Tax Fraud Blotter: Methy business
Everybody out of the Pool; dying Embers; the House falls; and other highlights of recent tax cases.
Middletown, Connecticut: Eugene Carlin, 59, has been sentenced to 18 months in prison, to be followed by three years of supervised release, for drug trafficking and tax offenses.
In July 2018, police searched Carlin’s residence and seized approximately 170 grams of d-methamphetamine hydrochloride. Carlin admitted that for over a year he worked with others to distribute methamphetamine.
Investigation further revealed that Carlin helped clients prepare and file false returns with the IRS.
In 2007, Carlin was convicted of tax evasion and aiding in the preparation of false returns. That matter also involved Carlin helping clients of his prep business file false returns. In August 2007, Carlin was sentenced to a year and a day of imprisonment and six months of home confinement. He also agreed to refrain permanently from preparing returns for others.
Carlin has been ordered to forfeit $100,000, his proceeds from the sale of methamphetamine.
Beloit, Wisconsin: Kimberly Harrison, 47, has been sentenced to 21 months in prison, to be followed by one year of supervised release, for aiding and abetting the preparation and filing of a false income tax return.
Harrison, who pleaded guilty in May, admitted that she filed returns from her home using various IP addresses. She didn’t sign the returns as the paid return preparer and instead made it look as if the taxpayers themselves were signing and filing their own returns.
Harrison prepared and filed 374 false returns for tax years 2013 through 2016, which caused a tax loss of $583,298. She earned about $9,350 a year in fees that she charged her clients and that she did not report on her own returns or to governmental authorities that provided her with public benefits.
West Palm Beach, Florida: A federal court has permanently barred Jeffrey Cadet, Kersh Tax Service and Kersha Lewis from preparing federal returns for others or from owning or operating a prep business.
The court also ordered the defendants to mail copies of the court order and complaint to all persons or entities for whom they prepared federal returns after Jan. 1, 2014.
The complaint filed by the government alleged that defendants prepared returns containing fictitious itemized deductions or fictitious business expenses. The complaint also alleges that the defendants filed returns containing fictitious or inflated education expenses to improperly claim the American Opportunity Tax Credits and Lifetime Learning Credit on behalf of clients.
According to the complaint, the defendants circumvented due-diligence for claiming the AOTC and the Earned Income Tax Credits, charged deceptive or unconscionable fees, failed to provide clients with complete copies of their returns, and failed to sign or identify themselves as the preparer on many returns they prepared.
The injunction was entered by default because those defendants failed to defend against the government’s allegations. Saglenda Johnson, also named in the suit, consented to a similar injunction entered earlier.
Columbus, Georgia: Preparer Keven Walker, 33, has pleaded guilty to federal wire fraud and ID-theft charges.
Walker’s co-defendant, Tiffany Gist, a.k.a. Tiffany Walker, 46, also of Columbus, entered a guilty plea in July. Both face up to 20 years in prison and a $250,000 fine for wire fraud and two years for ID theft.
Walker owned Walker Tax Financial Group. During the 2013 tax year, IRS agents discovered that the co-defendants filed 126 fraudulent returns, attempting to steal approximately $216,684 in refunds. The co-defendants used one victim’s correct Social Security number to file a phony return but the address and W-2 were false.
Long Beach, California: Retired CPA Carol Ann Pedersen, 66, has been sentenced to 97 months in prison for running a $27.5 million Ponzi scheme that for roughly two decades defrauded her friends and her accounting firm’s clients.
Pedersen pleaded guilty in March to one felony count of wire fraud.
Between 1996 and September 2017, Pedersen, who only was licensed to be a CPA, served as her victims’ unlicensed investment advisor. Through her firm, she solicited her accounting clients’ investments through two types of investment opportunities: “Time Deposit” and “Client Pool.” Pedersen told her victims that Time Deposit would invest in low-risk securities providing a fixed return on their money, while Client Pool would invest their money in the stock market through an investment pool Pedersen had established with other investors’ funds.
Pedersen’s fraud was a Ponzi scheme. She deposited the funds into her personal accounts, and then spent the money on personal expenses, including real estate, her credit card bills and establishment of trusts for her family. She used her victims’ money to fulfill distribution requests by her other victims, which she falsely represented were returns on their investments. Pedersen’s victims, at least 56 people, invested more than $40 million into these accounts during the scheme and their total loss was at least $27,547,839.
She was also ordered to pay approximately $27.5 million in restitution.
Portland, Maine: Preparer Ashraf Eldeknawey has pleaded guilty to one count of aiding and assisting in the preparation of a false return.
Eldeknawey, who operated a prep business inside a Halal market from 2015 through 2018, admitted to willfully preparing a 2015 return for two clients that intentionally overstated self-employment income to claim the Earned Income Tax Credit and a fraudulently inflated federal refund. Eldeknawey admitted that his preparation of false returns cost the government between $40,000 and $100,000.
He faces up to three years in prison as well as monetary penalties, and agreed to pay restitution to the IRS.
Montgomery, Alabama: Preparer Laquanda Gilmore Garrott, 39, has been sentenced to six years in prison for filing false federal returns.
From 2011 through 2015, Garrott operated the prep business L&G Associates and put false information on multiple returns to increase refunds for clients. In one case, Garrott falsely claimed that a client lost more than $30,000 on a lawn care company even though she knew her client had no such business. By including the false business losses, Garrott was able to offset the client’s taxable income and make the client eligible for the Earned Income Tax Credit.
She was also ordered to pay $56,897 in restitution.
Bettendorf, Iowa: Dr. Nirander Kumar, 66, has pleaded guilty to failure to pay employment taxes.
In July 2014, Kumar was responsible for paying withheld employment taxes on behalf of Jai Mata Lakshmi, d.b.a. Embers of Phoenix, which operated two businesses at the same Davenport, Iowa, location: Echelon Sports Bar and Embers of Phoenix. Kumar willfully failed to pay the second quarter 2014 withheld employment taxes due on behalf of Jai Mata Lakshmi. In total, Kumar admitted to willfully failing to pay some $187,000 in employment taxes withheld from Jai Mata Lakshmi employees. Kumar also admitted that he failed to pay over $234,000 of employment taxes withheld from employees’ pay at Bettendorf Pediatric, and more than $39,000 in employment taxes for another business, Funky Desi, in Moline, Illinois.
He faces a maximum of no more than five years in prison, up to a $10,000 fine, supervised release of not more than three years and a $100 assessment. Sentencing is Dec. 19.
Lanett, Alabama: Preparer Gladys Rosalynn McCauley, 42, has pleaded guilty to two counts of aiding and assisting in the filing of false federal income tax returns.
McCauley owned Roz House of Tax, which collected fees out of the refunds McCauley claimed for clients. To inflate those refunds, she placed false items in the returns as early as January 2015 and continuing through May 2017.
Sentencing is Nov. 26. She faces up to six years in prison, along with monetary fees. She will also be ordered to never again prepare returns for others.