Some of our favorite recent tax fraud cases.
Waco, Texas: Preparers Patricia Foley (a.k.a. Sissy Foley), Amanda Smith, April Leann Morgan (a.k.a. April Leann Ercanbrack), Cassandra Egbert and Joshua Stifle have been permanently barred individually and doing business as Accounting System Services and doing business as A Kind Bookkeeping and Tax Service from preparing returns for others.
The complaint inspiring the stipulated order of permanent injunction, to which the five defendants agreed, alleges that they prepared returns for clients that contained false, improper or inflated business expense deductions on Schedule Fs. These activities led to the clients filing returns that unlawfully understated income and tax liabilities and overstated refunds, according to the suit.
The injunction requires the defendants to turn over to the U.S. a list of all persons for whom they prepared federal returns or claims for a refund for tax years 2009 through 2014. The order granting the injunction further authorizes the federal government to monitor the defendants’ compliance.
Los Angeles: Preparers David and Nadav Kalai have been convicted of one count of conspiracy to defraud the IRS and two counts of willfully failing to file a FBAR.
According to the second superseding indictment and evidence, the pair were principals of United Revenue Service, a tax prep business with 12 offices throughout the U.S. David Kalai worked primarily at URS’s former headquarters in Newport Beach, Calif., and later at URS’s location in Costa Mesa, Calif. Nadav Kalai, David’s son, worked out of URS’s headquarters in Bethesda, Md., as well as the URS locations in Newport Beach and Costa Mesa. David Almog was the branch manager of the New York office of URS and supervised preparers for URS’s East Coast locations.
The second superseding indictment and the evidence established that the co-conspirators prepared false individual income tax returns that did not disclose clients’ foreign financial accounts or report income earned from those accounts. To conceal the clients’ ownership and control of assets and to conceal the clients’ income from the IRS, the co-conspirators incorporated offshore companies in Belize and elsewhere and helped clients open secret bank accounts at the Luxembourg locations of two Israeli banks, designated Bank A and Bank B. Bank A is a large financial institution headquartered in Tel Aviv, Israel, with branches worldwide. Bank B is a midsized financial institution, also headquartered in Tel Aviv, with a presence on four continents.
The co-conspirators incorporated the offshore companies to act as named account holders on the secret accounts at the Israeli banks, then facilitated the transfer of client funds to the secret accounts and prepared and filed returns that falsely reported the money sent offshore as a false investment loss or a false business expense.
The co-conspirators also failed to disclose the existence of, and the clients’ financial interest in and authority over, the secret accounts and caused the clients to fail to file FBARs with the U.S. Treasury.
Evidence established that the Kalais each failed to file FBARs for calendar years 2008 and 2009 concerning a foreign account held at Bank A in Luxembourg. The bank account was held in the name of a nominee corporation in Belize and held over $300,000.
Sentencing is March 16.
Shelton, Conn.: Preparer Bellarmin Namegabe, 46, has pleaded guilty to preparing false returns.
According to court documents and statements in court, Namegabe, while operating a tax prep business, falsely reported expenses, deductions and credits on numerous clients’ returns without his clients’ knowledge or consent. The false returns included fabricated Schedule As and Cs, numbers of dependents, fuel tax credits and other items.
IRS agents interviewed 11 of Namegabe’s clients who stated that he falsified their returns. In addition, an undercover agent dropped off his W-2 at Namegabe’s business, provided his name and such ID information as his Social Security number, and left. The information provided indicated that the undercover agent was only entitled to a refund of $632. Approximately two weeks later, the agent’s return was posted to the IRS database, prepared falsely and generating a refund of $3,235.
Namegabe pleaded guilty to one count of aiding and assisting the filing of a false return, which carries a maximum of three years of imprisonment. He also agreed to pay back taxes, penalties and interest related to the false returns he prepared during the 2007 through 2011 tax years for the 11 individuals interviewed as part of the investigation. The tax loss attributed to those false returns is some $240,196.
Sentencing is February 26.
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