Crime Watch: January 24, 2013

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Justice Department Seeks to Shut Down Florida Tax Preparer

The United States has asked a federal court in Jacksonville, Florida, to stop Thomas G. Bandzul from preparing tax returns for others, the Justice Department announced January 17. According to the government complaint, Bandzul has repeatedly prepared federal tax returns that unlawfully understate customers' federal tax liabilities.

The suit alleges that Bandzul concocts bogus or inflated deductions, business expenses, education credits, and charitable contributions, which he falsely reports on his customers' federal income tax returns.

The suit alleges that the IRS has examined over 250 tax returns prepared by Bandzul and found that over 90 percent of tax returns understated the taxpayer's liability. According to the complaint, the total harm to the US Treasury caused by Bandzul's misconduct could exceed $17 million.

The suit further alleges that, in some instances, Bandzul filed returns that claimed a refund larger than what Bandzul had disclosed to the taxpayer. Once the refund was paid, Bandzul retained the additional amount without the taxpayer's knowledge.


Pennsylvania Man Sentenced to Prison for Tax Evasion

Stephen Thomas of York, Pennsylvania, was sentenced January 15 in US District Court for the District of Columbia for tax evasion, the Justice Department and IRS announced. US District Judge Amy Berman Jackson sentenced Thomas to eighteen months in prison and ordered him to pay $154,362 in restitution to the IRS.

On September 11, 2012, Thomas pleaded guilty to attempting to evade his 2006 federal income taxes. According to court records, between 2002 and 2004, in the District of Columbia, Thomas formed multiple entities whose names contained the initials ECG, which stood for ESOP Capital Group. ECG purported to provide financial, business, and other management services to companies that were interested in creating ESOPs (employee stock ownership plans). In or about 2005 and 2006, Thomas, through ECG, contracted to provide such services to two companies in Maine.

As part of his guilty plea, Thomas admitted that he failed to file his 2005 through 2007 individual income tax returns and failed to file 2005 through 2007 corporate income tax returns for ECG.

Thomas further admitted that he engaged in a series of affirmative acts of evasion during 2005 through 2007, including concealing his income by moving earnings from the Maine companies into bank accounts in the name of his wife, withdrawing cash on a weekly basis which totaled more than $400,000, using cashier's checks, and titling his primary residence in the name of his wife.

Thomas further admitted that he failed to report at least $573,785 of income, and that his tax evasion during 2005 through 2007 resulted in a tax loss to the IRS of at least $154,362.


Utah Man and Nevada Woman Charged with Tax Conspiracy

A federal grand jury in Salt Lake City returned an indictment Wednesday January 23 charging Gerrit Timmerman III, seventy, of Midvale, Utah, and Carol Sing, seventy-three, of Henderson, Nevada, with one count of conspiracy to defraud the United States. The indictment was announced by Kathryn Keneally, Assistant Attorney General for the Justice Department's Tax Division and US Attorney for the District of Utah David B. Barlow.

According to the indictment, from April 23, 2004, through March 5, 2007, Timmerman and Sing conspired to defraud the United States by marketing corporations sole as a part of a scheme to evade the assessment and payment of federal income taxes.

Timmerman and Sing falsely told their clients that so-called "corporations sole" were exempt from US income tax laws, had no obligation to file tax returns, and had no obligation to apply for tax-exempt status.

They further claimed that individuals could render their own income non-taxable by assigning it to the corporation sole, could draw a tax-free stipend from their corporation sole, and could render property immune from IRS collection activity by transferring property to the corporation sole.

During the life of the conspiracy, Timmerman and Sing were responsible for the creation of approximately ninety corporations sole. At the time their corporation soles were created, these clients had outstanding federal income tax assessments totaling at least $5 million.

If convicted, Timmerman and Sing each face a maximum of five years in prison and a fine of up to $250,000.


Justice Department Sues to Stop South Carolina Tax Return Preparers Engaged in Earned Income Credit Scheme

The United States has asked a federal court in Florence, South Carolina, to permanently bar Susann Allen of Darlington County, South Carolina, and Rachel D. Watson of Florence County, South Carolina, from preparing federal income tax returns for others, the Justice Department announced January 22.

According to the government complaint, Allen and Watson have prepared federal income tax returns at a number of businesses in South Carolina, including, most recently, Fludd's Express Tax Service and Gold Valley Pawn. The complaint alleges that they have prepared returns that unlawfully understate income tax liabilities and overstate refunds through a variety of schemes.

The government complaint alleges that Allen and Watson prepared returns that unlawfully claim the Earned Income Tax Credit by reporting fictitious Schedule C businesses or business income or fictitious dependents.

The complaint also alleges that Allen and Watson fabricated or inflated deductions. According to the complaint, the IRS has examined thirty-two returns prepared by Watson and six prepared by Allen and found that every single one overstated their client's refund. 

The total excessive refund of those returns is alleged to be greater than $100,000. Altogether, the government complaint alleges that Allen's and Watson's activities may have resulted in millions of dollars of loss to the United States.


Federal Employee and Former NYC Corrections Captain Barred from Promoting Alleged Tax Fraud Scheme

A federal court has permanently barred Nafeesah H. Hines and Rodney N. Chestnut from promoting an alleged tax fraud scheme, as well as preparing tax returns for anyone other than themselves, the Justice Department announced January 18. The civil injunction orders, to which Hines and Chestnut consented without admitting the allegations against them, were entered by Judge Kiyo Matsumoto of the US District Court for the Eastern District of New York.

According to the government complaint in the case, Hines and Chestnut promoted and personally participated in a scheme based on the frivolous "redemption" theory, which promoters falsely claim allows taxpayers to obtain funds from supposed secret Treasury accounts. The government alleged that Hines and Chestnut used IRS forms, including Forms 1099-OID and 1099-A, to report large amounts of fictitious income tax withholding to claim large tax refunds on customer tax returns prepared by Chestnut or prepared by the customers with Chestnut's help.

Chestnut, the government alleges, is a former captain with the NYC Corrections Department and promoted the scheme to former coworkers. Hines, who the complaint alleges is a US Food and Drug Administration employee, prepared or filed false 1099 forms with the IRS, both for Chestnut's customers as well as for other people, according to the lawsuit.

The complaint alleges that Hines prepared or filed more than 3,000 fraudulent IRS forms that falsely reported over $54 million of purportedly withheld income taxes.


Federal Court Permanently Bars Virginia Company's Promotion of Tool Reimbursement and Tool Rental Schemes

The Justice Department announced January 18 that a federal court has permanently barred Cash Management Systems, a Virginia corporation, from promoting two tax schemes that allegedly involve disguising wages as tool-reimbursement or tool-rental payments.

Also subject to the civil injunction order were Cash Mangement's marketing arm, Xell Enterprises, incorporated in Kansas; its principals, Bruce Lemay and Richard Herson Mills; and Allen Davison, of Overland Park, Kansas. According to the government complaint, Davison provided legal opinion letters regarding the schemes and served on Cash Management's board of directors.

Judge Eric F. Melgren of the US District Court for the District of Kansas entered the permanent injunction, which the defendants consented to without admitting to the allegations against them. Davison was enjoined from promoting other tax schemes in 2010.

The complaint alleges that defendants promoted and implemented two fraudulent tax schemes to employers and employees in the automotive, construction, and trucking industries across the United States.

In the first, employers allegedly re-characterize a portion of employees' wages as purported reimbursements for tools in order to evade federal income and employment taxes. The second plan allegedly involves re-characterizing a portion of wages as purported tool rental payments. The suit alleges that both plans are specifically designed and promoted as ways to reduce reported income and employment taxes.

The government asserts in its complaint that from 2004 through 2010, the schemes cost the US Treasury an estimated $17 million.


Alabama Residents Indicted for Stolen Identity Refund Fraud Conspiracy

Mary and Christian Young and Octavious Reeves were indicted by a federal grand jury in the Middle District of Alabama on a variety of charges stemming from an identity theft and tax fraud conspiracy, the Justice Department and the IRS announced January 17. The alleged conspirators were charged in a thirty-one-count indictment that was returned on December 18, 2012.

Mary and Christian Young and Octavious Reeves, all of Elmore County, Alabama, were charged with conspiring to defraud the United States, along with access device fraud and aggravated identity theft. Mary Young was also charged with several counts of wire fraud. 

According to the indictment, the defendants' conspiracy lasted from January 2012 through June 2012 and involved using stolen identities to file tax returns claiming fraudulent refunds.

The indictment further alleges that Mary Young obtained the names and Social Security numbers of individuals that were then used to electronically file false tax returns. Mary Young would direct the false tax refunds to bank accounts linked to prepaid debit cards. Mary and Christian Young and Octavious Reeves would then use the prepaid debit cards to withdraw cash or pay for personal items.

If convicted, Mary Young faces face a maximum potential sentence of 328 years in prison, Christian Young faces a maximum of twenty-seven years in prison, and Octavious Reeves faces a maximum of seventy-eight years in prison.

Source: US Department of Justice



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