Tax Fraud Blotter: Counting loot in the bathroom
Maryland red lights more preparers; gambling with ill-gotten gains; deli defrauding; and other highlights of recent tax cases.
Oxnard, Calif.: Preparer Rodrigo Pablo “Paul” Lozano, a.k.a. “El Profe,” 61, has been sentenced to 10 years in prison for his participation in a conspiracy to prepare and file some 12,825 fraudulent income tax returns that claimed more than $56 million in refunds.
Lozano owned and operated the preparation business Lozano & Associates- Ayuda – where he hired, trained and supervised primarily Latino females in their late teens or early 20s to prepare clients’ federal income tax returns. Lozano operated his business by renting space from businesses that catered to Latino clients.
A naturalized U.S. citizen from Mexico, Lozano went by the name “El Profe” as he was a teacher before he began preparing returns.
According to the evidence at trial, members of the conspiracy obtained ITINs, which are issued in lieu of a Social Security number to undocumented workers in the U.S. to allow them to file returns. The evidence demonstrated that co-conspirators provided Lozano with fake identification documents, such as Mexican consular identification cards — also known as Matrícula cards — and birth certificates, which Lozano used to obtain ITINs in the names shown on the fake ID documents.
Using fake wage and tax statements and fictitious dependents, Lozano used the ITINs to file income tax returns that claimed the Additional Child Tax Credit. The fraudulent returns typically sought $3,000 to $4,000 in refunds.
Lozano submitted nearly 13,000 false returns in an 18-month period in 2011 and 2012 while his employees were telling him that the ID and W-2 documents looked suspicious and the IRS was sending hundreds of warning notices stating that the returns and W-2s were invalid. Despite the repeated warnings, Lozano continued to direct his employees to file the fraudulent returns.
Lozano split the refunds with his co-conspirators. At times, he had employees count out tens of thousands of dollars in cash in a bathroom next to his office space.
Following a two-week jury trial last July, Lozano was found guilty of one count of conspiracy to defraud the U.S. Before the IRS stopped the scheme, it had already paid out more than $23 million in refunds to Lozano and his co-conspirators.
Lozano was also ordered to pay $23,094,300 restitution to the IRS.
Annapolis, Md.: The Maryland comptroller has suspended processing e-returns from 15 private preparers throughout the region due to a high volume of questionable returns.
The new Maryland preparers or businesses are: Security Tax & Accounting Srv, Tax Relief and On-Site Tax Services, in Baltimore; Global Alliance Solution and Dieudonne Sossoukpe, in Germantown; Dem Tax and Accounting Services and Metrotax Services, in Silver Spring; Eze Tax Service and Holmes Tax Services, in Hyattsville; Hitchye Tax & Business Cons Svc in Catonsville; Abayomi Olobatuyi in Abingdon; ARPL Tax Services and More in Windsor Mill; STES Tax Service in Greenbelt; and Alleluia Income Tax Service in Towson.
Also suspended were returns from Valentine Tax in Brooklyn, N.Y.
The suspicious characteristics detected on the returns included business income reported when taxpayers did not own a business; refund amounts requested much higher than on previous-year tax returns; inflated or undocumented business expenses; dependents claimed when the taxpayer did not provide required 50 percent support or care; and inflated wages and withholding information.
Gulfport, Miss.: Preparer Doris Kelley, 65, has pleaded guilty to obstructing the internal revenue laws and aiding in the preparation of a false return.
According to documents filed with the court and information presented at the plea hearing, Kelley operated a prep business from her home and instructed several of her clients who owed federal income taxes to write payment checks directly to her, rather than to the IRS.
Kelley kept these funds for herself and used most of the money to gamble at local casinos.
Typically, Kelley provided copies of accurate returns to her clients but then filed no return with the IRS. In some cases, she also filed false returns in her clients’ names without their knowledge.
The tax loss exceeded $495,000. The sentencing hearing is July 7. Kelley faces a maximum of three years in prison on both counts as well as a term of supervised release, restitution and monetary penalties.
Loveland, Colo.: Delicatessen franchise owner Daryl Brent Giesking has pleaded guilty to conspiring to file fraudulent claims for tax refunds.
According to court documents, Giesking conspired with his preparer, Teresa Marty of Advanced Financial Services in Placerville, Calif., to claim fraudulent refunds.
With Marty’s help, Giesking filed three individual returns claiming more than $1 million in refunds based on falsely reported income tax withholdings. The IRS paid out a $350,765 fraudulent refund to Giesking. Within months of receiving the refund, Giesking spent the funds on precious metals and coins, a truck, jewelry, luxury travel and sporting equipment.
After discovering the refund should not have been paid, the IRS levied Giesking’s bank accounts and recovered approximately $40,503. Following the levies, Giesking took steps to liquidate a number of his assets, such as selling the truck he bought with the fraudulent proceeds and withdrawing funds in his retirement account. He then relocated to Ecuador, where he was arrested in June 2016 on a warrant issued in this case.
Sentencing is July 13, when Giesking faces a maximum of 10 years in prison, a period of supervised release, restitution and monetary penalties.