Tax Fraud Blotter: Royal pains

Gone commercial; PTIN-free; seen the light; and other highlights of recent tax cases.

Seattle: Real estate owner Steven T. Loo, 69, has been convicted on six counts of tax evasion and six counts of making false returns.

Loo had an ownership interest in and operated commercial real estate properties in Washington and California. He hired companies to manage the properties and had the companies send profits from the properties to bank accounts he controlled. Loo spent this money for his benefit and that of his family and friends and re-invested in various businesses that he controlled.

He did not declare that income — more than $4.7 million — on his returns, using shell companies and repeated transfers of funds to conceal the income.

Each count of tax evasion is punishable by up to five years in prison. Making and subscribing to a false return is punishable by up to three years. Sentencing is Oct. 9.

Mobile, Alabama: Tax preparer Carrie Mae Jones has been sentenced to two years in prison for filing fraudulent returns.

Jones operated Agee's Outreach Tax Service and Royalty Queen Tax Service, where she acted as a ghost preparer of at least 34 false or fraudulent returns between 2019 and 2022. 

She was also ordered to pay $419,452 in restitution and serve a year of supervised release.

Jacksonville, Florida: Ana Romero, of Honduras, has been sentenced to 21 months in prison for conspiracy to commit wire fraud and conspiracy to defraud the U.S. to impede the IRS. The court also ordered Romero to forfeit $461,850, proceeds of the wire fraud offense.

Between 2018 and 2019, she conspired to facilitate payment of construction workers off the books to avoid premiums for workers' comp and payroll taxes. Construction contractors and subcontractors entered arrangements with the conspirators through which Universal Florida Construction — a shell company formed by Romero — facilitated both distribution of proof of insurance and payment of workers with cash.

In exchange for 6% to 8% of the contractors' and subcontractors' payroll, Romero and others caused the distribution of certificates of liability insurance in the name of Universal, which contractors and subcontractors then used as nominal proof that workers were supposedly insured. The insurance company was defrauded of more than $1.2 million.

Romero and others also facilitated the deposit of checks into the shell company's bank accounts, as well as the withdrawal of cash to be paid to workers — all without withholding or paying over payroll taxes to the IRS. Through these arrangements with the conspirators, the construction contractors and subcontractors could disclaim responsibility for withholding and paying payroll taxes to the IRS or ensuring that the workers were legally authorized to work in the U.S. 

The conspirators caused the U.S. Treasury to lose more than $1.9 million. One co-conspirator, Oscar Molina-Avila, was previously sentenced to 52 months in prison for his role in the scheme. Co-defendant Jose Molina-Herrera was previously sentenced to 27 months.

Romero, who pleaded guilty last year, was also ordered to pay $1,947,471.18 in restitution to the IRS.

St. Louis: Tax preparer Elisa Y. Brown, 60, has been sentenced to five years of probation for falsifying federal income tax returns for clients.

Brown admitted preparing false returns from 2016 to 2020. She prepared returns from her home for $150 to $250 per return but did not have a PTIN; she digitally signed each return in the name of the taxpayer, making it appear to the IRS that the taxpayer had prepared the return. She admitted filing false returns for 11 clients from 2016 to 2020.

During the same time, she prepared and submitted a total of 560 returns, many of which contained similar false deductible expenses.

Brown, who previously pleaded guilty to two counts of assisting in the preparation of a false return, was also ordered to pay $156,559.98 in restitution.

Greeneville, Tennessee: Ryan Glidewell has pleaded guilty to conspiring to commit wire and mail fraud, aiding and assisting in the preparation of a false return, and money laundering for his role in a scheme to claim refunds based on false claims for the Employee Retention Credit and paid Sick and Family Leave Credit.

Glidewell and his conspirators created phony businesses that lacked employees or operations to falsely claim the credits. Glidewell filed numerous false returns for those businesses and directed the refunds to be mailed to addresses he and conspirators controlled.

In total, the returns claimed more than $3.4 million in refunds, of which the IRS paid $1.8 million.

Sentencing is Nov. 12. He faces a maximum of 20 years in prison for conspiring to commit mail and wire fraud, up to 10 years for money laundering and a maximum of three years for aiding and assisting in the filing of a false return.

Indianapolis: CPA Jason L. Crace has been sentenced to three years in prison for assisting in the preparation of false returns for clients who participated in an illegal tax shelter.

Between 2013 and 2022, Crace prepared income tax returns for clients that claimed millions of dollars in false deductions for "royalty payments."

As Crace knew, these payments were merely circular flows of money to give the appearance of genuine business expenses. Typically, a client would send money to bank accounts controlled by scheme promoters who then sent the money — minus a fee — back to a different bank account controlled by the client. Shelter participants retained control of the money they transferred while falsely deducting the transfers as business expenses.

One of the scheme's promoters, Stephen T. Mellinger III, previously pleaded guilty and was sentenced to eight years in prison for his role in the scheme.

Crace's preparation of false returns claiming fraudulent deductions caused a loss to the IRS of more than $2.5 million.

Crace, who previously pleaded guilty, was also ordered to serve a year of supervised release and pay $2,532,936 in restitution.

Baton Rouge, Louisiana: Benjamin Thomas III, of Hammond, Louisiana, has been convicted of five counts of failing to truthfully account for and pay over federal trust fund taxes. 

Thomas owned, operated and controlled Lighthouse Community Care, a mental health services clinic. As the business expanded, Thomas opened several locations in Louisiana and hired more than 100 employees.

Throughout the company's existence, Thomas would withhold trust fund taxes from employees' paychecks, but he often failed to timely file Lighthouse's quarterly employment returns and consistently failed to pay over to the IRS the withheld funds. For the five specific time periods charged, the first three quarters of 2017 and the first two quarters of 2018, Thomas failed to truthfully account for and pay over more than $970,000 in trust funds.

The IRS frequently communicated with him through written notices, phone calls and an in-person interview to remind him of his tax obligations and encourage him to pay. Meanwhile, he diverted more than $350,000 in company funds to a vacation home in the Dominican Republic, more than $400,000 to a separate management company that he controlled and more than $500,000 to a family trust that he created. Thomas also spent hundreds of thousands of dollars on luxury automobiles, private school tuition, high-end clothing, jewelry and accessories.

Thomas had been living in the Dominican Republic since early 2023.