A selection of our favorite recent fraud cases.
Waterbury, Conn.: Preparer Marcus Fox, 42, has been sentenced to a year of imprisonment followed by one year of supervised release for preparing and filing hundreds of false returns.
According to court documents, Fox prepared returns for individuals in his community, many of whom were associated with a church he attended. From approximately 2009 through 2012, he prepared and filed more than 900 returns with the IRS, a number of which contained false childcare credits, education credits, American Opportunity Credits, itemized deductions, education expenses, charitable contributions, unreimbursed employee business expenses, hobby expenses and childcare costs.
Fox typically received $200 to $350 for his prep services.
Beginning in approximately 2011, Fox also falsified a number of returns that allowed him to secure a greater payout for himself without his clients’ knowledge. He would prepare a client return with significant falsified credits or expense deductions, inflating the refund. The return would be e-filed with the IRS with instructions to split payment of the large refund between the client and Fox, with Fox receiving a substantial portion. He would also prepare a second return, which he never filed, but instead provided to his client to hide the ongoing scheme.
The government suffered a tax loss of more than $2.2 million.
In March, Fox pleaded guilty to two counts of aiding and assisting the filing of a false return.
St. Cloud, Minn.: Preparer and CPA Bernice Aurelia Garbina has been charged with five counts of failing to file income tax returns and five counts of failing to pay income taxes.
She is alleged to have evaded paying approximately $4,000 in Minnesota income tax by failing to file and pay for tax years 2010 through 2014, according to the complaint.
The complaint also states that Garbina admitted that she knew when tax filings were due and did not file hers on time.
Each tax-related felony charge carries a maximum of five years in prison, a $10,000 fine or both.
Franklin, Tenn.: Michael Mancil Brown, 37, has been sentenced to four years in prison for engaging in an extortion and wire fraud scheme involving former presidential candidate Mitt Romney’s tax returns.
According to trial testimony, evidence recovered from a computer seized from Brown’s residence in 2012 implicated him in a scheme to defraud Romney, PricewaterhouseCoopers and others by falsely claiming that he had gained access to the PwC internal computer network and had stolen tax documents for Romney and his wife, Ann, for tax years prior to 2010.
In August 2012, a letter delivered to the PwC offices in Franklin demanded $1 million in Bitcoin to prevent the release of the purportedly stolen Romney returns; the letter invited interested parties who wanted the allegedly stolen Romney tax documents to be released to contribute $1 million to another Bitcoin account.
Brown was also ordered to pay $201,836 restitution to PricewaterhouseCoopers.
Baltimore: Lateisha Kone has agreed to an injunction permanently barring her from preparing federal returns for others or from owning, operating or profiting from a tax prep firm, according to published reports.
Though she agreed to the order’s entry, Kone didn’t admit to the claims against her, reports added.
Authorities reportedly said that Kone and her employees at six Liberty Tax Service franchises filed returns that, among other things, had false business profit or loss information and intentionally omitted W-2 and Social Security income. In all, 1,222 returns reported fictitious household help income, news outlets added.
Kone then reportedly kept each refund as a preparation fee and gave each customer a $50 cash payment as part of a Liberty Tax promotion.
Pasadena, Calif.: A circuit court has reportedly ruled that preparer Neil Thomsen, convicted on dozens of counts of fraud, cannot be forced to pay restitution in another tax fraud case in which he was not ultimately convicted.
News outlets reported that Thomsen was convicted of 32 federal offenses arising from a tax fraud scheme in which he filed false returns using stolen IDs from former clients and co-workers. Before the trial commenced in his first case, reports added, Thomsen was also indicted in a separate case on charges of conspiring with three co-defendants by claiming fraudulent federal income tax refunds. Thomsen reportedly neither pleaded guilty to nor was convicted on any of the charges in this case.
In sentencing Thomsen to 15 years in federal prison in the first case, a federal judge also ordered $515,257 in restitution to the IRS, which included the $197,922 in restitution calculated in the second case against Thomsen and his three co-defendants, according to published reports that added that the second indictment against Thomsen was later dismissed, leading to his appeal that he should not be held responsible for the restitution payment in that case.
Although it was once the case that a defendant could be required to pay restitution only to the victims of the offenses for which he was convicted, this is no longer always true, authorities reportedly said.
Columbia, Mo.: Preparer David Lee Keithley, 63, has pleaded guilty to defrauding clients and failing to pay his personal income taxes, which totaled nearly $300,000.
He was charged with one count of assisting in the filing of a false income tax return and one count of failing to file an income tax return.
Keithley owned and operated Keithley and Associates, offering prep and payroll tax services; clients hired him to prepare returns as well as make tax deposits to the government. After accepting funds from his clients, Keithley failed to make the clients’ deposits to the government and instead used the money for his own personal benefit.
When clients contacted Keithley after receiving letters from the IRS indicating that these returns had not been filed or taxes had not been paid, he told his clients he would contact the IRS to correct it.
The misappropriated funds totaled $120,354.
Keithley also admitted that he willfully failed to file federal income tax returns for tax years 2009 through 2013. The total amount of tax owed by Keithley to the IRS for those years is $148,423. He also owes the State of Missouri $22,264 for state income taxes due for the years 2009 to 2013.
Keithley faces up to four years in federal prison without parole.
Newark, N.J.: Preparer Mach Worotikan has been indicted on 16 counts of making false claims to the IRS.
According to the indictment, from June 2010 through November 2011 Worotikan devised a scheme to prepare and file fraudulent returns by approaching taxpayers and proposing preparing their returns for a nominal fee or no fee. He took the W-2s and used the information to prepare returns. Worotikan then added claims for false dependents, false child and dependent care expenses, false student loan interest and false unreimbursed employee expenses.
Worotikan addressed each taxpayer’s return to one of four post office boxes that he controlled and forged each of the taxpayer’s signatures on the returns and failed to sign the returns as the paid preparer, making it appear the returns were prepared by the individual taxpayers.
The Treasury Department issued refund checks in the names of the taxpayers and mailed them to the mail boxes. Worotikan then endorsed the refund checks and cashed them at a check-cashing facility. He then gave the taxpayers a nominal amount of the refund and kept the rest for himself. The tax loss to the government totaled some $97,265.
Each count of the indictment carries a maximum prison sentence of five years and a maximum fine equal to the greatest of $250,000, twice the gross amount of any gain derived from the offense or twice the gross amount of any loss by any victims.
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