WASHINGTON - A federal court has permanently barred Charles Klink, Caleb Grodsky and Steven Block from promoting abusive tax shelters known as "intermediary transactions" and "distressed asset trusts," the Justice Department announced today. The civil injunction orders, to which the three men consented without admitting to the allegations against them, were entered by Judge Joseph Irenas of the U.S. District Court for the District of New Jersey. The court orders require the defendants to give the government a list of all persons who participated in any tax plan or arrangement that they promoted since Jan. 1, 2000.
According to the government complaint, Klink and Grodsky, who are both attorneys in Southern California, and Block, who resides in Louisville, Ky., and has worked in the financial services industry for more than two decades, received millions of dollars from customers across the country for helping them dispose of corporate assets without paying federal corporate income taxes on the resulting capital gain income. The complaint alleges that the three men used an intricate web of trusts and corporations to act as intermediaries between their customers, who owned closely held corporations, and buyers who wanted to purchase the corporations' assets.
The complaint alleges that the defendants purchased all of the stock in a customer's corporation shortly before or after the asset sale. They then allegedly falsely told the customer that, following defendants' purchase of the corporation, the defendants would restructure the corporation into a profitable new business and have it pay the corporation's federal income taxes resulting from the asset sale. However, according to the complaint, rather than pay the taxes owed after the asset sale, the defendants allegedly claimed deductions for sham fees and bogus bad debt write-offs generated from distressed-asset-trust tax shelters to offset most or all of the capital gains. The defendants also allegedly took steps to siphon off the corporation's assets, leaving it with no funds to pay any taxes due once the Internal Revenue Service learned of the scheme and assessed taxes.
The complaint against Klink, Grodsky and Block alleges that they have caused the corporations they acquired to deduct improperly more than $112 million of distressed consumer receivables. The government estimates that the tax loss resulting from their promotion of the tax schemes at issue in this case exceeds $40 million.
Thursday, July 14, 2011
Federal Court has Permanently Barred Charles Klink, Caleb Grodsky and Steven Block From Promoting Abusive Tax Shelters Known as "Intermediary Transactions"
Wednesday, July 13, 2011
David A. Cusumano and Henry Nino Both Admitted to Committing Tax Evasion by Failing to File Income Tax Returns
WASHINGTON – Two Michigan residents pleaded guilty to tax evasion, the Justice Department and the Internal Revenue Service (IRS) announced today. A federal grand jury in Detroit returned an indictment against David A. Cusumano and Henry Nino in January 2011.
According to court documents, Cusumano was a mechanical engineer from Plymouth, Mich., and Nino was an electrician from Northville, Mich. Both men admitted to committing tax evasion by failing to file income tax returns and maintaining Employee’s Withholding Allowance Certificates (IRS Forms W-4) with their employers that falsely claimed they were exempt from tax withholding.
According to court documents, both men admitted to using the services of Florida-based tax fraud promoter American Rights Litigators/Guiding Light of God Ministries (ARL/GLGM). Nino and Cusumano both paid ARL/GLGM to submit false and obstructive correspondence to the IRS and to their banks, and to submit complaints to the Treasury Inspector General for Tax Administration that falsely accused IRS employees of criminal conduct.
According to court documents, Nino attempted to prevent the IRS from collecting his unpaid taxes for the years 1996, 1997 and 2000-2003 by transferring title of his personal residence to a nominee entity called the Michigan Natural Group, using money orders to make mortgage payments, cashing paychecks rather than depositing them in a bank account, and submitting fake financial instruments to the Department of the Treasury in purported payment of his tax liabilities.
According to court documents, in addition to the actions carried out by ARL/GLGM on his behalf, Cusumano attempted to evade the assessment of his 2003-2008 taxes by failing to file tax returns for each of these years as required by law and by submitting fake financial instruments to the Department of the Treasury in purported payment of his tax liabilities.
In August 2004, a federal district judge permanently enjoined the operators of ARL from the sale of a nationwide tax scam. In April 2008, a federal court in Florida sentenced two promoters of ARL, as well as ARL client Wesley Snipes, to prison for tax offenses. In August 2010, three promoters of ARL were each sentenced in the District of Columbia to 10 years in prison, along with ARL founder Eddie Ray Kahn, who was sentenced to 20 years in prison.
The total tax loss associated with Nino’s conduct, for sentencing purposes, is $366,088 and the total tax loss associated with Cusumano’s conduct, for sentencing purposes is $390,185.
The charges against Cusumano and Nino carry a maximum sentence of up to five years in prison. Sentencing is scheduled for Oct. 20, 2011.
Tuesday, July 12, 2011
John Miles and Kathryn Miles Sentenced for Conspiracy to Defraud the United States
WASHINGTON – A husband and wife from Mathews County, Va., were sentenced today for conspiring to impair and obstruct the Internal Revenue Service (IRS) in the ascertainment and assessment of federal income taxes from 2001 through 2010, the Justice Department and the IRS announced. John Scott Miles was sentenced to 30 months in prison and Kathryn Charles Miles was sentenced to 20 months in prison. Both were sentenced to three years of supervised release and ordered to pay $215,591.27 in restitution.
John Miles and Kathryn Miles were charged in October 2010 and pleaded guilty in March 2011 before U.S. District Judge Raymond A. Jackson in Norfolk, Va., who sentenced them today.
At their plea hearings, Kathryn Miles and John Miles admitted to earning taxable income as the owners and operators of a construction business named “Scotts Construction” and “KCM Construction & Design.” Kathryn Miles also admitted to earning taxable income as a nurse at various Virginia hospitals. The Miles’ joined American Rights Litigators, a business they knew sold and promoted tax avoidance methods, in 2001 and maintained an annual membership. Kathryn Miles admitted that, in 2005 and 2006, she submitted six tax returns to the IRS in which she falsely claimed that she earned no wages and in which she did not disclose the operation of her construction business. She submitted falsified tax documents with each tax return. John Miles admitted that he did not file tax returns during the time of the conspiracy.
Monday, July 11, 2011
Pamela J. Whitson Pleads Guilty to Embezzlement and Failure to File Federal Income Tax Return
OKLAHOMA CITY—PAMELA J. WHITSON, 59, of Norman, Oklahoma, pled guilty in federal court today to forging a check and failing to file a federal income tax return in connection with her embezzlement of more than $960,000 from an Oklahoma City oil and gas company, announced Sanford C. Coats, United States Attorney for the Western District of Oklahoma.
At today’s plea hearing, Whitson admitted she worked for several years as the office manager at an oil and gas exploration in Oklahoma City. From 2002 through 2008, she forged the signatures of authorized signers on checks drawn on the oil and gas company’s accounts. Whitson admitted she wrote many of the forged checks payable to herself or to cash and used the embezzled funds mostly for gambling. At the plea hearing, Whitson also admitted she did not claim any of the embezzled funds as income on tax returns. She pled guilty to not filing an income tax return for the 2007 calendar year.
At sentencing, Whitson faces up to 10 years in federal prison and a fine up to $250,000 on the forged security charge, and up to one year in federal prison and a fine up to $25,000 on the federal tax charge. In connection with her guilty plea, Whitson signed a plea agreement and agreed to pay $965,333.47 in restitution. A sentencing hearing will be set by the court in approximately 90 days.
Sunday, July 10, 2011
Milton Tillman and Son Sentenced to Prison on Federal Charges Relating to Operation of 4 Aces Bail Bonds
BALTIMORE—U.S. District Judge Catherine C. Blake sentenced Milton Tillman, Jr. (Milton Tillman), age 54, of Baltimore, today to 51 months in prison, followed by five years of supervised release, for filing a false tax return, unlawfully engaging in the business of insurance and wire fraud in connection with the operation of his bail bond business and a scheme to defraud Ports America Baltimore, Inc. (Ports America), where he worked. Judge Blake sentenced his son, Milton Tillman III, a/k/a “Moe,”(Moe Tillman) age 33, also of Baltimore, today to five years’ probation with the special condition that he serve six months in community confinement and six months on home detention with electronic monitoring. Judge Blake specified that Moe Tillman would be allowed to work during his community confinement and home detention. Judge Blake ordered Milton Tillman to pay restitution of $120,000 for the losses incurred by Ports America and ordered Moe Tillman to pay restitution of $12,500 to the IRS. Judge Blake further ordered that Moe Tillman perform 100 hours of community service and that both Milton and Moe Tillman resolve any outstanding tax liabilities with the IRS.
The sentences were announced by United States Attorney for the District of Maryland Rod J. Rosenstein; Special Agent in Charge Richard A. McFeely of the Federal Bureau of Investigation; Thomas F. Farrell, Assistant Inspector General for Labor Racketeering and Fraud Investigations, U.S. Department of Labor; and Acting Special Agent in Charge Jeannine A. Hammett of the Internal Revenue Service - Criminal Investigation, Washington, D.C. Field Office.
“Given that bail bond companies in Maryland work closely with state judicial officers and exercise power to arrest criminals, it is important to make certain that the bonding companies themselves are not run by criminals,” said U.S. Attorney Rod J. Rosenstein.
Thomas F. Farrell, Assistant Inspector General for Labor Racketeering and Fraud Investigations, United States Department of Labor, said, “Mr. Tillman defrauded the International Longshoremen’s Association Local 333 and Ports America, Chesapeake, by collecting wages and benefits for work he did not perform. Today’s sentencing demonstrates the Office of Inspector General’s continued resolve in investigating and preventing fraud schemes against our nation’s unions. This office and our law enforcement partners remain committed toward combating union corruption.”
“To maintain faith in our nation’s tax system, honest taxpayers need to be reassured that everyone is paying their fair share,” said Jeannine Hammett, Acting Special Agent in Charge Internal Revenue Service Criminal Investigation Division. “The IRS-Criminal Investigation Division, together with its law enforcement partners will investigate and prosecute those who violate our tax system.”
According to his plea agreement, on October 26, 1996, Milton Tillman began serving a federal prison sentence after being convicted of tax-related charges. Prior to the start of his sentence and during his imprisonment, Milton Tillman made arrangements with his son, Moe Tillman, and others to incorporate and manage a bail bonding business that Milton Tillman had started. About two months after Milton Tillman began his sentence, Moe Tillman incorporated 4 Aces Bail Bonds, Inc. (4 Aces), initially located at 2332 E. Monument Street and relocated to 1101 North Point Boulevard, in Baltimore.
A bail bondsman must be licensed as an insurance producer and must also be authorized to act on behalf of a surety insurer. Milton Tillman, who had previously been convicted of tax charges as well as extortion, was not eligible to be licensed as a bail bondsman without written consent from the Maryland Insurance Administration (MIA). Subsequent to those convictions, Milton Tillman never applied for, nor received, consent from the MIA to engage in the insurance business.
Nonetheless, while serving his federal sentence from 1996 through 2000 and until approximately August of 2008, Milton Tillman oversaw the development of 4 Aces. While he was incarcerated, he used intermediaries to negotiate insurance premiums with out-of-state surety companies and he authorized the employment of various bail bondsman to sell surety insurance through 4 Aces.
After his release from prison in December of 2000, Milton Tillman hired and fired employees and oversaw the daily operations of the office, including the authorization of the writing of bail bonds. He continued to maintain and develop 4 Aces’s relationship with the out-of-state surety companies. Milton Tillman oversaw the incorporation of two other bail bonding companies which were incorporated and owned by Moe Tillman, and the use of their corporate resources. Under Milton Tillman’s management and as represented on 4 Aces’ tax returns, 4 Aces’ gross income grew from $188,337 in 2000 to $5,822,588 in 2006.
Upon Milton Tillman’s release from federal prison in 2001, a condition of his supervised release was to obtain employment. Between 2001 and December 2007, Milton Tillman reactivated his union membership and worked as a longshoreman primarily with Ports America. As a longshoreman, Milton Tillman was required to be physically present at the port terminal to work with a longshoremen gang to load or unload a particular ship. Wage records maintained by Ports America indicate that the company paid wages and hourly benefit contributions to Milton Tillman for at least 258 shifts he purportedly worked during 2006 and 2007. However, Milton Tillman was not present to unload cargo vessels for 121 of the work shifts. Travel records indicate that between July 2006 and September 2007, Milton Tillman was not even in the United States for 10 of the 121 “no-show” shifts. Between January 2006 and August 2007, Milton Tillman was in the country, but not in Maryland for 24 of the 121 “no-show” work shifts.
Milton Tillman used the pretense of working as a longshoreman at the docks not only to unlawfully obtain wages and benefits from Ports America, but also to conceal from the IRS the full extent of his involvement in the bail bonding business and the income he derived from it. For tax years 2000 to 2006, Milton Tillman filed wage and tax statements (W-2 forms) issued by Ports America and other stevedoring companies that overstated the hourly wages and other compensation he earned in those years from working as a longshoreman. For the same tax years, Milton Tillman concealed the true amount of income he derived from his participation in the 4 Aces’ bail bonding businesses by under-reporting the amount of money he had diverted from the business to himself and his real estate companies. For example, on October 15, 2007, Milton Tillman filed a personal tax return for 2006 that listed his total income as $406,426. However, this reported total income failed to include the substantial additional income that Milton Tillman had diverted from 4 Aces. In that year, as he done in past years as well, Milton Tillman directed 4 Aces funds to be used to purchase and improve real estate and to pay down the debt and taxes on properties he owned; pay the premiums on his life insurance policies; make monthly payments on car loans; and pay personal taxes and criminal fines. For the tax years 2002 to 2006, Milton Tillman under-reported a substantial amount of diverted funds on which more than $400,000 of taxes were due.
According to Moe Tillman’s plea agreement, as an officer and the only listed shareholder of the company, Moe Tillman was legally obligated to file a corporate tax return for 2003 for 4 Aces, which he failed to do. Based in part upon the amount of bail bonds issued by 4 Aces in 2003, investigating agents estimated that the company had a net taxable income in 2003 of at least $80,489, with taxes due of approximately $15,616.
Saturday, July 9, 2011
Kimberly Prebles Sentenced to 71 Months in Federal Prison for Defrauding Employer Out of More Than $4.3 Million
CINCINNATI—Kimberly Prebles, 43, of Monroe, was sentenced to 71 months in federal prison here today on one count of wire fraud and one count of filing a false federal income tax return arising from her scheme to defraud her employer, Clark Western Building Systems, Inc. of Middletown of approximately $4,315,755 over a 10-year period.
Carter M. Stewart, United States Attorney for the Southern District of Ohio; J. Mark Batts, Acting Special Agent in Charge, Federal Bureau of Investigation (FBI); and Tracey Warren, Acting Special Agent in Charge, Internal Revenue Service Criminal Investigation (IRS), announced the sentence delivered today by United States District Judge Susan Dlott.
According to court documents, Prebles worked at Clark Western from approximately 1999 until March 2009, most recently as an accounting manager in the accounts payable department. In or about June 1999, Prebles fraudulently opened a bank account in the name of one of the company’s vendors and began writing checks and making wire transfers from Clark Western’s accounts into the fraudulent account she controlled. She falsified company documents to conceal her embezzlement. She used the stolen money to pay personal expenses including the purchase of property, jewelry, travel, vehicles, and home improvements.
In addition to the wire fraud, Prebles also pleaded guilty to failing to report the income from the embezzlement scheme on her personal income tax returns from 2005 through 2008.
Judge Dlott ordered Prebles to pay restitution in the amount of $3,612,634.80 to the victims of her crime and restitution of $829,307.77 to the IRS. She must also serve three years of supervised release after her prison term.
Friday, July 8, 2011
Reynaldo Orozco Sentenced to 1/ Months in Prision for Employment Tax Fraud
MIAMI - Reynaldo Orozco was sentenced to 18 months in prison by U.S. District Court Judge Adalberto Jordan for filing a false employment tax return, the Justice Department and the Internal Revenue Service (IRS) announced today. Orozco was also ordered to pay $504,047 in restitution to the United States.
Orozco previously pleaded guilty to one count of filing a false employment tax return on March 22, 2011. According to court documents, during 2004 through 2007, Orozco owned and operated Rock Construction Builders Inc. (RCB), a construction business located in Miami-Dade County. Orozco admitted that he issued RCB corporate checks to various other corporations holding them out to be legitimate subcontractors. In truth, these corporations did not perform work for RCB. Orozco cashed the checks at local check cashing stores and used the bulk of the cash obtained in this manner to pay RCB employees. Orozco failed to report the cash wages on quarterly employment tax returns and failed to withhold and pay over employment taxes on the wages.
From 2004 through 2007, RCB failed to report approximately $3,294,426 in cash wages to the IRS. Based on the conduct described above, the United States Treasury suffered an employment tax loss of approximately $504,047.
Thursday, July 7, 2011
Diana Kay Erickson Pleads Guilty to Mail Fraud, False Tax Returns; Embezzled $253,848 from Employer
SPRINGFIELD, MO—Beth Phillips, United States Attorney for the Western District of Missouri, announced today that an Aurora, Missouri woman pleaded guilty in federal court today to mail fraud and to filing false tax returns, which were related to a scheme to embezzle $253,848 from her employer.
Diana Kay Erickson, 46, of Aurora, pleaded guilty before U.S. Magistrate Judge James C. England.
By pleading guilty today, Erickson admitted that she embezzled $219,606 from Superior Lifts, Inc., between Sept. 7, 2006, and April 2, 2008, and that she embezzled $34,242 from Goolsby Rental Properties between March 14, 2006, and Dec. 18, 2006.
Erickson was employed in 2006 as a bookkeeper at Superior Lifts, which sold automobile lifts and other products. Superior Lifts, which is no longer in business, had its office in Aurora in 2004 then moved to Nixa, Mo., in 2009. The owners of Superior Lifts also operated Goolsby Rental Properties, a second business that managed rental properties in the Wichita, Kan., area. Erickson also performed bookkeeping duties for Goolsby Rental Properties.
When customers of Superior Lifts mailed bank checks as payments, Erickson repeatedly removed those checks and deposited them in her own personal bank account.
Erickson also admitted that she filed false U.S. Individual Tax Returns for tax years 2006, 2007, and 2008. These returns were false because Erickson failed to report income she embezzled from Superior Lifts and Goolsby Rental Properties. As a result, the tax loss to the government (without penalties and interest) was $57,801.
Under federal statutes, Erickson is subject to a sentence of up to 23 years in federal prison without parole, plus a fine up to $350,000 and an order of restitution. A sentencing hearing will be scheduled after the completion of a presentence investigation by the United States Probation Office.
Tuesday, July 5, 2011
Federal Court Permanently Bars Tracey R. Randolph From Preparing Federal Tax Returns
WASHINGTON - A federal court has permanently barred Tracey R. Randolph from preparing federal tax returns for others, the Justice Department announced today. The civil injunction order, to which Randolph consented, was signed by Judge Mark Goldsmith of the U.S. District Court for the Eastern District of Michigan. The order requires Randolph to provide the government with a list of all persons for whom she prepared returns for tax years 2003 through 2009.
The government complaint in the case alleged that Randolph of Detroit included fabricated deductions for charitable donations, employee business expenses and other expenses on tax returns that she prepared since 2006. The complaint further alleged that Randolph instructed her customers under audit by the Internal Revenue Service (IRS) to give false statements and fabricated documents to the IRS in order to give the false impression that the bogus deductions claimed on the returns were legitimate.
The same federal court previously entered a permanent injunction against Machista Choice. According to the government complaint, Choice of River Rouge, Mich., was Randolph’s former business partner with whom she worked under the business names “Nedra’s Way Tax Service” and “Olivia’s Way Tax Service.” The complaint alleged that Choice also prepared tax returns that included fabricated deductions.
Monday, July 4, 2011
Cathy Vinnett and her daughter Lashanda Vinnett Prepared Federal Tax Returns for Customers That Claimed Fraudulent Tax Refunds
WASHINGTON - The United States has filed a lawsuit in federal court in New Orleans seeking to bar two women and their tax preparation companies from preparing federal tax returns for others, the Justice Department announced today.
The government’s civil injunction complaint alleges that Cathy Vinnett, her daughter Lashanda Vinnett (both of whom reside in Destrehan, La.), and their companies – M&C Tax Service, D&C Tax Service, River Parish Tax Professionals and Remarkable Tax Services – prepared federal tax returns for customers that claimed fraudulent tax refunds based on fabricated telephone excise tax credits, earned income tax credits and first time homebuyer tax credits. The suit alleges that the Vinnetts retained most of the resulting refunds for themselves, without telling their customers. According to the complaint, the bogus refund claims have resulted in a tax harm to the government that could be as much as $2.2 million.
Sunday, July 3, 2011
United States Sues Lloyd Kirk to Bar Him from Promoting Alleged "Form 1099-OID" Tax Fraud Scheme
WASHINGTON - The United States has sued a Seattle-area man to stop him from promoting an alleged tax fraud scheme, the Justice Department announced today. The government’s civil injunction complaint alleges that John Lloyd Kirk promotes the use of fabricated Internal Revenue Service (IRS) Forms 1099-OID to report fictitious income tax withholding. Kirk’s customers allegedly file federal tax returns claiming huge tax refunds based on the fake withholding.
According to the complaint, Kirk, who resides in Des Moines, Wash., promotes the scheme through his business, the Indian Nations Advocate Law Office. Kirk allegedly holds seminars in the western United States and sells DVDs of his seminars to promote the tax scam. The complaint states that at least 31 of Kirk’s customers have used the scheme to make fraudulent tax refund claims totaling approximately $8 million.
Saturday, July 2, 2011
Federal Court Bars Aurelia Sanderson Johnson From Preparing Federal Tax Returns
WASHINGTON - A federal court has permanently barred Aurelia Sanderson Johnson from preparing federal tax returns for others, the Justice Department announced today. The civil injunction order, to which Johnson consented, was signed by Judge Mark E. Fuller of the U.S. District Court for the Middle District of Alabama. The court also ordered Johnson to provide a list of her customers to the government and to mail a copy of the court order to each person for whom she prepared a federal income tax return since Jan. 1, 2007.
According to the government complaint, Johnson, who resides and does business in Montgomery, Ala., employed at least two schemes on the returns she prepared for her customers in order to obtain false or overstated tax refunds. In one scheme, Johnson allegedly prepared returns reporting fictitious income or improperly reporting individuals as “qualifying children” in order to inflate or generate false earned income tax credits. In the second scheme, Johnson allegedly fabricated or inflated business expense deductions on her customers’ returns in order to reduce their taxable income and generate bogus refunds of withheld taxes.
Friday, July 1, 2011
Tyrone Robert Campbell and his wife Twanna Dorothea Campbell, Sentenced to Prison for Preparing False Tax Returns and Aggravated Identity Theft
BALTIMORE, MD—U.S. District Judge William M. Nickerson sentenced Tyrone Robert Campbell, a/k/a “Mr. Muhammad,” “Muhammad Shahid,” and “Tyrone Moore,” age 42 of Baltimore, today to five years in prison, followed by three years of supervised release; and his wife, Twanna Dorothea Campbell, aka “Twanna D. Gaines,” “Twanna Campbell-Moore,” and “Mrs. T,” age 32, also of Baltimore, to a year and a day in prison, followed by three years of supervised release, for conspiracy to file false tax returns and aggravated identity theft. Tyrone Campbell was also convicted of aiding and assisting in the preparation of false tax returns. Judge Nickerson also entered and order of restitution against both Campbells, in the amount of $1.25 million.
The sentences were announced by United States Attorney for the District of Maryland Rod J. Rosenstein; Acting Special Agent in Charge Jeannine A. Hammett of the Internal Revenue Service—Criminal Investigation; and Special Agent in Charge Richard A. McFeely of the Federal Bureau of Investigation.
"IRS Criminal Investigation has made investigating refund fraud and identity theft a top priority," stated Acting Special Agent in Charge, Jeannine A. Hammett, of the Washington DC Field Office. "Filing fraudulent tax returns in the names of other individuals may result in significant harm to those individuals whose identities were stolen, as well as a monetary loss against the U.S. Treasury."
Special Agent in Charge Richard A. McFeely of the FBI said, “The FBI and its law enforcement partners are committed to detecting and investigating identity theft and other financial crimes. But the best protection is prevention. This case reminds us all to be vigilant in protecting our personal financial information, even when dealing with trusted advisors. ”
According to their plea agreements, Tyrone and Twanna Campbell owned a tax preparation business that operated under various names, including Phoenix Tax World, 101 Taxes, 420 Income Tax Services, and 1 One 1 Taxes (collectively, “Phoenix”). Between 2006
and 2009, Phoenix was located in Baltimore at several locations, including 2216 Harford Road, 3349 Greenmount Avenue and 4829 Belair Road.
From approximately late 2005 or early 2006 through at least April 2009, the Campbells prepared over 600 fraudulent individual federal income tax returns on behalf of their clients. The Campbells required each client to fill out a questionnaire requesting that individual’s personal and financial information. After the client left the Phoenix office, the Campbells filled out an electronic tax return in which, without the client’s knowledge, they entered false items to increase the client’s tax refund. For example, the Campbells claimed: exemptions and child tax credits for non-existent dependents; losses from businesses the client did not operate; credits paid for bogus child care expenses; and federal income tax withholdings from unearned wages. Once the client’s tax refund check became available the Campbells required as a cash payment a percentage—generally between 20% and 40%—of the client’s tax refund. In this way, the Campbells’ inflation of their clients’ tax refunds increased the Campbells’ own tax preparation fees.
The Campbells also enrolled many clients in a Refund Anticipation Loan (RAL) program without their knowledge. A RAL is a short-term loan provided by a lender that is based on, and usually repaid by, an anticipated federal income tax refund. A bank funded the client’s RAL and issued the loan in the form of a check made payable to the client. In doing so, the bank deducted its own fees and also deducted an additional tax preparation fee, which it wired directly to a bank account controlled by the Campbells. Thus, the Campbells received an additional tax preparation fee that was not disclosed to their clients. In 2007, the Campbells opened a bank account using the stolen personal identifying information of one of Mrs. Campbell’s former clients to conceal the fact that these additional tax preparation fees were being paid to them. The Campbells wrote checks drawn off that bank account in order to pay for personal and business expenses.
In the course of preparing and presenting materially false tax returns on behalf of his clients, Tyrone Campbell committed several instances of aggravated identity theft. For example, on February 4, 2008, he used the name and social security number of an individual without that individual’s knowledge or permission, listing that person as a dependent on a client’s tax return, in order to increase the client’s tax refund. In fact, the individual was not a dependent of the client. Twanna Campbell maintained a list of names, dates of birth and social security numbers of children which she used to obtain larger tax refunds for her clients by claiming deductions for dependents who were not actually related to her clients. The book was recovered by law enforcement in June 2009 , when law enforcement officers executed a search warrant at the Campbell’s home, along with $96,480 in cash hidden in the home.
Thursday, June 30, 2011
Ralph S. Guastaferro, Jr. and his wife, Karen Sentenced on Money Laundering and Tax Fraud Charges
BUFFALO, NY—U.S. Attorney William J. Hochul, Jr. announced today that Ralph S. Guastaferro, Jr. and his wife, Karen, both of Williamsville, New York, were sentenced today by Chief U.S. District Judge William J. Skretny. Ralph Guastaferro, who was convicted of money laundering, was sentenced to 24 months in prison and fined $100,000. Karen Guastaferro, who was convicted of failing to collect and pay over taxes, was sentenced to three years’ probation, including six months home confinement. She was also ordered to pay restitution in the amount of $56,670.58 to the Internal Revenue Service.
Assistant U.S. Attorney MaryEllen Kresse, who handled the cases, stated that Ralph Guastaferro operated a business called Eclipse Processing, Inc. As part of a money laundering scheme, Guastaferro opened accounts with two payment processing companies in California and Ohio. Those accounts were used by certain unscrupulous telemarketers, many of whom were located in Canada, to process alleged sales of some product or service. However, many of the victims whose checking accounts were debited had never purchased any product or service. After the victims accounts were debited, the payment processing companies transferred the funds to bank accounts controlled by the defendant in Buffalo, New York. Guastaferro then wire transferred the funds, less a percentage, to the telemarketers in Canada. This was done in an attempt to conceal the nature and source of the funds. The defendant admitted that the total amount of the funds involved in his criminal conduct was $1.2 million.
Karen Guastaferro owned and operated Eclipse Glass Tinting, Inc., a glass tinting and automotive accessory business located in Clarence, New York. From 2004 through 2008, Mrs. Guastaferro employed between five and seven people at the business. Although Guastaferro had a duty to collect and truthfully account for and pay over federal employment taxes for each of her employees, the defendant was convicted of lying to the IRS about how many employees she had and how much she paid them, thus intentionally failing to account for and pay over the required federal employment taxes for those employees.
Wednesday, June 29, 2011
Wayne Chih-Wei Shu Sentenced for Counterfeit Software Scheme
WAYNE CHIH-WEI SHU, 44, of Battleground, Washington was sentenced today in U.S. District Court in Tacoma to three years in prison, three years of supervised release, and $687,633 in restitution for charges stemming from his scheme to profit from selling counterfeit Microsoft software, and his failure to file income tax returns. SHU pleaded guilty to Mail Fraud, Trafficking in Counterfeit Goods, Trafficking in Illicit Labels, and two counts of wilful failure to file tax returns on January 13, 2011, right after opening statements in his trial. At sentencing U.S. District Judge Benjamin H. Settle said, “Our economy greatly depends on protection of all property rights including intellectual property rights.”
According to records filed in the case, SHU owned and operated various entities that advertised and sold counterfeit and tampered with software over the internet. The companies operated under the names Micro Sharp, Inc., Micro Sharp Technologies, Inc., Microsharp.com., Inc., and Meet Your Price, Inc. SHU offered Microsoft products for sale over the internet. The products were counterfeit, tampered with, or infringed on copyrights owned and held by others. SHU engaged in a practice known as “kitting”; selling software products that contained a mix of some genuine components with other components that were counterfeit or tampered with. The “kitting” made it more difficult for customers to determine that the software was counterfeit. SHU also used counterfeit licenses and certificates of authenticity to fool consumers who thought they were purchasing licensed Microsoft products. Pursuant to a law passed by Congress in 2004, it is illegal to traffic in stand alone certificates of authenticity absent the software that the certificate was designed to authenticate. SHU continued his sales of counterfeit software and stand alone certificates of authenticity even after Microsoft sent him numerous “cease and desist” letters over several years. As part of his plea agreement, SHU admitted that he sold up to $1 million worth of counterfeit software and illicit certificates of authenticity during the course of the scheme.
When law enforcement executed a court authorized search warrant at SHU’s residence on June 20, 2007, they seized an estimated $2.6 million worth of software that included genuine software, counterfeit software, illicit labels of authenticity, and software that had been tampered with in order to disguise its origin. Analysis revealed that 41 percent of the products were counterfeit or tampered with. The investigation also revealed that SHU and his wife stopped filing personal or corporate income tax returns in 2004, resulting in a combined tax loss of over $650,000 in tax years 2004, 2005, and 2006. SHU’s wife, Maynila Voravongseng, was sentenced on May 24, 2011, to imprisonment for a term of 30 days, based on her conviction of failure to file tax returns for these same years. The couple has agreed to work with the IRS to determine their tax liabilities for 2004-2007.
Under the terms of the plea agreement, the couple is forfeiting to the government a 2000 Mercedes, nearly $70,000 in cash and bank accounts, and equity in their home.
Tuesday, June 28, 2011
Hannah Noel Perlich Indicted in $3 Million Mortgage Fraud Scheme
MINNEAPOLIS—Earlier today in federal court, a former loan officer from Minneapolis was indicted in connection with a $3 million mortgage fraud scheme that involved six properties. Hannah Noel Perlich, age 29, was charged with six counts of wire fraud and one count of conspiracy to commit wire fraud in connection to the crime. Perlich worked as a loan officer for two mortgage brokerage companies—St. Joseph’s Financial and Legacy Lending.
The indictment alleges that from 2005 through 2006, Perlich, aided and abetted others, obtained mortgage loan proceeds through fraud. The purpose of the alleged scheme was to obtain mortgage loans in substantially higher amounts than the purchase price of the properties involved. This was accomplished through the use of inflated appraisals and fraudulent underwriting and loan documentation. Allegedly, Perlich caused the false loan applications to be provided to potential lenders. In addition, Perlich allegedly concealed payments to herself from the loan proceeds by diverting them to buyers and other co-conspirators.
Several co-conspirators already have been sentenced for their roles in the scheme, while others were recently charged.
If convicted, Perlich faces a potential maximum penalty of 20 years in prison on each count. All sentences will be determined by a federal district court judge. This case is the result of an investigation by the Federal Bureau of Investigation. It is being prosecuted by Assistant United States Attorney Christian S. Wilton.
This law enforcement action is in part sponsored by the interagency Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. It includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch and, with state and local partners, investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.
Monday, June 27, 2011
Barbara J. Singletary Indicted for Federal Prison Tax Fraud Scheme
An O’Fallon, Missouri, woman was indicted on June 23, 2011, for Conspiracy to Commit Mail Fraud and Money Laundering, the United States Attorney for the Southern District of Illinois, Stephen R. Wigginton, announced today. Barbara J. Singletary, age 62, was indicted for her role in assisting her son, Michael S. Chaney, commit tax fraud while incarcerated in FCI Greenville.
According to the Indictment, Singletary was charged for participating in an income tax refund scheme where the participants supplied fictitious tax returns and bogus IRS Forms W-2 to numerous state taxing authorities to falsely claim that inmates - and their friends and family members - had earned income in those states and were owed a tax refund. Singletary mailed blank tax forms along with documents necessary to create false Forms W-2 to Chaney in prison. Chaney then completed the fraudulent returns and mailed them back to Singeltary. The mailings to Singletary were purportedly addressed to a law firm located at her home so prison staff would not review their contents. After receiving the packages, Singletary mailed each of the returns to the applicable state taxing authorities in order to claim the refunds.
The Indictment alleges that Chaney personally completed fraudulent tax returns to nine (9) different state taxing authorities which resulted in those states being defrauded out of $152,893. Singletary opened multiple bank accounts to receive the fraudulent refunds, which helped conceal the existence of the scheme as well as the identity of the coconspirators. Singletary also withdrew money obtained from the tax refund scheme to purchase marijuana that was smuggled into the prison through another inmates’ spouse during visitation. Chaney and the other inmate sold the marijuana for profit to federal inmates residing at FCI Greenville. Singletary filed tax returns for herself in Hawaii, Oregon, Kentucky, Illinois, Maine, Nebraska, Colorado, Maryland, Arizona, New Mexico, and Oklahoma, falsely claiming approximately $49,000 in fraudulent state income tax refunds.
Sunday, June 26, 2011
Michael S. Chaney was Charged for Participating in an Income Tax Refund Scheme
A federal prisoner incarcerated at FCI Greenville was convicted in U.S. District Court on June 21, 2011, for Conspiracy to Commit Mail Fraud and Money Laundering, the United States Attorney for the Southern District of Illinois, Stephen R. Wigginton, announced today.
Michael S. Chaney, 41, originally from St. Charles, Missouri, pled guilty to a one-count Information. Chaney was charged for participating in an income tax refund scheme where the participants supplied fictitious tax returns and bogus IRS Forms W-2 to numerous state taxing authorities to falsely claim that inmates—and inmates’ friends and family members—had earned income in those states and overpaid their state income taxes, thereby entitling them to a tax refund. Chaney personally completed fraudulent tax returns to nine (9) different state taxing authorities which resulted in those states being defrauded out of $152,893. An individual outside of the prison opened multiple bank accounts to receive the fraudulent refunds, which helped conceal the existence of the scheme as well as the identity of the coconspirators. Chaney used money obtained from the tax refund scheme to purchase marijuana that was smuggled into the prison during visitation and resold for a profit.
At his sentencing, which has not yet been set by the District Court, Chaney faces up to an additional five years’ imprisonment, a fine of up to $250,000, and three years’ Supervised Release.
