Crime Watch: August 30, 2013
by Terri Eyden on
Former Utah Chiropractor Sentenced to Prison for Tax Evasion
The Justice Department and the IRS announced August 26, 2013, that Douglas R. Madsen, a former chiropractor from Ephraim, Utah, was sentenced by the US District Judge Clark Waddoups to thirty-three months in prison and restitution of over $500,000 following a conviction for attempted evasion of payment of income tax in the District of Utah.
On January 12, 2012, a jury convicted Madsen of one count of tax evasion. According to court documents, Madsen owed approximately $1.3 million in assessed income tax, interest, and penalties for the years 1995 and 1999 to 2004. Madsen's tax debt had grown, by the trial date, to over $1.7 million, after accrued interest.
The evidence presented at trial established that Madsen used nominee trusts to conceal the ownership of numerous acres of property, ultimately causing the transfer of that property to Grand Scale Inc., a Washington State corporation of which he was the president, vice president, secretary, treasurer, and chairman of the board. In addition, the evidence showed that Madsen used other entities to encumber property and cloud equity in that property through use of mortgages and Uniform Commercial Code financing statements. Madsen was previously held in civil contempt by the US District Court for the District of Utah for failure to comply with court orders with respect to an IRS summons.
Source: US Department of Justice
Justice Department Sues to Shut Down South Carolina Tax Return Preparer
The United States has requested the federal district court in Charleston, South Carolina, to permanently bar Jessica Geddis of Summerville, South Carolina, from preparing federal income tax returns for others, the Justice Department announced August 27, 2013.
According to the complaint, Geddis prepared federal income tax returns from her home and as a tax preparer at MBM Tax and Accounting Services LLC. The complaint alleges that Geddis prepared returns for herself and others that overstate income by reporting fictitious household help income. Geddis overstated her customers' income in order to increase the amount of her customers' refundable tax credits, including the Earned Income Tax Credit, Child Tax Credit, and Making Work Pay Credit.
The complaint further alleges that Geddis directed the IRS to deposit all, or a portion of, her customers' overstated refunds into bank accounts that she controls. According to the complaint, the IRS has reviewed Geddis' bank records and determined that she has received at least 148 fraudulent tax refunds totaling $281,678 between January 2008 and May 2012.
Source: US Department of Justice
California Business Owner Sentenced to Eighteen Months in Federal Prison for Tax Fraud
The owner of a Ventura County, California, residential and commercial paint business was sentenced to 18 months in federal prison for failing to report to the IRS wages paid to employees totaling over $1.5 million.
Scott G. Titus, 53, of Ojai, the owner and operator of Scott Titus Painting, was sentenced by US District Judge Stephen V. Wilson, who also ordered Titus to pay restitution in the amount of $666,748.40 to the IRS.
In April of this year, Titus pleaded guilty to count one of the information charging him with subscribing to a false quarterly employment tax return for 2008.
According to the plea agreement, during the years 2008 through 2010, Titus owned and operated Scott Titus Painting. Titus painted residential and commercial properties and was paid by his clients in both cash and checks. Titus used the cash payments received from clients, along with cash derived from cashing checks and cash withdrawals from his business bank account, to pay his employees their wages in 2008, 2009, and 2010.
For the years in question, Titus failed to report $1,594,971 in wages paid to the employees of Scott Titus Painting on the quarterly and annual employment tax returns filed with the IRS resulting in a tax loss to the government of at least $666,748.
The count to which Titus pleaded guilty relates to the employment tax return for the second quarter of 2008. Specifically, Titus reported paying wages to employees of $22,195, when in fact he paid wages of $215,774, falsely underreporting the wages paid by $193,579.
The investigation of Titus was conducted by IRS Criminal Investigation in Los Angeles in conjunction with the US Attorney's Office Tax Division.
Source: US Attorney's Office - California
Final Defendant Sentenced to 102 Months in Federal Prison for His Role in a Credit Card Fraud Scheme
A Bellflower, California, man was sentenced to 102 months in federal prison for his role in a credit card fraud scheme that used the names of real and fictitious individuals and business entities to obtain fraudulent credit cards used to make unauthorized withdrawals and purchases.
Clayton Stewart, aka Douglas Blackburn, was sentenced in the fraud scheme by US District Judge Gary Allen Feess. In addition to the prison term, Judge Feess ordered Stewart to pay $404,284.80 in restitution to the victim financial institutions.
Clayton Stewart pleaded guilty in November to one count each of bank fraud conspiracy, access device fraud, and money laundering conspiracy admitting that he, together with his brother Johnny Stewart of Marina Del Rey, and codefendant Dexter Hardy of Los Angeles County, engaged in a scheme to defraud Bank of America, Chase Bank USA, and Capital One Bank of funds belonging to these financial institutions through the use of fraudulent credit card applications.
According to documents filed with the court, Clayton Stewart and Johnny Stewart were involved in a conspiracy in which the defendants fraudulently applied online for unauthorized credit cards from the financial institutions. For many of the cards, Clayton Stewart and his brother made calls to the bank in the names of actual victims to inquire about the cards opened in the names of the business entities. Once Clayton Stewart and his brother received the credit cards, they used the credit cards to make unauthorized bank ATM withdrawals and purchases, including purchases of department store gift cards and Apple iPads. To get more money out of the scheme, Clayton Stewart and his brother created sham entities so that charges could be made with the fraudulent credit cards on merchant processors for the entities. The intended dollar loss associated with the scheme is $652,050.00.
Johnny Stewart was convicted in November by a federal jury of eighteen felony counts, including bank fraud, access device fraud, money laundering, and aggravated identity theft. He received a sentence of 144 months in federal prison. Dexter Hardy pleaded guilty in August of last year to one count of bank fraud conspiracy. He received a sentence of thirty-three months in federal prison.
In February 2008, Clayton Stewart was sentenced in US District Court to thirty-seven months in federal prison after pleading guilty to a similar access device fraud scheme. Clayton Stewart was released from federal custody on September 17, 2010. Search warrant records from the previous scheme uncovered letters from Johnny Stewart to Clayton Stewart on how to commit different types of fraud without being detected by law enforcement. In those letters, Johnny Stewart instructed Clayton Stewart how to conduct bank transactions on the home computer so that Clayton Stewart did not need to go to the bank and risk being detected.
Source: US Attorney's Office - California
Tax Preparer Sentenced to Federal Prison for Identity Theft and Tax Fraud
A Lynn, Massachusetts, man was sentenced August 15, 2013, in US District Court in Boston for identity theft and tax fraud committed while operating a tax return preparation business. Roosevelt Fernandez was sentenced by to forty-two months in prison and ordered to pay $116,679 in restitution to the IRS. On January 16, 2013, Fernandez pleaded guilty to a thirteen-count superseding information charging him with aiding and assisting in the preparation of false income tax returns and identity theft.
Fernandez held himself out as an experienced tax return preparer operating a business called H&T Multi Services in Lynn. On numerous occasions, Fernandez inserted false and fabricated information into his clients' income tax returns. This information included wholly fictitious and fraudulently inflated claims relating to deductions and credits. In addition, Fernandez omitted the names and personal identifying information of dependent children from their actual parents' income tax returns, and then charged other clients $500 or more to add those dependents to their income tax returns in order to generate larger tax refunds.
Source: US Attorney's Office - Massachusetts
You may like these other stories...
Regulators struggle with conflicts in credit ratings and auditsThe Public Company Accounting Oversight Board (PCAOB), which was created by the Sarbanes-Oxley Act in 2002, released its third annual report on audits of...
Could the IRS disallow Ice Bucket Challenge charitable contributions?Unless you’ve been living under a rock, you’ve probably heard of – or participated in – the ALS Ice Bucket Challenge.I was...
As a general rule, a taxpayer can deduct the full amount of monetary contributions made to a qualified charitable organization, as long as certain substantiation requirements are met. These donations are typically made...
Upcoming CPE Webinars
This webcast will include discussions of recently issued, commonly-applicable Accounting Standards Updates for non-public, non-governmental entities.
Excel spreadsheets are often akin to the American Wild West, where users can input anything they want into any worksheet cell. Excel's Data Validation feature allows you to restrict user inputs to selected choices, but there are many nuances to the feature that often trip users up.
In this session we'll discuss the types of technologies and their uses in a small accounting firm office.
This webcast will include discussions of commonly-applicable Clarified Auditing Standards for audits of non-public, non-governmental entities.