Tax Fraud Blotter: ‘Catfishing’ an IRS employee
Creative parking violations; scams at day care; “additional” cash fees; and other highlights of recent tax cases.
Union City, N.J.: Preparer Shirley Arias, a.k.a. Shirley Zambrano, 43, has pleaded guilty to one count of aiding and assisting others in the preparation of false and fraudulent tax returns.
According to case documents and statements in court, Arias, of Fairlawn, N.J., owned and operated the prep business Santos & Associates and for tax years 2012 through 2014 she assisted in the filing of income tax returns based on false information.
She used a number of fraudulent practices, including falsely claiming deductions and fabricating educational credits to inflate refunds. The bogus returns resulted in a tax loss to the government of approximately $130,279.
The charge to which Arias pleaded guilty carries a maximum of three years in prison and a $250,000 fine. Sentencing is July 25.
Buffalo, N.Y.: Unregistered preparer Shonnell Harris, 48, has pleaded guilty in connection with filing fraudulent tax returns for employees and other acquaintances at her now-shuttered day care center. She also agreed to pay more than $19,000 for the amount of illegal proceeds she received from filing the fraudulent returns. Harris faces up to four years in prison.
Durham, N.C.: Preparer Laurean S. Robinson, 31, has pleaded guilty to filing false returns, specifically fraudulently claiming the Earned Income Tax Credit and inflating refunds.
According to court documents, from 2012 through 2014 Robinson worked as the office manager and a preparer at the prep business Tax Breaks. To qualify clients for the EITC, Robinson falsely reported that they earned income providing such household services as babysitting and caretaking. Robinson also trained other Tax Breaks employees to similarly prepare false returns.
In addition to fees charged by Tax Breaks, Robinson often required clients to pay her an additional fee in cash.
The tax loss was some $600,737. Sentencing is Aug. 15, when Robinson faces up to three years in prison, a period of supervised release, restitution and monetary penalties.
Chicago: A federal judge has barred Irving Brown Sr., a retired Chicago Fire Department captain, from preparing federal returns for others.
After a two-day bench trial, the court found that Brown prepared and filed fraudulent returns for clients, including for Chicago Fire Department firefighters.
The court found that Brown operated a seasonal prep business out of his home called Irving Brown, Sr. Tax Services, and prepared more than 1,600 federal tax from 2011 to 2015 either himself or with the assistance of others.
The court’s ruling noted that the IRS audited 94 returns prepared by Brown Sr. and found that all but two required an adjustment by the service. Based upon these audits, the total tax deficiency exceeded $700,000; the IRS projects a tax loss well in excess of $1 million, according to the court’s findings.
The court determined that Brown engaged in a variety of ways to underreport clients’ tax liabilities, such as fabricating the existence of small businesses with high expenses and inflating itemized deductions to offset earned income. The court also determined that Brown routinely fabricated itemized deductions such as charitable contributions and unreimbursed employee expenses.
For example, on one return Brown reported more than $3,000 in parking expenses as unreimbursed employee expenses, even though the client did not drive to work or park any car at work. The court noted that this client did not even have a car for that particular year.
The court determined that Brown actively attempted to obstruct the IRS investigation, finding that Brown offered to pay $3,000 towards a client’s tax liability if the client agreed not to turn Brown in or sign an affidavit implicating him.
The court also determined that Brown provided customers with false receipts and blank work orders, which appeared to be written in the same handwriting, and instructed those customers to present those documents to the IRS to support the fraudulent items on their returns.
Flint, Mich.: Former IRS employee Gregory Lundene, 53, has been sentenced to six months in prison after pleaded guilty to participating in a Nigerian‑based ID-theft scheme, according to published reports.
Lundene pleaded guilty in October to a charge of conspiracy to commit bank fraud in the scheme that attempted to steal thousands of dollars from taxpayers and other victims, reports added.
Authorities began investigating Lundene after an allegedly fraudulent return was filed online in March 2015 with the IRS, reports said. The return, filed for a taxpayer identified only as “RB” in the complaint, called for a $282,548 refund, which was deposited into a bank account controlled by Lundene, reports said.
Subsequent investigation, news outlets said, revealed a trail of tax information illegally accessed by an IP address in Lagos, Nigeria; illegal wire transfers of thousands of dollars to accounts that Lundene controlled; and claims by the former IRS agent that he was under the sway of a woman named Woods whom he’d met online and whose IP address was also traced to Nigeria.
Lundene’s attorney reportedly originally argued that his client shouldn’t face prison time because he was “a single star‑crossed lover: a man who did stupid things for a woman who not only left his love unrequited, but who also did not exist; a man who has been left destitute by this misguided love, a man who was catfished.”
The term refers to creating a fake online presence for misdeeds.