The Justice Department has filed seven lawsuits around the country to stop a massive tax refund fraud scheme based on claims of large tax withholding.
The seven federal lawsuits were filed in Los Angeles; Panama City, Fla.; Salt Lake City; Nashville; and Pocatello, Idaho; against seven individuals.
Papers filed in the cases say the defendants prepared tax returns requesting a total of $562.4 million in bogus refunds. One defendant Dick Jenkins, of Heber City, Utah allegedly holds himself out as a CPA and requested a $210 million fraudulent refund for one customer. Jenkins is charged with claiming a total of $393 million in phony refunds. The Internal Revenue Service caught the vast majority of the bogus tax returns and blocked the claimed refunds.
"The scope of the misconduct alleged in these lawsuits is staggering," said John A. DiCicco, Acting Assistant Attorney General for the Justice Departments Tax Division, in a statement. "The IRS and Justice Department are working together closely to ensure that those who promote or participate in this large-scale attempted raid on the Treasury face all appropriate civil and criminal sanctions. Anyone who participates in this scheme can expect to not get the claimed refund, face very large civil penalties (up to 20 percent of the false claim), and where appropriate, face criminal prosecution with possible substantial prison sentences if convicted."
Under the tax fraud scheme, known as the "redemption" or "OID redemption" scheme, participants file a series of false IRS forms, including tax returns, amended returns, and Forms 1099 (including Form 1099-OID) or Forms W-2, to request fraudulent tax refunds based on phony claims of large income tax withholding. According to papers filed in these cases and earlier cases against other alleged scheme promoters, redemption scheme promoters are tax defiers who falsely tell customers that the federal government maintains "secret" accounts of money for its citizens. Promoters claim to be able to help customers access the secret funds by filing the false IRS forms.
Altogether, according to the IRS, redemption scheme participants (including customers of the defendants in the seven lawsuits filed this week) have requested a total of $3.3 trillion in fraudulent refunds.
