Some of our favorite recent tax fraud cases.
Ambler, Penn.: CPA Howard Drossner, 53, has received 40 months in prison for conspiring to defraud a Texas-based financial services company targeted for extortion by a group led by Lucchese organized crime family member Nicodemo S. Scarfo.
According to court documents and case evidence, Scarfo is a made member of the Lucchese crime family. In April 2007, Scarfo, Salvatore Pelullo and others schemed to take over FirstPlus Financial Group using threats of economic harm to intimidate and remove the prior management and board of directors and replace them with individuals beholden to Scarfo and Pelullo.
Drossner joined the conspiracy in February 2008 when he created false tax returns to help Scarfo’s then-fiancée to secure a $500,000 mortgage to purchase a house for $715,000 in Egg Harbor Township, N.J.
In addition to time, Drossner received three years of supervised release and was ordered to pay a fine of $125,000. He is also required to notify the Pennsylvania State Board of Accountancy of his guilty plea and consent to the voluntary suspension of his CPA license.
Four other members of the conspiracy were convicted of several offenses in July and await sentencing, as do three other defendants charged in the indictment and who pleaded guilty. Two other organized crime bosses named as unindicted co-conspirators are already serving lengthy prison sentences.
Lake Station, Ind.: Preparer Michael Nash has filed to withdraw his guilty pleas in an alleged tax fraud scheme, according to published reports.
Nash is accused of inflating clients’ income for filing purposes in 2010 and improperly keeping some of their refund money without their knowledge (Accounting Today).
Nash’s attorney reportedly says in the new motion that the preparer claims the pleas were not “freely and voluntarily given.” Nash also disagrees with the factual foundation for the charges, reports added.
In the plea agreement, Nash admits to a number of details about the alleged tax scheme, including that the total loss was between $400,000 and $1 million, said reports, adding that he faces up to 10 years in prison on one count of conspiracy to defraud the U.S. and a consecutive two-year term on an ID-fraud count.
Snellville, Ga.: A federal judge has sentenced former Birmingham, Ala., preparer Janice E. Foy, 52, to seven months in prison and a year of supervised release and ordered her to repay $70,045 to the IRS for filing false returns.
Foy, who pleaded guilty in May to one count of subscribing to a false federal return and one count of aiding in the preparation of a false return, owned and operated the now-defunct VIP Tax Services. According to court records, Foy orchestrated a refund scheme and from 2008 to 2010 filed returns containing numerous false items to maximize refunds.
Foy also pleaded guilty to one count of subscribing to a false U.S. return for claiming a phony First-Time Homebuyer Credit of $7,500 on her own 2008 return. She also pleaded guilty to one count of preparing a false federal return while operating a tax prep service by adding false education credits, a false child tax credit and a false First-Time Homebuyer Credit to a client’s return.
Foy admitted to filing 26 false federal returns for 20 clients for tax years 2007 to 2009. Those returns contained fictitious dependents, inflated deductions, false income and expenses and false education credits, dependent care expenses, and First-Time Homebuyer Credits or residential energy credits. Some of the false deductions and credits also enabled her clients to falsely claim the EITC and the Additional Child Tax Credit.
Loss to the government totaled $90,798.
In a related case, Kristie Sykes, 42, of Birmingham, who worked at VIP, pleaded guilty to two counts of a five-count indictment charging her with aiding in the preparation of false federal returns.
Rancho Cucamonga, Calif.: Preparer Robert L. Cardoza has been permanently barred from preparing federal returns for others.
The complaint alleged that he prepared returns that fraudulently claimed deductions, including fake medical and dental expenses, charitable contributions, unreimbursed employee business expenses, and car and truck expenses. According to the complaint, he also falsely represented to clients that he was a CPA with an MBA and a doctoral degree.
According to the complaint, in the last six years Cardoza prepared more than 5,000 federal returns and his fraudulent preparation cost the U.S. Treasury millions of dollars.
Slidell, La.: Preparer John Labee, 36, has been sentenced to 46 months of imprisonment, followed by three years of supervised release, and ordered to pay $412,781 in restitution.
In December, he pleaded guilty to aiding and assisting in the preparation of false tax documents, lying on personal income tax returns and making false declarations before a grand jury.
According to court documents, Labee owned and operated several tax prep companies, including Millenium Bookkeeping Services and IP Financial Services that prepared the taxes of numerous clients. He prepared returns that contained false or fraudulent information, including W-2s that fabricated the amount of federal income tax withheld and inflated business expenses and deductions.
Labee’s schemes sought to cost the government some $2,242,121 in taxes. Between 2007 and 2012, he also under-reported gross receipts from his tax business and over-reported federal tax withheld from his income, resulting in a failure to pay some $163,457 in federal taxes.
On March 13, 2013, Labee appeared before a federal grand jury and, after being placed under oath, stated that in 2013 he prepared no returns other than his own. In fact, he continued operating his prep business last year.
Pittsburgh: A federal court has permanently barred preparer Larry E. Snow from preparing federal returns for others.
Snow, who allegedly claimed false deductions on clients’ returns, pleaded guilty in 2012 to one count of aiding and assisting in the preparation and presentation of false and fraudulent income tax returns and was later sentenced to six months of home detention and three years of probation.
According to the complaint, he repeatedly prepared returns with false deductions for medical expenses, personal property taxes, charitable contributions and unreimbursed employee expenses. He also allegedly maintained a list he called “IRS Gimmies,” items he instructed his employee preparers to report on each return regardless of whether the client was entitled to them.
The IRS estimates that Snow’s fraudulent preparation for one year alone cost the U.S. Treasury more than $1.3 million in tax revenue.
The court also ordered Snow to notify his former clients of the injunction.
Chicago: The Justice Department has asked a federal court to permanently bar Anna Platos and Theodore “Ted” Platos, who do business as Midway Accounting Services, from preparing federal returns.
The civil injunction alleges that Anna and Ted Platos claim bogus deductions and credits on clients’ federal returns. According to the complaint, the pair allegedly claim head-of-household filing status on returns to increase standard deductions, even though the clients do not qualify for that status.
The pair also allegedly fake claims for education credits, unreimbursed employee business expenses, charitable contributions, medical expenses and state and local taxes paid. The complaint further alleges that Anna Platos fabricated a receipt to support an energy credit she claimed on a client’s return, presented that receipt to the IRS and then told the client to lie to the IRS.
Register or login for access to this item and much more
All Accounting Today content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access