Tax Fraud Blotter: ‘Ghost’ companies and phony business losses
Businesses that never existed, students who never went to school, and other highlights from our favorite recent tax fraud cases.
Atlanta: Preparer Cheryl Singleton, 29, has been sentenced to 150 months in prison for filing tax returns fraudulently claiming more than $20 million in refunds.
According to court documents, Singleton owned and operated Advanced Tax Services, a prep business with multiple locations throughout the Atlanta area. Singleton hired and trained employees to prepare fraudulent returns and encouraged them to manipulate the numbers to maximize clients’ refunds.
From 2011 through 2016, Singleton and her employees included false dependents and fraudulent Schedule C businesses on clients’ returns to inflate their refunds. Singleton and her employees also manipulated other individuals into providing their personal ID information by telling them they could qualify for an “Obama Stimulus” payment; others used these individuals’ ID information to file fraudulent income returns in their names without their knowledge or consent.
In addition, Singleton attempted to defraud USAA, a financial institution serving military members and their families, out of more than $421,000 in fraudulent loans and lines of credit, used stolen and fake identities to try to open accounts, obtain credit cards and obtain loans from USAA.
Singleton pleaded guilty in August to wire fraud. In addition to the prison term, she was ordered to serve three years of supervised release and to pay $5,100,129.41 in restitution, including $4,944,524 to the IRS and $105,597 to USAA.
Twin Falls, Idaho: Preparer Mary Galan, 66, has received two years in prison to be followed by three years of supervised release and been ordered to pay $336,926 in restitution to the IRS for conspiracy to defraud the U.S.
According to the plea agreement, from about 2013 to 2015 Galan, owner and operator of Galan Accounting, conspired to defraud the IRS by claiming education credits on clients’ returns while knowing that the clients did not pay qualified higher education expenses for an eligible student.
For tax years 2012 through 2014, Galan and her co-conspirators prepared 187 tax returns for 165 clients claiming $342,901 in education credits from the College of Southern Idaho. These returns claimed $787,630 in qualified expenses from the school, yet records from the college show that of the $787,630 only $8,905 in qualified expenses for only six students were paid.
According to the plea agreement, before claiming the credits Galan did not ask taxpayer clients if they were paying for education or for documentation supporting the credits. She merely asked clients if they had children of college age.
For some clients, Galan also prepared returns directing the IRS to deposit refunds into personal bank accounts belonging to her and her co-conspirators. In total, Galan received direct deposits of taxpayer client refunds of $219,490.
In October, Galan pleaded guilty to one count of conspiracy.
Baltimore – Maryland authorities have filed criminal cases against four preparers who allegedly stole tens of thousands of dollars from the state through tax frauds.
- Darwin Acosta, 30, has been indicted on grounds that between March and June 2014 he prepared and filed fraudulent returns using the personal ID information of numerous victims. Acosta unlawfully had some $53,700 in refunds deposited into his personal bank account.
- Rochelle Cunningham, 46, was indicted on allegations that between March 2005 and April 2009 she obtained the personal ID information of numerous victims and used that information to file fraudulent returns. Cunningham unlawfully deposited more than $80,000 in stolen refunds into various bank accounts she controlled.
- Scott Jacobson, 38, was indicted on charges that during the 2014 season he operated a prep business through which he prepared and filed fraudulent federal and state returns for clients, claiming fraudulently inflated refunds; he unlawfully obtained more than $10,000 in Maryland refunds.
- Evelyn Thompson, 54, faces state allegations that between January 2014 and April 2016, she prepared and filed fraudulent state returns, though she was not registered as a licensed preparer in Maryland. Most of these returns allegedly included false information to inflate refunds. Thompson also charged her clients a fee for the preparation and filing of their returns but allegedly did not report the fees on her personal income tax returns. Authorities said she also included false information on her personal returns to inflate the refunds.
Palestine, Texas: Preparer Jefferson Kincade, 39, has been sentenced to 102 months in prison after pleading guilty in August to fraudulent or false statements in a tax return, theft or conversion of money and aggravated ID theft.
According to court information, Kincade, who also agreed to a cash forfeiture of $110,919.54, prepared returns for individuals at EZ Tax and devised a scheme to prepare false returns, steal clients’ refunds and use the clients’ and other individuals’ IDs to accomplish the theft.
Kincade made false statements and representations in the returns to inflate refunds. He intercepted the refunds by printing the checks, not giving them to his clients and then cashing them with the help of two individuals not associated with EZ Tax.
Columbia, Mo.: Preparer David Lee Keithley, 63, has been sentenced to two years in prison without parole and been ordered to pay $291,041 in restitution to his victims for defrauding clients and failing to pay his personal income taxes.
Keithley, who pleaded guilty in August to one count of assisting in the filing of a false income tax return and one count of failing to file an income tax return, owned and operated the prep business Keithley and Associates. After accepting funds from his prep clients, Keithley failed to make the clients’ tax deposits to the government. Instead, he used the money for his own personal benefit.
When clients contacted Keithley after receiving letters from the IRS indicating these returns had not been filed or taxes had not been paid, he told his clients he would contact the IRS to correct it.
The total amount of these misappropriated funds is $120,354.
Keithley also admitted that he willfully failed to file federal income tax returns for tax years 2009 through 2013. The total amount of tax owed by Keithley to the IRS for those years is $148,423. In addition, Keithley owes the state of Missouri $22,264 for state income taxes due for the years 2009 to 2013.
The total loss caused by Keithley’s criminal conduct is $291,041.
According to court documents, Keithley has a lengthy criminal history of theft and fraud, including three state felony convictions that involved, among other crimes, thefts from business clients and stealing funds that were supposed to be used for a client’s tax payment.
Baton Rouge, La.: Preparer Joseph A. Gillies faces felony charges for a tax fraud involving “ghost” companies and phony business losses that cost Louisiana taxpayers hundreds of thousands of dollars.
Authorities said he prepared and submitted hundreds of returns that contained fabricated business losses for companies that, in some cases, did not exist. Numerous clients told investigators that they did not report any business losses when they provided Gillies with their tax records. Some of those returns contained fabricated business losses reported when the clients weren’t even business owners.
From 2012 to 2015, the alleged fraud cost Louisiana taxpayers an estimated $768,740.