Toxic pollutants; fabricated gambling winnings and losses; financial shortfalls; and other highlights of recent tax cases.
Crookston, Minnesota: A Minnesota man pleaded guilty to filing a false claim with the IRS.
Philip Nelson Green filed false individual income tax returns with the IRS for the years 2019, 2020, 2021 and 2022. Each of these tax returns reported multiple false or fraudulent items, including false wage information, itemized deductions, withholding amounts and child and dependent care expenses. For the years 2021 and 2022, Green filed false tax returns that collectively sought more than $500,000 in refunds he was not entitled to receive.
Green pleaded guilty to one count of making a false claim. He is scheduled to be sentenced on Jan. 28, 2027, and faces a maximum penalty of five years in prison. He also faces a period of supervised release, restitution and monetary penalties.
San Diego: James Soriano, a former public official at the Naval Information Warfare Center in San Diego, was sentenced to 72 months in prison for accepting hundreds of thousands of dollars in bribes.
Soriano admitted he accepted bribes from defense contractors in the form of lavish meals, employment opportunities for family members and friends and tickets to premier sporting events. In exchange, he used his position to help the contractors secure and maintain hundreds of millions of dollars in government contracts.
Soriano also admitted to filing false tax returns in connection with the bribes he received.
Soriano was ordered to forfeit $209,527.51 and pay $18,722.40 in restitution to the IRS.
The defense contractors — acting through their presidents, officers and employees — gave various things of value to Soriano, including dinners at Ruth's Chris, Island Prime and Fogo de Chão; tickets to the 2018 MLB All-Star Game, 2018 World Series and 2019 Superbowl; and jobs for Soriano's family and friends, including Soriano's wife and Soriano's family friend, Liberty Gutierrez, who gave Soriano $2,000 a month in cash from her salary at one of the companies working under a defense contract.
In return, Soriano took official action to aid his benefactors, such as allowing defense contractors to draft government documents in competitive and non-competitive procurements, submitting those documents as part of the procurement process, and advocating for their selection as defense contractors. Soriano also willfully failed to disclose the cash payments he received from Gutierrez on his federal tax returns.
From approximately March 2016 through at least October 2019, Soriano and a coworker, Dawnell Parker, received bribes from Philip Flores, the president and CEO of Intellipeak Solutions, a defense contractor headquartered in Fredericksburg, Virginia. Soriano also admitted that from approximately May 2015 through at least October 2019, he separately received bribes from another defense contractor, with offices in San Diego and Stafford, Virginia, who also gave him expensive dinners, a job for his wife, and rounds of golf at a private country club.
From approximately June 2014 through at least October 2019, Soriano received bribes from Russell Thurston, a vice president of Cambridge International Systems, a defense contractor headquartered in Arlington, Virginia. In return for these bribes, Soriano used various methods to steer contracts to these defense contractors and kept his contracting activities hidden from the Naval Information Warfare Center.
Charleston, West Virginia: A Fayette County man previously convicted of violating the Clean Water Act was sentenced to prison after admitting to underreporting his income, causing more than $260,000 in tax losses.
Michael Graves, 70, of Charlton Heights, was sentenced to six months in prison and has been ordered to pay $266,053 in restitution.
Graves filed an individual return listing his income at $816 for the tax year 2016 when the actual number was closer to $427,000.
Graves falsely listed his annual income from 2017 to 2020, underreporting income by more than $600,000. Prosecutors outlined a previous conviction that put Graves under federal supervision.
Graves owned and operated West Virginia Environmental Services, a company that was paid more than $9.8 million for accepting industrial waste and treating contaminated liquid at a Fayette County landfill from 2006 to 2020.
In 2023, Graves pleaded guilty — both individually and as a company — to violating the Clean Water Act by failing to maintain the landfill, which discharged toxic pollutants into a tributary of the Kanawha River.
Philadelphia: Manoach Chayaud, 43, of Carmel, Indiana, was convicted of a years-long conspiracy to defraud the IRS.
The defendant was charged by indictment in December 2024, arising from a scheme that ran from approximately November 2013 through February 2022, in the Eastern District of Pennsylvania and elsewhere.
Chayaud recruited two individuals to assist him in a scheme to file false tax returns on behalf of clients of his tax preparation business, setting up an office in Indiana, where he lived, and an office in Philadelphia, where the two co-conspirators lived.
Chayaud taught the two co-conspirators how to prepare tax returns to increase client refunds by, among other things, filing false Schedules C claiming large losses for businesses that the client did not have, fraudulently claiming education credits, and fraudulently claiming Schedule A deductions.
As a result, the defendant and his co-conspirators were able to increase the refunds for their clients and charge additional tax preparation fees. Chayaud and one of the co-conspirators split the proceeds of the business; the other co-conspirator was paid a percentage of the fees the business charged.
Chayaud is scheduled to be sentenced on Dec. 15 and faces a maximum possible term of five years in prison, a fine, or both.
Tampa, Florida: A Tampa man has been sentenced to almost four years in federal prison for his role in a tax fraud scheme that prosecutors said sought more than $1.4 million from the IRS.
Mahmoud Mehdi was sentenced after being convicted of conspiracy to commit wire fraud and making and subscribing a false tax return.
A federal judge also ordered Mehdi to forfeit $137,931.33 and pay $732,521.18 in restitution.
The scheme ran from January 2019 through December 2022 and involved the electronic submission of fraudulent tax forms to the IRS.
The returns allegedly contained fabricated gambling winnings and losses, along with false federal tax withholding amounts based on those fake winnings.
The fraudulent returns sought refunds that the taxpayers were not entitled to receive.
The intended tax loss totaled about $1.4 million. The actual loss was $732,521.18, which the IRS paid through refunds or credits applied to prior debts.
Rocheport, Missouri: A Rocheport, woman who founded and operated Moresource Inc. in Columbia has been sentenced to federal prison for wire fraud and failing to collect or pay over taxes.
Kathryn L. Cunningham, 66, was sentenced to two concurrent terms of 18 months in federal prison. Cunningham previously pleaded guilty to one count of wire fraud and one count of failure to collect or pay over taxes.
Following her prison sentence, Cunningham will serve three years of supervised release. She was also ordered to pay a $200 special assessment and restitution in an amount that will be determined by the court.
Moresource contracted with clients to calculate and distribute payroll and income taxes for their employees. The company collected money from clients for payroll and related expenses and maintained those funds in an account. Moresource was also responsible for preparing related tax forms for its clients.
Because the payroll account operated similarly to an escrow account, with money collected from clients before payments became due, the account should not have experienced a shortage.
By January 2020, however, Moresource owed approximately $1.4 million in payroll taxes on behalf of its clients while having less than $400,000 available in its payroll account.
An investigation determined that Cunningham took money from Moresource's operating account and used it for personal expenses. She also borrowed money from at least two lenders to cover financial shortfalls and repaid those loans with money from Moresource accounts.
Cunningham also obtained a Small Business Administration-guaranteed loan and an SBA line of credit to finance Moresource's operations and payroll account.
Investigators determined Cunningham asked clients to make payroll deposits early to replace money she had embezzled. She attributed the shortage to another client's cash-flow problems.
During the same period, Cunningham stopped filing timely and accurate IRS Forms 941 and stopped making regular payments to the IRS for employment taxes owed on behalf of Moresource clients.
Brooklyn, New York: A Brooklyn woman pleaded guilty to preparing false tax returns for clients.
Edris Cust operated a tax preparation business called Cust Tax Service. From approximately 2019 through 2023, Cust prepared false and fraudulent individual tax returns for multiple clients of Cust Tax Service. These returns included, among other false items, false elections for head-of-household filing status, sales of capital assets resulting in losses and rental receipts, as well as inflated rental expenses.
These false items resulted in Cust's clients reporting to the IRS income tax returns that sought refunds they were not entitled to receive or lower taxes than they should have paid. Cust caused a total loss to the IRS of more than $1.4 million.
Cust pleaded guilty to one count of willfully aiding and assisting in the preparation and presentation of a false tax return. She will be sentenced at a later date and faces a maximum penalty of three years in prison.
