BANGOR – An Old Town accountant pleaded guilty this week to aiding the preparation of a false income tax return that netted one of his clients tax return money, but also put him in arrears with the Internal Revenue Service.

George Bates, 50, faces a possible maximum penalty of three years in prison, a $250,000 fine or both. He was released on personal recognizance bail after a Thursday hearing at U.S. District Court. Chief Judge D. Brock Hornby of the U.S. District Court in Maine presided.

The tax return was one of several Bates filed with fictitious information. According to a plea agreement, the misconduct covered a two-year period from 1994 to 1996, and involved at least five other clients and 10 other tax returns.

“The United States stipulates that the tax loss caused by the defendant is $7,210,” the plea agreement states.

About 18 people, some who said they were supporters, sat in a federal courtroom on Harlow Street during the hearing Thursday. Bates waived indictment and pleaded guilty to a document called an “information.”

Bates ran a service called Affordable Accounting in Old Town. He no longer is in business, according to one official.

According to a court document, Bates submitted an income tax form for the 1996 calendar year for a local man and indicated the man had a word processor-courier business. Bates indicated on one form that the man had declared a financial loss attributed to the business.

In fact, the man never operated such a business.

Had the matter gone to trial, a government attorney told the judge he would have produced Bates’ client who would testify that the expenses and income reported for the business were “substantially false and fictitious,” according to a court document.

Assistant U.S. Attorney Mike Love is prosecuting the case for the government. According to Love, the client in question and others named in the plea agreement won’t be prosecuted for filing false returns. All, however, have had to pay taxes they owed to the IRS.While Bates is convicted of only one count, the judge may consider other false tax returns mentioned in the plea agreement as “relevant conduct” for sentencing.