Tax Fraud Blotter: ‘Til parole do they part
Scheming from coffee shops; disbarred and behind bars; AOTC on 3,000 returns; and other highlights of recent tax cases.
Waterbury, Conn: Preparer Michael Mir, 41, has waived his right to be indicted and pleaded guilty to a federal tax offense.
According to court documents and statements in court, Mir prepared more than 3,300 federal returns for the 2012 through 2015 tax years through a prep practice he operated. Mir falsified information on numerous returns that he prepared for clients by fabricating business expenses or by inflating deductible medical and dental expenses.
For the 2012 through 2014 tax years, Mir deposited more than $400,000 in income generated by his prep business into his personal bank account; he did not report any income from his prep business on his 2013 personal return and reported only $18,500 in income from his prep business on his 2014 return. Mir filed no personal income tax return for 2015.
Through Mir’s preparation of false returns and underpayment of his own taxes, the government lost $406,679.
He pleaded guilty to one count of aiding and assisting the filing of a false tax return, which carries a maximum three years of imprisonment, a fine of up to approximately $800,000 and restitution. Sentencing is June 1. Mir’s clients must resolve their own tax liability with the IRS.
Minneapolis: Hassan Osman, 52, has been sentenced to nine years in prison for conspiracy, tax fraud and failing to appear on the day of trial.
He was found guilty in September on one count of conspiracy, 13 counts of aiding and assisting in the preparation of a false tax return, and one count of unlawful flight from prosecution.
Between January 2008 and April 2011, Osman and his co-conspirators devised and carried out a tax fraud by filing false federal returns claiming fraudulent refunds. The returns used fake W-2s created in the name of several front companies. Most of the returns were efiled either from coffee shops or from a local business that Osman owned.
The resulting refunds were split among Osman and his co-conspirators. Often the fraudulent refunds were deposited onto prepaid debit cards and sent to addresses controlled by Osman or his co-conspirators. He and his co-conspirators filed more than 90 income tax returns claiming approximately $1,012,877 in fraudulent refunds.
Osman was arrested in April 2015 and later released on bond pending trial. That July, when he failed to appear for a court-ordered pretrial conference, a warrant was issued for his arrest. In April 2016, Osman was arrested in Toronto and extradited back to the U.S.
White Plains, N.Y.: Disbarred Orange County attorney Joseph Scali, 68, of West Hartford, Conn., has been convicted of mail fraud, structuring cash transactions, making false statements to the IRS, obstructing the IRS, tax evasion, obstruction of justice and perjury.
According to case records and evidence, from January 2011 through August 2012, Scali, who represented the seller of land and mineral rights in Pennsylvania, schemed to defraud the prospective purchaser of that property of the $850,000 the latter had given to Scali to hold in escrow by misappropriating those funds from his attorney trust account.
He engaged in tax evasion for the 2011 and 2012 years by, among other things, deliberately withholding from the IRS his attorney trust account records, which would reveal the funds he had misappropriated.
In addition, between 2006 and November 2013 Scali corruptly endeavored to obstruct the IRS by providing materially false, incomplete, and misleading information to a Revenue Officer about his filing history and income; commingling client funds and personal funds in his attorney trust account; paying for personal items directly out of that account; and structuring $32,400 in cash deposits into that account.
He also failed to timely file 1040s for the years 2006 through 2012, as well as 1120s for his law firm for the years 2007 through 2012. Scali was separately convicted of making false statements to the IRS and structuring cash deposits.
Scali committed obstruction of justice and perjury when, in seeking to set aside his disbarment by the U.S. District Court for the Southern District of New York, he lied under oath to that court about why, in 2013, he had been suspended from practicing law in New York by the Second Department of the Appellate Division of the New York State Supreme Court. He was disbarred by the Appellate Division on July 6, 2016.
In 2014 and 2015, he committed mail fraud by fraudulently undertaking a legal representation of a client for a fee without disclosing his 2013 suspension from the practice of law in New York.
Scali was convicted on two counts of mail fraud, which carry a maximum of 20 years in prison; one count of structuring cash transactions, with a maximum of five years in prison; two counts of making false statements to the IRS (maximum of five years); one count of obstructing the IRS (maximum of three years); two counts of tax evasion (maximum of five years); one count of obstruction of justice (maximum sentence of 10 years); and one count of perjury (maximum of five years). Sentencing is June 1.
Memphis, Tenn.: Two former Memphis staffing company owners have been sentenced to prison for payroll tax fraud.
Mark Stinson, who was convicted in December of conspiring to defraud the U.S., failing to pay over payroll taxes, filing false tax documents, theft of government funds and aggravated ID theft, was sentenced to 75 months in prison. His wife, Jayton Stinson, previously pleaded guilty to conspiring to defraud the U.S. and was sentenced to a year in prison.
According to court documents and testimony, from 2005 through 2015 the couple operated a temporary staffing company that provided services to businesses in Tennessee and elsewhere. The company’s standard contract with its customers provided that the staffing company was responsible for withholding employment tax from employees’ wages and paying over the amounts withheld to the IRS.
The Stinsons failed to pay over $2.8 million in withholdings and other federal employment taxes, failed to timely file employment tax returns and filed false employment tax returns. To avoid making payments to the IRS, the Stinsons changed the name and structure of the company multiple times after accumulating employment tax liabilities.
The Stinsons also conspired to impede efforts by the IRS to collect employment tax liabilities owed. For example, the couple made false representations to the IRS about their control of the staffing company and their knowledge of the requirement to account for and pay over employment taxes. They also falsely identified multiple family members as company executives, placed the staffing company in the names of nominees who had no control over the business operations and established payment arrangements intended to impede a levy.
The Stinsons used the withheld funds to pay for personal expenses, including a Mercedes-Benz, a Cadillac Escalade, mortgage payments and private school tuition for their children. Mark Stinson also filed a fraudulent return for a relative that included a false dependent seeking an undeserved refund.
The Stinsons were also ordered to serve terms of supervised release and to pay $2.8 million in restitution.
Pompano Beach Fla.: Preparer Patrick Bernavil, 38, has been sentenced to 30 months in prison, to be followed by one year of supervised release, for filing false tax returns.
According to court records, Bernavil owned the prep business BMS Tax and Accounting Services from 2004 through 2014, where he employed and trained preparers. A $2,500 American Opportunity Tax Credit was claimed on some 3,000 returns prepared by BMS for tax years 2011 through 2013, among other false claims.
These fraudulent claims caused some $2.9 million in tax loss. Bernavil also made false claims on his personal income taxes for tax years 2012 and 2013 and failed to file a return for 2014, causing a tax loss of $183,471.
Bernavil, who previously pled guilty to one count of aiding and abetting the preparation and presentation of fraudulent income tax returns, was also ordered to pay $2,612,202 restitution.