Bogus 941s; oh the pain; Full Spectrum of fraud; and other highlights of recent tax cases.
Chicago: Former U.S. Rep. Melvin Reynolds, 66, has been sentenced to six months in prison for failing to file four years of federal income tax returns, with two months of credit for time served.
He was found guilty last year of four counts of willfully failing to file a federal income tax return; Reynolds failed to file returns for the calendar years 2009, 2010, 2011 and 2012.
Northbrook, Ill.: Barry Poticha, 73, bookkeeper for two Chicago-area staffing companies, has admitted that he conspired to defraud the IRS for at least a decade by falsifying corporate returns and W-2s.
Poticha admitted that beginning no later than 2000 and continuing through 2011 he conspired with an independent contractor to falsify information in the 941s filed by the companies, as well as in false W-2s. When employees discovered discrepancies in the W-2s, Poticha issued letters to conceal the fraud.
He pleaded guilty to one count of conspiracy to defraud the U.S. and admitted that he caused a total federal tax loss of some $24,450,609. He also admitted to filing false personal income tax returns for tax years 2010 through 2015, underreporting his income and over-reporting his income tax withholding, resulting in a federal tax loss of $341,621 and a state tax loss of $32,604.
Baltimore: Preparer Tynisha Martin Kadiri, 39, has been convicted of assisting in the filing of false income tax returns and failure to file corporate returns.
Evidence showed that Kadiri, who owned three prep businesses in West Baltimore, filed false and fraudulent returns for her clients that included business receipts that the taxpayers didn’t receive, business losses that the taxpayers did not incur, and false or fictitious businesses. These false statements resulted in the clients receiving inflated refunds. Evidence also proved that she didn’t file federal corporate income tax returns for her businesses for tax years 2014 and 2015.
She faces a maximum of three years in prison per count, a fine of $250,000 for aiding or assisting in the filing of false income tax returns, and a year in prison for willful failure to file a return.
Penn Valley, Pa.: Accountant and businessman Craig Rosen, 61, has received a year and a day in prison after pleading guilty to four counts of tax evasion.
Rosen owned and operated several businesses associated with medical treatment and pain relief. In each of the years 2009 through 2012, he earned income ranging from $175,000 and $432,000 but failed to file returns, report income or pay taxes for any of those years. He also took steps to conceal his true income, including paying personal debts from accounts that were not in his name.
Newark, N.J.: Kiburi D. Tucker, 43, former executive director of a childcare and community program and a partner in a political fundraising and consulting company, has been sentenced to 38 months in prison for wire fraud and tax evasion.
According to case documents and statements in court, as executive director of The Centre Inc., Tucker embezzled its funds through ATM, debit card and bank withdrawal transactions to fund personal expenditures, including gambling, travel, and furnishing his home. Tucker defrauded The Centre of $332,116 from 2012 through 2015.
Tucker, who was also receiving an annual salary from his employment at the Passaic Valley Sewerage Commission, filed false personal income tax returns in which he intentionally under-reported both the proceeds that he embezzled from The Centre and income from his partnership in Elite Strategies, a political fundraising and consulting company.
Tucker admitted that he was responsible for underreporting $177,040 in income from these sources for the 2015 tax year, resulting in a tax loss of $56,509.
Tucker also received three years of supervised release and was ordered to pay $133,624 in restitution to the IRS and to forfeit $334,116.
Columbus, Ohio: Attorney Michael (a.k.a. Mickey) Prisley, 52, has pleaded guilty to one count of conspiracy to submit false claims for federal income tax refunds.
According to court documents, Prisley served as an assistant prosecuting attorney for Athens County, Ohio, from 2011 through January 2014. Between the fall of 2009 and September 2015, he conspired to defraud the IRS by filing hundreds of false income tax returns to obtain fraudulent income tax refunds.
Prisley deposited the refund checks and withdrew cash to pay his co-conspirators; he also received drugs in exchange for cashing the refund checks. He also gave his co-conspirators false power of attorney forms so they could cash stolen refund checks without the taxpayers’ knowledge.
A total of $466,842 in fraudulent refunds was released by the IRS, of which Prisley assisted his co-conspirators in obtaining $250,220.99.
Conspiracy to submit false claims for income tax refunds carries a maximum sentence of 10 years in prison and a fine of up to $250,000.
Co-defendants Tawnya Writesel (a.k.a. Tawnya Rutan), Amy K. France and Denard T. Nelson were also charged in relation to this case. France pleaded guilty in 2016 to one count of conspiracy to submit false claims and one count of ID theft and was sentenced to 37 months in prison. France was also ordered to pay nearly $467,000 in restitution. Nelson pleaded guilty in 2015 to one count of ID theft and was sentenced to five years of probation and ordered to pay more than $87,000 in restitution.
Prisley agreed to pay more than $250,000 in restitution to the IRS.
Union, N.J.: Preparer Toni Ciullo, 43, has pleaded guilty to aiding and assisting others in the preparation of false and fraudulent returns.
According to case documents and statements in court, Ciullo owned and operated Full Spectrum Consulting; for tax years 2010 through 2014, Ciullo used a number of fraudulent practices, including increasing claimed losses and credits for certain businesses, increasing clients’ unreimbursed employee expenses and medical and dental costs and creating fictitious businesses, all to inflate clients’ refunds.
Ciullo admitted that the bogus returns resulted in a tax loss to the government of approximately $322,537.
The charge to which Ciullo pleaded guilty carries a maximum of three years in prison and a $250,000 fine. Sentencing is Aug. 7.
Tacoma, Wash.: Donald Knutsen, 54, owner of two local sports-memorabilia and card-gaming shops, has pleaded guilty to failing to pay employment taxes on more than 50 employees.
Knutsen admitted that between 2008 and 2016 he withheld $234,769 in income, Social Security and Medicare taxes from the paychecks of at least 51 employees but failed to accurately report and pay the tax withholdings and an additional $122,350 in employer-owed taxes to the IRS.
According to case records, Knutsen operated the two stores for more than 27 years. Investigation revealed that as early as 2002 he stopped paying employment taxes on his employees but instead used the money to acquire inventory and promote his business. He also failed to file personal income tax returns after 2000.
Knutsen agreed to pay the taxes and any interest imposed by the IRS. He faces up to five years in prison when sentenced on July 20.
Charleston, S.C.: A federal court permanently enjoined Jacqueline Lowndes from preparing federal returns for others.
The court also ordered her to mail a copy of the injunction order to all clients for whom she prepared a return for tax years 2012 through 2016. Lowndes agreed to the civil injunction order.
According to the complaint, Lowndes prepared federal income tax returns for clients that reported false, improper or inflated deductions which understated tax liabilities and inflated refunds. She also allegedly falsely claimed the Earned Income Tax Credit on behalf of clients who didn’t qualify by exaggerating losses and expenses, falsely claiming dependents and falsely changing the filing status of clients.
Returns prepared by Lowndes underreported tax liabilities or overstated refunds by more than $600,000, according to the complaint.