Tax Fraud Blotter: The American Scheme
Bad call; anti-social behavior; wearing a Frownie; and other highlights of recent tax cases.
Irvine, Calif.: CPA Antonia Rios, 52, has pleaded guilty to one count of attempting to interfere with the administration of the internal revenue laws, resulting from her obstruction of an investigation into millions of dollars in refunds claimed in returns prepared by her firm.
Rios, a partner at Quick Rios & Associates, admitted that Quick Rios had prepared federal returns for approximately 200 clients — including a number of Fortune 500 companies — that cumulatively sought more than $100 million in refunds based on the Telephone Excise Tax Refund, which was available to compensate individuals and businesses that paid excess telephone excise taxes from 2003 to 2006.
Rios admitted that she submitted to the IRS altered documents related to the TETR to support refunds claimed in the tax returns Quick Rios had prepared for clients. She also admitted that during a 2011 meeting with IRS auditors she presented an e-mail she had fabricated to show “proof” that Quick Rios was properly calculating the TETR credit.
When the IRS questioned Rios and her business partner about the fake e-mail, Rios and her business partner falsely blamed others at Quick Rios for fabricating the e-mail, instead of admitting that she had done it.
Rios admitted that under Quick Rios’ fee arrangements with its clients, she and her partner stood to make millions of dollars in fees if the IRS ultimately paid out the TETR-based tax refunds based on returns the firm prepared.
Rios was not charged with filing false returns, although the IRS did negotiate settlements with many of the firm’s clients.
Rios faces a maximum of three years in federal prison when she is sentenced on June 25.
La Vergne, Tenn.: Preparer Elassia D. Munson, 43, has pleaded guilty to preparing false returns for her clients and filing her own false returns.
According to court documents, from 2010 through 2015 Munson prepared and filed materially false federal returns for her clients by claiming false education credits, false charitable deductions and bogus medical and dental expenses, generating large tax refunds. Munson diverted a substantial part of the refunds to her E-Trade financial account.
Additionally, Munson failed to report the diversions and her prep fees on her own personal income tax return for years 2011 through 2014.
As part of the plea agreement, she agreed to pay back approximately $97,000 to the IRS. Sentencing is Feb. 26, when she faces a maximum of three years in prison on each count, as well as a period of supervised release and other monetary penalties.
Pensacola, Fla.: Preparer Christopher Jacob Rankins, 33, has been sentenced to 18 months in prison after pleading guilty last summer to 12 counts of aiding or assisting others in the preparation of false returns.
Case documents reflect that between January 2011 and May 2012, while working as a preparer at American Tax Service, he helped others in the preparation and presentation of fraudulent and false returns.
The returns prepared by Rankins falsely represented the taxpayers’ business expenses and falsely claimed educational credits, which resulted in taxpayers receiving approximately $356,172 in undeserved refunds and credits.
Rankins was also ordered to pay $356,172 restitution to the IRS.
Springfield, Penn.: Preparer Mohamed Mansaray, 41, has been sentenced to 10 years in prison for conspiring to defraud the IRS, aiding and abetting the preparation of false federal income tax returns, wire fraud and aggravated ID theft.
Mansaray, a former social worker, owned Medman’s Financial Services, a prep service with offices in Philadelphia. Medman’s filed numerous false federal income tax returns, which generated fraudulent refunds, some as large as $9,000.
Mansaray and his co-conspirators, who were other tax preparers at Medman’s, obtained the stolen personal IDs of foster children and used that information to claim fraudulent dependents on numerous returns prepared for Philadelphia clients. The stolen IDs were purchased from Gebah Kamara, a former Catholic Social Services employee, who has been sentenced to 30 months in prison. Kamara was paid some $200 to $300 for each child’s ID used.
Mansaray charged clients as much as $800 for fraudulently including a false dependent on an income tax return. More than 300 foster children’s identities were stolen and misused during the scheme.
Mansaray was first charged with conspiring to defraud the Internal Revenue Service and aiding and abetting the preparation of false federal income tax returns in 2013. He pleaded guilty to those charges in 2014. Additional investigation showed that after he pled guilty Mansaray continued to prepare fraudulent returns for clients. His bail was revoked and he was imprisoned in May 2016 after he was charged again with numerous additional counts of aiding and abetting the preparation of false federal income tax returns, wire fraud, and aggravated identity theft. Mansaray pleaded guilty to those charges in March.
Germantown, Ohio: Businessman James Wright, 62, who controlled the operation of an anti-aging skincare business in Dayton, Ohio, has been convicted of seven counts of filing false corporate, individual and private foundation returns.
According to the indictment and evidence at trial, Wright ran the day-to-day operations of B&P Co., which manufactured and sold an array of skincare products, including Frownies, a wrinkle-reduction product endorsed by celebrities. Wright’s great-grandmother invented Frownies in 1889 and the product has been sold by his family ever since.
Beginning in the late 1990s, Wright formed a series of entities that he used to divert money from B&P to himself and members of his family. Instead of receiving a salary from B&P, Wright incorporated a company called The Remnant Inc., to which B&P paid “management fees.” Wright caused the preparation of false corporate returns for The Remnant on which he deducted personal expenses, including rent, utilities and pool and lawn care for his residence.
Wright also used funds from The Remnant’s bank accounts to pay rent for one of his daughters in New York and California and paid personal expenses directly out of B&P’s bank accounts as well. He directed employees of B&P to use corporate funds to pay for the rent and utilities at an apartment rented by his mother as well as rent for his daughter in New York.
In 2004, Wright applied to the IRS for nonprofit status for a private foundation called Fore Fathers Foundation. Wright caused B&P to make donations to the foundation and then used more than $170,000 of the foundation’s funds over a seven-year period to pay for high school and college tuition for all five of his children.
According to testimony at trial, these payments constituted acts of self-dealing that Wright was required to disclose on the foundation’s returns and pay excise taxes on. When Wright filed the foundation’s 2003 through 2009 returns, however, he falsely reported that he had not engaged in acts of self-dealing and failed to pay the excise taxes due on the distributions.
Evidence established that Wright had a long history of interactions with the IRS. In 1998, he pleaded guilty to tax evasion for using trusts to conceal income from the IRS; this case arose from an audit of Wright’s individual income tax returns. In 2002, the IRS initiated an audit of The Remnant’s income tax returns. During a 2010 audit of B&P’s income tax returns, Wright falsely stated to a revenue agent that he had no prior dealings with the IRS.
Wright faces a maximum of three years in prison on each count, as well as a period of supervised release, restitution and monetary penalties.