Football and Tax Fraud at U of South Dakota

By Teresa Ambord

Sadly, fraud is becoming a bigger and bigger part of the American landscape. That is, stealing a piece of the American dream instead of earning it.
 
In mid-November, nine people were indicted by a federal grand jury on charges of tax fraud conspiracy and identity theft. The defendants include four former athletes from the University of South Dakota (USD) and one current member of its football team.
 
Specifically the nine are accused of collecting identifying information on individuals, using it to file bogus tax returns in the names of the victims, and then collecting huge refunds. Had they been 100 percent successful, the scammers would've collected $1.1 million in fraudulent refund money, according to the US Attorney for the District of South Dakota Brendan Johnson. The IRS was able to uncover the scheme, but only after paying out half a million dollars. 
 
Among the defendants is current USD football player, Christopher Lundy, a twenty-year-old defensive back from Tampa, Florida. He was arrested along with Terry Liggins, a former USD track athlete. The two men appeared before a federal magistrate the same day. They pleaded not guilty and were released to await trial.
 
Three former USD players plus two others also were arrested in Tampa and appeared before a federal magistrate the same day. US Attorney Johnson reported that they were released, with orders to appear in federal court on December 10. Arrests of two other suspects were pending. 
 

A Growing Threat

In 2010, the IRS Incident Tracking Statistics Report showed 270,518 separate cases of tax identity theft. A year later, the number of cases spiraled 237 percent, to 641,052.

Anyone can become a victim, but the most vulnerable taxpayers are those living in Florida, followed by residents of Georgia and then California. 
 
Treasury Inspector General for Tax Administration J. Russell George said in a press release, "The growth in these cases has overwhelmed IRS resources and burdened taxpayers." 
 
However, progress is being made. As of April 28, 2012, the IRS reported success in 95 percent of fraudulent attempts, resulting in the interception of $6.4 billion in bogus refunds. Not all these false refunds were associated with stolen information. Some related to the deliberate misuse of credits, such as the First-Time Homebuyer Credit, as well as energy and education credits.
 
The ring leader
Among those arrested in Tampa was former USD player Alphonso Valdez. The IRS believes he was the ring leader. Assistant US Attorney Sara Sweeney told US Magistrate Anthony Porcelli that Valdez persuaded people in Tampa as well as students at USD to scavenge for identifying information that could be used to file fraudulent tax returns. Some of the refunds were paid via preloaded debit cards, which is one option offered by the IRS. People who commit tax fraud often take advantage of this option for receiving bogus refunds because it offers a better layer of anonymity to criminals and doesn't require the thief to give the IRS bank account information (such as when using the direct deposit option).
 
The scheme began to fall apart when Valdez used those debits cards to withdraw $900 in cash from a South Dakota ATM. Authorities say he attempted to disguise himself wearing a cap and sunglasses. 
 
What does USD have to say?
A spokeswoman for the school, Tena Haraldson, told reporters that no formal disciplinary action has yet been taken against Lundy, but that he wasn't permitted to play in the game against in-state rival, South Dakota State. Lundy is still enrolled but "the university feels it's best for him not to play," said Haraldson. Though the case was just made public, Haraldson said the school has been cooperating with an investigation for a year. "We've been aware for some time that there has been an investigation going on. We didn't know until the press release (from the US Attorney) who all the names were that were on this list," she said. 
 
Valdez' attorney reports that his client has been accepted on a football scholarship to the University of Tennessee and expects to attend there. If convicted, the conspiracy charge carries a maximum sentence of ten years in prison and a $250,000 fine. The identity theft charge has a maximum penalty of two years in prison. 
 
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