Tax Fraud Blotter: Plastics to oil to guilty
Cars, jewelry and rent; former IRS agent gets 52 months; brothers in crime; and other highlights of recent tax cases.
Las Vegas: Former accounting manager and controller Nicole Marie Graziano, 42, has been sentenced to 27 months in prison for committing $193,000 in tax evasion and stealing more than $725,000 from two different employers.
She pleaded guilty in July to three counts of wire fraud, two counts of filing a false tax return and one count of attempt to evade or defeat tax.
According to the plea agreement, between 2009 and 2015 Graziano used several schemes, including manipulation of her employers’ payroll tax records, to conceal the thefts. She used the stolen money to pay for luxury items for herself and family members, including cars, jewelry and her rent.
Graziano admitted to filing false individual federal income tax returns for tax years 2013 and 2014 and grossly underreporting her income and tax liability. She also failed to file an individual federal return for tax year 2015.
New Richmond, Wis.: Business owner Stephanie M. Johnson, 40, has pleaded guilty to failing to pay payroll taxes withheld from her employees’ paychecks, as well as to defrauding her corporation and her business partner.
Johnson co-owned Paradigm Services and had corporate responsibility to collect and pay over the company’s payroll taxes. Johnson admitted that she failed to pay to the IRS payroll taxes of $28,323.66 on behalf of Paradigm employees for the fourth quarter of 2013 and instead kept the money for her personal expenses.
She also admitted to defrauding Paradigm of some $197,230.64 by using its corporate debit cards for her personal purchases.
Sentencing is August 7, when Johnson faces a maximum of five years in prison on the tax charge and 20 years on the mail fraud charge.
Fayetteville, Ark: Former IRS revenue agent Ryan Payne, 36, of Barling, Ark., has been sentenced to 52 months in prison followed by three years of supervised release and been ordered to pay $9,953.13 in restitution for false representation of an Social Security number and aggravated-ID theft.
According to court records, in 2015 the Treasury Inspector General for Tax Administration launched an investigation of Payne stemming from his employment at the IRS in Fayetteville (Payne resigned from his position in January 2015). As part of his duties, Payne conducted an official audit of a business for the tax year 2010. The owner of the business provided Payne a flash drive containing business records, as well as personal ID information. Payne retained the flash drive after leaving the IRS and set up a credit account using the business owner’s name and Social Security number.
Washington, D.C.: Business owner Michael Sang Han, 47, formerly of Palm Beach, Fla., has been found guilty of two counts of tax evasion for not paying more than $4 million in taxes in 2010 and 2011.
According to evidence, Han owned and operated Envion, a company that he claimed held the patents on technology used to convert plastics into fuel oil. Han convinced two individuals to invest nearly $40 million in his company, then used more than $14 million of that money to fund a lavish personal lifestyle. In 2010 and 2011, Han purchased a Palm Beach home, paid for extravagant renovations and internal decorations, flew on private jets and bought multiple luxury cars, including BMWs, a Range Rover and a Ferrari. He also used millions of the investors’ money to replace money that he had previously stolen from Envion.
According to the government’s evidence, Han also took steps to conceal his personal use of the investors’ money from his bookkeepers and preparers. He did not report any of the money he converted for his personal use on his 2010 and 2011 tax returns, thereby evading more than $4 million in tax liability.
Han faces a maximum of five years in prison on each count, as well as a period of supervised release, restitution and monetary penalties. Sentencing is August 1.
Shelby Township, Mich.: Preparer Robert Stillwell, 56, has admitted to providing 40 fraudulent returns for clients, according to published reports.
Stillwell prepared a tax return for a client who provided only a W-2 form yet Stillwell included a Schedule C-EZ, indicating the client was a self-employed barber with a net profit, as well as a bogus Form 8863 for an education credit, cited officials said.
Tax loss to the IRS was reportedly $4,092.
In addition, news outlets said, from other offices Stillwell prepared an additional 39 fraudulent returns for various clients for tax years 2011 through 2014, resulting in a tax loss to the government of $152,956.
Stillwell agreed to pay restitution to the IRS, officials reportedly said. He faces a maximum of three years in prison and a $100,000 fine when sentenced on Sept. 11, reports added.
Buffalo, N.Y.: Preparer Dorothea Fleming, 54, has pleaded guilty in connection to charges that she submitted fraudulent returns for 35 clients, news outlets said.
Fleming was reportedly a preparer at Pro-File Tax and Insurance Coalition; her scheme resulted in $10,618 in unwarranted refunds, outlets said, within a single calendar year.
When sentenced on July 31, reports added, Fleming faces a possible sentence of 18 months to four years in prison.
Paterson, N.J.: Restaurateurs Elio Federico, 71, of Totowa, N.J., and Ralph Federico, 68, of Saddle Brook, N.J., have each pleaded guilty to one count of tax evasion.
According to case documents and statements in court, the Federico brothers co-owned an Italian restaurant that had been in business since 1967. The brothers operated the restaurant on a cash-only basis, paid a substantial portion of the employee payroll in cash and paid virtually all of their suppliers in cash.
The Federicos admitted that they concealed a portion of their income from the IRS by, among other things, skimming cash from the restaurant’s gross receipts, which they did not report as income; reprogramming the cash register so it would not maintain a gross receipt balance for more than a few days; and deliberately failing to provide the restaurant’s accountant with invoices that reflected the true cost of goods sold and the actual amount of gross income.
They admitted that they failed to pay income and employment taxes that they owed from 2011 through 2014, causing a tax loss to the U.S. of $241,219.
The tax evasion charge carries a maximum of five years in prison and a $250,000 fine. Sentencing is Sept. 4.
Owings Mills, Md.: Preparer Dawn Chapelle Cottman, 45, has been convicted of 14 counts of filing false returns, wire fraud and aggravated identity theft.
Cottman owned the tax prep business 40 AM Tax Service, which she operated from her residence. Evidence showed that from January 2009 until March 2013 she e-filed hundreds of returns, and then had the refunds for those returns directly deposited into her bank account.
Many of the returns she filed contained materially false information to inflate refunds, including fictitious personal income amounts and dependent information that qualified taxpayers for the Earned Income Tax Credit and the American Opportunity Credit. Cottman also prepared and filed income returns using the personal identifiers of other people without their knowledge and consent to fraudulently obtain a refund. She paid various individuals to obtain the identities of other people in whose names she filed the false returns. Cottman had the resulting refunds direct deposited into her bank account.
Cottman was also convicted of filing a false personal return for 2011 on which she claimed that her prep business had gross receipts of $152,100, when in fact more than $1 million of other people’s tax refunds were wired into her account. Cottman also falsely claimed to have earned a net income of some $17,000 when she spent more than $250,000 that year on personal expenses, including trips to Disneyland, Las Vegas, Busch Gardens and Atlantic City.
She faces a maximum of 20 years in prison for wire fraud, five years for filing false claims, three years for filing a false return and a two-year consecutive sentence for aggravated ID theft. Sentencing is August 10.