A roundup of our favorite recent tax fraud cases.
Peabody, Mass.: Preparer Barry Ginsberg, 63, has been sentenced to 21 months in prison and six months of home confinement and been ordered to pay restitution after pleading guilty to multiple counts of mail and wire fraud, preparing false returns and obstructing the IRS.
Ginsberg owned and operated a payroll tax business that had a number of so-called “escrow” clients. Authorities said he not only prepared payroll returns but these clients also regularly sent him money for paying payroll taxes to the IRS. Ginsberg took the money and used it for other business or personal reasons.
To cover up his scheme, Ginsberg falsified his clients’ returns, indicating that the payroll taxes had been paid in full. When asked by clients about their mysterious IRS debts, Ginsberg gave them “a litany of false excuses, including blaming the IRS and his own staff.”
Gretna, La.: Preparer Joyce M. Gaines of Harvey, La., owner of the tax prep business Tax Town, is the 50th person arrested under a statewide initiative to crack down on tax fraud in Louisiana.
She is accused of filing state income tax returns containing fabricated business losses for hundreds of clients, many of whom were not business owners. The scheme resulted in more than $250,000 in fraudulent state income tax refunds.
Gaines has been booked on charges of filing or maintaining false public records and illegal transmission of monetary funds. Two of her employees were arrested on the same charges earlier in September.
Miami: CPA Pamella B. Watson, 60, of Davie, Fla., has pleaded guilty to facilitating an income tax refund fraud.
According to court documents, Watson operated Watson & Associates Business Services Inc., where she prepared clients’ returns and provided copies showing refund amounts and/or amounts payable to the IRS. Without the clients’ knowledge or authorization, the figures on the returns were changed and returns showing a higher refund amount were filed with the IRS. The clients’ bank accounts received the refund amount reflected on the copies from Watson and the remainder of the refunds were deposited into an account that she controlled.
Court documents state that Watson prepared approximately 557 forms 1040 for tax years 2010 through 2013 and some 71 percent had refunds split or put completely into accounts she controlled. From approximately January 2011 through September 2014, Watson deposited $3,405,479.20 of client refunds from 183 individual taxpayers. According to court documents, Watson also diverted checks totaling $222,676 into her personal IRS account, and an additional $56,766 in IRS payments from Watson’s clients was applied to an associate’s tax account. These checks were generated by clients who were informed by Watson that they were paying their own tax liability.
Watson is scheduled to be sentenced on December 4, when she faces a maximum of 20 years in prison.
New York: Gary Mole, 51, an Australian citizen and the former CEO of Glacial Energy Holdings, has been arrested on six felony charges stemming from the underreporting of over $18.5 million dollars in taxable income by Glacial Energy of New York, a wholly owned subsidiary of GEH.
According to the felony complaint, Mole was the CEO and sole shareholder of GEH, an energy service company incorporated in Nevada. In approximately 2006, Mole allegedly began personally investing taxable revenue of GENY in a mining operation known as Gemico, in the Democratic Republic of Congo. In 2006 and 2008, Mole allegedly diverted more than $18.5 million in taxable revenue from GENY to Gemico. Mole allegedly instructed subordinates to wire money to bank accounts in the Democratic Republic of Congo, Switzerland, Lichtenstein, South Africa, and China, among others, all for the benefit of Gemico.
The complaint further charges that Mole and GENY then improperly deducted the monies invested in Gemico as consulting expenses on GENY’s returns for years 2006, 2007 and 2008, understating GENY’s New York State taxable income by millions of dollars.
To conceal and justify the false accounting of the payments to Gemico as consulting expenses, in 2007 Mole and a former employee at GEH allegedly created and backdated a consulting agreement between Gemico and Glacial and fake invoices from Gemico to Glacial.
Mole and GENY are charged with evading more than $740,000 in New York State income taxes.
