Special Tax Shelter Strategy; ghost prepared; material falsehoods; and other highlights of recent tax cases.
Philadelphia: Daniel A. Pallen, 46, of Springfield, Pennsylvania, entered a plea of guilty to one count of tax evasion and one count of mail fraud, arising from his submission of over $400,000 in fictitious checks to evade payment of his federal taxes and to purchase a new electric utility truck.
Pallen signed and submitted 14 fake certified checks to the IRS in November 2024 and January 2025, totaling $294,454.52. Pallen also submitted payment vouchers designating that his fictitious checks be applied to his tax liabilities for Tax Years 2013, 2014, 2015, 2016, 2017, 2018, 2020 and 2022.
Pallen's checks were fraudulent because they all used a bank routing number associated with the Federal Reserve Bank and a false bank account number that was Pallen's Social Security number. In February 2025, the defendant called the IRS to ask whether his checks had been received and to inquire as to why the corresponding payments had not been applied to his tax liabilities.
In addition, Pallen signed and used a fake cashier's check in the amount of $129,710.51 to purchase a new electric utility truck in October 2024 from Company A. The check that he provided to Company A to pay for the electric truck was fraudulent and forged; the account and routing numbers listed on the check belonged not to Pallen, but to Company A's own bank account.
After Pallen's sham check bounced and Company A secured the electric utility truck, Pallen, who is a licensed attorney and the owner of a law firm in Media, Pennsylvania, filed a civil lawsuit in November 2024 against Company A that sought the "immediate return" of the vehicle, along with costs and attorneys' fees.
The lawsuit, which was signed and verified by Pallen, falsely represented that Company A unlawfully possessed and had no ownership, right, or title to the electric utility truck, when, in fact, the defendant knew the vehicle had been purchased with a bounced check that was forged and fictitious. His verified lawsuit also attached a made-up Form 1099-A tax filing that falsely claimed that Company A had borrowed $129,710.51 from a trust managed by Pallen. In December 2024, Pallen served a notice of default and praecipe for default judgment against Company A, which again sought possession of the electric utility truck and a money judgment against Company A.
The defendant is scheduled to be sentenced on December 10 and faces a maximum possible term of 25 years in prison.
Detroit: A Michigan man pleaded guilty to filing a false claim in connection with his $7 million scheme to defraud the IRS.
Rodney Underwood, of Detroit, prepared and filed with the IRS more than 200 nearly identically false tax returns on behalf of clients from various locations in Detroit. Underwood "ghost prepared" these returns, meaning he left the paid preparer section blank so the returns appeared to be self-prepared. On each of the false tax returns, Underwood reported false dividend income amounts and false withholding amounts to generate refunds that the clients were not entitled to receive.
Underwood did not report fees he received from the scheme as income on his own individual tax returns. The false tax returns filed by Underwood fraudulently claimed more than $7 million in refunds and caused an actual loss to the government of approximately $6.2 million.
Underwood pleaded guilty to making a false claim. He is scheduled to be sentenced on Jan. 6, 2027, and faces a maximum penalty of five years in prison.
Las Vegas: A Nevada tax preparer was sentenced to 60 months in prison for operating two false tax return schemes.
From 2015 through 2025, Michael J. Moore, of Las Vegas, a former CPA, operated a tax preparation, bookkeeping and accounting business that advertised itself as specializing in clients from the adult entertainment industry. Moore promoted a fraudulent tax avoidance scheme called the "Special Tax Shelter Strategy." As part of the scheme, Moore promised clients that in exchange for a fee he could prepare a tax return that eliminated the taxes they owed to the IRS and, in most cases, create a large tax refund. The fees Moore required as part of this "Special Tax Shelter Strategy" were paid by the clients using the refund money received from the IRS. In many instances, clients were required to pay tens of thousands of dollars in fees.
To carry out the "strategy," Moore made up false and fraudulent entries on the clients' tax returns. In many cases, he did this by including false business expenses frequently amounting to hundreds of thousands of dollars in losses. In some instances, Moore prepared and filed the tax returns using a former employee's name and personal identifying information without their permission or knowledge.
After he had been charged for his role in the scheme, Moore engaged in a separate scheme involving preparation of false returns for clients. As part of this second scheme, Moore again reported totally false items on client tax returns.
In total, Moore caused a tax loss to the IRS of more than $3.5 million.
Moore pleaded guilty to one count each of tax evasion, helping a client file a false tax return, wire fraud and aggravated identity theft.
Philadelphia: University of Pennsylvania's Fels Institute of Government graduate William Dunbar, a key lobbyist for Philadelphia Mayor and 2016 University of Pennsylvania's Fels Institute of Government graduate Cherelle Parker, pled guilty to a six-year tax fraud scheme.
Dunbar worked with Parker on her 2023 campaign for mayor. He faces a maximum of 16 years in prison, three years of supervised release and a $1 million fine.
Dunbar filed a series of annual federal and state individual income tax returns containing "material falsehoods."
The returns, filed for each of the tax years from 2019 through 2024, were made for himself and his wife through TurboTax. Each of the documents contained a declaration that it was made under the penalties of perjury.
The attorney's office estimated that the resulting tax loss to the United States was between $350,000 and $750,000. Dunbar now faces two counts of tax evasion, one count of making and subscribing a false tax return, and one count of aiding and assisting the presentation of false tax returns.
During the 2023 Philadelphia mayoral election, Dunbar worked as an unpaid adviser. He will be sentenced on Jan. 11, 2027.
Portland, Maine: A Hampden man pleaded guilty to one count of tax evasion.
Brandon Wilson, 55, owed substantial back taxes based on his tax returns for 2010 through 2017. After the IRS levied Wilson's bank accounts as part of its collection efforts, Wilson began conducting his debt collection business without holding bank accounts in his own name. He did this by having accounts opened under the names of individuals running businesses in Massachusetts and Virginia. While these entities were ostensibly conducting debt collection services for Wilson, they were also holding money and conducting personal and business transactions on his behalf. Wilson directed specific payments out of the accounts, and received a series of smaller payments through Cash App, PayPal and other means. This arrangement allowed Wilson to continue to control his money while frustrating the IRS's ability to collect the taxes owed.
Wilson faces up to a year and a day in prison, a fine of up to $250,000, and three years of supervised release.
Belleville, Illinois: A Belleville tax preparer was sentenced to three years in prison and ordered to pay more than $700,000 in restitution after she admitted to filing false tax returns for years.
Dormeshia A. Haire, 38, pleaded guilty to one count of making false statements on a tax return, one count of wire fraud and three counts of aiding and abetting the submission of false and fraudulent returns.
Haire operated Dormeshia Taxes, Dormeshia Haire Taxes, Dormeshia Haire Tax Services and One Tax Guru Financial Services. Haire devised a scheme to defraud the government by falsifying her personal income and her clients' business expenses for tax years 2019 through 2024. She reported lower gross income for herself so that she would not have to pay the full amount of taxes owed to the government.
For some of her clients, she inflated business losses and reported they had businesses they did not own so they would receive larger tax refunds and she would receive a higher commission.
Investigators determined the government lost at least $654,819 from Haire's income taxes and her clients' refunds. Haire was ordered to pay $716,406 in restitution to the IRS and the Illinois Department of Revenue. Haire agreed to pay interest on the restitution.
Wichita, Kansas: A Kansas businesswoman pleaded guilty to defrauding customers of her bookkeeping company by taking their money but leaving their tax bills unpaid.
Nicole Clem, 43, of Augusta pleaded guilty to one count of wire fraud and one count of failure to pay employment taxes.
Clem served as owner and operator of Bookkeeping N Beyond, which provided individual and business clients with accounting, tax preparation and payroll services.
Clem used Automated Clearing House electronic transfers to withdraw funds from her clients' bank accounts that were designated to pay their employment taxes or other taxes. Instead, Clem spent the money on personal expenses such as airline and concert tickets, hotels, restaurants, student loan payments, vehicle repairs and essential oils. An investigation identified more than 20 clients with losses totaling more than $1 million.
Clem was not accurately reporting her income to the IRS and failed to pay $35,222 in employment taxes for her own business from 2017 to 2023.
She is scheduled to be sentenced on December 2, 2026.
