A roundup of some of our favorite recent tax fraud cases.
Richmond, Va.: A federal grand jury has indicted three preparers on charges of conspiracy to defraud the U.S. and aiding and assisting in the preparation of false federal income tax returns.
According to the indictment, from around December 2011 to spring 2012, Erik Pittman, 35, Jeremy Blanchard, 35, and Corey Taylor, 25, operated three locations of the prep business Mo Money Taxes. The indictment alleges that the three, along with others, created and inflated fraudulent credits, including the EITC and the American Opportunity Credit, to claim undeserved refunds.
All three defendants are charged with conspiracy to defraud the U.S. Pittman is charged with six counts of assisting in the preparation of false federal income tax returns, Blanchard with eight counts of the same charge and Taylor with five. If convicted, each faces a maximum of five years in prison and a fine of $250,000 for the conspiracy count and a maximum sentence of three years in prison and a $250,000 fine for each count of preparing false returns.
Los Angeles: Two preparers with offices in California, Maryland and New York have been sentenced for facilitating an offshore tax fraud scheme.
David Kalai was sentenced to three years in prison to be followed by three years of supervised release, with a condition of home confinement to last the entire term of release, and ordered to pay a $286,000 fine. His son Nadav Kalai was sentenced to 50 months in prison to be followed by three years of supervised release, and ordered to pay a $10,000 fine.
Last December, a federal jury convicted the Kalais of one count of conspiracy to defraud the IRS; the Kalais were also each convicted of two counts of willfully failing to file a FBAR.
An alleged co-conspirator, David Almog, who is charged in the second superseding indictment, remains a fugitive.
The Kalais advised and assisted their high-net-worth clients in concealing millions of dollars of assets and income in secret foreign bank accounts and filing false federal income tax returns. They also maintained a secret offshore account of their own at Bank Leumi in Luxembourg in the name of a foreign sham corporation.
According to the second superseding indictment and evidence introduced at trial, the Kalais were principals of United Revenue Service Inc., a tax prep business with 12 offices throughout the U.S. David Kalai worked primarily at URS’s former headquarters in Newport Beach, Calif., and later at URS’s location in Costa Mesa, Calif. Nadav Kalai worked out of URS headquarters in Bethesda, Md., as well as the locations in Newport Beach and Costa Mesa.
Evidence at trial established that the co-conspirators purposefully prepared false individual income tax returns for their URS clients that did not disclose the clients’ foreign financial accounts nor report the income earned from those accounts. To conceal the information, the co-conspirators incorporated offshore companies in Belize and elsewhere and helped clients open secret bank accounts at the Luxembourg locations of two Israeli banks, Bank Leumi and Bank B.
The sham corporations that the co-conspirators incorporated in Belize and elsewhere were used to act as named accountholders on the secret Israeli bank accounts. The co-conspirators then recommended and facilitated the transfer of client funds to the accounts and prepared and filed returns that falsely reported the money sent offshore as a false investment loss or a false business expense, or entirely omitted any income earned by a client from a foreign source. The Kalais also failed to disclose the clients’ secret accounts on returns that they prepared and caused the clients to fail to file FBARs.
Three URS clients who testified at the Kalais’ trial have pleaded guilty to tax felonies arising from their participation in the scheme.
The evidence at trial also established that the Kalais each failed to file an FBAR for calendar years 2008 and 2009 with respect to a foreign account held at Bank Leumi in Luxembourg. According to the bank, the Kalais were the true owners of the account, which was held in the name of Anack Ltd., a nominee Belizean corporation. In 2008 and 2009, their offshore bank account had more than $300,000 on deposit.
Birmingham, Ala.: Preparer Eunice F. Plummer, 35, has been charged with three counts of tax evasion and eight counts of aiding in the preparation of fraudulent returns. The government also filed a plea agreement with Plummer in which she agrees to plead guilty to the charges and to pay restitution of $104,098 to the IRS for taxes not paid on income earned in 2011 through 2013, plus an additional $67,206 to the IRS for aiding in the preparation of fraudulent returns.
Plummer, owner of M&P Tax Services, is charged with evading income taxes for 2011, 2012 and 2013 by preparing and submitting personal tax returns in which she failed to report all the taxable income she earned from her business. According to the plea agreement, she tried to evade taxes by depositing the income received from M&P Tax Services into a bank account held in a relative’s name and managed to dodge $104,098 in taxes owed to the IRS.
She also allegedly prepared false returns for the clients of M&P and requested significant refunds from IRS; she added false deductions and expenses to her clients’ returns that resulted in a $67,206 tax loss to the government.
Baton Rouge, La.: Tax preparer Chandris Ferguson, on bail from a 2013 arrest, is back in custody facing multiple felony counts for tax fraud, accused of filing falsified state income tax returns that resulted in her clients receiving inflated refunds totaling $63,686.
Ferguson, owner of The Best Tax Services, filed returns claiming fabricated business losses for clients who had sustained no losses and who in many cases were not even business owners. She is also accused of instructing clients to ignore official notices from the state Department of Revenue seeking to verify the business information on returns.
Ferguson was arrested in 2013 on similar fraud charges related to her work at The Best Tax Services.
In the current case, she faces 10 counts of computer fraud, 10 counts of filing or maintaining false public records and five counts of obstruction of justice.
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