Tax Fraud Blotter: Last resorts
Several business names; politics as usual; fraudulent spins; and other highlights of recent tax cases.
Tangipahoa Parish, La.: Preparer Alicia Washington, a.k.a. Alicia Keith, has been sentenced to 42 months in prison for her involvement in stolen ID tax fraud.
Washington pleaded guilty in February 2017 to one count of conspiracy to defraud the U.S. and to commit theft of public money, wire fraud and aggravated ID theft, and one count of aggravated ID theft.
According to court documents, she operated as a preparer using several business names. From 2008 to 2016, she conspired to prepare false returns using stolen IDs; the conspirators stole names and Social Security numbers of individuals who had been arrested or imprisoned and e-filed fraudulent returns seeking refunds. The IRS provided the fraudulent refunds in the form of checks or prepaid debit cards.
She was also sentenced to two years of supervised release and ordered to pay $809,605 restitution.
Glenside, Pa.: Political consultant William R. Miller V, 44, pleaded guilty to one count of federal tax evasion.
According to case documents and statements in court, Miller evaded federal income taxes by failing to file returns and by concealing income when he finally did file returns for tax years 2010 through 2014. During that time, Miller cashed numerous checks issued to him for his Philadelphia-area political consulting work and deposited only a portion of the proceeds into bank accounts. After learning of an IRS investigation, he tried to conceal his income in March 2016 by filing federal returns for 2010 through 2014, which themselves were false.
In all, Miller attempted to evade taxes on $393,359 in personal income, resulting in a $94,233 federal tax loss for tax years 2010 through 2014.
Sentencing is Aug. 13. The tax evasion charge is punishable by a maximum of five years in prison and a potential fine of $250,000 or twice the gross gain or loss from the offense.
Princeton Junction, N.J.: Business owner Albert Chang, 71, has been sentenced to 21 months in prison for failing to report more than $1.5 million in income he fraudulently diverted to overseas shell companies.
He previously pleaded guilty to information charging him with one count of conspiring to evade income taxes and one substantive count of tax evasion.
According to case documents and statements in court, Chang and Michael Q. Fu, 54, of Cranbury Township, N.J., co-owned and operated United Products and Instruments in Dayton, N.J. UNICO was established by Chang and Fu in 1991 and primarily engaged in the sale and export of microscopes and centrifuges for medical purposes. As part of the conspiracy, Chang and Fu created two shell companies in China: Action Towers and Bench Top Laboratories. Chang and Fu then diverted business income to themselves by funneling money to the shell companies’ bank accounts and deducting the diverted funds from UNICO’s corporate return as the cost of goods sold or commission.
The two also had Hong Kong-based Shanghai Electric overbill UNICO some 5 percent on legitimate invoices. Once UNICO paid the invoices, they directed Shanghai Electric to wire transfer the overbilled amount to their accounts in China.
The two failed to report that income on their federal income tax returns: Chang failed to report $1,559,200, resulting in a tax loss of $237,064; Fu failed to report $1.57 million, resulting in a tax loss of $321,141.
Chang was also sentenced to three years of supervised release. Restitution will be determined at a later date. Fu previously pleaded guilty and was sentenced to 37 months in prison.
Rochester, N.Y.: Craig Jerabeck, 57, has pleaded guilty to conspiracy to commit wire fraud and filing a false return.
In 2001, Jerabeck and co-defendants Jeb Tyler and Jason Guck started 5LINX Enterprise, a multi-level marketing company that offered utility and telecommunications services, health insurance, nutritional supplements and business services. 5LINX independent representatives sold products and services and recruited additional representatives. Jerabeck was president and CEO, Guck was vice president and secretary, and Tyler was also a vice president.
As part of his plea agreement, Jerabeck admitted that he, Guck and Tyler received approximately $2,310,510 from a Florida vendor without the knowledge of the 5LINX investors, board of directors or other stockholders. He also admitted that he, Guck and Tyler were each prohibited from receiving such money by their stockholders agreements.
Jerabeck also provided false information on his personal returns for the years 2011, 2012, 2013 and 2015. He failed to report income he received from 5LINX and took undeserved deductions (commissions that were not paid). The false returns resulted in a tax loss to the IRS of approximately $118,628.
The charges carry a maximum of 20 years in prison and a fine of $250,000.
Huntingdon, Pa.: Inmate Jeremy Baney, age 47, has pleaded guilty to aiding and assisting in making false statements to the IRS.
Authorities said that Baney admitted to being involved in a prison tax scheme from November 2009 through February 2012. He obtained the names and Social Security numbers of inmates to file false returns or would send that information to a former inmate who would then prepare and file the fraudulent 1040EZs with fictitious wages and holdings. The government alleged that Baney attempted to receive refunds totaling $236,407.
Salisbury, Md.: Dr. Warren Gregory Belcher, 60, has been sentenced to 15 months in prison to be followed by a year of supervised release for filing fraudulent income tax returns and attempting to obstruct the internal revenue laws.
According to evidence, Belcher operated a chiropractic business for nearly 20 years. During that time, he received income for chiropractic services from insurance companies, patients and other third parties, including another chiropractor in Baltimore. From 2009 through 2015, Belcher filed individual income tax returns that fraudulently claimed that he had earned no business income, when in fact evidence established that he received payments totaling more than $350,000 during that time.
He filed his false 2015 return after being notified that he was the target of a federal grand jury investigation. He filed an additional false tax return for 2016 while under indictment and awaiting trial.
Evidence included dozens of letters that Belcher sent to insurance companies and other third parties in which he threatened that the companies could be subject to civil and criminal penalties for reporting to the IRS payments they made to him for his services. He also threatened an accountant to prevent the accountant from reporting his income to the government. Belcher himself also submitted fraudulent forms to the IRS to falsely represent that companies that had reported his income to the IRS had not actually paid him.
For 2009 and 2011, the IRS mailed Belcher notices informing him that his returns underreported his income and assessed additional taxes and penalties against Belcher for his fraudulent returns, including a $5,000 penalty for filing a frivolous return. Belcher responded by sending letters to the IRS asserting that the agency was violating the law by assessing and collecting his taxes.
Belcher was also ordered to pay $63,763.58 restitution to the IRS.
Scottsdale, Ariz.: Resort operator William Whittington, 68, formerly of Pagosa Springs, Colo., has pleaded guilty to filing a false return.
According to court documents, Whittington filed a false 2010 individual income tax return on which he underreported his income by more than $390,000. From 2010 to 2012, he directed that the Springs Resort & Spa in Pagosa Springs, run by him and members of his family, pay many of his personal expenses, which for these years resulted in him underreporting his income by more than $900,000 and not paying more than $360,000 in taxes.
From 2003 to 2010, Whittington used two offshore bank accounts in Liechtenstein to generate approximately $9.7 million in investment income. He did not pay taxes on this income, resulting in a tax loss of at least $1.5 million.
Sentencing is Oct. 9. In addition to a prison sentence, Whittington faces a period of supervised release, restitution and monetary penalties.