Crime Watch: May 22, 2013

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Virginia Investment Firm Officer Sent to Prison in KPMG Tax Shelter Case

Michael Parker of Baltimore, Maryland, who was the chief operating officer of TransCapital Corporation, a tax-advantaged investments company based in Northern Virginia, was sentenced May 20 to fifty-four months in prison by US District Judge Sandra S. Beckwith in Cincinnati, Ohio, the Justice Department and the IRS announced. In addition, Parker was sentenced to serve three years of supervised release after his release from prison.

In December 2009, Parker pleaded guilty to one count of conspiracy to defraud the United States for his role in KPMG's promotion, marketing, and implementation of a tax shelter product known as Sale Leaseback of Tenant Improvements Strategy (SLOTS).

According to the plea agreement and statements made during trial and related proceedings, Parker admitted to conspiring with others to defraud the IRS with regard to tax shelter transactions. Parker, a CPA and an attorney, acted as the chief operating officer of TransCapital Corporation during the alleged conspiracy. Parker testified at the trial of an accountant who was a tax partner at KPMG, LLC, at its Tysons Corner, Virginia, office, and an attorney for TransCapital, both of whom were acquitted of conspiracy charges after a four-week jury trial.

According to the plea agreement, trial testimony, and other statements, from 1998 through 2006, Parker and others marketed and implemented a tax shelter to KPMG clients called SLOTS. The SLOTS shelter enabled client corporations to claim tax deductions totaling more than $240 million on corporate income tax returns filed with the IRS.

During 2002 through 2004, the IRS audited three US corporations that had claimed losses generated by SLOTS transactions, including the Kroger Company. Parker identified Kroger as the Fortune 500 corporation that did the largest SLOTS tax shelter transaction, and which claimed over $178 million in loss deductions, causing over $64 million in tax loss to the IRS. Parker admitted that he and the others conspired to impede and impair the IRS by making false and misleading statements to IRS agents and attorneys during these audits, including the Kroger audit.

Additionally, Parker admitted that he and others concealed certain aspects of the tax shelter transaction from SLOTS clients, including Kroger, for the purpose of impeding and impairing the IRS. Parker further acknowledged that the SLOTS tax shelter and related transactions were themselves nothing more than devices to disguise and conceal mere financing transactions.

Source: US Department of Justice


Alabama Woman Receives Four Years in Prison in Stolen Identity Refund Fraud Scheme

Larreka Jackson was sentenced May 16 to three years in prison for her role in a multimillion-dollar conspiracy to use stolen identities to obtain tax refunds, the Department of Justice and the IRS announced. Jackson was also ordered to pay restitution in the amount of $721,519.12. In January 2013, Jackson pleaded guilty to one count of conspiracy to file false claims and one count of aggravated identity theft.

On August 15, 2012, a federal grand jury in Montgomery, Alabama, returned a twenty-five-count indictment charging Jackson with conspiring to file false tax returns using stolen identities, filing false claims, wire fraud, and aggravated identity theft. According to court documents, Jackson and Chiquanta Davis operated a tax preparation business called It's Tax Time in Montgomery, Alabama. Jackson and Davis used It's Tax Time as a front to file false tax returns using stolen identities. Jackson and Davis unlawfully obtained the names and Social Security numbers of actual persons and filed false tax returns using those names. Jackson directed the fraudulent tax refund to bank accounts controlled by her and her coconspirators.

Chiquanta Davis was previously sentenced to sixty-six months in prison for her role in the conspiracy.

Source: US Department of Justice


Former California Return Preparer Pleads Guilty to Preparing False Returns Filed with the IRS

A self-employed income tax return preparer pleaded guilty May 20 to preparing and submitting false tax returns on behalf of clients to the IRS.

Peter Chavez, former operator of Tax Care 4 Less and later known as Tax Care for Less, in Burbank, California, pleaded guilty to two counts of aiding and assisting in the preparation of false income tax returns.

In May 2005, a federal grand jury returned a nineteen-count indictment charging Chavez with aiding and assisting in the preparation of fraudulent income tax returns. Following the indictment, Chavez remained a fugitive until his arrest on March 5, 2013, in Hemet, California. Chavez has remained in federal custody since his arrest.

In his plea agreement, Chavez admitted that in addition to the nineteen tax returns set forth in the indictment, between 1999 and 2002, Chavez prepared or supervised the preparation of thousands of federal income tax returns for clients of his business Tax Care 4 Less, which he filed by electronic means with the IRS. In preparing these tax returns, Chavez claimed false or fraudulent itemized deductions, including false mortgage interest expenses, inflated state, local and personal property tax deductions, inflated deductions for charitable contributions and miscellaneous deductions, and false educational credits resulting in a reduced tax liability for Chavez' client-taxpayers.

The two counts to which Chavez pleaded guilty to relate to the 2000 and 2001 federal income tax returns filed on behalf of clients, which included false deductions and credits, reducing the taxpayers' liability by $1,890 and $1,703, respectively. 

As a result of his guilty plea, Chavez faces a statutory maximum sentence of six years in federal prison and a fine of $500,000 when he is sentenced August 19, 2013. 

Source: US Attorney's Office


Michigan Businessman Faces Thirty-Three Years in Prison for Bank Fraud and Obstructing the IRS

Mosii Mays Blackwell of Detroit, Michigan, pleaded guilty in the Eastern District of Michigan to obstructing the IRS and bank fraud, the Justice Department and the IRS announced May 16.

According to the information and other documents filed in court, from April 2004 to December 2012, Blackwell failed to report to the IRS over $4.5 million in gross receipts generated by Detroit-area businesses that he operated and controlled through various entities, such as the Detroit Manufacturing Group, Moci Jeans, Arzel Corporation, Renaissance Contractors, and Greentree Entertainment Group, LLC.

In addition, the information states that on November 5, 2004, Blackwell executed a bank fraud scheme by causing a loan application to be submitted to mortgage lender that falsely reported the applicant was employed by one of his business entities at a salary of $18,000 each month.

Blackwell faces a maximum potential sentence of thirty-three years in prison and a fine of up to $1,250,000.

Source: US Department of Justice


Alabama Man Pleads Guilty for Involvement in a Large-Scale Stolen Identity Fraud

Glenn Powell Jr. pleaded guilty May 16 in the Middle District of Alabama to his role in a large-scale stolen identity refund fraud, the Justice Department and the IRS announced.

On April 17, 2013, a federal grand jury in Montgomery, Alabama, indicted Powell on conspiracy and theft of government money charges. According to court documents, Powell opened two bank accounts on which he was the only authorized signer. Between August 2009 and February 2011, at least forty-nine false federal income tax refunds totaling approximately $95,926 were directed to Powell's bank accounts. Powell was able to withdraw approximately $46,423.71 in false tax refunds before the IRS stopped him. The overall scheme Powell participated in is alleged to have involved over $500,000 in false refunds.

As a result of his plea, Powell faces a maximum potential sentence of ten years in prison.

Source: US Department of Justice


Florida Husband and Wife Indicted for Federal Tax Crimes

Drs. David Leon Fredrick and Patricia Lynn Hough of Englewood, Florida, were indicted by a federal grand jury in Fort Myers, Florida, for conspiring to defraud the IRS by concealing millions of dollars in assets and income in offshore bank accounts at UBS and other foreign banks, the Department of Justice and IRS announced May 16.

According to the indictment, Fredrick and Hough, married doctors, served on the board of directors of two Caribbean-based medical schools, one located on Saba, Netherlands Antilles, and one located on Nevis, West Indies. Fredrick had an ownership interest in the medical school on Nevis until 2007, when both medical schools were sold.

The indictment alleges that Fredrick and Hough conspired with each other and with Beda Singenberger, a citizen and resident of Switzerland who is under indictment in the Southern District of New York, and a UBS banker to defraud the IRS. They carried out the conspiracy by creating and using nominee entities and undeclared bank accounts in their names and the names of the nominee entities at UBS and other foreign banks to conceal assets and income from the IRS, including the sale of real estate associated with the medical school on Saba and shares they owned in the medical school on Nevis. The real estate was sold for more than $33 million, all of which was deposited into one of their undeclared accounts in the name of a nominee entity.

It is further alleged in the indictment that Fredrick and Hough used e-mails, telephone, and in-person meetings to instruct Swiss bankers and asset managers to make investments and transfer funds from their undeclared accounts at UBS. It is alleged that Fredrick and Hough caused funds from the medical schools' undeclared accounts to be transferred to undeclared accounts in their individual names or in the names of nominee entities. Fredrick and Hough then used the funds in their undeclared accounts to purchase an airplane, two homes in North Carolina, and a condominium in Florida. Fredrick also transferred more than $1 million to his relatives.

Fredrick and Hough were also charged with four counts of filing false tax returns for 2005, 2006, 2007, and 2008. The indictment alleges that Fredrick and Hough filed false tax returns which substantially understated their total income and failed, on Schedule B, to report they had an interest in or signature or other authority over bank, securities, or other financial accounts located in foreign countries. 

A trial date has not been scheduled. The conspiracy charge carries a maximum potential penalty of five years in prison and a $250,000 fine. The false return charges each carry a maximum potential penalty of three years in prison and a $250,000 fine.

Source: US Department of Justice


Michigan Man Sentenced for Tax Fraud

Steven Kern of Marine City, Michigan, was sentenced to serve one year and one day in prison by US District Court Judge Arthur J. Tarnow in the Eastern District of Michigan, the Justice Department and IRS announced May 14. On January 28, 2013, Kern pleaded guilty to an indictment charging him with eight counts of filing false corporate tax returns and eight counts of failing to file his individual income tax returns.

According to court documents, Kern operated the Kern Chiropractic Center in Marine City. From 2003 through 2010, Kern filed false corporate returns for Kern Chiropractic that did not include as gross receipts cash and check payments that Kern diverted from the business for his own personal use. During the same years, Kern failed to file individual tax returns, despite earning more $1.2 million in gross income during that time period. Filed court documents and court proceedings further established that Kern has not filed an individual federal income tax return since 2002 and told IRS - Criminal Investigation special agents he believed signing and filing a completed individual federal tax return was a violation of his constitutional rights.

Source: US Department of Justice


Los Angeles Resident Sentenced to Eighty-Eight Months Imprisonment

Andrea Lorraine Avery of Los Angeles was sentenced to eighty-eight months' imprisonment, three years' supervised release, and ordered to pay $2,883,401.62 in restitution. 

In May 2011, six defendants were charged by a federal grand jury in connection with the scheme. In addition to Andrea Avery, Kirkland Charles, William Earl Gordon, Annita Hawes, and James Arthur Booker have already been sentenced. The remaining defendant, Bill James Releford, is scheduled to be sentenced in June 2013.

According to the evidence presented at trial, Avery and her codefendants operated a scheme to defraud financial institutions by using stolen identities of people with good credit scores to establish business lines of credit and then used the money for personal expenses. Avery and her associates carried out the fraud by obtaining stolen personal identifying information, including dates of birth, Social Security numbers, credit profiles, and driver's license numbers, to complete fraudulent applications for business lines of credit to various banks. Once the applications were approved by the banks, funds were deposited into corporate bank accounts that were linked to the credit lines, usually in the amount of $100,000 each. The defendants liquidated the credit lines by issuing checks payable to the defendants and their companies, often for their personal use.

Over the course of the scheme, Avery operated numerous shell companies, directly receiving thirty-three checks totaling approximately $225,000. As evidenced at trial, Avery also used others involved in the scheme to cash checks for her and provided her with the profits. The evidence also demonstrated that she demanded that she receive approximately 15 to 20 percent from each fraudulent credit line.

At trial, Avery was found to be the mastermind who directed and controlled the entire fraud scheme that netted her and her co-schemers millions of dollars. Between 1998 and 2005, Avery directed others in the opening and draining of dozens of different credit lines. Based upon the seventy-six lines of credit presented at trial, the fraud resulted in a total actual loss of approximately $2,883,401.62.

Source: US Attorney's Office

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