Crime Watch: October 25, 2013
by Terri Eyden on
Los Angeles Man Sentenced to Sixty Months in a Multimillion Dollar Scheme to Defraud a Professional Football Player
Appearing before United States District Judge Stephen V. Wilson, a Los Angeles man was sentenced October 24 to sixty months in federal prison for defrauding professional football player Dwight Freeney in a multimillion dollar fraud scheme.
Michael A. Stern, also known as Michael Millar, was further ordered to pay restitution in the amount of $2,594,600 to Freeney.
In August 2012, Stern was charged in a multi-count federal indictment with wire fraud, access device fraud, money laundering, and obstruction of justice. In January 2013, Stern pled guilty to count eight of the indictment, which charged him with access device fraud.
According to documents filed with the court, Stern was introduced to Freeney in approximately February 2010 by Freeney's financial manager. However, both the financial manager and Stern falsely claimed that Stern's name was Michael Millar. Stern falsely presented himself to Freeney as a wealthy and successful businessman who could assist Freeney in a variety of ways. Stern further falsely presented himself as a potential partner and investor in Rolling Stone Los Angeles (RSLA), a Hollywood, California, restaurant owned by Freeney and Roof Group, LLC, a limited liability company controlled by Freeney. And, while in the months following his initial meeting with Freeney, Stern had some involvement with Freeney and RSLA, Stern never invested any money in the restaurant and there was never any agreement that Freeney, Roof Group, or RSLA owed Stern any money.
However, despite the fact that he was neither employed nor owed any money by Freeney, Roof Group, or RSLA, from approximately June 2010 until approximately October 2011, Stern fraudulently gained access to several of Freeney's personal and Roof Group bank accounts. While Stern was not a signatory on any of Freeney's bank accounts, he was able to fraudulently gain access to the accounts, without Freeney's knowledge or permission, based on information that he obtained through Freeney's financial manager. Once he gained access to Freeney's accounts, Stern engaged in over 400 separate fraudulent transactions that ultimately resulted in losses of approximately $3 million to Freeney.
According to documents filed with the court, Stern used the money he stole from Freeney's accounts to pay for personal expenses that were unrelated to Freeney, Roof Group, or RSLA. For example, tens of thousands of dollars of Freeney's money was used to pay for Stern's legal bills in connection with various unrelated civil and bankruptcy proceedings in Florida. Stern also used Freeney's money to pay for jewelry, lavish foreign vacations for himself and his family, the private school tuition of his children, and for day-to-day expenses like gasoline and groceries. Finally, several hundred thousand dollars of Freeney's money was used in an attempt to purchase a private plane for Stern. All of this was done without Freeney's knowledge or permission.
Further, in early 2012, Stern became aware that the FBI was investigating his activities with respect to Freeney. Fearing that the FBI would soon uncover evidence of his fraudulent scheme, in March 2012, in a series of recorded conversations with an FBI Confidential Informant (CI), Stern instructed the CI to fly to Los Angeles to destroy a computer hard drive that Stern believed contained incriminating evidence.
Stern was arrested on March 22, 2012, at the Miami International Airport. At the time of his arrest, Stern had on his person two checks totaling approximately $35,000 made out to Freeney. In addition, Stern was in possession of a Bank of America debit card with Freeney's name on it.
On June 24, 2013, Freeney's former financial manager pled guilty in a related case to a single-count information charging her with accessory after the fact. She is scheduled to be sentenced in December.
Source: US Attorney's Office – California
Florida Doctor Convicted of Federal Tax Crimes
Dr. Patricia Lynn Hough, of Englewood, Florida, was convicted October 24 by a jury in Fort Myers, Florida, of conspiring to defraud the IRS by concealing millions of dollars in assets and income in offshore bank accounts at UBS and other foreign banks, and of filing false individual income tax returns which failed to report the existence of those foreign accounts or the income earned in those accounts, the Justice Department and the IRS announced.
According to court documents and court proceedings, Hough owned two Caribbean-based medical schools – the Saba University School of Medicine located in Saba, Netherlands Antilles, and the Medical University of the Americas located in Nevis, West Indies. Hough conspired to defraud the IRS with her husband, Dr. David Fredrick, who is awaiting trial. They carried out the conspiracy by creating and using nominee entities, including a foundation, and undeclared accounts in their names and the names of nominee entities at UBS and other foreign banks to conceal assets and income from the IRS. Both schools and associated real estate were sold on April 3, 2007, for more than $35 million, all of which was deposited into undeclared accounts in the name of the nominee entities. The majority of the sale proceeds were not reported to the IRS on their tax returns and no tax was paid.
The evidence at trial further proved that Hough and her coconspirator used e-mails, telephone calls, and in-person meetings to instruct Swiss bankers and asset managers to make investments and transfer funds from their undeclared accounts at UBS. The evidence established that Hough and her coconspirator caused funds from the undeclared accounts in the names of the medical schools to be transferred to undeclared accounts in their individual names or in the names of nominee entities. Hough and her husband then used the funds in their undeclared accounts to purchase an airplane, two homes in North Carolina and a condominium in Sarasota, Florida.
Hough was also convicted of four counts of filing false tax returns for 2005, 2006, 2007, and 2008. The evidence at trial established that Hough filed false tax returns that substantially understated her total income because she failed to report substantial interest and investment income and in 2007, because she failed to report her half of the proceeds from the sale of the medical schools. In addition, Hough failed to report on Schedule B of the tax returns that she had an interest in or signature or other authority over bank, securities, or other financial accounts located in foreign countries.
US District Judge John Steele scheduled sentencing for February 10, 2014. The conspiracy count carries a maximum potential penalty of five years in prison and a $250,000 fine. The false return counts each carry a maximum potential penalty of three years in prison and a $250,000 fine.
Source: US Department of Justice
Alabama Man Pleads Guilty to Stealing Tax Refunds
Tarrish Tellis of Montgomery County, Alabama, pleaded guilty October 24 to conspiracy, theft of public funds, and aggravated identity theft, announced Assistant Attorney General Kathryn Keneally of the Justice Department's Tax Division and US Attorney for the Middle District of Alabama.
According to court documents, Tellis obtained and used the stolen means of identification of individuals, including their names, dates of birth, and Social Security numbers, for the purpose of filing false federal income tax returns. Tellis instructed his coconspirators and others to provide him with bank account numbers for accounts at financial institutions that were used to receive the fraudulently obtained tax refunds. Tellis used the account numbers and stolen means of identification to file false tax returns that claimed over $700,000 in false refunds. As a result of his plea, Tellis faces a maximum sentence of seventeen years in prison and a maximum fine of $250,000 per count.
Source: US Attorney's Office – Alabama
Las Vegas Man Sentenced to Two Years' Imprisonment for his Role in a Riverside County Mortgage Fraud Scheme
Appearing before US District Judge Dolly M. Gee, a Las Vegas man was sentenced October 23 to twenty-four months in federal prison for conspiring to defraud residential mortgage lenders of hundreds of thousands of dollars by fabricating loan documents for the purchase and improvement of two properties located in Riverside County.
Lemuel David Thornton was further ordered to pay restitution in the amount of $232,000 to victim bank JPMorgan Chase & Co.
Thornton pleaded guilty in June of 2012 to one count of conspiracy to commit wire fraud and one count of money laundering.
According to the plea agreement filed in this case, Thornton engaged in an illegal scheme to defraud lenders who made residential mortgage loans. In early 2006, Thornton and his coconspirators obtained financing to purchase residential properties by preparing Uniform Residential Loan applications for lenders that contained false and misleading statements about income and employment.
For two of the residential properties purchased by Thornton and a coconspirator, the financing included funds designated for improvements to the property. Such improvement funds would be factored into the sale price of the property. Included in the purchase agreement would be instructions for the seller to credit an amount to a third-party for upgrades and landscaping.
According to the plea agreement, Thornton and his coconspirator submitted to the escrow companies fraudulent demand letters from sham companies, directing that specified funds be disbursed to the sham companies to be used for upgrades, construction, repairs, and landscaping for the property to be purchased.
Thornton and his coconspirator would cause the money paid to the sham third-party company at the close of escrow to be wired from the escrow company into an account over which Thornton or his coconspirator had control. The money would then be used for a purpose other than the improvements specified in the demand letters and the term of the loan.
The plea agreement details two Canyon Lake, California, homes – the Gray Fox Drive Property and the Continental Drive Property – which Thornton and his coconspirators used to execute the scheme. As to the Gray Fox Drive Property, through a series of transactions $164,100 was fraudulently disbursed to Thornton. As to the Continental Drive Property, $207,899 was fraudulently disbursed to Thornton and his coconspirator.
Thornton has been in federal custody since his arrest in January.
Source: US Attorney's Office – California
Justice Department Sues to Stop Maui, Hawaii, Tax Return Preparer
The United States filed a civil complaint October 23 asking a federal court in Honolulu to enjoin James A. Ericson from preparing federal tax returns for others, the Justice Department announced. The complaint alleges that Ericson frequently prepares returns for individuals claiming refunds from the federal government that are not deserved. The complaint also alleges that Ericson prepares roughly over 1,000 tax returns per year for individuals on Maui, Hawaii.
According to the complaint, Ericson improperly understates his customers' federal tax liabilities by creating phony businesses and then listing those fake businesses on returns and fabricating expenses and losses for them, claiming false or inflated credits and deducting personal expenses of his customers, such as costs associated with customers' hobbies, which are not legally deductible. In total, the government's complaint alleges that the loss to the US Treasury from Ericson's activities could be as much as $31 million for tax years 2007-2012. The government also asserts that many of Ericson's customers may owe additional tax, interest, and penalties because of the improperly prepared returns.
In addition to asking the court to prohibit Ericson from preparing or filing federal tax returns for others, the complaint also seeks to enjoin anyone acting in concert with Ericson from preparing or filing federal tax returns, to prohibit Ericson from requesting or directing the preparation of federal tax returns for others, to require Ericson, within thirty days of entry of an injunction issued in this case, to contact all persons for whom he prepared a federal tax return since January 1, 2008, in order to inform all such persons of the permanent injunction entered against him, to require Ericson to provide a list of all such persons to the United States, to allow the United States to monitor Ericson's compliance with any such injunction, and to request that the court retain jurisdiction over this case to enforce any injunction entered against Ericson.
Source: US Department of Justice
Justice Department Sues to Shut Down Mississippi Tax Return Preparer for Allegedly Overstating Tax Refunds
The United States has requested that the federal district court in Jackson, Mississippi, permanently bar Danee Aikens from preparing federal income tax returns for others, the Justice Department announced October 18.
According to the complaint, Aikens prepares federal income tax returns under the name Comprotax Service from an office in Durant. The complaint alleges that Aikens prepared returns that overstated income, including by reporting fictitious household help income, in order to increase the amount of her customers' claim to the Earned Income Tax Credit.
The complaint further alleges that Aikens prepared returns that falsely claimed a refundable education credit on behalf of her clients.
As alleged in the complaint, the loss to the government from Aikens' return preparation from 2009 through 2012 could exceed $7 million.
Source: US Department of Justice
Ohio Tax Return Preparation Firm with Large Portion of Elderly Customers Shut Down
On October 17, a federal court in Columbus, Ohio, permanently barred Tobias Elsass and his companies, Fraud Recovery Group Inc. and Sensible Tax Services Inc., from preparing federal tax returns, promoting the availability of theft loss deductions, or engaging in any other tax-related business in the future. The court found that Elsass and Fraud Recovery Group have continually and repeatedly promoted a nationwide scheme falsely informing their customers that they were entitled to claim large theft loss tax deductions and then preparing the tax returns that improperly claimed such deductions.
Elsass serves as president and founder of Fraud Recovery Group and Sensible Tax Services. The district court found that Elsass and his companies promoted a scheme that preyed largely on elderly investors across the United States who had suffered financial losses. Elsass and his companies told the investors that they could deduct their financial losses on their federal income tax returns in an advantaged way and receive large refunds. Under federal tax law, victims of truly fraudulent investment schemes, such as a Ponzi scheme, may properly deduct their financial losses as thefts only if they can substantiate that the losses were, among other things, the product of criminal conduct.
In its opinion, the court concluded that Elsass misled his elderly investor customers into believing that they had valid theft loss deductions, thereby inducing them to pay him and his companies to prepare and file amended tax returns. The opinion notes that hundreds of theft loss deductions claimed on tax returns prepared by Elsass and his companies were improper, because the financial losses they sought to deduct were merely the result of company mismanagement instead of criminal conduct, as Elsass knew. Elsass and his companies were also aware that the IRS was disallowing such claims, but filed similar claims for other investor customers in any event, in the hope that the later filings would escape IRS scrutiny. The court found that, as a result of such egregious conduct, Elsass and his companies potentially left their investor customers subject "to audits and scrutiny from the IRS."
The court also determined that Elsass had intentionally engaged in "incompetent or disreputable" behavior not becoming a tax professional. Based on the record before it, the court found that Elsass seemed "perfectly willing to lie and deceive, even to the extent of possibly committing perjury, in order to advance his own interests." Accordingly, the "sheer magnitude and variety of the defendant's transgressions" made permanent injunctive relief appropriate.
The court directed that FRG be closed and its operations terminated. The court's injunction order permanently bars Elsass from engaging in any business relating to providing tax advice or the preparation of tax returns. Elsass and his companies are also prohibited from owning any interest in, operating, incorporating, working for, or having any other association with any tax-related business in the future, and they must immediately divest any ownership interest they presently have with any such entities. The court's order also requires Elsass and his companies to advise their existing customers of the injunction's terms and to provide the government with a list of all current customers.
Source: US Department of Justice
Former California Income Tax Preparer Sentenced to Thirty-Seven Months in Federal Prison for Defrauding the IRS of Over $7 Million in False Tax Refunds
A self-employed income tax return preparer was sentenced October 21 by United States District Judge Philip S. Gutierrez to thirty-seven months' imprisonment after pleading guilty to charges that he prepared and filed with the IRS false tax returns on behalf of clients.
Peter Chavez, former operator of Tax Care 4 Less and later known as Tax Care for Less in Burbank, California, was further ordered to pay a fine of $50,000 and was barred from preparing tax returns during his period of supervised release.
In support of the sentence, the judge found that the defendant defrauded the IRS and his clients, involving his unwitting clients in the scheme which resulted in them facing unwelcome IRS tax audits and having to pay back the tax refunds they thought they legitimately received.
In May, Chavez pleaded guilty to two counts of aiding and assisting in the preparation of fraudulent tax returns. The two counts to which Chavez pleaded guilty relate to the 2000 and 2001 federal income tax returns filed on behalf of clients, which included false deductions and credits, reducing the taxpayers' liability by $1,890 and $1,703, respectively.
According to documents filed with the court, Chavez admitted that between 1999 and 2002, he prepared or supervised the preparation of thousands of federal income tax returns for clients of his business Tax Care 4 Less, which he filed by electronic means with the IRS. In preparing these tax returns, Chavez claimed false or fraudulent itemized deductions – including false mortgage interest expenses; inflated state, local, and personal property tax deductions; inflated deductions for charitable contributions and miscellaneous deductions; and false educational credits – resulting in a reduced tax liability for Chavez' client-taxpayers and inflated tax refunds. As a result of the fraudulently filed tax returns, refunds were generated causing a tax loss to the government of $7.38 million.
Since 2003, Chavez has not worked regularly. He moved to Mexico for a time and chose not to work because he was afraid he would be found and prosecuted for this case. Chavez remained a fugitive until his arrest on March 5, 2013, in Hemet, California. Chavez has remained in federal custody since his arrest.
Source: US Attorney's Office – California
Tampa Woman Pleads Guilty to Stolen Identity Refund Fraud
Tressa V. Guy of Tampa, Florida, pleaded guilty October 17 to conspiracy to commit wire fraud and aggravated identity theft. Guy also agreed to forfeit $790,421.28 to the United States as proceeds of the offense. Guy will be sentenced on January 9, 2014, and faces up to twenty-two years in prison.
According to the plea agreement, Guy and her coconspirators orchestrated a scheme to defraud the US Treasury by causing fraudulent federal income tax returns to be filed using stolen identities, soliciting personal identifying information and addresses from coconspirators in Florida and Georgia for use in the scheme, and coordinating the withdrawal of fraudulently obtained tax refund amounts from prepaid debit cards.
The identities used to file the fraudulent tax returns in this scheme belonged to individuals living in various states across the country. As part of the conspiracy, at least 322 federal income tax returns for tax year 2011 were filed from nine IP addresses claiming refunds of $2,701,844.00 and resulting in a loss to the IRS of $790,421.28.
Source: US Attorney's Office – Florida
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2 weeks 3 days ago by mucar1990