Tax Fraud Blotter: Physician, jail thyself
CPA skims half a mil; rough ride; makeup fake-up; and other highlights of recent tax cases.
Boston: CPA James Carey, 50, former owner of the forensic accounting firm Carey & Co., has been sentenced to 18 months in prison and a year of supervised release for understating his income by hundreds of thousands of dollars on his personal income tax returns.
Carey pleaded guilty to two counts of making material misstatements on his 2009 and 2010 personal returns.
Carey & Co. administered bank accounts on behalf of insurance companies into which the insurance companies and their clients could make deposits and from which payments could be made on behalf of and to the insurance companies. In November 2009, a customer of one of the insurance companies sent Carey & Co. a payment of $594,217 intended for the insurance company; during the months that followed, Carey transferred almost all of that money out of the account and used it for his own purposes.
In 2010, Carey also reported less than a third of the actual income of his business on his personal income tax return.
Carey was also ordered to pay $355,535 restitution.
Salisbury, Md.: Dr. Warren Gregory Belcher, 59, has been convicted of filing fraudulent income tax returns and attempting to obstruct internal revenue laws.
According to the evidence at trial, Belcher operated a chiropractic business for nearly 20 years and during that time 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 did not report that he operated a chiropractic business and fraudulently claimed that he had earned no business income, when, in fact, the evidence at trial established that he received total payments of more than $350,000 during that time period.
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 payments made to him for his services to the IRS on a 1099-MISC. Belcher also made threatening statements to an accountant to prevent the accountant from reporting his income to the government.
Belcher himself submitted fraudulent 1099-MISCs to the IRS, falsely representing that companies that had reported his income to the IRS had not actually paid him income.
For the years 2009 and 2011, the IRS mailed Belcher notices informing him that his returns underreported his income. The IRS also assessed additional taxes and penalties against Belcher for his fraudulent returns, including a $5,000 penalty for filing a frivolous return. Belcher responded to these IRS notices by sending letters to the IRS asserting that the IRS was violating the law by assessing and collecting his taxes.
Belcher testified that he filed these “zero returns” based on a theory he read in the book “Cracking the Code.” Belcher admitted that he knew the author of the book, Peter Hendrickson, and the author’s wife, Doreen Hendrickson, had both been convicted of tax crimes.
Sentencing is March 9, when Belcher faces a maximum of three years in prison on each count, as well as a term of supervised release, restitution and monetary penalties.
Montgomery, W.Va.: Business owner Steve Lopez, 68, has pleaded guilty to failing to pay over employment taxes.
According to case documents and information, from 2008 through 2012 Lopez owned and operated Ready Transport Services, which mainly provided taxi services. From 2009 through 2012 he also owned RTS Ice Cream, Coffee and Candy Shop. Lopez was responsible for collecting and paying over to the IRS Social Security, Medicare and income taxes withheld from his employees’ wages. He also was responsible for paying the employer’s share of his employees’ Social Security and Medicare taxes.
Lopez admitted that he did not pay approximately $393,851 in employment taxes due to the IRS, including funds he withheld from his employees’ paychecks as well as money he owed as their employer.
Sentencing is March 14. Lopez faces a maximum of five years in prison as well as a period of supervised release, restitution and monetary penalties.
Columbus, Ga.: Federal postal worker Harold Coley has received 97 months in prison for his role in a stolen ID refund fraud.
Coley, convicted in September of conspiring to file fraudulent refund claims, mail fraud and embezzlement of mail, worked as a mail carrier and in 2012 was recruited by co-conspirator Keisha Lanier to participate in a stolen ID tax refund scheme.
Coley compiled addresses ostensibly related to streets on his route, including many addresses that did not exist or were related to vacant buildings, and provided them to Lanier and others for the purpose of filing fraudulent federal returns. Lanier obtained many of the stolen IDs used for the returns from co-conspirator Tamika Floyd, who worked for the Alabama Department of Public Health.
Lanier and others directed the IRS to mail the fraudulent refund checks to the addresses Coley provided. In exchange for cash, Coley intercepted these checks and provided them to Lanier and others. Coley’s co-conspirators directed more than 1,600 refund checks totaling more than $2.5 million to addresses on his postal route.
Lanier and Floyd were convicted and previously sentenced to prison for their roles in the scheme.
Coley was also ordered to serve three years of supervised release and pay $901,351 restitution to the IRS.
Greensboro, N.C.: David A. Crowley, 57, owner of a waste management and disposal company, has pleaded guilty to filing a fraudulent return.
According to case documents and information, Crowley owned and operated Southern Logistics and Environmental, and from 2006 through 2013 contracted with a television retail company to dispose of cosmetic products that were returned by its customers.
Instead of destroying and disposing of the products, Crowley provided the returned cosmetics to other individuals, who then sold the products through online marketplaces. In exchange, he received a portion of the sales.
Crowley did not report the money he received from sales of returned cosmetics on his income tax returns for 2006 through 2013; for 2011 he did not file a return at all. For these tax years, Crowley received and did not report $3,331,341 from the returned cosmetic sales, causing a federal tax loss of $895,654.
He faces a maximum of three years in prison, a period of supervised release, restitution and monetary penalties.