Texas Man Indicted in Multimillion-Dollar Identity Theft and Tax Refund Fraud Scheme
A man from the Houston, Texas, area who was arrested in late June at an airport while attempting to flee the country, was indicted July 12 in the Central District of California in a multimillion-dollar identity theft and tax refund fraud scheme.
Fidelis Negbenebor has been charged in a nine count indictment returned by a federal grand jury charging him with three counts each of theft of government property, fraud in connection with identification documents, and aggravated identity theft.
According to the indictment and complaint – using stolen identities, Internet anonymizing services, and computer connections originating from multiple computers located in Africa and the United States – fraudulent tax returns were electronically filed with the IRS allegedly seeking refund checks to which the defendant was not entitled. The proceeds, once deposited into fraudulently opened bank accounts, were allegedly transferred to other banks located in the United States and locations abroad including Ghana and Nigeria.
The affidavit filed in support of the criminal complaint states that over 300 potentially fraudulent tax returns have been identified as being connected to the scheme. The total loss to the government is approximately $3,478,182. One refund check allegedly generated as part of the scheme was in the amount of $1,003,957 and mailed to a University of California, Los Angeles student-housing address.
The investigation led to the execution of a search warrant at Negbenebor's Sugarland, Texas, residence in late June. Items recovered from the home included several false identification documents and dozens of Social Security numbers belonging to individuals other than Negbenebor.
The day following the execution of the search warrant, Negbenebor traveled from Texas to Newark, New Jersey, and had made arrangements through an online Internet service to travel from New Jersey to Canada in an apparent attempt to flee from the United States. Negbenebor was arrested on Sunday, June 30, 2013, at the Newark, New Jersey, airport pursuant to the criminal complaint filed in the Central District of California. He has been detained pending trial in New Jersey and will be transported by the US Marshals to the Central District to answer to the charges in the indictment.
Internet anonymizing services are used by people attempting to cloak their true Internet Protocol address (IP address). The service makes the customers' Internet browsing experience anonymous by masking or hiding the customers' true IP address and replacing it with the IP address of the service.
Negbenebor will have a post-indictment arraignment when he is transported to the Central District of California from the District of New Jersey, where he is currently detained. If convicted of the charges in the Indictment, Negbenebor faces a statutory maximum sentence of at least seventy-five years in federal prison. In addition, the charge of aggravated identity theft carries a mandatory two-year prison term that must run consecutively to the predicate offenses.
Source: US Attorney's Office – California
California Businessman Pleads Guilty to Concealing Foreign Bank Account at Israeli Bank on His Tax Return
The Assistant Attorney General for the Tax Division and the US Attorney for the Northern District of California announced that Moshe Handelsman of Saratoga, California, pleaded guilty July 17 to filing a false tax return for tax year 2007.
According to the plea agreement, between approximately 1993 and 2000, Handelsman, a US citizen, used three bank accounts held in the names of two different foreign corporations at foreign banks to falsely reduce his taxes. The last of those accounts was held at an Israeli bank located in Tel-Aviv, Israel. The foreign bank accounts and foreign corporations were set up with the assistance of his tax return preparers.
According to court documents, in approximately 2000, Handelsman traveled to Israel and met with a banker at the Israeli bank who referred him to an Israeli attorney to set up a foreign corporation. The foreign corporation was called Exportus Ltd. and was the named account holder of the account at the Israeli bank. From 2003 through 2008, Handelsman sent $1,808,075 from a domestic corporation he controlled, called Advanced Forecasting Corp., to the Exportus Ltd. bank account. With the assistance of his tax return preparers, the funds transferred offshore were then deducted as false "Information Acquisition" expenses on the Advanced Forecasting Corp.'s tax returns. The false business expenses on the corporate tax returns resulted in an underreporting of Handelsman's income on his individual income tax returns for 2003 through 2008. Handelsman also failed to disclose the existence of his foreign bank account on his individual income tax returns.
According to the plea agreement, in 2009, Handelsman closed his account at the Israeli bank and repatriated the money by transferring the funds into a second Israeli bank account and then to a US–based Charles Schwab account in the name of a relative. The funds were then transferred from the Charles Schwab account to Handelsman to make it appear that the funds were a nontaxable gift from the relative.
Handelsman faces a potential maximum prison term of three years and a maximum fine of $250,000. In addition, Handelsman has agreed to pay a civil penalty to the IRS in the amount of 50 percent of the high balance of his undeclared accounts for failing to file FBARs. His sentencing is scheduled for November 6, 2013.
Source: US Department of Justice
Texas Father and Son Receive Lengthy Federal Prison Sentences and Ordered to Pay Large Fines
Larry Lake and his son, Travis Lake, were sentenced July 17 in US District Court in Fort Worth, Texas, by US District Judge John McBryde, to fifteen years and one month in federal prison, respectively, following their convictions earlier this year on tax and tax-related charges.
In addition, Judge McBryde ordered that Larry Lake pay a $550,000 fine as well as any taxes, interest, and penalties owed, which will equal approximately $25 million. Judge McBryde ordered that Travis Lake pay a $30,000 fine; he has already paid $26,816 in restitution prior to sentencing.
Larry Lake was convicted at trial in February 2013 on one count of concealment of assets (bankruptcy fraud) and three counts of tax evasion. He was remanded into custody following the conviction. Travis Lake pleaded guilty in February 2013 to an indictment charging three counts of fraud and false statements in connection with tax returns he filed for tax years 2006, 2007, and 2008. He was remanded into custody after the sentencing hearing.
According to the public court record, Larry Lake is a resident of Colleyville, Texas, and owns and operates several businesses, including VIP Finance of Texas, an auto title loan business with branches throughout the Dallas–Fort Worth area; Cash Auto Sales, which handles the auto club memberships for VIP Finance; and he is a part owner of Grapevine Drug Mart, a family-owned and operated pharmacy in Grapevine, Texas.
According to the factual resume filed in his case, Travis Lake manages Grapevine Drug Mart, and according to an order setting conditions for his release, Travis Lake is also a resident of Colleyville.
According to evidence presented at Larry Lake's trial, the day before he filed for bankruptcy in November 2004, Larry Lake knowingly and fraudulently transferred and concealed more than $3 million held in an E*TRADE account and a Compass Bank account.
The funds were subsequently transferred by Larry Lake through a series of bank deposits, wire transfers, and cashier's checks. In addition, Larry Lake utilized a "shell" company to assist in concealing the assets.
Additionally, according to evidence presented at trial, Larry Lake devised a scheme to evade the assessment of his personal income taxes by underreporting income on his and his spouse's joint tax returns for the tax years 2006 through 2008. The unreported income was derived from his businesses, VIP Finance, and Grapevine Drug Mart.
Further evidence showed that from August 2006 through November 2009, Larry Lake and his spouse agreed to structure more than 1,100 currency deposits into at least thirteen different bank accounts, knowing that structuring was illegal. These accounts were spread among several financial institutions, and the total amount structured during this time period was in excess of $9.3 million.
Larry Lake failed to disclose the structured funds, and the existence of the accounts containing the structured funds, to his income tax return preparer. In addition, Larry Lake failed to report income he received from Grapevine Drug Mart, having told his return preparer that he sold the business during the 2003 calendar year. By willfully withholding this information from his return preparer, the IRS suffered a total tax loss of $4,838,032.
According to the factual resume filed in Travis Lake's case, from 2006 through 2008, he received quarterly and weekly payments of income drawn on Grapevine Drug Mart's business bank accounts. The quarterly payments were generally received three to five times per year and varied in amounts ranging from $25,000 to $100,000. Each quarterly payment was made payable to Certified Tech Services, a dba Travis Lake established, and deposited into Certified Tech Services' business bank account. The weekly payments, in the form of checks, were much smaller and were made payable to Travis Lake or his wife and were deposited into personal accounts Travis Lake controlled. The factual resume further states that Travis Lake timely filed his federal income tax returns for 2006, 2007, and 2008, but willfully omitted income of approximately $77,070 for 2006, $82,540 for 2007, and $54,000 for 2008, all of which he received from Grapevine Drug Mart.
In related cases, two pharmacists at Grapevine Drug Mart, have also pleaded guilty to tax evasion, according to factual resumes filed in those cases. Norvell Moss admitted that he failed to report approximately $194,150 in income he received from Grapevine Drug Mart for tax year 2008, and as a result of not reporting all of his income, Norvell Moss had an additional tax due and owing of $58,233 for that year. He was sentenced in May 2013 to eighteen months in federal prison and ordered to pay $8,277 in restitution as well as a $30,000 fine.
Another pharmacist, Joseph Moss, admitted that he failed to report approximately $159,450 in income he received from Grapevine Drug Mart for tax year 2008, and as a result of not reporting all of his income, he had an additional tax due and owing of $58,554 for that year. He was sentenced last month to twelve months and one day in federal prison and ordered to pay $51,150 in restitution and a $3,000 fine.
Source: US Attorney's Office – Texas
Pizza Franchise Owner and Four Others Indicted for Tax Fraud
The Justice Department announced July 16 that Happy Asker, franchise owner of multiple Happy's Pizza franchises, was indicted by a federal grand jury in Detroit along with Maher Bashi, Tom Yaldo, Arkan Summa, and Tagrid Bashi for multiple tax offenses arising from a conspiracy to underreport taxable income and payroll taxes of nine Happy's Pizza franchises. All defendants with the exception of Happy Asker were arrested.
The indictment alleges that from approximately June 2004 through April 2011, the defendants conspired with each other to divert business receipts, underreport wages, and understate the true income and expenses of specified Happy's Pizza franchises. According to the indictment, the scheme resulted in the specified franchises paying more than $2.1 million in unreported wages to employees and shareholders.
Additional charges in the indictment include:
- Three counts of filing a false individual income tax return as to Happy Asker.
- Twenty-one counts of aiding in the filing of false payroll tax returns as to Happy Asker and Maher Bashi.
- Twenty-three counts of aiding in the filing of false payroll tax returns as to Tom Yaldo on behalf of specified Happy's Pizza franchises.
- Eleven counts as to Happy Asker and Maher Bashi for aiding in filing false corporate tax returns on behalf of specified Happy's Pizza franchises.
Finally, the indictment also charges Happy Asker and Maher Bashi with one count of obstructing the due administration of the internal revenue laws. Summa and Tagrid Bashi are also charged together in a count of obstructing the due administration of the internal revenue laws, and Yaldo is also charged with one count of obstructing the due administration of the internal revenue laws.
If convicted of the conspiracy charge, the defendants face up to five years in prison and a $250,000 fine. The charges of filing a false income tax return and aiding or assisting in filing a false return carry a maximum penalty of three years in prison and a fine of $250,000 for each count. The obstruction charge carries a maximum penalty of three years in prison and a fine of $250,000 for each count.
Source: US Department of Justice
California Economist Sentenced in Manhattan Federal Court to Four Years in Prison for Evading Over $1.5 Million in Taxes Due to IRS
The US Attorney for the Southern District of New York announced that David Gilmartin, a PhD economist, was sentenced July 16 in Manhattan federal court to four years in prison for failing to file tax returns since 1989, evading payment of his taxes, and obstructing attempts by the IRS and the state of New York to assess and collect his personal income taxes.
Gilmartin was convicted of tax evasion and mail fraud charges in January 2013 after a one-week jury trial before US District Judge Miriam Cedarbaum, who imposed the July 16 sentence.
According to the indictment and evidence introduced at Gilmartin's trial, Gilmartin, willfully failed to file income tax returns and pay income taxes on over $1.7 million in consulting income from 1989 through 2010. He justified his failure to pay taxes by claiming he could not identify a provision in the tax code that made him liable for the payment of income taxes. Despite numerous IRS notices, meetings, and letters, and despite Gilmartin's friends telling him that he would go to jail, Gilmartin refused to file his tax returns or pay his income taxes.
Gilmartin evaded his taxes by providing a false Social Security number to one employer and by providing false withholding forms to employers that claimed he was exempt from taxes to keep his employers from withholding taxes from his paychecks. In order to prevent the IRS from assessing and collecting his taxes, from 1995 through 2002, Gilmartin paid nearly $500,000 from his paychecks directly to his banks for credit card purchases and payments on a line of credit, rather than deposit them in a bank account he knew the IRS would try to levy. From 2008 until his arrest, Gilmartin cashed over $338,000 in paychecks rather than deposit them into a bank account, also to prevent the IRS from collecting his taxes.
As a result of his evasion efforts, Gilmartin owes more than $1.5 million in income taxes and interest to the IRS, and more than $99,000 to New York.
In addition to the prison term, Judge Cedarbaum also sentenced Gilmartin to three years of supervised release. Gilmartin was also ordered to pay $1.67 million in restitution and $2,500 in the costs of prosecution.
Source: US Attorney's Office – New York
Boca Raton Resident Convicted of Filing False Tax Returns, Access Device Fraud, and Aggravated Identity Theft
The US Attorney for the Southern District of Florida, the Justice Department, IRS - Criminal Investigation, and the FBI announced July 16 that Harvey Zitron of Boca Raton, Florida, was convicted by a federal grand jury on all ten counts charged in the indictment.
According to the indictment, Zitron was charged with filing fraudulent IRS United States Individual Income Tax Returns, Forms 1040, for 2004 and 2005 (Counts 1 and 2), and Amended Individual Income Tax Returns, Forms 1040X for 2003, 2004, and 2005 (Counts 3-5), all in violation of Title 26, United States Code, Section 7206(1). In addition, he was charged with three counts of access device fraud, in violation of Title 18, United States Code, Section 1029(a)(2) (Counts 6, 8, and 10), and two counts of aggravated identity theft, in violation of Title 18 United States Code, Section 1028A(a)(1) (Counts 7 and 9).
According to the evidence presented at trial, Zitron used companies to write checks to friends or acquaintances who cashed the checks and returned the cash to Zitron. Zitron then failed to declare this income on his tax returns. He also opened credit card accounts in the names of his son and ex-wife and charged more than $1,000 in a single year on those accounts without their authorization or knowledge.
Zitron faces a maximum sentence of three years for each count of tax fraud, ten years for each count of access device fraud, and two consecutive years for each count of aggravated identity theft. Sentencing is set for October 8, 2013.
Source: US Attorney's Office – Florida