Slideshow CPAs and Tax Pros Gone Wrong

Published
  • June 28 2016, 4:27pm EDT

Bad Eggs, Rotten Apples

While accountants and tax professionals are generally known for their integrity, the occasional practitioner goes spectacularly wrong – giving in to the dark side with fraud, embezzlement, false tax returns and more.

Following are 10 of our favorite recent cases – including two from the enforcement side of things. (Note that we only picked cases that reached conclusions, which means, given how long sentencing procedures can drag on, that many are from 2015).

Spiritual Fraud

California CPA Donald Gridiron defrauded a New Jersey religious facility, the Agape Family Worship Center, out of more than $4 million, using his job to embezzle money and transfer more than $2.75 million to accounts he controlled and more than $1.5 million to an account associated with a foundation in which Gridiron was involved. He used the money for mortgage payments, payments to a luxury car dealership, and for gambling.

In 2016, he pled guilty to one count of wire fraud and one count of filing a false tax return, and was sentenced this year to 57 months in prison, plus three years of supervised release.

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In from the Cold

After six years hiding on the Appalachian Trail, accountant and former controller James T. Hammes was sentenced in June to eight years in prison for embezzling $8.7 million from the Pepsi bottler where he used to work. He also agreed to pay nearly $7.7 million in restitution.

Between 1998 and 2009, Hammes set up fictitious vendor accounts and manipulated the monthly accounting reports to make off with the money, used a miscellaneous account where he could charge off fraudulent checks and manipulated the legitimate accounts to offset the amounts in the miscellaneous account.

(Read the full story here.)

They Should at Least Be Familiar with Prison …

In April 2016, tax preparers Kamal J. James, a.k.a. Bro. Messiah Aziz El, 34, of Seaford, Del., was sentenced to 96 months in prison, and Crystal G. Hawkins, a.k.a. Sis. Crystal Gabri El, 39, of Laurel, Del., was sentenced to 48 months in connection with filing fraudulent returns on behalf of inmates at various New Jersey prisons.

From October 2011 and October 2013, they solicited current and former New Jersey prison inmates as clients and then filed fraudulent returns on their behalf, generating several thousand dollars in refunds and a $1,485 fee for the defendants. In addition to the prison terms, both James and Hawkins were sentenced to three years of supervised release and ordered to pay $570,897 restitution.

Not-So-Trusty

In May 2016, former CPA Thomas D. Ziff was sentenced to seven months in prison and a year of supervised release and was ordered to pay $47,539 in restitution to the IRS after pleading guilty to one count of filing a false tax return. From 2006 through 2010, Ziff operated a tax preparation and accounting business and during that time was also the trustee of a trust that was associated with the last will and testament of another individual. As the trustee of the trust, Ziff transferred approximately $300,000 from the trust bank account to other bank accounts that he controlled. He also failed to report the embezzled funds as income on his federal returns for the years 2008, 2009 and 2010.

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Par for the Crime

In May 2016, CPA Robert K. Stewart was sentenced to four years’ probation, with one year of home detention, and forfeiture of $150,000, for insider trading with his son Sean R. Stewart, an investment banker who allegedly passed his father tips and confidential information from clients of the two banks where he worked. The inside information was sent in coded e-mails, disguised as discussions about golf.

The elder Stewart pled guilty; his son’s case is still pending. 

For more details, see our original story.

Old Enough to Know Better

Florida CPA Pamella B. Watson, 60, was sentenced in December 2015 to 6.5 years in prison and $3.68 million in restitution for using her tax preparation business to facilitate an income tax refund fraud scheme.

She prepared approximately 557 federal income tax returns from tax years 2010 through 2013, of which about 71 percent received refunds that were split into an account controlled by Watson, or the entirety of the refund was diverted into her bank account.

Thousands of Fraudulent Tax Returns

Talashia Hinton, a.k.a. LayLay and LaLa, of Phenix City, Ala., was sentenced in November 2015 to 94 months in prison and restitution of $7,173,704 for participating in a large-scale stolen identity tax refund scheme in which more than 3,000 false tax returns for 2012 and 2013 were filed that claimed more than $7.5 million in fraudulent federal income tax refunds from the Internal Revenue Service.

Hinton worked with others who supplied her with IRS electronic filing identification numbers and stolen identities that included personal information so that Hinton could prepare and file false tax returns to claim refunds using those stolen names. Hinton directed the IRS to pay the refunds by issuing U.S. Treasury checks and direct deposits onto prepaid debit cards.   

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‘Unconscionable, Exorbitant and Often Undisclosed’

In June 2016, Florida tax preparer Kerny Pierre-Louis was permanently barred from preparing returns for others and owning or operating a tax prep business, and ordered to disgorge $1 million in proceeds he derived from preparing false returns.

Pierre-Louis and his employees prepared fraudulent returns for clients, targeting primarily low- to moderate-income clients with deceptive and misleading advertisements; preparing and filing fraudulent returns to inflate refunds; and profiting through unconscionable, exorbitant and often undisclosed fees.

Pierre-Louis agreed to entry of the injunction and disgorgement judgment, but did not agree to any of the facts alleged in the civil complaint.

Who Will Watch the Watchmen?

In May 2016, IRS revenue agent Paul G. Hurley was sentenced to 2.5 years in prison, plus three years of probation, for soliciting and accepting a bribe from a Seattle marijuana business whose tax returns he had audited in 2013 and 2014. Hurley presented the owner of the marijuana business with his tax bill for both years, totaling more than $290,000 (since marijuana is illegally federally even when legal locally, those in the business can't deduct expenses). However, Hurley told the business owner he had saved him more than a million dollars and then allegedly asked for $20,000 in cash. The business owner called in the copy, who captured Hurley in a sting.

Watchmen, Pt. 2

Former IRS revenue agent Creshika C. Wise, 31, a former IRS revenue agent, pleaded guilty to a charge of aggravated ID theft after impersonating a taxpayer in order to steal more than $470,000. She had set up a bank account under the name “U.S. Treasury and Accounting Service,” and then told a taxpayer who owed the IRS back taxes to wire the money into the account. She then later tried to steal more money from the taxpayers by opening a checking account in their name and changing IRS records to have their refund sent to a mailbox she controlled.

Sentencing is Aug. 3. For more, see our story.