Crime Watch: July 25, 2013

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Former Manager of a National Tax Preparation Store Sentenced to One Year and a Day in Prison for Defrauding the IRS

A former manager of an H&R Block Preparation store has been sentenced to twelve months and one day in federal prison for using the identities of former tax preparation clients to file false returns with the IRS seeking fraudulent income tax refunds. Damon Charles Dubose of North Hills, California, was sentenced July 22 by US District Judge Dale S. Fischer.

Dubose pleaded guilty in March to one count of wire fraud and one count of filing false claims with the IRS. 

According to documents filed with the court, working as a manager of an H&R Block Preparation store in Van Nuys, Dubose used his access to H&R Block records to obtain the personal identifying information, which included names, dates of birth, and Social Security numbers, of H&R Block clients. Dubose then used this personal identifying information to create and submit to the IRS at least twelve false and unauthorized 2011 tax returns in order to generate fraudulent tax refunds of at least $48,593. 

Dubose filed the returns so that the refunds would be accessible by the "H&R Block Emerald Card", a preloaded Master Card. Dubose then used the H&R Block Emerald Cards at ATMs to withdraw as cash the fraudulent tax refunds. 

On February 16, 2012, Los Angeles County Sheriff's Department deputies found Dubose standing near ATM machines wearing a beanie, a scarf, and panty hose on his face, used presumably to disguise his appearance. The deputies arrested Dubose after they recovered from his vehicle six envelopes with handwritten names and partial Social Security numbers that contained H&R Block information sheets and H&R Block Emerald cards; ATM withdrawal receipts; a printout that contained twelve Social Security numbers and dates of birth corresponding to the names and numbers on the envelope; and $4,078.16 in cash.

The wire fraud count stems from Dubose electronically transferring an unauthorized tax return from Van Nuys, California, to Tennessee or West Virginia. The false claim count stems from an unauthorized tax return filed by Dubose on February 6, 2012, for an individual using fabricated information to falsely claim a refund in the amount of $4,353.

Source: US Attorney's Office  California


Louisiana Stolen Identity Tax Refund Fraud Defendant Sentenced to Federal Prison

The Justice Department and the IRS announced that Angela Myers, a resident of Baton Rouge, Louisiana, was sentenced July 18 in the Middle District of Louisiana to 132 months in federal prison for wire fraud, making false claims, subscribing to false tax returns, and aggravated identity theft.

Based on the evidence presented during a four-day trial in March 2013, Myers operated Angie's Tax Service, a tax preparation business located in Baton Rouge. Myers electronically filed false claims for tax refunds using the names and Social Security numbers of identity theft victims. Myers filed the identity theft tax returns using a unique preparer identification number assigned to her daughter. Many of the victims were nursing home patients who resided at Port Allen Care Center in Port Allen, Louisiana, and who did not have the ability to leave the nursing home.

The evidence also revealed that Myers lied on her own 2007 and 2008 federal income tax returns, failing to report hundreds of thousands of dollars of tax preparation fees that she earned at Angie's Tax Service and used to buy various items, including an RV and a $50,000 investment product.

In addition to the prison sentence, the court ordered Myers to pay $202,685 in restitution to the IRS in addition to $39,030 that was already forfeited in the case.

Source: US Department of Justice


Former Owner of Employee Leasing Company Sentenced to Federal Prison for Failing to Pay Payroll Taxes to the IRS

The Justice Department and the IRS announced July 18 that Richard R. Whatley, a former owner of Alliance Staffing Management Inc. (ASM), was sentenced to fifty-one months in prison for willfully failing to account for and pay over employment taxes. Whatley was also ordered to pay $541,513.61 in restitution to the IRS. 

 In January 2010, a federal grand jury charged Whatley with five counts of willfully failing to account for and pay over employment taxes, relating to three different employee leasing companies that he allegedly operated and controlled between the years 2001 and 2006. The employee leasing companies included American Employment Group Inc., ASM, and Intermountain Consulting Group Inc. The tax loss associated with Whatley's criminal conduct during these years totaled more than $2.3 million. Whatley pleaded guilty in January 2013 to one of the charged counts.

According to the plea agreement, during the 2002 through 2004 tax years, Whatley held an ownership interest in and had the ability to control the finances of ASM, an employee leasing company. Whatley's control included determining the amount of employment taxes that had to be paid over to the IRS and the authority to decide which bills would be paid and which bills would not be paid. As charged in the superseding indictment, in the fourth tax quarter of 2003, Whatley caused the collection of employment taxes from ASM's employees' wages and then willfully failed to pay over $541,513 for the employees' portion of employment taxes to the IRS.

Source: US Department of Justice


Sportswear Distribution Business Owner Pleads Guilty to Tax Evasion

The Justice Department and IRS announced July 19 that Harry Neuhoff, a resident of Brooklyn, New York, pleaded guilty to tax evasion.

According to documents filed with the court, Neuhoff was president and an owner of Eva Tees Inc., formerly of Long Island City, New York, and presently located in Piscataway, New Jersey. From approximately 2006 to 2008, Neuhoff manipulated Eva Tees' accounts through an accounting software program to delete cash sales from the general ledger accounts maintained on the computer accounting system. As a result, Neuhoff filed false corporate tax returns on behalf of Eva Tees that underreported the gross receipts. 

Neuhoff's conduct also correspondingly resulted in his filing of false personal income tax returns with the IRS for those years. According to the documents filed with the court, Neuhoff underreported the gross receipts of Eva Tees through computer manipulations by at least $1.5 million. Sentencing is scheduled for November 8, 2013.  

Neuhoff faces a maximum sentence of five years in prison, three years of supervised release, a $250,000 fine, and a $100 special assessment. He has agreed to pay restitution to the IRS.

Source: US Department of Justice


Inland Empire Return Preparer Sentenced to Twelve Months and One Day in Prison for Tax Fraud

The operator of a San Bernardino tax preparation service has been sentenced to twelve months and one day in federal prison for failing to report income totaling almost half a million dollars on his personal federal income tax returns.

Gerald Jerome Parker Rancho Cucamonga, California, the operator of GJP Tax Associates located in San Bernardino, was sentenced July 22.  In addition to the prison term, the judge ordered Parker to pay $135,055 in restitution to the IRS. Parker pleaded guilty in May to one count of subscribing to a false income tax return. 

According to the plea agreement, Parker failed to report income from his tax preparation business totaling $491,978 on his 2006, 2007, and 2008 personal income tax returns. 

The count to which Parker pleaded guilty relates to his 2006 tax return.  Parker falsely stated that his business income was $9,333, when in fact he had income of $51,847.  For the 2007 and 2008 tax years, Parker did not file a tax return, failing to report business income of $218,230 and $231,234, respectively

Parker further admitted that for the 2005, 2006, and 2007 tax years, he prepared twenty-three tax returns for clients that falsely inflated deductions for charitable gifts, business expenses, or "other" expenses generating falsely inflated tax refunds.

Parker has agreed to the entry of a binding civil injunction, barring him for life from aiding in the preparation of federal income tax returns for anyone other than himself and his legal spouse, and barring him from representing other individuals before the IRS. 

Source: US Attorney's Office  California


Illinois Man Convicted of $1.2 Million Dollar Tax Evasion 

A Jersey County, Illinois, resident pleaded guilty to felony charges of tax evasion on July 23, 2013, the United States Attorney for the Southern District of Illinois announced. David Ray of Fieldon, Illinois, waived his right to face a grand jury indictment and pled guilty to charges brought directly by the US Attorney's Office.

Documents filed in District Court established that Ray committed tax evasion by using his various businesses to pay personal expenses, by vesting ownership of personal assets in the name of his businesses, and by filing false tax returns with the IRS or refusing to file a US Individual Tax Return all together. In tax years 2005–2010, Ray concealed income from the IRS for the purpose of limiting his tax liability resulting in him avoiding $1,272,904.83 in federal income taxes that he otherwise would have been required to pay. Ray agreed to make full restitution to the IRS as a condition of his guilty plea.

Tax evasion is punishable by not more than five years in prison, and/or a $100,000 fine, and not more than three years of supervised release. Ray will be sentenced in US District Court on November 8, 2013.

Source: US Attorney's Office - Illinois


Justice Department Seeks to Shut Down Southern Illinois Tax Preparer

The Justice Department announced July 23 it has asked a federal court to bar Ronald Manis of Carbondale, Illinois, from preparing tax returns for others. The civil injunction suit, filed in the US District Court for the Southern District of Illinois, alleges that Manis routinely prepares federal tax returns for individuals and corporations improperly claiming deductions that result in his customers understating their federal tax liabilities.

The government complaint also alleges that Manis prepares federal tax returns for his customers, claiming as business expenses his customers' nondeductible personal expenses, including the cost of lavish personal vacations. According to the government complaint, Manis engages in this conduct "in a misguided attempt to mint his reputation as a uniquely skilled and knowledgeable tax return preparer."

In September 2011, Manis pleaded guilty to willfully failing to file his own federal income tax returns for 2003-2006 and was sentenced to three months in prison. According to the government complaint, Manis was released from federal prison on July 20, 2013.

The government suit also alleges that Manis falsely represented himself as a fully licensed CPA to customers and the IRS, and that he illegally used an electronic filing number belonging to a friend to electronically file customers' returns after the IRS denied Manis's application for an electronic filing number.

Source: US Department of Justice


Court Bars South Carolina Tax Return Preparer from Preparing Returns for Others

The Justice Department announced July 24 that a federal district judge in Charleston, South Carolina, permanently barred Stacy Middleton from preparing federal income tax returns for others.

According to the government's complaint, Middleton and a second defendant, George Jenkins, prepared federal income tax returns in Charleston through a business named MBM Tax and Accounting Services LLC. As alleged, Middleton prepared returns for his clients that unlawfully understated his clients' income tax liabilities and overstated his clients' refunds through a variety of schemes.

The complaint alleged that Middleton prepared returns that unlawfully created fictitious deductions and credits as well as overstating and duplicating existing deductions and credits. The complaint further alleged that Middleton created fraudulent copies of Form 1099 on behalf of customers, creating fake income to enable Middleton to claim the Earned Income Tax Credit on behalf of his clients.

According to the complaint, the IRS examined 842 returns prepared by Middleton and Jenkins, and over 93 percent of those examinations resulted in an adjustment to their client's tax liability. According to the complaint, the IRS estimated that the US Treasury lost as much as $55 million in revenue on account of Middleton's and Jenkins' misconduct.

Middleton consented to the entry of the injunction. The government's claims remain pending against Jenkins and will be addressed in further court proceedings.

Source: US Department of Justice

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