Tax Fraud Blotter: Sorry about that, chief

Zapped; drug deals; doing the deduction shuffle; and other highlights of recent tax cases.

Baltimore: Former Police Commissioner Darryl De Sousa, 54, has been sentenced to 10 months in federal prison, followed by one year of supervised release, for three counts of failing to file individual federal tax returns.

DeSousa was also ordered to perform 100 hours of community service and was ordered to pay restitution in the full amount of the government’s loss of $67,587.72. Counting payments already made, the amount still owed is $60,645.11.

According to his plea agreement, De Sousa was employed by the Baltimore Police Department beginning in 1998 and resigned last May 15. On June 10, 1999, De Sousa submitted a W-4 to the City of Baltimore falsely claiming nine allowances for both federal and state tax purposes. When he filed his federal and state income taxes for calendar years 2008 through 2012, he falsely claimed undeserved deductions, including for unreimbursed employee expenses, mortgage interest deductions and deductions for local property taxes when he did not have a mortgage or own any real property, and business losses when he operated no businesses.

De Sousa admitted that for calendar years 2011 and 2012 he filed no returns at all and did not do so until 2014. When he did file returns for those years, he falsely claimed unreimbursed employee expenses and donations to charity and failed to pay penalties and interest on those late-filed returns.

Minneapolis: Former co-op manager Jerome Hennessey, 56, has pleaded guilty to one count of mail fraud and one count of tax evasion.

According to the defendant’s guilty plea and documents filed in court, from 2003 through last September Hennessey, the former manager of Ashby Farmers’ Co-Operative Elevator Co., oversaw the day-to-day activities of the co-op, controlling the bank accounts and obtaining loans for the business. He wrote checks to himself and to third parties for, among other things, renovations and improvements to his residence and a cabin, the purchase of real estate, the purchase of all-terrain vehicles, outstanding credit card balances, property taxes, expensive hunting trips and taxidermy services.

Hennessey attempted to disguise the payments by writing descriptions on the carbon copies of the checks falsely indicating that the checks were for the purchase of corn and soybeans or other operating expenses and supplies. He then provided the carbon copies to the co-op’s bookkeeper, thus ensuring that the co-op’s accounting records would give the false impression that the funds he had taken had been used for legitimate purposes.

To make sure that the co-op had sufficient funds to cover its legitimate expenses and to cover the millions of dollars that he stole, Hennessey obtained a line of credit for more than $7 million. In total, Hennessey stole some $5,338,922.21.

Milwaukee: Susan Wenszell, 57, former owner of an electrical construction company, has pleaded guilty to one count of failing to account for and pay federal payroll taxes.

According to documents filed in court, Wenszell was the president and owner of J. Wenszell Enterprises, an outdoor electrical construction company formed by Wenszell’s husband and his brother. The payroll taxes in question consisted of federal income taxes, Social Security taxes and Medicare taxes withheld from the wages of employees of the company. From the second quarter of 2012 through the fourth quarter of 2015, Wenszell withheld more than $1.2 million from employee wages but paid only $13,966.88 to the IRS. In addition, during 2010 and 2011 she withheld and failed to pay an additional $394,000.

Wenszell also failed to pay the employer’s share of payroll taxes during 2010 to 2015, which totaled almost $530,000. Throughout this period, Wenszell failed to file any quarterly payroll tax returns with the IRS.

During 2012 to 2015, despite paying almost none of the required payroll taxes, Wenszell and her husband withdrew more than $1.1 million from their business to pay personal expenses.

She faces up to five years in prison and fines of up to $250,000 when sentenced on May 28.

Hands-in-jail-Blotter
hand in jail

Hattiesburg, Miss.: Pharmaceutical marketer Hope Thomley, 52, has pleaded guilty for her role in a $200 million scheme to defraud health care benefit programs, including Tricare, which covers U.S. military service members and their families.

Thomley pleaded guilty to one count of conspiracy to commit health care fraud and one count of conspiracy to commit money laundering and tax evasion.

She admitted her role in a scheme that involved marketing compounded medications, which ordinarily are medications specially combined or formulated to meet the individual needs of patients. Thomley, who owned and operated the exclusive marketing agency for Advantage Pharmacy of Hattiesburg, was responsible for obtaining prescriptions for which the pharmacy could obtain reimbursement from health care benefit programs. Her marketing company received nearly half of the reimbursements that Advantage obtained from the compounded medications.

Thomley admitted that co-conspirators formulated Advantage’s compounded medications without regard to the needs of patients but instead with the goal of increasing reimbursements paid by health care benefit programs. To inflate her profit, she admittedly obtained prescribers’ signatures on blank prescription forms and then filled out those forms with the names of her children and Tricare beneficiaries that she and her husband recruited from the community to receive these medications.

She also admitted her role in a money-laundering and tax evasion scheme that she and other co-conspirators used to conceal the fraudulent proceeds and evade taxes. Thomley evaded paying approximately $6.6 million in income taxes, she admitted, and from approximately April 2012 through January 2016, health care benefit programs reimbursed Advantage and other pharmacies involved in the scheme at least $200 million.

The government seized more than $15 million in cash and other assets from Thomley, which will be forfeited in connection with her plea. Her sentencing is July 2.

Since 2017, nine other people in this scheme have pleaded guilty and one was convicted.

Federal Way, Wash.: Tax preparer Lina Pastars, 52, has been convicted of eight counts of aiding and assisting in preparing false income tax returns.

Pastars ran a prep business out of her home and collected higher fees from clients by inflating their deductions and refunds. According to testimony case records, investigation began in 2015 when the IRS audited one of her clients whose 2012 return claimed more than $30,000 in unreimbursed business expenses. The clients claimed Pastars claimed the deductions without their knowledge.

The IRS then began a review of returns prepared by Pastars from 2012 to 2014 and discovered that the returns had unreimbursed employee business expenses that far exceeded the average claims in the Puget Sound region. Analysis revealed that Pastars claimed unreimbursed business expenses for clients that were three to four times the average claim.

On two occasions in spring 2015, undercover IRS agents went to Pastars posing as tax prep clients; both were very clear that they had no employee business expenses. Nevertheless, Pastars claimed thousands of dollars in unreimbursed expenses so that the returns showed a refund. She also increased the fee that she charged each undercover agent saying, “If I do deduction I charge more.”

Most of her clients paid in cash, making her profit from the scheme difficult to trace. But based on clients who paid by check or via an online payment system, Pastars went from 159 returns prepared in 2012 to 366 prepared in 2015. Over those same years her trackable income from tax prep increased ten-fold, from $6,500 in 2012 to $65,470 in 2015. (Those figures do not account for clients who paid in cash.) Analysis of returns she prepared between 2012 and 2015 revealed that she inflated deductions for business expenses and charitable donations as much as $4 million.

Sentencing is June 28. Aiding and assisting in the preparation of false income tax returns is punishable by up to three years in prison and a $100,000 fine.

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