Tax Fraud Blotter: Stretching a buck
Hidden fees; Maxed out; inhuman services; and other highlights of recent tax cases.
Newberry, Fla.: Businessman Mac Johnson, 51, has been sentenced to a year and a day in prison after pleading guilty in February 2018 to tax fraud, wire fraud, structuring financial transactions to evade reporting requirements and harboring undocumented aliens.
Johnson, a roofing, tree service and dumpster business employer, devised a scheme to conceal the amount of wages earned by his undocumented alien employees to avoid paying more than $1.7 million in federal income, Medicare and Social Security taxes, as well as more than $1 million in Florida workers' compensation premiums. Johnson concealed the wages from the State of Florida by inaccurately and incompletely identifying all employees, representing that lower wages were paid than the true amounts, and paying by cash or a non-payroll check in amounts of less than $10,000 to avoid reporting requirements.
Johnson also agreed to make restitution to the IRS.
Beaumont, Texas: A federal court entered a permanent injunction against Sylvia Rodriguez, a.k.a. Sylvia Ornelas, barring her from preparing federal returns for others and owning or operating a prep business.
The court found that Rodriguez engaged in fraudulent and deceptive conduct that substantially interfered with the administration of the tax laws. In its complaint, the government alleged that Rodriguez prepared returns making false or fraudulent claims for the Earned Income Tax Credit, the fuel tax credit and the American Opportunity Credit. In addition, Rodriguez allegedly reported fictitious business and inflated federal income tax withholdings on her clients’ returns. Also, according to the complaint, Rodriguez did not give some clients copies of their filed returns or gave them returns that were different from those filed.
Miami: A federal court has entered a permanent injunction barring Vilbrun Simon, Saintanise Agenord, Simon Accounting & Tax Services and Village Tax Multi Services from preparing federal income tax returns for others.
The government alleged that the defendants filed federal returns that fabricated income, deductions and credits to inflate refunds on clients’ returns and usually deducted their fee from clients’ refunds without the clients’ knowledge.
The court prohibited the defendants from engaging in certain activities related to preparing returns for others and from operating, managing or participating in any business that prepares federal returns. The order also requires the defendants to post notification at businesses that they own or operate that no tax return will be prepared at such location or by any of the defendants at any other location.
Dallas: A federal court has permanently enjoined Jhane Broadway, individually and d.b.a. Jeprofessionalz (a.k.a. MaxTaxPros) from preparing federal income tax returns for others.
The order also requires Broadway to mail or email notice of the injunction order to all clients for whom she prepared a federal return or claim for refund for tax years 2015 through 2017.
The government alleged that Broadway unlawfully prepared federal income tax returns that understate the tax liabilities of her clients by claiming false, improper or inflated deductions, including fabricated Schedule A deductions and Schedule C business losses. The order also prohibits Broadway from having an ownership interest in or working for any entity that prepares returns or represents clients before the IRS. Broadway consented to the order.
Marathon, Fla.: Preparer Pedro C. Rodriguez, 51, has been sentenced to five years in prison for filing fraudulent returns.
According to case documents, Rodriguez, who pleaded guilty, owned and operated the JC Mar Tax Services. From approximately 2007 through 2017 Rodriguez filed fraudulent returns for his clients seeking undeserved refunds by reporting fictitious itemized deductions and fraudulent education and residential energy credits. For each of the years 2013 through 2017, Rodriguez submitted between 1,900 and 2,200 returns on behalf of his clients. At sentencing, the government provided evidence that established that his fraudulent returns resulted in a loss to the IRS of $14.5 million.
Rodriguez was also sentenced to a year of supervised release and ordered to pay $14,569,171 in restitution.
Baltimore: Preparer Floyd Briscoe Wright, 66, has been sentenced to five years of incarceration with all but 90 days suspended for felony theft and willfully filing a false return.
Wright, who pleaded guilty in February, will be placed on probation for three years after his release and must also pay $50,000 in restitution.
Wright, while employed by the Maryland Department of Human Services, owned and operated Briscoe & Associates, a tax prep business. He admitted to an ongoing scheme involving the filings of numerous fraudulent returns on which he entered false adjusted gross incomes based on false and inflated business losses, false charitable contributions, fictitious businesses or other false filings that minimized his clients’ Maryland tax liabilities and inflated their refunds.
East Amherst, N.Y.: Marc Korn, 62, former owner of local nursing homes who was convicted of bank theft and willful failure to pay tax, has been sentenced to 18 months in prison and ordered to pay more than $2.5 million in restitution to three different private entities, along with some $850,000 to the IRS.
Authorities said Korn was the former owner of the Batavia Nursing Home in Batavia, N.Y., and the Fairchild Manor Nursing Home in Lewiston, N.Y. He committed bank theft in connection with his actions concerning a credit card and a loan from a local bank, and failed to pay over employment taxes related to his nursing homes over three quarters in 2009. In 2008, Korn tried to refinance the Batavia Nursing Home; in June of that year, the bank provided $3.9 million to refinance the nursing home and provided Korn with a credit card. Korn submitted a personal financial statement that contained numerous falsehoods. He also provided the bank with statements of bank accounts that he claimed to own, but those statements contained falsehoods, including that he claimed ownership of an account containing $50,000 in February 2008 when the account actually contained $1 and belonged to someone else. The loan and payments on the credit card went into default and the bank lost more than $2.4 million.
Prior to March 2009, for both Batavia Nursing Home and Fairchild Manor Nursing Home, Korn used a service to collect and pay over employment taxes owed. Beginning in March 2009, he ceased using the service and subsequently intentionally failed to pay to the IRS employment taxes owed for the second, third and fourth quarters of 2009. Instead, Korn spent the money on such personal expenses as restaurants, hockey tickets, jewelry and his children’s college tuition.
Burbank, Calif.: Sean Edin Talaee, 62, of Glendale, has pleaded guilty to tax and mail fraud charges after failing to report $2.8 million he embezzled from his employer as income to the IRS. He pleaded guilty to one count of mail fraud and one count of subscribing to a false income tax return.
According to the plea agreement, between October of 2015 and June of last year Talaee worked as the controller overseeing accounting and tax payments for the printing company Printograph, including estimated payments based on the company’s expected gross income, deductions and credits.
To enable payment of the estimated taxes, Talaee brought Printograph checks to the president and sole owner of Printograph for her signature. Talaee represented that he would submit the signed checks to the IRS as estimated payments to be credited in relation to Printograph’s income. At least eight times, he obtained Printograph checks but inserted his own taxpayer information when filling out the IRS voucher forms that accompanied the checks. Talaee embezzled eight checks, each for either $200,000 or $400,000, for a total of $2.8 million.
Talaee claimed these payments as credits on his own income tax returns that he submitted to the IRS, thereby causing the IRS to send Talaee large tax refunds. He claimed estimated tax payments of $400,000 in 2015, $800,000 in 2016 and $1.6 million in 2017, allowing him to receive tax refunds of $401,749 in 2015, $789,088 in 2016 and $1,588,157 in 2017. Talaee also underreported income on his individual income tax returns by failing to report the embezzled money as income for the 2015, 2016 and 2017 tax years.
Talaee faces a maximum of 23 years in federal prison and a fine of $350,000 when sentenced on Aug. 19. He may also be ordered to pay restitution of at least $740,085 to the IRS.