Tax Fraud Blotter: To the cleaners
Disabled, in foster care and deductible; no profits but thousands in expenses; conviction overturned; and other highlights of recent tax cases.
Darby, Pa.: Preparer Musa Turay, 44, who used the identities of disabled children and children in foster care to file false federal income tax returns, has been sentenced to 10 years in prison and been ordered to pay $83,870 restitution.
Turay was a partner at Medmans Financial Services, with two offices in Philadelphia. Turay and defendant Mohamed Mansaray, the other partner of the business, ran the prep service.
Turay prepared and filed federal income tax returns that included intentional false deductions, fake credits and fictitious dependents using the names and Social Security numbers of children unrelated to the taxpayers, some of whom were in the foster care system. He prepared more than 1,000 fraudulent returns; the IRS estimated that the loss was some $8 million. He also falsified his own personal income tax returns by falsely adding dependents.
Turay fled the country after the government filed a motion to revoke his bail. The defendant absconded for nine months before being apprehended.
Turay is the last of 11 defendants in this investigation to be sentenced. The total loss to the government caused by all the tax preparers who worked at Medmans Financial was more than $30 million.
Lagrange, Ga.: A federal court has permanently enjoined Lucrezia Finch Henderson from preparing federal income tax returns for others.
According to the complaint, Henderson prepares returns at Infinity Tax and allegedly engaged in abusive tax schemes such as reporting fake businesses on clients’ returns to generate losses and lower tax liabilities. The court found that she falsely reported on several clients’ returns that each had a business that earned no money and had tens of thousands of dollars in expenses. According to the complaint, Henderson used the losses from these fake businesses to offset clients’ income and claim a larger refund.
In addition, the court found that she falsely reported that her clients had education expenses in support of credits the clients were ineligible to claim; the complaint alleged that some of these clients did not even attend college that year.
According to the complaint, the IRS audited about 110 returns prepared by Henderson and found that she understated clients’ tax liabilities by more than $650,000 in total.
The court also ordered Henderson to mail a copy of the injunction order to all clients for whom she prepared a return after Jan. 1, 2015.
Brooklin, Maine: Steven Nygren, 51, of Salem, Mass., has been sentenced to 95 months in prison and five years of supervised release for bank fraud, unauthorized use of credit card numbers and tax evasion. He was also ordered to pay more than $815,000 in restitution.
According to court records, from June 2014 through August 2015, Nygren used his position as financial manager to embezzle and forge 63 business checks worth more than $732,000 and to charge $62,000 to business credit cards for unauthorized personal purchases.
From 2010 through 2016, he also evaded payment of more than $1 million in previously assessed federal taxes and penalties for tax years dating back to 1996.
Newport, R.I.: Michael Lynch, 53, a national sales executive for Dr. Pepper/Seven Up Inc., has been sentenced to 33 months in prison for submitting more than $1.7 million in fraudulent invoices to Dr. Pepper through a promotions and marketing company he formed in his wife’s name.
Earlier this year Lynch admitted that in 2003 he incorporated Seacoast Unlimited Marketing and Promotions in his wife’s name, and, through Seacoast, from January 2007 until late last year submitted to Dr. Pepper more than 200 fraudulent invoices totaling $1,716,949 for services such as promotional signs and banners, delivery of sample products to retail stores and offering of discount prices to retail stores. None of the services billed to and paid for by Dr. Pepper was provided.
Lynch admitted that he failed to declare any of the income he derived through Seacoast on joint federal filings with his wife. The tax loss totals $386,320.
Lynch was also ordered to serve two years of supervised release upon completion of his term of incarceration, to pay full restitution to Dr. Pepper and to pay federal taxes owed.
Saratoga, Calif.: Jyh-Chau “Henry” Horng, 51, has been found guilty of two counts of filing false tax returns and one count of lying to the IRS during a 2010 audit.
Horng’s wife, Meili “Ally” Lin, was also tried with respect to two counts of tax fraud; the jury failed to reach a verdict with respect to one count and acquitted Lin of the second.
Horng owned and operated an international trading business from his home. Evidence showed that he filed joint returns for 2006 and 2007 that underreported the couple’s income. On the 2006 return, Horng reported that the couple’s income was only $232,116; on the 2007 return, he reported that the couple suffered a loss of $212,217.
In addition, while the couple was under audit, Horng told an IRS auditor that the information in their loan applications were lies made up by their loan brokers and that the couple had no foreign bank accounts. Evidence demonstrated that the reported income figures and Horng’s statements to the auditor were demonstrably false.
During the same period, the defendants purchased millions of dollars’ worth of real estate, reported on numerous loan applications annual income of over $1 million, invested more than $5 million into a Milpitas shopping center and spent more than $350,000 using credit cards.
Horng faces a maximum of three years in prison for each false return and up to an additional five years in prison for lying to the IRS auditor. The court also may order him to serve an additional period of supervised release and to pay restitution and monetary penalties.
New York: Samuel Gentle, 62, a previously convicted preparer from Mount Vernon, N.Y., and currently jailed in Brooklyn, has had a top charge dropped against him and may be eligible for early release, according to published reports.
Gentle was convicted in 2016 after a jury found that he had repeatedly added fake deductions to his clients’ returns. He was sentenced to 51 months in prison.
The conviction has been overturned, reports said, and he is scheduled for resentencing on July 19. Reports added that federal prosecutors do seek to bar Gentle from ever again working on others’ returns.
Edgerton, Wis.: Businessman Gary Auerswald, 61, has received two years in prison for failing to pay taxes withheld from employees’ paychecks.
Auerswald, who pleaded guilty in March, owned Full Spectrum Building Components and had the responsibility to collect and pay over the company’s quarterly federal payroll taxes. Full Spectrum withheld payroll taxes from its employees’ checks but failed to make these payments. Auerswald instead used the money to pay for business and personal expenses.
The prison term is to be followed by three years of supervised release. Auerswald was also ordered to pay $593,300.46 in restitution.
Wilmington, Del.: Business owner Jeffrey Minner, 55, has been sentenced to 18 months in prison after pleading guilty to withholding taxes from his employees but failing to pay those monies over to the IRS.
According to statements at the sentencing hearing and documents filed in court, Minner owned and operated Advanced Enterprises Inc., a commercial cleaning company that had 140 to 185 employees at any given time. Between 2011 and 2016, he collected more than $1.2 million in employee Medicare, Social Security and income taxes that he did not pay over to the IRS. Instead, Minner used a portion of those monies to fund his lifestyle and pay off other debts.
Minner was also ordered to pay $1,223,660 in restitution to the IRS.