A California man appeared in a federal court Monday morning to answer charges that he promoted a fraudulent tax return filing scheme that also involved fraudulent vehicle registration titles.
Arturo Villarreal-Alba, 44, of Whittier, Calif., was named in a 34-count superseding indictment returned by a federal grand jury last week. Villarreal had earlier been indicted last September as part of a larger scheme charging 55 individuals in a huge fraud scheme involving hundreds of false income tax returns that sought more that $250 million in tax refunds. Villarreal was originally indicted for aiding and assisting the filing of two false individual income tax returns for others claiming fraudulent tax refunds in the amounts of $1,568,044 and $452,472.
Villarreal worked with Old Quest Foundation, Inc. in Fontana, and De La Fuente Ramirez and Associates in Rancho Cucamonga, two companies charged in the scheme used to file fraudulent federal income tax returns containing bogus claims for refunds.
Old Quest and DLFRA allegedly filed thousands of Forms 1099 that falsely reported to the IRS that more than $1 billion in fictitious federal income tax had been withheld, or secured property had been acquired or abandoned, when no such amount of federal income tax had been withheld and no such amount of secured property had been acquired or abandoned.
Old Quest allegedly filed more than 400 false federal income tax returns with the IRS, which together fraudulently claimed more than $250 million in false income tax refunds, while DLFRA filed more than 35 false federal income tax returns with the IRS, allegedly claiming more than $19 million in fraudulent income tax refunds.
As a result of the alleged false federal income tax returns that Old Quest and DLFRA filed with the IRS, the IRS erroneously issued millions of dollars in tax refunds to Old Quest and DLFRA customers, including one refund for $816,594 who was defendant Villarreal’s customer.
The first superseding indictment alleges that Villarreal would refer customers to Old Quest and DLFRA to have their false Form 1099-OID based federal income tax returns prepared and filed with the IRS, which would routinely claim six-figure tax refunds to which the customers were not entitled.
Original Issue Discount (OID) reported on IRS Forms 1099-OID is a form of interest income typically realized on debt instruments that were issued at a discount to, or purchased for less than, the ultimate redemption value of the debt instrument, such as Treasury bills (but not U.S. savings bonds), zero-coupon bonds, and other debt instruments that pay no stated interest until maturity. The defendants in Operation Stolen Treasures allegedly utilized 1099-OID forms in a fraudulent manner.
Prosecutors also claim that at the same time Villarreal was engaged in committing tax fraud, he was also engaging in other frauds and committing identity theft against other victims. Villarreal allegedly contacted customers of his fraudulent OID tax scheme and urged them to participate in a fraudulent vehicle title-washing scheme.
According to prosecutors, Villarreal would tell customers with good credit that there was a special program for them where they could use their good credit to purchase several new vehicles. After the purchase of the vehicles, Villarreal’s nonprofit organization would make all the payments due on those vehicle loans, and the customer would end up owning one of the vehicles, while the remaining vehicles would go to the nonprofit organization. In reality, there was no such organization.
Villarreal allegedly would strip or “title wash” the liens from the vehicle titles. To do so, Villarreal would cause false documents to be prepared and filed with the California Department of Motor Vehicles to fraudulently remove the legal owners from the titles of the vehicles. In addition, Villarreal would cause false documents to be prepared and filed with the DMV to remove the registered owner from the titles of the vehicles. Vehicles used in the scheme included a 2008 Cadillac Escalade, a 2010 Toyota 4Runner, and a 2010 Honda Pilot.
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