Crime Watch: April 4, 2013

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Self-Proclaimed "President" of Sovereign Citizen Nation Convicted in Alabama of Federal Tax Crimes

A federal jury in Montgomery, Alabama, found James Timothy Turner, also known as Tim Turner, guilty of conspiracy to defraud the United States, attempting to pay taxes with fictitious financial instruments, attempting to obstruct and impede the IRS, failing to file a 2009 federal income tax return, and falsely testifying under oath in a bankruptcy proceeding, the Justice Department, the IRS, and the FBI announced March 25.

Based on the evidence introduced at trial and court filings, Turner, the self-proclaimed "president" of the so-called sovereign citizen group "Republic for the United States of America" (RuSA), traveled the country in 2008 and 2009 conducting seminars teaching attendees how to defraud the IRS by preparing and submitting fictitious "bonds" to the US government in payment of federal taxes. Although the evidence at trial revealed the bonds are fictitious and worthless, witnesses testified that Turner used special paper, financial terminology, and elaborate borders in an effort to make them look "real" and more likely to succeed in defrauding the recipient.

Turner was convicted of sending a $300 million "bond" in his own name and of aiding and abetting others in sending fifteen other "bonds" to the Treasury Department to pay taxes and other debts.

The evidence at trial also established that Turner taught people how to file retaliatory liens against government officials who interfered with the processing of fictitious "bonds." Turner filed a purported $17.6 billion maritime lien in Montgomery County, Alabama, Probate Court against another individual. 

Finally, evidence presented at trial demonstrated that the FBI began an investigation after Turner and three other individuals sent demands to all fifty governors in the United States in March 2010 ordering each governor to resign within three days or be "removed."

Turner remains in federal custody pending sentencing. He faces a potential maximum prison term of 164 years, a maximum potential fine of $2,350,000, and mandatory restitution.


Georgia Tax Return Prepare Sentenced to Prison

Tyrone Thompson was sentenced March 18 to more than eleven years in prison by US District Judge Hugh Lawson in the Middle District of Georgia for conspiracy and filing fraudulent tax returns in order to receive tax refunds, to which the defendant was not entitled, the Justice Department and IRS announced.

In addition to Thompson, the scheme involved four others who had already been sentenced. Judge Lawson also ordered Thompson to pay $516,363 in restitution to the IRS. In October 2012, all five defendants pleaded guilty to filing a false claim for tax refunds. In addition, Thompson pleaded guilty to conspiracy to file false claims for tax refunds.

According to court documents, Thompson organized a scheme in which he prepared and filed fraudulent federal income tax returns using the names of other individuals. He included with the returns fictitious Schedules C reporting business income and losses and also claimed false First-Time Homebuyer Credits in order to obtain tax refunds to which he and his codefendants were not entitled. He directed fraudulently obtained refunds to be deposited to his codefendants' bank accounts.

The attempted tax refund fraud exceeded $400,000.


Justice Department Seeks to Shut Down Alabama Tax Preparer Who Allegedly Falsifies Tax Returns at Cost of Millions to US Treasury

The United States has asked a federal court in Montgomery, Alabama, to bar Kenya Hendrix Adams from preparing tax returns for others, the Justice Department announced March 21. According to the government complaint, Adams has repeatedly prepared federal tax returns that understate her clients' federal tax liabilities. The suit alleges that Adams did so by falsely claiming or inflating tax credits or fabricating deductions.

The suit alleges that the IRS has completed examinations of 315 returns prepared by Adams and that 88 percent of those returns understated the filing taxpayer's liability. Because Adams prepared almost 2,000 returns over a five-year period between 2007 and 2012, the suit alleges that the harm to the US Treasury as a result of her conduct could be in the millions of dollars.


Inmate Sentenced for Filing False Tax Returns While in Alabama Federal Prison

David Marrero, a federal inmate in the custody of the Bureau of Prisons, was sentenced March 27 to forty-six months in prison for tax fraud committed while in prison, the Justice Department and the IRS announced. Twenty-four months of the sentence imposed will run concurrent with Marrero's current ten-year federal sentence, and twenty-two months will run consecutive to his ten-year sentence. Marrero had pleaded guilty in December 2012 to filing false claims.

According to court documents, while serving his federal sentence in Montgomery County, Alabama, Marrero began sending various false documents to the IRS and to the federal judge who had presided over his case in Florida. Among the documents Marrero sent were fictitious money orders and false tax returns making claims for refunds, including one tax return claiming a $2,719,438 refund – the amount of restitution Marrero had been ordered to pay following his conviction in Florida.

The fraudulent tax returns were based upon false IRS Forms 1099-OID on which Marrero had fraudulently claimed that various companies withheld a substantial amount of federal taxes from him when, in fact, the companies had withheld nothing. Marrero also used financial documents he had obtained from other people, without their knowledge or consent, as supporting documentation for his fraudulent claims.


Federal Court Permanently Bars Indiana Firm from Preparing Tax Returns

A federal court permanently barred a Gary, Indiana, tax preparation firm and its owner, John Newlin, from preparing tax returns for others, the Justice Department announced March 28. The civil injunction order, to which Newlin and Quick Sam agreed without admitting the allegations against them, was signed by Judge Jon E. DeGuilio of the US District Court of the Northern District of Indiana.

The government in the civil injunction suit alleged that Newlin's business, Quick Sam Tax Refund, had repeatedly prepared federal income tax returns that unlawfully understated customers' income tax liabilities.

According to the complaint, Quick Sam guaranteed its customers they would receive the largest refund by getting their taxes prepared at Quick Sam. In order to deliver on this promise, the complaint alleges, Quick Sam employees fabricated bogus business expenses, claimed improper tax credits, and reported fictitious dependents to illegally increase customers' tax refunds. Newlin and Quick Sam allegedly gave bonuses to employees for engaging in these fraudulent practices.

Several Quick Sam employees have been accused of fraud in the past, according to the complaint. Charles Standifer, Rhonda Murphy, Chanel Bandy, and Brittaney Walker-Lipsey, all former Quick Sam tax return preparers, have pled guilty to tax-related crimes. The complaint alleges that the total harm to the government caused by Newlin and Quick Sam's illegal conduct possibly exceeded $35 million in lost tax revenue.


Virginia Nurse Sentenced to Federal Prison for Tax Fraud

Jeffrey Charles, a resident of Grimstead, Virginia, was sentenced April 1 to serve forty-six months in federal prison for conspiring with his daughter and son-in-law to defraud the United States, aiding and assisting in the preparation of false tax returns in his daughter's name, and filing a false tax return in his own name, the Justice Department and the IRS announced.

On November 6, 2012, following a six-day jury trial in Newport News, Virginia, Charles was convicted of one count of conspiracy, three counts of aiding and assisting in the preparation of false tax returns, and one count of filing a false tax return. According to the evidence presented at trial, Charles, a registered nurse and the administrator of a rehabilitation center, conspired with his daughter and son-in-law to impair and impede the IRS in ascertaining, computing, assessing, and collecting federal income taxes.

The evidence also proved that Charles aided and assisted in the preparation of three false tax returns in his daughter's name for tax years 2000, 2001, and 2005 and attached false documents to each tax return.

Finally, the evidence at trial also established that Charles filed a false tax return in his own name for tax year 2006 in which he allegedly falsely reported earning $0.00 income. Charles joined American Rights Litigators (ARL), a Florida-based organization, and paid ARL to send fraudulent documents to the IRS on his behalf and on behalf of his daughter. In August 2004, a federal district judge permanently enjoined ARL and two of its promoters from the sale of a nationwide tax scam. In August of 2010, three promoters of ARL were each sentenced in the District of Columbia to ten years in prison, along with ARL founder Eddie Ray Kahn, who received a twenty-year sentence.

Senior Judge Henry Coke Morgan Jr. also ordered Charles to pay over $300,000 in restitution to the IRS as part of his sentence.

In a separate but related case, Charles' coconspirators each pleaded guilty to conspiracy and were sentenced to federal prison.


California Accountant Charged with Aiding and Assisting the Preparation of False Tax Returns

A federal grand jury returned an indictment charging Jeffery Deshon Applewhite, aka Jeffery Donald Mason, of Los Angeles, with aiding and assisting the preparation and presentation of false and fraudulent federal income tax returns, the Justice Department and IRS announced April 1.

According to the indictment, from 2006 through 2011, Applewhite, a certified public accountant who owned and operated tax preparation businesses, including Applewhite and Company, CPA and Mason Financial Services Inc., aided and assisted in the preparation and presentation of false and fraudulent federal income tax returns containing claims for deductions and credits to which his clients were not entitled. Some counts allege that Applewhite used another individual's PTIN without permission in preparing false federal income tax returns.

The maximum penalty for aiding and assisting the preparation of false claims is three years in prison and a fine of $250,000 for each count of conviction. The maximum penalty for each count of identity fraud is fifteen years and a fine of $250,000.


Justice Department's Civil Injunction Program Shuts Down Fraudulent Tax Return Preparers and Promoters Nationwide

The Justice Department announced March 27 recent results of its civil injunction efforts to combat unscrupulous tax return preparers and tax fraud promoters. According to IRS estimates, 60 percent of taxpayers use tax professionals to prepare and file their tax returns. Paid tax return preparers now prepare more than eighty million individual tax returns annually.

For more than a decade, the department's Tax Division, working with the IRS, has pursued a civil injunction program to stop fraudulent return preparers and promoters from violating federal tax laws and consumer protection laws. With the current tax-filing season underway, the Tax Division in the last six months has obtained permanent injunctions against more than thirty preparers and promoters doing business all over the United States.

Since October 1, 2012, the Tax Division has obtained civil injunctions against both large-scale return preparation franchises and smaller, independent return preparers and promoters across the country. For example, on October 22, 2012, a US District Court in Dayton, Ohio, entered preliminary injunctions against ITS Financial LLC and its CEO, Fesum Ogbazion. ITS Financial is the parent company that owns the Dayton-based Instant Tax Service tax-preparation franchise operation. Instant Tax Service claims to be the fourth largest tax-preparation firm in the nation. The preliminary injunction remains in force pending trial on the government's request for a permanent injunction, currently scheduled for May 2013. During December, January, and February, federal district courts also permanently enjoined current and former Instant Tax Service franchisees in Las Vegas, Kansas City, and Los Angeles and entered a preliminary injunction against an Instant Tax Service franchisee in Indianapolis. Similarly, on March 1, 2013, a US District Court in Tennessee permanently shut down a licensee of Memphis-based Mo' Money Taxes LLC and Money Co USA LLC. Federal courts have also shut down return preparers in Mississippi, Florida, Louisiana, and South Carolina and promoters of alleged tax-fraud schemes in Michigan, New York, and Kansas.

As alleged in the Tax Division's civil injunction complaints, fraudulent return preparers commonly falsify information to take advantage of refundable credits available under federal tax law, often improperly manipulating customers' income, expenses, and dependents to hit the so-called "sweet spot" to maximize the refundable credit claimed. They also take advantage of customers by selling deceptive loan products with exorbitant fees. As identified in the government's complaints, some of the fraudulent schemes and practices that have been stopped through injunction orders recently include:

  • Preparing phony tax return forms with fabricated businesses and income;
  • Claiming false education and homebuyer credits;
  • Claiming false and inflated deductions;
  • Claiming false filing status;
  • Claiming false dependents;
  • Selling deceptive loan products;
  • Filing tax returns without customer consent or authorization;
  • Preparing bogus W-2 forms, based on information from employee paystubs;
  • Falsifying information on returns to claim inflated earned income tax credits; and
  • Filing fraudulent tax returns using stolen taxpayer identities to obtain improper tax refunds.

Some preparers try to conceal their fraud by not signing the returns they prepare and by using stolen or fake Social Security numbers to misidentify the paid preparer.



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