Some of our favorite recent tax fraud cases.
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Kansas City, Mo.: Fourteen defendants across the country have been indicted in attempting to receive $96 million in fraudulent refunds from the IRS, according to a law firm representing one client, who received probation.
The refunds reportedly stemmed from false returns prepared and filed by Gerald Poynter -- a.k.a. “Brother Love” -- of Kansas City, Mo., in the amounts of $352,885 from the U.S. Treasury for 2005 and $229,606.33 for 2006.
The firm said the indictment accused the defendants of promoting the scheme at hotel meetings and living room gatherings by telling prospective clients they could “recoup” any debt taken out in their names.
According to the indictment, the defendants reportedly used such financial documents as mortgage and loan statements, car payments, bank statements, credit card statements and other records of debt and spending to list those debts on returns as investment earnings. Although 89 percent of the claims were rejected, the rest resulted in $3.5 million in refunds.
University Place, Wash.: Preparer Cleo J. Reed, 62, has received 30 months in prison and three years of supervised release including six months of home detention and been ordered to pay $2.4 million in restitution in connection with filing false returns for low-income people.
Reed operated We ‘B’ Tax Service from October 2007 until July 2010, and during that time filed more than 1,300 fraudulent returns resulting in a tax loss of $4.2 million. Authorities said Reed took a cut of the fraudulently inflated refunds he claimed for clients. At sentencing, U.S. District Judge Benjamin Settle ordered Reed to serve as part of his supervised release following his prison term.
According to records in the case, Reed had co-conspirators recruit low-income clients for whom he prepared false returns, inflating the wages so the clients could maximize their refund under the EITC. He paid the recruiters a fee for each person they lured in to the scheme and sometimes submitted the returns without even meeting or speaking to the client.
The large number of returns filed by Reed claiming an EITC triggered the investigation. Undercover agents met with Reed and he described how he would falsify their income to boost their refunds and how he paid young single mothers to find him other single moms to expand the scheme.
He pleaded guilty in March.
La Place, La.: The government has asked a federal court to permanently bar Shawanda Nevers (a.k.a. Shawanda Bryant, a.k.a. Shawanda Hawkins, a.k.a. Shawanda Johnson) from preparing federal income tax returns for others.
According to the complaint, Nevers prepared federal returns through a business named 3LJ’s Industrial Service Solutions LLC. The complaint alleges she prepared returns that unlawfully understated tax liabilities and overstated refunds through a variety of schemes.
Authorities said Nevers prepared returns that claimed losses by fabricating expenses for fictitious businesses or overstating expenses incurred by legitimate enterprises and often included Schedule Cs in her clients’ returns without their knowledge. Returns that Nevers prepared directed the IRS to deposit the refunds into her account, from which she deducted a fee before remitting the balance to her clients.
The complaint states that the IRS examined a sample of returns that Nevers prepared for the tax years 2009 through 2011 and almost all of the returns had Schedule C losses that audits proved were either overstated or falsified.
The complaint alleges that her activities may have resulted in as much as a $6 million tax loss.
Chicago: A federal court has permanently barred Gary J. Stern from promoting tax fraud schemes and from preparing related returns. The injunction order, to which Stern consented without admitting the allegations, permanently bars Stern from preparing various types of returns for individuals, estates and trusts, partnerships or corporations, among others.
According to the complaint, Stern designed at least three fraud schemes that helped hundreds of clients falsely claim over $16 million in improper tax credits and avoid paying income tax on at least $3.4 million. He allegedly promoted the schemes to customers, colleagues and business associates including lawyers, entrepreneurs and professional football players, and some of the latter, including NFL quarterback Kyle Orton, sued Stern in connection with the scheme, alleging fraud, breach of fiduciary duty, and professional malpractice.
According to the complaint, beginning in the early 2000s Stern created a web of partnerships, companies and other entities to serve as a conduit for sham transactions designed to funnel false credits to his customers. He allegedly funneled over $11.4 million of these bogus credits to customers and used a bogus trust arrangement to fraudulently distribute an additional $5.34 million in credits to his customers.
Finally, according to the complaint, Stern promoted an abusive income-shifting technique to help his wealthiest customers illegally avoid taxes. Stern and his business associates allegedly kept most of the money that clients contributed to this scheme.
Columbus, Ohio: Preparer Neville Lyimo, 37, has received 18 months in prison and been ordered to pay $4,471 in restitution on 10 counts of preparing false income tax returns, according to published reports, which added that Lyimo filed returns with bogus information through his company Netask Tax Service from 2003 to 2007.
IRS investigators reportedly said that Lyimo obtained inflated refunds for clients by filling their returns with false deductions, exemptions and credits for education, children and dependent care. Reports said he was indicted on 27 counts of tax fraud in 2011 and that last May a jury found him guilty on 10 of those charges.
In September 2012, he reportedly pleaded guilty to one charge and later withdrew that plea.
Loss to the IRS was reported to be $16,721, but restitution was reduced because some of the taxpayers have paid what they owe.