Tax Fraud Blotter: Wrapping ITS up
Cigars and nose jobs; “training” to manipulate numbers; and other highlights of recent tax cases.
Cincinnati: Fesum Ogbazion, 44, owner and CEO of ITS Financial LLC, the national franchisor of Instant Tax Service, has been convicted of conspiracy to commit wire fraud, wire fraud, bank fraud, evasion of employment taxes and failure to pay over employment taxes.
According to the evidence at trial, Ogbazion founded ITS in 2004 and at one time it had more than 1,100 franchise locations throughout the country. From approximately January 2009 through 2012, Ogbazion conspired with others at ITS to generate loan and prep fees by luring taxpayers into ITS franchises through a fraudulent nationwide advertising campaign.
The ITS ads offered RALs through an independent third-party lender despite ITS not having such a lender to fund the promised loans. Evidence showed that Ogbazion used the false advertising to entice customers into coming to ITS locations for a loan and then used their loan applications to prepare and file income tax returns, often without customers’ authorization.
ITS charged clients $500 to $800 in prep fees; between 2006 and 2011, the company collected more than $70 million in fees.
Ogbazion also failed to pay approximately $1.3 million in payroll taxes due from ITS and another business during four tax quarters in 2009 and 2010. He evaded IRS attempts to collect the unpaid taxes by directing business revenue to nominee accounts, placing assets in the names of nominee entities and making false statements to an IRS revenue officer during collection activity.
In 2013, ITS and Ogbazion were permanently barred from operating or being involved with any work or business relating to the preparation of returns.
Ogbazion faces a maximum of 20 years in prison on the conspiracy count, 20 years for the wire fraud counts, 30 years for bank fraud, five years for tax evasion and five years for failure to pay employment taxes. He also faces a period of supervised release, restitution and monetary penalties.
Fort Lauderdale, Fla.: Salesman Thomas Daly, 53, has pleaded guilty to tax evasion, admitting that he evaded paying taxes on more than $1.5 million in income that he earned from 2002 to 2015.
Daly further admitted that, except for the 2007 tax year, he has not filed an income tax return since 2002.
Daly worked for a local company selling hurricane-resistant windows to residential homeowners in South Florida. In August 2009, the IRS notified Daly of its intent to levy his wages because of his failure to pay taxes.
To obstruct the collection, Daly established his own business, South Florida Home Marketing, and changed his employment status from an employee to an independent contractor. He listed himself as the director of SFHM and opened a business bank account in its name. Due to Daly’s change in employment status, his employer paid SFHM directly, thwarting government attempts to levy Daly’s wages.
From approximately August 2009 through April 2017, Daly used SFHM’s bank account to pay for personal expenses, including rent, cigars, international travel, entertainment, his girlfriend’s cosmetic surgery, jewelry and a boat. He also falsely classified numerous personal expenses as business expenses on the memo line of the checks drawn on the SFHM bank account.
He admitted that his actions caused a tax loss of more than $351,241.
Sentencing is Aug. 18, when Daly faces a maximum of five years in prison, a period of supervised release, restitution and monetary penalties.
Hampton Roads, Va.: Preparer Kevin Towns of A Plus Tax Service and NN Financial has pleaded guilty to one count each of conspiracy to defraud the U.S. and aiding the preparation of false tax returns, according to published reports.
According to cited court documents, Brenda Benns owned the businesses, and Towns and his sister Stephanie worked for Benns, as did several seasonal employees. One of those workers, Dytania Collins, was sentenced last month to five months of house arrest for her role in the scheme, reports added.
News outlets said that Benns and Stephanie Towns are set to stand trial June 27, but Benns’ attorney has requested a postponement.
A statement of facts reportedly filed with the plea of Towns said he worked for Benns from about July 2009 through about February 2014, during which time, the companies prepared “hundreds” of false income tax returns on behalf of clients to secure them larger tax refunds than they were entitled to.
Towns reportedly sometimes claimed SE income in amounts that would reduce clients’ tax liability and maximize the Earned Income Tax Credit, the documents said. In other cases, he falsely reported expenses or charitable contributions or claimed education credits or dependent exemptions for which his clients did not qualify, reports said.
The statement of facts also reportedly referenced a January 2011 training session during which Towns taught employees how to manipulate numbers within a return to generate a higher refund. News outlets added that the document said Towns prepared the bulk of the company’s false returns.
Authorities reportedly estimate the tax loss at about $989,000.