BIRMINGHAM—One employee of a state business development consortium and two employees of a non-profit institute associated with the consortium have entered into plea agreements with the federal government on income tax and fraud charges, announced U.S. Attorney Joyce White Vance, FBI Special Agent in Charge Pat Maley and IRS Criminal Investigation Special Agent in Charge Reginael D. McDaniel.
LAUREN YOUNG, 33, head of marketing for the Alabama Small Business Development Consortium, has agreed to plead guilty to charges of wire fraud and filing false tax returns.
MICKIE DAVIS, 49, bookkeeper for the Alabama Small Business Institute of Commerce, has agreed to plead guilty to charges of conspiracy, wire fraud and filing false tax returns.
BENJAMIN JOHNSON, 35, executive director of the Small Business Institute, has agreed to plead guilty to charges of conspiracy and filing false tax returns.
Federal prosecutors brought charges against Young, Davis and Johnson, all of Gadsden, by informations either filed or unsealed today, along with the plea agreements.
The Alabama Small Business Development Consortium is composed of universities in the state, each with its own small business development center, as well as a procurement technical center and an international trade center. The consortium’s purposes are to enhance economic growth, to provide management and technical assistance to small businesses, and to develop Alabama’s workforce.
A federal grand jury indictment was unsealed last week charging the state director of the Alabama Small Business Development Consortium, Maurice William Campbell Jr., with fraud, money laundering and conspiracy. The indictment charges Campbell with using his position as the consortium’s director to obtain more than $7 million from the State of Alabama.
It charges Campbell, 59, of Rainbow City, with conspiracy to defraud the state and the Alabama Small Business Institute of Commerce, a private non-profit institute he incorporated, and with making financial transactions intended to conceal the proceeds of the fraud.
The Institute of Commerce received nearly all of its funding from the state through grants, contracts and appropriations in the education budget. From 2005 through 2010, the private, non-profit institute received more than $7.3 million in public funds intended to provide services including education and training to Alabama workers.
Campbell hired Young in 2006 as marketing director for the Alabama Small Business Development Consortium. In October 2006, she received a business check card for the consortium and, over more than three years, used it to make about $195,000 in illegitimate expenditures for herself or others, according to her plea agreement. She made efforts to conceal that she was improperly spending Institute funds, according to the plea agreement.
Young also received thousands of dollars in state funds for reimbursement of travel expenses that Young had paid with Institute funds, according to her plea agreement.
Young acknowledges that she under-reported her income on tax returns for 2008 and 2009.
Davis acknowledges in her plea agreement that, as bookkeeper of the institute, she “received hundreds of thousands of dollars in cash, services, clothing, lodging, meals, and other items for personal benefit, financed by the Institute and its state funding. Moreover, she knowingly and willfully assisted others in using institute funds for their personal benefit, including the incorporator” of the institute, Campbell.
In July and August 2005, Davis opened bank accounts for the institute and knew it received its funding from the state, according to plea agreement. That same year, she began writing checks, at Campbell’s request, from the institute to women he referred to as the Little Sisters, the plea agreement says. From 2006 to 2010, Davis used and witnessed others using business check cards on the institute’s accounts for personal expenses, including jewelry, clothing, event tickets and meals, according to her plea agreement. She acknowledges that in 2008, she financed a trip to the Bahamas using institute funds.
Davis under-reported her income on tax returns for 2007, 2008 and 2009, according to the plea agreement.
Johnson was hired as executive director of the institute in September 2006. He acknowledges in his plea agreement that he knew less than 20 percent of the state money coming to the institute was being awarded in grants to member schools. Johnson acknowledges that he used institute funds for personal expenses, including trips, clothing, and car maintenance, and that he was aware other institute officials were spending the state funds for personal expenses.
In August 2008, Johnson created Johnson Marketing Group, which he and Campbell used to obtain money from the institute, according to Johnson’s plea agreement.
Johnson acknowledges that he under-reported his income on tax returns for 2008 and 2009.
Sunday, April 10, 2011
Lauren Young, Mickie Davis and Benjamin Johnson Agree to Plead Guilty to Tax and Fraud Charges
Saturday, April 9, 2011
Mark D. Leitner Indicted Filing False Liens for Billions of Dollars Against Federal Law Enforcement
WASHINGTON - Mark D. Leitner has been indicted by a grand jury in the Northern District of Florida for filing false liens against federal law enforcement, corruptly endeavoring to impede and impair the Internal Revenue Service (IRS), and public disclosure of another’s Social Security number in the commission of illegal activity, the Justice Department announced today.
According to the indictment, Leitner was previously a defendant in a criminal trial, United States v. Hirmer, et. al., in the Northern District of Florida in March 2010. A jury in Pensacola, Fla., found him guilty of conspiracy to defraud the IRS after a month-long jury trial.
According to the indictment, during the jury trial and after the jury returned the guilty verdict, Leitner caused false maritime liens to be publicly filed against the property of prosecutors, investigators and court personnel involved in the criminal trial. The liens falsely claimed that Leitner was owed $48.489 billion from each individual. On five of the seven false liens, Leitner publicly disclosed individuals’ correct Social Security numbers; this information was publicly available in each state where the liens were filed. Leitner also filed and mailed numerous harassing and frivolous documents to the court and personnel involved in this case.
An indictment merely alleges that a crime has been committed, and a defendant is presumed innocent until proven guilty beyond a reasonable doubt. Each count of filing false liens carries a penalty of up to 10 years in prison and a $250,000 fine. Each count of Social Security fraud carries a maximum penalty of up to five years in prison and a $250,000 fine. The corruptly obstructing the IRS charge carries a maximum penalty of up to three years in prison and a $250,000 fine.
Friday, April 8, 2011
Justice Department ask Court to Allow IRS to Seek HSBC INDIA Bank Account Records
WASHINGTON - The United States is seeking an order from a federal court in San Francisco authorizing the Internal Revenue Service (IRS) to request information from HSBC Bank USA, N.A. about U.S. residents who may be using accounts at The Hong Kong and Shanghai Banking Corporation in India (HSBC India) to evade federal income taxes, the Justice Department announced today.
The government filed a petition with the court to allow the IRS to serve what is known as a “John Doe” summons on the bank. The IRS uses a John Doe summons to obtain information about possible tax fraud by people whose identities are unknown. If approved, the John Doe summons would direct HSBC USA to produce records identifying U.S. taxpayers with accounts at HSBC India, many of whom are believed by the government to have hidden their accounts from the IRS.
According to documents filed with the government’s petition, on Jan. 26, 2011, a grand jury in Newark, N.J., indicted Vaibhav Dahake of Somerset, N.J., charging him with conspiracy to defraud the United States by using undeclared accounts in the British Virgin Islands and at HSBC India to evade his income taxes. According to those documents, employees of HSBC Holdings plc and its affiliates operating in the United States assured Dahake that accounts maintained in India would not be reported to the IRS.
The government alleges that, according to HSBC’s website, in 2002 HSBC India opened a “representative office” at an HSBC USA office in New York City to enable “Non-Resident Indians” (NRIs) living in the United States to open accounts in India. In 2007, HSBC India allegedly opened a second representative office at an HSBC USA office in Fremont, Calif., purportedly “to make banking transactions more convenient for the NRI community based in California.” Although HSBC India closed those offices in June 2010, the government alleges that NRI clients may still access their accounts at HSBC India from the United States. According to the petition documents, NRI clients have told IRS investigators that NRI representatives in the United States assured the clients that they could invest in accounts at HSBC India without paying U.S. income tax on interest earned on the accounts and that HSBC would not report the income earned on the HSBC India accounts to the IRS.
“The Department of Justice is committed to ensuring that all U.S. taxpayers meet their obligations to declare and pay taxes on foreign bank accounts,” said John A. DiCicco, Principal Deputy Assistant Attorney General for the Justice Department’s Tax Division. “The ability to hide accounts in foreign countries is rapidly dwindling. We will continue working hand-in-hand with the IRS to enforce the tax laws against those who are using offshore accounts – wherever they are located – to evade taxes.
“The IRS continues to focus its attention on international tax evasion,” said IRS Commissioner Douglas Shulman. “This summons request is focused on obtaining more information to help us determine if additional actions are needed. As I’ve said all along, our international efforts are not about just one country or one bank – it’s about our wider effort to ensure compliance with the nation’s tax laws.”
Federal law requires U.S. taxpayers to pay federal income taxes on all income earned worldwide. U.S. taxpayers must also report foreign financial accounts if the total value of the accounts exceeds $10,000 at any time during the calendar year. A willful failure to report a foreign account can result in a penalty of up to 50 percent of the amount in the account at the time of the violation.
Thursday, April 7, 2011
Donna Paul and Her Husband William Paul Charged with Four Counts of Tax Evasion
WASHINGTON - Donna Paul and her husband, William Paul, formerly of Montgomery, Ala., were indicted by a federal grand jury and charged with four counts of tax evasion for the tax years 2004 through 2007, the Justice Department and Internal Revenue Service (IRS) announced today.
John A. DiCicco, Principal Deputy Assistant Attorney General for the Tax Division, and Leura G. Canary, U.S. Attorney for the Middle District of Alabama, made the announcement.
According to the indictment, Donna Paul is a board-certified physician with a specialty in rheumatology. She and her husband operated several non-profit organizations that provided medical services. The Pauls attempted to evade the assessment of Donna Paul’s income by falsely characterizing her income as loans, by making false statements to IRS employees, and by deliberately causing the non-profit organizations to not file tax returns. Donna Paul did not file a U.S. Individual Income Tax Return, IRS Form 1040, between 2003 and 2007 and William Paul has not filed an IRS Form 1040 since the 1980s.
An indictment merely alleges that a crime has been committed, and a defendant is presumed innocent until proven guilty beyond a reasonable doubt. If convicted, the Pauls both face a maximum of 20 years in prison and a maximum fine of $1 million.
Wednesday, April 6, 2011
Verizon Communications Pays United States $93.5 Million to Resolve False Claims Act Allegations
WASHINGTON - Verizon Communications Inc. has paid the United States $93,525,410.96 in order to resolve allegations that the company overcharged the General Services Administration (GSA) on invoices dealing with government-wide voice and data telecommunications services contracts, the Justice Department announced today.
Verizon subsidiary MCI Communications Services Inc. dba Verizon Business Services is alleged to have invoiced GSA for a variety of federal, state and local taxes and surcharges in violation of the contracts or applicable regulations in connection with the FTS2001 and FTS2001 Bridge contracts. The department’s joint investigation with GSA’s Office of the Inspector General (OIG) found that Verizon and MCI submitted false claims under the contracts for the reimbursement of property taxes, common carrier recovery charges and unallowable surcharges, charges that are not directly reimbursable under the FTS2001 contracts.
Tuesday, April 5, 2011
Edward T. Fodrey Pleads Guilty to Kickback Scheme and Failure to File Tax Return
WASHINGTON—A Virginia contractor pleaded guilty to participating in a scheme to steer contracts to him for repair, maintenance and renovation work at healthcare and nursing home facilities owned by Medical Facilities of America Inc. (MFA), the Department of Justice announced today.
Edward T. Fodrey, a resident of Norfolk, Va., pleaded guilty in U.S. District Court in Norfolk to conspiring with other individuals to steer contracts for repair, maintenance and renovation at MFA healthcare and nursing home facilities. According to the two-count felony charge filed on March 30, 2011, from about May 2006 until at least December 2006, Fodrey conspired with an MFA employee who oversaw the bidding process for repair, maintenance and renovation contracts at MFA facilities in North Carolina and Virginia. That MFA employee steered contracts to Fodrey in return for kickbacks.
According to the court document, the MFA employee created fictitious competitor bids that were higher than the quotes submitted by Fodrey and other co-conspirator venders, to create the appearance of competition. The MFA employee directed subordinates to solicit quotes only from Fodrey or other conspiring vendors. The MFA employee specified the amount Fodrey should quote to MFA as well as the amount of the kickback on each of the contracts. Fodrey paid more than $200,000 in kickbacks to the MFA employee and received contracts totaling more than $750,000. The court document states that as a result of the kickback scheme, MFA was deprived of competitive pricing to its financial detriment. Fodrey was also charged with failing to file a tax return for 2006, which is the year in which Fodrey received payment on the MFA contracts. According to the plea agreement, Fodrey has agreed to cooperate with the department’s ongoing investigation.
Fodrey is charged with conspiracy to commit mail fraud for the kickback scheme, which carries a maximum penalty of 20 years in prison and a $250,000 criminal fine. Fodrey is also charged with failure to file an income tax return, which carries a maximum penalty of one year in prison and a $100,000 criminal fine. The maximum fines for each of these charges may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximums.
Monday, April 4, 2011
Thomas J. Ernst Arraigned on Charges of Tax Evasion and Impeding the IRS
WASHINGTON – Thomas J. Ernst, formerly a resident of McLean and Arlington, Va., was arraigned today in the Eastern District of Virginia. Ernst was indicted March 10, 2011, for one count of corruptly endeavoring to impede the Internal Revenue Service (IRS), three counts of tax evasion for 2004, 2005 and 2006, and two counts of failing to file corporate tax returns in 2004 and 2005, the Justice Department and IRS announced today. Ernst appeared today before the Honorable U.S. District Court Judge Claude M. Hilton.
According to the indictment, Ernst was the president and chief executive officer of Medicure Plus Inc., a health insurance benefits administration company. From 2000 through 2006, Medicure operated as a third party administrator of the Postmasters’ Benefits Plan (PBP), the health benefits carrier for the National League of Postmasters (NLP). Medicure and NLP entered into a 10 year guaranty agreement under which Medicure managed PBP’s operations; NLP paid Medicure $166,000 each month plus a $33,000 administrative fee.
According to the indictment, between 2001 and 2007, Ernst corruptly endeavored to obstruct and impede the due administration of the IRS by causing Medicure to make payments from its corporate bank account for numerous personal expenses, including: a summer rental house; more than $1.5 million in payments to himself, his wife, sister-in-law and children; his son’s Georgetown University college education; and various property purchases and rentals. None of these payments were included on any personal income tax return as income to Ernst. Additionally, Ernst used nominee bank accounts, purchased and leased assets in the names of his children and sister-in-law and created fictitious documents to conceal his income and ownership of assets from the IRS.
Ernst did not file U.S. Individual Income Tax Returns, Forms 1040 with the IRS for 2001 through 2006 and is charged with evading his taxes in 2004, 2005 and 2006. Further, Ernst failed to cause Medicure to ever file a corporate income tax return, Form 1120, and he is charged with failing to file a Medicure corporate income tax return in 2004 and 2005.
An indictment is merely a formal charge by the grand jury. The defendant is presumed innocent unless and until proven guilty in U.S. District Court. If convicted, the defendant faces a maximum potential sentence of 20 years in prison. The trial date has been scheduled for Aug. 2, 2011, before Judge Hilton.
Sunday, April 3, 2011
Ricky Walter Denton Charged with 2009 Bank Robbery also Charged with Joann Smith Choat in Tax Fraud Scheme
BIRMINGHAM—A federal indictment unsealed today charges a Tuscumbia man with a 2009 armed robbery of a Colbert County bank, and a separate indictment returned today charges him and a Tuscumbia woman in a federal tax fraud conspiracy, announced U.S. Attorney Joyce White Vance, IRS Criminal Investigation Special Agent in Charge Reginael D. McDaniel, FBI Special Agent in Charge Patrick Maley, and Colbert County Sheriff Ronnie May.
The grand jury indictment filed today in U.S. District Court charges RICKY WALTER DENTON, 46, and JOANN SMITH CHOAT, 55, with conspiring to obtain $148,685 in false federal income tax refunds through a three-year scheme that involved taking other people’s Social Security numbers and birth dates and filing false returns.
The indictment, returned earlier this month and unsealed today, charges Denton with robbing the First Southern Bank in Colbert County in December 2009 and with brandishing a handgun during the crime. Denton assaulted and “put in jeopardy the life of another person” by using a handgun, according to the indictment.
“Law enforcement agencies are to be commended for their cooperative work in these cases, which closed the trail on someone who threatened another person’s life to steal from a bank, and who stole the identities of people around him so that he and his co-conspirator could steal money from taxpayers,” Vance said.
“At the IRS, protecting taxpayer money is a matter we take very seriously. An integral part of the IRS mission involves detecting and stopping fraudulent tax refund claims,” McDaniel said. “Thanks to the resolve of our law enforcement partners, we were able to accomplish our mission.”
The conspiracy count in today’s tax fraud indictment charges that, from January 2007 to May 2010, Denton obtained the identifying information of others, used that information to create false tax forms, and mailed those forms to Post Office boxes in Tuscumbia that Choat had opened at his request.
Choat submitted the false tax forms to the IRS, and when she received refunds on them, deposited the $148,685 in U.S. Treasury checks into her personal credit union account, according to the indictment.
The indictment also charges Denton with five counts of making false claims against the government for creating and causing false tax returns to be submitted. It charges Denton with five counts of aggravated identity fraud for using the Social Security number of another person to commit mail fraud and conspiracy to commit mail fraud.
The indictment charges Denton and Choat with five counts of mail fraud for fraudulently causing the U.S. Treasury to mail refund checks, and with one count of conspiracy to commit mail fraud against the Treasury Department.
Denton could face a maximum sentence of 20 years in prison and a $250,000 fine on the conspiracy and fraud charges, and a mandatory two-year sentence for aggravated identity theft, which must be served consecutive to any sentence on the mail fraud and conspiracy to commit mail fraud charges. On the robbery charge, Denton could face a maximum sentence of 25 years in prison and a $250,000 fine. The separate charge for brandishing a weapon during the robbery carries a maximum seven-year sentence that must be served consecutive to any robbery sentence.
Choat could face a maximum sentence of 20 years in prison and a $250,000 fine on the conspiracy and fraud charges.
Saturday, April 2, 2011
Richard E. Brown Indicted for Wire Fraud, Mail Fraud, and Making a False Tax Return
INDIANAPOLIS—Joseph H. Hogsett, United States Attorney, announced that Richard E. Brown, 53, of Mt. Vernon, Ind., was charged by a federal grand jury sitting in Evansville, Wednesday, March 30, 2011, with multiple counts of wire fraud, mail fraud, and making a false tax return. Following a return of indictment, federal agents arrested Brown. The indictment is the result of a lengthy investigation by special agents of the Internal Revenue Service, Criminal Investigation Division, and the Federal Bureau of Investigation.
The indictment alleges that Brown, while serving as office manager and bookkeeper of an Evansville family business, used credit cards from that business to pay his own personal expenses without authorization. Allegedly, Brown also used checks of his former employer to pay the expenses of his church where he had also served as bookkeeper. Following these thefts, Brown filed false federal income tax returns which omitted the embezzled funds. As a result, the government lost thousands of dollars in taxes due by Brown. The loss to the family business is alleged to be over $100,000.
According to Assistant U.S. Attorney James M. Warden, who is prosecuting the case for the government, Brown faces a maximum of 20 years in prison and a $250,000 fine on each fraud count, and three years in prison and a $250,000 fine on each tax count. Brown was released following an initial hearing held in Evansville this morning before Judge Young. A jury trial is scheduled for May 31, 2011.
Friday, April 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.
Thursday, March 31, 2011
Hussein Ali Mehdi Pleads Guilty to Investment Fraud and Tax Fraud
EUGENE, OR—Today, Hussein Ali Mehdi, 48, of Eugene, Oregon, pleaded guilty to three counts of mail fraud and one count of tax fraud related to an investment fraud scheme.
According to court documents, the defendant admitted to submitting fraudulent claims for class action settlements associated with various securities litigation. The defendant further admitted to receiving more than $850,000 of fraudulent proceeds through his investment scheme.
In those claims, the defendant falsely asserted that he and others held stock in the companies subject to the class action settlements. To support the false claims, the defendant created fraudulent brokerage account statements purported to be from various investment brokerage firms, including Charles Schwab, TD Waterhouse, and Ameritrade, that falsely represented that he and others owned shares of the securities covered by the settlements. To pull off his scheme, the defendant used several nominees and addresses in at least two states.
In connection with the investment fraud scheme, the defendant also admitted filing a false federal income tax return on which he severely understated his income. On the false tax return, the defendant claimed his taxable income was only $58,241, when, in reality, he knew it was more than $290,000.
Wednesday, March 30, 2011
Mohammad Jafar Nikbakht Pleads Guilty to Tax Evasion
WASHINGTON - Mohammad Jafar Nikbakht, aka Freydoon Nikbakht, pleaded guilty to tax evasion before U.S. District Court Judge John A. Houston in San Diego, the Justice Department and Internal Revenue Service (IRS) announced today. According to the indictment and other documents filed with the court, Nikbakht ran a series of lucrative auto dealerships in the greater San Diego area. Between 1998 and 2007, Nikbakht significantly under-reported income earned from these businesses. The government claims that Nikbakht defrauded the U.S. Treasury of more than $400,000 in income tax revenue through the course of these years.
According to indictment and other documents filed with the court, Nikbakht pleaded guilty to tax evasion for the year 2007. Nikbakht admitted that during that year he earned income through auto dealership operations, including through a dealership called Southern California Car Exchange. Nikbakht further admitted that he willfully failed to file his personal tax return and pay his taxes, and that he engaged in various acts to conceal income from the IRS. For example, Nikbakht admitted that he ran an auto wholesale operation under another dealer’s license and that he instructed the other dealer to write his income payment checks to the order of a third-party or to “cash”.
The government contends that even at his plea hearing, Nikbakht only admitted to a fraction of his misconduct. Additional evidence concerning Nikbakht’s 2007 tax evasion and his alleged tax crimes for prior years as well as allegations that Nikbakht obstructed justice in the tax investigation, will be presented before Judge Houston at a preliminary sentencing hearing scheduled for April 12, 2011.
Nikbakht faces up to five years in prison. In addition, the government is seeking a fine of at least $250,000 and an order requiring Nikbakht to pay full restitution to the IRS as well as the costs of his prosecution.
Tuesday, March 29, 2011
Federal Court has Permanently Barred Gerald A. Poynter II From Preparing Federal Tax Returns for Others and Promoting a Fraudulent Tax Scam
WASHINGTON – A federal court has permanently barred Gerald A. Poynter II of Kansas City, Mo., from preparing federal tax returns for others and from promoting a fraudulent tax scam, the Justice Department announced today.
The court found that Poynter, who uses the business name “Jerry Love Ministries” prepares false Internal Revenue Service (IRS) forms to help his customers claim fraudulent tax refunds based on phony reporting of large income tax withholding. The court order states that Poynter’s scheme is a version of the repeatedly rejected “redemption” scheme used by tax defiers to evade tax obligations or obtain wrongful financial benefits. According to the court, proponents of that scheme claim that the U.S. government is in possession of money rightfully owned by taxpayers. The court found that Poynter told his customers that he could recover that money for them for a fee, and that he then generated fraudulent IRS forms to support false tax refund claims on their behalf.
According to the court, Poynter helped at least 165 customers make fraudulent refund claims totaling more than $64 million. The IRS catches the vast majority of false “redemption” claims, and civil and criminal penalties for taxpayers who file such claims can be severe.
The IRS recently advised taxpayers to beware of tax scams like return preparer fraud. In the past decade, the Justice Department’s Tax Division has obtained hundreds of injunctions against tax-fraud promoters and dishonest tax return preparers.
Monday, March 28, 2011
James and Theresa Demuro Sentenced For Failing to Pay Employment Taxes
WASHINGTON - James and Theresa Demuro of Bridgewater, N.J., were each sentenced by U.S. District Judge Garrett E. Brown Jr. to 51 months in prison, followed by three years supervised release, the Justice Department and the Internal Revenue Service (IRS) announced today. Judge Brown also ordered the Demuros to pay restitution to the IRS in the amount of $1,337,952.12.
The DeMuros were convicted following a jury trial that began on Nov. 9, 2010, of one count of conspiracy to defraud the United States and 21 counts of willfully failing to pay over employment taxes. According to the indictment and evidence introduced during trial, the DeMuros co-owned and operated an engineering and surveying firm called TAD Associates LLC dba DeMuro Associates. From 2002 through 2008, they withheld employment taxes from their employees’ paychecks but failed to pay approximately $546,247.39 in taxes to the IRS. In addition, they operated under a prior entity name DA Resources Inc., which they ceased operating in an effort to thwart the ability of the IRS to collect unpaid employment taxes related to that entity.
At trial, the government introduced evidence that, beginning with the first quarter of 2007 through the last quarter in 2008, the defendants paid employees’ wages and withheld employment taxes from paychecks but did not pay any of the employee withholdings to the U.S. Treasury. In addition, the DeMuros withheld funds from their employees’ pay checks for health insurance, child support and retirement savings accounts, and failed to pay these funds over to the appropriate entities.
Evidence was also introduced that the Demuros converted withheld funds for their business and personal use, including more than $280,000 in purchases from QVC, Home Shopping Network and Jewelry Television.
Sunday, March 27, 2011
Murphy Hubbard Pleads Guilty to Mail Fraud and Tax Evasion
WASHINGTON - Murphy Hubbard, a Springfield, Mo., CPA, pleaded guilty to two counts of mail fraud and one count of tax evasion before Judge James England in the Western District of Missouri, the Department of Justice and Internal Revenue Service (IRS) announced today.
According to the terms of Hubbard’s plea, he has agreed to be sentenced to 42 months in prison and shall be ordered to pay full restitution to the victims in this case, including the IRS.
According to court documents, Hubbard owned and operated an accounting and tax business known as The Hubbard Group PC. Hubbard embezzled more than $400,000 from two trusts placed under his control by local families between 1998 and 2009. The first of these trusts, created by Ms. Hazel Beatrice S. Hirst, of Springfield, designated four local charities as the beneficiaries of her life’s savings. The second trust, established by the heirs of Mr. Noel C. Rummens, of Rogersville, Mo., was created for the express purpose of funding educational expenses for Mr. Rummens’s surviving heirs and relatives. Rather than fulfilling the wishes of these families by faithfully executing their trust agreements, Hubbard instead took the vast majority of this money for himself, using it to pay personal expenses, to buy items such as automobiles and farm equipment, and for travel. Virtually all of the money taken from these trusts went unreported to the IRS, resulting in a tax loss of approximately $79,434.
Saturday, March 26, 2011
Caesars Palace Nightclub Host Ali “Shawn” Olyaie Pleads Guilty to Tax Crime
WASHINGTON - Ali “Shawn” Olyaie, a former “VIP host” at the Pure Nightclub located in Caesars Palace Hotel and Casino in Las Vegas, pleaded guilty in Las Vegas before U.S. District Court Judge Kent Dawson to one count of filing a false federal individual income tax return for the 2006 tax year, the Justice Department and Internal Revenue Service (IRS) announced today.
According to information disclosed at Olyaie’s plea hearing, during the years 2005 and 2006, Olyaie’s responsibilities as a VIP host at the Pure Nightclub included promoting the club, booking reservations and catering to the club’s clientele. In addition to paying an admissions fee, some Pure patrons typically made cash payments to Pure door personnel and VIP hosts to bypass the general admissions line and to obtain more desirable seating inside the nightclub. The cash payments were collected, pooled and generally distributed on a weekly basis to Pure managers, door personnel and VIP hosts, including Olyaie. Olyaie’s cash distributions from the pool of money collected from patrons of Pure comprised the bulk of his compensation during the time he worked at Pure. Olyaie concealed the cash payments he received by not reporting the income to the IRS on his individual income tax returns during the years he worked at the Pure Nightclub.
Judge Dawson set Olyaie’s sentencing for June 29, 2011, at 9:00 a.m.
On Nov. 9, 2010, Richard Chu, another former VIP Host at the Pure Nightclub, pleaded guilty to filing a false 2006 federal individual income tax return that did not report the cash payments he received at Pure. Chu is also awaiting sentencing.
This case is being investigated by IRS – Criminal Investigation and is being prosecuted by Tax Division Trial Attorneys Christopher J. Maietta and Joseph A. Rillotta.
Friday, March 25, 2011
Richard Jaensch Charged with Obstructing the IRS
WASHINGTON - Richard Jaensch, a resident of Annandale, Va., has been indicted by a Alexandria, Va., federal grand jury with one count of corruptly endeavoring to impede the Internal Revenue Service (IRS), one count of filing a false claim for a refund and four counts of failing to file a tax return for 2004 through 2007, the Justice Department and the IRS announced today.
According to the indictment, Richard Jaensch, a self-employed plumber, failed to file personal income tax returns between 2001 and 2007, despite the fact that he was required to do so by law. Between 2002 and October 2009, Jaensch obstructed and impeded the IRS by, among other acts: filing numerous documents and pleadings in Fairfax County, Va.; claiming, that he and his wife, a federal employee, were not persons required to file federal income tax returns; that his wife was not a party to the Constitution of the “united States of America” (sic) and that she was not a taxpayer; providing false information to the IRS; and filing with the IRS a false 2008 federal income tax return, Form 1040.
In addition, Jaensch caused his wife to yearly present a letter to her employer directing them to stop withholding federal income taxes from her salary. The IRS began levying his wife’s paycheck and bank accounts to satisfy her outstanding tax liability, and Jaensch continued his obstructive conduct by filing or causing his wife to file correspondence with the IRS claiming that the IRS could not instruct her employer to withhold taxes from her paycheck. In addition, in April 2009, Jaensch electronically filed with the IRS a false 2008 individual income tax return claiming a tax refund of $774,052, which he knew to be false and fraudulent.
An indictment is merely a formal charge by the grand jury. The defendant is presumed innocent unless and until proven guilty in U.S. District Court. If convicted, the defendant faces a maximum potential sentence of 12 years in prison. The court has not yet set a trial date.
Thursday, March 24, 2011
Reynaldo Orozco Pleads Guilty to Employment Tax Fraud
WASHINGTON - Reynaldo Orozco pleaded guilty to one count of filing a false tax return before U.S. District Court Judge Adalberto Jordan in the Southern District of Florida, the Department of Justice and the Internal Revenue Service (IRS) announced today. The court set sentencing for June 17, 2011.
According to court documents, during tax years 2004 through 2007, Orozco owned and operated Rock Construction Builders Inc. (RCB), a construction business located in Miami-Dade County, Fla. Orozco 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 employment taxes on the wages. From 2004 through 2007, RCB failed to report approximately $3,294,426 in cash wages to the IRS.
Court documents also stated that on Feb. 11, 2005, Orozco made and subscribed to a false IRS Form 941 (Employer’s Quarterly Federal Tax Return) for the quarter ending Dec. 31, 2004. Orozco knew this return was false because it failed to report the substantial cash wages paid to RCB employees that quarter.
Based on the conduct described above, the U.S. Treasury suffered an employment tax loss of approximately $504,047. Orozco faces a maximum of three years in prison.
Wednesday, March 23, 2011
Kathryn Charles Miles and husband John Scott Miles Pleads Guilty to Tax Fraud Conspiracy
WASHINGTON – Kathryn Charles Miles and husband John Scott Miles, of Mathews County, Va., pleaded guilty to conspiring to impair and obstruct the IRS in the ascertainment and assessment of federal income taxes from 2001 through 2010.
The pleas were announced by U.S. Attorney for the Eastern District of Virginia Neil H. MacBride, Principal Deputy Assistant Attorney General for the Justice Department’s Tax Division John A. DiCicco and the Internal Revenue Service (IRS).
Kathryn Miles, who was charged in October 2010, pleaded guilty March 19, 2011, before U.S. District Judge Raymond A. Jackson in Norfolk, Va. John Miles pleaded guilty today.
At her plea hearing, Kathryn Miles admitted to earning taxable income as a nurse at various Virginia hospitals and with her husband, as an owner and operator of a construction business named “Scotts Construction” and “KCM Construction & Design.” Kathryn Miles and John Miles admitted that in 2001 they joined American Rights Litigators, a business they knew sold and promoted abusive tax schemes, and maintained an annual membership. Kathryn Miles also 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. Kathryn Miles submitted falsified tax documents with each tax return she filed with the IRS and John Miles admitted that he did not file tax returns for tax years 2004 and 2005, despite being required to do so by law.
Judge Jackson released the defendants on bond pending sentencing. Kathryn Miles’s sentencing is scheduled for June 30, 2011 and John Miles’s sentencing is scheduled for July 11, 2011. Both defendants face a maximum potential penalty of five years in prison and a $250,000 fine, and both defendants have agreed to pay all taxes, interest and penalties.
