Crime Watch: June 13, 2013

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Accountant Receives Six-Year Federal Sentence for Wire Fraud and Tax Evation

Melvin Mooring of Gainesville, Virginia, was sentenced June 7 to six years in prison, followed by three years of supervised release, in connection with the theft of approximately $3.3 million from a Chantilly, Virginia, company where Mooring served as the chief financial officer. Mooring was also ordered to pay $3,541,003.57 in restitution to his victims. Mooring pleaded guilty to wire fraud and tax evasion charges on March 8. 

From 2000 to 2011, Mooring served as the chief financial officer of K&R Industries, a private company in Chantilly. According to court records, from 2004 to 2011, Mooring stole approximately $3.3 million from the company via company checks and wire transfers, which he routed through the bank account of a company he controlled in order to conceal their fraudulent nature.

Mooring also altered company financial statements to conceal the fraud. Mooring used the funds for a luxurious home, travel, jewelry, and a BMW automobile, and to generally fund a comfortable lifestyle. 

Mooring also failed to report the stolen funds as income on his individual income tax returns for the years 2005 through 2010, resulting in approximately $865,426 in losses to the US Treasury.

Source: US Attorney's Office  Virginia


Federal Court Permanently Bars Maryland Tax Preparers from Preparing Tax Returns for Others

Two federal judges in separate cases entered orders permanently barring Marvin Binion Sr., his son Marvin Binion II, and Binion senior's ex-wife Tonya Hubbard and her firm Universal Tax Service LLC, from preparing tax returns for others, the Justice Department announced June 7. The civil injunction orders, to which all defendants consented, were signed by Judge Roger W. Titus and Judge Alexander Williams Jr., of the US District Court for the District of Maryland.

The two government complaints, one against the Binions and one against Hubbard and her firm, alleged that the defendants prepared fraudulent tax returns for customers containing bogus deductions for items like charitable contributions, unreimbursed employee business expenses, and other miscellaneous expenses.

The lawsuits also alleged that Hubbard, Universal Tax Service LLC, and the Binions violated federal law by not signing the returns they prepared for customers and by not placing IRS preparer identification numbers on the returns. All tax preparers are required to place an IRS-issued tax preparer identification number on every federal income tax return they prepare for a customer.

According to the complaints, the defendants prepared customer returns using commercial tax software; placed the returns in postage-paid, pre-addressed envelopes; and instructed customers to sign and mail the returns to the IRS on their own. The suits alleged that defendants did this to hide from the IRS their role in preparing the returns.

The government alleged that Hubbard and the Binions charged customers a return-preparation fee of $300 and that the Binions may have earned as much as $30,000 per day preparing fraudulent returns.

Source: US Department of Justice


Court Issues Order Barring Michigan Tax Preparer from Preparing Tax Returns for Others

The US District Court for the Eastern District of Michigan has issued an order permanently barring Nataki Davis (formerly known as Nataki Barnes), a Southfield, Michigan, tax preparer, from preparing federal tax returns for others for a period of five years, the Justice Department announced June 7. The court also ordered Davis to mail copies of the court order to all persons or entities for whom she has prepared federal tax returns, amended returns, or other federal tax documents or forms since January 1, 2011. Davis consented to the civil injunction order.

Davis operated a business that provided tax return preparation services under the names NKB Tax Services, NKB Tax Services Etc., and Ready Trans. The complaint states that Davis prepared approximately 1,597 tax returns for tax processing years 2010 through 2012. The IRS closed examinations on fifty-two of those 1,597 tax returns prepared by Davis, and forty-eight, or 92 percent, of those examined returns resulted in additional tax assessments.

Many of the returns that Davis prepared for customers contained false deductions and credits, including inflation of deductions for charitable contributions, mortgage interest, real estate and personal property taxes paid, and false education credits. Returns also included manipulation of taxpayer data for the purposes of claiming the Earned Income Tax Credit for which the taxpayers would otherwise be ineligible.

The court also issued an order permanently barring Davis's brother Clarence Barnes Jr. from applying for an electronic filing identification number (EFIN) or assisting any other individual or entity in the application for or procurement or use of an EFIN to file a federal income tax return. Barnes consented to this civil injunction order.

Source: US Department of Justice


Eight Charged in Five-Year Federal Tax Fraud Conspiracy Orchestrated by Bessemer Prison Inmate

Eight Alabamians from across the state have been charged in connection with a five-year federal tax fraud conspiracy organized by an inmate at a Bessemer prison, federal authorities announced June 7.

Shermaine "Shade" German, who is incarcerated in the Bibb County Correctional Facility, was an inmate at Donaldson Correctional Facility in Bessemer when the conspiracy began.

According to a twenty-count indictment filed in May in US District Court, German and seven others conspired from January 2008 through May 2013 to obtain payment of false claims for refunds from the IRS by filing fraudulent federal income tax returns.

German is charged with orchestrating the tax fraud scheme from Donaldson. He obtained names, birth dates, and Social Security numbers of other people, including many fellow inmates who were on death row or serving life sentences without parole.

Using their information, he created false income tax returns, citing fabricated amounts of tax withholdings, according to the indictment. He also created false power of attorney forms. German mailed the forms from prison, and several other members of the conspiracy notarized forms and cashed or deposited income tax refund checks they received from the scheme.

German's codefendants are Ronald Webster, Brenda Joyce McDonald, and Yvette Berry Pinckney, all of Montgomery; Marlo Yvette Miller and Irene King Douglas, both of Huntsville; Cynthia Dianne Ware of Eufaula; and Barbara Ann Grimes of Mobile. All but McDonald were arrested June 7.

The charges against German include making false claims to the IRS, mail fraud, conspiracy to commit mail fraud, and aggravated identity fraud. The conspiracy to defraud the government and false claims charges both carry a maximum penalty of ten years in prison and a $250,000 fine. Mail fraud and conspiracy to commit mail fraud both carry a maximum penalty of twenty years in prison and a $250,000 fine. Aggravated identity fraud carries a two-year minimum mandatory prison sentence that must be served consecutively to any other sentence imposed in the crime.

Source: US Department of Justice


Orange County Business Owner Pleads Guilty to Federal Tax and Structuring Violations

The owner and president of a general contracting business in Orange County pleaded guilty June 10 to cashing customer checks totaling approximately $2 million and failing to report the receipt of these payments on his income tax returns.

Jeremy Scott Levine of Newport Beach – the owner and president of JSL Construction and Landscaping (JSL), a general contracting business in Newport Beach – pleaded guilty to one count of subscribing to a false tax return for the 2010 tax year and one count of structuring a cash transaction.

According to the plea agreement, for the 2006 through 2010 tax years, Levine failed to report all of the business receipts of JSL on the individual and corporate income tax returns filed by Levine by cashing checks received from customers in payment for remodeling, construction, and landscape services.

Beginning in 2006, Levine directed numerous JSL customers to pay for some of the services provided by JSL by writing checks payable to Levine, rather than writing a check payable to JSL. During the years 2006 through 2010, Levine cashed JSL customer checks totaling approximately $2 million and received currency in exchange for the checks.

For the years 2006, 2007, 2008, and 2009, Levine failed to report income in the amounts of $293,977, $451,550, $336,550, and $416,830, respectively. Levine's failure to report all of his income on the tax returns he filed for the years 2006 through 2010 resulted in a tax due and owing to the government of approximately $300,000.

In addition to subscribing to a false income tax return, Levine pleaded guilty to cashing checks of less than $10,000 to evade federal reporting requirements. Levine admitted that in June of 2010, he cashed two JSL customer checks in the amounts of $9,500 and $7,325 at two different bank branches, and on the following day, he cashed a JSL customer check in the amount of $9,500. The transactions were purposely structured to evade the federal reporting requirements requiring a financial institution to report cash transactions in an amount that exceeds $10,000.

As a result of his guilty plea, Levine faces a statutory maximum sentence of eight years in federal prison and a fine of $500,000 when he is sentenced October 28, 2013. 

Source: US Attorney's Office  California


Tampa Man Sentenced to More Than Four Years in Prison for Stolen Identity Refund Fraud

On June 7, US District Judge Virginia M. Hernandez Covington sentenced Nedal Faisal Ahmad to four years and three months in federal prison for mail fraud and aggravated identity theft. As part of his sentence, the court also entered a money judgment in the amount of $35,989.75, the proceeds of the charged criminal conduct. Ahmad pleaded guilty on March 8.

According to court documents, through his business and through other means, Ahmad negotiated US Treasury checks and reloadable debit cards containing fraudulently obtained tax refunds. For instance, Ahmad "swiped" reloadable debit cards at his business (Al-Wafaa Trading), knowing that the funds on these cards were fraudulently obtained tax refunds, and kept a large portion of the cards' value as a fee for processing the illegal funds. Ahmad processed over $60,000 of fraudulently obtained tax refunds through his business.

Ahmad was also involved in cashing fraudulent US Treasury checks. The treasury checks were tax refunds that were fraudulently obtained by others. Beginning in October 2011, Ahmad began sending fraudulent Treasury checks via the US mail and other delivery services to an individual in New York. Ahmad further instructed the individual to pay him 60 percent of the funds from the check, while the associate could keep the remaining 40 percent. During the undercover operation, Ahmad sent the associate nine fraudulently obtained US Treasury checks totaling over $95,000 of stolen money from the US Treasury.

Source: US Attorney's Office  Florida


Tax Preparers Indicted and Arrested on Fraud Charges

US Attorney Robert E. O'Neill announced the return of a multi-count indictment charging Jacksonville residents Troy Solomon and Antonio Gadsden with conspiracy to defraud the government and multiple counts of aiding and assisting in the preparation of false income tax returns. Solomon is also charged with sixteen counts of wire fraud, one count of aggravated identity theft, and one count of willful failure to file a return.

They each face a maximum penalty of three years in federal prison for the conspiracy charge. Gadsden faces up to three years in federal prison for each of his four false preparation charges. Solomon faces a maximum penalty of three years in federal prison for each of his sixteen false preparation charges. Additionally, Solomon faces a maximum penalty of twenty years in federal prison for each wire fraud charge, two consecutive years in prison for the aggravated identity theft charge, and up to one year in prison for the failure to file charge. Both individuals were arrested on federal warrants June 4.

According to the indictment, Solomon and Gadsden worked at Solomon's Tax Services, LLC and conspired to defraud the United States by preparing returns using false information to maximize the refund amount received. The indictment further alleges that larger refunds resulted in more tax preparation business, which led to greater tax preparation fees. 

Solomon allegedly stole the identity of an individual in order to participate in the IRS e-File Program, through which Solomon obtained an EFIN. That identification number was used to file IRS Form 1040s. Further, the indictment alleges that Solomon failed to file an income tax return for tax year 2011.

Source: US Attorney's Office  Florida


Michigan Woman Arrested for Criminal Contempt

Doreen Hendrickson of Commerce Township, Michigan, was arrested June 7 following an indictment by a federal grand jury for criminal contempt, the Justice Department and IRS announced.

Hendrickson and her husband, Peter Hendrickson, filed tax returns for 2002 and 2003 on which they claimed more than $20,000 in fraudulent tax refunds. These returns were based on the frivolous argument set forth in Peter Hendrickson's book, Cracking the Code, that only federal, state, and local government employees are liable for the payment of income taxes.

In May 2007, as part of a lawsuit against the Hendricksons filed by the department's Tax Division, US District Judge Nancy G. Edmunds in Detroit entered a permanent injunction that barred the Hendricksons from filing additional false tax returns. Judge Edmunds also ordered the Hendricksons to file amended 2002 and 2003 returns. According to the indictment, Doreen Hendrickson violated this injunction by failing to file amended 2002 and 2003 tax returns and by filing a false 2008 tax return that was based on the arguments in her husband's book.

Source: US Department of Justice


New Jersey Tax Return Preparer Admits Filing Tax Returns Using the ID of a Deceased Person

On June 5, a Livingston, New Jersey, tax return preparer admitted filing false claims with the IRS using a dead tax return preparer's identification and preparing false documents for numerous fraudulent loans, US Attorney Paul J. Fishman announced. Todd P. Halpern pleaded guilty to an information charging him with filing false claims and wire fraud.

In late 2008, Halpern purchased A & V Financial (A & V), a tax return preparation business located in Guttenberg, New Jersey, from the wife of the prior owner",V.R.", who had died in March 2008. Halpern received the company's computers and all of its client records. As part of the agreement to purchase A & V, Halpern was to obtain a new EFIN in his own name. Instead, he continued to file tax returns using V.R.'s EFIN number because Halpern's criminal record prevented him from obtaining an EFIN.

From 2009 through 2010, Halpern prepared and caused to be filed 657 fraudulent federal income tax returns with the IRS using V.R.'s EFIN. Halpern prepared and filed some of these fraudulent tax returns without the knowledge and authorization of the taxpayers identified on the returns. Some of these tax returns contained fraudulent income and deduction amounts, which generated fraudulent refunds that were directly deposited into Halpern's bank account.

On or about June 24, 2009, in one case, Halpern prepared and filed a fraudulent 2008 Form 1040 with the IRS in the name of "B.G.", which fraudulently claimed an income tax refund in the amount of $13,183. The 2008 Form 1040 prepared by Halpern contained false income and deduction entries for B.G., because B.G. did not have any income for that tax year and did not file an income tax return. The $13,183 tax refund was directly deposited into Halpern's bank account.

Halpern received a total of $373,938 in fraudulent tax refunds. He used these funds to support his lavish lifestyle, including purchases at Prada, Chanel, Saks Fifth Avenue, and Bloomingdales; to acquire season tickets to the New York Giants; to purchase thousands of dollars in jewelry, gold coins, and silver certificates; to make car payments on multiple luxury vehicles, including a 2007 Cadillac Escalade and a 2008 Lexus GX-470; and to buy car parts for his classic 1957 Chevy Bel Air.

From January 2008 through May 2012, Halpern prepared false documents for numerous fraudulent loans from financial institutions. Halpern prepared tax returns, Forms W-2, and bank statements showing inflated income and asset balances to be used to support loan applications for borrowers, including him, to acquire mortgage loans, primarily involving residential properties in New Jersey, as well as other personal and business loans. Halpern and others caused the fraudulent documents to be submitted to mortgage lenders, other financial institutions, the US Department of Housing and Urban Development, and the Federal Housing Administration (FHA), which were relied upon for the approval of mortgage and other loans.

In November 2009, Halpern served as the buyer for the short sale of 215 Newark Avenue, Bloomfield, New Jersey, from seller B.S. for a purchase price of approximately $185,000. In support of Halpern's purchase of this property, an FHA-insured mortgage loan for Halpern in the amount of $181,649 was obtained from a New Jersey–based mortgage company. Halpern and others submitted numerous fraudulent documents to FHA and to the mortgage company, including false bank statements, pay stubs, and 2008 federal income tax returns in Halpern and his wife's names. As in his tax fraud scheme, the false tax returns that Halpern prepared reflected V.R.'s identification number in an effort to conceal that Halpern had personally prepared the tax returns. 

At the plea hearing, the court also entered a consent judgment and order of forfeiture for $373,938 and for a classic 1957 Chevy Bel Air, which constitutes the proceeds that Halpern obtained as a result of his frauds.

The wire fraud count to which Halpern pleaded guilty is punishable by a maximum potential penalty of thirty years in prison and a fine of up to $1 million, or twice the gross amount of pecuniary gain or loss resulting from Halpern's offense. The tax fraud count carries a maximum penalty of five years in prison and a maximum fine of $250,000. Sentencing is scheduled for September 10, 2013.

Source: US Attorney's Office  New Jersey


Brothers Who Made "Contributions" to Orthodox Jewish Organizations Plead Guilty to Tax Evasion after Taking Secret Refunds from Groups

Two brothers who made tens of thousands of dollars of contributions to charitable organizations operating under the umbrella of a New York–based orthodox Jewish group known as Spinka pleaded guilty to tax fraud for taking tax deductions for contributions that were refunded by the nonprofits.

Alan Goldstein and David Goldstein, both of the Hancock Park district of Los Angeles, pleaded guilty before US District Court Judge John F. Walter. Alan Goldstein pleaded guilty to one count of subscribing to a false income tax return and one count of tax evasion. David Goldstein pleaded guilty to two counts of tax evasion.

According to court documents, the Goldsteins each entered into an arrangement under which they would make contributions to Spinka charitable organizations – including Yeshiva Imrei Yosef, Mosdos Hachesded, Central Rabbinical Seminary, and Kollel Ner A'Avrohom – and in return, agents of Spinka would secretly refund 90 percent of the contributions through various third parties. In addition, agents of Spinka would mail charitable contribution receipts for the full amounts of the contributions.

According to plea agreements filed in federal court, in 2005 and 2006, Alan Goldstein made $135,000 in contributions to charitable organizations operating under the Spinka umbrella. Alan Goldstein accepted kickbacks equaling 90 percent of his contributions on these Spinka-related contributions. Similarly, for the same two years, David Goldstein made $145,000 in contributions to Spinka-related entities, and he received 90 percent of the money back through kickbacks. David Goldstein received $356,400 in kickbacks on behalf of himself and his brothers.

Both defendants filed their respective 2005 and 2006 tax returns claiming the inflated contribution amount for the purpose of tax fraud. Consequently, the tax loss to the government was $45,961 with respect to Alan Goldstein and $46,531 with respect to David Goldstein, according to the plea agreements.

Spinka is a religious group that operated a variety of charitable organizations, contributions to which could be tax deductible under the Internal Revenue Code. Prior to the Goldsteins, sixteen other defendants pleaded guilty to charges arising from an investigation of kickbacks provided by Spinka charitable organizations to wealthy contributors.

The Goldsteins are scheduled to be sentenced August 19, 2013. At sentencing, Alan Goldstein faces a statutory maximum sentence of eight years in federal prison and a fine of $500,000. David Goldstein faces a statutory maximum sentence of ten years in prison and a fine of $500,000. In addition, each defendant may be ordered to pay full restitution for the tax loss, which is estimated to be $55,145 for Alan Goldstein and $70,039 for David Goldstein.

Source: US Attorney's Office  California


Owner of Michigan Inventory Counting Businesss Pleads Guilty to Tax Fraud

David P. Rowley, a resident of Jackson, Michigan, pleaded guilty June 6 before US District Judge Denise Page Hood to filing a false individual income tax return, the Justice Department and the US Attorney for the Eastern District of Michigan announced.

According to documents filed with the court, between 1999 and 2009, Rowley owned and operated an inventory business for automobile dealerships known as Kennedy Inventory & Service Inc. (KIS). The business also operated under the names D&P Inventory and Spartan in Ohio Inventory. At Rowley's direction, KIS withheld trust fund taxes, which are the employee portion of FICA taxes, and employee income tax withholding from his own wages as well as from the wages of the approximately fifty to one hundred employees it employed at any given time during this period. Also at Rowley's direction, KIS failed to pay over those trust fund taxes to the IRS. In addition, Rowley failed to timely file employer's quarterly federal tax returns for KIS for quarters during 1999 through 2006 and individual income tax returns for himself for tax years 2002 through 2007.

In March 2008, Rowley filed thirty-two delinquent employer tax returns for KIS for years 1999 through 2006 in which he falsely stated that the company had paid over its employees' trust fund taxes to the IRS when it had not. In November 2008, Rowley filed delinquent individual tax returns for himself for 2002 through 2007. On those returns, he falsely reported that KIS had withheld income taxes from his wages. The tax loss to the government from Rowley's fraud was between $200,000 and $400,000.

Rowley faces a maximum sentence of three years in prison, one year of supervised release, a $250,000 fine, and a $100 special assessment. He has agreed to pay restitution of $303,433.12 to the IRS. Sentencing is scheduled for September 5, 2013.

Source: US Department of Justice


Former IRS Worker Sentenced for Extortion and Tax Fraud

Former IRS employee Patricia Fountain of Philadelphia, was sentenced June 11 to nineteen years in prison for a series of tax refund schemes that defrauded the US Government. Fountain was convicted on March 13, 2013, along with codefendants Larry Ishmael and Calvin Johnson, Jr., also of Philadelphia, who are awaiting sentencing. A federal jury found each of the three defendants guilty of multiple counts of both conspiracy and filing false claims/tax returns to the IRS. For abusing her public office, Fountain was also found guilty of extortion under color of official right.

Collectively, the defendants' schemes cost the IRS well over $3 million. US District Court Judge Stewart Dalzell also ordered Fountain to pay restitution in the amount of $1.7 million, a $1,300 special assessment, and ordered three years of supervised release.

Each of the defendants solicited claimants whose personal information the defendants used to file false tax returns claiming the Telephone Excise Tax Refund (TETR) in 2007 and the First Time Homebuyer Credit in 2009. Fountain also claimed the TETR by filing false tax returns for herself and for Ishmael and used one of the claimant's information to file a false tax return in 2008. Fountain also filed false claims claiming the American Opportunity Tax Credit between 2010 and 2012. Johnson also used claimants' information to file false tax returns in 2012, including while he was being supervised on pretrial release in this case.

For each of the schemes, the defendants charged claimants a cash fee. With respect to her TETR scheme, which Fountain engineered using inside information from the IRS, Fountain warned that she would "red flag" those claimants who received a refund without paying her $400 fee. She then filed amended returns for certain claimants whom she believed had not paid the fee, causing the IRS to demand repayment from them. Fountain and Ishmael pooled their cash fees for their mutual use, including an $11,299 down payment on a Mercedes Benz R350, which Fountain structured by paying $9,900 in cash and charging the rest to a credit card.

Johnson's sentencing hearing is scheduled for June 18, and Ishmael's sentencing hearing is scheduled for July 26. Pending sentencing, Ishmael and Johnson are being detained in federal custody. Judge Dalzell previously sentenced codefendants Andre Bruce, Howard Chilsom, William Martin, and Calvin Johnson, Sr. in April 2013.

Source: US Attorney's Office  Pennsylvania

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