Some of our favorite recent tax fraud cases.
Santa Ana, Calif.: Preparer Alma M. Wilbur, 40, of Victorville, Calif., has pleaded guilty to filing more than $41 million worth of false claims against the U.S., making her the 53rd and final defendant linked to the quarter-billion-dollar “Old Quest” tax refund scheme to be convicted.
Wilbur admitted that in May 2009 she filed a false federal return in her name that sought a refund of $281,146, and that she prepared more than 70 returns that fraudulently claimed more than $41 million in bogus tax refunds.
The scheme run out of the Fontana, Calif.-based Old Quest Foundation was the largest tax refund fraud in history involving misuse of Original Issue Discount tax forms. The case against Wilbur and the other Old Quest defendants stems from Operation Stolen Treasures, an IRS investigation that led to 55 people being indicted by a federal grand jury in the fall of 2011.
Old Quest and a related business, the Rancho Cucamonga-based De la Fuente and Ramirez and Associates, prepared and filed more than 400 false income tax returns that together claimed more than $250 million in fraudulent refunds.
During a search warrant executed at Old Quest’s offices, investigators seized several unfiled returns, including one signed return that falsely reported $10,500,106 in federal withholdings and fraudulently claimed a $6,868,675 refund. Although the IRS stopped most of the false refunds before they were issued, several large refunds were issued, including one for $1,192,653.
Nine defendants in the scheme (Accounting Today) were found guilty at trial and 44 pleaded guilty. One defendant remains a fugitive and one was acquitted.
Last week, another preparer, who is also an ordained minister, also pleaded guilty to preparing false returns. Eugene H. Marzette Sr., 71, of San Bernardino, Calif., pleaded guilty to one count of making a false claim against the U.S. for preparing a false return for an Old Quest customer that claimed a refund of $1,152,024. Evidence showed that the IRS paid a $1 million refund to that Old Quest customer.
Also, last month, Jose Tavares Hernandez, 42, of Riverside, a correctional officer for the state of California, was convicted at trial of making false claims against the U.S. based on false income tax returns that resulted in a $769,963 refund issued to him.
Marzette, Wilbur and Tavares Hernandez each face a maximum of five years in federal prison. Tavares is scheduled to be sentenced December 12, Marzette on January 9, 2015, and Wilbur on February 13, 2015.
Bastrop, La.: Preparer Camille Cooper, 40, has received 30 months in prison and one year of supervised release and been ordered to pay $92,530 in restitution to the IRS for one count of aiding and assisting in making and subscribing a false return.
According to evidence presented at the guilty plea, Cooper, a tax preparer at Faster Tax Refund Express from December 2010 to April 2011, filed 17 fraudulent 1040s, some with falsified Schedule Fs and some with falsified 4136s and falsified Schedule Cs.
As a result, the IRS issued $92,530 in bogus refunds to clients. Cooper received approximately $2,275 in kickbacks, authorities said.
Sterling Heights, Mich.: Preparers Damian and Holly Jackson have been arraigned on charges of conspiracy, filing false returns and filing false claims with the IRS.
According to court documents, Damian Jackson owns Diamond & Associates Enterprises Inc., and he and Holly Jackson did business as Diamond Tax Services. Beginning in approximately April 2009 and continuing through April 2010, the Jacksons conspired with one another to defraud the U.S. by filing false claims for federal income tax refunds for clients. The Jacksons are also accused of filing false federal returns for themselves.
The Jacksons caused more than $1,076,969 in fraudulent refund claims, as well as received fees from clients for preparing the returns and a percentage of the false refunds.
Court documents also allege that the Jacksons filed false individual returns for themselves for the 2007 and 2008 tax years, claiming false income tax withholding and requesting refunds of more than $1,045,625. Holly Jackson also filed a false return for the 2009 tax year, claiming a refund of $141,795 while knowing the claim was false.
Greenville, Miss.: The U.S. has requested that the U.S. District Court permanently bar preparer Nathaniel Kimble from preparing federal income tax returns for others.
According to the complaint, Kimble has prepared returns under the business name Kimble Tax Services since 2010 and allegedly learned how to prepare returns by working with preparer Alice Mobley. Mobley, sentenced to 75 months in prison after pleading guilty to three charges related to her return practices in Alabama, admitted in her criminal case that she conspired with employees of Kimble Tax Services to file phony returns.
The complaint alleges that Kimble knowingly prepared federal returns that understated clients’ tax liability and overstated refunds by inflating or fabricating EITCs.
Atwater, Calif.: Preparer Susan Tomsha-Miguel was properly convicted of impersonating a congressional aide in a scheme to calm a client, according to published reports that cited a recent decision of the U.S. Court of Appeals for the 9th Circuit.
According to news outlets, Tomsha-Miguel sought to help a client with an IRS dispute in early 2011 and contacted then-Congressman Dennis Cardoza’s office to ask Cordoza to call the IRS on the client’s behalf. Cardoza's office did offer to help but reportedly asked the client to complete a release form, which aides faxed to Tomsha-Miguel on official letterhead.
Rather than have the client fill out the release, Tomsha-Miguel photocopied Cardoza’s letterhead onto a letter she wrote and signed as with the fictitious name of an aide to Cardoza, reports said. The faked letter, addressed to Tomsha-Miguel, promised that the director of the IRS's Taxpayer Advocate Service would make the client’s issue a “priority,” reports said.
Tomsha-Miguel reportedly faxed the letter to the client, who tried to follow up directly with Cardoza’s office and the fictional aide.
A federal grand jury indicted Tomsha-Miguel on one count of impersonating an officer or employee of the U.S., reports said, adding that she was eventually convicted and sentenced to a year of probation and 50 hours of community service.
On appeal, Tomsha-Miguel reportedly argued that the government failed to make its case because she addressed the forgery to herself and that a person cannot pretend to herself that she is a federal employee. The court reportedly disagreed, though one judge dissented and said that Tomsha-Miguel should not have been convicted.
Rancho Santa Margarita, Calif.: A federal court has barred local resident Kenneth Elliott from promoting an alleged nationwide tax scheme that involved using welfare benefit plans to unlawfully increase and accelerate deductions and avoid income taxes, the Justice Department announced.
Welfare benefit plans permit companies to pool and make monetary contributions toward life insurance for the benefit of each participating company’s employees or principals. Participants in legitimate welfare benefit plans may be able to deduct their plan contributions as a business expense. The complaint alleged that Elliott falsely informed his customers that the welfare benefit plans he promoted and operated were legal.
But, according to the complaint, Elliott promoted and operated plans that illegally permitted his customers to both claim substantial deductions for their contributions and then later access the full cash value of their contributions by taking out loans against the life insurance policies purchased. The complaint alleged that Elliott’s promotion and operation of these unlawful plans cost the federal government significant amounts of tax and subjected his customers to audits and IRS scrutiny.
The injunction order bars Elliott from selling and operating any purported welfare benefit plans. The court also ordered him to send a copy of the injunction order to his customers.
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