Crime Watch: June 28, 2013

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California Man Sentenced to Two Years in Prison for Aiding in the Evasion of Payment of a $15 Million Tax Liability 

On June 24, Jason M. Harvey was sentenced to two years imprisonment, three years of supervised release, and ordered to pay $11,738,000 in restitution for aiding in the evasion of payment of federal payroll taxes by US District Judge George H. King. 

In a superseding indictment filed February 16, 2012, Michael P. Harvey, Jason Harvey's father, and Jason Harvey, the owner of Advanced Business Payroll, Inc., Global Business Outsource Solutions, Inc., and Global Consulting, Inc., were arraigned for attempting to evade the payment of over $15 million in payroll taxes and interest due to the IRS. Codefendant Denise Browning was also indicted for having aided and assisted in the preparation of the false payroll tax returns and forms 941 for Advance Business Payroll, Inc. and Global Payroll Services, Inc. 

On January 6, 2012, Michael Harvey pleaded guilty to evading payment of over $15 million to the IRS, admitting that he caused the companies to not honor the levies, and he aided Jason Harvey to cause those companies to not honor the IRS levies. On February 4, 2013, Michael Harvey was sentenced to thirty months in prison, three years of supervised release following imprisonment, and ordered to pay $ 15,177,106.43 in restitution.

On November 16, 2012, codefendant Browning was found guilty of two counts of aiding and assisting in the preparation of false payroll tax returns, following a three-day trial. On March 11, 2013, Browning was sentenced to forty-two months in prison and one year of supervised release following imprisonment. 

On July 31, 2012, Jason Harvey pleaded guilty to aiding Michael Harvey in evading the payment of over $15 million in payroll taxes and interest assessed by the IRS.

According to his plea agreement, Jason Harvey was responsible for filing correct payroll tax returns, collecting payroll tax, and remitting payroll tax withheld from employees of the client's businesses to the IRS and California. During the period January 1, 2004, through December 31, 2006, Jason Harvey failed to pay over $10 million in payroll taxes that were actually due by the Global companies for the wages paid to employees, and he failed to file some of the payroll tax returns required to be filed with the IRS. 

In further attempts to aid evading the payment of taxes, Jason Harvey failed to honor IRS levies served to his payroll processing companies around September 18, 2006. Both Jason Harvey and Michael Harvey acknowledged service of the levies in writing around September 27, 2006. The levies required those companies to pay to the IRS amounts that became due and owing by the companies to Michael Harvey. 

According to court documents, before the service of the levies, Advanced Business Payroll, Inc., Global Business Outsource Solutions, Inc., and Global Consulting, Inc. issued more than forty-five checks made payable to Michael Harvey, which totaled more than $230,000. However, after service of the levies, the companies instead made cash payments to Michael Harvey of at least $62,700 and also paid Michael Harvey at least six checks made payable to "cash" totaling $22,800, without paying such amounts to the IRS in accordance with the levies. Also, in December 2006, Jason Harvey and Michael Harvey caused Global Consulting Inc, to issue two checks totaling $100,000 for the credit of Michael Harvey which were used to make payments on a personal judgment against Michael Harvey. 

Source: US Attorney's Office  California


Utah Man Indicted for Passing Fictitious Financial Instrument

On June 26, a federal grand jury in Salt Lake City returned a superseding indictment charging Dick Reid Jenkins, a resident of Heber City, Utah, with eighteen counts of presenting false, fictitious, and fraudulent claims to the United States and one count of passing a fictitious obligation.

According to the superseding 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, Original Issue Discount. In addition to his own false returns, from September 2008 through February 2009, Jenkins caused 16 other false federal income tax returns to be filed on behalf of other individuals. These other false tax returns also used false Forms 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 certified public accountant at all times relevant to these charges.

Additionally, according to the superseding indictment, on June 30, 2008, Jenkins passed and presented a false and fictitious financial instrument to the US Department of the Treasury in the amount of $300,000,000.

An indictment is not a finding of guilt. Individuals charged in indictments are presumed innocent until proven guilty. If convicted, Jenkins faces a statutory maximum penalty of 25 years in prison for each count of submitting fictitious obligations to the United States and five years in prison for each count of presenting false, fictitious, and fraudulent claims to the United States.

Source: US Department of Justice


Utah Resident Charged with Submitting False Claims for Tax Refunds and Fictitious Financial Instruments

A federal grand jury in Salt Lake City returned an indictment on June 26 charging Paul Ben Zaccardi, a resident of Sandy, Utah, with five counts of presenting false, fictitious, and fraudulent claims to the United States and three counts of passing fictitious obligations.

According to the indictment, on or about August 20, 2008, Zaccardi submitted five false claims to the United States by filing income tax returns for the years 1996 through 2000, seeking refunds to which he was not entitled. Altogether, Zaccardi sought refunds totaling $1,510,251. The indictment further charges that Zaccardi submitted fictitious obligations to the United States that purported to pay his tax debts. The first of these was submitted in July 2008 and claimed to be valued at $5,000,000; the second and third were submitted in November of 2009 and claimed to be valued at $300,000,000 each.

If convicted, Zaccardi faces a maximum of 100 years in prison.

Source: US Department of Justice


San Francisco Resident Sentenced to Twenty-Four Months in Prison for Filing False Claims for Tax Refunds

On June 19, 2013, Eric Flentoil pleaded guilty and was sentenced to two years in prison for access device fraud and filing false claims, announced US Attorney Melinda Haag and IRS  Criminal Investigation.

In pleading guilty, Flentoil admitted to filing a false 2011 income tax return using a stolen Social Security number and claiming a tax refund of $2,915. Unknown to Flentoil, the individual to whom the Social Security number belonged, had made a $40,000 estimated tax payment to the IRS for his 2011 taxes. Therefore, the IRS sent a $40,000 refund check, in the victim's name, to the address on the false return, which was Flentoil's home address. Flentoil used the victim's name and Social Security number to open a bank account, deposit the $40,000 check, and obtain a debit card to access the funds. From June 1, 2012, through June 11, 2012, Flentoil used the debit card to withdraw funds and make purchases.

Flentoil also filed a false 2011 federal income tax return in his own name, receiving a $2,071 tax refund, to which he was not entitled.

Flentoil was indicted on March 19, 2013. He was charged with access device fraud, filing false claims, and aggravated identity theft. He pleaded guilty to access device fraud and filing false claims. 

Source: US Attorney's Office  California


California Tax Preparer Sentenced to Two Years in Jail for Tax Fraud

Naushad Buksh was sentenced June 20 to two years months in prison for filing a false tax return and assisting in the preparation of a false tax returns, announced United States Attorney Melinda Haag and IRS  Criminal Investigation.

Buksh pleaded guilty on January 24, 2013. According to his plea agreement, Buksh has prepared tax returns for approximately twenty years. During 2007, 2008, 2009, and 2010, he operated a tax return preparation business in Hayward, California, and was responsible for all income and expenses of the business. His taxable income earned from this business was $116,387, $134,843, $178,167, and $210,683, respectively. Buksh intentionally omitted this income from his tax returns, which resulted in a tax loss of $160,528.

Buksh admitted in his plea that, in addition to filing false returns for himself, he also prepared tax returns on behalf of his clients that included false deductions and credits for the purpose of creating fraudulent tax refunds. Buksh admitted that he knew the deductions and credits were false because he fabricated them. Specifically, some of the false deductions and credits included home mortgage interest and points, unreimbursed employee expenses, inflated education credits, student loan interest and/or tuition fee deductions, false personal property tax deductions, and false or inflated tax preparation fees. By adding these false claims to his clients' tax returns, he caused a tax loss to the government totaling $109,077.

Buksh is scheduled to self-surrender to the custody of the US Marshalls on August 20, 2013.

Source: US Attorney's Office  California


Two Women Convicted of Conspiracy to Defraud the United States in a Tax Fraud Scheme That Illegally Sought $225 Million in Fraudulent Tax Refunds

Two California women employed in the Fontana-based Old Quest Foundation have been convicted of conspiracy to defraud the United States and/or filing false claims against the United States in a tax fraud scheme that resulted in more than 400 fraudulent federal income tax returns being filed with the IRS that cumulatively sought more than $250 million in fraudulent refunds and filing false claims against the United States.

Suemy L. Gongora, an Old Quest tax return preparer who filed her own false tax return, was found guilty June 25 of one count of conspiracy to defraud the United States and nine counts of filing false claims against the United States, including her own federal tax return.

Sandra Kay Lynch, an Old Quest bookkeeper, was also found guilty June 25 of two counts of filing false claims against the United States. Lynch continued with the scheme after search warrants were executed at the Old Quest offices in September 2009. 

The case against Gongora and Lynch stems from "Operation Stolen Treasures", an investigation conducted by special agents with IRS - Criminal Investigation that led to fifty-five people being indicted by a federal grand jury in the fall of 2011. Throughout most of 2009, Gongora, Lynch, and others operated a company known as Old Quest Foundation, through which hundreds of false tax returns were filed, collectively claiming approximately $200 million in excessive withholdings and tax refunds due. To date, twenty-eight defendants charged have pleaded guilty to charges (seven defendants have been sentenced and the remaining nineteen defendants are awaiting sentencing); twenty-two defendants are scheduled for trial beginning in July; five defendants have been convicted at trial; and one defendant remains a fugitive.

Old Quest employees prepared fraudulent IRS forms 1099-OID, which purported to be issued by the banks holding the Old Quest customers' mortgages. The 1099-OID falsely claimed that the banks paid the customers hundreds of thousands of dollars in interest in 2008, but that the payments had been withheld from the customers and paid to the IRS. 

Other employees, including Gongora, then prepared fraudulent tax returns or amended tax returns incorporating such false income and withholding information and claiming large refunds, in some cases worth over $1 million per return. The customers were instructed to sign the tax returns, which were later filed with the IRS, without reviewing the returns or given a copy. 

Lynch and others recruited customers to Old Quest for purposes of the scheme. The customers were often charged thousands of dollars in fees but received no tax refund. Instead, many of the customers were fined by the IRS for their false submissions.

Evidence introduced at trial  Old Quest files; correspondence from defendants; IRS records; and testimony from customers, IRS employees, and Old Quest employees  established that both defendants were active participants in Old Quest's operations. Both defendants and the other scheme participants were repeatedly warned that the refund claims were fraudulent and the scheme was unlawful. 

Gongora was an experienced, licensed, professional tax return preparer who had worked for several years at a major national tax preparation firm. In addition to preparing false returns for Old Quest customers, she filed a false tax return in her own name, claiming a refund of over $460,000. Gongora admitted to investigators that she knew the Old Quest program was fraudulent, but she kept participating in it because she needed the money. 

Lynch, also a trained and licensed tax preparer, was the Old Quest bookkeeper and recruited a number of customers. On September 30, 2009, IRS criminal investigators executed a search warrant on the Old Quest offices, seizing numerous documents and shutting down the tax preparation business. Lynch continued working for Old Quest after the search warrants, continuing to help customers prepare responses to IRS frivolous filing letters. She also encouraged another customer to file a 1099-OID-based return and referred him to another tax preparer for that purpose. 

The two defendants, both of whom are currently released on bond, are scheduled to be sentenced by US District Judge Josephine Staton Tucker on February 28, 2014. As a result of this week's convictions, Gongora faces a statutory maximum sentence of fifty-five years in federal prison, and Lynch faces a statutory maximum sentence of ten years in federal prison.

Source: US Attorney's Office  California


Miami Resident Sentenced in Identity Theft Tax Fraud Scheme Involving Baptist Health System Patient Information

Wifredo A. Ferrer, US Attorney for the Southern District of Florida, and Michael J. DePalma, Acting Special Agent in Charge, IRS  Criminal Investigation, announced the June 24 sentencing of defendant Cristobal Raul Puig of Miami. Puig was sentenced to thirty-one months in prison, to be followed by three years of supervised release.

Puig previously pled guilty to one count of possessing fifteen or more Social Security numbers of other persons, with corresponding names and dates of birth, and one count of knowingly using, without lawful authority, the means of identification of another person.

According to court documents, an employee of Baptist Health System's West Kendall location sold the names, dates of birth, Social Security numbers, and addresses of hospital patients to Puig. Defendant Puig then used the stolen patient identification information to file unauthorized income tax returns. At the time of his arrest, Puig was in possession of a list containing the names, dates of birth, Social Security numbers, and addresses of twenty recent hospital patients.

Source: US Attorney's Office  Florida


Alabama Woman Pleads Guilty to Conspiracy in Tax Refund Identity Theft Scheme

Scottie Alice Johnson of Montgomery County, Alabama, pleaded guilty to one count of conspiracy to defraud the United States for her role in a stolen identity refund fraud (SIRF) scheme, the Justice Department and the IRS announced June 21. 

According to court documents, Johnson conspired with Barbara Murry, Veronica Temple, and Yolanda Moses to receive fraudulently obtained tax refunds. Yolanda Moses created a tax preparation business called B & B Tax Service, which was located in the same building as codefendant Barbara Murry's hair-weaving shop, called B & B Weaving.

The conspirators obtained stolen identities from multiple sources and recruited individuals, including Scottie Alice Johnson, to deposit fraudulently obtained tax refunds into their respective bank accounts. Moses and Temple filed false tax returns using the stolen identities and directed the refunds into bank accounts they or their coconspirators controlled. Between January 2006 and April 2012, Murry, Temple, and Moses filed over 900 false tax returns with the IRS and fraudulently claimed in excess of $1.7 million. Johnson's bank account received $140,505.22 in refunds proceeds. Johnson also used her son's bank account in the scheme to receive $22,650 in tax refunds.

Sentencing has not yet been scheduled. Johnson faces a maximum sentence of five years in prison, three years of supervised release, restitution, and a maximum fine of $250,000, or twice the loss caused by the offense. Murry, Temple, and Moses earlier pleaded guilty to various charges and each was sentenced.

Source: US Department of Justice 


New Jersey CPA and Client Arrested and Charged for Attempted Bribes of IRS Revenue Agent

A CPA with an office in Clifton, New Jersey, and one of his clients were arrested June 13 by federal agents for allegedly trying to bribe an IRS revenue agent to reduce the client's tax liability of more than $900,000, US Attorney Paul J. Fishman announced.

Hamed Aref of Clifton and his client Yousef Zaben of North Bergen, New Jersey, are each charged in a criminal complaint with one count of conspiracy to bribe a public official and two counts of bribery of a public official. Both men are variously charged for alleged bribes related to Zaben's tax liability. One of the bribery charges against Aref also alleges he attempted to pay an IRS revenue agent to reduce the tax liability of another client, Zaben's son.

According to documents filed in this case, an IRS revenue agent working in the Mountainside, New Jersey, IRS office – referred to in the complaint as "R.A." – was assigned to conduct an audit in February 2012 of Zaben's son, a client of Aref's. During a meeting with Aref that month, R.A. told him that approximately $90,000 in bank discrepancies for the 2010 tax year would require additional tax payments. 

Aref ran his own accounting and tax preparation firm. In a conversation begun in Aref's office and continued outside the building, per the CPA's request, Aref asked R.A. to reduce the tax liability by $20,000, offering approximately $2,000 to the agent in exchange. R.A. pretended he would think about the offer and set a date for another meeting with Aref, then immediately reported the bribe attempt to law enforcement officers from TIGTA.

When Aref and R.A. met again in March 2012, R.A. was outfitted with video and audio recording equipment provided by law enforcement. At that meeting, Aref asked for documentation reflecting a reduction in his client's income of more than $32,000 for tax years 2009 and 2010, and R.A. produced a false audit report reflecting the requested numbers. Aref then asked R.A. to leave the office and placed an envelope with $3,000 cash on R.A.'s chair. When R.A. returned, Aref told the agent the money was from Zaben and stood guard while R.A. counted the cash out on the desk.

A subsequent IRS audit of Zaben revealed a number of large, unexplained bank deposits in 2009 and 2010, totaling more than $1.6 million, on which Zaben owed the IRS approximately $904,367. During meetings in February and March 2013, Aref and R.A. met at the Clifton office to discuss the liability. Aref provided false figures to R.A. that showed a total tax liability of approximately $1,137.94 for those years, and suggested a meeting between Zaben and R.A.

At that meeting, in April 2013, R.A. showed Zaben both the correct and falsified audit reports, and Zaben paid R.A. the falsely reduced amount of $1,137.94. Zaben then produced $10,000 in cash, which both defendants said was for R.A. Zaben also said he would pay R.A. an additional $5,000, some of which he gave to R.A. at a later meeting.

Each of the meetings in which bribes were paid was recorded by law enforcement. 

The conspiracy count carries a maximum potential penalty of five years in prison, and the bribery counts each carry a maximum potential penalty of fifteen years in prison. Each of the counts also carries a maximum $250,000 fine.

Source: US Attorney's Office – New Jersey


Judge Taxes Scammer with Eighteen-Year Prison Sentence

Calvin Johnson, Jr. of Philadelphia, Pennsylvania, was sentenced June 18 to eighteen years in prison for participating in tax fraud conspiracies with a former IRS employee and several others. Johnson was convicted of conspiracy and filing false claims/tax returns to the IRS in a series of schemes that defrauded the US Government of more than $1 million. Johnson was also found guilty of filing false claims while he was on pretrial release. US District Court Judge Stewart Dalzell ordered Johnson to pay restitution in the amount of $1.24 million and ordered three years of supervised release.

Johnson and two co-conspirators, former IRS employee Patricia Fountain and Larry Ishmael, were convicted at trial in March 2013. The defendants solicited claimants whose personal information they used to file false tax returns claiming the Telephone Excise Tax Refund (TETR) in 2007 and the First Time Homebuyer Credit in 2009. These three defendants each received fraudulently obtained TETR refunds.

Fountain also used one of the claimant's information to file a false tax return in 2008. Fountain and Johnson also participated in separate schemes to file false tax returns between 2010 and 2012. Johnson continued his scheme while he was awaiting trial in this case.

For each of the schemes, the defendants charged claimants a cash fee. With respect to her 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.

In addition to the charges of conspiracy and filing false claims/tax returns, Fountain was convicted of abusing her public office and extortion under color of official right. She was sentenced last week to 19 years in prison. Ishmael's sentencing hearing is scheduled for July 26, 2013. Andre Bruce, Howard Chilsom, William Martin, and the defendant's father, Calvin Johnson Sr., were all sentenced in April 2013

Source: US Attorney's Office  Pennsylvania

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