A roundup of our favorite recent tax fraud cases.
Champlin, Minn.: Preparer Rona Griffin, 52, has pleaded guilty to 17 counts of preparing fraudulent taxes and failing to pay her own taxes.
Griffin was accused of costing the state more than $1.6 million in tax revenue between 2009 and 2013.
In pleading guilty to nine charges of preparing fraudulent returns for nine of her clients and failing to pay her personal income taxes and the taxes for her company, HAH Broker Inc., Griffin admitted to a number of aggravating circumstances. They included that she abused a position of trust, that she forged church and mileage documents to cover up the fraud, and that she sent a letter to the Minnesota Department of Revenue stating that her only income was from child support and Social Security.
According to the criminal complaint, Griffin started HAH Broker out of her home in Champlin before moving to Minneapolis. Investigation determined she had hundreds of individual and business clients and made false statements on most of their tax filings. In talking to a number of the individuals who went to Griffin for tax prep, investigators learned that Griffin consistently lied about their charitable contributions and about business expenses that were not reimbursed.
Many of her clients contributed nothing or just a few hundred dollars to charity. Griffin would report on their income tax forms that they contributed 10 percent of their income to charities, often to churches they never attended, authorities added.
Griffin also would change clients’ occupations: For instance, one client worked as a forklift operator in a warehouse. She changed that to sales representative and indicated that he had more than $10,000 in unreimbursed employee expenses in mileage, travel and other expenses, according to the complaint.
When her clients began receiving letters that they would be audited, Griffin invited the clients to meet in her home in March 2013. She told a number of them to buy ledgers and create mileage reports to support their travel deduction, the complaint states. She has admitted to forging those documents.
Griffin’s company was profitable from 2008 to 2013, yet in 2010, 2011, 2012 and 2013 she filed no returns for HAH Broker and only one individual return. The latter was false, showing an adjusted gross income of $9,237, while a Department of Revenue audit found that she made more than $150,000, according to the complaint.
Sentencing is March 28, when she faces up to 68 months in prison.
Laguna Hills, Calif.: Former tax preparer Randall Craig Hutchens, 62, has received 57 months in prison and was ordered to pay $1.4 million restitution to the IRS for selling fraudulent tax shelters to numerous clients through his tax prep company, Accounting Services Inc.
Hutchens pleaded guilty in May to three counts of aiding and assisting in the preparation of false returns.
According to the plea agreement, from approximately May 2010 until October 2013, Hutchens sold numerous clients fraudulent tax shelters that required them to purchase an equity interest in an LLC on condition that it could, typically within two years, repurchase that interest for substantially less than the price paid for it (typically, $1).
None of the LLCs was legitimate. Hutchens prepared tax returns for clients who bought the shelters, including in them false losses related to the tax shelter LLCs. During this scheme, Hutchens prepared and filed with the IRS at least 125 false federal income tax returns that cost the U.S. at least $1,622,512 in lost taxes.
The three counts to which Hutchens pleaded guilty relate to fraudulent 2011 federal income tax returns filed on behalf of clients that included either a false Schedule E, a false loss on Form 4797 or a false Schedule C.
According to authorities, a few months after a federal search warrant was executed at ASI, Hutchens made a series of structured transactions involving at least six different bank accounts in what appeared to be an effort to hide proceeds totaling $279,280 from the sale of his Laguna Hills residence. Over two weeks, Hutchens made 44 cash withdrawals, keeping the amounts under the $10,000 bank reporting requirement.
Hutchens’ sentence was further enlarged by prior convictions for fraud-related offenses dating back 30 years, including grand theft, federal securities fraud, false claims to a federal agency and forgery.
Doral, Fla.: A federal court in New Jersey has permanently barred preparer Felix Taveras Santos from preparing federal income tax returns for others.
Santos is prohibited individually and doing business as Latino Tax from operating a preparation business; he agreed to the entry of the injunction but did not admit to the allegations in the civil complaint against him.
According to the complaint, Santos and his business, which was located in Atlantic City, N.J., prepared false and improper returns during the 2010 through 2014 filing seasons. The IRS audited 43 federal returns that Santos or one of his employees prepared, and the audits resulted in adjustment of four out of every five of those returns and a total income tax deficiency of approximately $100,000, according to the complaint.
The complaint also alleged that Santos and his employees understated clients’ tax liabilities or inflated refunds by improperly claiming child tax credits, including for children who lived outside of the U.S.; declaring dependency exemptions, for instance, for clients who had no proof that they supported the children; and using incorrect filing statuses.
The injunction order requires Santos to provide the U.S. with a list of his clients since 2010 and to send a copy of the court’s injunction order to all clients for whom he and Latino Tax prepared returns starting in 2010.
Phoenix: Preparer Paula Anthony, owner of FYI Business Services, has been indicted in connection with allegedly running a fraudulent tax prep business from her home and stealing more than $300,000.
Anthony faces charges of mail fraud, aggravated ID theft, conspiracy to commit money laundering and conspiracy to defraud.
According to the indictment, in early January 2013 Anthony and a co-conspirator, listed as T.C., devised a scheme to collect refunds by using stolen IDs, prepaid debit cards and numerous bank accounts.
Using an online bill-payment feature, 367 checks totaling more than $300,000 were issued to Anthony, the indictment said.
Local news outlets said Anthony denied involvement and claimed that someone stole her identity for the fraud. She reportedly added that the returns cited in the indictment were filed with a program other than the ATX software that she used.
Topeka, Kan.: Preparer Maurice L. Stewart, 38, has been charged with filing false returns, including 13 counts of filing false tax returns and 13 counts of wire fraud.
According to the indictment, which alleges the government paid more than $479,000 in refunds to Stewart’s clients based on returns containing false information, Stewart filed returns in clients’ names, falsely claiming the returns were self-prepared and fraudulently reporting that clients had suffered business losses.
Authorities added that he e-filed returns using the IP address of a Topeka business where he was formerly employed as an online IT technical services coordinator and also that he prepared returns using an online program where he had opened an account using another person’s name.
If convicted, he faces a maximum of three years in prison and a fine up to $250,000 on each count of filing a false return, and a maximum 20 years and a fine up to $250,000 on each wire fraud count.
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