ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Sunday, May 19, 1996 TAG: 9605200086
SECTION: VIRGINIA PAGE: A-1 EDITION: METRO
DATELINE: BLACKSBURG
SOURCE: ELISSA MILENKY STAFF WRITER
NOTE: Below
RECORDS SHOW how Salvatore Barranco avoided paying the government $2.6 million in taxes. But the records will never reveal why.
Salvatore Barranco was living an enviable life - on the surface.
The 53-year-old orthopedic surgeon had a successful Blacksburg medical practice with his name prominently displayed on the clinic facade. He lived with his wife, Patricia, in a nearly half-million-dollar home with an indoor pool and sauna overlooking Ellett Valley.
Colleagues and patients knew him as a respectable, giving man who volunteered his medical skills on the sidelines of Blacksburg High School football games for 20 years.
For more than a year, however, Barranco lived under a cloud of legal troubles that only recently became public. On Feb. 13, he was sentenced in U.S. District Court in New York to 27 months in prison on charges of evading more than $2 million in taxes. He reported to a federal prison in Lexington, Ky., on March13.
Few among Barranco's peers, patients and friends knew the doctor had quietly pleaded guilty to the charges a year ago.
In New York, Barranco was one of 200 doctors, salespeople and other prominent persons - including a former editor of Business Week magazine - who were clients of an accounting firm that created and guided a $24million tax-evasion scheme.
In retrospect, Barranco's associates can now piece together why he resigned from a local Rotary Club last year and declined to volunteer at the high school football games last season with only vague explanations.
The leave of absence from his practice and the surrender of his medical license came later. In fact, Barranco waited until Feb. 26, just weeks before he was to report to prison, to send a letter to Radford Community Hospital that asked Chief Executive Officer Skip Lamb to take him off the hospital's active staff.
"I don't think anybody knew about his problems until immediately before it came out" in the media, said David Crist, Blacksburg High football coach. "He's very private. He's always been private with his nonprofessional life."
The intricacies of how Barranco avoided paying the government $2.6 million in taxes are detailed in federal court records. In short, he sent in federal tax returns for himself and his medical practice, Montgomery County Orthopedics Associates, that included fraudulent business and charitable deductions and understated his personal and business incomes.
Barranco did not respond to requests to be interviewed before he left for prison. His wife also declined to comment.
The charges against Barranco, provided by the U.S. Attorney's Office in New York, tell this story:
From 1982 to 1992, Barranco wrote checks to bank accounts that appeared to be valid charities, business associates and organizations. The fraudulent accounts, set up by Abrams Associates, a New York accounting firm, had names such as Virginia Medical and Dr. Shuman Fu. Barranco would then get 90 percent of the money back from the accounts.
The accounting firm would send the money to Barranco directly, put it in his bank and brokerage accounts, invest it or even pay off some of the doctor's personal expenses, such as credit card bills.
In 1991, for example, Abrams Associates sent American Express a check for more than $20,000, which was drawn from one of the satellite accounts, as credit on Barranco's account.
The accounting firm, which prepared the income tax returns for Montgomery Orthopedics from 1983 to 1992, kept what amounted to 10 percent of each check as its fee.
Barranco's friend and former partner, Eugene Strelka, also is implicated in the tax-evasion schemes involving Montgomery Orthopedics. The two started the medical practice in 1974, but Barranco bought up Strelka's shares in the business in 1984 after an accident left Strelka paralyzed.
Strelka continued to practice medicine at Montgomery Orthopedics, however. He and Barranco also were charged with concealing Strelka's salary from insurance companies that were making disability payments to Strelka on the condition that his income stayed at a certain level.
Strelka, who now lives in Moneta, pleaded guilty in June 1994 to conspiracy and tax evasion and will be sentenced Sept.26.
Barranco is serving his 27 months in a Kentucky correctional facility. Like other inmates, he will be assigned to a work detail, which includes plumbing, carpentry and food service.
Those who know Barranco express puzzlement and disappointment as to why someone with a six-figure income would risk everything for even more money.
He appeared to have the trappings expected of any successful doctor in a specialized field.
In the early years, he and his family lived in a large brick house in Blacksburg's upper-middle-class Stroubles Mill neighborhood. Strelka lived nearby.
In 1975, Barranco and his wife bought a five-acre plot in Ellett Valley's tony Woodland Hills area. They built a $434,000 home at the end of a long driveway. A fountain on the front steps of the house is turned on during warmer weather.
The couple purchased land near the house throughout the 1980s, amassing more than 100 acres with a value of $169,100, according to county tax records. In 1986, the 30-acre plot surrounding the house was switched to Patricia Barranco's name only.
Another 93 acres were purchased in her name in 1987.
In the 1980s, when federal authorities charge that Barranco was involved in the tax evasion scheme, he invested money in a partnership with two other local doctors. WTB Partnership rents out office spaces in Blacksburg and owns several lots in a Montgomery County subdivision.
It was Barranco's medical practice, however, that brought the orthopedic surgeon the most attention. For years, Barranco was one of the few orthopedic physicians in the area, so there weren't many people with broken bones in Blacksburg and Christiansburg who did not limp into his office.
Barranco had both supporters and detractors. Crist, the football coach, knows Barranco as the "outstanding surgeon" who treated two of his three sons. To Crist, Barranco was the faithful presence on the sidelines of almost every Blacksburg High football game - home and away - who treated everything from minor scrapes to serious injuries.
Each year, the coach estimated, Barranco treated 60 to 70 kids at the games.
"When and if he ever realized what was happening, I have no idea," Crist said. "I've been around him too long, too much to think he purposely got into that situation."
"He did so many things on his own to help other people who needed help," Crist added. "He's not the kind of person who is selfish. ... He's not a self-centered guy. I think most purposeful tax evaders are self-centered, and that he sure was not."
For years, Barranco donated his time to do athletic physicals for the school system, recalled Judy Reemsnyder, a patient for 25 years and a former neighbor.
She described Barranco as a devoted family man who was friendly and warm; the kind of doctor who dropped everything on a Friday afternoon to treat her when she broke her leg. Reemsnyder vows she will remain Barranco's patient if he returns to his practice.
"I'm just sick that it happened," said Reemsnyder, who first learned of the charges when she picked up a newspaper in March. "You don't want to print what my comment was. I just couldn't believe it, I just couldn't believe it. That would be the last thing I would expect from somebody of his caliber."
Blacksburg is a small community where many people will talk in great detail about Barranco privately, but few will make their comments public. One fellow Rotary Club member said recently, ""He was a very nice person, I thought. I'm not excusing it, it's kind of disgusting in a way. He didn't need the money, but I hate to see this happen. He was a likable person."
Several doctors who knew or worked with Barranco did not return a reporter's phone calls for this story.
"Professionally, he had a good reputation," said Dr. Scott Kincaid, Radford Community Hospital's former chief of staff. "That's why it was a surprise to everyone."
Several people, including a Blacksburg doctor who knew Barranco professionally, referred to his ego, as represented by the large, black letters that read "The Barranco Clinic" on the side of the building that houses Montgomery Orthopedics and several other medical practices.
"When you name a clinic after yourself, that's a pretty good indication," the doctor said.
The Barranco Clinic sits off U.S. 460, just across the parking lot from Columbia Montgomery Regional Hospital. Barranco was one of the first doctors on the hospital's active staff during the early 1970s, said Reemsnyder, who also worked at Montgomery Regional.
Though Reemsnyder never worked directly with Barranco at the hospital, she heard from others that he was sometimes difficult to work with because he demanded perfection from others as well as himself.
During the 1980s, Barranco clashed with Montgomery Regional administrators over his desire to perform surgeries at his clinic. The hospital opposed Barranco's state application, and his bid for a special certificate for an out-patient surgical clinic failed, sources said.
He moved his affiliation to Radford Community Hospital, Montgomery Regional's competitor, in 1984 and remained there until February. Hospital spokeswoman Susan Lockwood said Barranco will have to reapply if he wants to be affiliated with Radford Community again.
The judge who sentenced Barranco recommended that the doctor be able to get his medical license back once he gets out of prison. In the meantime, the practice is being run by Barranco's associate, Dr. R.L. Barrowman, who would not comment for this story.
"He has paid a high enough price," said U.S. District Judge John S. Martin, according to a court transcript.
When Barranco leaves prison in 1998, he will be on probation for two years and also will be liable for the unpaid taxes. In the meantime, his presence remains in the New River Valley.
His name is still embossed on the front door of Montgomery County Orthopedics Associates. And the black letters that spell out his name on the outside of the building also remain, just as bold as before.
LENGTH: Long : 180 lines ILLUSTRATION: PHOTO: (headshot) Barranco. KEYWORDS: PROFILEby CNB