A roundup of our favorite recent tax fraud cases.
Spokane, Wash.: CPA Roger Stadtmueller has been sentenced to 15 months in prison for making and subscribing false corporate income tax returns.
According to court documents filed with the court, Stadtmueller owned and operated Stadtmueller & Associates, a firm that offered accounting and consulting services, including income tax preparation, bookkeeping and financial auditing. He also owned Zazz Inc., the corporate entity under which Stadtmueller & Associates conducted business.
Stadtmueller willfully subscribed phony corporate returns for Zazz for 2006, 2007 and 2008 that understated gross receipts by some $1.8 million.
Stadtmueller pleaded guilty on July 26. He was also ordered to serve a year of supervised release and to pay $400,000 restitution to the IRS.
Detroit: The Justice Department is seeking to shut down Tax R Us, a prep business that it claims unlawfully understates clients’ income tax liabilities and overstates refunds with deliberate misstatements on the returns.
The suit asks the court to permanently bar Tax R Us, Vannak Long, Rosalind Warnock, Jasmine Jackson and Mary Jackson from preparing returns for others. The suit also asks the court to order each of them to turn over a list of all the returns they have prepared.
According to the complaint, Long, the owner of Tax R Us, frequently understated his clients’ gross receipts and overstated business deductions to minimize their income subject to tax. The complaint also alleges that Warnock, a past Tax R Us preparer, and current Tax R Us preparers Jasmine Jackson and Mary Jackson prepared returns that fabricate self-employed businesses and business losses to offset clients’ taxable income from other sources and to increase their clients’ EITC.
In addition to this improper conduct, Warnock, Jasmine Jackson and Mary Jackson claimed education credits that clients were ineligible to receive, according to the complaint.
Warnock, Jasmine Jackson and Mary Jackson pleaded guilty to charges of preparing false returns. Jasmine Jackson was sentenced in August; Mary Jackson and Warnock await sentencing.
According to the complaint, Long, Warnock, Jasmine Jackson and Mary Jackson’s fraudulent prep cost the federal government more than $3 million.
De Kalb, Miss.: Preparer Christopher Chamberlin has been permanently barred from preparing federal returns for others.
In April, the government filed suit against Chamberlin and alleged that he prepared federal income tax returns that claimed fabricated business losses for clients who didn’t have a business and fictitious losses from farming businesses for clients who didn’t own farms. The government also alleged that he reported the fictitious losses and expenses to generate or inflate the Earned Income Tax Credit or to create a larger refund than his clients otherwise would have been able to claim.
The court ordered Chamberlin to deliver a copy of the injunction to all clients for whom he prepared a return after Jan. 1, 2014, and to deliver a list of those clients to the federal government. The court also ordered him to turn over copies of all returns he prepared since Jan. 1, 2014.
St. Louis: Semere Tsehaye, 39, owner of local Instant Tax Service businesses, has been found guilty of two counts of tax evasion.
According to trial evidence, Tsehaye operated at least 20 ITS franchise locations in and around East St. Louis, Illinois, Kansas City, Kansas, and Kansas City and St. Louis, from 2005 to 2011. He owned and operated his locations using two entities named A&S Tax Service and ERI Enterprises.
Evidence showed that during 2010 and 2011 Tsehaye generated fraudulent financial summaries that understated the gross receipts generated by A&S and ERI and provided them to his own preparer. Evidence also showed Tsehaye’s preparer used these financial summaries to prepare Tsehaye’s individual income tax returns, which Tsehaye then filed with the IRS.
These returns underreported A&S and ERI’s gross receipts some $547,000 in 2010 and $1.03 million in 2011, causing a tax loss of more than $580,000.
In 2013, a federal court permanently enjoined Tsehaye and A&S from operating a prep business or preparing federal tax returns.
Sentencing is Jan. 4, when Tsehaye faces a maximum of five years in prison for each count of tax evasion, as well as a period of supervised release and monetary penalties.
Destrehan, La.: Accountant Christopher White, 50, has received 48 months in prison for his involvement in a cover-up of a $50 million Medicare fraud.
According to case records, White was an accountant for multiple companies in a home health-care fraud carried out in and around New Orleans over more than 10 years. Among other roles, White coordinated payment of illegal kickbacks to patient recruiters who canvassed the streets of New Orleans to collect Medicare numbers from elderly and disabled Medicare recipients.
When a grand jury subpoena was issued to certain companies, he and others fabricated and backdated tax and employment records to conceal the kickbacks to these recruiters.
According to the plea agreement, from 2007 through 2014, the companies involved in the scheme submitted more than $56 million in claims to Medicare, most of which were fraudulent; Medicare paid approximately $50.7 million on these claims.
White was also ordered to pay $2,272,241.96 restitution.
Smithfield, N.C.: Oscar Barahona Fiallos has received 20 months in prison for conspiring to defraud the government and steal public money.
According to court and case documents, Fiallos owned and operated a prep business under the names El Caracol Inc. and Oscar’s Income Tax Service. In 2011 and 2012, he cashed large numbers of U.S. Treasury checks issued as a result of fraudulent returns filed with the IRS in the names of third parties. The checks were provided to Fiallos by co-conspirators and Fiallos never met the third-party payees, who purportedly lived in New York, New Jersey and North Carolina.
Fiallos deposited the checks into his bank account and then provided co-conspirators with cash equal to the value of the check, minus a fee. After a bank account was closed, Fiallos obtained a check-cashing license to continue cashing checks for his co-conspirators. He also prepared ITIN applications and false returns for third parties he never met and who didn’t sign the documents.
Fiallos agreed that the intended loss to the IRS was more than $2.8 million. He pleaded guilty in February to one count of conspiring to defraud the U.S. and commit theft of public money.
In addition to his prison sentence, Fiallos was ordered to serve three years of supervised release and pay $2.8 million restitution to the IRS.
Dothan, Ala.: Former preparer Patricia Daniel has pleaded guilty to filing a false federal return and agreed to pay $42,743 restitution.
Cited federal court records show that Daniel, who worked as a preparer in local cities of Dothan and Abbeville, pleaded guilty to a single felony count of preparing and filing a false return.
As part of the guilty plea, Daniel agreed that the intended loss amount in the case actually came to between $42,743 and $95,000, according to reports that added that she also agreed not to work or be employed as a preparer.
Records show that Daniel pleaded guilty to the false preparation and filing of an income tax return to the IRS in April 2011, news outlets said. The return filed represented that the taxpayer was entitled to claim deductions based on a falsely claimed item in the return and falsely claimed the amount of $13,100, and the defendant knew the taxpayer was not entitled to claim the deduction, reports said.
Cited records also show the federal government originally filed a 21-count felony indictment against Daniel involving the filing of multiple false returns.
She reportedly faces a prison sentence of not more than three years and a fine of not more than $100,000.
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