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.
Thursday, May 19, 2011
Roger Lee Clark Gets 6 ½ Years in Prison for Ponzi Scheme and False Income Tax Returns
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.
Wednesday, May 11, 2011
Patrick Merrill Brody Sentenced in Salt Lake City For Tax Offense
WASHINGTON - Patrick Merrill Brody was sentenced on May 6, 2011, to 10 months of prison, 12 months of supervised release and ordered to pay the costs of prosecution for willfully failing to file a federal income tax return for 2001, the Justice Department and Internal Revenue Service (IRS) announced today.
Brody’s sentencing by U.S. District Court Judge Clark Waddoups followed a week-long trial in October 2010. According to the evidence at trial, Brody’s obligation to file a tax return for 2001 arose from the income he received for work in connection with his tax planning firm, Merrill Scott & Associates. The business was shut down and placed into receivership by the Securities and Exchange Commission (SEC) in early 2002 for alleged securities fraud. The civil suit resulted in a judgment against Brody for more than $16 million. Brody earned more than $500,000 in income from Merrill Scott & Associates during 2001, but deliberately failed to report the income and its tax liability on a federal income tax return.
Tuesday, May 10, 2011
John M. Volpentesta Sentenced to 11 Years in Prison on Federal Fraud and Tax Charges
Late yesterday afternoon, in Rockford federal court, United States District Judge Frederick J. Kapala sentenced JOHN M. VOLPENTESTA, 54, formerly of Marengo, Illinois, to 133 months in federal prison without parole on his federal fraud and tax convictions.
On July 19, 2010, after a four-week trial, a federal jury in Rockford returned guilty verdicts against Volpentesta, convicting him of two counts of mail fraud, two counts of wire fraud, 11 counts of failing to pay over to the IRS taxes he withheld from the wages of his employees, three counts of failing to file unemployment tax returns, and three counts of failing to file personal income tax returns. The jury acquitted Volpentesta of two remaining mail fraud counts.
The fraud charges arose from Volpentesta’s operation of a residential construction business located in Marengo, known as Volpentesta Construction, Inc. (also known as “VCI”). The indictment alleged that Volpentesta defrauded at least four families with whom VCI contracted to build homes. Specifically, the indictment charged Volpentesta with obtaining large sums of money from these families by: (1) falsely stating that VCI had performed work on their homes that was actually performed by subcontractors; (2) fraudulently billing his customers for work performed by subcontractors and materials suppliers, and then failing to pay those subcontractors and suppliers; (3) billing customers for materials he used on other projects, including a strip mall he owned; and (4) charging additional “fees” to which VCI was not entitled under its contracts with the families.
The indictment also alleged that Volpentesta defrauded certain individuals who invested money in, or loaned money to, VCI by making false promises about the security of their investments and when their money would be returned. According to the indictment, Volpentesta defrauded his construction customers and investors out of a total of more than $1 million.
The indictment also charged Volpentesta with 17 federal tax charges. Eleven of those counts charged that from the second quarter of 2003, through the fourth quarter of 2005, Volpentesta collected federal income tax, Medicare, and Social Security taxes from the wages of VCI’s employees, but then failed to pay those monies to the IRS. According to the indictment, the amount of taxes Volpentesta collected from his employees and failed to pay to the IRS was $164,999. Three of the tax counts charged Volpentesta with failing to file Form 940 Federal Unemployment Tax returns on behalf of VCI for the years 2003, 2004, and 2005. The remaining three counts charged Volpentesta with failure to file Form 1040 federal income tax returns on behalf of himself and his wife for the years 2003, 2004, and 2005. According to these three counts, Volpentesta received gross income in the following amounts during those years: (1) 2003—$375,853.01; (2) 2004—$156,844.95; and (3) 2005—$193,833.53.
Monday, May 9, 2011
Troy A. Beam Convicted of Tax Fraud
HARRISBURG, Pa - Troy A. Beam was convicted today in the Middle District of Pennsylvania before U.S. District Judge Christopher C. Conner. Beam, a resident of Shippensburg, Pa., was convicted of tax evasion, obstructing and impeding the due administration of the Internal Revenue laws and willful failure to file federal income tax returns, the Justice Department and Internal Revenue Service (IRS) announced today.
According to the indictment and evidence at trial, Beam, a former certified public accountant and state auditor in the Pennsylvania Auditor General’s Office, earned substantial sums of income from 1992 to the date of the indictment while operating a home construction business known as “Sunbeam Builders,” as well as owning and operating two real estate businesses known as “Latrobe Leasing” and “Goldstar Property Management” that purchased, rented and sold real estate. Despite earning substantial income from these businesses, as well as other activities, Beam failed to file any federal income tax returns since April 1996, when he filed his 1995 tax return reporting a loss. In April 1996, Beam also filed false amended federal income tax returns for 1992, 1993 and 1994, seeking tax refunds for taxes he previously had paid for those years.
The indictment alleged and the evidence at trial proved that Beam obstructed the IRS in its attempt to calculate and collect his taxes by using numerous sham trusts and other entities, including North Star Investment Holdings Ltd. to hide his income and assets. Beam used North Star to set up a bank account in the Cayman Islands into which he deposited nearly $3 million of income derived from his construction business.
Beam faces up to 12 years of in prison, $900,000 in fines and full restitution to the IRS for all back taxes due and owing. Sentencing is scheduled for Aug. 12, 2011.
Sunday, May 8, 2011
Dorthea Alexander Allegedly Prepared False Tax Returns for Customers
WASHINGTON - The United States has sued Dorthea Alexander of Leola, Pa., seeking to bar her from preparing federal tax returns for others, the Justice Department announced today. The civil injunction suit alleges that Alexander claimed false tax deductions, credits and exemptions on customer tax returns during her employment as tax supervisor at Pawn Plus Inc. in Lancaster, Pa.
According to the government complaint in the case, Alexander allegedly fabricated deductions for charitable donations, business expenses, medical expenses and other miscellaneous expenses to reduce her customers’ reported tax liabilities. The complaint states that she also used the names and social security numbers of unrelated individuals to claim improper dependent exemptions for her customers, sometimes charging customers extra for doing so.
In one instance cited in the complaint, Alexander allegedly told a customer that he “could use some dependents,” which would give him a larger tax refund. She allegedly then listed as dependents on his tax return the names and social security numbers of people whom the customer did not know, and charged the customer a fee for claiming those dependents equal to half of the resulting inflated tax refund.
According to the complaint, the total harm to the government from Alexander’s misconduct for the 2004 through 2007 tax years could be as high as $10.8 million.
Friday, May 6, 2011
Federal Court Bars Andrew DeDominicis From Promoting Alleged Tax Fraud Scheme
WASHINGTON - A federal court has permanently barred a North Carolina man from selling an alleged tax fraud scheme, the Justice Department announced today. According to the government complaint, Andrew DeDominicis (formerly known as Andrew Brown) of Dallas, N.C., promoted the formation and use of a “corporation sole” to help his customers improperly avoid paying federal income taxes. The civil injunction order, to which DeDominicis consented, was entered by Judge Martin Reidinger of the U.S. District Court for the Western District of North Carolina.
According to the complaint, some states authorize an entity known as a corporation sole to enable religious leaders to hold property and conduct business for the benefit of a legitimate religious entity. The complaint states that DeDominicis falsely informed his customers that their corporations sole would be treated as churches and will not need to file federal income tax returns.
The court also required DeDominicis to give a copy of the injunction order to each customer who bought a corporation sole from him and to remove from his websites any material promoting the use of corporations sole.
Thursday, May 5, 2011
John Walter Kaber Pleads Guilty to Tax Evasion
WASHINGTON - John Walter Kaber, a resident of Bloomfield, Mich., pleaded guilty to tax evasion, the Justice Department and Internal Revenue Service (IRS) announced today. The Honorable U.S. District Court Judge Victoria A. Roberts set sentencing for Sept. 20, 2011.
According to the plea agreement, Kaber was the owner of Merchant Processing, a business that installed credit card processing systems. Despite earning substantial income from Merchant Processing and incurring a tax liability on that income, Kaber failed to file timely U.S. Individual Income Tax Returns (IRS Forms 1040) for the 1991 and 2005 tax years. Kaber filed Forms 1040 for the 1992-1996 and 2000-2004 tax years that reflected a tax due and owing, but failed to pay the taxes due. Kaber also failed to pay a portion of the employment taxes for Merchant Processing that were due to the IRS during the 2000-2003 tax years. The defendant’s total tax due and owing to the United States for the 1991-1996 and 2000-2005 tax years, including both income taxes and employment taxes, is more than $868,000.
According to the plea agreement, in order to carry out his tax evasion scheme and to conceal his assets from the IRS, the defendant, among other things, used his wife’s name to purchase and refinance two parcels of real property and to purchase a boat, boat slip and vehicle. Kaber also sought to prevent the IRS from collecting unpaid taxes from his bank accounts by, among other things, cashing checks rather than depositing them in the bank, depositing business receipts into his wife’s checking account, and removing his name from a joint bank account after it became subject to an IRS levy.
On Nov. 6, 2007, the U.S. District Court for the Eastern District of Michigan entered a judgment against the defendant for his unpaid 1991-1996 taxes.
Wednesday, May 4, 2011
Robert Anthony Warren Found Guilty in Manhattan Federal Court of Multi-Million-Dollar Tax Refund and Theft of Mail Scheme
PREET BHARARA, the United States Attorney for the Southern District of New York, announced today that ROBERT ANTHONY WARREN was found guilty following a one-week jury trial in Manhattan federal court for his role in a scheme to fraudulently generate millions of dollars in federal tax refund checks and to steal the checks from the U.S. mail. U.S. Circuit Judge DENNY CHIN presided over the trial.
According to the evidence presented at trial and other documents filed in the case:
WARREN was charged as part of an investigation into a massive tax and mail theft scheme. As part of the scheme, coconspirators operating out of the Dominican Republic electronically filed thousands of fraudulent federal tax returns, seeking tens of millions of dollars in tax refund checks. The fraudulent returns were filed using Social Security numbers and other identifying information stolen from residents of the Commonwealth of Puerto Rico. Participants in the scheme targeted Social Security numbers assigned to residents of Puerto Rico because they are generally not required to file federal tax returns with the Internal Revenue Service (IRS), so long as their income derives solely from Puerto Rican sources. In this way, the fraudsters minimized the risk that legitimate federal tax returns were already filed by the owners of the Social Security numbers they were using in the scheme.
Each of the tax returns at issue falsely represented that the taxpayer on the return resided at an address in the Bronx, where the refund check requested in the return would be sent. The checks were then collected by mail carriers assigned to the mail routes where the checks were sent. The mail carriers participating in the scheme were paid a kickback for each check they collected. The carriers passed the checks on to other coconspirators, who cashed them at various banks and check-cashing businesses located in the United States and the Dominican Republic.
Since 1993, WARREN has been a mail carrier employed by the U.S. Postal Service at Tremont Post Office in the Bronx. He was recruited into the tax scheme in 2007. From July 2007 until May 2008, WARREN collected at least 256 fraudulent refund checks that were sent to his mail route as part of the scheme. He was paid a $100 kickback for each check that he stole. Each check was worth, on average, close to $10,000. In all, WARREN helped steal over $2.5 million worth of fraudulent tax refund checks. He made at least $25,000 in kickbacks from the scheme.
WARREN, 46, of the Bronx, New York, is scheduled to be sentenced by Judge CHIN on September 13, 2011, at 10 a.m. He faces a maximum term of 20 years in prison.
Tuesday, May 3, 2011
Justin Glynn French Sentenced to 16 Years for Orchestrating Multi-Million Dollar Rehabilitation Tax Credit Scheme
RICHMOND, VA—Justin Glynn French, 40, of Richmond, Va., was sentenced today to 196 months, followed by three years of supervised release, for stealing millions from federal and state tax credit programs intended to rehabilitate historic buildings.
Neil H. MacBride, United States Attorney for the Eastern District of Virginia; Ken Cuccinelli, Attorney General of Virginia; Michael F.A. Morehart, Special Agent in Charge of the FBI's Richmond Field Office; Rebecca Sparkman, Special Agent in Charge of the Internal Revenue Service Criminal Investigation's Washington, D.C., Field Office; and Colonel W. Steven Flaherty, Superintendent of Virginia State Police, made the announcement after sentencing by United States District Judge John A. Gibney, Jr.
"Justin French lined his pockets with millions in stolen tax dollars and defrauded more than 100 investors," said U.S. Attorney MacBride. "Mr. French exploited the rich history of the Commonwealth to cheat taxpayers and investors out more than $11 million intended to preserve historic homes in Virginia. While Mr. French spent lavishly on a beach house, a personal jet and trips to Las Vegas, more than 100 investors lost their retirement funds, their medical care accounts, and their kids' college funds."
"Justin French violated the trust of investors and defrauded the state and federal governments out of millions of dollars," said Attorney General Cuccinelli. "Today's sentence sends a message not only to French that his tax-credit scheme was reprehensible, but also to anyone else attempting to cheat taxpayers out of their hard-earned money. Unfortunately, the repercussions of French's crimes will be felt for years to come by those who unwittingly invested in his tax-credits and by honest people who are currently rehabilitating properties in the Commonwealth."
On Jan. 24, 2011, French pled guilty to wire fraud and engaging in unlawful monetary transactions through a criminal information for his role in orchestrating a multi-million dollar rehabilitation tax credit scheme and defrauding more than 110 investors who purchased tax credits from French for their own use.
According to the statement of facts filed with the plea agreement, Justin French was the owner and operator of French Consulting Company, a Richmond-based real estate development company. He actively sought state and federal historic tax credits as his company worked to rehabilitate a number of historic properties throughout the Richmond area.
At the state level, the Virginia Department of Historic Resources (VDHR) administered the Virginia Historic Rehabilitation Tax Credit program. That program allowed the property owner to receive a state income tax credit equal to 25 percent of the amount spent on eligible rehabilitation expenses. At the the federal level, the U.S. Department of the Interior National Park Service (DOI-NPS) administered the Federal Historic Preservation Tax Incentives program. This program encouraged private sector rehabilitation of historic buildings through tax credit equal to 20 percent of the amount spent on eligible rehabilitation expenses.
Through court documents, French admitted that since 2005, he has initiated the historic rehabilitation tax credit application process on at least 36 properties in Richmond; 14 were approved by state authorities and 20 were approved by federal authorities. Upon receiving the approved credits, and sometimes before receiving final approval, French would sell the credits to private investors who would use those credits on their own tax returns.
As an example of this fraud, French purchased a property on March 7, 2008, located at 1509 Belleville Street in Richmond. In correspondence with the bank that funded a loan for the project, French stated that he had purchased the property for $700,000 and expected the rehabilitation costs to be approximately $200,000.
In November 2008, French began the application process seeking federal and state rehabilitation tax credits for this property. On March 20, 2009, he submitted the final tax credit applications and required CPA cost certification for 1509 Belleville Street to the VDHR. In those applications, he represented the rehabilitation costs as $1,571,503. On March 26, 2009, the VDHR approved French's state application and awarded him $392,875.75 in state tax credits. On April 17, 2009, the DOI-NPS approved French's federal application authorizing him $314,300.60 in federal tax credits for this project.
In connection with his plea hearing, French agreed that the requested tax credits for the 1509 Belleville Street, LLC project were grossly inflated. According to the United States, the actual authorized expenses for the purpose of obtaining state and federal historic rehabilitation tax credits should have been approximately $403,200 (including the 20% developer fee and an additional 20% allowance for allowable expenses), as opposed to the $1,571,503 represented to state and federal authorities. If the actual amounts consistent with the bank loan file had been submitted to the state and federal authorities, French would have received approximately $100,800 in Virginia tax credits (as opposed to $392,875.75 in Virginia tax credits) and $80,640 in federal tax credits (as opposed to $314,300.60 in federal tax credits). The combined total of federal and state tax credits French illegally obtained by inflating the rehabilitation expenses for 1509 Belleville Street was approximately $525,737.
French's subsequent transactions with a number of private investors who purchased these tax credits resulted in his pleading to engaging in unlawful monetary transactions. As part of the investment process, French caused the mailing of subscription agreements via United States mail to the individual investors. Those investors, in turn, executed the subscription agreements and returned those documents along with their investment funds to the defendant. In February 2009, those individual investors provided the defendant with approximately $228,800 in exchange for purchasing the state tax credits related to 1509 Belleville Street. These investor funds were deposited into a First Market Bank business checking account for the 1509 Belleville Street project. French subsequently transferred $218,000 of those funds to his personal money market savings account at First Market Bank.
Overall, French agreed in his plea agreement that the intended and actual tax credit losses connected to the 1509 Belleville Street and other rehabilitation projects was between $7 million and $20 million. The defendant also agreed to pay full restitution for the losses he caused in connection with the ongoing rehabilitation tax credit scheme, which will be determined as the victims and loss amounts are identified in the ongoing investigation. The final restitution amount will be determined at a restitution hearing to be scheduled at a later date, following the completion of the investigation.
To date, the total losses for the scheme have been calculated as $11,266,622. French has agreed to an order of forfeiture imposing a monetary judgment of $7 million, representing the proceeds he received from the fraudulent scheme. At this time, he has agreed to forfeit the assets listed in the First Consent Order of Forfeiture entered at his plea hearing. The investigation to identify additional assets remains ongoing.
Monday, May 2, 2011
Federal Court Bars George Thomas Gaines From Preparing Federal Tax Returns
WASHINGTON - A federal court has permanently barred George Thomas Gaines of Aurora, Colo., from preparing federal tax returns for others, the Justice Department announced today. The civil injunction order, to which Gaines consented, was signed by Judge Robert E. Blackburn of the U.S. District Court for the District of Colorado.
The government complaint in the case alleged that Gaines and his companies, G&G Tax Service and American Benefits, prepared federal income tax returns for customers that used fictitious businesses to claim false tax deductions and improper earned income tax credits. According to the complaint, more than 96 percent of the audited tax returns prepared by Gaines between 2004 and 2007 understated his customers’ tax liabilities.
Sunday, May 1, 2011
Loretta and Tracey Fergerson Indicted for Tax Fraud and Identity Theft
MONTGOMERY, Ala. – Loretta and Tracey Fergerson were indicted by a federal grand jury in the Middle District of Alabama on a variety of charges stemming from an identity theft and tax fraud conspiracy, the Justice Department and the Internal Revenue Service (IRS) announced today. The sisters were charged in a 22-count indictment that was returned on March 23, 2011, and unsealed Tuesday.
The Fergerson sisters were charged with conspiring to defraud the United States, filing false claims, wire fraud and aggravated identity theft. According to the indictment, Loretta Fergerson operated Fast Tax Cash, a tax return preparation business in Montgomery, Ala., from January 2005 to February 2008. The defendants’ conspiracy spanned over one year and involved using stolen identities to file tax returns claiming fraudulent refunds.
The indictment alleges that Tracey Fergerson unlawfully obtained the names and Social Security numbers of individuals. Loretta Fergerson would then electronically file false tax returns using the names and Social Security numbers Tracey provided. Loretta was then able to apply for and obtain refund anticipation loans from banks based on the false tax returns.
An indictment merely alleges that crimes have been committed, and the defendants are presumed innocent until proven guilty beyond a reasonable doubt. If convicted, Loretta and Tracey Fergerson each face a maximum of 129 years in prison.
