East Bay Doctor Admits to Tax Fraud, Owes $5.4 Million

CONTRA COSTA COUNTY, CA -- A doctor who owns two pathology laboratories in Hercules has pleaded guilty in federal court to a charge of tax evasion and admitted that he owes $5.4 million in unpaid taxes for a seven-year period.

Pathologist John Campagno, 70, of Napa, entered the plea on Dec. 15 in San Francisco, and could face up to five years in prison. He's scheduled to be sentenced by U.S. District Judge William Alsup on March 28.

Compagno owns the West Coast Pathology Laboratory Inc. and the Histopathology Reference Laboratory as well as a third corporation, John Campagno, M.D., Inc., all based in Hercules.

He pleaded guilty to one count of evading taxes by knowingly filing a false tax return for the 2010 calendar year.

As part of his plea agreement, Compagno also admitted to owing $3.85 million in corporate taxes for 2005 through 2011, plus $1.56 million in personal income taxes for 2006 through 2011.

The unpaid corporate taxes resulted from Compagno's deductions of more than $10 million in expenses that were non-deductible during the seven years, prosecutors said.

The unpaid income taxes came from his failure to declare income from more than $10 million in constructive dividends over six years.

Constructive dividends are certain payments made by a corporation to a shareholder who is also an employee. Although the corporation may not classify the payments as dividends, the U.S. Internal Revenue Service considers them dividends.

Bay City News contributed to this report/Image via Shutterstock