Tax Fraud Blotter: Is there a doctor in the house?
Eighteen months, guaranteed; former CPA, current inmate; trust them not; and other highlights of recent tax cases.
East St. Louis, Ill.: Preparer Evelyn Johnson, 56, has been sentenced to 18 months in prison following her conviction for 29 counts of aiding and assisting in the preparation of false federal returns.
Johnson operated the E.J. Johnson Tax Service, which offered “refund guarantee” and where an IRS undercover agent was sent to have her taxes prepared after the service detected a potential pattern of fraudulent returns. Johnson prepared a false return for the agent that falsified Schedule A deductions.
The tax loss to the U.S. was established to exceed $769,000.
Canfield, Ohio: Dr. Nicholas Garritano, 55, has been sentenced to six months in jail and ordered to pay $105,673 after failing to pay over Social Security, Medicare and employment taxes collected from his employees.
During 11 quarters spanning 2009 through 2012, Garritano was president and sole shareholder of the corporation Dr. N.M. Garritano Inc., and was responsible for the corporation’s business and financial operations. He caused the corporation to pay taxable wages and salaries to its employees, from which federal income and FICA taxes were withheld, according to court documents.
Garritano, who previously pleaded guilty in the case, filed quarterly federal forms on behalf of the corporation relating to the employment taxes. Although the corporation withheld substantial employment taxes from the wages of its employees for each quarter, he failed to pay over the full amount of the withheld taxes to the IRS, according to court documents.
St. Louis: Former CPA Mark Beckham, 62, has been sentenced to 36 months in prison for obstructing the administration of the internal revenue laws.
Beckham, found guilty in September of one felony count of attempting to interfere with the administration of the internal revenue laws, had his license to practice as a CPA revoked after a federal mail fraud conviction in 2006.
Evidence showed that Beckham prepared 2009 and 2010 individual and corporate federal income tax returns for a client that were subsequently audited by the IRS. During this audit, Beckham provided his client’s dayplanner calendar to the IRS after altering the book to reflect that Beckham’s client worked for a company that had large tax losses. In fact, Beckham’s client had not worked for the company. The dayplanner was given to the IRS to support deductions for non-passive losses on the returns Beckham prepared for his client.
Las Vegas: Business owner Maria Larkin, 55, has been sentenced to a year and a day in prison for evading payment of employment taxes and penalties.
According to evidence. Larkin owned and operated Five Star Home Health Care Inc. and was responsible for collecting and paying over income, Social Security, and Medicare tax withheld from her employees’ wages. From 2004 through 2009, Larkin did not pay over to the IRS the employment taxes she withheld and the IRS assessed trust fund recovery penalties against Larkin for these years.
Larkin concealed her assets and income to evade paying the penalties and to obstruct the IRS’s efforts to collect the outstanding taxes. She lied to the IRS regarding her ability to pay, changed the name of her business, placed her business in the name of a nominee, had her employees cash checks for her and bought a home in the name of a nominee.
She evaded more than $1.6 million in taxes.
Larkin was also sentenced to three years of supervised release and ordered to pay $1,153,633.50 in restitution to the IRS.
Porterville, Calif.: Preparer Marie E. Sherrill, 57, has been sentenced to four years in prison for wire fraud and tax fraud.
According to court documents, Sherrill operated a bookkeeping and prep business under the name Sherrill Financial Services. Between January 2011 and December 2014, Sherrill prepared false returns for her clients containing false deductions to inflate refunds, which caused a loss to the IRS of some $255,900.
Sherrill also used the intimate financial knowledge she gained from her clients to identify victims she could lure into an investment fraud scheme. She told victims of this scheme that their money would be put into “pooled investments” with the money of other investors to earn a high rate of return.
The money was, in fact, never put into any investment, but was used instead to pay Sherrill’s personal expenses or to make lulling payments to earlier investors in order to make them believe their money was earning a profit. The victims were defrauded of at least $1.3 million.
She was also ordered to pay more than $1.3 million in restitution to the victims and $255,900 to the IRS.
Annapolis, Md.: The Maryland Comptroller has suspended processing electronic returns from five preparers due to a high volume of questionable returns received.
The preparers, all in Maryland, are: Family Benefit Financial Group, Baltimore; C & A Financial Services, Hagerstown; Millennium Consultant INT, Upper Marlboro; Hope Unlimited Tax Service, District Heights; and Big Ben Tax Service, College Park.
Wilson, N.C.: Preparer Tawanda Denise Pitt has pleaded guilty to filing a false claim for refund with the IRS.
According to documents and court information, in early 2015 Pitt managed the prep business Integritax and falsified client returns with false dependents and education credits and fake businesses to seek refunds. Pitt also admitted that she trained other preparers to file fraudulent returns.
She caused a tax loss of $550,000 to $1.5 million; the total tax loss resulting from false education credits alone exceeded $780,000.
Sentencing is May 8, when Pitt faces a maximum of five years in prison, a period of supervised release and monetary penalties. She also agreed to pay $203,106 in restitution to the IRS.
Ferndale, Mich.: Local resident Durand Micheau, 48, has been sentenced to 114 months in prison on convictions connected to a scheme to defraud the IRS.
Micheau was convicted in May 2017 on numerous counts of conspiracy, mail fraud, aggravated ID theft and engaging in illegal monetary transactions. Micheau’s wife, Sharon Gandy-Michaeu, and two of her brothers, Anthony Gandy and Christopher Gandy, were convicted on the same charges in March. Anthony Gandy received 80 months in prison and Sharon Gandy-Micheau and Christopher Gandy six years each in prison.
Evidence established that the defendants participated in a scheme to defraud the federal government that centered on the filing of over 20 fraudulent 1041s. The returns requested more than $1.4 million in refunds based on income tax withholdings that never occurred. The IRS mailed 14 refund checks to the defendants that were payable to the trusts and totaled $940,000.
To facilitate the scheme, the defendants obtained EINs for the trusts from the IRS and opened post office boxes and bank accounts in the names of the non-existent trusts. The U.S. Treasury refund checks were either deposited into the bank accounts, followed shortly thereafter by large cash withdrawals, or cashed at local check-cashing stores.
In addition, the scheme used the names and ID information of a number of individuals whose purses or wallets had been lost or stolen.
Micheau also received three years of supervised release and was ordered to pay $360,500 in restitution to the U.S. Treasury.