Tax Fraud Blotter: Stogie scam
Exit jail right; EINs galore; old unReliable; and other highlights of recent tax cases.
St. George, Utah: Financial advisor Henry Brock has been sentenced to six years in prison for his role in selling fraudulent tax-avoidance and investment strategies.
According to documents and court information, Brock founded a financial services company in 2009 and served as the president from 2009 through 2017. He marketed and sold the “IRA Exit Strategy” to potential investors, promising a way to avoid paying taxes on IRA withdrawals. Brock caused his business to issue tax forms to his clients falsely representing that they were investors in his business that incurred losses, which offset tax liabilities.
He caused clients to file fraudulent returns claiming a total of some $3.8 million in bogus business losses and resulting in a tax loss of more than $1.1 million.
Brock fraudulently raised more than $10.8 million in investments by making false representations to investors, the financial condition of his company and other matters. At least once, Brock transferred $196,323 of a client’s investment funds and used the money for his own personal and business expenses.
Brock was also ordered to serve three years of supervised release and pay $12 million restitution.
Aurora, Colo.: Jaquon Mucsarney, 37, has been sentenced to 12 years in prison to be followed by three years of supervised release for conspiracy to defraud the U.S. and aggravated ID theft.
According to information in the indictment and plea agreement, between 2011 and 2016 Mucsarney devised a scheme to defraud the IRS by filing a return with false information to obtain a fraudulent refund. At various times, Mucsarney received assistance from his mother, Schosche Mucsarney, and his girlfriend, Sherry Charleston.
Mucsarney created some 50 fictitious businesses that had little or no legitimate business activity. To file corporate returns for these businesses, he logged into the U.S. Treasury website and obtained an Employer Identificaton Number using either his or Schosche’s Securities and Exchange Commission. When Mucsarney became aware the IRS was investigating his activities, he started using individuals’ stolen names and Social Security numbers to obtain EINs for various companies.
Mucsarney typically filed 1120s on behalf of the shell companies, which he completed with false information relating to income, deductions, overpayments and refunds due. When he was incarcerated on unrelated charges, he would either supply Schosche and Charleston with the false information to complete the fraudulent returns or have Schosche send Mucsarney blank IRS forms to complete. Mucsarney then mailed the completed returns to the IRS from jail.
Mucsarney submitted some 100 fraudulent federal returns that claimed refunds totaling $2,168,277; the IRS ultimately paid out approximately $327,970, which Mucsarney was also ordered to repay in restitution.
Schosche Mucsarney was sentenced in November 2016 to five years of probation and ordered to pay $195,902 restitution to the IRS. Sherry Charleston was sentenced in January 2017 to 18 months in prison and three years of supervised release, and was ordered to pay $16,541 restitution.
Rocky River, Ohio: Business executive C. David Snyder, 61, has been convicted on six charges related to embezzling $126,000 from an employee retirement fund and collecting nearly $860,000 from his employees but not paying the money to the IRS.
He was convicted on one count of embezzling from an employee pension fund and five counts of failure to pay over taxes. He was acquitted on two tax charges.
Snyder served as chairman, president and CEO of Attevo, a tech consulting company in Cleveland. He also served as chairman and primary shareholder at Ruralogic in Bryan, Ohio.
Snyder, on behalf of Attevo, and the IRS in 2011 agreed to a monthly payment plan of $48,350 per month to repay the company’s outstanding payroll tax liabilities. Attevo made 10 payments then made no further payments, according to court documents. Snyder also withheld payroll tax from employees but failed to pay it to the IRS. Snyder failed to pay over approximately $328,355 of payroll taxes in 2010 and approximately $530,778 in 2012, according to court documents.
He created a 401(k) and profit-sharing plan for Attevo employees in 2009; Ruralogic was added to the plan in 2010. The plan was funded through employee payroll deferrals. Between 2010 and 2012, Snyder failed to pay into the plan approximately $126,000 in contributions and loan repayments withheld from employee wages, according to court documents.
During the time of his criminal conduct, instead of paying Attevo’s employment taxes, Snyder paid $20,000 per month for the rental of a personal residence in Lakewood and his vacation home in Chautauqua, N.Y., leases on four vehicles, and other personal expenses, according to trial testimony and court documents. He also used Attevo’s American Express to pay personal expenses, including women’s clothing at Ann Taylor, Nieman-Marcus and other stores, beauty supplies at Oro Gold in Las Vegas, travel to resorts in Florida, and for pool/spa renovations, according to trial testimony and court documents.
Snyder earned income from Attevo totaling some $1.6 million between 2009 and 2012, according to the court documents and trial testimony.
Sentencing is October 9.
Denver: Former home healthcare business owner Michelle Medina has been sentenced to two years in prison for tax evasion.
According to documents and case information, Michelle Medina owned and operated RHHS Inc., also d.b.a. Reliable Home Health Services, which provided home healthcare services in Colorado. From 2008 through 2011, Medina concealed hundreds of thousands of dollars in personal income by having RHHS directly pay her personal expenses.
Medina did not inform her preparer of this additional income and filed false individual income tax returns underreporting income. Her actions caused a tax loss of $550,000 to $1.5 million.
Medina, who pleaded guilty late last year, was also ordered to serve three years of supervised release and to pay $841,327 in restitution to the IRS.
Briarwood, N.Y.: Customs broker Alberto Rodriquez, 66, has pleaded guilty to mail fraud in connection with evading federal excise tax on imported cigars.
According to information in the court record, from as early as July 2013, Rodriquez operated as a customs broker in New York. He contracted with two tobacco importers to import large cigars. To defraud the U.S. of excise tax, Rodriguez created false and fraudulent documents, including federal Customs and Border Protection Forms 7501 that misrepresented, among other things, the quantities of large cigars imported and the federal tobacco excise tax due. Rodriguez also transmitted false and fraudulent documents to CBP using the U.S. mail.
Rodriguez sent invoices to the two tobacco importers reflecting the true quantities of imported cigars and the properly calculated excise tax due, which resulted in the importers paying Rodriguez more than what he paid to CBP. To conceal the scheme, he altered documents, including importer invoices and bank records, and provided these altered documents to Tax and Trade Bureau agents and employees, all for the purpose of misleading TTB and pretending that he had correctly calculated and paid to CBP the federal excise tax.
In total, Rodriguez evaded $503,681.15 in federal excise tax. Sentencing is August 22, when Rodriguez faces a maximum of 20 years in prison.
Beaumont, Texas: Tax preparer Charles Maull II, 36, of Mt. Vernon, Texas, has been sentenced to 30 months in prison after pleading guilty to six counts of willfully aiding in the preparation and filing of a false income tax return.
According to information in court, from 2010 to 2017 Maull knowingly falsified business income, overstated withholding taxes, fraudulently claimed education credits and fraudulently claimed dependents that taxpayers were not entitled to claim.
Maull was also ordered to pay $674,730.68 in restitution to the IRS.