Crime Watch: May 16, 2013

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California Man Sentenced to Prison and Ordered to Pay $1.5 Million for Scheme That Swindled New Jersey Investors

A man who perpetrated a million-dollar investment fraud from California that defrauded New Jersey victims was sentenced May 14 to forty-six months in prison for crimes related to the scheme, US Attorney Paul J. Fishman announced.

Robert Schroy of Placentia, California, previously pleaded guilty to a criminal information charging him with one count each of wire fraud and tax evasion. US District Judge Joel A. Pisano, who accepted the plea, also imposed the sentence in Trenton federal court.

From 2004 through 2009, Schroy solicited people to invest in an alleged "international bank trade." He admitted that he and fellow conspirators falsely promised prospective investors extraordinary gains, ranging between 10 and 100 percent per week for a minimum period of twenty-five weeks, plus the return of their principal investment. Based on Schroy's misrepresentations, numerous investors, including investors in New Jersey, wired investment monies to accounts controlled by Schroy and others. Although the money was wired to the designated accounts, Schroy admitted it was not invested in any bank trade. Instead, he and other conspirators used it for personal expenditures, including automobiles, vacations, and meals at restaurants. In total, Schroy admitted they misappropriated at least $1 million in investor money.

In pleading guilty to the tax evasion count, Schroy specifically admitted he failed to file a 2007 US Individual Income Tax Return and failed to report $479,566 of taxable income, upon which an additional tax of $151,781 was owed to the IRS.

In addition to the prison term, Judge Pisano sentenced Schroy to serve three years of supervised release and ordered him to pay $1,540,044 in restitution.

Source: US Attorney's Office


Justice Department Sues to Shut Down Missouri Tax Return Preparers

The United States has asked a federal court in St. Louis, Missouri, to permanently bar Joseph Burns, dba Electronic Tax Service, Joseph Thomas, and International Tax Service Inc. (Thomas's business), from preparing federal tax returns for others, the Justice Department announced May 9. The civil injunction suit alleges that Burns and Thomas, who previously worked together, prepare fraudulent tax returns for customers from the same office building in the midtown neighborhood of St. Louis.

According to the complaint, the defendants repeatedly fabricate deductions on customers' returns and report false filing statuses in order to illegally lower their customers' federal tax liabilities and to generate larger tax refunds.

The government alleges that the defendants also prepare returns containing bogus Schedule C income, which illegally allows some customers to claim the maximum earned income tax credit. Based on past audit results, the government alleges that the loss to the US Treasury caused by these defendants' ongoing return preparation activities could be as much as $6 million annually.

Source: US Department of Justice


Maine Woman Sentenced in Tax Rebate Fraud Scheme

Attorney General Janet T. Mills announced that Amy Metcalf-Perry of Cherryfield, Maine, has been sentenced to four years in prison, with all but nine months and a day suspended, and three years of probation after pleading guilty to an eight-count indictment that arose from a scheme to steal Maine and federal tax refunds.

Metcalf-Perry also was ordered to repay $28,318 in restitution.

Superior Court Justice Robert Murray convicted Metcalf-Perry on May 8. She was charged with theft by deception, attempted theft by deception, and forgery.

According to the Attorney General's Office, Metcalf-Perry prepared and filed nearly a hundred fraudulent federal and Maine income tax returns, along with Maine property tax and rent refund applications. She falsified income, withholding, contact, and identity information.

The attorney general said Metcalf-Perry generally prepared and filed the fraudulent returns electronically and then had the refunds direct deposited to a bank account.

Despite the volume of electronic and written returns filed by taxpayers each year, Maine Revenue Services was able to discover and halt Metcalf-Perry's tax filing scheme and prevent most of the attempted thefts.

During its investigation, Maine Revenue Services also discovered Metcalf-Perry filed fraudulent federal income tax returns. This prosecution included the theft of the federal funds.

Source: US Attorney's Office


Internet Installer Sentenced for Hijacking Customer's Internet to Perpetrate Identity Theft Tax Scheme

Corey Thompson was sentenced May 7 to serve thirty months in prison for his involvement in a sophisticated stolen identity refund fraud conspiracy, the Justice Department and the IRS announced. In July 2012, Thompson pleaded guilty to one count of conspiracy to file false claims and to one count of aggravated identity theft.

According to court documents, in January 2012, Thompson and his coconspirators filed at least twenty-seven fraudulent 2011 tax returns that requested a total of $91,304 in refunds. Thompson and his coconspirators obtained the means of identification from a prison guard and from an employee at a debt collection agency.

Court documents also state that in 2011 and 2012, Thompson worked as an independent contractor for a cable company. As an independent contractor, Thompson installed cable and Internet access. To perpetrate the conspiracy, Thompson hijacked the Internet service of customers for whom he had performed work. From his home, Thompson used his laptop and his specialized knowledge and equipment to essentially shut down the customer's Internet and then take over that customer's Internet. Thompson would then file false tax returns using the hijacked Internet, which made it appear as if the false tax returns were being filed by the customer. Thompson directed the tax refunds to be placed on prepaid debit cards. The prepaid debit cards were intercepted by the US Postal Service.

Source: US Department of Justice


Federal Court in California Shuts Down Tax Preparer

A federal court in Los Angeles has entered an order permanently barring Simon Jenkins from preparing federal income tax returns and other tax-related documents for others, the Justice Department announced May 3. Jenkins, who operated under the business name "Jenkins Tax Service" in Gardena, California, consented to the civil injunction order, which was signed by US District Judge Dean D. Pregerson.

The government complaint, filed on February 1, 2013, alleged that Jenkins engaged in a pattern of claiming false deductions, false credits, false expenses, and false claims for refunds on behalf of his customers for the tax years 2004 through 2008, causing the government to incur a tax loss of $238,024 for those years.

In addition to barring Jenkins from preparing tax returns, Judge Pregerson also required Jenkins to contact his customers and inform them of the entry of the permanent injunction within thirty days.

As noted in the complaint, in a prior related criminal proceeding, Jenkins pleaded guilty to one count of aiding and assisting in the preparation and presentation of false income tax returns. According to the plea agreement filed in the criminal case on June 15, 2011, Jenkins agreed to enter into a binding civil injunction, barring him for life from aiding or assisting in the preparation of federal income tax returns for anyone other than himself and his legal spouse, and barring him from representing persons before the IRS.

Source: US Department of Justice


California Man Indicted in Tax Fraud and Identity Theft Scheme

A federal grand jury returned a superseding indictment May 8 charging a Palmdale, California, man with making false claims against the government, theft of government property, mail fraud, wire fraud, and aggravated identity theft.

Jerry Anthony Gregoire, Jr., who was previously indicted on April 24, 2013, is charged with having used the personal identifying information of others to prepare false individual income tax returns that were filed with the IRS. 

According to the first superseding indictment, Gregoire allegedly filed fraudulent 2009 and 2010 federal income tax returns in the names of other individuals using the victim taxpayers' true names and Social Security numbers without the victim taxpayers' knowledge or consent.

The returns allegedly contained false information regarding the victim taxpayers' residence addresses, incomes, expenses, and deductions and claimed that the victim taxpayers were entitled to the tax refunds. The returns allegedly directed the IRS to deposit the refunds to bank accounts that Gregoire controlled. The false returns were either mailed or electronically transmitted to the IRS.

Gregoire is expected to be arraigned on the new charges sometime before his trial. Currently his trial is scheduled to begin on June 11, 2013.

Source: US Attorney's Office


San Bernardino County Resident Sentenced to Two Years in Federal Prison for Tax and Identity Fraud Scheme

A San Bernardino County man who was charged for his role in a scheme to unlawfully use the names and Social Security numbers of other people to file fraudulent federal income tax returns has been sentenced to two years in federal prison.

Grover Lucano of Bloomington, California, was sentenced May 7 by US District Judge Otis D. Wright II, who also ordered Lucano to pay restitution in the amount of $1.5 million to the IRS.

In January 2011, Lucano pleaded guilty to six criminal counts related to his scheme to use the identities of others to file false tax returns claiming $1.5 million in false refunds.

According to the Information filed with the court to which Lucano pleaded guilty, Lucano used the identity of others to file five false income tax returns claiming refunds in the amount of $3,793 to $7,562 for the 2007, 2008, and 2009 tax years. The taxpayers whose identities were used did not authorize the filing of the tax returns and were not entitled to an income tax refund based upon the false income, child care, and recovery rebate tax credits claimed on the returns.

Lucano further possessed without lawful authority the identity of another individual, including the name, date of birth, and Social Security number used in the filing of a false return.

Source: US Attorney's Office


Federal Court in Georgia Shuts Down Tax Return Preparer

A federal court permanently barred Larry J. Heath, a Cartersville, Georgia, tax preparer who operated Heath's Income Tax, Heath & Hames Income Tax, and Heath's Income Tax II, from preparing tax returns for others, the Justice Department announced May 13. The civil injunction order, to which Heath agreed without admitting the allegations against him, was signed by Judge Harold L. Murphy of the US District Court for the Northern District of Georgia. The government's complaint in the injunction suit was brought against both Larry Heath and his brother, Andrew R. Heath. The case against Andrew Heath remains pending.

The government complaint alleged that Larry Heath and his businesses repeatedly prepared federal tax returns that unlawfully understated customers' federal tax liabilities. The suit alleged that Larry Heath concocted bogus losses, expenses, education credits, business expenses, and charitable contributions, which he falsely reported on his customers' federal income tax returns.

The IRS previously suspended Larry Heath's IRS-issued electronic filing identification number (EFIN) because of the large number of erroneous returns he prepared, according to the complaint. Larry Heath then supposedly "sold" his business to two different women and used their EFINs to continue to file tax returns, the complaint alleged. The injunction applies to the businesses that were purportedly sold, Heath & Hames Income Tax and Heath's Income Tax II.

Source: US Department of Justice


Las Vegas Physician Sentenced for Tax Evasion and Failing to File Income Tax Returns

Robert David Forsyth of Las Vegas was sentenced in US District Court in Las Vegas to twenty-seven months in prison for income tax evasion and failing to file income tax returns, the Justice Department and the IRS announced May 13. He was also sentenced to three years of supervised release and ordered to pay $306,171. Forsyth was indicted in April 2012 and pleaded guilty to the indictment on April 22, 2013.

 According to court documents, from 1999 through 2008, Forsyth worked as a physician and earned income from a variety of sources, including his medical practice, expert witness fees, and, beginning in 2002, Social Security benefits. Forsyth, however, failed to file an individual income tax return from 1999 through 2008. In fact, according to the indictment, Forsyth has not filed an income tax return since the 1994 tax year.

Court documents further established that instead of filing tax returns and paying his taxes, Forsyth, a Canadian citizen and US permanent resident alien, closed all of his personal bank accounts and used a third-party business to cash his paychecks. He made extensive use of cash, including using cash to pay personal expenses, in an effort to avoid detection. Throughout the years that Forsyth evaded payment of his taxes, he used income that he earned to fund his own lifestyle. Instead of paying the IRS, Forsyth spent money on gambling, luxury items, and hotel accommodations in San Jose, California; Costa Rica, and Bangkok.

Source: US Department of Justice


Idaho Businessman Sentenced to Prison for Tax Evasion

Michael George Fitzpatrick of Hope, Idaho, was sentenced to forty-two months in prison by US District Judge Larry A. Burns, the Justice Department and the IRS announced May 13. Fitzpatrick was also ordered to serve three years of supervised release and to pay just under $1.4 million in restitution to the IRS for unpaid individual and corporate federal income taxes.

Fitzpatrick was convicted of two counts of tax evasion in January 2013 by a Coeur d'Alene, Idaho, jury. A previous jury had convicted him in September 2012 on two counts of failure to file corporate income tax returns but was unable to reach verdicts on the tax evasion counts. Fitzpatrick was remanded into custody immediately after the second trial.

According to the indictment and evidence introduced at both trials, Fitzpatrick operated a business selling products that purported to help individuals eliminate credit card debt. During 2003 and 2004, gross sales from the business, operating under the names Dynamic Solutions Inc. (DSI) and North American Educational Services Inc. (NAES), exceeded $9 million. At trial, the government proved the corporations failed to report $3.7 million, and Fitzpatrick himself failed to report over $500,000 in income, resulting in a total tax loss of $1,397,762.

The evidence further established that Fitzpatrick last filed an individual income tax return in 1996. At trial, Fitzpatrick argued at length that the income tax laws did not apply to him. However, the evidence showed he expended significant time and expense to put all of his property in the names of nominees.

The evidence at trial also established Fitzpatrick sent over $5 million offshore to a bank located in the Dominican Republic. Fitzpatrick accessed this money through the use of a debit card and through wire transfers. During this two-year period, Fitzpatrick used over $1 million of his money hidden offshore to buy real estate and to gamble in Las Vegas on nine separate trips to the Bellagio Casino. 

Source: US Department of Justice


California Jewelry Store Owner Sentenced to Prison for Conspiracy to Launder the Proceeds of Bank Fraud

Safieh Fard of Escondido, California, was sentenced to sixty-three months in prison by US District Judge Cormac J. Carney, the Justice Department and the IRS announced May 14. Fard was also ordered to pay $594,000 in restitution to the IRS for unpaid individual income taxes. 

Fard was convicted by a Santa Ana, California, jury on November 21, 2012, of one count of conspiracy to defraud the IRS and one count of conspiracy to launder the proceeds of bank fraud. Fard's coconspirators, her sister Sedigheh Bahramian, and two of her sons, Mohsen Kikalaye and Ahmad Kikalaye, pleaded guilty and were sentenced to related counts of bank fraud in 2010.

According to the indictment and evidence introduced at trial, starting in 1997 and continuing through 2004, Fard and her coconspirators purchased valuable residential real estate properties, including numerous beachfront properties in Newport Beach, California. To obtain mortgages to purchase these properties, Fard and her coconspirators provided false information to federally insured banks that substantially overstated their income and assets on mortgage applications. Fard submitted mortgage applications that falsely stated she earned over $40,000 per month, despite claiming no taxable income on her federal income tax returns during the eight-year conspiracy.

Evidence introduced at trial established that Fard and her coconspirators bought, sold, and transferred ownership of the properties between and among themselves. Ultimately, the properties were sold to third parties resulting in substantial monetary gain. Fard and her coconspirators then failed to report capital gains on more than $3.7 million from these sales on their federal income tax returns.

The evidence further established that Fard and her coconspirators Mohsen Kikalaye and Ahmad Kikalaye sold Newport Beach properties to unrelated third parties and received the proceeds in a large lump-sum payment by either wire transfer or check. Fraud proceeds were then transferred through multiple bank accounts to an account in the name of Fard's coconspirator Ahmad Kikalaye, who withdrew proceeds in cash in amounts slightly below the $10,000 federal reporting requirement. Fraud proceeds were also used to buy new real estate properties.

Source: US Department of Justice



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