Crime Watch: June 21, 2013

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"Sovereign Citizen" Sentenced to More Than Eight Years in Prison for Tax Fraud Scheme  Millions Claimed in Refunds

A Yelm, Washington, man who advised and assisted others in a common tax fraud scheme, was sentenced June 14 in US District Court in Tacoma to ninety-seven months in prison and three years of supervised release. Raymond Leo Jarlik Bell was convicted in March 2013 of five counts of filing false, fictitious, and fraudulent claims; fifteen counts of assisting in filing false tax returns; three counts of mail fraud; and one count of criminal contempt.

Jarlik Bell and his wife, Ute Christine Jarlik Bell, are of members of the so-called "Sovereign Citizen" movement. Members of the Sovereign Citizen movement profess a belief that both state and federal government entities are illegitimate. US District Judge Ronald B. Leighton imposed $705,276 in restitution saying",Your scheme . . . is fraud at its core. You are hurting people intentionally, regardless of your adherence to [your beliefs]."

The Jarlik Bell investigation centered on the filing of false tax returns using a scheme known as OID fraud; Jarlik Bell advised and assisted others in using the scheme. In 2006, Jarlik Bell obtained a tax refund in excess of $30,000 using the scheme. Numerous others who were advised by Jarlik Bell also filed for and received fraudulent refunds they did not deserve. One woman received a tax refund of more than $590,000.

In 2005, Jarlik Bell was ordered by US District Judge Robert J. Bryan to stop promoting fraudulent tax schemes. Less than three years later, he was back promoting another massive tax fraud among friends, family, and strangers.

Ute Christine Jarlik Bell was convicted of four counts of filing false, fictitious, and fraudulent claims. She will be sentenced June 18, 2013.

Source: US Attorney's Office  Washington 


Alabama Man Indicted for Multistate Stolen Identity Refund Fraud

Christopher Cordelle Davis of Montgomery County, Alabama, was indicted by a federal grand jury in the Middle District of Alabama for his role in a scheme to file fraudulent tax returns using stolen identities, the Justice Department and the IRS announced June 13 following Davis's arrest. He was charged with conspiracy to defraud the United States, five counts of wire fraud, and five counts of aggravated identity theft.

According to the indictment, Davis provided stolen identities to Kenneth Jerome Blackmon Jr. Davis and Blackmon then filed fraudulent tax returns using the stolen identities. The refunds would be directed to debit cards. Davis would recruit individuals to obtain the debit cards and to go on trips during which the cards would be used to cash out the refund money at various locations in different states, including Georgia and South Carolina. The indictment also alleges that in September 2011, Davis possessed over 600 stolen identities, some taken from a medical facility in Alabama and over 200 prepaid debit cards in Gwinnett County, Georgia. Blackmon was previously convicted and sentenced to fifty-one months in prison for his role in the conspiracy.

If convicted, Davis faces a maximum potential sentence of five years in prison for the conspiracy charge, up to twenty years in prison for each wire fraud charge, and a mandatory two-year sentence for the aggravated identity theft counts. He will also be subject to fines and mandatory restitution and forfeiture if convicted.

Source: US Department of Justice


California Woman Charged with Aiding and Assisting the Preparation of False Tax Returns and Identity Fraud

Lanisha D. Applewhite of Richmond, California, was indicted by a federal grand jury in San Francisco for aiding and assisting the preparation and presentation of false and fraudulent federal income tax returns as well as identity fraud, the Justice Department and the IRS announced June 13.

According to the indictment, from 2008 through 2011, Applewhite, a return preparer, aided and assisted in the preparation and presentation of false and fraudulent federal income tax returns containing claims for deductions and credits to which her clients were not entitled. In addition, six counts allege that Applewhite used individuals' Social Security numbers without lawful authority in preparing false federal income tax returns.

The maximum penalty for aiding and assisting the preparation of false claims is three years in prison and a fine of $250,000 for each count of conviction. The maximum penalty for each count of identity fraud is fifteen years in prison and a fine of $250,000.

Source: US Department of Justice


Wyoming Couple Indicted for Tax Evasion

In an indictment unsealed on June 12, Robert and Judy Sathre, of Sheridan, Wyoming, were charged by a federal grand jury in Cheyenne for conspiring to defraud the IRS and tax evasion relating to taxes owed by Robert Sathre for tax years 1995 and 1996. Judy Sathre was also charged with filing a false tax return for tax year 2007.

According to the indictment, Robert Sathre sold a Minnesota business and received installment payments in 1995 and 1996 for more than $3 million. Robert Sathre concealed his income by filing a 1995 tax return in which he reported only $64,928 in total income. Robert Sathre then purchased land and set up another business, a gas station/convenience store in Sheridan known as the Rock Stop.

According to the indictment, the Sathres concealed assets by opening a foreign bank account in the Caribbean island of Nevis and by using purported trusts. In a ten-month period spanning 2005-2006, Robert Sathre sent over $500,000 to the account in Nevis to keep the funds out of reach from the IRS. When Robert Sathre sold the Rock Stop in 2007, he had over $1,250,000 from the sale proceeds wired to the trust account of a Wyoming law firm. Later, the Sathres directed the law firm to wire $900,000 from the trust account to their account at the Bank of Nevis. They also provided a false declaration and false promissory note to the Bank of Nevis to conceal the source of this transfer. Robert Sathre obtained a debit card linked to the foreign account to access funds locally. He also provided the Bank of Sheridan with an IRS form on which he falsely claimed that he was neither a citizen nor a resident of the United States.

The indictment also alleges that the Sathres tried to conceal their ownership of real estate. They used a purported trust to encumber their residence at Troon Place in Sheridan and to conceal their ownership of property in Hennepin County in Minnesota. To conceal ownership of the Rock Stop, they similarly used a second purported trust, at one point resigning as trustees and appointing their teenage daughter as the trustee.

The indictment also charges Judy Sathre with one count of filing a false tax return for 2007. The indictment alleges that the return was false both for reporting only $42 in interest income and for failing to disclose that she had a financial interest and signatory authority over the bank account at the Bank of Nevis.

Source: US Department of Justice


Utah Man Charged with Filing False Claims for Tax Refunds

On June 12, a federal grand jury in Salt Lake City returned an indictment charging Dick Reid Jenkins, a resident of Heber City, Utah, with eighteen counts of presenting false claims to the United States.

According to the indictment, in September 2008, Jenkins filed a false 2007 income tax return for himself, which claimed an income tax refund of $402,920. Then, in October 2008, Jenkins filed a false amended 2004 income tax return, which claimed an income tax refund of $434,261. Both false claims were based on the use of false Form 1099-OID. In addition to his own false returns, from September 2008 through February 2009, Jenkins caused sixteen other false federal income tax returns to be filed on behalf of other individuals. These other false tax returns also used false Form 1099-OID and claimed federal income tax refunds totaling $8,407,623. The indictment further alleges that Jenkins was licensed by the state of Utah as a CPA at all times relevant to these charges.

If convicted, Jenkins faces a maximum of ninety years in prison.

Source: US Department of Justice


Federal Court Shuts Down Florida Tax Preparer

A federal court in Orlando, Florida, permanently barred Carlos A. Cabrera from preparing federal tax returns for others, the Justice Department announced June 18. The permanent injunction order was signed by Judge Charlene E. Honeywell of the US District Court for the Middle District of Florida. Cabrera, whose business was in Kissimmee, Florida, consented to the permanent injunction order without admitting the allegations against him.

The government complaint in the civil injunction action alleged that Cabrera and his business, Cabrera Financial Group, prepared federal income tax returns for customers that claimed improper losses for nonexistent businesses and fabricated education credits in order to unlawfully understate customers' tax liabilities. According to the complaint, Cabrera prepared over 17,000 tax returns for 2009 and 2010, with an average tax understatement of $4,222 per return for returns the IRS examined. The government suit alleged that the total losses to the Treasury Department from Cabrera's misconduct could be tens of millions of dollars for those two years alone.

Source: US Department of Justice


United States Seeks to Shut Down Texas Tax Preparer Whose Customers Work Overseas for Defense Contractors 

The United States sued a Southlake, Texas, woman seeking to bar her from preparing federal tax returns for others, the Justice Department announced June 19. The civil injunction suit was filed against Karena Mondrianh in US District Court for the Northern District of Texas.

The government complaint alleges that Mondrianh prepares fraudulent tax returns that understate customers' taxable income by inventing – sometimes without the customer's knowledge – false business expenses and by falsely claiming that a customer's income is exempt from tax. The suit alleges that most of Mondrianh's customers work overseas for defense contractors.

The complaint further alleges that Mondrianh has provided false information to the IRS in improper attempts to delay IRS audits of customers. She allegedly urged one customer to lie to an IRS agent in order to prevent an IRS audit.

Source: US Department of Justice


Massachusetts Tax Preparer Pleads Guilty to Filing False Returns 

A Dighton, Massachusetts, man was convicted June 12 of falsifying his own personal income tax returns. David J. Woods pleaded guilty before US District Judge Patti B. Saris to filing false individual tax returns for the period 2006 through 2008.

Woods has owned and operated Woods Tax & Accounting Services for the past twenty years. During the period 2006 through 2008, Woods failed to report taxable income of over $500,000, resulting in a tax loss to the government.

Sentencing is scheduled for September 25. Woods faces a statutory maximum penalty of three years in prison to be followed by one year of supervised release and a fine of $250,000.

Source: US Attorney's Office  Massachusetts


Kentucky Doctor Sentenced for Evading Taxes 

A London, Kentucky, physician was sentenced June 13 to eighteen months in prison to be followed by six months of home incarceration for evading federal income taxes. 

US District Court Judge Gregory F. Van Tatenhove sentenced Werner Grentz for tax evasion and ordered him to pay the IRS approximately $900,000 for taxes that Grentz owes for the years 1999 to 2010. 

According to the plea agreement, Grentz made $356,073 in taxable income in 2009 while working as an independent physician contractor for a hospital in Jellico, Tennessee, and a medical office in London, Kentucky. Grentz previously admitted that he hid his income by having his earnings deposited into bank accounts of companies that he controlled. 

Grentz pleaded guilty to the charge in January 2013. Under federal law, Grentz must serve 85 percent of his prison sentence. Following his release, he will be under the supervision of the US Probation Office for three years.

Source: US Attorney's Office  Kentucky


Man Sentenced to Three Years in Prison for Tax Evasion Schemes and Theft from Federal Housing Program

A New Hampshire man was sentenced June 11 for carrying out two elaborate tax evasion schemes and theft of federal housing assistance funds.

Raymond C. Stebbins was sentenced by US District Judge George A. O'Toole, Jr. to three years in prison, to be followed by two years of supervised release, and restitution to the IRS and the US Department of Housing and Urban Development (HUD). In March 2013, Stebbins pleaded guilty to two counts of conspiracy, five counts of tax evasion, two counts of making false statements, and theft of public money.

Stebbins was engaged in two, ten-year long schemes: (1) a false invoice scheme aimed at evading the ascertainment and assessment of income taxes, and (2) a Section 8 housing fraud scheme.

In 2000, Christopher McGadden, the general manager of Xcel Fire Protection, engaged in a false invoice/tax evasion scheme with Stebbins. Stebbins purportedly owned numerous businesses, among them a trucking company, a moving company, a real estate company, and two or more business equipment resale companies. Stebbins prepared and sent bogus invoices in the names of the companies he purportedly owned to Xcel. The invoices falsely reflected that one of the Stebbins' companies had provided goods or services to Xcel when they had not. Knowing the invoices were bogus, McGadden authorized Xcel to pay the invoices by check. Stebbins then deposited the Xcel checks into various bank accounts he had opened, structuring the withdrawals of funds from those accounts. Thereafter, Stebbins gave McGadden 90 percent of the proceeds of those checks in cash and kept 10 percent for himself.

In addition, McGadden caused Xcel's customers to write checks directly in the name of one of Stebbins' companies. Stebbins deposited those checks in his bank account and did the same 90/10 split with McGadden. Neither Stebbins nor McGadden paid the proper income taxes on the $490,000 they took from Xcel checks and certain Xcel customer checks.

In a second conspiracy, starting in December 1999, Stebbins conspired with another individual, identified as FV, to defraud the IRS. Stebbins carried out a nearly identical false invoice tax evasion scheme in which the two men fraudulently diverted more than $3.3 million in funds rightfully belonging to FV's construction company based in Nashua, New Hampshire. This scheme, although larger in scope, worked virtually identical to Stebbins' scheme with McGadden. Neither Stebbins nor FV paid the proper income taxes on the money they took from FV's company checks.

For the tax years 2005 through 2009, Stebbins attempted to evade a large part of income tax he owed to the IRS by filing erroneous returns that underreported his income.

Furthermore, Stebbins made false statements to HUD when applying for the Section 8 Housing Assistance Program, which provides housing assistance payments to people who need rent subsidy in order to obtain adequate housing.

Beginning in December 1997, Stebbins represented to HUD that he was unable to afford adequate housing. As a result, Stebbins received Section 8 benefits from June 1998 through May 2008. During this time, HUD periodically attempted to establish Stebbins' continued eligibility for Section 8 benefits, and the level of those benefits, by sending him annual recertification forms which requested information concerning his household income level and assets. Stebbins filled out the forms with false entries that underreported his household income and assets. At the time he was receiving Section 8 benefits from HUD, Stebbins was an approved Section 8 housing assistance landlord for two multifamily properties, one in Quincy and another in Nashua. Between January 1, 2002 and May 31, 2008, Stebbins effectively stole money from HUD in the form of Section 8 housing payments that he was not entitled to.

Judge O'Toole ordered Stebbins to report to the US Marshal's Office in Boston to begin serving his sentence on June 18, 2013.

Source: US Attorney's Office – Massachusetts


Accountant Sentenced to Eighteen Months Imprisonment for Filing a False Tax Return with the IRS

Michael Lyadda, of Valencia, California, was sentenced to eighteen months in prison, one year of supervised release, and ordered to pay $272,983.83 in restitution for filing a false federal income tax return, Form 1040, with the IRS by U.S. District Judge Margaret M. Morrow June 17.

On March 4, 2013, Michael Lyadda, formerly of Uganda, pleaded guilty to one count of filing a false federal income tax return, Form 1040, with the IRS. According to the plea agreement filed earlier this year, Lyadda filed a false tax return for the year 2004 and 2005, knowing that the tax return was false and contained incorrect information. 

According to court documents, Lyadda knew the Form 1040 was not true and correct when he signed and filed the return. Lyadda, who holds a degree in accounting, admitted he subscribed to a Form 1040 for the tax years 2004 and 2005, which listed a false amount for adjusted gross receipts. Lyadda admitted that he received over $300,000 in income for tax years 2004 and 2005 which he did not report. 

As part of his plea agreement, Lyadda agreed to enter into a closing agreement with the IRS to assess and collect the total tax for the years 2004 and 2005. The total tax loss is $117,875. 

He also agrees pay restitution in the form of additional taxes, penalties, and interest owed the IRS prior to sentencing and that he is liable for the fraud penalty (75 percent of the tax due to the IRS) on the understatements of tax liability. The total taxes, penalties, and interest for the years 2004 and 2005 owed by the Lyadda is $272,983.83.

Source: US Attorney's Office  California



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