Tax Fraud Blotter: Firestarter
Fate sealed; insults to injury; thanks, dad; and other highlights of recent tax cases.
Gilmore City, Iowa: Preparer David Miller, 52, has pleaded guilty to three counts of aiding and assisting in the preparation and presentation of false and fraudulent income tax returns and three counts of receiving stolen government money or property.
Miller admitted that while operating a prep business he prepared fraudulent income tax returns that resulted in a total loss to the government of $16,114 for tax years 2012 through 2015. Miller also stole 39 partial client refunds in the amount of $36,582 for 2014, 2015 and 2016. His theft of federal funds for 2011, 2012 and 2013 and theft of state government funds resulted in additional losses of $73,258.07. Failing to report this money, he also racked up additional tax obligations for himself of $30,752 for his 2011 through 2016 returns.
Miller has agreed to pay $156,706.07 restitution to the IRS. For aiding and assisting in the preparation and presentation of false and fraudulent income tax returns, Miller faces a maximum of three years’ imprisonment, a maximum fine of $100,000 and not more than a year of supervised release. For receiving stolen government money or property, he faces a maximum of 10 years’ imprisonment, a maximum fine of $250,000 and not more than three years’ supervised release.
Rochester, New York: Contractor Jason Bassett, 43, convicted of filing a false return, has been sentenced to six months in prison and six months’ home confinement.
Bassett owned and operated a paving and sealing company. After receiving payment for services provided, Bassett failed to deposit all the income into the business bank account. He also didn’t advise his preparer that he had cashed numerous business checks.
For 2012 through 2015, Bassett failed to report approximately $1,704,873.89 in income on his returns, failing to pay some $378,331 in federal taxes. He has paid back that amount to the IRS but still owes more than $400,000 in penalties and interest. He also failed to withhold taxes from his employees’ wages, did not provide his employees with W-2s and did not report this on a federal return.
Portland, Maine: Preparer Ashraf Eldeknawey, 46, has been sentenced to six months in prison and a year of supervised release for preparing false returns.
Eldeknawey operated a prep business inside the Ahram Halal Market in Portland from 2015 to 2018. He prepared fraudulent returns for clients on which he reported SE income that they didn’t earn, producing undeserved refunds. He also filed a 2014 return for himself on which he overstated the expenses associated with a painting business he operated.
Eldeknawey, who pleaded guilty last summer, was also ordered to pay $97,191 restitution to the IRS.
Providence, Rhode Island: Chiropractor Leonard Marino, 50, of Johnston, Rhode Island, has pleaded guilty to tax evasion.
Marino, president and sole shareholder of Chiropractic Associates, admitted that from 2016 through 2019 he schemed to divert $1,061,000 in income generated by his business to his own personal use and failed to report the income to the IRS.
A significant amount of Chiropractic Associates income is derived from insurance company payments for bodily injury claims submitted by law firms on behalf of some of Dr. Marino’s patients. Payments, in the form of checks, were made by the law firms payable to Chiropractic Associates. Marino admitted to devising schemes to cash many of the law firms’ checks and divert the money. After a bank raised concerns with him about his check cashing, he requested that the law firms make checks payable to him personally, which they did. Marino then cashed those checks using a check casher.
He admitted that in 2017 he failed to report $531,408.38 in gross income, which would have resulted in tax due the IRS of approximately $236,945. He admitted that from 2016 through 2018, he failed to report income totaling $1,061,000.
Sentencing is May 7. Tax evasion is punishable by up to five years imprisonment, three years’ supervised release and a fine of $250,000 or not more than twice the gross gain or twice the gross loss resulting from the offense.
Honolulu: Nathan Y.G. Lum, 62, has been sentenced to 30 months’ imprisonment after previously pleading guilty to aggravated ID theft in connection with the theft of government funds and failure to file a return.
Lum was the former division director of the International Longshore and Warehouse Union Local 142, Longshore Division (ILWU), and from 2011 through 2017 failed to file any federal or state returns that should have reported his income. He failed to pay the IRS and State of Hawaii some $280,743.27 in taxes.
In most years, Lum earned more than $200,000 from the ILWU. He also failed to report some $90,000 that he received from California-based Relativity Media company in 2012 and 2013 in connection with efforts to secure Hawaii tax credits while he was an official of the ILWU.
After Lum’s father died, between 2013 and 2016 Lum forged his father’s signature on more than 50 checks from his deceased father’s bank account and deposited them into his own personal account. In total, Lum obtained some $33,435 in his father’s Social Security benefits and spent these funds on his personal expenses.
Lum was also sentenced to a year of supervised release and was ordered to pay $314,178.27 restitution.
Milaca, Minnesota: Preparer Cindy M. Halgren has pleaded guilty to 12 counts of preparing false or fraudulent returns and three counts failing to pay state income tax.
Halgren operated Clearview Tax out of her home. Investigators determined that between 2012 and 2018 she prepared and submitted false tax filings for multiple clients and herself. Many returns appeared to include expenses for activities that clients identified to Halgren as hobbies but were portrayed as business deductions.
She also falsified information on her own income tax returns and property tax refund returns filed for 2014 through 2016.
Sentencing is in June.
Charlotte, North Carolina: Preparer Andrivia Wells has pleaded guilty to filing false returns for clients and for herself, according to published reports.
Wells reportedly pleaded guilty to three out of 35 counts, including aiding and assisting in the filing of false returns and filing false returns for herself. She did not address a charge related to obstructing criminal investigators from the IRS, reports said.
From 2011 through 2019, Wells reportedly ran Rush Tax Service out of three locations, where, prosecutors said, she prepared more than 6,000 returns and received more than $1.2 million in fees from her clients. Often, the fees were taken from the clients’ refunds and clients were unaware of how much they were being charged, which was frequently more than $500, reports said.
Wells filed returns with fabricated items, including wages, filing status, American Opportunity Credits, education credits, Schedule C income and losses and other false items, reports said. Clients did not know what Wells was doing until they were contacted by the IRS with questions about items on their returns, reports added.
Shortly after Wells was notified about the investigation, prosecutors told news outlets that they allege she set one of her offices on fire on the day her summons response was due. The fire destroyed client files, financial records and computer hardware, reports said.