Some of our favorite recent tax fraud cases.
New York: Preparer Celamour Berus, of the Springfield Gardens section of the Borough of Queens, has been arrested for multiple tax crimes following his indictment on April 3.
According to the indictment, Berus, owner and operator of the tax prep business Celamour Enterprises, prepared false individual income tax returns for clients for tax years 2007 through 2011. Berus included false itemized deductions for charitable contributions, unreimbursed employee expenses and other expenses on 38 returns.
The indictment also alleges that he falsified his own federal income tax returns for tax years 2007 through 2010 by failing to report all of the gross receipts generated by his tax prep business and including false itemized deductions for unreimbursed employee expenses.
If convicted, Berus faces a maximum of three years in prison for each count and a fine of up to $250,000.
Greensboro, N.C.: Preparer Claude Arthur Verbal II, of Miami and formerly of Raleigh, N.C., pleaded guilty to one count of conspiracy to defraud the U.S., one count of aiding and assisting the preparation of false returns, one count of health-care fraud and one count of money laundering, in two separate cases.
According to court documents, Verbal owned Nothing But Taxes, a prep franchise with 10 branches throughout North Carolina that operated from 2005 to at least 2012. Verbal personally prepared false returns for clients and taught and encouraged his employees to do so, as well. Verbal and NBT employees frequently offered clients a dramatically larger refund if the clients agreed to make a cash payment to the person who prepared their return; these cash payments were over and above the flat preparation fee NBT charged every client whether or not their return was falsified.
Authorities said that from 2005 to 2007, Verbal prepared dozens of false returns, one of which for 2006 falsely reported the client had a Schedule C business and a dependent and that Verbal knowingly prepared and e-filed. The most common falsifications at NBT involved dependents, Schedule C businesses, tip income, the EITC and education credits, according to court papers.
Verbal and many of his employees facilitated the purchase and sale of false dependents at NBT by purchasing the names, dates of birth and Social Security numbers of local individuals for use as false dependents on other clients’ returns.
Authorities added that in November 2010 one of Verbal’s employees informed a U.S. probation officer of the fraudulent practices and the officer informed Verbal of this fraud, who falsely denied knowledge of it. Afterward, Verbal took steps to keep the profitable prep location open and to continue operating as usual but to also distance himself from the fraudulent practices. He transferred e-filing privileges for that branch to a nominee, and he and others persuaded a relative of Verbal to use their name to apply for new e-filing privileges. In exchange, Verbal and his wife paid the relative $10,000; the relative had no role in operating NBT, no professional tax experience and no knowledge of the fraud.
In 2012, the IRS shut down e-filing privileges at all NBT branches due to persistent fraud. Verbal re-applied for the privileges twice for all NBT locations, first in the name of the relative and, when that failed, in the name of another relative who had no knowledge of NBT’s business.
According to court documents, in a series of related cases other NBT employees including branch managers, preparers, client recruiters and one former employer who opened her own phony prep business also pleaded guilty to charges involving federal tax fraud, fraud and ID theft, and received sentences ranging from 15 to 70 months in jail. A former area social worker also admitted to selling identities to NBT preparers for use as false dependents on returns.
According to court documents, Verbal also owned and operated Infinite Wellness Concepts, a Medicaid behavioral health provider in Burlington, Durham and Greensboro, N.C. IWC contracted to provide group therapy, intensive in-home services, and enhanced mental health and substance abuse services. Court documents state that Verbal acquired at least $1 million in fraudulently obtained funds from the Medicaid program.
Authorities said Verbal used proceeds of the schemes to buy luxury cars, homes and jewelry. The money laundering charge to which he pleaded guilty relates to the purchase of a $52,000 diamond ring with the proceeds of health care fraud. As part of that investigation police also seized $765, 917 from bank accounts controlled by Verbal, a 2011 Toyota Camry and four pieces of diamond jewelry, including a seven-carat diamond ring.
Sentencing is August 11, when Verbal faces up to 28 years in federal prison and $850,000 in fines. He agreed to pay restitution to the IRS and Medicaid.
Kirkwood, Mo.: Preparer James T. Mahoney has pleaded guilty to failing to file tax returns. According to court documents, Mahoney, an accountant who prepared returns since 1987, became self-employed in 1997 and originally ran his tax prep business from his residence. Mahoney earned a substantial income for the tax years of 2007, 2008 and 2009 and as a result owed a total tax of more than $180,000.
Mahoney admitted that he purposely failed to file income tax returns and paid none of his taxes for those years. At his sentencing on July 9, he faces a maximum of one year in prison or fines up to $25,000, or both.
Kent, Wash.: Preparer Ryan Lanh Yann, 60, has been arrested following his indictment for a tax fraud scheme in which he falsely claimed refunds while victimizing clients. He is charged with 10 counts of wire fraud, four counts of false, fictitious or fraudulent claims, and two counts of aggravated ID theft.
According to the indictment, Yann operated a tax prep business where between 2009 and 2012 he prepared returns for clients, many of whom were immigrants unfamiliar with the U.S. tax system and lacking strong English skills. Yann provides clients one version of their return while filing a different version with the IRS.
On the filed return, Yann claimed additional false deductions or dependents to inflate the refund. He then kept the additional money, and in some instances allegedly informed a client of a tax liability and then kept any money the client provided. The indictment alleges that YANN collected more than $300,000 with his scheme, with false refund claims ranging from about $500 to more than $2,300.
Aggravated ID theft is punishable by a minimum two-year prison term in addition to any other sentence imposed. Wire fraud is punishable by up to 20 years in prison and making false and fictitious claims by up to five years in prison.
St. Louis: Edward Jones has been indicted on multiple fraud charges involving his alleged scheme to use stolen identities to obtain federal refunds.
According to the indictment, between February 2009 and April 2012 Jones (who is not connected with the company Edward Jones) devised a scheme to defraud the IRS and financial institutions by enticing them to issue electronic refunds and prepaid debit cards in the identities of others. Jones represented himself as a preparer for federal income tax and state property tax credits and obtained the names, birth dates and SSNs of individuals who wanted him to prepare and e-file such returns or credit forms.
To inflate refunds, Jones fraudulently claimed that the filers were self-employed individuals with unsubstantiated business deductions and entitled to the EITC as a result of the misrepresentation that the filers had dependents. Returns prepared by Jones resulted in the fraudulent payment of substantial refunds. Jones also misdirected some of the fraudulently obtained refunds to himself by instructing the IRS to e-deposit the money into prepaid debit card accounts he controlled.
He was indicted on two felony counts of mail fraud, two felony counts of making false claims and two felony counts of aggravated ID theft. If convicted, he faces a maximum of 20 years in prison for each count of mail fraud, five years for each false claims count and two years for aggravated ID theft, all with fines up to $250,000.
Gautier, Miss.: A U.S. district court has permanently barred preparer Tamara Brock from preparing federal returns for others. The complaint alleged that Brock, formerly a Liberty Tax franchisee, prepared federal returns for clients in Moss Point, Miss., and Pensacola, Fla. According to the complaint, she prepared returns that included fictitious education expenses to qualify clients to receive or maximize the AOC.
The judgment requires Brock to turn over a list of those for whom she provided tax prep since Jan. 1, 2011, and to notify those clients of the injunction.