Tax Fraud Blotter: Something fishy
One, two, three, jail!; lack of class; Deepwater sentencing; and other highlights of recent tax cases.
Teaneck, N.J.: Sixto Rodriguez, 55, of Kissimmee, Fla., has been found guilty on 17 counts of an indictment charging him with filing false returns on behalf of himself and 14 counts of aiding and assisting in the preparation and presentation of false returns on behalf of his prep clients.
According to case documents and statements in court, from 2004 through 2012 Rodriguez operated the prep business 1-2-3 Taxes and met with clients to prepare and file their individual federal income tax returns. Rodriguez inflated education credits, charitable donations, unreimbursed business expenses and rental losses that he knew his clients had not actually incurred. On average, for the clients charged in the indictment, this resulted in his clients receiving more than $4,000 in undeserved refunds per return.
Rodriguez also failed to report more than $230,000 in net profits he made from his business from 2007 through 2009 and personally avoided paying more than $89,000 in taxes.
The charges on which Rodriguez was convicted each carry a maximum of three years in prison and a $250,000 fine. Sentencing is Aug. 21.
Uvalda, Ga: Preparer Betty McLain, 66, has pleaded guilty to aiding and assisting in the preparation of a false return.
According to evidence, McLain operated Betty’s Tax Service next to her home. To increase her business and attract more clients, she prepared returns that falsely claimed clients and dependents attended and spent money on colleges at which they were never enrolled. Most of the 2,000 returns filed by McLain since 2011 claimed these education credits.
Following investigation into the accuracy of the returns, McLain was charged in February with 24 counts of preparing false returns for others and three counts of filing her own false returns.
As a result of the fraudulent returns, McLain defrauded the IRS out of nearly $1 million. She pleaded guilty to one count of aiding and assisting in the preparation of a return for a client whom she falsely claimed was entitled to education credits totaling $5,119.
Mclain agreed to never again prepare returns for anyone else and faces a maximum of three years in prison, a year of supervised release and a $100,000 fine.
Holcomb, Kan.: Preparer Marcelino Almaraz received 21 months in prison for filing a fraudulent income tax return and aiding and assisting in the preparation of fraudulent returns.
According to documents and information provided to the court, Almaraz owned Accounting Services, which provided prep services, and fraudulently sought to obtain refunds by including false filing statuses such as head of household and adding phony dependents to inflate child tax credits. Almaraz also falsified his own income tax returns for 2010 and 2011 by underreporting his income.
Almaraz was also ordered to serve a year of supervised release and to pay $397,552 in restitution to the IRS.
Klawock, Alaska: Husband and wife Archie Demmert III, 57, and Roseann Demmert, 60, have pleaded guilty to two counts of willfully failing to pay their income taxes.
According to court documents, the Demmerts each held commercial fishing permits and earned six-figure incomes in 2013 and 2014 from commercial fishing; they failed to timely pay the required income taxes. From 2006 to 2012, the Demmerts also did not timely pay in full federal taxes owed.
Tax loss to the IRS arising from their conduct exceeded $300,000.
Sentencing is Oct. 4. The Demmerts each face a maximum of two years in prison, as well as a period of supervised release, restitution and monetary penalties.
North Brunswick, N.J.: IRS revenue officer Chandra Porter, 53, has admitted that she made false statements and submitted false documents to a federal program to defer repayment on a student loan.
According to documents filed in the case and statements in court, in June 2008 Porter applied for a Direct Plus Loan under the Federal Family Education Loan Program so that a relative of hers could attend a college program. Between July 2008 and June 2010, the U.S. Department of Education disbursed $49,179 to the college program on behalf of Porter’s relative. After the relative completed the college program, the loan became due in December 2010, and Porter was required to make monthly payments towards the loan.
Beginning in April 2012, she began submitting Unemployment Deferment Request applications to defer the loan payments, falsely representing that she was unemployed and was unable to find suitable employment. Porter was, in fact, a full-time employee of the IRS as a revenue officer. Several of the deferment applications she submitted were faxed to the loan handlers from the IRS office where Porter worked.
The count of making false statements carries a maximum of five years in prison and a $250,000 fine. Sentencing is Oct. 30.
San Dimas, Calif.: Former preparer Ismael Michael Padilla, 42, has been sentenced to four years in prison for engaging in a $5.2 million scheme to defraud the IRS through the submission of fraudulent income tax returns.
Padilla, who operated under the name RMD Financial Services, was also ordered to pay $4,342,352 in restitution to the IRS. Padilla pleaded guilty in February to aiding and assisting in the preparation of false federal income tax returns.
According to court documents, between 2008 and 2016 he submitted more than 1,100 false federal returns to the IRS, each claiming refunds based on fabricated itemized deductions. Padilla filed these returns in the names of his clients without their knowledge or consent.
Padilla diverted the false refunds into bank accounts he controlled. To deceive clients, Padilla typically prepared two versions of returns for the same year, one for the client and one for the IRS. In the latter, Padilla claimed false and inflated itemized deductions for items such as mortgage interest. The clients were unaware that these false deductions had been claimed on their returns.
Padilla received some $5,241,787 in false federal refunds. During the same time, he submitted more than 300 fraudulent California income tax returns, resulting in some $1,036,000 in fraudulent state refunds. Padilla employed the same scheme that he used in the federal fraud.
St. Petersburg, Fla.: Preparer Joseph Bassler, 62, has been sentenced to 37 months in federal prison for money laundering and mail fraud.
According to court documents, Bassler held himself out as a professional accountant who could assist companies affected by the Deepwater Horizon oil spill in filing business economic loss claims. As part of his scheme, Bassler prepared and submitted fraudulently inflated claims falsely alleging lost income on behalf of clients. As payment, he accepted a portion of the recovery money for the loss claims.
Bassler, who pleaded guilty in June 2017, submitted 62 claims, three of which were paid. For the three claims that were paid, Bassler and his clients received over $600,000 more than they were entitled to from the compensation fund. The remaining claims were denied when Bassler’s fraudulent scheme was discovered.
The court also entered a money judgment of $77,224, the proceeds of the scheme.
Harrisburg, Pa.: Kenyatta Canidate, 36, has pleaded guilty to filing false federal income tax returns.
Canidate was charged in May with filing false returns; she filed six false returns on her own behalf and 41 false returns on behalf of acquaintances who paid her $100 for each bogus return. Tax loss to the IRS totaled some $138,000.
The maximum penalty for this offense is five years in prison, a term of supervised release following imprisonment, and a $250,000 fine.