Three-alarm fraud; trust no one; first, best and guilty; and other highlights of recent tax cases.
Syracuse, New York: Phoenix Phan has been sentenced to 18 months in prison and a year of supervised release for filing a false return for herself and aiding and abetting the filing of a false return for a client.
Phan admitted that she failed to report gross receipts on her personal income tax returns for tax years 2013 to 2017. She also admitted that she helped hundreds of clients file false federal income tax returns during the same period, including by falsely reporting business income that the taxpayer did not earn, phony rental losses or false filing statuses.
Phan also was ordered to pay $890,690.67 in restitution to the IRS.
Miami: A federal court has permanently enjoined two area tax preparers and their businesses from preparing federal tax returns or operating any tax prep business in the future.
The court also ordered that they disgorge more than $60,000 in proceeds, and issued a narrower injunction against a third preparer and his business.
The complaint alleged that Tammi King owned and operated two tax prep businesses, Kingsworld Financial Services Corp. and Brightstar Management Corp., and employed Norman Williams Jr. to prepare returns. The complaint also alleged that John Gay Jr. owned a tax prep business called The Tax Doctor, which King was affiliated with at one time.
According to the complaint, King, Williams and Gay all prepared returns for clients that included fraudulent self-employment expenses, false energy credits and fake charitable contributions. For example, the complaint alleged that Williams, a Miami-area firefighter, fabricated more than $1.3 million in fraudulent cash charitable contributions for 96 of his fellow firefighters for the 2019 tax year.
King, Williams and King’s businesses consented to permanent injunctions; they must permanently cease all operations. Disgorgement of some $60,000 ordered by the court is based on fees associated with returns filed by King and Williams, including 238 returns Williams prepared for fellow firefighters between tax years 2018 and 2020.
The court also issued a narrower injunction against Gay and The Tax Doctor, to which Gay consented. The injunction does not shut down Tax Doctor but does require that Gay and this business employ heightened document substantiation and recordkeeping before preparing and filing returns claiming certain credits and deductions, including the Child Tax Credit, head of household status, dependent care deductions and certain tuition-related credits.
Howell Township, New Jersey: Steven Bryce, who ran an illegal gambling business, has pleaded guilty to filing a false tax return.
In 2014 he filed a 1040 for 2013 on behalf of himself and his spouse that falsely stated that they had total income of $112,899. That year Brice had received significantly more income than that.
He agreed to pay full restitution of $338,885 to the IRS for tax losses resulting from false returns he filed for 2011 to 2016.
Subscribing to a false return carries a maximum of three years in prison and a maximum $250,000 fine. Sentencing is July 11.
Ocala, Florida: David O. Isagba has pleaded guilty to one count of mail fraud and one count of conspiring to defraud the U.S. with respect to tax claims.
Between 2009 and 2019, he submitted 227 fraudulent claims to the IRS claiming to be entitled to more than $2.9 billion in refunds on behalf of nonexistent trusts. Isagba received $5,815,723.65 from the IRS and used the money to buy a home and luxury vehicles.
He faces a maximum of 30 years in prison. His wife’s trial in the case begins in May.
Davenport, Florida: Guillermo Inamagua and Mayra Velasquez, who is from Apopka, Florida, have pleaded guilty to one count of conspiracy to commit wire fraud and one count of conspiracy to defraud the U.S.
Inamagua and Velasquez each owned and managed a construction company: Inamagua’s was First Construction; Velasquez’s was Best Construction. These companies purported to supply services and a labor force to work for construction contractors. Each company was required to secure and maintain adequate workers compensation coverage per state law. The providers of workers comp based the premiums and the amount of coverage on the number of employees a company had and the total annual payroll.
Inamagua’s and Velasquez’s companies each had agreements with contractors and subcontractors to use workers purported to be their company’s employees at construction sites. These workers were often undocumented aliens who were actually working for and under the daily supervision and direction of the contractors. Inamagua and Velasquez or others would regularly receive “payroll checks” from these contractors that were cashed at various financial institutions to pay the purported employees.
Inamagua and Velasquez each fraudulently represented in insurance applications that their company had limited payroll and a limited number of employees who worked on construction jobsites. They also caused the transmission of false wire communications to numerous contractors representing that their employees had full workers comp coverage.
Inamagua’s company received and cashed more than $18 million in checks from various construction contractors for his purported employees; Velasquez’s received and cashed more than $7 million. The employees worked on job sites without adequate insurance, and the insurers lost premiums they would have charged had they been aware of the true number of workers. Best and First also disclaimed responsibility for ensuring that jobsite workers were legally authorized to work in the U.S. and that required state and federal payroll taxes were being paid for these workers.
Inamagua caused a loss to the IRS of some $4,673,571 in unpaid payroll taxes. Velasquez caused a loss to the IRS of some $1,769,000. Each faces up to 10 years in prison.
Honolulu: Bookkeeper Paul Henri Marie Harleman has pleaded guilty to six counts of wire fraud and eight counts of money laundering.
While Harleman was working as a contract bookkeeper, he devised two schemes to steal from three of his clients. From July 2018 to May 2020, Harleman formed an LLC with a name nearly identical to the name of a significant vendor to one of his clients and then charged the client’s credit card for more than $146,000 in fraudulent invoices.
In the second scheme, from September 2019 to his arrest, Harleman transferred more than $1,064,000 in a series of payments disguised as payroll from two of his clients to his LLC. Harleman also moved stolen money from his three clients from his personal checking account to a personal investment account.
He faces up to 20 years in prison on each wire fraud count and up to 10 years for each money laundering count, as well as a fine of up to $250,000 on each count, plus a term of supervised release of up to three years. The court must also order restitution to the victims and forfeiture of the fraud proceeds and the property involved in the money laundering. Sentencing is Aug. 2.
Overland Park, Kansas: Home health care exec Lance Ashley has pleaded guilty to employment tax crimes.
Starting around 2010, Ashley was the sole owner and operator of Ashley Home Care Services, which provided daily living services to individuals. Ashley was responsible for all financial matters relating to the company, including handling the payroll and collecting and paying over federal employment taxes.
From 2013 through 2016, Ashley Home Care did not pay to the IRS all the employee withholdings that it collected. Rather, Ashley used some of the funds to pay corporate and personal expenses.
After the IRS began collecting AHCS’s unpaid taxes in 2016, he provided fraudulent bank records to the IRS and did not fully disclose his bank accounts.
He caused a federal tax loss of some $321,476.
Sentencing is June 6, when Ashley faces a maximum of five years in prison. He also faces a period of supervised release, restitution and monetary penalties.
