Crime Watch: July 3, 2013

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Owner of Landscaping Business in New York Pleads Guilty to Tax Evasion

The Justice Department and IRS announced June 28 that Lawrence Garafola, a resident of Poway, California, pleaded guilty to tax evasion.

According to documents filed with the court, Garafola owned and operated A-1 Tree & Shrub Service (ATS), a landscaping business located in Freeport, New York. Beginning in approximately 2004 and continuing through approximately 2008, Garafola failed to report to the IRS a substantial portion of income he obtained through payment for services rendered by ATS. Instead of depositing checks to ATS into ATS's business bank account, Garafola used a commercial check cashing service to cash checks and failed to report that income to his tax return preparer.

Garafola admitted that for tax years 2007 and 2008, he failed to report approximately $1,843,847 of income, resulting in an additional tax due and owing to the government of approximately $516,277.

Garafola faces a maximum sentence of five years in prison, three years of supervised release, and a $250,000 fine. He has agreed to pay restitution of $760,637 to the IRS.

Source: US Department of Justice


Maryland Businessman Pleads Guilty to Concealing Foreign Bank Account on His Tax Return

The Justice Department and IRS - Criminal Investigation announced that Alexei Iazlovsky of Potomac, Maryland, pleaded guilty July 1 in the US District Court for the Central District of California to filing a false tax return for tax year 2008.

According to court documents, Iazlovsky, a US citizen, maintained an undeclared bank account held in the name of a foreign corporation at the Luxembourg branch of an Israeli bank. Iazlovsky owned a corporation that produced documentaries for Russian television stations. A tax return preparer suggested to Iazlovsky that he could reduce his taxes by keeping money out of the United States and diverting payments from his Russian clients to a foreign bank account held in the name of a foreign corporation. Iazlovsky met with a banker from the Israeli bank at a New York hotel to open the Luxembourg account.

According to court documents, Iazlovsky diverted a total of $2.6 million in untaxed payments from his Russian clients to his undeclared bank account in Luxembourg. From 2002 through 2009, Iazlovsky filed false individual and corporate tax returns that failed to report his authority over and ownership of the bank account in Luxembourg. He also omitted the income diverted to and generated by the undeclared account in Luxembourg. Iazlovsky has admitted that the tax loss is more than $400,000.

Iazlovsky has agreed to pay a civil penalty in the amount of 50 percent of the high balance of his undeclared account to resolve his civil liability with the IRS for failing to file FBARs. Iazlovsky faces a maximum prison term of three years and a maximum fine of $250,000.

Source: US Department of Justice


Long Beach Enrolled Agent and Tax Return Preparer Pleads Guilty to Aiding in the Preparation of a False Tax Return

Rathana Ung, an Orange County, California, resident and former director and officer of Lim's Income Tax and Lim's Tax, Inc. in Long Beach, pleaded guilty July 1 to aiding in the preparation of a false 2008 federal income tax return filed with the IRS.

According to the plea agreement, Ung, a licensed enrolled agent, filed false Forms 1040 with the IRS containing false deductions and false business losses, knowing that the taxpayers for whom the returns were filed were not entitled to claim such deductions. 

According to the plea agreement, between 2006 and 2010, Ung filed federal income tax returns for numerous clients claiming false deductions for mileage, meals and entertainment expenses, and other unreimbursed employee business expenses. Some of the tax returns contained false Schedules C (Profit or Loss from a Business) and at least one return contained a false deduction for tuition and fees.

The false tax returns generated refunds for which the taxpayers were not entitled. Ung admitted she prepared false federal income tax returns to obtain more clients by obtaining and maintaining a reputation in the community as a return preparer who would secure large refunds for her clients. 

As part of the plea agreement, Ung agrees to make full restitution to the United States for the losses caused by her preparation and filing of false federal income tax returns. She agrees that the amount of such losses is at least $103,736. 

Rathana Ung faces a maximum sentence of three years imprisonment at sentencing scheduled for October 7, 2013. 

Source: US Attorney's Office  California


Former Swiss Banker Pleads Guilty to Failure to Report Foreign Bank Account

Assistant Attorney General for the Tax Division Kathryn Keneally and US Attorney Melinda Haag for the Northern District of California announced that Pius Kampfen of Mill Valley, California, pleaded guilty June 28 to an information charging him with willful failure to file the required reports of foreign bank accounts (FBAR) for a Swiss bank account he controlled.

According to the plea agreement, Kampfen was employed as an international banker for approximately forty years until he retired in 2001. He retired as senior vice president and the senior west coast representative San Francisco of Julius Baer Bank. As an international banker, he advised Julius Baer clients interested in international diversification about the bank's investment management services.

Beginning in 2000, Kampfen was the beneficial owner of a number of bank accounts in Switzerland held in the name Albia Investments. Between 2000 and June 2012, he maintained accounts in the name of Albia at UBS AG, Pictet & Cie, ABN-AMRO, Bank Vontobel and Baumann & Cie. For the years 2007, 2008 and 2009, Kampfen failed to report any of the Albia accounts on his income tax returns or file FBARs for the accounts despite the fact that he knew he was required to do so.

As part of his plea agreement, Kampfen has agreed to pay an FBAR penalty of $1,465,393 before he is sentenced.

Sentencing has been scheduled for October 4, 2013. Kampfen faces a maximum penalty of five years in prison and a fine of up to $250,000.

Source: US Department of Justice


Pharmacist at Grapevine Drug Mart Is Sentenced on Income Tax Evasion Conviction

Joseph Moss has been sentenced to one year and one day in federal prison and ordered to pay a $3000 fine and $51,150 in restitution following his guilty plea in January 2013 to one count of income tax evasion, announced US Attorney Sarah R. Saldaña of the Northern District of Texas.

Moss, according to the factual resume filed in the case, is a licensed pharmacist who worked as a pharmacist for Grapevine Drug Mart, a family-owned and operated pharmacy in Grapevine, Texas. He received quarterly and weekly payments of income drawn on Grapevine Drug Mart's business bank accounts. The quarterly payments were generally received three to five times per year and varied in amounts ranging from $20,000 to $100,000. Each of the quarterly payments were made payable to Moss enterprises, a dba Moss established, and deposited into Moss Enterprises' business bank account. The weekly payments were much smaller in amount and were made payable to Moss via check. From October 2006 through December 2008, Moss cashed these weekly checks made payable to himself and thus not reported on his income tax return.

The factual resume further states that in October 2009, Moss timely filed his federal income tax return but attempted to evade the amount of federal income tax he owed by failing to report approximately $159,450 that he had received from Grapevine Drug Mart for the 2008 tax year. As a result, Moss had an additional tax due and owing of $58,554 for the 2008 tax year. Joseph Moss's father, Norvell Moss, was sentenced last month to 18 months in federal prison for the same offense. He was ordered to pay a $30,000 fine and an additional $8,277 in restitution to go along with the more than $94,000 he had paid prior to sentencing.

According to the public court record, two other defendants affiliated with Grapevine Drug Mart were recently convicted in the Northern District for tax-related felony offenses. Larry Lake, also a Colleyville resident and a part-owner of Grapevine Drug Mart, was convicted by federal jury in Fort Worth in February 2013 on concealment of assets (bankruptcy fraud) and three counts of tax evasion. His son, Travis Lake, who managed Grapevine Drug Mart, pleaded guilty that same month to an indictment charging three counts of fraud and false statements in connection with tax returns he filed for tax years 2006, 2007 and 2008. Both Larry Lake and Travis Lake are scheduled to be sentenced in mid-July 2013.

Source: US Attorney's Office  Texas


California Residents Indicted for Nationwide $60 Million Fraudulent Tax Refunds Scheme

In an indictment unsealed June 25, Teresa Marie Marty, Rebecca Bandera-Marty, and Pamela Harris of Placerville, California, were charged with conspiring to defraud the United States, the US Department of Justice and the Internal Revenue Service announced. In addition to the conspiracy count, Marty is charged with thirty-three counts of false claims against the United States, and Bandera-Marty is also charged in sixteen of these counts. 

According to the indictment, in 2008 and 2009 Marty, Bandera-Marty, and Harris conspired to defraud the United States by filing at least 250 false individual federal income tax returns, claiming more than $60 million in false federal income tax refunds for clients in twenty-six states. In response to the false returns, the IRS erroneously issued more than forty tax refunds, totaling more than $8 million, including a false refund for $277,832 for Marty's own tax return.

According to the indictment, the defendants operated the fraudulent scheme through Marty's tax preparation business, Advanced Financial Services (AFS) in Placerville, California. Marty and her daughter-in-law Bandera-Marty were licensed tax preparers, and Harris was AFS's office manager. The defendants recruited clients by claiming that they could eliminate their debts and legally receive sizable tax refunds. They billed and collected excessive fees for this service, sometimes as high as $6,000. The defendants prepared the false tax returns claiming large refunds based on fictitious Forms 1099-OID. The fraudulent returns falsely reported that a client's total outstanding debt (mortgage, credit limits on credit cards, student loans, auto loans, etc.) was actually interest income that the client had received from the lender that had been withheld by the IRS, and therefore, the client was entitled to a refund.

In March 2010, a federal judge in Sacramento permanently barred Marty and AFS from acting as federal tax return preparers in response to a lawsuit filed by the Justice Department's Tax Division. 

If convicted, Marty, Bandera-Marty, and Harris each face up to ten years in prison for the conspiracy charge. Marty and Bandera-Marty also face up to five years in prison for each false claim charge. 

Source: US Attorney's Office  California



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