Crime Watch: August 30, 2013

Aug 30th 2013
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Northern California Residents Indicted for Filing False Liens against IRS Employees and Tax Fraud

The Justice Department announced August 20 the unsealing of a superseding indictment returned by a federal grand jury in Sacramento, California, charging Teresa Marie Marty, Charles Tingler, and Victoria Tingler, all of Placerville, California, with conspiracy to defraud the United States and filing multimillion-dollar liens against government officials.

Marty is charged with filing liens against the property of three IRS employees involved in the collection of taxes she owed the IRS. She also filed liens of at least $84 million against the property of two Justice Department attorneys involved in a lawsuit filed against her in 2009 to enjoin her and her business, Advanced Financial Services (AFS), from preparing tax returns.

According to the superseding indictment, the Tinglers were clients of Marty and AFS, who filed a false tax return in 2008 fraudulently claiming a refund of $358,415. The indictment charges the Tinglers, as well as Marty, with filing this tax return. When the IRS tried to collect the fraudulently obtained refund, both Charles and Victoria Tingler filed multiple liens against the IRS revenue officer who was handling their collection case.

According to the charging documents, the liens disclosed the Social Security numbers of the respective government employees. Marty and the Tinglers are also charged with multiple counts of unlawfully using the Social Security numbers of the government employees in the liens they filed with the California Secretary of State.

Finally, the indictment charges Marty, Charles Tingler, and AFS office manager Pamela Harris with participating in a conspiracy to defraud the IRS. The indictment alleges that as part of the conspiracy, Harris and Marty engaged a commercial collection agency to collect one of the three false liens that Charles Tingler had filed, one of which was in the amount of $500,000.

Marty, Harris, and Marty's daughter, Rebecca Bandera-Marty, had previously been indicted in June 2013 for a large-scale tax-fraud scheme. Those charges are included in this superseding indictment. According to the superseding indictment, in 2008 and 2009 Marty, Bandera-Marty, and Harris conspired to file at least 250 false individual federal income tax returns on behalf of individuals who resided in twenty-six states, and which claimed more than $60 million in false federal income tax refunds.

If convicted, the defendants face up to five years in prison for the conspiracy charge as well as each charge of filing a false claim and unlawfully disclosing a Social Security number. Each retaliatory lien count carries a maximum penalty of ten years in prison.

Source: US Department of Justice


California Businessman Pleads Guilty to Conspiracy to Conceal Israeli Bank Accounts

Aaron Cohen of Encino, California, pleaded guilty August 29, 2013, in the US District Court for the Central District of California to conspiracy to defraud the United States, the Justice Department and IRS-CI announced. 

According to court documents, Cohen, a US citizen, maintained undeclared bank accounts at two international banks headquartered in Tel Aviv, Israel, identified in court documents as Bank A and Bank B. One of Cohen's undeclared accounts was maintained at a branch of Bank A located in the Cayman Islands.

The accounts were held in the names of nominees in order to keep them secret from the US government. In or about 2000, Cohen began using the funds in his undeclared account in the Cayman Islands as collateral for back-to-back loans obtained from another branch of Bank A located in Los Angeles. Cohen's ownership of the funds in the Cayman Islands accounts was not identified in the loan records maintained at the Los Angeles branch, thus concealing the fact that he was borrowing his own money, paying tax-deductible interest on the loans, and not reporting the interest income he was earning in the Cayman Islands on his US tax returns.

According to the plea agreement, in or about 2009, Cohen transferred approximately $2 million from his Cayman Islands account at Bank A to a new offshore account at Bank B in Israel. Cohen then used the funds in the new account as collateral to obtain a back-to-back loan from the Los Angeles branch of Bank B. Cohen failed to report any income from the accounts on his individual income tax returns that were filed with the IRS.

For tax years 2006 through 2009, Cohen failed to report interest income of approximately $238,000. The highest balance in the undeclared accounts was approximately $3,450,000.

Cohen is the latest in a series of defendants charged in the US District Court for the Central District of California with failing to report income from undeclared accounts in Israel.

On March 29, 2013, Zvi Sperling of Beverly Hills, California, pleaded guilty to conspiring to defraud the United States in connection with back-to-back loans obtained in Los Angeles at branches of Bank A and Bank B that were secured by funds in undeclared bank accounts in Israel. For tax years 2005 through 2008, Sperling failed to report income of approximately $381,563. The highest balance in Sperling's undeclared accounts was approximately $4 million.

On May 21, 2013, Guity Kashfi of Los Angeles, California, pleaded guilty to conspiring to defraud the United States in connection with back-to-back loans obtained from branches of Bank A and Bank B in Los Angeles that were secured by funds in undeclared bank accounts in Israel and Luxembourg. For tax years 2005 through 2011, Kashfi failed to report interest income of approximately $221,306. The highest balance in Kashfi's undeclared accounts was approximately $2.5 million.

Cohen faces a potential maximum prison term of five years and a maximum fine of $250,000. In addition, Cohen 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. 

Source: US Department of Justice


Alabama State Employee Sentenced to Prison for Stolen Identity Refund Fraud

Chequlia Motley of Montgomery, Alabama, was sentenced August 13, 2013, to serve thirty-six months in prison for conspiracy and aggravated identity theft, the Justice Department and the US Attorney for the Middle District of Alabama announced. Motley pleaded guilty to those charges in May 2013.

According to Motley's plea agreement, she was a former state employee who stole identities from state databases and sold them to coconspirators. As evidence presented at the sentencing hearing showed, Motley had previously worked for the Alabama State Employees' Insurance Board and stole the personal information of over a hundred state workers and their family members from the databases maintained by the board.

She provided this information to Veronica Temple, Yolanda Moses, and Barbara Murry, who used the stolen identities to file false tax returns that fraudulently requested tax refunds from the IRS. Temple, Moses, and Murry were previously convicted and each sentenced in February to fifty-seven months in prison.

In addition to the prison sentence, Motley was ordered to pay $179,946 in restitution to the IRS.

Source: US Department of Justice


Federal Court Permanently Bars Indiana Instant Tax Service Franchisee from Tax Preparation

A federal court in Indianapolis permanently barred David Franklin and his company, Instant Refund Tax Service (IRTS), from preparing tax returns and from operating a tax-preparation business, the Justice Department announced August 19. The government alleged that IRTS, which Franklin wholly owns, operated as a franchisee of Instant Tax Service, a large national tax-preparation franchisor operated by ITS Financial LLC, based in Dayton, Ohio.

The order follows an earlier preliminary injunction against the defendants. In a separate case, a federal court in Ohio preliminarily enjoined the Dayton-based franchisor last November. The defendants in both cases consented to entry of the preliminary injunctions without admitting the allegations against them.

The Indiana permanent injunction order was signed by Judge Sarah Evans Barker of the US District Court for the Southern District of Indiana. The government complaint in the case alleged that Franklin owned and operated twenty-two Instant Tax Service locations that prepared and filed false and fraudulent income tax returns for customers, fabricated income for phony businesses to obtain larger tax credits, forged W-2 forms, filed returns improperly based on paycheck stubs rather than W-2 forms, claimed false education tax credits, and reported false filing statuses for customers. The government also accused Franklin's offices of filing tax returns without customers' authorization and selling false and deceptive loan products to customers.

The case is one of five similar civil actions that the Justice Department brought against Instant Tax Service franchises and the corporate franchisor, ITS Financial, which claims to be the fourth-largest tax-preparation firm in the nation. The court recently conducted a two-week trial in the Ohio case in connection with the government's request to permanently enjoin the Instant Tax Service franchisor. A decision has not yet been issued.

Source: US Department of Justice


Alabama Tax Return Preparers and Nineteen Foreign Nationals Charged with Conspiring to Defraud the United States, Identity Theft, and Money Laundering

The Justice Department announced August 20 that a fourteen-count superseding indictment was unsealed, charging JB Tax Professional Services Inc., Jacqueline J. Arias, and Jose Bayron Estrada, of Spruce Pine, Alabama, along with nineteen foreign nationals, many of whom resided in the New Orleans area, with conspiracy to defraud the United States and conspiracy to commit mail and wire fraud by filing fraudulent income tax returns. The indictment also charges certain defendants with aggravated identity theft and conspiracy to commit money laundering. Most of the defendants were previously indicted in May 2013 and arrested in June 2013.

According to the indictment, members of the conspiracy obtained Forms W-2, often by purchasing them for cash, for the purposes of filing fraudulent income tax returns. Conspirators further obtained individual taxpayer identification numbers (ITINs) for use in filing fraudulent tax returns, in some cases using false applications filed with the assistance of Arias and JB Tax Professional Services. An ITIN is a tax processing number issued by the IRS to individuals who do not have, and are not eligible to obtain, a Social Security number. Both Arias and the business were designated by the IRS as certified acceptance agents, which are entrusted by the IRS with the responsibility of reviewing the documentation of an ITIN applicant's identity and alien status for authenticity, completeness and accuracy before submitting their application to the IRS.

The charging documents allege that the defendants used the Social Security numbers of real persons to conduct mail and wire fraud. The defendants also allegedly disguised and concealed the proceeds of their fraud by agreeing to conduct certain types of financial transactions.

Each defendant faces a maximum potential sentence of five years in prison for the conspiracy charge. Each aggravated identity theft charge carries a mandatory two-year prison sentence, and the defendants charged in the money laundering conspiracy count face a possible maximum sentence of twenty years in prison. The defendants will also be subject to fines, mandatory restitution, and forfeiture if convicted.

Source: US Department of Justice


New York Maintenance and Construction Company Owner Pleads Guilty to Failing to Pay Payroll Taxes

On August 20, the Justice Department announced the guilty plea of Thomas Nastasi III of Mt. Kisco, New York, to one count of willful failure to pay the IRS the payroll taxes of his company, Nastasi Maintenance & Construction LLC. Nastasi pleaded guilty before US District Judge Paul G. Gardephe in the Southern District of New York.

According to the previously filed indictment and statements made during Nastasi's guilty plea, from 2001 through 2011, Nastasi owned and operated several Manhattan construction and maintenance companies, including Nastasi Maintenance & Construction. As the president of the companies, Nastasi was responsible for withholding payroll taxes from his employees and paying them over to the IRS. Those taxes included the employees' income taxes, Social Security, and Medicare taxes. Nastasi accumulated over $1.7 million in payroll taxes that were owed but never paid to the IRS. 

Court documents and statements also established that instead of paying the companies' payroll taxes to the IRS, Nastasi used company funds to pay hundreds of thousands of dollars in personal expenses, for items including boat-related expenses and cigars. Nastasi also made false statements to the IRS in the course of its attempts to obtain delinquent tax returns and collect the corporate and personal taxes owed by Nastasi and his companies. Sentencing is set for December 19, 2013.

Source: US Department of Justice


Texas Tax Preparer Is Permanently Barred from Tax Preparation for Alledgedly Falsifying Returns for Overseas Customers and Impeding Audits

The Justice Department announced that on August 22, 2013, a federal court in Ft. Worth, Texas, permanently barred Karena Mondrianh from preparing tax returns and from operating a tax-preparation business. Mondrianh consented to entry of the preliminary injunctions without admitting the allegations against her.

In its complaint, the government alleged that Mondrianh prepared fraudulent tax returns understating customers' income by inventing false business expenses and by falsely claiming that customers' income was exempt from tax. According to the complaint, most of Mondrianh's customers work overseas for defense contractors. The permanent injunction order was signed by Judge John H. McBryde of the US District Court for the Northern District of Texas.

The complaint further alleged that Mondrianh provided false information to the IRS in improper attempts to delay IRS audits of customers. She also allegedly urged a customer to lie to an IRS agent in order to forestall an IRS audit.

Source: US Department of Justice


Former Alabama Postal Employee Pleads Guilty for His Involvement in a Fraudulent Tax Refund Scheme

Antoine Green, a former US Postal Service (USPS) employee, pleaded guilty August 26, 2013, in US District Court for the Middle District of Alabama to crimes related to his involvement in a stolen identity tax refund fraud scheme, the Justice Department announced.

According to court documents, between November 2011 and October 2012, Green, who was employed as a postal carrier with the USPS in Montgomery, Alabama, stole at least sixty-one US Treasury tax refund checks from his mail route. The checks, which totaled approximately $145,952, were issued by the IRS in connection with fraudulent tax returns filed in the names of identity theft victims.

For his involvement in the scheme, Green pleaded guilty to one count of theft of government money and one count of theft of mail by a postal employee. He faces a maximum potential sentence of fifteen years in prison and a fine of up to $500,000.

Source: US Department of Justice


Former Utah Chiropractor Sentenced to Prison for Tax Evasion

The Justice Department and the IRS announced August 26, 2013, that Douglas R. Madsen, a former chiropractor from Ephraim, Utah, was sentenced by the US District Judge Clark Waddoups to thirty-three months in prison and restitution of over $500,000 following a conviction for attempted evasion of payment of income tax in the District of Utah.

On January 12, 2012, a jury convicted Madsen of one count of tax evasion. According to court documents, Madsen owed approximately $1.3 million in assessed income tax, interest, and penalties for the years 1995 and 1999 to 2004. Madsen's tax debt had grown, by the trial date, to over $1.7 million, after accrued interest.

The evidence presented at trial established that Madsen used nominee trusts to conceal the ownership of numerous acres of property, ultimately causing the transfer of that property to Grand Scale Inc., a Washington State corporation of which he was the president, vice president, secretary, treasurer, and chairman of the board. In addition, the evidence showed that Madsen used other entities to encumber property and cloud equity in that property through use of mortgages and Uniform Commercial Code financing statements. Madsen was previously held in civil contempt by the US District Court for the District of Utah for failure to comply with court orders with respect to an IRS summons.

Source: US Department of Justice


Justice Department Sues to Shut Down South Carolina Tax Return Preparer

The United States has requested the federal district court in Charleston, South Carolina, to permanently bar Jessica Geddis of Summerville, South Carolina, from preparing federal income tax returns for others, the Justice Department announced August 27, 2013.

According to the complaint, Geddis prepared federal income tax returns from her home and as a tax preparer at MBM Tax and Accounting Services LLC. The complaint alleges that Geddis prepared returns for herself and others that overstate income by reporting fictitious household help income. Geddis overstated her customers' income in order to increase the amount of her customers' refundable tax credits, including the Earned Income Tax Credit, Child Tax Credit, and Making Work Pay Credit.

The complaint further alleges that Geddis directed the IRS to deposit all, or a portion of, her customers' overstated refunds into bank accounts that she controls. According to the complaint, the IRS has reviewed Geddis' bank records and determined that she has received at least 148 fraudulent tax refunds totaling $281,678 between January 2008 and May 2012.

Source: US Department of Justice


California Business Owner Sentenced to Eighteen Months in Federal Prison for Tax Fraud

The owner of a Ventura County, California, residential and commercial paint business was sentenced to 18 months in federal prison for failing to report to the IRS wages paid to employees totaling over $1.5 million.

Scott G. Titus, 53, of Ojai, the owner and operator of Scott Titus Painting, was sentenced by US District Judge Stephen V. Wilson, who also ordered Titus to pay restitution in the amount of $666,748.40 to the IRS.

In April of this year, Titus pleaded guilty to count one of the information charging him with subscribing to a false quarterly employment tax return for 2008.

According to the plea agreement, during the years 2008 through 2010, Titus owned and operated Scott Titus Painting. Titus painted residential and commercial properties and was paid by his clients in both cash and checks. Titus used the cash payments received from clients, along with cash derived from cashing checks and cash withdrawals from his business bank account, to pay his employees their wages in 2008, 2009, and 2010. 

For the years in question, Titus failed to report $1,594,971 in wages paid to the employees of Scott Titus Painting on the quarterly and annual employment tax returns filed with the IRS resulting in a tax loss to the government of at least $666,748.

The count to which Titus pleaded guilty relates to the employment tax return for the second quarter of 2008. Specifically, Titus reported paying wages to employees of $22,195, when in fact he paid wages of $215,774, falsely underreporting the wages paid by $193,579. 

The investigation of Titus was conducted by IRS Criminal Investigation in Los Angeles in conjunction with the US Attorney's Office Tax Division.

Source: US Attorney's Office - California 


Final Defendant Sentenced to 102 Months in Federal Prison for His Role in a Credit Card Fraud Scheme

A Bellflower, California, man was sentenced to 102 months in federal prison for his role in a credit card fraud scheme that used the names of real and fictitious individuals and business entities to obtain fraudulent credit cards used to make unauthorized withdrawals and purchases.

Clayton Stewart, aka Douglas Blackburn, was sentenced in the fraud scheme by US District Judge Gary Allen Feess. In addition to the prison term, Judge Feess ordered Stewart to pay $404,284.80 in restitution to the victim financial institutions.

Clayton Stewart pleaded guilty in November to one count each of bank fraud conspiracy, access device fraud, and money laundering conspiracy admitting that he, together with his brother Johnny Stewart of Marina Del Rey, and codefendant Dexter Hardy of Los Angeles County, engaged in a scheme to defraud Bank of America, Chase Bank USA, and Capital One Bank of funds belonging to these financial institutions through the use of fraudulent credit card applications.

According to documents filed with the court, Clayton Stewart and Johnny Stewart were involved in a conspiracy in which the defendants fraudulently applied online for unauthorized credit cards from the financial institutions. For many of the cards, Clayton Stewart and his brother made calls to the bank in the names of actual victims to inquire about the cards opened in the names of the business entities. Once Clayton Stewart and his brother received the credit cards, they used the credit cards to make unauthorized bank ATM withdrawals and purchases, including purchases of department store gift cards and Apple iPads. To get more money out of the scheme, Clayton Stewart and his brother created sham entities so that charges could be made with the fraudulent credit cards on merchant processors for the entities. The intended dollar loss associated with the scheme is $652,050.00. 

Johnny Stewart was convicted in November by a federal jury of eighteen felony counts, including bank fraud, access device fraud, money laundering, and aggravated identity theft. He received a sentence of 144 months in federal prison. Dexter Hardy pleaded guilty in August of last year to one count of bank fraud conspiracy. He received a sentence of thirty-three months in federal prison.

In February 2008, Clayton Stewart was sentenced in US District Court to thirty-seven months in federal prison after pleading guilty to a similar access device fraud scheme. Clayton Stewart was released from federal custody on September 17, 2010. Search warrant records from the previous scheme uncovered letters from Johnny Stewart to Clayton Stewart on how to commit different types of fraud without being detected by law enforcement. In those letters, Johnny Stewart instructed Clayton Stewart how to conduct bank transactions on the home computer so that Clayton Stewart did not need to go to the bank and risk being detected.

Source: US Attorney's Office - California 


Tax Preparer Sentenced to Federal Prison for Identity Theft and Tax Fraud

A Lynn, Massachusetts, man was sentenced August 15, 2013, in US District Court in Boston for identity theft and tax fraud committed while operating a tax return preparation business. Roosevelt Fernandez was sentenced by to forty-two months in prison and ordered to pay $116,679 in restitution to the IRS. On January 16, 2013, Fernandez pleaded guilty to a thirteen-count superseding information charging him with aiding and assisting in the preparation of false income tax returns and identity theft.

Fernandez held himself out as an experienced tax return preparer operating a business called H&T Multi Services in Lynn. On numerous occasions, Fernandez inserted false and fabricated information into his clients' income tax returns. This information included wholly fictitious and fraudulently inflated claims relating to deductions and credits. In addition, Fernandez omitted the names and personal identifying information of dependent children from their actual parents' income tax returns, and then charged other clients $500 or more to add those dependents to their income tax returns in order to generate larger tax refunds.

Source: US Attorney's Office - Massachusetts


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