Some of our favorite recent tax fraud cases.
Dayton, Ohio: Fesum Ogbazion, of Beavercreek, Ohio, and Kyle Wade, formerly of West Chester, Ohio, have been arrested after being indicted for impeding the administration of the Internal Revenue Code, conspiracy to commit wire fraud, and wire fraud. Ogbazion is also charged with six counts of money laundering, one of evasion of payment of employment taxes, eight counts of failure to collect and pay over employment taxes and one count of bank fraud.
According to the indictment, Ogbazion owned and controlled ITS Financial LLC, the national franchisor of Instant Tax Service, which Ogbazion founded and which claimed to have more than 1,100 franchise locations throughout the U.S. in 2009. Wade was the vice president of financing for ITS and owned multiple ITS franchises.
From about January 2004 through November 2012, Ogbazion and Wade schemed to obstruct the IRS, with numerous ITS franchises filing false federal income tax returns without valid W-2s and without the permission of taxpayer clients. The returns included false and inflated Schedule C income in an attempt to increase the EITC.
Over several years, Ogbazion also instructed an ITS employee to e-file large volumes of unsigned returns on the first day of the “tax filing season,” then falsely backdated customer filing authorizations. ITS also maintained and filed false documents with the IRS, including fabricated W-2s created by ITS employees using tax prep software, and forged client signatures on various false IRS forms.
From about December 2009 through November 2012, Ogbazion and Wade also conspired to generate loan and prep fees for ITS and its franchises by luring low-income and unsophisticated taxpayers into ITS franchises through a nationwide advertising campaign that offered customers RALs. Despite ITS having no independent lender to fund the promised loans, ITS collected loan application and prep fees from its customers.
For the 2011 tax filing season, Ogbazion and Wade represented to ITS staff, franchises and customers that RALs were obtained through an independent lender even though Ogbazion owned the purported lender, which had limited lending capabilities. Ogbazion knew that the overwhelming majority of loan applications would be denied.
The indictment alleges that ITS generated more than $12.5 million in fees in 2010 and more than $3.1 million in fees in 2011 from this loan scheme.
The indictment also alleges that Ogbazion was responsible for ITS’s and TaxMate LLC’s federal employment payroll taxes and that he failed to pay over approximately $1.26 million in payroll taxes due from these businesses during four tax quarters in 2009 and 2010. He also evaded IRS attempts to collect ITS and TaxMate federal payroll taxes by directing business revenue to nominee accounts, placing assets in the names of nominee entities and making false statements to an IRS revenue officer during the course of collection activity, among other acts of concealment.
If convicted of impeding the administration of the IRS, the defendants face a maximum of three years in prison and a fine of up to $250,000. If convicted of conspiracy to commit wire fraud and wire fraud, they face a maximum of 30 years in prison and a fine of up to $1 million for each count.
If Ogbazion is convicted of money laundering, he faces a maximum of 20 years in prison and a fine of up to $500,000. If convicted of tax evasion and failure to pay over employment taxes, he faces a maximum of five years in prison and up to a $250,000 fine for each count.
Finally, Ogbazion faces a maximum of 30 years in prison and up to a $1 million fine if he is convicted of bank fraud.
Phenix City, Ala.: Preparer Lasondra Miles Davis, 37, has been sentenced to two years in prison to be followed by one year of supervised release, and been ordered to pay $1,941 in restitution to the IRS for her involvement in a stolen ID tax fraud, according to published reports.
Davis pleaded guilty earlier this year to one count of aggravated ID theft; her mother, Teresa Floyd, pleaded guilty earlier this year to one count of conspiracy to defraud the U.S. and one count of aggravated ID theft, reports added.
News outlets cited court documents that said that between March 2011 and May 2014, Davis and Floyd operated several tax prep businesses, including T & L Tax Service. Davis obtained stolen IDs, which, according to cited allegations in the superseding indictment, Floyd then used to file more than 900 false federal income tax returns that claimed more than $2.5 million in refunds.
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