Crime & Safety

UPDATED: Two Brookfield Residents Plead Guilty to Fraud in Federal Court

Brothers' business in New Berlin was raided in 2007.

Two Brookfield brothers have pleaded guilty on federal charges, including fraud, conspiracy and receiving stolen infant formula, the U.S. Attorney's office said Tuesday.

Rassem and Ishaq Kaloti were charged Tuesday with diverting more than $2.2 million from various business ventures and concealing the income from their accountants and the Internal Revenue Service over a nine-year period, then filing false income tax returns in 2005.

Ishaq Kaloti faces an additional count of purchasing and receiving stolen infant formula.

Maximum penalties are 10 years imprisonment and $250,000 fine on the stolen infant formula charge; five years and $250,000 on conspiracy to defraud the United States; and three years and $100,000 on filing false income tax returns.

Under the terms of the plea agreement, prosecutors will recommend a sentence of 30 months each, with neither brother to be imprisoned at the same time. Both also owe back taxes, penalties and interest from 2000 to 2006.

Rassem Kaloti, 50, and Ishaq Kaloti, 45, owned and operated a series of businesses, including Kaloti Wholesale Inc., a dry-grocery wholesaler; RIMKO Realty LLP, through which they owned buildings in Milwaukee; Thyzdar LLP, through which they operated the Howard Johnson Hotel in those buildings; and Kaloti Enterprises of Michigan, another grocery wholesaler.

In the plea agreement, prosecutors outlined a series of schemes the brothers used to conceal income from all these businesses. They set up secondary bank accounts and hid them from their accountants; signed false business checks; created a second reservation computer and credit card machine at the hotel; and falsely represented as β€œpurchases” checks that were cashed to pay illegal immigrant workers at Kaloti Wholesale β€” workers who also performed personal services for the brothers.

On Feb. 14, 2007, agents from the Federal Bureau of Investigation and the Internal Revenue Service searched the Kaloti Warehouse in New Berlin pursuant to a search warrant and seized, among other things, more than 81,000 cans of suspected stolen infant formula, according to a press release from U.S. Attorney James L. Santelle.

As part of the plea agreement, the Kalotis have agreed to the forfeiture of this infant formula to the United States. Both were released on signature bond.


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