Crime Watch: March 11, 2013
by Terri Eyden on
Client's Tax Payments and Preparing Returns with False Deductions
The IRS announced March 8 that its Office of Professional Responsibility obtained the disbarment of enrolled agent Lorna M. Walker for stealing a client's tax payments and for preparing tax returns with false deductions for multiple clients.
Walker's enrolled agent status and her ability to prepare federal tax returns were revoked for at least five years. She practiced in the Seattle area.
In a Final Agency Decision, the Administrative Law Judge disbarred Walker for misappropriating client payments intended for the IRS in furtherance of an offer in compromise, and for preparing multiple returns containing Schedule C deductions for which she could not produce substantiation on audit.
Walker was engaged to represent a taxpayer in a collection matter. The client gave Walker two money orders totaling $1,500 to forward to the IRS, along with an offer in compromise for delinquent taxes. The judge found that Walker altered, endorsed, and cashed the money orders for her own personal use, which are acts of willful incompetent and disreputable conduct under Circular 230.
The judge also found that Walker prepared 1040s for seven clients claiming Schedule C deductions that were unsubstantiated and unsupportable. It was found that Walker failed to exercise due diligence in preparing the Schedule Cs, thereby violating multiple due diligence provisions contained in Circular 230.
Walker also failed to respond to the administrative complaint and the motion for default judgment. The judge determined that because Walker failed to respond either to the complaint or to the motion for default judgment, she was deemed to admit all the allegations in the complaint and to not oppose the default motion.
Tax Preparers Barred for Claiming Improper Tax Credits and Fraudulent Conduct
A federal court permanently barred Toney Fields and Trumekia Shaw, who do business as Fields Mo' Money Taxes in Nashville, Tennessee, from preparing federal tax returns, the Justice Department announced March 4. The civil injunction order was signed by Judge Kevin H. Sharp of the US District Court for the Middle District of Tennessee. It found that the defendants engaged repeatedly in fraudulent conduct that interfered with enforcement of federal tax laws.
The government complaint in the civil injunction lawsuit alleged that Fields is a licensee of Mo' Money Taxes LLC and MoneyCo USA LLC, both located in Memphis. According to the complaint, Fields and Shaw get an improper jump on their competition by opening Mo' Money Taxes in Nashville immediately after Christmas before the tax year ends. According to the complaint, Fields and Shaw use customers' end-of-year paystubs to prepare tax returns, before employers have issued W-2 wage-statement forms to employees. Preparing tax returns based on paystubs rather than proper W-2 Forms violates IRS rules.
Fields and Shaw allegedly use the paystubs to create fake W-2 Forms to include with the returns. End-of-year paystubs frequently omit income and distributions that are shown on employer-issued W-2 Forms. This inevitably results in errors on federal tax returns.
The complaint alleged that Fields and Shaw inflate or claim false tax credits on customers' tax returns. According to the complaint, Fields and Shaw frequently claim improper dependent exemptions in order to claim inflated earned-income credits or child tax credits for their customers. The complaint also alleged that the defendants include false filing statuses and bogus claims for charitable contributions on customers' returns.
The complaint says the government estimates that the defendants' misconduct may have caused revenue losses of over $5 million from the more than 1,100 tax returns they prepared in 2011.
Residential Builder Pleads Guilty to Tax Obstruction
William B. Clayton, a residential builder formerly of Corolla, North Carolina, pleaded guilty March 4 before Judge Terrence W. Boyle to corruptly obstructing and impeding the due administration of the tax laws, the Justice Department and IRS announced.
According to the indictment, Clayton failed to file federal income tax returns over a six-year period, resulting in the assessment of taxes and penalties and the initiation of IRS collection proceedings.
Between May 2007 and August 2010, Clayton took steps to obstruct the IRS's efforts to collect his unpaid tax liabilities, such as concealing property from the IRS and destroying a former property in Corolla that had been acquired by the government.
According to court records, in an effort to pay down Clayton's tax liabilities, the IRS scheduled a public auction of Clayton's former property. In the days leading up to the auction, Clayton committed, or caused the commission of, various acts of destruction and demolition at the Corolla property, including destroying an outdoor pool deck and pool house; forcibly removing a guest house from the property and transporting it to a non-consenting neighbor's property; and forcibly removing cabinets, countertops, a kitchen island, sinks, toilets, and light fixtures.
Clayton's sentencing hearing is scheduled for May 28, 2013. Clayton faces a maximum potential penalty of three years in prison, one year of supervised release, and a $250,000 fine.
Alabama Defendants Sentenced for Their Role in Million Dollar Identity Theft
Corey Means was sentenced March 7 to twenty months in prison, and Melba Wilson was sentenced to eight months home detention for their involvement in a million dollar identity theft tax scheme, the Justice Department and the IRS announced.
According to court documents, between October 2009 and April 2012, Antoinette Djonret and her coconspirators used stolen identities to file over 1,000 false tax returns that fraudulently claimed over $1.7 million in tax refunds. Djonret orchestrated this scheme. She obtained stolen identities from multiple sources, including Alabama state databases.
Djonret also established an elaborate network for laundering the refund money. Djonret recruited Means, Wilson, and others into the conspiracy. Wilson and Means recruited individuals to obtain prepaid debit cards and gave the cards to Djonret.
Means also provided addresses to Djonret for the purpose of receiving prepaid debit cards. The fraudulent tax refunds obtained by the conspiracy were directed to these prepaid debit cards, and Djonret and her coconspirators would then use the cards to obtain the proceeds.
Djonret was previously sentenced to 144 months in prison for her role in this scheme and for other criminal conduct.
Louisiana Tax Return Preparer Convicted of Stolen Identity Refund Fraud
Following a four-day jury trial in Baton Rouge, Louisiana, a federal jury convicted Angela Myers on March 7 of wire fraud, making false claims, subscribing to false tax returns, and aggravated identity theft, the Justice Department and IRS announced.
Based on the evidence presented at trial, Myers operated Angie's Tax Service, a tax preparation business located in Baton Rouge. Myers electronically filed false claims for tax refunds using the names and Social Security numbers of identity theft victims. Myers filed the identity theft tax returns using a unique preparer identification number assigned to her daughter.
Many of the victims were nursing home patients who resided at Port Allen Care Center in Port Allen, Louisiana, and who did not have the ability to leave the nursing home.
The evidence also revealed that Myers lied on her own 2007 and 2008 federal income tax returns, failing to report hundreds of thousands of dollars of tax preparation fees that she earned at Angie's Tax Service, which she used to buy various items, including an RV and a $50,000 investment product.
Corrections Officer and Former Corrections Officer Indicted for Stolen Identity Tax Refund Fraud
A twenty-nine-count indictment was unsealed March 8 in Montgomery, Alabama, charging Bryant Thompson, an Alabama corrections officer, and Quincy Walton, a former Alabama corrections officer, with federal tax crimes, the Justice Department and the IRS announced.
Thompson and Walton are both charged with one count of conspiracy to defraud the United States. Thompson is additionally charged with ten counts of wire fraud and ten counts of aggravated identity theft. Walton is additionally charged with four counts of theft of government money and four counts of aggravated identity theft.
According to the indictment, Thompson, a corrections officer at the Alabama Department of Corrections, unlawfully obtained the names and Social Security numbers of inmates in the custody of the State of Alabama and caused to be filed false tax returns in the names of those inmates. The IRS issued tax refund checks in the names of inmates whose identities Thompson unlawfully obtained, and Walton cashed those checks.
If convicted, Thompson and Walton face a maximum sentence of five years in federal prison for the conspiracy count, a maximum of twenty years for each wire fraud count, a maximum of ten years for each theft of government money count, and a minimum of two years for aggravated identity theft. In addition to prison time, Thompson and Walton also face the possibility of fines and restitution to the IRS and other victims.
Source: US Department of Justice
Former Manager of a National Tax Preparation Store Pleads Guilty to Defrauding the IRS
A former manager of an H&R Block Preparation store pleaded guilty today to charges that he used the identities of former tax preparation clients to file false returns with the IRS seeking fraudulent income tax refunds. Damon Charles Dubose of North Hills, California, pleaded guilty to one count of wire fraud and one count of filing false claims with the IRS.
According to documents filed with the court, working as a manager for an H&R Block Preparation store in Van Nuys, Dubose used his access to H&R Block records to obtain the personal identifying information of H&R Block clients. He created false and unauthorized tax returns for at least twelve individuals using their personal identifying information and submitted the returns to the IRS in order to generate fraudulent tax refunds of at least $48,593.
Dubose filed the returns so that the refunds would be accessible by the H&R Block Emerald Card. Dubose then used the H&R Block Emerald Cards at ATMs to withdraw as cash the fraudulent tax refunds.
According to the plea agreement, the wire fraud count stems from Dubose electronically transferring an unauthorized tax return from Van Nuys, California, to Tennessee or West Virginia. The false claim count stems from an unauthorized tax return filed by Dubose on February 6, 2012, for an individual using fabricated information to falsely claim a refund in the amount of $4,353.
As a result of today's guilty plea, Dubose faces a statutory maximum sentence of twenty-five years in federal prison and a fine of $500,000 when he is sentenced on July 8, 2013, by U.S. District Judge Dale S. Fischer.
Source: IRS - Criminal Investigation, Los Angeles Field Office