Tax Fraud Blotter: The big sleep
All in the family; unhappy motoring; youth movement; and other highlights of recent tax cases.
Stockton, California: Preparer Paola Bedoy has been sentenced to five years in prison for preparing fraudulent returns.
For years Bedoy ran the tax prep business Javez Enterprises. She encouraged and assisted her clients in preparing fraudulent federal income tax returns by claiming Earned Income Tax Credits and Child Tax Credits based on dependents who were ineligible. Bedoy falsely listed a child as disabled when he was not, put dependents on returns that her clients didn’t even know and repeatedly sought tax credits based on non-citizen children living in Mexico. In one instance, Bedoy suggested the fraud to a client so that the client could afford to pay her fee and then tripled her fee to that client. Bedoy also admitted to investigators that she “bought” children to add to clients’ returns to inflate refunds and sometimes kept the inflated portion of the refunds for herself.
Initially claiming she committed some of this fraud to help her family, she gambled at area casinos, losing more than $130,000 during a period in which she reported only $67,000 in income on her personal federal returns.
Bedoy testified in her own defense at trial and received a sentencing enhancement for obstruction of justice after the court determined that she gave materially false testimony.
Boylston, Massachusetts: Business owner Robert Fuller has been sentenced to six months in prison and a year of supervised release for filing false and fraudulent corporate and individual tax returns.
From 2013 through 2016, Fuller, owner of Fuller Motor Home, omitted more than $900,000 in income from his corporate returns by cashing checks written to the business and not reporting the cashed checks to his preparers. He also failed to report any of this diverted income as income on his personal returns.
Fuller, who pleaded guilty in February, was also ordered to pay $451,535 in restitution to the IRS.
Rochester, New York: Preparer Daciann Brown, 30, a Jamaican native, has pleaded guilty to failure to appear for sentencing.
In May 2018, Brown pleaded guilty to wire fraud, false claims and fraud related to ID documents. Brown purported to be a tax preparer and filed 66 false tax returns on behalf of 44 taxpayers with the IRS. Thirteen of those taxpayers did not know Brown was filing returns using their personal information.
Brown was scheduled to be sentenced in August 2018 but failed to appear. The charge carries a maximum of 10 years in prison and a $250,000 fine.
Norwalk, Connecticut: Bookkeeper Penni Sherman, a.k.a. Penni Parker, has been sentenced to eight months in prison to be followed by two years of supervised release for fraud and tax offenses stemming from an embezzlement scheme.
Sherman operated PSP Accounting & Bookkeeping and provided bookkeeping services to area businesses. Between 2011 and 2018, she stole $418,197.09 from clients and used the money to pay her own credit card bills and for other personal expenses, including salon services.
Sherman stole more than $396,000 from one of her clients who owned a small business. When confronted about the embezzlement, Sherman returned $165,920 to the victim.
She failed to report the embezzled funds and other business receipts on her federal returns, resulting in a loss of $125,167 to the IRS.
Sherman, who pleaded guilty in October, was also ordered to pay $252,277.09 in restitution to the victims and $125,167 in back taxes, plus interest and penalties, to the IRS.
San Diego: Business owner David Daughtrey has pleaded guilty to bank fraud and tax evasion, admitting that over the course of several years he evaded taxes by failing to report $498,612 of income to the IRS, as well as orchestrating a scheme to fraudulently obtain a mortgage for his $1.8 million residence.
As part of the bank fraud, Daughtrey directed another individual to submit a mortgage application to Wells Fargo to purchase a $1.8 million, five-bedroom residence, to falsely claim that the funds used as down-payment belonged to the third party and the residence would be used by the third party. Daughtrey provided the money and the home was intended to be his primary residence. He made monthly mortgage payments of some $8,000 but continued to represent to the bank that the third party owned the house.
He admitted he was the true owner of the residence and promised to make a good faith effort to transfer the legal ownership of the home into his own name.
He also admitted that over several years he and his spouse (who is not charged in the case) conspired to commit tax evasion by filing returns listing substantially less income than Daughtrey earned. He failed to report his total income in tax years 2013, 2014 and 2015, and did not file timely returns for subsequent years. Tax loss to the IRS for the years 2012 through 2014 was $456,536.
Daughtrey agreed to pay $1,016,457.91 in restitution to the IRS, which includes the tax loss plus penalties and interest. Sentencing is Nov. 16.
Richmond, Virginia: Youth-counseling exec Vosean Smyre has been sentenced to 14 months in prison for evading federal taxes.
From 2012 through 2015, Smyre’s employment relationships with several Virginia youth counseling businesses generated significant income for him. He concealed portions or all of the funds he received or failed to file a return entirely, significantly underreporting his income each year to the IRS.
To conceal his income from these businesses, he withdrew money for personal expenses from the business bank account of the counselling businesses. He also made cash payments to himself from business bank accounts belonging to several different businesses to include the counselling businesses. Smyre also did not provide his accountant with the Schedule K-1 prepared by the accountant of one of the businesses, which reflected Smyre’s additional income of $26,743 in 2013 and $56,768 in 2014.
He lived an affluent, cash-purchase lifestyle, spending on private schooling for family members, luxury automobiles, entertainment and travel, and renting or owning multiple residences.
Smyre, who pleaded guilty in March, was also ordered to pay $368,233.52 in restitution to the IRS.
Farmington Hills, Michigan: Dr. Richard MacAuley has been sentenced to two years in prison after pleading guilty to corruptly endeavoring to obstruct and impede administration of the internal revenue laws, including by misleading IRS officers, withholding records from the IRS and providing a false document in response to an IRS summons.
In December 2017, the IRS was investigating MacAuley’s chain of clinics, Sleep Diagnostics of Michigan, for failing to pay more than $500,000 in federal payroll taxes. The IRS sought to determine whether there was any basis to transfer and collect SDM’s outstanding taxes from its provider, Advanced Sleep Diagnostics of Michigan.
While MacAuley was Advanced’s owner on paper, he withheld the ownership document from the IRS and falsely denied any relationship between the companies. He then falsely claimed that he’d sold SDM’s assets to Advanced in 2016. When the IRS issued a summons for the sales contract, which did not exist, two individuals created a fraudulent and backdated asset purchase agreement for MacAuley to give the IRS.