Crime Watch: January 31, 2013

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Justice Department Sues to Permanently Enjoin Florida Tax Return Preparer

The Justice Department filed suit January 28 asking the US District Court for the Middle District of Florida to permanently bar Torrey Burden from preparing federal tax returns for others. The civil injunction suit alleges that Burden prepares returns through A&L Financial Solutions in St. Petersburg, Florida. 

According to the complaint, Burden prepares tax returns using false information in order to reduce his customers' tax liabilities. Specifically, the government alleges that Burden claims false or overstated deductions and claims tax credits that his customers were not eligible to claim. The IRS has examined eighty returns prepared by Burden and found that 92.5 percent resulted in additional taxes owed. As alleged in the complaint, the IRS projects that the tax loss from the returns prepared by Burden could exceed $1,000,000.


Alabama Employee Indicted for Providing Names to a Million Dollar Identity Theft Scheme

A federal grand jury in Montgomery, Alababma, returned an indictment charging Lea'Tice Phillips for conspiring to file false tax returns using stolen identities, the Justice Department and the IRS announced January 29. The thirty-seven count indictment charges Phillips with conspiracy to file false claims, wire fraud, computer fraud, and aggravated identity theft.

According to the court documents, Phillips worked for an Alabama state agency and had access to state databases that contained means of identification of individuals. Between October 2009 and April 2012, Phillips conspired with Antoinette Djonret and others to file false tax returns using stolen identities.

On multiple occasions, Phillips accessed a state database to obtain means of identification. Phillips used her state e-mail to send means of identification to Djonret. Djonret and others used those means of identification to file false tax returns. Djonret and her coconspirators filed most of the tax returns from her residence in Montgomery.

Djonret and her coconspirators used an elaborate network of individuals to launder the tax refunds. They recruited individuals to purchase prepaid debit cards and to provide the cards to Djonret and her coconspirators. The fraudulent tax refunds were directed to the prepaid debit cards. Djonret and her coconspirators would then use the prepaid debit cards to obtain the proceeds. Some of the prepaid debit cards were in the name of Lea'Tice Phillips. In total, Djonret filed over 1,000 false tax returns that claimed over $1.7 million in fraudulent tax refunds.

On August 9, 2012, a federal grand jury in Montgomery returned a superseding indictment charging Antoinette Djonret, Angelique Djonret, Tabitha Stinson, Melba Wilson, Chantresa Hayes, and Corey Means for their roles in the same conspiracy.

If convicted, the Phillips faces ten years imprisonment for the conspiracy to file false claims, twenty years for each wire fraud count, ten years' imprisonment for each computer fraud count, and a mandatory two-year sentence for the aggravated identity theft counts. She is also subject to fines, mandatory restitution, and forfeiture.


Alabama Woman Indicted for Her Role in a Million Dollar Identity Theft Scheme

A federal grand jury in Montgomery, Alabama, returned an indictment charging Scottie Alice Johnson with a conspiracy to commit theft of public funds and to defraud the Internal IRS and with theft of public funds, the Justice Department and the IRS announced January 29.

According to the indictment, between 2006 and 2012, Johnson conspired with others to defraud the IRS and commit theft of public funds. Coconspirators filed false federal income tax returns with stolen identities and had refunds directly deposited into several bank accounts, including bank accounts in the name of Scottie Alice Johnson and another individual. The bank accounts associated with the conspiracy received at least $1.3 million in false tax refunds.

If convicted, Johnson faces five years in prison for the conspiracy count and ten years in prison for each theft of public funds count. Johnson is also subject to fines, mandatory restitution and forfeiture.


Federal Court Preliminarily Bars Indianapolis Instant Tax Service Franchisee from Preparing Federal Tax Returns, Alleged Manager Also Permanently Barred

A federal court in Indianapolis has barred David Ray Franklin and his company, Instant Refund Tax Service (IRTS), which does business as Instant Tax Service, from preparing tax returns and from operating a tax-preparation business, the Justice Department announced January 30. Instant Tax Service is a national tax-preparation chain operated by ITS Financial LLC, based in Dayton, Ohio. A federal court entered a preliminary injunction against the Ohio firm and its owner last November.

The Indiana preliminary injunction order, which remains in effect pending final resolution of the civil lawsuit, was signed by Judge Sarah Evans Barker of the US District Court for the Southern District of Indiana. The court also permanently barred an alleged IRTS manager, William Brown, from preparing federal tax returns for others. The defendants consented to the court orders without admitting the allegations against them.

The government complaint in the case alleges that Franklin owned and operated twenty-two Instant Tax Service locations that prepared and filed over 10,000 federal tax returns in 2010 and 2011 combined. Brown allegedly worked for Franklin and managed one of Franklin's busiest Instant Tax Service offices.

The United States accused Franklin's offices and Brown of preparing false and fraudulent income tax returns for customers, fabricating income for phony businesses to obtain larger tax credits, forging forms W-2, filing returns improperly based on paycheck stubs rather than W-2 wage statements, claiming false education tax credits and reporting false filing status. The complaint also alleged that Franklin's offices filed tax returns without authorization and sold false and deceptive loan products to Instant Tax Service 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 trial on the government's request in the Ohio case to permanently shut down the Instant Tax Service franchisor is scheduled for May.


California Man Pleads Guilty to Failure to Report Foreign Bank Accounts at UBS

Christopher B. Berg of Portola Valley, California, entered a plea of guilty today before the US District Court in San Jose, California, to an information charging him with willful failure to file the required report of foreign bank account (FBAR) for an account he controlled at UBS in Switzerland in the year 2005.

According to the information, in 1999, Berg began working as a consultant. In 2000, Berg met with Beda Singenberger, a Swiss financial consultant, and a vice president of banking at UBS in San Francisco regarding setting up a bank account at UBS in Switzerland to shelter a portion of his consulting income from taxation. Beginning in 2001 and continuing through 2005, funds representing $642,069 in compensation earned by Berg from consulting services were deposited by wire transfer to UBS accounts.

Berg used the money in these accounts at UBS in Switzerland to purchase a vehicle, to obtain cash while in Europe, and to pay the balance on a Eurocard he used while traveling in Europe. Berg did not disclose the existence of his accounts at UBS in Switzerland to his certified public accountant, and did not disclose the income earned by these accounts or the consulting income deposited to the accounts. The tax harm associated with Berg's conduct is $270,757.

United States citizens and residents who have an interest in, or signature or other authority over, a financial account in a foreign country with assets in excess of $10,000 are required to disclose the existence of such account on Schedule B, Part III, of their individual income tax returns. Additionally, US citizens and residents must file an FBAR with the US Treasury disclosing any financial account in a foreign country with assets in excess of $10,000 in which they have a financial interest, or over which they have signature or other authority.

Sentencing has been scheduled for July 8, 2013. Berg faces a maximum penalty of five years in prison and a fine of up to $250,000.


California Man Pleads Guilty to Tax and Identity Theft Charges

A Montclair, California, man, who was charged for his role in a scheme to unlawfully use the names and Social Security numbers of other people to file fraudulent federal income tax returns, has pleaded guilty to tax and identity theft charges.

Chibueze Chidozie Nwafor, also known as "Cheeze", of Montclair, entered his guilty plea January 29, the day his criminal trial was scheduled to begin. Specifically, Nwafor pleaded guilty to three criminal counts - presenting false claims to the United States, theft of government benefits, and aggravated identity theft. The charges are the result of an investigation by the IRS Criminal Investigation.

According to the plea agreement, Nwafor used the identification of other individuals who he knew to be real people, specifically the names and Social Security numbers of purported tax filers, in order to submit false tax returns. Nwafor knew the information contained in the false tax returns that he filed contained materially false information, including taxes withheld and wages received from a bogus corporation, California Mutual Life and Health ("CMLH"). During this same time period, Nwafor misappropriated tax filer refunds to which he was not entitled for his own use.

In 2009, Nwafor prepared tax returns for various individuals including a 2008 federal income tax return in the name of an unidentified victim claiming a tax refund of $7,773. Similar to other tax refunds filed by Nwafor, this federal income tax return included a Form W-2, which falsely claimed that the unidentified victim received $30,119 in wages from CMLH. Subsequent to the filing of this fraudulent return, the IRS issued a tax refund which Nwafor stole and converted to his own use.

For the 2010 tax year, Nwafor filed a fraudulent tax return on his own behalf claiming false deductions, which resulted in Nwafor receiving a Treasury check in the amount of $32,789 from the IRS.

The minimum amount of the attempted tax loss attributable to Nwafor from 2009 through 2011 is approximately $126,991. 

As a result of today's guilty plea, Nwafor faces a statutory maximum sentence of fifteen years in federal prison and a fine of at least $750,000 when sentenced by United States District Judge Otis D. Wright, II on April 29, 2013. The charge of aggravated identity theft carries a mandatory term of at least two years. 


Former Los Angeles County Employee Pleads Guilty to Identity Theft Scam, Identities Stolen from the County were used to File Sixty-Five Fraudulent Tax Returns

A former employee with the Los Angeles County Department of Public Social Services (DPSS) pleaded guilty January 28 to a single identity theft violation and admitted that identities she stole from the county were used to file fraudulent tax returns in the names of sixty-four different people causing a loss to the IRS of over $357,000. 

Veronica Niko, thirty-six, of Lancaster, pleaded guilty to one count of transfer/use of means of identification to commit an unlawful activity. Niko pleaded guilty before United States District Judge Dale S. Fischer, who scheduled a sentencing hearing for June 10, 2013, at which time Niko will face a statutory maximum sentence of fifteen years in federal prison.

Niko, who formerly worked as a receptionist in the Lancaster office of DPSS, used her position to obtain the names and Social Security numbers which were used to file the fraudulent tax returns. As a receptionist, Niko was a contact person for individuals coming into the county office to apply for aid and had access to the names and Social Security numbers of a large number of people who applied for or received certain types of state-administered public assistance. 

In a plea agreement filed in federal court, Niko admitted that she provided the personal identifying information of various individuals applying for aid to her husband, codefendant Thomas Marshall, thirty-seven, of Lancaster, who has previously admitted his role in the conspiracy to submit false claims for tax refunds to the IRS. Niko further admitted that she knew that Marshall intended to use the information for fraudulent purposes.

According to the plea agreement, county records show that on July 10, 2009, Niko accessed the identifying information of an unidentified victim. Niko provided this information to Marshall, and it was used to file with the IRS a false federal income tax return, falsely claiming a First Time Homebuyer Tax Credit and requesting an $8,000 refund. On August 14, 2009, the IRS issued the $8,000 refund which was deposited into an account maintained by codefendant Michael Williams, forty-two, of Palmdale.

In total, the names and Social Security numbers of sixty-four different individuals whose profiles Niko obtained from the county's computer system were used to file sixty-five fraudulent tax returns through tax year 2011, causing an actual loss to the IRS of $357,704.90. 

In addition to Niko, four other defendants were charged in the scheme. Defendant Marshall pleaded guilty in November to conspiracy to submit false claims to the IRS, and is scheduled to be sentenced on March 18, 2013. Mao Niko, forty, of Lynwood pleaded guilty to a single count of conspiracy to submit false claims to the IRS and is scheduled to be sentenced on April 29, 2013. The two remaining defendants, Williams, along with codefendant Mike Niko, thirty-four, of Los Angeles, both of whom are facing a charge of conspiracy to submit false claims to the IRS, are scheduled to go to trial on April 16, 2013.



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