Some of our favorite recent tax fraud cases.
San Diego: A federal court has permanently barred Lawrence Preston Siegel from preparing federal returns for others, providing tax advice for compensation or any promise of compensation and working for any business that provides tax advice or prepares returns.
Siegel is also a fugitive from the State of California, wanted on a 20-count criminal complaint filed in 2014, charging him with Medi-Cal fraud, grand theft, forgery, ID theft, financially dependent adult abuse and tax evasion.
The civil complaint alleges that Siegel impersonated licensed California attorneys and used multiple aliases, including Larry Lave and Yehuda Lave, to falsely represent that he is a licensed attorney and CPA to recruit customers and implement his tax frauds. According to the complaint, he resigned from the California bar in 1994 and lost his CPA license in 1997 after he was convicted of federal crimes, including tax evasion; Siegel allegedly never regained either accreditation.
The complaint alleges that among his tax fraud schemes, Siegel falsely advised his customers, typically high earners who own profitable businesses, that they could establish companies in another state, usually Nevada, then treat their California home as an out-of-state corporate office. Siegel claimed that doing so would transform a vast array of non-deductible personal expenses into tax-deductible business expenses, according to the complaint.
The complaint details how Siegel boasted about this fraud in e-mails, including one where he falsely claimed that his customers are entitled to free housing as tax-free compensation from their out-of-state companies and that the “housing can [b]e luxurious and cost thousands a month” because of “an assumption that corporations don’t waste money.”
In conjunction with his fraud schemes, Siegel allegedly prepared client returns. In some instances, he filed returns without reviewing them with his clients or obtaining their permission to file, according to the complaint. He is alleged to have fraudulently claimed clients’ personal purchases as deductible business expenses on returns he prepared.
For example, the complaint states that Siegel deducted on one couple’s tax returns purchases at Tiffany, Royal Caribbean Cruise Lines, Louis Vuitton and Princess Cruise Lines, allegedly trying to hide these deductions by lumping them together and reporting them as large expenses for “supplies” or “medical records and supplies.”
According to the complaint, Siegel also attempted to delay and obstruct IRS examinations of clients who entered into his fraud schemes, allegedly providing false corporate documents to the IRS in order to deceive auditors, producing bogus contracts to IRS auditors and lying to IRS officials during U.S. Tax Court litigation when asked to confirm information on behalf of his customers.
Detroit: The U.S. has barred Liberty Tax Service franchise owner Syed N. Ahmed and his companies from preparing federal returns for others.
According to the complaint, Ahmed and his businesses operated at least 10 Liberty Tax Service franchise locations in the Detroit and Chicago areas. The complaint alleged that his employees prepared federal income tax returns containing false information to inflate refunds or refundable credits for clients. The government alleged that defendants prepared returns that included, among other things, false or inflated Schedule C income and expenses, bogus dependents, false filing statuses, improper education credits and false itemized deductions.
The lawsuit further alleged that the defendants’ Liberty franchises prepared 17,759 federal income tax returns between 2010 and 2013. According to the complaint, defendants’ conduct cost the U.S. Treasury $2.8 million, based on audit adjustments the IRS made to returns for 2010 to 2013 that were prepared and filed by Ahmed’s Liberty franchises. Total loss to the government could be much higher, the complaint states.
Ahmed and his companies agreed to the entry of the injunction but did not admit the allegations in the civil complaint against them.
Charlotte, N.C.: Tamny Denise Westbrooks, 52, of Fulshear, Texas, has been convicted of three counts of filing false federal tax returns and one count of corruptly endeavoring to obstruct the IRS.
According to evidence, Westbrooks, a contracted manager of JATS Tax Service, underreported her net profits by inflating her business expenses for tax years 2007, 2008 and 2009. She also filed false returns for herself and others and paid workers in cash while failing to file W-2s or 1099s.
Sentencing is March 18, when Westbrooks faces a maximum of three years in prison and a fine of up to $250,000 for each count.
San Diego: Former U.S. Navy sailor Leonard Damon Washington has pleaded guilty to tax evasion and filing false returns for a scam that resulted in more than $1 million in inflated refunds for fellow Navy service members and more than $140,000 in phony fees for Washington.
According to case papers and admissions in court, in 2010 Washington marketed himself to more than 140 Navy service members as someone who could assist in preparing and filing income tax returns. He convinced other sailors to hire him as their preparer and pay him $1,000 per return by using a variety of false and misleading representations, including that he could obtain “special military tax” deductions and other special prep services because of their military status.
Washington then prepared and filed false income tax returns on behalf of clients, including returns that claimed falsified gambling winnings and phantom tax withholdings. Although he received more than $140,000 in fees from clients, Washington concealed his role as their paid preparer from the IRS and directed his fees into various bank accounts to impede IRS efforts to determine his true income.
Washington spent a substantial portion of his fraud proceeds on hotels, flights, restaurants, luxury items, jewelry and other personal expenses, and evaded more than $49,000 in personal federal income taxes he owed for 2010.
Killeen, Texas: Resident Letitia Janelle Warren was sentenced to one year and a day in prison and ordered to pay restitution of $106,721 to the government after admitting to lying on returns, according to published reports.
News outlets said that from 2008 to 2012 Warren used Tax Slayer online tax preparation software and worked out of her home. She reportedly admitted to filing 38 returns for customers that fraudulently claimed education credits, itemized deductions and business income.
She typically charged $150 to $160 for the preparation of each return and was paid in cash, reports said, adding that Warren also confessed to making false claims on her own returns, including omitting approximately $48,000 in income on her 2011 return.
