Tax Fraud Blotter: Generating Business
A roundup of our favorite recent tax fraud cases.
Phenix City, Ala.: Preparer Pamela Ann Smith, 56, of Lanett, Ala., has been sentenced to 51 months in prison for her role in a stolen-ID/refund fraud.
According to court documents and evidence, between 2007 and 2012 Smith led a large-scale scheme from her tax prep business, Jaycal Tax Service. Smith recruited her son, Calvin Perry, and his friend, Ernest Simmons Jr., to participate in the scheme wherein Smith, Perry and Simmons opened multiple bank accounts and post office boxes, then filed more than 1,200 federal income tax returns using the stolen IDs of actual individuals.
The returns sought more than $4 million in fraudulent refunds. U.S. Treasury checks were mailed to physical addresses and post office boxes under Smith’s control and subsequently deposited into multiple bank accounts controlled by Smith, Perry and Simmons. Smith personally received more than $300,000 from this scheme.
Smith pleaded guilty in November to one count of conspiracy to defraud the government with respect to filing false income tax refund claims and one count of aggravated ID theft.
In addition to the prison term, Smith must serve three years of supervised release and pay $340,057 restitution.
Burley, Idaho: Preparer Cruz “Kelly” Chacon, 42, has pleaded guilty to one count of assisting, advising and counseling clients to submit materially false federal income tax returns.
According to the plea agreement, the IRS estimates that from 2008 through 2011, Chacon and some of her employees at Kelly’s Tax Service submitted more than 2,500 falsified returns, primarily by claiming unjustified credits such as the Child Tax Credit. This increased clients’ refunds, which helped Chacon generate business, authorities said.
As part of her plea agreement, Chacon has agreed to pay $81,384 restitution. Sentencing is May 9.
Memphis, Tenn.: Preparer Latoya Garrett, 41, has been indicted for filing materially false federal income tax returns that defrauded the government of nearly $130,000.
According to the indictment, Garrett was a preparer at the Bryan Tax Service, Global Taxes and Tax Bank for tax years 2010 and 2011. IRS investigation discovered that many of the returns filed by Garrett contained false Schedule C income and expenses, false education credits and falsely claimed dependents on the returns of 13 taxpayers, some of whom had multiple returns. The taxpayers denied providing the information to Garrett.
The total loss is $129,744.00.
If convicted, she faces up to three years of imprisonment and a fine of $100,000 on each count.
St. Louis: Tax prep firm owner Semere Tsehaye, 38, has been arrested after a grand jury issued an indictment on two counts of tax evasion.
According to the indictment, from 2005 to 2011, Tsehaye owned and operated at least 20 Instant Tax Service franchise locations in and around East Saint Louis, Ill.; Kansas City, Kan.; and Kansas City, Mo., and St. Louis. Tsehaye owned and operated his ITS franchises using two entities named A&S Tax Service and ERI Enterprises.
During 2010 and 2011, Tsehaye generated fraudulent financial summaries that understated the gross receipts generated by A&S and ERI and provided them to his tax return preparer, who used them to do Tsehaye’s federal individual income tax returns. These returns were false in that they underreported A&S and ERI’s gross receipts by approximately $506,000 in 2010 and $1.03 million in 2011.
If convicted, Tsehaye faces a maximum of five years in prison and a $250,000 fine on each count of tax evasion.
Houston: The United States has filed to permanently bar John E. Carter, d.b.a Midwestern Financial Group, and Sulayman Mamadou Jarra, d.b.a. African Art Appraisal Services, from preparing false returns.
According to the complaint, Carter promoted a tax evasion scheme to clients, telling them they could reduce their federal tax liability by supposedly donating African tribal art to an educational institution or museum. The complaint states that Carter provided his clients with an appraisal by Jarra that substantially overvalued the art, and that for many of the returns, the signature was forged on the IRS form where the institution purportedly acknowledged receipt of the art.
Carter then used the false appraisal to prepare returns for clients, claiming false deductions for charitable donations, according to the complaint.
In 2013, Jarra pleaded guilty to one count of aiding and assisting in the preparation and presentation of false tax returns; he received a sentence of probation. Carter was convicted in 2014 of five counts of willfully aiding and assisting in the preparation and presentation of false returns and was sentenced to 41 months in prison.
Grand Rapids, Mich.: Resident Andres Orrego-Hernandez, 31, has been sentenced to 18 months of imprisonment for conspiracy to defraud the government and aiding in the filing of a false tax return. He was also ordered to pay $371,648 restitution to the IRS and serve two years of court supervision following his release from prison.
According to the plea agreement filed with the court, Orrego-Hernandez, who pleaded guilty last November, admitted his role in the conspiracy and in aiding and assisting in the preparation of federal returns that inflated income or the number of dependents to qualify clients for the EITC or claimed entirely false deductions or credits to inflate refunds.
Orrego-Hernandez directed his portion of the client refunds to bank accounts he controlled.
In November, co-defendant Humberto Manrique-Mendoza received 18 months in prison, 24 months of supervised release and 200 hours of community service, and was also ordered pay $371,648 restitution to the IRS.