Tax Fraud Blotter: Scales of justice

Aggravating factors; a big dig; steal of the Century; and other highlights of recent tax cases.

Durham, N.C.: Catinia Denise Farrington, a resident of Cypress, Texas, and the owner of a North Carolina mental health company, has been sentenced to prison for submitting false claims to Medicaid and tax evasion.

She was sentenced to 60 months in prison on each count, to run concurrently. On Sept. 4, Farrington pleaded guilty to one count of healthcare fraud conspiracy and one count of tax evasion for the tax year 2014.

According to the court documents, Farrington owned Durham County Mental Health and Behavioral Health Services and from 2011 through 2015 submitted thousands of false claims to Medicaid for services that were not performed, resulting in approximately $4 million in wrongful payments. During this time, Haydn Thomas worked as an office manager for an oral surgeon and provided Farrington with the names and Medicaid identification numbers of dental patients. The patient information was used to submit the false claims to Medicaid.

In addition, Farrington earned more than $1.1 million from Durham County Mental Health and evaded income taxes by transferring funds to various business bank accounts and paying personal expenses from the business bank accounts while failing to file returns. The resulting tax loss is approximately $391,747.

She was also sentenced to three years of supervised release and ordered to pay $3,950,656 in restitution to NC Fund for Medical Assistance and $391,747 to the IRS.

East St. Louis, Ill.: Preparer Evelyn Johnson, 57, has been sentenced to 30 months in prison for failing to surrender, which must run consecutively to her original 18-month sentence on 29 counts of aiding in the preparation of false federal income tax returns.

In February, she failed to surrender to U.S. marshals to begin serving her sentence. She was then charged with a new crime for failing to surrender for service of a sentence while on release. In her defense, Johnson claimed she was not a U.S. citizen subject to the laws of the United States, that she was not the defendant and that she was not “Evelyn Johnson.” She also contested the jurisdiction of the U.S. District Court.

Johnson took her case to trial; the jury found her guilty. At the sentencing hearing, the district court found that Johnson had engaged in repeated acts of obstructive, contumacious conduct and had committed perjury when she testified at trial, both of which were considered aggravating factors.

New York: Preparer Tom Shin, 36, of Staten Island, has been sentenced to two years in prison for aiding in the preparation of a false return and wire fraud.

According to allegations and the indictment to which Shin pleaded guilty in November, he was hired to prepare joint federal and state tax returns for two individuals for tax year 2017. Shin showed the clients completed return forms indicating that the clients owed approximately $1.3 million in taxes. Shin actually filed false returns on behalf of the clients without their knowledge that concealed the tax liability.

In connection with applications for extensions of time to file his personal tax returns, Shin directed tax authorities to withdraw approximately $1.3 million from the clients’ bank account, and then filed personal returns seeking an approximately $1.3 million refund.

Shin was also sentenced to two years of supervised release and was ordered to forfeit $335,394.

New Milford, Conn.: Business owner William F. Anderson, 50, has been sentenced to 18 months in prison, followed by two years of supervised release, for tax evasion.

According to court documents and statements in court, Anderson owns several companies, including W.F. Anderson, a landscaping and excavation business based in Danbury; 1959, LLC; Retaining Wall Solutions; Wil-Rent; and Jacobs Creek Farm LLC. For the 2007 through 2014 tax years, Anderson failed to pay more than $1.2 million in federal income taxes on nearly $4 million in income.

Anderson committed multiple acts of evasion, including using business income to purchase cashier’s checks to keep income out of his accounts, conducting structured transactions to avoid the filing of currency transaction reports and misrepresenting on a form that was filed with the IRS in May 2015 that he had less than $1,000 in a business checking account when, in fact, he had written checks for tens of thousands of dollars shortly before the submission of that form.

On November 5, Anderson pleaded guilty to one count of tax evasion. He must cooperate with the IRS to pay all outstanding taxes, interest and penalties, which total more than $1.7 million.

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hand in jail

Amherst, N.Y.: Realtor Maxim Levin, 41, who was convicted of filing a false return, has been sentenced to 21 months in prison.

According to prosecutors, from 2012 to 2015 Levin operated Glebova Realty Group, which purchased, renovated and sold real estate throughout the Buffalo area. During those years, he filed federal income tax returns but failed accurately to report the gross receipts that he earned from his real estate business and failed to pay taxes on such income.

Levin caused more than $3.1 million of gross receipts from his business to be excluded from his income tax returns, resulting in a tax loss of $161,606.

Levin was also ordered to pay $161,606 in restitution.

Dublin, Calif.: Restaurateurs Man Young Kim and Kyong Ja Kim, a.k.a. Angie Kim, have pleaded guilty to conspiracy to defraud the United States.

According to the plea agreement, Man Kim, 64, and Angie Kim, 58, admitted they failed to report on federal income tax returns the cash received from sales at their restaurants, Sushi Boat Oakridge, Sushi Boat Valley Fair and Sushi Boat Westgate. The Kims admitted they deposited funds from the restaurants’ credit card sales into a corporate bank account but did not deposit most of the cash. Instead, the Kims used the cash to pay employee wages and to purchase other personal non-business-related items, including real property.

The Kims acknowledged they maintained detailed spiral notebooks that recorded daily credit card and cash sales and that they used a CPA to prepare their returns but provided the accountant with only the corporate bank account records, not the spiral notebooks that showed cash sales.

Man Kim also admitted he did not pay employment taxes on the cash wages he paid to the restaurant employees.

The total loss to the government is $1,152,622.66.

Both defendants were charged with one count of conspiracy to defraud the United States. Man Kim was also charged with three counts of filing a false return and nine counts of willful failure to account for and pay employment taxes, while Angie Kim was also charged with three counts of aiding and assisting in the preparation of false returns. The Kims both pleaded guilty to the conspiracy count. If they comply with the plea agreement, the additional charges will be dismissed at sentencing on July 18. The maximum for conspiracy is five years in prison and a fine of $250,000, plus restitution if appropriate.

Shelby Township, Mich.: Businessman Mersed Bebanic, 35, has been sentenced to 14 months in prison for tax evasion and ordered to pay restitution and a $20,000 fine.

Bebanic owned and operated three businesses, including Century Trucking Inc., Century Trucking Services and Century Innovations. He was required to file personal income tax returns for tax years 2011 through 2014 and had to report an accurate net profit of his business on his 1120S.

Instead, in April 2014 Bebanic prepared and filed a 1040 for the 2013 tax year and underreported his total income, reporting his taxable 2013 income as $34,073 and the total taxes on his income as $10,790 when Bebanic knew his total income for 2013 was substantially higher. As a result, the tax due and owing on his income for 2013 was also substantially higher, totaling $281,368. Bebanic admitted that he met with his accountant in April 2014 and provided information that overstated his business expenses.

Factoring in penalties, the loss associated with Bebanic’s tax evasion from 2011 through 2014 totaled $1,224,461. He agreed to pay the total amount of his restitution by applying funds seized from his home during the execution of a search warrant in August 2016.

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