Crime Watch: September 19, 2013
by Terri Eyden on
Colorado Woman Sentenced to Prison for Failure to Pay $4.7 Million in Employment Taxes
Beth Ann Pettyjohn of Englewood, Colorado, was sentenced September 11 to serve twenty-eight months in federal prison for failure to pay over employment tax. Following her prison sentence, Pettyjohn was ordered to spend three years on supervised release. The judge also ordered her to pay $4,669,532.05 in restitution to the IRS as well as a $25,000 fine.
Pettyjohn waived her right to be indicted by a federal grand jury on January 17, 2013, and was charged by Information. According to the stipulated facts contained in the plea agreement, as well as the Information, Pettyjohn is the co-owner and vice president of Overhead Door Company of Denver (OHD). From September 2003 to June of 2009, Pettyjohn stopped paying over the payroll taxes (income taxes withheld and FICA) OHD withheld from employee wages as well as the matching portion of FICA totaling almost $4.7 million owed to the IRS.
Pettyjohn admitted that she knew she had a duty to pay over the amounts withheld from employee wages, but she told an IRS agent she failed to do so because the IRS was not "beating down her door." Pettyjohn managed the accounting department at OHD and determined which bills were paid and then issued and signed the related checks. Pettyjohn has a bachelor's degree in business with a major in accounting, and she has an inactive CPA license issued by the state of Colorado. During the relevant years, the defendant employed both hourly and salaried employees.
During the period in question and for many prior years, Pettyjohn and her husband lived in a home valued at over $1 million. Between 2005 through 2007, Pettyjohn received wages from OHD averaging approximately $133,000 per year. Also, after Pettyjohn stopped paying over the payroll taxes at OHD, she purchased pieces of real estate. In August of 2007, Pettyjohn and her husband purchased a condominium in Gypsum, Colorado, for $349,900 with a $100,000 down payment. In 2009, Pettyjohn paid $285,000 in cash to purchase her son's condominium in suburban Denver. The condo was resold to an unrelated party a few months later.
Source: US Attorney's Office - Colorado
North Carolina Woman Sentenced for Preparing False Tax Returns and Identity Fraud
The Justice Department and the IRS announced that Leslie Louise Brewster of Durham, North Carolina, was sentenced September 12 to serve seventy months in federal prison for crimes related to preparing false tax returns and identity fraud. She was also ordered to pay restitution to the IRS of $92,910.
On February 20, 2013, Brewster pleaded guilty to three felonies relating to her preparation of false tax returns: one count of aiding and assisting the preparation of a false tax return, one count of wire fraud, and one count of aggravated identity theft.
According to court documents, Brewster was the manager of the Burlington, North Carolina, branch of Nothing But Taxes (NBT), a tax return preparation franchise with locations throughout North Carolina. Brewster falsified federal income tax returns for hundreds of NBT clients in order to obtain larger tax refunds for the clients than they were actually entitled to receive. The returns Brewster prepared for clients reported, among other items, false dependents, fictitious businesses, and bogus education credits.
Brewster also purchased personal identifying information, including names and Social Security numbers, from members of the community. Brewster used this personal identifying information to claim false dependents on tax returns she prepared for clients and provided some of the identities she purchased to other return preparers at the NBT Burlington location for their use in a similar fashion. Brewster typically charged NBT clients a cash fee, above the normal flat fee for preparation of a return, to prepare a return containing false dependent information.
Recently, two defendants in related cases were also sentenced to prison for tax crimes arising out of the NBT scheme. Saichelle McNeill, a return preparer at the Greensboro branch of NBT, was sentenced to serve twenty-seven months in prison on August 20, 2013. McNeill previously pleaded guilty to wire fraud, aggravated identity theft, and aiding and assisting the preparation of a false tax return. Tiffany Rogers, a return preparer at the Burlington branch of NBT, was sentenced to serve forty-eight months incarceration on August 14, 2013. Rogers previously pleaded guilty to wire fraud, aggravated identity theft, willfully filing a false personal income tax return, and aiding and assisting the preparation of a false tax return.
Two other NBT employees, Nikki Brewster and Dawn Williams, are currently awaiting sentencing. Each of them pleaded guilty to wire fraud, aggravated identity theft, and aiding and assisting the preparation of false tax returns. Court documents associated with their respective guilty pleas allege that Nikki Brewster was the manager of a NBT branch in Durham while Williams was a return preparer at the Burlington branch.
Court documents in the cases of Nikki Brewster, Williams, Rogers, and McNeill stated that those defendants, like Leslie Brewster, also prepared false tax returns for NBT clients and committed identity theft by claiming false dependents on clients' tax returns.
Source: US Department of Justice
CPA Disbarred for Stealing from Daughter's Trust Fund
The IRS announced September 17 that its Office of Professional Responsibility (OPR) has prevailed in seeking the disbarment of David O. Christensen after he was convicted of theft for misappropriating funds as the conservator of his daughter's trust account. Christensen's CPA licenses in Washington and Oregon were revoked previously as a result of his conviction.
In a final agency decision, the administrative law judge (ALJ) declined to carve out a request by Christensen for limited practice as a tax return preparer and, instead, disbarred him from all practice before the IRS, finding that Christensen's conviction for theft and the revocation of his CPA licenses constituted disreputable conduct under Circular 230. Christensen had argued that he should be permitted to continue to prepare tax returns because his theft conviction resulted from a family matter that had nothing to do with his tax return preparation practice before the IRS.
Agreeing with OPR's proposed sanction, the ALJ held the seriousness of Christensen's offense warranted disbarment from practicing before the IRS, finding that the "respondent has displayed a lack of integrity, including in his testimony at trial, in attempting to distinguish his professional actions from his 'father-daughter' relationship."
Christensen is prohibited from any practice (including tax return preparation) before the IRS for a five-year period.
Source: IRS Newswire
Owner of New York Construction Company Pleads Guilty to Tax Fraud
Gurmail Singh, a resident of Richmond Hill, New York, pleaded guilty September 17 in US District Court in the Eastern District of New York to filing a false federal tax return, the Justice Department and IRS announced.
According to the indictment, court records, and admissions made by the defendant in court, Singh used check-cashing services to cash more than $2.9 million in checks paid to his construction company, Fancy and Vicky Construction Co. Inc. in Richmond Hill, for services between 2006 and 2008. He concealed his check-cashing activities from his tax return preparers, and this income was not included as gross income on the company's tax returns. Singh also diverted cash receipts earned by his companies for his own personal use. Singh admitted that his failure to report Fancy and Vicky's gross receipts caused a tax loss to the IRS of between $400,000 and $1,000,000.
Singh faces a potential maximum sentence of three years in prison and a maximum fine of $250,000.
Source: US Department of Justice
Alabama Man Indicted for Multiyear Stolen Identity Refund Fraud
An indictment was unsealed September 16 in Montgomery, Alabama, charging Nakia Jackson with conspiracy to file false tax returns, theft of public funds, and aggravated identity theft, announced the Justice Department's Tax Division and the US Attorney for the Middle District of Alabama. The indictment was unsealed following Jackson's arrest.
According to the indictment, between January 2009 and March 2011, Jackson conspired with several individuals to file false tax returns using stolen identities, some of which Jackson obtained from a state employee. He used the stolen identities to file false tax returns and directed the tax refunds to several bank accounts. The bank accounts were opened by individuals Jackson recruited to receive the false refunds and directed them to withdraw the false refund money. Jackson also recruited a bank teller to aide in the scheme.
If convicted, Jackson faces a maximum potential sentence of ten years in prison for the charge of conspiracy to defraud the United States and for each count of theft of government money count, and a mandatory two-year sentence for the aggravated identity theft counts. He is also subject to forfeiture, fines, and mandatory restitution if convicted.
Source: US Department of Justice
Former Vice President of Wells Fargo Advisors and Morgan Stanley & Co. Pleads Guilty in $1.8 Million Fraud Scheme
Adorean Boleancu pleaded guilty in federal court in San Francisco on September 13 to one count of wire fraud, US Attorney Melinda Haag announced.
In pleading guilty, Boleancu, vice president and senior financial consultant in the Wealth Management Group of Wells Fargo Advisors, LLC., admitted to writing more than $1.8 million in checks on accounts of an elderly, widowed client for his personal benefit. He signed the victim's name to checks drawn on the victim's brokerage account and home equity lines of credit without the victim's knowledge or authorization. The checks were payable to Boleancu's family members, his girlfriend, another female acquaintance, cash, and financial companies where Boleancu had credit card accounts.
Boleancu of Napa, California, was indicted by a federal Grand jury on July 9. He was charged with fourteen counts of bank fraud, four counts of wire fraud, five counts of money laundering, and four counts of aggravated identity theft.
Boleancu is currently released on an $800,000 bond. Boleancu's sentencing hearing is scheduled for December 17. The maximum statutory penalty for wire fraud is thirty years and a fine of $1,000,000, plus restitution.
Source: US Attorney's Office - California
Utah Couple Pleads Guilty for Tax Fraud Scheme
Husband and wife Robert Watson and Marie Watson pleaded guilty in federal court in Salt Lake City in connection with a tax fraud scheme arising out of their operation of the Teazers Sports Bar & Grill in Ogden, Utah.
Robert Watson pleaded guilty to two counts of filing false tax returns – one a corporate return and one a personal return. He faces a maximum penalty of three years in prison and a fine of $100,000. Marie Watson pleaded guilty to one count of filing a false personal tax return and also faces a maximum penalty of three years in prison and a fine of $100,000. The Watsons will be sentenced on January 10, 2014.
According to the indictment and other publicly filed documents, during the time the Watsons owned and operated Teazers, they failed to report substantial cash income on Teazers' corporate returns and on their personal tax returns. Teazers generated large amounts of cash income from entrance fees known as "cover charges" charged at the door of the bar and from other items in the bar, such as pool tables and video games. The Watsons deliberately hid this cash income from their tax preparer and caused tax returns to be filed with the IRS that grossly understated their true income.
The Watsons' guilty pleas involved false returns arising out of this scheme for tax year 2007. According to the publicly filed plea documents, Robert Watson could owe the IRS as much as $221,290 in back taxes, and Marie Watson could owe as much as $114,942. The final amount owed to the IRS will be determined at sentencing.
Source: US Attorney's Office - Utah
Missouri Tax Preparer Pleads Guilty to Federal Tax Fraud Charges
A Missouri tax preparer pleaded guilty September 16 to preparing false income tax returns resulting in a total tax loss of more than $316,000. Cynthia M. Raymond of Jackson, Missouri, pleaded guilty to five counts of filing false tax returns and one count of aggravated identity theft.
In her plea, she admitted submitting approximately ninety-eight false tax returns under the names of thirty-six clients for the tax years 2007 through 2010. Her clients were not aware that she prepared returns including false deductions for business losses, charitable contributions, unreimbursed business expenses, medical expenses, and false tax credits that included education and residential energy credits.
She filed the returns electronically and provided her clients with different tax returns than she filed with the IRS. She routinely directed the IRS to deposit part of the refund to her clients' accounts and to deposit the rest of the refund into her personal account.
Sentencing is set for December 17. She faces a maximum penalty of three years in federal prison and a fine up to $100,000 on each count of filing a false tax return, and a maximum penalty of five years and fine up to $250,000 on the identity theft count.
Source: US Attorney's Office - Kansas
Federal Jury Convicts Amarillo Anesthesiologist on Tax Evasion Charges
After a four-day trial, a federal jury on September 13 in Amarillo, Texas, convicted Edgar A Lockett, Jr., on all six counts of an indictment charging tax evasion. Lockett faces a maximum statutory sentence of five years in federal prison and a $250,000 fine for each of the counts of conviction. He could also be ordered to pay restitution.
The government presented evidence at trial that Lockett is a self-employed anesthesiologist who currently resides in Amarillo; he formerly resided and practiced in other cities in Texas, including Mineral Wells and McAllen. Lockett most recently billed under the name of Medical & Health Alliance Ministries.
According to evidence the government presented, Lockett has not filed income tax returns since 1999, except for a joint return filed with his spouse for tax year 2007. He owes the United States $1,432,740 in unpaid income taxes for tax years 2000 through 2010.
The government presented further evidence that Lockett concealed from the IRS the nature, extent, and location of his assets by placing funds and property in the names of nominee companies and secreting his income in bank accounts that he opened using his deceased father's name and Social Security number.
Source: US Attorney's Office - Texas
Presidential Tax Service Owner Ordered to Prison for Falsifying Returns
Sharon Edwards Kitine, the former owner of a now defunct Presidential Tax Service in Houston, Texas, was sentenced September 16 to federal prison for falsifying client returns. Kitine pleaded guilty April 29, and the tax service establishment she owned closed in March 2012 following her arrest. US District Judge Vanessa Gilmore handed Kitine a sentence of twenty-four months in prison to be immediately followed by one year of supervised release.
The factual basis in support of the plea stated that Kitine claimed false deductions for Houston-area clients that fraudulently increased tax refunds by approximately $205,682 for tax years 2006 through 2011, and she was further ordered to pay that amount in restitution to the IRS.
Kitine was permitted to remain on bond and voluntarily surrender to a US Bureau of Prisons facility to be determined in the near future. However, the government stated its intention to seek Kitine's immediate custody if she fails to truthfully file her own 2012 tax return by the due date of October 15. At the hearing, Kitine sought probation in order to immediately begin to repay the National Treasury for the harm she has caused. The United States responded by advising the court that, despite having served as a paid preparer for others for several years, the IRS had no record that Kitine had ever filed a personal tax return prior to being charged in this case. Further, after permitted release on bond in March 2012, Kitine had filed a 2011 personal income tax return as required by her conditions of release, but failed to pay any of the taxes shown due with that return.
Court records indicated that on or about March 29, 2008, Kitine knowingly prepared and caused to be filed with the IRS a false 2007 US Individual Income Tax Return - Form 1040 for taxpayers and fee-paying clients in need of tax return preparation services. Without consent of the taxpayers, Kitine included certain materially false deductions with the intention of generating an excessive federal income tax refund and causing a direct pecuniary harm of several thousand dollars to the IRS.
Specifically, Kitine knowingly and willfully included materially false deductions for a variety of Schedule C deductions as well as Schedule A deductions for home mortgage interest and real estate taxes, even though the taxpayers rented their home. This tax return alone caused a loss to the US Treasury in the approximate amount of $11,261.
Kitine also knowingly and willfully prepared and caused to be filed with the IRS another twenty-eight false federal income tax returns for other clients for tax years 2006 through 2011 that generated excessive refunds based upon false and fraudulently inflated deductions and credits that caused another $194,421 in aggregate losses to the IRS.
Source: US Attorney's Office - Texas
Missouri Woman Sentenced on Tax Fraud Charges
Nancy Cicero was sentenced September 11 to thirty-three months in prison on multiple fraud charges for filing false tax returns, claiming over $3 million in refunds, for four years beginning in 2005.
According to testimony presented at trial, Cicero claimed false income tax refunds by submitting income tax returns to which she attached false and fictitious 1099-OID forms for the taxable years 2005 through 2008. On her 1040s for those years, Cicero claimed a refund amount based upon the false federal income tax withholdings that were reported on her false 1099-OIDs. In total, Cicero represented that financial institutions withheld over $3 million in taxes on her 1099-OID forms, thus claiming a refund of over $3 million.
Source: US Attorney's Office - Missouri
Tennessee Federal Court Bars the Owners of Mo' Money Taxes from Owning, Operating, Licensing, or Franchsing a Tax Return Preparation Business and Preparing Tax Returns for Others
A federal court in Memphis, Tennessee, permanently barred the owners of Mo' Money Taxes, Markey Granberry, and Derrick Robinson as well as a former Mo' Money manager, Eumora Reese, from preparing tax returns for others and owning or operating a tax return preparation business, the Justice Department announced September 18.
The United States brought the civil injunction suit in April, seeking to shut down Mo' Money Taxes, a Memphis-based tax-preparation chain that at one time operated as many as 300 offices in eighteen states. The government complaint alleged that Mo' Money Taxes, its owners Granberry and Robinson, and store manager Reese created and maintained a business environment that encouraged the preparation of fraudulent federal income tax returns. According to the complaint, Mo' Money Taxes' managers, licensees, and employees prepared fraudulent returns that caused their customers to incorrectly report their federal tax liabilities and underpay their taxes. The complaint further alleged that defendants charged customers bogus and unconscionably high fees.
According to the complaint, Granberry and Robinson most recently used the business name Marquis Taxes and, along with Reese, also used the name Southern King Taxes. The complaint also alleges that Granberry and Robinson received fees for each tax return prepared by these businesses through Caymau Service Bureau LLC. The civil injunction order not only bars Granberry, Robinson, and Reese from owning and operating these businesses, but also from managing, working in, controlling, licensing, or franchising a tax return preparation business.
The complaint alleges that Granberry, Robinson, and Reese encouraged Mo' Money Taxes preparers to falsely claim the earned-income credit, claim improper filing status, claim bogus education credits, improperly prepare returns using paystubs rather than employer-issued W-2 forms, fabricate bogus W-2 forms, file tax returns without customers' consent, sell false and deceptive loan products, and charge deceptive and unconscionable fees.
Source: US Department of Justice
Former Marketing Agency Executives and Phoenix-Based Businessman Charged in Manhattan Federal Court for Kickback Scheme
The US Attorney for the Southern District of New York, the Department of Justice, and IRS-CI announced September 13 the filing of federal criminal charges against Michael J. Mitrow and Matthew J. Mitrow, former executives of a New Jersey–based marketing agency, and Robert T. Madison, a Phoenix-based businessman, for their roles in a kickback scheme in which Michael and Matthew Mitrow received more than $1 million in kickbacks for steering the marketing agency's business to a company owned by Madison.
Madison, who was originally charged by complaint in November 2012, is also charged with defrauding the marketing agency by submitting false invoices. Michael Mitrow is also charged with a separate scheme to submit false invoices to the marketing agency as well as tax evasion and obstructing the IRS.
According to the allegations in the superseding indictment filed in Manhattan federal court, in approximately 1998, Michael Mitrow started a marketing agency that provided marketing services to pharmaceutical companies by targeting labor unions and their members with direct mail services that touted the benefits of the pharmaceutical companies' products. In 2007, Michael Mitrow and his partners, including Matthew Mitrow, sold a controlling interest in the marketing agency to a private equity firm. As part of the sale, Michael Mitrow and his brother, Matthew Mitrow, stayed on at the agency as CEO and executive vice president, respectively.
The marketing agency used a Phoenix-based printing and direct mail company owned by Madison for printing and mailing services related to various pharmaceutical marketing campaigns. From February 2007 through January 2009, Michael Mitrow, Matthew Mitrow, and Madison engaged in a scheme in which Madison paid more than $1 million in undisclosed kickbacks to Michael and Matthew Mitrow in exchange for Michael and Matthew Mitrow steering business from the marketing agency to Madison's company. As part of the kickback scheme, Madison paid more than $1 million in personal expenses of Michael Mitrow, including more than $750,000 for private jet travel.
Madison also paid Matthew Mitrow's personal expenses, including home renovation expenses, credit card bills, and a $19,000 bill at a New York City club. The defendants also took various steps to conceal the kickbacks from the marketing agency.
Madison obtained the money used to pay the kickbacks by fraudulently billing the marketing agency for more than $7 million in services that he either failed to perform or substantially underperformed. In doing so, Madison defrauded a large New York City–based pharmaceutical company out of tens of millions of dollars for services it had purchased from the marketing agency.
Michael Mitrow also engaged in another scheme to defraud the marketing agency. Specifically, from approximately June 2008 through May 2009, in order to generate funds to pay for private jet travel for himself and others, Michael Mitrow conspired with the owner of a private jet charter business to fraudulently bill the marketing agency for bogus consulting services that were never rendered. On eight separate occasions, he directed the owner of the private jet charter business to submit bogus invoices to the marketing agency, ranging from $66,000 to $85,000, in the name of fake pharmaceutical consultants for purported consulting services. After Michael Mitrow personally approved these invoices, the money was funneled through a Florida-based collection agency and then diverted to pay outstanding and ongoing debts arising from his and others' personal use of private jets.
Finally, in addition to concealing from the IRS the income he derived from the above schemes, Michael Mitrow misused his corporate credit card to pay for personal expenses, including airfare, lodging, dining, and retail purchases. He concealed the personal nature of these expenses by falsely labeling them as business expenses and billing the expenses to his employer. As a result, Michael Mitrow concealed his true income from the IRS and failed to pay a substantial amount of income taxes in 2008.
Michael Mitrow of Whitehouse Station, New Jersey, is charged with two counts of conspiracy to commit wire fraud, which each carry a maximum sentence of twenty years in prison; one count of tax evasion, which carries a maximum sentence of five years in prison; and one count of obstructing and impeding the IRS, which carries a maximum sentence of three years in prison.
Matthew Mitrow of Westfield, New Jersey, is charged with one count of conspiracy to commit wire fraud, which carries a maximum sentence of twenty years in prison.
Madison of Henderson, Nevada, is charged with two counts of conspiracy to commit wire fraud, which each carry a maximum sentence of twenty years in prison.
Source: US Attorney's Office - New York
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