Tax Fraud Blotter: Evasive action
Stimulation; with a bullet; self-description and misrepresentation; and other highlights of recent tax cases.
Pittsburgh: Preparer Eduardo Cardona, 39, has pleaded guilty to charges of aiding or assisting in the preparation or filing of false federal income tax returns.
Cardona prepared false federal returns for others that included false Schedule C information and that requested undeserved refunds.
Sentencing is Sept. 6, when Cardona faces a total sentence of three years in prison, a fine of $250,000 or both.
Green Bay, Wis.: Preparer Catalina Taboada, 47, has been sentenced in federal court to 21 months in prison for willfully preparing false income tax returns.
In 2009, Taboada started her prep business, Taboada & Associates. According to the plea agreement, Taboada committed fraud at her business in several ways, including fraudulently claiming child tax credits for clients whose children lived exclusively in Mexico and claiming child tax credits for clients’ nieces, nephews, cousins or other distant relatives. Taboada additionally claimed dependent exemptions for children who were not residents of the U.S., Mexico or Canada.
Taboada admitted to understanding the qualifying rules for child tax credits and exemptions but nevertheless making the claims to “stimulate the economy.”
She also agreed to pay $571,800 in restitution to the IRS.
Swartz Creek, Mich.: Robert J. Reznick, former police chief of the Village of Oakley, has pleaded guilty to wire fraud and filing a false income tax return.
According to court records, Reznick fraudulently used his position as a police chief to obtain reduced prices on firearms, ammunition and other equipment from suppliers in and outside of Michigan. He then sold the merchandise to his reserve officers for his personal profit.
Though the population of Oakley was fewer than 300, Reznick recruited and maintained a roster of approximately 120 reserve officers for the Oakley Police Department, most of whom were affluent professionals or otherwise prominent individuals who lived outside of and distant from the village. He also facilitated the sale of assault shotguns from an out-of-state vendor and enabled the purchasers of those shotguns to evade federal and state taxes on the transactions.
Reznick pleaded guilty to willfully filing a false 2012 federal income tax return and acknowledged under-reporting income on returns for additional years. The criminal tax loss totals some $87,702.
Brownsburg, Ind.: Former attorney Scott C. Cole, 54, who prepared returns for area clients, has pleaded guilty to one count of tax evasion for his multi-year effort to evade the payment of taxes and penalties on income he failed to report.
According to case papers and court filings, as a result of IRS audits of Cole’s 2001 and 2002 returns, the Tax Court and the U.S. Court of Appeals for the Seventh Circuit determined that Cole owed over $1 million in taxes and penalties stemming from his fraudulent omission of more than $1.5 million of income from his individual tax returns for those years.
From 2011 through 2017, when the IRS sought to collect those taxes, Cole took various steps to evade payment, including opening bank accounts in the names of nominees, such as family members; directing that payment for legal and tax prep services performed by him be made payable to nominee companies he controlled; paying personal bills from bank accounts maintained in the names of nominees; and dealing extensively in cash and money orders. Cole also prepared returns for clients that omitted his name as the paid preparer. The IRS collected less than $3,000 of his tax debt for the 2001 and 2002 tax years.
Cole also resigned from the Indiana bar following the filing of a complaint in 2014 that charged him with the filing of fraudulent returns with the IRS and the State of Indiana for the 2001 and 2002 tax years.
Sentencing is expected to be in late summer.
Jefferson County, Ala.: Preparer Larry Wayne Battle has pleaded guilty to filing a false return.
According to court documents, on his 2014 return Battle filed a Schedule C for his tax prep business that reported gross receipts of $128,000. He understated his gross receipts by approximately $321,638, resulting in a tax loss of $163,401.
Sentencing is July 30, when Battle faces a maximum of three years in prison, as well as a period of supervised release, restitution and monetary penalties.
Sioux Falls, S.D.: Preparer Isaiah Rangel, 50, has pleaded guilty to aiding and assisting in the preparation of false and fraudulent returns.
Between January 29, 2015, and April 15, 2015, Rangel operated a prep business known as 1st Global Tax and willfully assisted in the preparation of a false and fraudulent income tax return of a taxpayer for calendar 2014.
The maximum penalty is three years in prison or a $100,000 fine or both, a period of supervised release of not more than one year and a special assessment of $100.
Columbia, S.C.: Preparer Marilyn Kirkland has been sentenced to 27 months in prison after pleading guilty to aiding and assisting in the preparation of false income tax returns.
Evidence showed that from 2014 through 2016 Kirkland operated a tax prep business where she fraudulently increased her clients’ refunds by preparing returns that reported fictitious income and expenses for businesses to claim the Earned Income Tax Credit. Kirkland also included false education credits. In total, she prepared some 500 fraudulent returns that included more than $900,000 in false claims from the IRS.
Kirkland was also ordered to repay $903,402 in restitution and, after her release from prison, to serve one year of court-ordered supervision.
Pasadena, Calif.: Kenneth Paul Ferreyro, 37, who falsely claimed to be a licensed attorney, has been found guilty of fraud related to his representation of “clients” in federal and state courts.
Ferreyro, a resident of Glendale, was also convicted of tax offenses for seeking more than $100,000 in refunds on federal returns that falsely claimed substantial payroll taxes had been withheld and remitted to the IRS. Evidence showed that from at least 2010 to 2017 Ferreyro told people, most of whom were affiliated with his father’s church, that he could represent them in U.S. Bankruptcy Court and other courts and that he could perform work related to real estate refinancing and tax liens. While Ferreyro did graduate from a law school, he never received a license to practice law.
Ferreyro prepared or filed bankruptcy petitions in Los Angeles, Sacramento and Phoenix. He claimed the victims were filing on their own behalf and also “represented” a person in a child support dispute in a state court in Idaho, and he charged another person $5,000 based on false claims that he could remove federal tax liens so the victim could refinance a residence. Ferreyro, who at times described himself as a “tax attorney,” also made false claims on returns he filed for 2013 through 2016. He submitted federal returns that falsely stated that he and his wife had already paid substantial amounts of payroll taxes and he fraudulently sought refunds totaling $126,826, some of which was paid by the IRS.
Sentencing is June 24, when Ferreyro faces a maximum sentence of 100 years in prison.
Los Angeles: Former Pasadena resident Bridgette Charmine Potts, 53, has been sentenced to a year and a day in prison for defrauding the IRS out of more than $150,000 by submitting fraudulent federal income tax returns that used stolen personal IDs.
According to court documents, between 2014 and 2016 Potts submitted fraudulent federal returns using the stolen personal IDs of 63 individuals. Potts also caused the IRS to wire the refunds to accounts she controlled.
During the course of the scheme, on Feb. 16, 2014, Potts knowingly submitted a fraudulent tax return to the IRS using the name and Social Security number of one victim who had not authorized Potts to file a tax return on his behalf. Based on the false statements that Potts made in filing this tax return, the IRS issued a refund payment intended for the victim in the amount of $4,405 which was electronically transferred to Pott’s bank account.
The total loss was approximately $159,377, which she was also ordered to pay in restitution to the IRS.