Tax Fraud Blotter: Bulls of exchange

Phony debts; dead wrongs; all ‘zeros’; and other highlights of recent tax cases.

Joliet, Ill.: Preparer Leticia Rodriguez, 42, has been convicted of committing identity theft through returns, according to published reports, and was also recently barred from preparing returns or owning a tax prep business.

She reportedly pleaded guilty to two counts of ID theft in two separate cases in 2016. In September, the U.S. Department of Justice reportedly filed a complaint against Rodriguez that accused her of defrauding customers and the federal government through her business, Rodriguez Tax Services.

Rodriguez had been serving a 36-month probation since her ID-theft conviction, news outlets said, adding that authorities estimated Rodriguez prepared about 4,000 federal returns since 2014 and that the known tax loss to the U.S. allegedly caused by her is at least $77,000, possibly much higher.

Port Murray, N.J.: Preparer Brian Allen Day, 56, has been sentenced to 32 months in prison for preparing fraudulent returns and bank fraud after he admitted creating fictitious debts for his clients and collecting payments on them for himself, news reports said.

Between 2013 and 2015, Day reportedly inflated expenses and deductions on his clients’ tax forms by more than $383,000 to get them bigger refunds. He also falsely advised some clients that they owed the IRS money that they didn’t; when they wrote checks to pay off those debts they sent the checks to his business, reports said, adding that he made $61,000 from this scam.

Day must reportedly pay nearly $500,000 in restitution.

Las Vegas: Three Nevada residents have pleaded guilty to conspiring to steal more than $2 million in federal refunds.

Chanh Trinh, Cannedy Trinh, and Elizabeth Trinh each pleaded guilty to one count of conspiring to defraud the United States by fraudulently obtaining the payment of income tax refunds. Chanh Trinh also pleaded guilty to one count of aggravated ID theft involving the use of his deceased brother’s identity.

According to documents filed with the court, the three conspired to file federal corporate and individual income tax returns reporting false income tax withholdings and payments. The Trinhs filed the fraudulent returns in the names of fictitious business entities, their own names and the names of other individuals, including a long-deceased family member. Chanh Trinh prepared and filed the returns.

All three deposited or cashed the refund checks using bank accounts and check-cashing businesses, and regularly concealed the funds by purchasing cashier’s checks that they used to obtain gambling chips at casinos.

The conspiracy resulted in false claims of more than $6 million, and more than $2 million in fraudulent refunds paid out by the IRS.

Sentencing is April 10. Chanh Trinh will be sentenced to 102 months in prison under his plea agreement, if accepted; Cannedy Trinh will be sentenced to two years in prison under his plea agreement, if accepted by the court. Elizabeth Trinh faces a maximum of 10 years in prison under her plea agreement. Each also faces a period of supervised release, restitution and monetary penalties.

New York: Resident Elias Amador has been sentenced to 46 months in prison for conspiring to defraud the U.S. in a large refund scheme using the stolen IDs of Puerto Rican citizens.

Tax fraud sometimes uses Puerto Rican Social Security numbers because individuals living in Puerto Rico are generally not required to file income tax returns; these individuals are not alerted if someone uses their personal information to file fraudulent returns.

From approximately 2010 to 2012, Amador and others conspired to cash more than $750,000 in refund checks generated by fraudulent returns. Amador obtained the refund checks, which were issued to addresses in New York and New Jersey, and cashed them using a runner and two check cashers in North Carolina. Amador, whose three co-conspirators previously were convicted and sentenced to prison, was also ordered to serve three years of supervised release and to pay $762,217 in restitution to the IRS.

Hands-in-jail-Blotter
hand in jail

San Francisco: Former fund manager G. Steven Burrill, 74, of Eagle River, Wis., was sentenced to 30 months in prison after pleading guilty to investment adviser fraud and filing a false 2010 individual income tax return that failed to report millions of dollars.

Burrill was the owner and CEO of Burrill Capital and a number of related entities. Through these entities, he managed investment funds, including Burrill Life Sciences Capital Fund III LP (the Fund), an investment fund of approximately $283 million and focused on the life sciences industry.

Burrill caused the fund to transfer millions of dollars in advance management fees to companies he controlled, then filed a false federal income tax return.

Marc Berger, Burrill’s accountant, was previously convicted of assisting Burrill with filing a false income tax return.

Birmingham, Ala.: Business exec Richard Lee Graham, 55, of Gardendale, Ala., was sentenced to four years in prison for passing a fictitious financial instrument and obstructing the administration of internal revenue laws.

Evidence established that, for the tax years 2006 to 2009, Graham owed, as of 2014, some $3.6 million in taxes, penalties and interest when the IRS began seizing his properties. In July 2014, Graham went to the Montgomery IRS office with a fictitious “International Bill of Exchange” for $3.6 million, along with false supporting documents, in an attempt to pay his taxes. A short time later, Graham showed up at the Birmingham IRS office with another fake instrument of the same type and amount and attempted to use it to settle his tax debt. He also had false documents mailed to an IRS employee in an attempt to prove the legitimacy of the phony check-like instrument.

This was Graham’s second conviction for a tax offense: In 2006, he pled guilty to willfully failing to file a return.

Graham was also ordered to serve five years of supervised release and to pay a $10,000 fine.

Columbus, Ohio: Attorney Marcus “Marc” Dunn has pleaded guilty to corruptly endeavoring to impede and obstruct the due administration of the IRS.

According to court documents and information, Dunn has been a licensed attorney in Ohio since the late 1990s. Starting in 2007, he advised and assisted the late Dr. Kevin Lake in various legal matters, primarily related to Dr. Lake’s operation of Columbus Southern Medical Clinic in Columbus. Dunn’s specialty during this time was tax law.

In 2009 and 2010, the IRS audited a number of corporate entities controlled by Dr. Lake. When the agent conducting the audits requested documents supporting certain tax positions taken by Dr. Lake regarding the clinic’s equipment, Dunn provided “bills of sale” appearing to support the false depreciation deductions that Dr. Lake’s entities had claimed. The IRS determined that these bills of sale were false in that they inflated the value of the clinic’s equipment. At the same time Dunn supplied these documents to the IRS, he had provided contrary information regarding the true value of the clinic equipment to third parties.

In 2011, Dunn filed petitions in U.S. Tax Court in an effort to challenge the IRS determination that some of the audited entities owed additional taxes. In 2014, the case was settled with an agreed amount of $608,583.20 due. In September 2014, Dunn was contacted by an IRS officer trying to collect the settlement amount from the Lake entities.

Dunn knowingly provided false and purposely misleading information to the officer about two of the three Lake entities by telling her that the entities at issue were closed; he had no idea who the officers of the entities were; the entities had no assets; an IRS 433-B would be all “zeros;” and he did not know where the entities banked.

At least partially due to Dunn’s statements, the revenue officer closed the collection cases because she believed the entities were defunct with no assets.

The parties agree that Dunn is responsible for a tax loss of $507,198. The loss has since been paid to the IRS using funds seized from Dr. Lake, who pleaded guilty in January 2017 to drug, tax and fraud charges; Dr. Lake died before sentencing.

Dunn faces a maximum of three years in prison, a period of supervised release and monetary penalties.

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