Tax Fraud Blotter: ‘It’s jail for you!’
A thousand returns and 45 bank accounts; “what to write and where to write it;” the Spirit was weak; and other highlights of recent tax cases.
Valdosta, Ga.: Saferia Johnson, 34, and Leo McGill, 51, of Calera, Ala., have pleaded guilty to one count of conspiracy to steal government funds, based on a fraudulent refund scheme seeing more than $2 million in refunds, and to one count of aggravated ID theft.
Co-defendant Detrone Middleton, 38, of Douglas, Ga., entered his guilty plea to the charges on March 15.
Evidence showed that in 2012 the IRS began an investigation after receiving information that a number of accounts controlled by the three co-defendants and others had received a large number of federal tax refund deposits issued in the name of people other than the owners of the bank accounts. Investigators pinpointed individuals whose identities had been used on the returns in question and determined that Johnson, McGill and Middleton were involved in a scheme where fraudulent federal returns were filed for tax years 2010 and 2011 and refunds deposited into 45 bank accounts.
The defendants admitted to filing some 984 fraudulent returns using stolen IDs for tax years 2010 and 2011. The returns, filed without the knowledge or permission of the individuals whose IDs had been stolen, sought refunds of $2,082,275. Refunds totaling $1,498,776.00 were issued by the IRS on those returns in the form of direct deposits to the 45 bank accounts, checks, or debit cards. Johnson, McGill and Middleton admitted that those amounts were received by them or their associates. Most of the stolen IDs were from minors at the time the returns were filed.
The three each face up to five years in prison for the conspiracy charge and two years for the aggravated ID theft; they may also be ordered to pay $1,498,776 restitution to the United States.
Durham, N.C.: Preparer Keesha Frye has been sentenced to 121 months in prison for conspiring to defraud the United States and preparing fraudulent returns for herself and her clients.
According to documents and information in court, Frye owned and operated KEF Professional Tax Services, and from 2012 through 2014 she and other KEF employees falsified clients’ returns with fake and inflated sources of income to qualify for and maximize the Earned Income Tax Credit and increase refunds. Frye also filed false personal returns that claimed bogus childcare expenses and business losses.
Her scheme caused a tax loss exceeding $1.7 million. Frye was ordered to serve three years of supervised release and pay $1,742,823 restitution to the IRS.
New York: Robert Bertrand, former CFO of Soupman Inc., has been sentenced to nine months in prison, to be followed by a year of supervised release, for failure to pay Medicare, Social Security and federal income taxes.
Soupman, based on Staten Island, licenses its name and recipes from Al Yeganeh, the inspiration for the “Soup Nazi” character on “Seinfeld.”
According to court filings and facts in court, between 2010 and 2014 Bertrand made unreported payments to Soupman employees and compensated certain employees in large unreported stock awards. He never reported this employee compensation to the IRS and never paid Medicare, Social Security and federal income taxes on the side payments or the stock awards, despite a 2012 warning from an external auditor that these payments should be reported.
From 2010 through 2014, Soupman’s total approximate unreported cash and stock compensation exceeded $2.85 million; total approximate tax loss to the U.S. exceeded $593,000. Bertrand, who pleaded guilty in December, was also ordered to pay $78,518.18 in restitution to the United States.
Omaha, Neb.: Preparer Sharon Williams-Combs, 47, has been convicted on 14 counts of aiding and assisting in the preparation or presentation of false or fraudulent returns, according to published reports.
Williams-Combs worked at a Jackson Hewitt kiosk at an Omaha Walmart, reports said, and willfully assisted taxpayers in filing fraudulent returns by claiming the taxpayers had personal business income that in fact they did not have.
According to court documents, she prepared a return in 2014 for an undercover IRS agent who told Williams-Combs that she was a mom and did not bring any documentation of personal income or business. Williams-Combs reportedly told the agent “what amounts to write and where to write it.”
When the agent “inquired what business it was that she allegedly had,” prosecutors wrote, “Williams-Combs told her it was babysitting,” according to reports.
Sentencing is July 6, when she faces up to three years in prison and a $100,000 fine on each count, news outlets added.
Charlotte, N.C.: Former minister William Todd Coontz, 51, of Ft. Lauderdale, Fla., has been convicted of failure to pay taxes and aiding and assisting in the filing of false returns.
According to filed court documents and trial evidence, from 2010 to 2014 Coontz was the minister of Rockwealth International Ministries and author of such books on faith and finances as “Please Don’t Repo My Car” and “Breaking the Spirit of Debt.” Coontz also operated two for-profit companies, Legacy Media and Coontz Investments and Insurance.
Beginning in at least tax year 2000 and continuing through at least tax year 2014, Coontz filed delinquent 1040s and consistently failed to make timely payments on the taxes he owed, despite multiple letters and late notices from the IRS. For tax years 2011 through 2013, Coontz filed late returns and did not pay the total assessed taxes, resulting in total tax liabilities of more than $326,394.
Evidence established that Coontz also filed federal income tax returns for tax years 2010 through 2013 that underreported his income. He engaged in a check-cashing scheme involving payments for travel reimbursements for speaking engagements and the sale of books and other products. During 2010 through 2013, he regularly traveled to speak at various ministries for which he was paid speaking fees and reimbursed for travel expenses. Coontz hid income from the IRS by claiming the travel as a business expense while simultaneously receiving travel reimbursement that he kept as personal income.
To conceal the payments, he directed or caused his travel assistant to direct the ministries to make reimbursement checks for travel expenses directly payable to “Todd Coontz” and to send the checks to his personal address rather than to Rockwealth Ministries. He then cashed these checks rather than deposit them into a bank account. Coontz also told his travel assistant to bill the churches for the cost of a first-class ticket even though his actual expenses for those tickets was substantially less.
According to trial evidence and other court records, during 2010 through 2013, Coontz also directed that other checks, such as payments for speeches and for the purchase of books and other products, be made payable to “Todd Coontz” and sent to his personal address.
He concealed and cashed at least 102 checks for travel reimbursements, speeches, and books and other products, totaling at least $252,037.99 and causing his total income for the relevant tax years to be underreported. During 2014, Coontz continued to conceal and cash checks received as payments, cashing at least 32 checks totaling $105,454.90 not reflected in his accounting records.
Coontz also underreported his income on his tax returns for tax years 2010 through 2013, failing to include as income the payments made by his corporations and ministry for his personal expenses, including payments for the benefit of his family members and for meals and entertainment. Contrary to the advice of his CPA about comingling personal and business funds, Coontz spent substantial amounts of business funds to pay for personal expenditures that were falsely classified as business expenses.
These expenses included payments totaling more than $227,700 for clothing and more than $140,000 to pay for M&E at various restaurants, including more than 400 charges at movie theaters. He also used residences and luxury vehicles titled in the names of companies he owned and controlled. Some of the items connected to these expenses were used by family members and there were no records kept about their supposed business use. In 2012, Rockwealth Ministries also purchased a $1.5 million condo as a parsonage for Coontz.
The failure to pay tax charge carries a maximum prison term of one year and a $100,000 fine, per count. Aiding and assisting in the filing of false returns carries a maximum of three years and a $250,000 fine, per count.