall from grace for a dedicated individual,” Piccarreta said.
In 2011, Bee Line Transportation reported total revenues of $4.1 million, Piccarreta said, questioning the IRS’s extensive examination of what he characterized as relatively small reported tax losses. In 2012, the company had gross receipts of $4.3 million, with $4.4 million in 2013.
“For those familiar with IRS investigations, (the $24,000 loss in 2011) would not be a particularly significant number even for a civil audit. If Mr. Bee had adequate representation from the outset, this matter may well have run an entirely different course,” the attorney said. “The numbers here simply do not portray the present case as one in which the heavens must fall unless imprisonment is imposed.”
Bee is now working “up to 100 hours per week” at his bus company, including driving a bus himself, and “currently lives in an approximately 720-square-foot, two-bedroom, single-wide trailer with his wife and three of his children, including two minors, aged 14 and 15.” Bee’s wife “has been suffering the debilitating effects of long-term COVID, and is incapable of living independently or providing care for the minor children,” the attorney wrote.
Bee
Line Bus Transportation has no connection to Bee Line Travel, a Green
Valley business that has been in operation for more than 30 years. Bee, a
Republican, served eight years in the state Senate and two years in the
state House of Representatives before he was appointed and then elected as a justice of the peace.
Bee’s residency in question after claims in court filings
Bee was appointed to a vacant slot as a justice of the peace, covering the Tanque Verde and Vail areas, by the Pima County Board of Supervisors in 2007, after JP Jim Green resigned midway through a term that was set to end in 2010. Bee, as required, ran to retain his seat in November 2008 (after successfully appealing to the state Supreme Court a lower-court decision that upheld a challenge to his nominating petitions because they lacked the end date of the unexpired term), and was then re-elected in 2010 and 2014.
But Bee may not have been legally qualified to serve as the elected judge for that area, as his attorney has stated that he did not even reside in Pima County at the time, much less within the appropriate precinct. While justices of the peace are not required to be lawyers, under Arizona state law, they must be registered to vote in the precinct from which they seek election.
In that same pre-sentencing memo, Bee’s attorney told the court that one of the Tucson properties for which the government questioned deductions made for improvements was “never a personal residence,” and that “Mr. Bee and his family resided in Casa Grande during this entire period of time.”
A neighbor in Casa Grande “can verify that Mr. Bee and his family resided at the Casa Grande property prior to, during, and subsequent to the relevant time periods,” Piccarreta told the court. “This truth is also verified by each and every member of the Bee family that resided in Casa Grande with Mr. Bee.”
In his court filing, Piccarreta included a memo from a private investigator, recounting an interview with a former neighbor in Casa Grande, who said she “remembered the Bee family well” and that the neighbor “often saw Mrs. Bee in the front (of the house) ‘planting plants and flowers’ and frequently observed the Bee children in the yard.”
The neighbor “said that she knew the family well enough to know that they did live in the home (in Casa Grande) full time from 2007 until they sold the home around the time her home caught fire in 2018.”
If the assertions by his lawyer are true, Bee would not have been legally qualified to serve as a justice of the peace.
In order to be eligible to be appointed or run as a justice of the peace, Bee would have had to have been a legal resident of the appropriate precinct in Pima County at the time of each election. According to Piccaretta’s statements, Bee lived in Pinal County, about 75 miles away from Justice Precinct 5 on Tucson’s East Side.
Candidates for office are required to declare that they do reside in the appropriate county and precinct, under penalty of perjury.
Bee’s voter registration records are not available to the public, unlike with most voters. Judges and law enforcement officers can take part in a state program to seal their records, which is meant to provide a measure of safety to them. Bee appears to have taken part in that program, and his records have not been unsealed despite his resignation almost four years ago. Due to document retention schedules, the paperwork he filed to become a candidate for office is no longer archived by Pima County.
But other election documents are still on file. Despite his attorney’s representations in court papers, Bee indicated that his address was at a home he owned near Old Spanish Trail and South Freeman Road, next to Saguaro National Park, in required campaign finance filings made for the 2008, 2010 and 2014 elections.
Millions in Tucson homes, ranches
Bee has — and still — owns multiple properties in that area, which covers the eastern edge of Pima County, including Vail and Tucson’s East Side, according to hundreds of pages of records in the Pima County Assessor’s, Recorder’s and Treasurer’s offices examined by the Tucson Sentinel.
Although Piccarreta told the court that Bee is “indigent” and living in a single-wide trailer in Pinal County, and getting help from a food bank, those records indicate he retains considerable real estate holdings here.
Among the properties, which are owned solely in his name per government records, is a five-bedroom, four-bath 4,100-square-foot home on three acres across the street from Saguaro National Park East, with an assessed full cash value of just shy of $1 million. Bee continues to claim that home as his primary residence for tax purposes, with no indication of commercial activity.
That was not the property Bee said was his address in campaign finance filings.
In court records, prosecutors said Bee indicated that that property would be his primary residence when he applied for a mortgage on it in 2010, noting that he signed paperwork with a warning that a false statement would be a felony.
But during the IRS audit, Bee “claimed that a luxury home on the east side of Tucson was actually a bus yard, that a pool he added and deducted as an expense of his bus company was built for use by employees, and that a Mustang Cobra parked in the garage on the property was used to drive undercover to check on buses in service,” prosecutors said.
Piccarreta told the court that “the home, itself, was never used as a personal residence but, for a time it was used as an office for the business because it was available. Subsequently, for over five years, as an investment property, the home has been rented with the caveat that the bus yard/garage is still to be used only by the business.”
“The truth is that the Saguaro Monument property was never used as a personal residence for Mr. Bee or his family. Mr. Bee and his family resided in Casa Grande during this entire period of time,” the attorney reiterated.
Federal prosecutors did not bring up the fact that Bee took out another loan on the property in 2015, with that $581,000 deed of trust agreement with Compass Bank drawn up on a standard Fannie Mae/Freddie Mac contract that indicates the property will be used as the borrower’s principal residence, and that providing false information about occupancy would mean a default on the loan.
Just blocks away, property records show Bee owns a seven-bedroom, five-bath residence set on eight acres, with an assessed full cash value of about $900,000. That home — with a 2,800-square-foot main house and a 1,200-square-foot guest house — features an indoor pool, along with garages with 20 bays. Next door is another 1-acre plot, also owned by Bee.
Not far away, Bee is listed as the owner of a sprawling ranch set on 41 acres in a rural part of Vail, also near the national park.
Formerly owned by Dr. Andrew Weil, the seven-bedroom, nine-bath property includes a 4,300-square-foot main house originally constructed in 1940, along with other living spaces and buildings totaling 8,300 square feet altogether. Bee’s wife is currently registered to vote at that address.
With a pool, the intermittent stream of the Rincon River running through the property, and space for an indoor theater, that real estate is assessed at $1.1 million — although the market value of many high-end properties has outpaced the assessed value considerably.
Across the stream, Bee and his wife are the owners, via an LLC, of another ranch property — also formerly owned by Weil, according to Pima County property records.
That includes a 1905 ranch house along with two guest houses, with a separate workshop and storage building, set on 43 acres, and assessed at $490,000. Bee’s son is currently registered to vote at that address.
The ranches are set behind a manned gate about 2,500 feet down the road, which also leads to other properties in the area.
During the period in question, Bee and his wife did own two newer suburban homes in Casa Grande, directly next door to each other, government property records indicate.
Neither was listed as a primary residence of the Bees in recent tax records.
One, which the neighbor said was used as a residence by the Bees through 2018, was purchased in 2007 with a $381,000 mortgage (the amount of any down payment was not included in Pinal County’s online records), then sold in June 2020 for $400,000. Bee listed his address as one of his ranches in Vail when he made that transaction.
The home next door was also purchased in 2007, for $101,000 down and a $319,000 mortgage. It was sold for cash in February 2015 for $220,000.
According to court documents, Bee has also owned residential property in Westport, Washington, a scenic town on the Pacific coast southwest of Seattle.
From public records, it’s not possible to determine how much Bee still might owe on any of the properties held in his name or owed by one of the LLCs he controls.
Asked about where Bee maintained his home, Piccarreta initially backed up his statements in court filings, telling the Tucson Sentinel that “I believe he was registered” to vote in Casa Grande, and that “they had two residences,” mentioning another 1,800-square-foot home near Old Spanish Trail and Saguaro National Park that records indicate the Bees sold in January 2020.
The home that Bee repeatedly indicated was his primary residence for tax and mortgage purposes was “really an investment property,” Picarretta told the Sentinel. “They were back and forth in Tucson” and Pinal County, he said.
Soto, the judge sentencing Bee on Wednesday, asked if he would rather
serve his time in Maricopa County, to be nearer the San
Tan residence, or at a minimum-security federal prison camp in Tucson. Piccarreta told the court that Tucson
would be preferable.
Judge Jeffrey T. Bergin, the presiding judge of Pima County Superior Court, would only respond that “the court will not give advisory opinions on hypothetical questions” when the Sentinel requested comment on how cases that Bee decided in the Consolidated Justice Courts might be impacted if he was not qualified to be elected to his post.
Other properties
In addition to the properties in his own name, and those he has owned jointly with his wife, Bee has owned other real estate via interlocking LLCs and a trust.
Records indicate that some properties have been transferred back and forth between Bee and one of those LLCs, while others have been conveyed between one of them and a limited partnership.
Bee’s lawyer told the court that the defendant “notes that he purchased ‘buffer’ properties on either side of the Saguaro Monument property in order to minimize the effects on the neighborhood from the buses entering and leaving the property for maintenance purposes.”
The lots on either side of the home Bee previously indicated was his principal residence were purchased by Evergreen Mountain LLC, rather than in Bee’s own name, in 2013.
One of those lots, which cost $241,000 with $30,000 down that year, was sold just two weeks ago for $222,000 with a $50,000 down payment, documents at the Recorder’s Office show.
Evergreen Mountain has been involved in a number of transactions with Bee as an individual and jointly with him and his wife, including another yet another home — the three-bedroom, two-bath ranch near Old Spanish Trail and South Freeman Road that he indicated was his address when he filed campaign finance reports in each of his elections — being conveyed back and forth. The Bees were listed as the owners when it was sold to a third party in January 2020 for $372,000.
Evergreen Mountain LLC has two members, according to Arizona Corporation Commission records: a third individual named Kaleb Hendrickson, and The Evergreen Mountain Trust. That trust is the sole member of Bee Line Bus Transportation, Bee’s company.
Keith and Robin Bee have signed company paperwork filed with the state as the trustees of The Evergreen Mountain Trust.
Evergreen Mountain LLC has also engaged in property transactions with Evergreen Mountain Parkway Limited Partnership, sometimes referred to in documents as Evergreen MP. Both the LLC and limited partnership have used the same post office box as an address in real estate contracts.
One of those real estate deals was for a house perched atop a hill along East Redington Road. The 7,100-square-foot, six-bedroom, five-bath residence last changed hands in 2021, selling for $1.77 million after extensive renovations under new owners.
Prior to 2010, the 7-acre property — just down the road from the ranch still owned by Paul McCartney — was owned by Bee, in his own name. That year, it was transferred to Evergreen Mountain LLC.
After successfully suing to lower the property taxes due to the claimed poor condition of the house, Bee gutted the structure in order to renovate it. For years to come, the County Assessor’s Office would list the property as “salvage,” noting that it was “uninhabitable/unusable at this time.”
In 2016, it was conveyed to Evergreen MP. In 2019, it was sold for $325,000 to a third party, who has apparently completed the renovations.
Evergreen Mountain LLC also owns a property in Summerhaven, atop Mt. Lemmon.
Neither Bee himself nor any of his LLCs are currently listed as the owner of any property in Pinal County.
Tangled properties, large debts
With multiple properties conveyed between Bee, him and his wife, and
LLCs over the years, a full picture of his past and current holdings is not clear. But
among his tangled finances there have been some substantial debts to go with
the property assets.
In a 2019 “confession of judgment,” the Bees and Bee Line ended a lawsuit brought by BMO Harris Bank by acknowledging a $310,000 outstanding debt stemming from a 2016 loan.
In January 2020, a default judgment was entered against the Bees, Bee Line Bus Transportation LLC and another bus company they operated, Royal Student Transportation Services LLC, when they did not appear to defend against a claim brought by their lawyer for the preceding decade.
Attorney Charles R. Smith was owed $119,000 for services rendered to Bee Line and The Evergreen Mountain Trust, along with $43,000 in interest on the overdue balance. Because the Bees did not contest the suit, a judge entered a judgment against them for the full amount of $162,000.
The $343,000 in restitution imposed by Bee’s criminal sentence this week may be compounded by a civil case that the IRS may file over remaining allegations.
Piccarreta told the court that the IRS has placed a lien on Bee’s pension as a judge, taking $4,200 per month from his $7,230 monthly check — from which another $1,900 in insurance is deducted, he said.
Bee’s lawyer wrote to the court that “although Mr. Bee is indigent, he has managed to gather $20,000, which has been placed in undersigned counsel’s trust account, to be paid after sentencing as a partial good-faith payment on his restitution obligations.”
Bee will be required to make payments toward what he owes the IRS with payments of $2,500 per month while on supervised release after serving his stint in prison.
‘Fair and decent’ judge
According to attorneys and others who saw Bee in action in his own courtroom as a judge and spoke with the Sentinel this week, he was by all accounts a “fair and decent” justice of the peace. One attorney, who requested anonymity in order to speak candidly, said “he was surprisingly even-handed for a Republican — good for defendants” who came before him.
“It’s a shame this happened like this,” said one person who had a case before Bee several years ago.
The
original indictment said Bee maintained the checking accounts in the name of Bee
Line Tucson and used them to pay for the personal expenses. That
information was turned over to his tax preparer. He also claimed several
personal vehicles as business vehicles and failed to report a $178,000
capital gain for tax year 2011, according to documents.
The
IRS began auditing Bee’s returns in 2014. Bee provided vendor invoices
when issued a summons, but “the documents Bee provided to the revenue
agent do not match corresponding copies and information obtained from
the vendors,” according to the original indictment. It also said some
information provided by Bee “had been removed in an effort to disguise”
the payments for personal items. He also provided a loan document from
Ford Motor Credit for a $65,259 Mustang GT 5.0 Roush that had incomplete
information, which the court called an attempt to obstruct and impede.
Bee’s
attorney said at the time that Bee was “the victim of a
very shoddy tax preparation and not carefully reviewing voluminous tax
returns. He, like most people, when given a thick return, just signed it
where he was told to sign.”
In
asking for a trial delay in December 2020, attorneys for Bee said the
case involved going through 86,000 pages of disclosure and required
consulting with accounting and tax experts. Before the deal was reached last August, trial had been set for
September.
While Bee gave up any right to appeal the sentence by taking the plea deal, he can apply for “compassionate release” before serving the full six months.
Even if Bee has to remain incarcerated for the entire term, “he’ll get it done, be out by Christmas,” Piccarreta told the Sentinel.
He told the court that Bee’s going to prison “will almost surely signal the demise of his business and force him into bankruptcy, requiring Mr. Bee to essentially find a new way to start over in life, at an age when it is not easy to do so.”
The U.S. Attorney for the District of Arizona, Gary Restaino, said after the sentence was imposed that “reporting income and paying taxes are important aspects of patriotism. Let this case serve as a reminder that all people, no matter their rank and circumstance, may face prison time when they cheat on their taxes. Thanks to our partners at the Internal Revenue Service for pursuing these cases fairly and comprehensively.”
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