Prominent Lehigh Valley attorney John Karoly pleaded guilty Monday to three counts of federal tax fraud charges for failing to pay $1.9 million in taxes on about $5.2 million worth of unreported income in 2002, 2004, and 2005. Prosecutors say he could spend 51 to 63 months in prison and possibly lose his license to practice as an attorney. 

[ 7/06/09 REPORT: Karoly Faces Jail Time ] 
[ 7/06/09 REPORT: John Karoly Pleads Guilty ]
[ 7/6/09 GOVERNMENT'S GUILTY PLEA MEMORANDUM ]
[7/6/09 DEPARTMENT OF JUSTICE NEWS RELEASE ]
[ 4/29/09 RAW VIDEO: FBI Raids John Karoly's Office ] 
[ 3/12/09 INDICTMENT ]
[ 9/25/08 REPORT: Prominent Attorney, Two Others Indicted ]
[ 9/25/08 INDICTMENT ]      [ 9/25/08 STATEMENT FROM KAROLY'S ATTORNEY ]
[ 3/12/09 REPORT: Karoly Facing More Charges ] 
  
Sentencing has not yet been scheduled.  

The September 2008 indictment against Karoly, 59, his son, John Karoly, III, and Dr. John Shane, charged him with trying to defraud the multi-million dollar estate of Karoly's late brother and sister-in-law, Peter Karoly and Laren Angstadt, by faking their wills after the couple were killed in a plane crash in February 2007. As part of today's plea agreement, Karoly has agreed to give up all claims to their estate. Charges against Karoly, III and Shane were also dismissed.

A superseding indictment later filed against Karoly alleged that in 2004 Karoly made a $500,000 donation to the Lehigh Valley Community Foundation and then had the money returned to him in an effort to defraud the foundation and the Dubbs United Church of Christ in Allentown. Prosecutors say charges of mail fraud and money laundering in connection with those claims will be resolved by a non-jury trial in September. 

Just last week, the Federal Election Commission announced a settlement in which Karoly will have to pay $155,000 on allegations that his law firm illegally funneled money to the presidential campaign of former U.S. Representative Dick Gephardt of Missouri. The FEC says the settlement includes no admission of wrongdoing by Karoly's firm.

In response to the settlement, an attorney representing Karoly said, "This complaint was filed five years ago by a former employee. Mr. Karoly has contested the complaint ever since. The settlement released today makes clear that he admitted no violation of wrongdoing of any kind, but wanted to avoid the burdens of continued litigation, which could have gone on for another five years."

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