Tax Fraud Blotter: Citizen pain
Renters’ rebates; nominal fees; bail fail; and other highlights of recent tax cases.
Pennsauken, New Jersey: Preparers Omar Faruq, 37, and co-conspirator Omar Ali, 36, have both entered pleas of guilty on one count each of conspiracy to defraud the IRS, aiding another in the filing of a false return and filing a false return.
Faruq and Ali conspired to file false tax returns on behalf of their clients at Omar Consultancy Inc., a tax service operated by them with offices in Pennsylvania and New Jersey. According to the plea memorandum, Faruq and Ali consistently used false filing statuses, false deductions and expenses, false business income and losses, and fictitious credits to decrease clients’ tax liabilities and inflate refunds.
Faruq diverted portions of his clients’ refunds to his own bank account as part of the conspiracy, totaling more than $300,000, and Ali diverted more than $170,000 to his own accounts.
Faruq and Ali both also pleaded guilty to filing a false income tax return for themselves and their respective spouses for tax year 2014. In filing the false returns, Faruq and Ali omitted gross receipts from their tax prep business on the 2014 returns and failed to report diverted funds from taxpayer-clients as income on their personal returns.
Pittsburgh: Preparer Earlene Clancy, 39, has pleaded guilty to aiding or assisting in the preparation or filing of false federal income tax returns.
Between 2010 and 2016, Clancy prepared hundreds of false federal income tax returns for other persons while employed as a preparer for Cititax Refund Company. The returns included false Schedule C information and requested hundreds of thousands of dollars in false Earned Income Tax Credit refunds.
Sentencing is Oct. 31, when Clancy faces a total of three years in prison, a fine of $250,000 or both.
Sacramento, California: Preparer Marcus Wilson, 32, has been sentenced to 30 months in prison plus three years of supervised release and been ordered to pay $1,026,340 in restitution for filing false claims with the government.
Wilson admitted that during 2011 and 2012 he filed numerous false returns on behalf of others and that he told clients that they may qualify for “Obama Stimulus” or “Renter’s Rebates” if they had not filed any return in a given year. The individuals then provided Wilson with information sufficient for him to file a return on their behalf; the individuals generally did not provide any financial or other tax-related information and Wilson falsified information regarding the individuals’ wage and business income to obtain federal refunds.
Wilson admitted he caused the IRS to fund over $1 million worth of refunds for tax year 2011. He was charged with one count of conspiracy to file false claims; five counts of filing false claims; five counts of wire fraud; and five counts of aggravated ID theft. Wilson pleaded guilty to one count of filing a false claim and the remaining counts were dismissed.
Scituate, Rhode Island: Businessman Billie R. Schofield, 63, who failed to file legitimate federal tax returns for 10 years and who falsely represented to the IRS on tax forms that he was “not a citizen of the United States” and that his earnings were not taxable, has pleaded guilty to tax evasion.
Schofield admitted that he took numerous steps to avoid paying federal income taxes by, among other things, creating and submitting to the IRS fraudulent checks totaling more than $60,000 to settle taxes due for tax years 2005 to 2008; creating and submitting to the IRS a fraudulent check totaling nearly $49,000 for past taxes due for tax year 2009; in 2013, instructing a corporation in which he held a minor partnership interest not to compensate him; filing false tax returns; in 2015, intercepting and concealing levies from businesses that owed him compensation; and repeatedly mailing false documents to the IRS to obstruct assessments and collection efforts.
In 2013, Schofield created a company with an Alaskan address, Sundown Services. Over the next few years, Schofield asked that payments owed to him be made payable to Sundown, to conceal his income. He asked his girlfriend to open a bank account in the name of Sundown into which he had her deposit checks made payable to Sundown but that were actually income payments to Schofield.
IRS investigation determined that from 2005 through 2009, Schofield’s tax due and owing was $201,310 and although he filed no returns for 2010 through 2016 he earned $731,481.55 from his business partnerships, commissions from a Canadian fishing company and from proceeds from the cultivation and sale of marijuana. For tax years 2005 through 2016, Schofield evaded $428,745.01 in federal taxes.
Sentencing is Sept. 13. Tax evasion is punishable by up to five years in prison, a fine of $250,000 and three years of supervised release.
Waupun, Wisconsin: Kimberly Bagneski, 48, has been sentenced to a year and a day in prison, to be followed by three years of supervised release, after pleading guilty to filing false returns seeking fraudulent refunds.
According to court documents, Bagneski offered to prepare and file returns for people for free or for a nominal fee. She then submitted returns seeking inflated refunds, typically by claiming fictitious business losses. Generally, Bagneski directed the IRS to send the refund to her bank account and then paid the taxpayer a fraction of the money she received. Bagneski also recruited her sister-in-law to assist her in filing the false returns in exchange for a portion of the fraudulent refund.
From 2010 through 2015, Bagneski and her sister-in-law prepared and filed 20 false federal income tax returns, as well as 19 false state returns.
Bagneski was also ordered to pay $84,129 in restitution to the IRS.
Salinas, California: Resident Ana Bajo, a.k.a. Ana Covarrubias, 43, has been sentenced to 14 months in prison for her role in a conspiracy to file fraudulent claims for income tax refunds.
According to documents and information provided to the court, during 2012 Bajo conspired with Jacqueline Ramos and Norma Morfin to obtain the personal ID information of others and used it to file more than 2,300 fraudulent federal income tax returns. These returns reported fake wages and fraudulently claimed dependents, education expenses and tax credits. The returns sought some $9.7 million in refunds, of which the IRS paid more than $7.5 million. Bajo and her co-conspirators directed the fraudulently obtained refund checks into bank accounts that they controlled.
Bajo was also ordered to pay $1,641,610 in restitution and to serve three years of supervised release. She was the fourth defendant to be sentenced for a role in the fraud.
Middlefield, Connecticut: Emergency response consultant Michael Callan, 70, has pleaded guilty to a charge related to his filing false returns that substantially underreported his income.
According to court documents and statements in court, Callan operates Callan & Co. and was audited by the IRS in May 2015. At the time, he had not filed federal income tax returns for the 2010 through 2015 tax years. Callan subsequently signed and filed individual federal income tax returns for the 2010 through 2012 tax years that significantly underreported income he received from his business.
For 2010, Callan reported $151,533 in total income from Callan & Co. but actually earned $217,925; in 2011, he reported $146,071 but actually earned $219,094; and in 2012, Callan reported $160,558 but actually earned $257,745. Callan also received more than $276,000 in income from Callan & Co. for the 2013 through 2015 tax years but failed to file a return for each of those years.
He has agreed to cooperate with the IRS to pay $153,636 in taxes owed, plus interest and penalties. Sentencing is Sept. 11.
Wheeling, West Virginia: William Seelbach, 89, of Fort Meyers, Florida, has been sentenced to three years’ probation for tax fraud.
Seelbach, owner of W&S Bail Bonding, d.b.a. A Bail Bonding by ABC, admitted to impeding the IRS in its collection of taxes and failing to file a federal income tax return for 2012 to report $144,030 in income.
Seelbach was also ordered to pay $83,607 in restitution, which was paid in full.