Crime Watch: July 12, 2013
by Terri Eyden on
New Jersey Adult Paraphernalia Wholesaler Sentenced to Prison for Tax Evasion, Hiding Nearly $1.2 Million from New York Business
A Middlesex County, New Jersey, man who coowns and operates a wholesale merchandise business in New York selling adult paraphernalia, was sentenced July 9 to nineteen months in prison for concealing more than $1.2 million in income in various domestic and foreign bank accounts, New Jersey US Attorney Paul J. Fishman and Assistant Attorney General Kathryn Keneally of the Justice Department's Tax Division announced.
Sameer Gupta of Edison, New Jersey, pleaded guilty on February 26, 2013, to one count of tax evasion in connection with his diverting funds from the wholesale merchandise business, J.S. Marketers Inc., to undisclosed foreign accounts at HSBC in India, among other places.
According to documents filed in this case and statements made in court, Gupta is the 50 percent owner of J.S. Marketers Inc., which sells adult paraphernalia to large adult store chains and smaller retail video stores and bodegas. From 2006 through 2009, Gupta diverted $822,916 of the business' receipts into seventeen different personal bank accounts held in the names of various individuals, including himself and family members. He directed more than $250,000 of those diverted funds into six different accounts held offshore at a branch of HSBC in India. From 2007 through 2009, Gupta caused twenty-two J.S. Marketers corporate checks to be made payable to himself and family members in amounts identical to invoices from the business' suppliers. Gupta endorsed those checks, which totaled $375,138, and deposited them into bank accounts that he controlled. Gupta filed individual income tax returns for the years 2006 through 2009 that did not report his income from the diverted funds.
As a result, Gupta evaded taxes on $1,198,054 in income for 2006 through 2009. He also failed to file Reports of Foreign Bank and Financial Accounts (FBARs) for 2006 through 2008. The tax loss resulting from Gupta's conduct, not including interest and penalties, is $383,475.
In addition to the prison term, Judge Hochberg sentenced Gupta to serve two years of supervised release. As part of his plea agreement, Gupta has paid to the United States Treasury a one-time FBAR penalty of $259,045 and has cooperated with the IRS in the investigation of his outstanding taxes due and owed for 2006 through 2009. The judge also ordered Gupta to pay an additional $20,000 fine.
Source: US Attorney's Office – New Jersey
Former Preschool Director Pleads Guilty to Tax Evasion
The Justice Department and the IRS announced July 10 that Susan C. Valentine, a resident of Fairfax County, Virginia, pleaded guilty to tax evasion.
According to documents filed with the court, Valentine was the former director at the Epiphany Weekday School (EWS) in Alexandria, Virginia. From 2008 through 2010, Valentine received a salary and also took additional funds from EWS for herself and members of her family. Despite earning this income, Valentine did not file income tax returns or pay income taxes for 2008 through 2010. Moreover, as director, Valentine caused false payroll tax forms to be filed on behalf of ESW with the IRS.
Sentencing was scheduled for October 18, 2013. Valentine faces a maximum sentence of five years in prison, three years of supervised release, a $250,000 fine, and a $100 special assessment. She has agreed to pay restitution to the IRS.
Source: US Department of Justice
Justice Department Seeks to Shut Down Indiana Tax Preparer
The Justice Department announced July 8 that it has asked a federal court in Indianapolis, Indiana, to bar Cynthia Hawk, who operates Gain Tax Services, from preparing tax returns. The civil injunction suit alleges that Hawk fails to comply with due-diligence requirements imposed by federal law on tax preparers who claim the earned income tax credit (EITC) on customers' income tax returns. According to the complaint, Hawk also falsified customers' incomes in order to claim the maximum EITC for them.
The EITC is a refundable federal income tax credit available to certain low- to moderate-income working individuals and families. As a refundable credit, the EITC may entitle a taxpayer to a refund from the US Treasury. The amount of the EITC depends on the taxpayer's income, filing status, and claimed number of dependents. The maximum credit in 2010 was $5,666. The range of earned income generating a maximum EITC is sometimes called the "sweet spot." According to the complaint, Hawk fabricated businesses and reported fake business income on her customers' tax returns to reach the EITC sweet spot.
The complaint alleges that the IRS determined that Hawk failed to comply with due-diligence requirements when claiming the EITC for her customers. The IRS penalized Hawk in 2011 for her failures. When the IRS performed a follow-up investigation in 2012, the complaint alleges that it again found ongoing failures and fraudulent claims by Hawk. According to the complaint, Hawk, who previously prepared tax returns in Atlanta, prepared at least 1,501 returns from 2009 through 2012, with unusually high refund rates ranging from 96 to 99 percent these years.
The complaint also alleges that Hawk claimed education credits on her customers' tax returns, when the customers did not actually have any qualifying education expenses.
Source: US Department of Justice
Naples Residents Plead Guilty to Tax Fraud for Failing to Pay Employment Taxes
The Justice Department and the IRS announced that Anthony Chaudhuri and Margaret Chaudhuri, of Naples, Florida, pleaded guilty July 8 to one count each of conspiracy to defraud the United States.
According to court documents, the Chaudhuris owned and operated a hospital inventory control software company under the name Ariel Computing and various other nominee names, including ADI. Ariel Computing was operated from various addresses in Ann Arbor, Michigan. Court documents indicate that between 1996 and 2008, the Chaudhuris withheld approximately $888,353 in employment taxes from Ariel Computing employees but failed to pay over to the IRS approximately $704,488 of these withheld taxes, instead diverting those funds for their own personal use.
At sentencing, the Chaudhuris face a maximum of five years in prison and a $250,000 fine for the conspiracy charge. A sentencing date has not yet been set.
Source: US Department of Justice
US Postal Service Mail Carrier Convicted for Involvement with Stolen Identity Refund Fraud Conspiracy
On July 3, a jury found Vernon Harrison, of Montgomery, Alabama, guilty of one count of conspiring to file false claims, eight counts of mail fraud, eight counts of aggravated identity theft, and six counts of embezzlement from the US mail, the Justice Department, the IRS, and the US Postal Service Office of the Inspector General announced July 5.
According to the evidence presented at the trial, Harrison was a US Postal Service mail carrier who was part of a stolen identity refund fraud conspiracy. Members of the conspiracy used stolen identities to file false tax returns from various locations, including houses and hotels, around Birmingham and Montgomery, Alabama. They then had the fraudulently obtained tax refunds generated by those returns sent to debit cards, which were subsequently mailed to addresses on Harrison's postal route in Montgomery. In exchange for cash, Harrison stole the debit cards from the mail and provided them to a coconspirator. Harrison stole, at a minimum, over a hundred debit cards from the mail for his coconspirators.
As was shown at trial, federal agents uncovered substantial evidence of the conspiracy during the execution of search warrants at locations in Montgomery and near Birmingham, including over a hundred envelopes for debit cards that had been mailed to addresses on Harrison's postal route. Soon after, agents also conducted surveillance on Harrison and observed him failing to deliver Turbo Tax cards that were in the mail.
Harrison faces up to ten years in prison for the conspiracy count, twenty years for each mail fraud count, five years for each mail embezzlement count, and a mandatory two-year sentence for the aggravated identity theft counts. In total, Harrison could be sentenced to up to 216 years in prison. Harrison also could be subject to fines, forfeiture, and mandatory restitution.
Source: US Department of Justice
Owner of New York City Parking Lots Pleads Guilty to Failing to Pay Payroll Taxes to the IRS
Preet Bharara, the United States Attorney for the Southern District of New York, announced July 8 that Trevor Whittingham, an owner of parking lots in Manhattan, pled guilty in Manhattan federal court to failing to pay payroll taxes to the IRS. Whittingham was arrested in January 2013 and pled guilty before US District Judge Richard J. Sullivan.
According to the Indictment and statements made in open court today at the plea proceeding, Whittingham owned and controlled two companies, EZ Going Park Here and We Have Cars II, through which he operated parking lots in Harlem and other parts of upper Manhattan. He was responsible for collecting, accounting for, and paying payroll taxes on behalf of both of these companies.
From December 2006 through June 2009, Whittingham caused EZ Going Park Here and We Have Cars II to deduct and collect payroll taxes from its employees. The majority of those payroll taxes, however, were not paid over to the IRS as required. Instead, Whittingham used the corporate funds of EZ Going Park Here and We Have Cars II to pay for various personal items and otherwise finance a lavish lifestyle. As a result, from 2005 through 2009, EZ Going Park Here and We Have Cars II accumulated approximately $251,265 in unpaid payroll tax liabilities.
Whittingham faces a maximum sentence of five years in prison. He will be sentenced by Judge Sullivan on November 15, 2013. Whittingham also agreed to make restitution to the IRS in the amount of $251,265.
Source: US Attorney's Office – New York
Debt Collection Employee and Son-in-Law Convicted of Sophisticated Identity Theft Scheme
Quentin Collick and Deatrice Williams were each found guilty of one count of conspiring to defraud the United States by filing fraudulent federal income tax returns, three counts of wire fraud, and three counts of aggravated identity theft, George L. Beck, Jr., US Attorney for the Middle District of Alabama, announced July 3. Collick was also convicted of three counts of theft of public money.
Based on the evidence introduced at trial and court filings, Williams worked for a debt collection company located in Norcross, Georgia. As an employee, Williams had access to names, Social Security numbers, and dates of birth of individuals who owed medical debts. Williams accessed several files and handwrote the personal information. Williams provided the stolen information to Collick.
Collick and his coconspirator, Corey Thompson, filed the false tax returns. Thompson previously pleaded guilty and was sentenced to thirty months in jail. In 2011 and 2012, Thompson worked as an independent contractor for a cable company. As an independent contractor, Thompson installed cable and Internet access for customers. In order to perpetrate the conspiracy, Thompson used his laptop and his specialized knowledge and equipment to essentially shut down and hijack his customers' Internet service. Thompson and Collick then filed false tax returns using the customers' hijacked Internet address, which made it appear as if the false tax returns were being filed by the customer.
Thompson and Collick directed the tax refunds to be placed on prepaid debit cards. The prepaid debit cards were intercepted by the United States Postal Service.
Collick and Williams currently await sentencing. Collick faces a maximum prison term of 106 years, and Williams faces a maximum prison term of seventy-six years.
Source: US Attorney's Office – Alabama