A roundup of our favorite recent tax fraud cases.
Detroit: A federal court has permanently barred former Liberty Tax Service franchise owner Craig M. Comer and his operating company Comer Inc. from preparing federal returns for others.
In January, the government filed suit against Comer and Comer Inc. and alleged that their five Detroit area Liberty stores prepared federal income tax returns that improperly inflated claims for tax refunds and refundable credits for clients during 2013, 2014 and 2015.
According to the complaint, the defendants also altered completed, client-signed returns to increase fees and then forged clients’ signatures on the returns when re-signing and filing them with the IRS.
As of March, Comer and Comer Inc. claimed to no longer own or operate any Liberty stores. They also agreed to the civil injunction order entered against them.
Greensboro, N.C.: Preparer Marvin Flythe has been sentenced to 18 months in prison for aiding and assisting in the preparation of false returns.
Flythe admitted that he ran the prep business “TAXHOVA” and maintained a YouTube video channel on which he advertised. Between January 2012 and January 2015, Flythe prepared and filed numerous individual income tax returns for clients on which he reported false business losses and false unreimbursed employee business expenses.
He admitted to filing at least 36 false returns for clients, for which $130,949 in fraudulent refunds were paid. Flythe also admitted to filing false personal returns, which underreported his income for tax years 2011, 2012 and 2013, and failing to file his 2014 return.
Flythe pleaded guilty in August to four counts of preparing false individual income tax returns for clients. In addition to the prison term, Flythe was ordered to serve one year of supervised release and to pay $105,128.04 restitution to the IRS.
Orlando, Fla.: A federal court has barred former LBS Tax Services franchisor Walner Gachette from preparing returns and entered a $5 million judgment against him.
According to the complaint, Gachette was responsible for growing LBS Tax Services from a single store in Orlando in 2008 to 239 stores in 2013 located in Alabama, Florida, Georgia, Mississippi, North Carolina, South Carolina, Tennessee and Texas, with a stated goal of 1,000 stores by 2016.
In the last two years, the U.S. filed 11 lawsuits in Orlando, Miami and Tampa, Fla., against Gachette and 14 former LBS franchisees and managers to bar each from owning or operating a prep business and preparing returns for others.
The former LBS Tax Services Florida franchisees and managers sued by the government include Douglas Mesadieu, Demetrius Scott, Ruby Rodriguez and Jehoakim Victor of Orlando; Jean Demesmin of Mt. Dora; Tonya Chambers of Winter Garden; Kerny Pierre-Louis of Windermere; Lauri Rodriguez and Milot Odne of Tampa; Jason Stinson of Longwood; Wilfred Antoine of Lake Worth; Alexander Baraz of Spring Hill; Patrick Clarke of Hallandale Beach; and Christopher Lawrence of Coral Springs.
The government alleged that many of these former LBS franchisees and managers initially operated their prep stores as “LBS Tax Services” but later changed their stores’ names. The United States also sued Kenneth Aikens of the New York borough of Brooklyn, who worked for Lawrence as a preparer and manager before Aikens assumed ownership of several prep stores in the Miami area, according to the government’s complaint.
According to the United States’ complaints, at least 239 prep stores were affiliated with LBS Tax Services in 2013. These stores – 192 of which were owned by the defendants – prepared more than 55,000 federal income tax returns, according to the government’s complaints.
The U.S. alleged that the defendants targeted primarily low-income clients with deceptive and misleading advertisements; one such advertisement frequently used by the defendants’ stores suggested that potential customers will receive a refund of more than $3,000 “per child”.
The government also alleged that they prepared and filed false returns that unlawfully inflated clients’ refunds, and profited by charging excessive prep fees. According to the complaints, the fraudulent schemes included falsely claiming the Earned Income Tax Credit, claiming improper filing statuses, fabricating self-employed businesses and related business income and expenses, fabricating deductions and falsely claiming education credits.
The defendants also charged excessive fees for each additional tax form attached to returns, according to the government’s complaints. Clients were often allegedly unaware of the fees; the stores also allegedly implemented “$999 charge weeks,” during which time the stores would charge as many customers as possible $999 for the preparation of a return.
Bay Shore, N.Y.: Preparer Thelma Rodriguez-Garden, 55, has been sentenced to a year and a day in prison for aiding and assisting in the preparation of a false return for others.
According to court documents, for tax years 2008 through 2011, Rodriguez-Garden, who owned and operated the prep business Garden Insurance Agency Corp., prepared false individual income tax returns that included, among other falsities, grossly inflated or wholly fictitious itemized deductions for unreimbursed employee expenses. Losses to the IRS were at least $107,459.
Rodriguez-Garden pleaded guilty to the charges in March. In addition to the prison term, Rodriguez-Garden was also ordered to serve one year of supervised release and to pay $107,459 restitution to the IRS.
Arlington, Va.: Congressional staffer Issac Lanier Avant has pleaded guilty to willfully failing to file individual income tax returns.
According to court documents, Avant has been a staff member of the House of Representatives since approximately 2000. Despite earning more than $165,000 each year from 2008 through 2013, Avant failed to timely file personal income tax returns for any of those years. He did file returns for tax years 2006 and 2007, but those returns each contained false deductions.
In May 2005, Avant filed with his employer and falsely claimed he was exempt from federal income taxes. He had no federal tax withheld from his paycheck until the IRS mandated that his employer begin withholding in January 2013.
Sentencing is Jan. 17, when Avant faces a maximum of one year in prison, a term of supervised release and monetary penalties. As part of his plea agreement, Avant agreed to pay $153,522 restitution to the IRS.
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