Tax Fraud Blotter: Sleazy rides
More than 1,300 bogus returns; King of crime; retired CPA is slick non-filer; and other highlights of recent tax cases.
Goose Creek, S.C.: Preparer Stacy B. Middleton, 47, has been sentenced on two felony counts of preparing and filing a false income return to 41 months in prison and a year of supervised release.
According to court documents and hearing statements, Middleton owned and operated the prep business MBM Tax & Accounting Services, and for calendar years 2009, 2010 and 2011 prepared and e-filed more than 1,300 fraudulent returns for his clients, without their knowledge, to inflate refunds.
The returns contained overstated, duplicated or fictitious deductions, fictitious Schedules C to maximize EITCs, fabricated expenses for Schedules A, C and E, fraudulent refundable credits, and fictitious 1099s.
Middleton admitted that his scheme caused a tax loss of $3.5 million.
Riviera Beach, Fla.: Corry E. Pearson, 28, owner of the prep firm Tax King, has been found guilty on one count of conspiracy to commit wire fraud, 16 counts of wire fraud, eight counts of aggravated ID theft and four counts of money laundering.
According to evidence, from 2012 through 2014 Pearson and his accomplices submitted more than 1,600 federal income tax returns. In some cases, they used Tax King to file the returns; in other cases, they filed the returns using home prep software and falsely represented that the taxpayers had prepared and filed the returns themselves. Almost all the returns were fraudulent.
In some cases, Pearson and his accomplices stole other people’s IDs and filed federal returns in the victims’ names, collecting the refunds for themselves. The defendant and his accomplices also falsely reported that money had been withheld from taxpayers’ wages and gambling winnings, falsely claimed that the taxpayers were entitled to education credits when they had not in fact attended school in the years in question, and filed fraudulent returns in the names of inmates who were serving long sentences during the tax year of the return.
In order to disguise their own identities, Pearson and his accomplices listed victims of ID theft as preparers on the returns they filed and directed that the refunds be deposited onto debit cards and into accomplices’ bank accounts.
Returns filed by the defendant and his accomplices sought at least $6,117,430 in refunds; the Treasury paid out at least $1,356,240 in refunds.
Co-defendant Stephane Cindy Anor, 27, of West Palm Beach, Fla., pled guilty in August to one count of conspiracy to commit wire fraud. Her sentencing is Nov. 9. Irene Wilson, 51, of Riviera Beach, a defendant in a related case, has pled guilty to one count of conspiracy to defraud the U.S. through false claims and on Sept. 22 was sentenced to 12 months of home confinement.
Pearson’s sentencing is Dec. 19, when he faces a maximum of 20 years in prison for the conspiracy to commit wire fraud, 20 years in prison on each count of wire fraud and 10 to 20 years in prison on each count of money laundering. He also faces a mandatory two years in prison on each count of aggravated ID theft.
Destin, Fla.: Retired CPA Rocky E. Griffith, 63, has been sentenced to a year and a day in prison and been ordered to pay $78,804 restitution to the IRS after pleading guilty to failure to file tax returns.
Griffith worked as a CPA for nearly 20 years. After retiring from accounting, he ran a charter boat and commercial rental businesses in the Destin area. Following the BP oil spill in 2010, despite earning income from oil spill claims and rental properties, Griffith failed to file returns for the years 2010, 2011 and 2012.
Dublin, Calif.: Shiv D. Kumar, 60, the former president and sole shareholder of A-Paratransit Inc., a company that provided transportation services to disabled individuals, has received 18 months in prison for filing false corporate federal returns.
In March, Kumar admitted underreporting more than $4.6 million in gross receipts. According to his plea agreement, Kumar filed false corporate returns with the IRS for tax years 2009 and 2010, which underreported API’s gross receipts by $2,229,216 and $2,412,435 and caused a tax loss to the U.S. of $1,584,055.
Kumar admitted that he deposited API’s receipts into three separate bank accounts and that to conceal API’s true gross receipts, he provided his accountant with bank records from only one of the accounts. He also acknowledged he provided his accountant with false books and records that omitted gross receipts diverted to undisclosed bank accounts.
Kumar was also ordered to serve a year of supervised release and may face payment of restitution.