Tax Fraud Blotter: From mouths of babes
Info direct from an IRS site; $15 million in phony refunds; school’s out; and other highlights of recent tax cases.
West Palm Beach, Fla.: A federal court has held that preparer Renel Herard violated a permanent injunction entered against him in 2016 that barred him from preparing, filing or assisting in the preparation or filing of federal returns for others.
In March 2017, the U.S. filed with the court to hold Herard in civil contempt based on evidence that he was assisting a business three doors down from his own to prepare returns for his former clients in violation of the injunction. Faced with the evidence against him, Herard admitted that he assisted others to prepare returns in 2017 and agreed to reimburse the U.S. for the cost of its investigation.
The U.S. District Court for the Southern District of Florida found that Herard violated the injunction entered in 2016, and held him in civil contempt. For that contempt, the court ordered Herard to pay the U.S. $52,654 to reimburse the government for the costs of its investigation.
The court further enjoined Herard from maintaining any interest in, working at or providing any direct or indirect assistance to an individual or entity that provides prep services.
Grand Rapids, Mich.: Oghenevwakpo Igboba has been convicted of one count of conspiracy to defraud the U.S., one count of wire fraud, eight counts of making a false claim to the U.S., and eight counts of aggravated ID theft.
Igboba used other individuals’ personal ID information to access tax information using an IRS website. He then used that information to file false federal income tax returns directing the IRS to pay fraudulent refunds to bank accounts he controlled. IRS systems stopped refunds from being issued for many of the stolen returns, but Igboba personally received at least $57,000 as a result of his crime.
He used personal ID information to access tax information for more than 100 individuals through IRS systems. Evidence demonstrated that he conspired with numerous people, both in the U.S. and abroad, to compile personal information and direct refunds to numerous bank accounts.
Igboba faces up to 20 years in prison on the wire fraud conviction and at least two years for the aggravated ID-theft convictions. The conspiracy conviction carries up to 10 years in prison, the false claims convictions up to five.
Maple Heights, Ohio: Preparer Keith Jeffries, 44, has been convicted for leading a conspiracy that filed more than 800 returns annually between 2012 and 2015, resulting in some $15 million in partially undeserved refunds.
Brian Peacock of Sandusky, Ohio, and Linnette Coleman and Nicole Pugh, both of Cleveland, previously pleaded guilty to their roles in the conspiracy.
Jeffries operated a tax prep business under the name Krew Time; Jeffries, Peacock, Coleman and Pugh all prepared returns for Krew Time clients. The company operated out of the residence of Jeffries, as well as out of the back offices of a MetroPCS store in Cleveland and from a commercial building in Cleveland, according to court documents.
The defendants filed false, fictitious and fraudulent returns in the name of Krew Time clients. The clients received the majority of the refunds with the defendants receiving a portion of the refund as their prep fee, according to court documents. Between 2011 and 2016, the conspirators filed false itemized deductions, business income expenses, tax credit information, medical expenses, false filing status and other information to obtain the phony refunds, according to court documents.
Jeffries will be sentenced on Jan. 8.
Silvis, Ill.: Nora L. Steele, 66, former executive of a local program that provided summer and after-school meals to at-risk children, has pleaded guilty to defrauding the government of approximately $515,617 and to filing a false return.
Steele served as the operations director for the Quad Cities Area Children’s Food Program from its inception in February 2016 until she left the organization in June 2017. Prior to the creation of QCACFP, Steele had served in a similar capacity since 2004 for an affiliated entity, Church of Peace, in Rock Island.
The U.S. Department of Agriculture, Food and Nutrition Service reimbursed QCACFP for each meal served. QCACFP submitted monthly requests for reimbursement to Illinois, which in turn received funding from the USDA to pay the reimbursement. Meals were provided in conjunction with after-school learning or care programming, typically at elementary or junior high schools and were operated by the YMCA or Spring Forward Learning. During the 2015-2016 and 2016-2017 school years, QCACFP provided meal services to 35 to 50 sites in the Quad Cities and Galesburg, Ill., communities each month.
According to court documents, Steele admitted that from August 2015 to June 2017 she submitted falsely inflated meal-count forms for reimbursement. In some cases, additional unserved meals were added to counts of legitimate meals that were served to children. In other cases, Steele submitted fraudulent meal-count forms when no meals at all were served at a particular location on a given day.
Among other things, the inflated reimbursement payments were used to fund Steele’s salary and salaries for Steele’s family members, who performed nominal duties for the food program. She also set up a retirement account for herself that was fully funded by the food program and used the program’s credit card to make personal purchases from QVC, including a foldable exercise bike that Steele categorized as “uniforms.”
In addition, Steele claimed fabricated mileage reimbursements, consistently claiming to have driven some 1,500 miles per monthly pay period for a reimbursement of approximately $840 for work-related travel that she did not actually make. For March 2016 through June 2017, she claimed work travel mileage reimbursement for more miles than the total mileage the vehicles belonging to Steele and her husband travelled during the same time period. Steele received $15,059 in 2015 and $19,282 in 2016 that was not taxed or reported as income on Steele’s personal returns, for a total tax liability of $10,128.
Sentencing is Jan. 17. The maximum for mail fraud is 20 years in prison. For filing a false return, the penalty is up to three years in prison.
Kansas City, Mo.: Preparer Onrea Knox-Lewis, 45, has pleaded guilty to a wire fraud scheme in which she filed dozens of fraudulent returns that resulted in $238,666 in undeserved refunds.
Knox-Lewis, a self-employed preparer, admitted that she filed income tax returns for the tax years 2012 through 2014 claiming false refunds. The fraudulent returns reported bogus wages, income tax withholdings or fraudulent dependents as well as the Earned Income Tax Credit. In some instances, she prepared and filed returns using stolen personal ID information.
After she filed the fraudulent returns over the Internet, Knox-Lewis had the bogus refunds loaded onto prepaid debit cards; she utilized some or all of the funds for her personal expenses. She faces up to 20 years in prison without parole.
Gladwyne, Pa.: Businessman David Shulick, 48, has been sentenced to 80 months in prison for embezzling $759,735 from the Philadelphia school district, for his part in a scheme to defraud PNC Bank and for filing false returns.
Between 2010 and 2012, Shulick and co-conspirator Chaka Fattah Jr., embezzled from the school district in part by misrepresenting the educational services provided to students by Shulick’s company, Unique Educational Experiences Inc.
Shulick secured funding from the district by promising to provide at-risk students with guidance counseling, psychological support services and school security.
Shulick and Fattah hid the costs of UEE services with budgets that contained false entries for costs, and inflated staff salaries and salaries for staff positions that were never filled at the school operated by UEE. Shulick and Fattah also devised a scheme to defraud PNC Bank. Fattah had defaulted on a PNC loan; as part of the scheme, Shulick acted as Fattah’s lawyer and threatened PNC with the possibility that Fattah might file bankruptcy if he were unable to resolve his outstanding debts, which would result in the bank receiving little or no repayment. Shulick sent a letter to PNC offering to settle the bank’s claim for $2,500, which the correspondence claimed was Fattah’s monthly income. Shulick’s companies were in fact paying Fattah at least $75,000 a year.
Shulick also filed false federal income tax returns for tax years 2009, 2010 and 2011, failing to report all of his taxable income in these years. He also claimed money he had spent renovating his residence and New Jersey shore home as business expenses of his company.