WASHINGTON - Karl Herrington of Parma, Mich., was arrested today on charges of two counts of corruptly endeavoring to obstruct the administration of the internal revenue laws, and five counts of filing false tax forms with the Internal Revenue Service (IRS), the Department of Justice, the Treasury Inspector General for Tax Administration (TIGTA) and the IRS announced. The indictment was returned on May 12, 2011, and was unsealed today in U.S. District Court in Detroit.
According to the indictment, Herrington submitted false forms to the IRS to intimidate and harass state and local government officials and employees. These included Forms 1099-OID falsely reporting that Herrington paid original issue discount, which is taxable as interest, to law enforcement personnel and judges involved in a criminal case against him in Jackson County. In that case, Herrington was charged with being an accessory after the fact for harboring his wife, who was wanted for outstanding arrest warrants.
The indictment also alleges that Herrington sent false Forms 1099-OID to federal attorneys prosecuting a criminal tax case against his wife in the Northern District of Ohio in order to interfere with that case. Among the false tax forms Herrington is accused of filing was an individual income tax return for himself falsely reporting federal tax withheld of over $8 million.
If convicted, Herrington faces a maximum potential sentence of 21 years in prison and a maximum fine of $1.5 million. An indictment is merely an allegation, and Herrington is presumed innocent unless and until proven guilty beyond reasonable doubt in a court of law.
Tuesday, May 31, 2011
Karl Herrington Arrested and Charged With Obstructing the IRS in Form 1099-OID Schemes
Monday, May 30, 2011
John A. Ortiz Admits Structuring More Than $943,000 in Cash Transactions
David B. Fein, United States Attorney for the District of Connecticut, announced that JOHN A. ORTIZ, 54, of Stratford, pleaded guilty today before United States District Judge Janet C. Hall in Bridgeport to one count of illegally structuring cash transactions.
Federal law requires all financial institutions to file a Currency Transaction Report (CTR) for currency transactions that exceed $10,000. To evade the filing of a CTR, individuals will often structure their currency transactions so that no single transaction exceeds $10,000. Structuring involves the repeated depositing or withdrawal of amounts of cash less than the $10,000 limit, or the splitting of a cash transaction that exceeds $10,000 into smaller cash transactions in an effort to avoid the reporting requirements. Even if the deposited funds are derived from a legitimate means, financial transactions conducted in this manner are still in violation of federal criminal law.
According to court documents and statements made in court, ORTIZ maintained a money market savings account at a credit union, and also had a personal line of credit at a bank. Between May 2006 and October 2009, ORTIZ made more than 70 large cash deposits into his savings account and more than 30 large cash payments to his personal line of credit account. The vast majority of the cash transactions were in the amount of $9000, and none exceeded $10,000. In total, ORTIZ structured approximately $943,000 in cash deposits and line of credit payments.
ORTIZ used the deposited funds to purchase, or to obtain credit in order to purchase, properties in Connecticut and Florida. ORTIZ also used more than $270,000 of the structured funds to settle a business dispute with his former partner.
ORTIZ owns and operates towing and auto repair businesses in Bridgeport and Stratford.
Judge Hall has scheduled sentencing for August 25, 2011, at which time ORTIZ faces a maximum term of imprisonment of 10 years and a fine of up to $500,000. ORTIZ also has agreed to forfeit approximately $388,540 to the government.
Sunday, May 29, 2011
Christopher T. Carr Admits Defrauding Citizens Bank
The United States Attorney for the District of Connecticut announced that CHRISTOPHER T. CARR, 55, of Westport, pleaded guilty today before Senior United States District Judge Alfred V. Covello in Hartford to one count of bank fraud stemming from a scheme to defraud Citizens Bank of millions of dollars.
According to court documents and statements made in court, CARR was the president of F&S Oil Company Inc. (“F&S Oil”), which was in the business of providing heating oil to residential and commercial customers in the Waterbury area. As primarily a seasonal business with fluctuating cash flow, with growing cash deposits when prepaid contracts were purchased by customers and declining cash flow as inventory was purchased and delivered, F&S Oil needed access to a banking line of credit to conduct its business on an ongoing basis. As a result, F&S Oil had a banking relationship with Citizens Bank, which included three outstanding lines of credit or loans secured by the assets, inventory, and receivables of F&S Oil. Citizens Bank would routinely extend funds to F&S Oil under the existing line of credit based, in part, on information provided by F&S Oil in periodic submissions of borrowing base certificates to Citizens Bank. The borrowing base certificates would itemize F&S Oil’s total gross accounts receivable and would include a listing of the aging of the receivables and a total fuel inventory.
In 2007, F&S Oil sought to construct a local biodiesel plant that, once completed, was projected to be able to produce heating oil with significantly better operating margins than that provided by simply purchasing heating oil from third parties. F&S Oil funded the construction primarily through its line of credit with Citizens Bank, as well as monies obtained by the prepayment of oil contracts by residential and commercial customers. During 2007 and early 2008, the biodiesel project ran into unanticipated construction and permitting problems that delayed its completion and significantly increased the cost of construction.
In pleading guilty today, CARR admitted that, as the biodiesel plant’s construction costs mounted, he defrauded Citizens Bank into further extending monies under the line of credit by repeatedly falsifying the borrowing base certificates provided to Citizens Bank by overstating F&S Oil’s accounts receivable and inventory. As a result, the government contends that CARR caused losses of between $2.5 million and $7 million to the bank.
Saturday, May 28, 2011
Federal Court Bars Shelia Young, Deane Young and Kennith Defoor From Preparing Federal Tax Returns
WASHINGTON - A federal court has barred a family of tax preparers in Overgaard, Ariz., from preparing federal tax returns for others, the Justice Department announced today. The court’s preliminary injunction order against Shelia Young, Deane Young and Kennith Defoor will remain in effect while a related criminal case against the defendants proceeds in court.
The government complaint in the civil injunction case alleged that the Youngs and Defoor promoted fraudulent tax schemes through their companies, Accurate Consulting LLC, and D4 Accounting, Consulting, Tax Services Inc. According to the complaint, these schemes included manipulating the amount of income and federal tax withholdings claimed on their customers’ tax returns, resulting in bogus claims for tax refunds. The complaint further states that, since 2001, the Youngs and Defoor prepared at least 337 federal tax returns requesting fraudulent tax refunds, often in amounts exceeding $100,000.
The three family members allegedly prepared frivolous tax returns that cumulatively claimed more than $24 million in fraudulent refunds and resulted in the Internal Revenue Service (IRS) issuing approximately $2.3 million in erroneous refunds. The complaint alleged that the Youngs and Defoor asserted fraudulent “zero income” and “commercial redemption” tax schemes and regularly submitted false IRS forms on behalf of their customers that reported both fictitious interest income and tax withholdings.
Friday, May 27, 2011
Charles Alexander Davis Indicted for Filing False Tax Returns and Obstructing the IRS
WASHINGTON – Charles Alexander Davis formerly of Mooresville, N.C., was indicted by a federal grand jury in Charlotte, N.C., on 10 counts of willfully filing materially false tax returns and one count of obstructing and impeding the Internal Revenue Service (IRS), the Department of Justice and the IRS announced. The indictment was returned on May 19, 2011, and was unsealed today in U.S. District Court for the Western District of North Carolina.
According to the indictment, Davis’s employer, an international airline carrier, withheld little or no federal income tax from Davis’s wages for years 1997 through 2005 because Davis previously had falsely represented that he was exempt from income tax withholding. The department said, in April 2006, Davis filed five fraudulent amended income tax returns for 1996 through 2000, falsely claiming that he earned little or no adjusted gross income in each of those years.
Davis had his initial appearance on May 20, 2011, in Puerto Rico, where he was apprehended.
If convicted, Davis faces a maximum potential sentence of 33 years in prison and a maximum fine of $2.75 million. An indictment is merely an allegation, and Davis is presumed innocent unless and until proven guilty beyond reasonable doubt in a court of law.
Thursday, May 26, 2011
Federal Court Bars Martha A. Jones From Preparing Federal Tax Returns
Source- http://www.justice.gov/tax/txdv11679.htm
WASHINGTON - A federal court has permanently barred Martha A. Jones of Chicago from preparing federal tax returns for others, the Justice Department announced today. The civil injunction order, to which Jones consented without admitting the allegations against her, was signed by U.S. District Court Judge Gary Feinerman for the Northern District of Illinois.
The government complaint in the case alleged that Jones included fabricated charitable contributions, employee business expenses and other deductions on tax returns that she prepared since 2005. The complaint alleged, for tax years 2005 through 2008, the Internal Revenue Service (IRS) examined 56 of the returns that Jones prepared and found inaccuracies in all of them. According to the complaint, the tax losses to the United States from Jones’s misconduct could exceed $1 million.
The complaint also alleged that Jones failed to sign her customers’ returns as the paid preparer, even after being advised by the IRS that she was legally required to sign them. The court order requires Jones to provide the government with a list identifying all persons for whom she prepared federal tax returns for tax years 2005 through 2009.
Wednesday, May 25, 2011
Company Bookkeeper Stacia Woodman, Sentenced for Embezzlement and Tax Fraud
BIRMINGHAM—A federal judge today sentenced a Leeds woman to three years and five months in prison on charges related to her embezzling more than $400,000 from her employer, announced U.S. Attorney Joyce White Vance, FBI Special Agent in Charge Patrick Maley, IRS Criminal Investigation Special Agent in Charge Reginael D. McDaniel, and Postal Inspector Frank Dyer.
U.S. District Judge L. Scott Coogler sentenced STACIA WOODMAN, 36, on five counts of mail fraud and three counts of tax fraud. Woodman pleaded guilty to the charges in February. Judge Coogler ordered her to serve three years’ supervised release following completion of her prison term.
From 2000 to 2009, while Woodman worked as a bookkeeper for J. Loper and Company, a Birmingham landscaping business, she engaged in a scheme to pay some of her personal expenses using her employer’s funds. Woodman concealed her fraud by arranging for company checks to appear on the company’s books and records as if they were issued for legitimate business expenses. Woodman concealed from the company’s owner and manager bank overdraft fees and notices to avoid alerting her employer that funds were being misappropriated. Over the course of her scheme, Woodman stole about $427,488.
In addition to the theft from her employer, Woodman failed to report on her personal income tax returns for 2006, 2007 and 2008 the income she received as a result of her fraud. The tax loss totaled $60,232 for the three years of under-reported income.
“Woodman was a trusted employee who abused her position of trust to personally benefit herself, and she criminally avoided her income tax obligations,” Vance said. “The nature of Woodman’s conduct was especially egregious because her conduct involved writing dozens of company checks for her own personal expenses and then using her knowledge of the company’s bookkeeping system to avoid detection by the company’s managers and owner.”
“Individuals thinking about participating in fraudulent schemes, including failing to report all forms of income, should stop in their tracks and simply look at the consequences of taking the next step,” McDaniel said. “Those consequences may include going to prison, being branded a convicted felon for the rest of their lives, and paying back all the taxes owed, plus steep penalties and interest.”
Judge Coogler ordered Woodman to pay $427,488 in restitution to her employer and determined that the Internal Revenue Service was entitled to $60,232 for the unpaid taxes.
Tuesday, May 24, 2011
Sharon Thurman Sentenced for Identity Theft and Filing False Tax Returns
WASHINGTON – A resident of Elmore, Ala., was sentenced to 60 months in prison for stealing identities and using them to file false tax returns, the Justice Department and Internal Revenue Service (IRS) announced today.
On Feb. 22, 2011, after a four-day trial, a jury in Montgomery, Ala., convicted Sharon Thurman of 14 counts of making false claims, two counts of theft of government money and two counts of aggravated identity theft. According to the indictment and evidence introduced during trial, Thurman owned and operated Sharon’s Tax Service in Elmore. Between January and April 2008, Thurman filed 14 fraudulent tax returns in which she unlawfully attempted to obtain tax refunds intended for individuals whose identities she stole.
At trial, 14 victims of identity theft testified that they did not file, and did not request Thurman to file the tax returns she filed in their names and Social Security numbers. Two victims in whose name she received payment from the IRS testified that they never received any money from Thurman. All 14 victims testified that, to the best of their knowledge, they had never met Thurman and had never been to Sharon’s Tax Service.
Monday, May 23, 2011
Imelda Sanchez Arrested for Loan Fraud and Identity Theft in Schemes Involving Fraudulent Tax Returns
LOS ANGELES—A Nipomo woman was arrested yesterday and arraigned late Monday afternoon on charges of orchestrating a tax scheme involving stolen identities, as well as a loan fraud scheme in which she allegedly submitted false income tax returns that overstated her income in an effort to obtain a $1.6 million loan.
Imelda Sanchez, 39, was arrested at her place of business Monday morning by special agents with IRS - Criminal Investigation and the FBI. Appearing yesterday afternoon in United States District Court in Los Angeles, Sanchez pleaded not guilty to charges contained in an 18-count indictment returned last week by a federal grand jury.
The indictment charges Sanchez with eight counts of making false claims to the Internal Revenue Service, three counts of aggravated identity theft, five counts of making false statements on loan applications, and two counts of making false statements to the FBI.
In the indictment filed last Wednesday, Sanchez is accused of preparing false and fraudulent tax returns in the names of several taxpayers in order to fraudulently obtain tax refunds from the IRS. The indictment alleges that Sanchez stole the identities of several people, using their names and Social Security numbers without their authorization.
Sanchez is further charged with making false statements to Santa Lucia Bank by submitting false personal and corporate income tax returns in applications for a $1.6 million loan.
Sanchez is also charged with having lied to the Federal Bureau of Investigation on two separate occasions in 2007 when asked about her role in creating false tax documents and employment verifications in collaboration with various loan officers.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until and unless proven guilty in court.
If convicted of all 18 counts in the indictment, Sanchez would face a statutory maximum sentence of 206 years in federal prison, as well as up to $7.5 million in fines.
Saturday, May 21, 2011
Federal Court Bars Daniel D. Weddington, James R. Earl and James R. Earl From Promoting Oil-and-Gas Tax Fraud Scheme
WASHINGTON - A federal court has permanently barred two men from promoting an alleged tax fraud scheme involving interests in purported oil and gas wells, the Justice Department announced today. Judge James L. Graham of the U.S. District Court for the Southern District of Ohio entered the permanent injunction orders against Daniel D. Weddington of Newark, Ohio, and James R. Earl of Heath, Ohio. Both men were preliminarily enjoined in 2008. A third defendant, Jeffrey L. Gaumer of Newark, N.J., was permanently enjoined in 2008. All three men agreed to the permanent injunctions without admitting to the government’s allegations against them in the amended complaint.
Weddington recently pleaded guilty in federal court to two counts of aiding and assisting the filing of false income tax returns and one count of obstructing the administration of the internal revenue laws in connection with his role in the oil-and-gas well scheme.
The amended complaint in the civil injunction case alleged that Weddington, Earl and Gaumer marketed a scheme to claim tax deductions for fictitious well-drilling costs to more than 200 customers across the country. Customers allegedly paid for their purported investments using sham notes that were supposedly paid off by fictitious gas royalty payments from fictitious wells. The amended complaint also alleged that the defendants used a shell corporation, Aurora Capital Group Inc., to issue sham letters of credit to customers in an attempt to make the customers’ sham notes appear legitimate, so as to deceive the Internal Revenue Service (IRS).
The amended complaint also asserted that Weddington is a public accountant, that Gaumer is a certified public accountant in the same accounting firm, and that they prepared tax returns for the majority of the scheme’s participants. According to the amended complaint, the IRS estimated that the scam caused tax revenue losses of $5.7 million to $6.9 million from 2001 to 2004.
Friday, May 20, 2011
Dr. Mark E. Hopkins And His Wife Sharon June Hopkins Sentenced of Federal Tax Evasion Conviction
ALBUQUERQUE, N.M. - An emergency room doctor and his wife were sentenced yesterday for tax evasion, announced Deputy Assistant Attorney General for Criminal Matters for the Justice Department’s Tax Division Ronald A. Cimino and U.S. Attorney for the District of New Mexico Kenneth J. Gonzales. Dr. Mark E. Hopkins, 60, was sentenced to 120 months in prison to be followed by three years of supervised release, and Sharon June Hopkins, 60, was sentenced to 97 months in prison to be followed by three years of supervised release.
The Hopkins’ jointly were ordered to pay $1,744.222.26 in restitution to the Internal Revenue Service (IRS). Upon their release, the couple will be required to make $2,000 monthly payments to the IRS and to cooperate with the IRS in paying their taxes, past and present. Finally, the Hopkins’ were ordered to pay $965.84 for the cost of a video deposition taken during the course of the prosecution.
On Sept. 29, 2010, a federal jury sitting in Albuquerque, N.M., convicted the Hopkins’ of seven counts of tax evasion and one count of conspiracy. At the time, Mark Hopkins was an emergency room doctor at the Carlsbad Medical Center, and Sharon Hopkins was the owner of My Favorite New Mexico Foods LLC, a business that manufactured and sold traditional New Mexico foods throughout the United States. Before moving to Carlsbad in 2001, the couple resided in Roswell, N.M.
According to the allegations in the indictment and the evidence presented at trial, the Hopkins’ had not filed accurate personal tax returns since tax year 1997. They filed a “zero” tax return for tax year 1996, which reported no wages and requested a refund of all withholding. From Jan. 1, 1996, through Dec. 31, 2007, Dr. Hopkins earned more than $3 million in income from his work as an emergency room doctor and paid only $21.25 in federal income taxes on this income. At sentencing, the court determined the tax loss to be $2,171,018.57 for 1996 to 2007. The Hopkins’ also failed to file or pay state income tax to the New Mexico Department of Taxation and Revenue during this time period.
At trial, the Hopkins’ claimed that Dr. Hopkins’ income from his employer was not taxable because it was simply an “exchange” of labor for time. The evidence at trial showed that the couple used a number of “tax defier” schemes such as directing Dr. Hopkins’ income to a purported religious entity, named Shalom Enterprises. However, the Hopkins’ paid a number of personal expenses such as their mortgage, credit cards and a timeshare in Mexico, out of the Shalom Enterprises bank account. The couple also titled bank accounts and their home in the names of “pure trusts.”
As shown at trial, Dr. Hopkins previously was pictured on the front page of the April 16, 2007, Carlsbad Current Argus, standing outside the post office the previous day protesting the payment of federal income taxes.
“Sentences like the one returned today, send a loud and clear message that those who use illegal tax schemes will be fully punished for their actions,” said Deputy Assistant Attorney General for Criminal Matters Cimino.
“No matter how much Dr. and Mrs. Hopkins disagreed with our tax system, they were still required to obey the law,” said U.S. Attorney Gonzales. “The sentences imposed on the Hopkins are appropriate given the type of manipulation and deception in which these two educated and skilled professionals engaged to evade paying taxes.”
Thursday, May 19, 2011
Roger Lee Clark Gets 6 ½ Years in Prison for Ponzi Scheme and False Income Tax Returns
GRAND RAPIDS, MI—Roger Lee Clark, 66, formerly of Wyoming, Michigan, received a sentence of 6 ½ years in prison for committing a multi-million-dollar Ponzi scheme and filing false income tax returns, U.S. Attorney Donald A. Davis announced today. U.S. Attorney Davis was joined in the announcement by FBI Special Agent in Charge Andrew Arena and IRS Criminal Investigation Special Agent in Charge Erick Martinez. Special agents of the FBI and of the IRS Criminal Investigation Division had investigated the case.
The Honorable Janet T. Neff, U.S. District Judge, presided over the sentencing. Judge Neff expressed her concern regarding the seriousness of the “knowing and willing theft” by Clark and the trail of financial ruin he left behind. “The pain of that financial ruin for older people is particularly reprehensible.” In a terse attempt to explain the $9.3 million fraud, Clark said, “things happened.” Judge Neff replied, “Wow, that takes the cake.” Judge Neff also ordered Clark to pay restitution to the victims and serve a combined total of four years of supervised release. Clark also agreed to a money judgment of $9,162,380.99 and the forfeiture of undeveloped real property in Byron Center as well as numerous vehicles.
Clark claimed that he owned and operated CRM Investors Corporation for the past 16 years, despite never having any training in financial planning or any related financial fields. Clark used CRM, along with other fictitious businesses that he created, to hide money and assets from victims and evade his income taxes.
In 2007, Clark instructed a California investor to wire transfer $1,001,500 into a bank account controlled by him. Clark explained to the investor that she was investing in the T-Bill trading program and that her investment was 100 percent secure. Clark admitted that in September and October of 2007, he sent the victim two wire transfers of $180,000 each and lied to her that the payments represented earnings from her investment, when in fact, the first payment came from her own principle and the second payment was from the principle of another investor. On January 29, 2009, Clark e-mailed the California investor indicating that all of her money was lost, but never stated where the money actually went.
Clark filed a 2007 tax return that reported his total income to be slightly over $11,000 when he knew that his actual total income was significantly higher. As part of his sentence, Clark was also ordered to pay total of $163,646.00 in back taxes.
Wednesday, May 18, 2011
Former Governor’s Assistant Charles Ruffin Poole Receives Federal Prison Term for Tax Evasion
RALEIGH—United States Attorney George E.B. Holding announced that in federal court today CHARLES RUFFIN POOLE, 39, of Raleigh, North Carolina, was sentenced by United States District Judge Terrence W. Boyle to 12 months’ and one day imprisonment followed by two years’ supervised release. The court also imposed a fine of $30,000.00 and restitution of the underpaid taxes of $16,629.00 (which POOLE has already paid).
A federal grand jury returned a superseding criminal indictment on March 18, 2010. On April 19, 2010, POOLE pled guilty to federal income tax evasion, in violation of Title 26, United States Code, Section 7201.
Holding stated: “Today was about Ruffin Poole. In the sentencing today, Ruffin Poole was held accountable for his conduct: Taking a deal netting him $55,000 (and other favors) from the financier of coastal developments while he was using his official position in the governor’s office to facilitate permitting for these developments.”
According to the plea agreement, on April 14, 2006, POOLE attempted to evade a portion of his 2005 federal income tax liability by concealing his receipt of $30,000.00 of income he received in connection with his involvement in the financing of Cannonsgate, a high-end community in Carteret County. In the sentencing, POOLE was also held accountable for receipt of an additional $25,000 from the same source, which was also not reported on his tax returns. As part of the plea agreement, POOLE agreed that he failed to report and correctly identify the source of income from criminal activity, i.e., these corrupt payments he received the Wilmington financier of the coastal developments.
Tuesday, May 17, 2011
Federal Court Bars T. Michael Haney From Promoting Form 1099-OID Tax Scheme
WASHINGTON - A federal court has permanently barred Atlanta-area financial planner T. Michael Haney from promoting the use of Internal Revenue Service (IRS) Forms 1099-OID to support false tax withholdings, the Justice Department announced today. The civil injunction order, to which Haney consented, was signed by Judge Clarence Cooper of the U.S. District Court for the Northern District of Georgia.
The government complaint alleged that Haney advised his customers to prepare false IRS forms, such as Form 1099-OID, to request fraudulent refunds based on phony claims of large income tax withholding. According to the complaint, Haney’s customers have submitted fraudulent refund claims of more than $3.5 million. The court order requires Haney to provide the government with a list of all persons to whom he sold his “OID” program since Jan. 1, 2007, and to provide them with a copy of the injunction order.
Claiming bogus tax refunds based on false Forms 1099-OID is identified by the IRS as one of the “Dirty Dozen” tax scams that taxpayers are urged to avoid. Since 2001, the Justice Department’s Tax Division has obtained hundreds of injunctions to stop the promotion of tax fraud schemes and the preparation of fraudulent tax returns.
Monday, May 16, 2011
Federal Court has Permanently Barred Houston-Area Tax Preparers, Christopher Helton and Marcia Johnson From Preparing Federal Tax Returns
WASHINGTON – A federal court has permanently barred Houston-area tax preparers Christopher Helton and Marcia Johnson from preparing federal tax returns for others, the Justice Department announced today. The civil injunction order against Johnson was signed by Judge David Hittner of the U.S. District Court for the Southern District of Texas. Helton previously consented to a similar injunction.
According to the government complaint, Helton and Johnson, doing business as M.C. Tax Service, M.C. Tax Interprise and M.J. Tax Service, repeatedly claimed false tax credits and deductions on their customers’ federal tax returns. The most common alleged misconduct was blatantly fraudulent claims for a credit for gasoline or other fuel that the customers purportedly bought and used in their businesses. Under federal tax law, the fuel tax credit is limited to off-highway use of fuels, such as in the agricultural industry. But Helton and Johnson allegedly claimed the credit for customers – in one instance, a day care provider – whose occupations clearly did not involve off-highway fuel use. According to the complaint, Helton and Johnson also repeatedly made false claims for the earned income tax credit.
Sunday, May 15, 2011
Reed A. Richard Sentenced to Serve 30 Months in Prison for His Role in Fraud Conspiracies and Tax Evasion
WASHINGTON — A former employee of two Massachusetts-based customer relationship management agencies that purchase direct mail advertising services was sentenced today for participating in fraud conspiracies and committing tax evasion relating to his receipt of more than $1.8 million in kickbacks, the Department of Justice announced.
Reed A. Richard of Carlisle, Mass., was sentenced in U.S. District Court in Boston by Judge Douglas P. Woodlock to serve 30 months in prison, to pay a $250,000 criminal fine and to pay $35,500 in restitution. On Dec. 14, 2010, Richard pleaded guilty to conspiring with others to defraud his employers, Mullen Advertising Inc. and PreVision Marketing LLC, by accepting kickbacks from two direct mail advertising printing brokers in exchange for awarding printing work to the companies that the brokers represented. Richard also pleaded guilty to one count of tax evasion for tax years 2004 and 2005 for falsely claiming substantial personal expenses as business expenses. The department said that the conspiracies took place from approximately January 2000 through approximately February 2006.
Direct mail advertising allows companies to specifically target potential customers and contact them with tailored offers, promotional materials or advertisements using the U.S. mail.
According to the court documents, as a vice president of direct marketing production services of Mullen Advertising, and later as a senior production manager of PreVision Marketing, Richard was responsible for procuring direct mail printing services by obtaining competitive bids from printing companies, awarding contracts, reviewing invoices and authorizing payment. As part of the conspiracies, Richard approved invoices, issued by or through the printing brokers, while knowing that they were fraudulently inflated to include the kickbacks he was to receive. The department said that a portion of these overcharges were passed from the brokers to Richard as kickback payments. According to the court documents, in order to conceal his role in the scheme, Richard used a shell company which purportedly provided consulting services to the printing brokers but was in fact a vehicle for Richard to receive the kickbacks. In addition to the conspiracies, Richard claimed substantial illegitimate business deductions on his company’s federal income tax returns. The department said that, as a result, he under-reported his corporate and personal taxable income, resulting in a total tax loss of approximately $170,000.
Saturday, May 14, 2011
Justice Department Sues to Halt “Sham Cemetery” Tax Scams
WASHINGTON – The United States is seeking to bar three men from promoting alleged tax shelter schemes involving sham cemetery investments, the Justice Department announced today. The government has filed a civil injunction lawsuit in federal court in Washington, D.C., against Michael A. Strauss of Herndon, Va.; his son, Patrick B. Strauss, of Washington, D.C.; and Joseph C. Barreiro of Poughkeepsie, N.Y.
According to the government complaint, the Strausses and Barreiro promoted illegal tax schemes to customers located in Northern Virginia, Maryland and Washington, D.C. Through these scams, they allegedly received millions of dollars from their customers and concocted approximately $35 million in fake partnership losses and phony charitable contribution deductions, which they falsely told their customers could be used to offset their federal income taxes. The complaint alleges that the three men falsely promised their customers $5 of tax benefits for every $1 that they “invested.” The defendants allegedly sold the schemes through shell entities, which they controlled, called Burial Specialists LLC, Memorial Specialists LLC and Dignified Charitable Burials.
The complaint states that the men falsely told their customers that Burial Specialists had bought a “license” worth more than $90 million from a company called Southern Dorchester LLC using a $90 million “promissory note.” The license purportedly gave Burial Specialists the right to future profits from performing funeral services at a purported cemetery in Spotsylvania County, Va. According to the complaint, the defendants also falsely claimed that Burial Specialists could annually deduct a portion of the license’s supposed value and then pass on millions of dollars in losses to the customers. The government contends that there was no arm’s-length sale by Southern Dorchester and that Michael Strauss and Barreiro fabricated the $90 million “license” value, along with the accompanying $90 million “promissory note,” to generate fake tax benefits. The defendants also allegedly used the fictitious promissory note to siphon off, for their personal benefit, funds that they told their customers were being “invested.”
According to the complaint, the defendants undertook a virtually identical scheme using Memorial Specialists and a supposed cemetery in Lloyd, N.Y., as well as a third scheme using Dignified Charitable Burials that generated bogus charitable contribution deductions.
Friday, May 13, 2011
Payroll Company CEO Albert Cipoletti, Who Defrauded Sacramento County and Others of More than $20 Million Sentenced to Prison
SACRAMENTO, CA—United States Attorney Benjamin B. Wagner announced today that Albert Cipoletti, 62, of Northport, N.Y., was sentenced today by United States District Judge Garland E. Burrell Jr. to six-and-a-half years in prison, to be followed by three years of supervised release, in connection with a scheme to divert more than $20 million from Sacramento County as well as two other businesses: SanDisk Corporation (SanDisk) and The Stanley Works and Stanley Solutions Inc. (Stanley). As part of the sentence, Cipoletti was ordered to pay $19,141,618 in restitution. On October 29, 2010, he pleaded guilty to one count of wire fraud.
This case is the product of an extensive investigation by the Federal Bureau of Investigation and Internal Revenue Service, Criminal Investigation. The County of Sacramento reported the offense to federal law enforcement and has assisted with the investigation. Assistant United States Attorney S. Robert Tice-Raskin is prosecuting the case.
U.S. Attorney Wagner said: "These defendants cheated the IRS, Sacramento County, and some of their other clients over a long period of time, causing millions of dollars in losses. Those who are entrusted to handle public funds have a responsibility to preserve and protect those funds. As this prison sentence makes clear, persons who cheat the public will pay a steep price."
"Payroll companies who are hired to handle various financial affairs for employers, but who intentionally fail to remit withheld employment taxes are not only enriching themselves, they are creating financial problems for the employees," stated IRS Criminal Investigation Special Agent in Charge Scott O'Briant. "The defendant in this case wrongfully diverted over $20 million in tax withholding, which should have been remitted to the IRS on behalf of the clients' employees. Today's sentence should be a warning that IRS Criminal Investigation will always be there to pursue those individuals who play fast and loose with other people's money for their own personal gain."
Special Agent in Charge of the Sacramento FBI office Herbert Brown said "Today's fraud schemes are more sophisticated than ever, and this case is yet another example of the complex white collar crime cases we continue to see across the nation. The FBI is committed to using our skills and resources, as well as working with our law enforcement partners, to track down the culprits and bring them to justice."
According to court documents, Cipoletti was the chief executive officer of Ingentra HR Services Inc. (Ingentra), a payroll services corporation in Hauppauge, N.Y. Ingentra, then known as Humanic Solutions Inc, was hired by Sacramento County in late 2004 to process the payrolls for Sacramento County's Special Districts (including the Sacramento Metropolitan Fire District, the cemetery district, the parks and recreation district, independent contractors, and various elected officials). As part of the payroll services, Ingentra calculated the tax payments for the clients and the clients' employees and then transmitted the payments to the state and federal tax authorities. Ingentra was responsible for paying the IRS the income tax withholdings to the IRS and to file the Employer's Quarterly Federal Tax Form (Form 941) with the IRS on behalf of the clients. (Form 941 includes totals for number of employees, total pay for the period being reported, and amounts withheld from the pay of the employees.)
According to Cipoletti's plea agreement, from 2005 until April 2010, he and co-defendant Kerry Seaman, comptroller for Ingentra, devised a scheme to defraud the County of Sacramento - Special Districts, SanDisk, and Stanley of the tax withholdings intended to be paid to the IRS by collecting the correct amount from the clients but under reporting to the IRS the amount owed and diverting the difference to Ingentra's operating account for Ingentra's use.
According to the plea agreement, Cipoletti and Seaman sent funding letters to the clients that correctly calculated payroll and federal tax withholdings for the clients' employees, and these clients wire transferred funds to Ingentra for the purposes of paying both the payroll and taxes. Cipoletti and Seaman then filed false 941s to the IRS, understating the true employee tax withholdings for these clients. Cipoletti and Seaman wrongfully diverted in excess of $20 million in tax withholdings from clients Stanley, SanDisk, and Sacramento County that should have been remitted to the IRS on behalf of these clients and these clients' employees.
Thursday, May 12, 2011
Lora L. Renshaw to Serve 30 Months in Prison for Embezzlement from Former Employer and Filing a False Tax Return
OKLAHOMA CITY—LORA L. RENSHAW, 50, from Jones, Oklahoma, was sentenced today by United States District Judge David L. Russell to serve 30 months in federal prison for mail fraud and filing a false tax return, announced Sanford C. Coats, United States Attorney for the Western District of Oklahoma.
From 2005 through 2009, Renshaw worked as the office manager for Crown Electric, Inc., in Oklahoma City. In December of 2010, Renshaw pled guilty to a two-count information charging her with writing over 500 checks on Crown Electric’s company’s account to pay her own personal expenses, forging the signature of an authorized signer on the checks, altering copies of the checks to reflect that payments had been made to legitimate company vendors, and submitting the altered check register and bank statements to the company’s CPA through the mail. Renshaw also pled guilty to submitting a false tax return for 2009 by failing to disclose the income she received from her embezzlement.
In addition to the 30-month prison term, Judge Russell ordered that Renshaw pay restitution of $1,275,247.43 to Crown Electric, $250,000.00 to Central Mutual Insurance Company, and $457,530.36 to the Internal Revenue Service.
