Tax Fraud Blotter: Flippin’ guilty

Register now

TNT blows up; HUD time; $18-million employment tax scheme; and other highlights of recent tax cases.

Danville, Va.: Preparer Timothy Harris, 49, has pleaded guilty to aiding in the preparation of a false return.

According to documents filed with the court, Harris owned and operated TNA Tax Services and TNT Tax Services and admitted that he used these businesses to prepare false returns for clients. Those returns claimed bogus business losses in order to seek unjustified refunds.

After the IRS revoked his EFIN in December 2012, he used another person’s EFIN to continue filing returns.

Harris admitted that his fraudulent conduct caused a tax loss of more than $250,000. Sentencing is Oct. 24, when Harris faces a maximum of three years in prison, a term of supervised release, restitution, and monetary penalties.

Lemon Grove, Calif.: Preparer Cynthia Lozano has been sentenced to 175 months in prison for her role in two stolen-ID refund fraud schemes.

In April 2013, Lozano was charged in a 33-count indictment for using stolen IDs to file fraudulent returns with the IRS. According to case documents, she directed the IRS to deposit the refunds into bank accounts in the names of her relatives and associates. For some actual tax preparation clients, Lozano claimed a larger refund from the IRS than she represented to her clients and then told the IRS to deposit the excess amounts into a bank account she controlled without clients’ knowledge.

In early 2015, Lozano pleaded guilty to aggravated ID theft and participation in her fraud in which she used the identities of more than 200 victims to file more than 400 returns, resulting in her receipt of some $1.5 million in bogus refunds between 2008 and 2013.

That June, while Lozano was awaiting sentencing, federal agents discovered that Lozano filed additional, similar fraudulent returns; she was subsequently charged in a second indictment with 51 counts, including filing false claims for refund, wire and mail fraud, and aggravated ID theft.

Some of the victims of Lozano’s 2015 scheme were actual or prospective tenants of properties she purchased and titled in the name of a relative who does not live in the U.S. Using her relative’s name as an alias, Lozano obtained authorization to rent some of the properties under the Department of Housing and Urban Development’s Section 8 program, then stole the names and Social Security numbers from her tenants and others who submitted rental applications and used them to file additional false returns.

She directed the IRS to deposit those refunds into bank accounts she opened with the assistance of two co-conspirators, who have since pleaded guilty and been sentenced.

Lozano was also ordered to serve three years of supervised release and pay $1.479 million in restitution.

Baltimore: Maryland real estate flipper David J. Simard, 58, has pleaded guilty to one count of obstructing the lawful functions of the IRS and four counts of failing to file personal and corporate income tax returns.

According to the indictment and information in court, Simard has purchased and sold real estate since the mid-1980s. In January 2008, he received notice that the IRS, in connection with an audit of his personal income taxes, requested documents and information from third parties regarding his real estate transactions.

Less than one month after receiving this notice, Simard created Pegasus Home Corp. and began buying and selling properties in its name instead of his own. From 2009 through 2010, Simard purchased and sold 96 properties in the name of Pegasus.

He attempted to conceal his ownership and control of Pegasus by falsely representing that a relative was the owner. Simard had the same relative apply with the IRS for an EIN for Pegasus and used this when buying and selling properties. This caused the IRS to receive information falsely indicating that the relative owned Pegasus. Simard also instructed the relative to open a bank account for Pegasus.

He did not file personal returns for tax years 2009 and 2010, despite earning income requiring him to file. He also did not file corporate returns for Pegasus for the same years.

Sentencing is Oct. 12, when Simard faces a maximum of three years in prison for obstructing the IRS and one year in prison for each count of failure to file tax returns. He also faces a period of supervised release, restitution and monetary penalties.

Orem, Utah: Former chiropractor Louis Hansen, 65, has been convicted of tax evasion and corruptly endeavoring to obstruct the internal revenue laws.

According to case evidence, Hansen attempted to evade payment of his federal income taxes for 2005, 2006, 2007 and 2010. For the years 2005, 2006 and 2010, he filed a return reporting that he owed taxes but did not fully pay the amounts due. For 2007, Hansen’s return was audited and additional taxes assessed.

In March 2012, Hansen sent a check to the IRS for $342,699 that was drawn on a closed bank account held in the name of another individual, and claimed that the check paid off his tax debt. Hansen then sent a signed letter to the revenue officer assigned to collect his unpaid taxes, claiming that he had paid the taxes owed.

A few months later, Hansen sent 10 additional checks, all for $425,000, to at least six IRS locations, all drawn on another closed account in the name of a different individual, claiming to pay the back taxes due.

Sentencing is Sept. 25. He faces a maximum of five years in prison for tax evasion and three years in prison for obstructing the IRS. Hansen also faces a period of supervised release, restitution and monetary penalties.

Houston: Business owner Richard Floyd Tatum Jr., 57, has been sentenced to 36 months in prison for failing to pay over employment taxes.

According to documents filed with the court, Tatum owned Associated Marine & Industrial Staffing Inc., an industrial staffing company that provided temporary labor to businesses. He employed approximately 1,000 people, including internal employees and external employees assigned to work at client locations.

Tatum was responsible for collecting, accounting for and paying over to the IRS the payroll taxes withheld from employees’ wages. Tatum exercised significant control over AMI’s finances, entered into contracts on behalf of the company, signed checks and decided which creditors to pay.

Tatum also signed and filed AMI’s employment tax returns. From March 2008 through December 2009, he filed false and delinquent employment tax returns for AMI, which did not report AMI’s external employees. In May 2013, Tatum filed delinquent returns for the quarters ending in March 2010 through December 2012, reporting AMI’s external employees but making no payments of the taxes owed.

Tatum withheld from his employees approximately $12 million in payroll taxes from March 2008 through December 2012, but did not pay over any of this money to the IRS. Tatum also failed to pay $6 million of AMI’s required share of Social Security and Medicare taxes during the same quarters. Instead, he used the money for his personal benefit, including making payments on his ranch and traveling to Las Vegas, Hawaii and France.

Tatum, who earlier this year pleaded guilty to one count of failing to pay over employment taxes, admitted that he caused a tax loss of more than $18 million. In addition to the term of imprisonment imposed, he was ordered to serve three years of supervised release and to pay $18,298,604 restitution to the IRS.

For reprint and licensing requests for this article, click here.