Egregious; Time runs out; third time’s the charm; and other highlights of recent tax cases.
Salem, Massachusetts: Resident Roosevelt Fernandez has pleaded guilty in connection with two schemes involving COVID-19 relief funds and tax returns for others.
Fernandez applied for 10 EIDLs, either in his own name or in the names of entities he controlled. In June 2020, he applied for an EIDL under the name Soluciones Multi Service and submitted a false tax filing in support of the application. The Small Business Administration deposited $124,900 into a bank account controlled by Fernandez from which he withdrew more than $80,000 in cash over the next two weeks. In August of that year, Fernandez applied for an EIDL in the name of another business using fraudulent tax filing information; the SBA deposited $149,900 into the same bank account.
He used the identities of various individuals to submit fraudulent state and federal returns, a number of which included fraudulent W-2s purportedly issued by employers but for whom the named taxpayer did not work. Various fraudulent refunds were deposited into an account in the name of Soluciones Multi Service. A May 2020 fraudulent EIP was deposited into this same account. Fernandez was depicted on ATM surveillance footage depositing another fraudulent tax refund check into this account.
Investigation uncovered some 40 fraudulent returns associated with Fernandez, totaling more than $620,000 in requested refunds.
The charges of wire fraud provide for up to 20 years in prison, up to three years of supervised release and a fine of up to $250,000. The charge of aggravated ID theft provides for a mandatory two years in prison, up to a year of supervised release and a fine of up to $250,000. Sentencing is May 11.
Edgeworth, Pennsylvania: Resident Dean Britton has been sentenced to 15 months in prison, three years of supervised release, and 300 hours of community service after his conviction of tax evasion.
From September 2013 through February 2017, Britton evaded at least $1,103,352 of federal income tax for 2004, 2006, 2007 and for 2009 through 2013. Among other tactics, he failed to file required income tax returns, placed personal bank accounts in nominee names, disguised personal earnings by depositing them into business accounts and titled his personal residence in the name of a nominee.
The court ordered restitution of $1,994,483.35, which includes tax loss plus interest accrued. The judge stated that the case was one of the more egregious tax evasion cases that she ever had as a district court judge. She noted that Britton had substantial income during the subject years, most significantly more than $1.9 million in 2007.
The court did impose a below-guideline sentence, highlighting that the defendant agreed to plead guilty prior to being formally charged.
North Lauderdale, Florida: A federal court has permanently enjoined two tax preparers and their business from preparing federal income tax returns or operating any tax prep business.
The civil complaint alleged that Wendell Devallon and Berald Dominique, co-owners of Tax Time Group Inc., prepared returns for clients that claimed fraudulent self-employment expenses, fictitious education credits, false fuel tax credits and fake charitable contributions, among other schemes. The complaint also alleged that Devallon and Dominique acted as ghost preparers.
In a June order, the court found the defendants in contempt for violating a preliminary injunction that restricted their tax prep activities while this case was pending. Devallon, Dominique and Tax Time Group consented to entry of the court’s order and admitted that sufficient evidence existed to show that they had violated the preliminary injunction. In August, the court entered an order requiring the defendants to pay $211,000 in sanctions for their violations of the preliminary injunction.
The more recent permanent injunction, to which Devallon, Dominique and Tax Time Group consented, bars them from any involvement in the preparation of federal returns. They must immediately close and cease all operations at any Tax Time Group office location and pay an additional $142,000 to the U.S. for their fraudulent prep activities that predated the complaint.
The permanent injunction requires Devallon and Dominique to give up their ownership of the “Tax Time Group” brand. If they sell the business, all proceeds will be applied to the $353,000 they must pay the U.S. If Devallon, Dominique or Tax Time Group is found to have prepared another return, they must pay the federal government $2,000 plus any fees they received for preparing the return. They will also pay $353,000 in disgorgement to the United States.
Maricopa, Arizona: Tax preparer Michelle Schaefer has been ordered to pay $2,965 in restitution and an $8,900 fine for operating a scheme of creating fictitious W-2s with fabricated Arizona income tax withholdings to increase refunds for herself and three clients.
Schaefer, owner of MM Tax Solutions, was indicted in 2020 on charges of “fraudulent schemes and artifices,” four counts of preparing false tax returns and four counts of forgery for allegedly preparing Arizona personal income tax returns that contained fraudulent information for tax year 2018. In December, she pleaded guilty to one count of preparing a false return for preparing a false Arizona return in 2019. Schaefer also stipulated that she would not prepare taxes for compensation going forward.
The four counts of preparing false tax returns and four counts of forgery were reportedly dropped as part of her plea agreement. Schaefer told news outlets that the one count to which she pleaded guilty “was due to a misunderstanding in a form.”
News reports added that Schaefer received a Citizen of the Year award from the local chamber of commerce in 2017 for her work with an area food pantry.
New Iberia, Louisiana: Businesswoman Joan Chauvin Edgar of Breaux Bridge, Louisiana, has been sentenced to 41 months in prison to be followed by three years of supervised release on tax fraud charges.
Edgar pleaded guilty in September to failing to pay over withholding and FICA taxes. She established NGE Techs in 2012 and the company existed until 2017, providing employees and other services to oilfield companies.
She submitted W-3s to the Social Security Administration for 2012 through 2017 reflecting the total wages paid to her employees by the company and taxes withheld by the company from its employees’ paychecks. She admitted that during the second quarter of 2015, although she had deducted and collected taxes from her employees to pay to the IRS, she failed to pay them.
Edgar was also ordered to pay $375,213.54 in restitution.
Orlando, Florida: Michael Dexter Little has been sentenced to 19 years and six months in prison for conspiracy to commit wire fraud, conspiracy to commit money laundering and aggravated ID theft.
From 2019 to 2021, Little filed a series of false returns claiming massive, bogus fuel tax credits. He filed the false returns in his own name and in the names of conspirators and ID-theft victims.
He and his conspirators obtained at least $12.3 million in fraudulent refunds and attempted to obtain at least $27 million more. The fraudsters also tried to launder their stolen gains and used significant portions of the fraudulent refunds to purchase real estate and other assets.
Little, who pleaded guilty in October, was also ordered to forfeit at least $12.3 million that was traceable to the offense. He was also previously convicted of tax fraud in 1999 and 2003.
Roanoke Rapids, North Carolina: Tax preparer Makita Boone has been sentenced to 30 months in prison and a one-year term of supervised release and ordered to pay $818,650 in restitution for aiding and assisting the preparation and presentation of a false 1040.
Boone, who pleaded guilty in November, prepared and filed false and fraudulent federal income tax returns for others through Renee’s Tax Pros, a business that she owned and operated at two locations.
Between about 2015 and 2019, Boone prepared more than 200 false returns for clients that reported fraudulent W-2 wages to maximize the Earned Income Tax Credit and otherwise inflating the refunds amount. The intended tax loss exceeded $1 million.
