Tax Fraud Blotter: Check it out
Various EFINs; Mr. Plow; toothsome; and other highlights of recent tax cases.
Phoenix: Preparer Maurice L. Smith has pleaded guilty to aiding and assisting in the preparation and presentation of false and fraudulent income tax returns.
According to case papers, Smith worked as a preparer since at least 2009, operating his business from his residence. Despite preparing returns for individuals, he didn’t sign his name to the returns but instead used various EFINs that were assigned to a tax prep firm. Smith obtained and used the EFINs without the firm’s permission.
For tax year 2015, Smith prepared the income tax return for client D.G., who paid Smith $300. Smith filed the return without first sending it to D.G. for her review; when D.G. finally reviewed the return — after the IRS had already accepted it — she noticed that Smith hadn’t signed the form as the paid preparer but rather made it appear as if D.G. had self-prepared the return. The return also stated that D.G. owned a business that provided cleaning services when she didn’t own a cleaning service business and never told Smith that she owned any business. Smith had used the fraudulent business expenses to reduce D.G.’s federal taxes.
Based on Smith’s false return, D.G. was set to receive a refund of $1,477. She subsequently submitted an amended return that showed she owed the IRS $248.
Smith prepared dozens of additional returns for individuals that also contained false business expenses. These false returns resulted in an additional loss to the IRS of $100,000 to $250,000.
Kansas City, Mo.: Sharieff A. Sylvester, 27, of Moreno Valley, Calif., has been sentenced to three years in prison without parole for his role in a scheme to steal refund checks from the mail and cash them at banks by using fake driver’s licenses. The court also ordered Sylvester to pay $20,416 in restitution.
On Jan. 4, he pleaded guilty to bank fraud and aggravated ID theft. In April of 2016, Sylvester and others traveled through Colorado and Kansas into Missouri in a scheme to defraud a bank using refund checks stolen from the mail and fake driver’s licenses. The conspiracy defrauded the bank and the U.S. Treasury of $447,517. Sylvester cashed six stolen refund checks totaling $20,416.
Two co-defendants have pleaded guilty and await sentencing.
Buffalo, N.Y.: Residents Emmanuel Collins, a.k.a. Scooter, 40, Quintella Wilson, 36, and Jocelyn Carson, 28, who were convicted of conspiracy to defraud the government with respect to claims (Collins and Carson) and aiding and abetting fraudulent returns, statements or other documents (Wilson) have been sentenced.
Collins was sentenced to 30 months in prison and ordered to pay $110,475 in restitution. Carson was sentenced to five years of probation and ordered to pay restitution totaling $19,640. Wilson was sentenced to a year probation and ordered to pay restitution totaling $6,300.
According to prosecutors, between 2012 and 2015, Collins organized various individuals in Buffalo to file fraudulent federal returns claiming false income and tax withholdings on false W-2s. For the tax years 2013 and 2014, Carson provided Collins with her name, date of birth and Social Security number. Collins then gave Carson a fraudulent W-2 to file with the IRS. In addition, Carson introduced another individual to Collins for the purpose of obtaining a fraudulent W-2 to be filed with the IRS. Wilson assisted Collins in part by driving the filers to preparers to file the fraudulent forms.
Investigators identified 16 fraudulent filings in the conspiracy that claimed $124,787 in false refunds. Collins generally took a cut of each tax refund.
Palm City, Fla.: Landlord Anthony Valentino, 76, has pleaded guilty to one count of tax evasion.
According to court documents and statements in court, Valentino is a real estate investor who owns property in Connecticut and New York, including a 100-unit apartment complex in Naugatuck, Conn. From 2011 to 2013, Valentino deposited more than $1.1 million of rental real estate receipts, paid in cash or checks, into his personal bank accounts in Connecticut and New York and failed to report the receipts on his personal and partnership federal returns. For the 2011 through 2013 tax years, Valentino only reported $42,815 in taxable income on his returns and failed to report $1,008,125 in taxable income. He evaded payment of $302,449 in income taxes.
Investigation also revealed that in 2013 Valentino made or caused to be made 27 cash deposits totaling $247,100 into his savings account in Connecticut. Many of the deposits, which ranged in amounts from $7,000 to $9,900, were made on the same day at different times or on consecutive days.
Sentencing is June 17, when Valentino faces a maximum of five years in prison. Valentino has paid restitution to the U.S. Treasury of $302,339 but still owes substantial interest and penalties. He also has agreed to forfeit $100,000 related to his structuring of cash deposits.
Guilford, Conn.: Landscaper Louis Pocograno, 58, has pleaded guilty to one count of tax evasion.
According to court documents and statements in court, Pocograno owns Poco & Son Lawn Care, a landscaping and snowplowing business. Between approximately 2013 and 2016, he cashed checks from clients that were made payable to him rather than his business and failed to report this income to the IRS. He also used some of the cash to pay undocumented workers he employed and failed to collect and pay over the employment taxes for these employees.
Sentencing is June 14. Pocograno faces a maximum of five years in prison. He has agreed to pay the IRS restitution of $33,383, which represents income tax that is due for the 2013 through 2016 tax years and an additional $250,364.59, which represents the employment tax due for those years, plus interest and penalties.
Hattiesburg, Miss.: Pharmacy owner Glenn Doyle Beach Jr., 46, has pleaded guilty today for his role in a $200 million compounding pharmacy scheme to defraud health care benefit programs, including TRICARE, which covers U.S. military service members and their families.
He pleaded guilty to one count of conspiracy to commit health care fraud and one count of conspiracy to commit money laundering and tax evasion. Beach was an owner and the managing member of Advantage Pharmacy of Hattiesburg and admitted his role in a scheme to defraud health care benefit programs, including TRICARE, by marketing medications known as compounded medications that are ordinarily combined or formulated to meet the individual needs of patients. Beach admitted that through Advantage he formulated compounded medications without regard to the individual needs of the patients but instead to increase reimbursements paid by health care benefit programs.
Beach further detailed a money laundering and tax evasion scheme that he and other co-conspirators used to conceal the fraudulent proceeds and evade taxes. From approximately April 2012 through January 2016, health care benefit programs, including TRICARE, reimbursed Advantage and other pharmacies involved in the scheme at least $200 million, Beach admitted. The government seized more than $6 million in cash and other assets from Beach, which will be forfeited in connection with his guilty plea.
Sentencing is July 2. Since 2017, 11 others involved in this scheme have pleaded guilty and one was convicted at trial.
Keasbey, N.J.: Preparer David Patterson, 37, has admitted filing a false return for two clients and failing to file a return.
According to case documents and statements in court, Patterson owned the prep business D&D Tax Service and admitted preparing a return on behalf of two clients for tax year 2012 in which he falsified medical and dental expenses, gifts to charity and unreimbursed employee expenses. He also admitted failing to file an individual return and pay federal income taxes for calendar year 2013.
The false filing count carries a maximum of three years in prison and a $250,000 fine. The failure to file count carries a maximum of up to a year in prison and a $100,000 fine. Patterson admitted to aiding and assisting in the preparation of 23 additional false returns and failing to file returns for calendar years 2014 and 2015, resulting in an aggregate loss of $290,321. Sentencing is Aug. 12.