IRS GENERAL CRIMINAL TAX FRAUD & TAX EVASION PROSECUTION SUMMARIES FY 2008-2010 — A REVIEW FOR SOUTH CAROLINA CRIMINAL TAX ATTORNEYS, LAWYERS & LAW FIRMS

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Joseph P. Griffith, Jr.
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In Fiscal Year 2009, the IRS initiated 1,778 criminal cases of general tax fraud, and recommended prosecution in 1,115 general criminal tax fraud cases. The IRS obtained 966 indictments or informations, and obtained convictions/sentences in 810 cases. The incarceration rate for these convictions was about 78%, and the average amount of prison time was 27 months. These statistics have generally remained constant from FY 2007 to FY 2009.
The IRS Criminal Investigation Division (IRS-CID) publishes annual reports on its website of IRS general criminal tax fraud and tax evasion prosecutions. In order to assist white collar criminal defense tax evasion attorneys, lawyers and law firms, these summaries have been collected into one document to allow practitioners to easily access a source of cases in order to be able to assess potential penalties for clients in similar situations. The applicable IRS criminal statutes are also set forth below.
Examples of IRS General Tax Fraud Investigations – Fiscal Year 2010
Sacramento Real Estate Investor Sentenced for Filing False Tax Documents with the IRS
On September 14, 2010, in Sacramento, Calif., Wallace Chin, of Sacramento, was sentenced to 12 months and one day in prison, to be followed by six months of home detention, and one year of supervised release. Chin was also required to pay $104,997 in restitution to the Internal Revenue Service (IRS). He pleaded guilty on May 25, 2010, to one count of filing a false tax return. According to court documents, Chin underreported by more than $700,000 the capital gains he received from the sale of property that he owned in Sacramento through a partnership. When Chin’s tax return was later audited by the IRS, Chin submitted a number of false and forged documents purporting to substantiate the false information in his return.
Two Sentenced in Wisconsin in Million Dollar Ponzi Scheme
On September 14, 2010, in Milwaukee, Wis., Jeff Stadelmann was sentenced to 108 months in prison, to be followed by three years of supervised release for wire fraud and money laundering. Donna Kay Lonzo was sentenced to 12 months and a day in prison and three years of supervised release. In addition, Stadelmann and Lonza were ordered to jointly pay $5,383,019 in restitution. According to court documents, from 2002 thru 2008 Stadelmann, a securities broker and owner of Li’L Bear, LLC, and Donna Lonzo bilked investors of $3.2 million by selling them unregistered securities. To keep his scheme going, Stadelmann used investors’ money to pay dividends to other investors, stating it was returns on their investments.
Three Sentenced for Their Roles in $3.7 Billion Ponzi Scheme
During the week of September 13, 2010, in Minneapolis, Minn., three individuals were sentenced for their roles in the Tom Petter’s $3.7 billion Ponzi scheme. Larry Reynolds was sentenced to 130 months in prison; Michael Catain was sentenced to 90 months in prison; and Robert Dean White was sentenced to 60 months in prison. According to court documents, Reynolds and Catain admitted that from 2002 through September of 2008, they conspired to launder the proceeds of the Ponzi scheme. Catain started a business called Enchanted Family Buying Co. (EFBC) while Reynolds started Nationwide International Resources, Inc (NIR), which were nothing more than shell corporations. The defendants use the bank accounts of these shell corporations to deposit investor money which was in the accounts of Petters Company, Inc. (PCI). Investors were falsely advised that the money would be used for the purchase of consumer electronics, which, in turn, would be sold by PCI to big-box retail stores for a profit. In reality, however, the funds were simply wired back to PCI and then used to further the fraud scheme and support the lavish lifestyle of Tom Petters. Court documents showed that White fabricated documents to make it appear to investors that PCI was purchasing merchandise from two suppliers when that was not the case. From 2002 through September of 2008, approximately $12 billion was routed through the EFBC and NIR accounts then back to PCI again. Multiple times each month wire transfers were made in amounts ranging from approximately $2 million to $25 million. Based on an agreement with PCI, Catain and Reynolds kept a percentage of the funds as their “commission.” That commission totaled more than $3 million for Catain and $9 million for Reynolds. Catain and Reynolds admitted they knew the wired funds came from investors, and that PCI had made false representations to those investors as to why they needed to send money to EFBC and NIR. They also admitted they knew the real reason for depositing the funds into the EFBC and NIR accounts was to conceal and disguise the true nature, source, ownership and control of that money.
Former Portland Man Sentenced to 97 Months for Role in Multi-State, Multi-Year Fraud Scheme
On September 13, 2010, in Portland, Ore., Antione Lamont Lawrence, “Tony Montana” or “T”, formerly of Portland, was sentenced to 97 months in prison and five years of supervised release, for his role in a fraud scheme that targeted dozens of cities across the United States from 2001 through 2007. Lawrence was also ordered to pay $688,623 in restitution to his victims. According to information presented in court, Lawrence led a team of thieves who traveled from Portland to other cities to burglarize commercial office buildings, steal checks, credit cards, and personal information, and then use the stolen items to create false identification documents and checks to commit bank fraud. In May 2010, Lawrence pleaded guilty to one count of bank fraud, and admitted that he and his team committed commercial burglaries in more than forty cities across the United States. Members of the team were experts at gaining entry to office buildings, and once inside they would steal a master key or key card which would allow them to re-enter buildings at will. After rummaging through desks to steal business checks, credit cards, account passwords, and personal information, Lawrence and his team would recruit a team of check cashers to walk into banks to cash the stolen checks in amounts ranging from a few thousand dollars to $50,000. Team members also shopped with the stolen credit cards, buying Rolex watches, designer clothes and high end electronics, or traveled to Las Vegas or area casinos to obtain cash advances on the stolen cards. Also on September 13, 2010, co-defendant Crystal Lynn Tuell, of Portland, was sentenced to five years probation for her role as a check casher for Lawrence’s team. Previously, Donald Wright was sentenced to 51 months in prison; Bradley Maier to 41 months in prison; Reggie Maier to 24 months in prison; Raymond Contreras III to 24 months in prison; and Alfonso Lopez-Ramirez to 71 months in prison, all in connection with this scheme.
Tucson Man Sentenced for Tax Fraud
On September 9, 2010, in Tucson, Ariz., Robert Hayes, of Tucson, was sentenced to 30 months in prison and two years of supervised release following his guilty plea to bankruptcy fraud and filing a false tax return. According to his plea agreement, Hayes operated The Hana Shirt Company, an Internet based vintage Hawaiian shirt sales business. In April 2005, Hayes filed an accounting of assets in a voluntary bankruptcy proceeding in which he claimed total assets of $3,900, which included $500 in clothes and 50 vintage shirts worth $500. He admitted that at the time he filed the accounting of assets, he possessed vintage shirts worth more than the $500 declared value. While Hayes was in bankruptcy proceedings, his father incorporated The Hana Shirt Co., and established a checking account for the company on behalf of the defendant, with the agreement that all future Hana Shirt Co., financial transactions be conducted through the business account. Beginning in June 2007, Hana Shirt Co. experienced a sharp increase in sales. The proceeds from approximately 77.5 percent of the sales proceeds never went into the Hana Shirt Co. business account. Rather, the proceeds ended up in Hayes’s personal bank accounts. Hayes spent the money on personal vehicles, home improvements, vacations and other goods and services for himself and his family. Hayes failed to report the income from the shirt sales that went directly into his personal accounts for tax years 2007 and 2008. The total tax loss for those years was $718,872.
Minnesota Woman Sentenced for Stealing More Than $709,000 from Her Employer
On September 8, 2010, in Minneapolis, Minn., Carol Silus was sentenced to 26 months in prison and ordered to pay full restitution for wire fraud and filing a false tax return. According to court documents, Silus admitted embezzling more than $709,000 from her employer between 2001 and 2007. Silus was hired as a nanny and household helper, and her work included bookkeeping, helping with children, and running personal errands. Starting in 2001, Silus also wrote checks to pay her employer’s bills; and in that capacity, Silus embezzled more than $709,000 over six years. In addition, Silus admitted filing a false 2007 tax return failing to include approximately $145,000 in income obtained through the fraud scheme. Silus further admitted failing to report approximately $675,000 in income from the scheme during tax years 2003 through 2007.
Minnesota Woman Sentenced for Her Role in Ponzi Scheme
On September 2, 2010, in St. Paul, Minn., Deanna Coleman was sentenced to 12 months and a day in prison for her role in a $3.7 billion fraud scheme orchestrated by Wayzata businessman Tom Petters. Coleman, of Plymouth, pleaded guilty in October 2008, to one count of conspiracy to commit mail fraud. According to the evidence gathered in this case, Petters Company, Inc. (PCI), which was formed in 1994 and owned solely by Tom Petters, was used for fraudulent purposes from its inception. As the fraud progressed, Coleman, who was hired by Petters as an office manager and later became an officer of PCI, admittedly began creating false documents that Petters and others used to induce investors to loan billions of dollars to PCI. For example, Coleman fabricated documents that indicated investment funds were used by PCI to purchase merchandise from two suppliers, Enchanted Family Buying Co. and Nationwide International Resources, Inc. In truth, no such purchases were made. Coleman also created fictitious documents highlighting the sale of PCI merchandise to big-box retailers, such as Costco and Sam’s Club. In reality, investment funds were used to make lulling payments to previous investors, pay off those who assisted in the scheme, fund businesses owned or controlled by the co-conspirators, and finance Tom Petters’ increasingly extravagant lifestyle. For her efforts, Coleman received millions of dollars.
Former Labor Union Official Sentenced for Stealing Union Funds and Filing False Tax Return
On August 30, 2010, in Riverside, Calif., Jimmie Leo Miles, of Barstow, who formerly served as the financial secretary and the treasurer of Local 1023 of the International Brotherhood of Electrical Workers (IEBW) Union, was sentenced to 12 months in prison. In addition to the prison term, Miles was ordered to pay $107,749 in restitution; $93,283 to IEBW Local 1023 and $14,466 to the Internal Revenue Service (IRS). Miles pleaded guilty in June 2010 to embezzling union funds and filing a false income tax return. As part of his guilty pleas, Miles admitted that he embezzled more than $90,000 in union funds from the beginning of 2003 through June 2007. Miles issued and signed more than 350 checks from the union’s bank account without obtaining authorization from the union’s membership or the union’s executive board. Miles wrote checks to himself and used other checks to pay for his personal expenditures, including his mortgage, homeowner’s insurance, automotive repairs, DirecTV, vehicle registrations, state and federal income tax.
Arizona Tax Accountant Sentenced for Stealing Almost $600,000
On August 30, 2010, in Phoenix, Ariz., Gregory A. Peters, of Mesa, Ariz., was sentenced to 32 months in prison and five years of supervised release as a result of his guilty plea to mail fraud, bank fraud and filing a false tax return for the year 2002. According to information presented in court, Peters and his wife owned and operated PBS Tax Firm Inc., a bookkeeping and tax return preparation company in Mesa and Scottsdale, Ariz. Through his company, Peters prepared municipal and State of Arizona sales tax returns for several of his clients. He had agreements with at least three of these clients to have them pay Peters their sales taxes along with his accounting fee. Peters would then prepare and submit the required tax returns as well as remit the taxes to the proper authorities. According to his plea agreement, Peters admitted that he stole almost $600,000 in funds remitted to him by clients for his personal use. He admitted that he prepared and filed false sales tax returns for these clients, showing that little or no sales tax was owed, while at the same time collecting the proper amount of tax from the clients. In some instances, Peters failed to file any sales tax returns at all, despite receiving substantial amounts of sales taxes from a client. Peters took approximately $589,366 of the funds remitted to him by clients for payment of their accrued sales tax obligations and admitted to using the stolen funds for his lavish personal living and family expenses. In June 2006, when applying for a $600,000 home equity line of credit, Peters’ loan application contained a financial statement and copies of U.S. income tax returns that show Peters receiving a greater amount of income then what was actually reflected on the tax returns he filed with the IRS.
Minnesota Man Sentenced to 25 Years in Prison for Swindling 923 Investors out of $158 Million
On August 24, 2010, in Minneapolis, Minn., Trevor Cook was sentenced to 300 months in prison for mail fraud and tax evasion. According to court documents, Cook admitted that from January 2007 through July 2009, he schemed to defraud people by selling investments in a foreign currency trading program. Cook diverted a substantial portion of the money provided to him for other purposes, including making payments to previous investors; purchasing ownership interest in two trading firms; buying a real estate development in Panama; paying personal expenses; and acquiring the Van Dusen Mansion in Minneapolis. To carry out his massive Ponzi scheme, Cook made false statements to potential investors, including promises that the investment program would generate annual returns of ten to twelve percent, and that trading would present little or no risk to the investors’ principal. He also misrepresented to investors the status of their investments. Cook admitted that on April 15, 2009, he filed a false and fraudulent U.S. Individual Income Tax Return, Form 1040, for calendar year 2008. That return failed to report taxable income of more than $5.2 million, for which more than $1.8 million was due in taxes.
Convenience Store Owner Sentenced for Tax Fraud Scheme
On August 20, 2010, in Richmond, Va., Mohammad Asif Ali, of Midlothian, Virginia, was sentenced to 12 months in prison for failing to report $400,829 of income and $107, 489 of tax on his personal tax returns from 2003 to 2007. According to information presented in court, Ali owned, operated, and controlled Richmond Miller Mart, a convenience store located at 6500 Jefferson Davis Highway, Richmond, Virginia. Ali established a subchapter C corporation, In & Out, Inc., in August 2001. He incorporated another subchapter C corporation, Triple Crown, Inc., with another person in November 2004. The business of both of these corporations was the operation of the same convenience store. Ali’s underreporting scheme involved the skimming of corporate receipts in three ways. First, he deposited substantial sums of currency receipts into his personal bank account rather than the corporate bank account. Second, he wrote checks from the corporate checking account for personal expenses, such as rent, car payments and gifts to family members in Pakistan. Third, he diverted checks payable to the corporation to himself by depositing them into his personal account. He then concealed each of these diversions from the person preparing his personal income tax returns. Ali pleaded guilty to the charge of filing a false tax return for 2007 on which he fraudulently understated his adjusted gross income by $183,056 and his tax due and owing by $56,390. He admitted, however, that he had also perpetrated the same scheme from 2003 to 2007. The total additional income for the five year period was $400,829, which resulted in additional unreported income tax liabilities of $107, 489.
Defendant Who Assisted Individuals in Transferring Property to The Order Of Tranquility Sentenced
On August 20, 2010, in Salt Lake City, Utah, Rulon DeYoung, who pleaded guilty to one count of impeding the lawful functions of the IRS and four counts of tax evasion in May, will serve 36 months in federal prison. As a part of a plea agreement reached with federal prosecutors, DeYoung admitted that he became aware of various individuals who had been assessed taxes by the IRS. He said he knew that these individuals either had tax liens on some piece of property they owned, either in their own names or in the names of a nominee, or that they had received notices from the IRS and were in danger of losing those properties. DeYoung admitted he assisted each of the individuals in transferring their property to The Order of Tranquility in order to evade and defeat the payment of the taxes they owed. After these individuals had transferred their properties to The Order of Tranquility, they continued to use those properties as they had before the transfers. DeYoung also admitted that because of his prior experience, he was aware that the actions these individuals were taking were inconsistent with the laws of the United States as interpreted by the courts of the United States.
Virginia Man Sentenced for Filing False Returns
On August 20, 2010, in Richmond, Va., Mohammad A. Ali was sentenced to 12 months in prison, followed by one year of supervised release, and ordered to pay a $100 special assessment. In addition, Ali was ordered to cooperate with the Internal Revenue Service (IRS) in the collection of any taxes, interest, and penalties. Ali owned and operated Richmond Miller Mart, a convenience store located in Richmond, Virginia. Ali pleaded guilty in May 2010 to subscribing to a false return. According to court documents, for calendar years 2003 to 2007, Ali failed to report on his tax return an additional $400,829 in income he skimmed from his convenience store. Ali also wrote checks from the corporate checking account for personal expenses, such as rent, car payments, and gifts to family members in Pakistan.
Oklahoma Man Sentenced for Tax Evasion
On August 18, 2010, in Oklahoma City, Okla., Randall Osborn of Shiatook, Oklahoma, was sentenced to 12 months and a day, one year of supervised release and ordered to pay more than $472,000 in restitution for failing to report all income from his business. According to court documents, Osborn pleaded guilty to falsely reporting his income for the years 2002, 2003, 2004 and 2005. Over that time he failed to report nearly $619,000 resulting in a tax loss to the government of more than $125,000.
New Jersey CPA Sentenced for Failing to Report Income from Tax Preparation Business
On August 18, 2010, in Newark, N.J., Michael Arizechi, a Certified Public Accountant (CPA), was sentenced to 12 months and a day in prison, followed by three years of supervised release, and ordered to pay a $3,000 fine. Arizechi pleaded guilty on February 8, 2010 to one count of income tax evasion for failing to report all his income for the 2003 tax year. According to court documents, Arizechi, owned a tax preparation business in East Orange known as Michael Arizechi CPA & Associates, where he prepared and filed tax returns with the Internal Revenue Service (IRS) on behalf of his clients. As a sole proprietorship, Arizechi was required to report all gross receipts generated by his tax preparation business on Schedule C of his personal income tax return. Arizechi failed to report approximately $143,418 in gross receipts for the 2003 tax year. Arizechi also admitted that he failed to report gross receipts of approximately $80,836 in 2002 and $126,133 in 2004.
Ohio Man Sentenced for Women, Infants, and Children (WIC) and Food Stamp Program Fraud
On August 17, 2010, in Cleveland, Ohio, Abrahem Jabr was sentenced to 30 months in prison and ordered to pay $1,713,904 in restitution. Under the Food Stamp program, qualified recipients are issued coupons or Electronic Benefit Transfer (EBT) cards for purchase of eligible food and goods. The Women, Infants, and Children (WIC) program issues coupons to qualified recipients for purchase of eligible food and goods. In each program the authorized retailers are reimbursed for redeemed food stamps and WIC coupons. According to court documents, Abrahem Jabr, along with his brother, Ahmad Jabr, Mahmoud Muntaser, and others defrauded the Food Stamp and WIC programs. The defendants would buy food stamp coupons, EBT cards, and WIC coupons for cash, sometimes at a discounted price, or allow recipients to use coupons for ineligible items such as beer and cigarettes. Then the coupons and EBT cards would be redeemed for their full authorized values with the U.S. Department of Agriculture (USDA). The defendants were compensated with more money than was actually exchange by the transactions. During 2002 through 2004, one grocery store owned by the defendants fraudulently redeemed approximately $1,995,735 in food stamp and WIC programs. In February 2010, Ahmad Jabr was sentenced to 41 months in prison and ordered to pay $996,944 in restitution. In August 2009, Mahmoud Muntaser was sentenced to 46 months in prison and ordered to pay $1,995,735 in restitution.
Four Former Comstock Image Employees Sentenced for Embezzling over $900,000
On August 17, 2010, in Newark, N.J., four former employees of Comstock Images, Inc. were sentenced for their roles in a conspiracy to embezzle approximately $900,000 from their employer through phony and falsely inflated invoices. Robert Gonzalez, of Lake Mary, Fla., served as the head of information technology (IT) for Comstock; he was sentenced to 40 months in prison and ordered to pay $982,361 in restitution. Geraldine Manuel, of Elmwood Park, N.J., served as head of the finance department for Comstock; she was sentenced to 20 months in prison and ordered to pay $600,000 in restitution. Philip McKenna was sentenced to three months of house arrest and Andrew Edwards was sentenced to two years of probation; McKenna and Edwards were ordered to pay up to $400,000 in restitution. According to court documents, Gonzalez recruited Manuel and others in Comstock’s finance and IT departments to participate in an embezzlement scheme. Gonzalez and Manuel used a Comstock American Express card to make personal purchases worth up to thousands of dollars at a time. They attempted to hide the purchases by creating phony expense reports for computer and IT-related equipment approximating the amounts of the personal purchases. Manuel would then issue Comstock checks to pay the American Express account. In addition, the defendants created fraudulent expense reports as reimbursement for personal expenses, cash, gifts, and trips. Manuel admitted that she issued Comstock checks to herself and her co-conspirators for the purported reimbursement of expense vouchers she knew to be fraudulent. Gonzalez pleaded guilty to conspiracy to commit mail and wire fraud, as well as two counts of tax evasion for failing to report taxable income from the expense report scheme. Manuel, McKenna, and Edwards pleaded guilty to conspiracy to commit mail and wire fraud. In addition to the prison terms, Gonzalez, Manuel, and McKenna were each sentenced to serve three years of supervised release.
Portland Man Sentenced to 24 Months for Role in Fraud Scheme
On August 12, 2010, in Portland, Ore., Raymond Contreras, III, of Portland, was sentenced to 24 months in prison and three years supervised release, for his role in a fraud scheme that targeted dozens of cities across the United States from 2001 through 2007. Contreras was associated with a team of individuals who traveled from Portland to other cities to burglarize commercial office buildings, steal checks, credit cards, and personal information, and then use the stolen items to create false identification documents and checks to commit bank fraud. In April 2010, Contreras pleaded guilty to one count of conspiracy to commit bank fraud and aggravated identity theft, and admitted that he used false identification documents to cash fraudulent checks at several banks throughout the country. The judge also ordered Contreras to pay $146,000 in restitution to his victims. Previously, Donald Wright was sentenced to 51 months in prison; Bradley Maier to 41 months in prison; Reggie Maier to 24 months in prison; and Alfonso Lopez-Ramirez to 71 months in prison, all in connection with this scheme. Two additional co-defendants (Antione Lawrence and Crystal Tuell) have pleaded guilty to offenses in connection with the scheme and are awaiting sentencing.
Dallas Realtor Sentenced for Tax Evasion
On August 12, 2010, in Dallas, Texas, John Sheets was sentenced to 40 months in prison and ordered to pay more than $2.4 million in restitution for tax evasion. According to court documents, Sheets is a licensed realtor and since 1996, Sheets and his wife, Eleanor, have successfully worked as real estate agents and have established multiple closely-held businesses including Eleanor Mowery Sheets, Inc.; Dallas EMS, LLC; and E-Residential, LLC. Sheets admitted that he has substantial unpaid individual and corporate tax debts from 1997, 1998, 1999, 2001, and 2005 through 2008 totaling approximately $2.7 million, including penalties and interest. The documents further state that beginning in 1998, rather than pay his substantial tax debts; Sheets used various business entities to conceal the nature and extent of his assets. Sheets admitted to doing personal business and paying personal creditors with these funds, rather than paying the IRS. Using these businesses, Sheets commingled funds to pay approximately $436,000 in mortgage interest to three lenders so that he and his wife could live in a $1.3 million home, and to buy personal items including an interest in a private airplane and vehicles. He also paid numerous personal creditors. Sheets further admitted that on April 5, 2006, he used a local check-cashing business to avoid paying federal income taxes; he took a $123,000 settlement check to the local check-cashing business, and rather than deposit the check into his personal bank account for free, he paid more than $2,000 to cash that check. None of the money from that check was used to pay the IRS; he used the funds to pay for personal expenses and other creditors.
North Carolina Investment Counselor Sentenced for Investment Fraud and Tax Fraud
On August 10, 2009, in Greenville, N.C., Harold Earl Blondeau, of Raleigh, was sentenced to 36 months in prison and ordered to pay $425,694 in restitution to the Internal Revenue Service (IRS) and several entities. A Criminal Information was filed on April 28, 2009 charging Blondeau with investment advisor fraud and making and subscribing to a false return. According to the Criminal Information, Blondeau utilized his role as an investment advisor to a particular client to gain access to funds held in trust for the benefit of the individual. Blondeau convert these funds for his own personal use and benefit, including using the money to purchase a beach house, large amounts of wine, and to pay down his own mortgage line of credit. Blondeau also failed to report or pay any taxes on these ill-gotten proceeds.
Georgia Man Sentenced on Tax Evasion Charges
On August 4, 2010, in Atlanta, Ga., Keith Kim, of Duluth, was sentenced to 21 months in prison on tax evasion charges relating to his failure to report and pay taxes on $1.4 million of his company’s receipts in the period 2003 through 2006. According to court documents and information presented in court, Kim operated mortgage brokerage businesses under two names, Capital Innovations Group (CIG) and KSK & Associates (KSK). During closing transactions, real estate attorneys wrote checks to the two companies for the brokerage services provided to lenders. Kim provided false information regarding the gross receipts of CIG and KSK to the accountants who prepared his corporate and personal income tax reports. From 2003 until 2006, Kim simply cashed or caused to be cashed approximately $1.4 million in these checks. For 2003 and 2004, he did not report this income on either his personal or the businesses’ tax returns. In 2005 and 2006, Kim did not file any corporate or personal tax returns. As a result, Kim evaded approximately $242,000 in taxes.
Seattle Area Man Sentenced for Operating a Ponzi Scheme
On August 2, 2010, in Seattle, Wash., Kevin Halverson, of Bothell, Washington, was sentenced to 51 months in prison, to be followed by three years of supervised release, and ordered to pay $7,654,639 in restitution. On April 19, 2010, Halverson was indicted for a Ponzi scheme involving alleged investments in high profile event tickets. Between 2003 and 2006, Halverson induced investors to provide him with $10 million, for a business purchasing tickets to high demand events, and reselling them at a substantial profit. Halverson purchased a small number of tickets to make the business appear legitimate, but primarily used investor money to pay off earlier investors in the manner of a typical Ponzi scheme.
Virginia Car Wash Owners Who Kept Two Sets of Books Sentenced on Tax Charges
On July 30, 2010, in Richmond, Va., Thomas Ellis and his wife, Brenda Ellis, were sentenced to 18 months and 12 months in prison, respectively, for conspiring to defraud the Internal Revenue Service (IRS) of more than $133,000 in tax revenue from 2003 through 2007. Thomas and Brenda Ellis were the owners of Buzz Thru Car Washes, an automated car wash service that provided washing, waxing, vacuuming and other vendor services after a customer deposited cash or coins into a machine. According to court documents, from 2003-2007, Thomas Ellis would bring the daily car wash cash receipts to the home office where Brenda Ellis would account for the cash in two sets of records and ledgers. On one set, she recorded the true amount of cash received by the two car washes. These amounts were summarized monthly and recorded on ledgers hidden on the back of a desk in the Ellis’ home office. On another set, however, she recorded a lesser amount of cash received and deposited this amount in a bank account. They kept the rest of the cash in a safe at the house or used the funds to maintain their lifestyle. When the defendants met with their accountant to prepare their income tax returns, they only reported as income the lesser amount of cash. Between 2003 and 2007, the defendants understated $386,397 in income from their car wash businesses on their Schedule C, Profit or Loss From Business, resulting in the non-payment of $133,163 in income taxes.
Oklahoma Man Sentenced for Tax Evasion
On July 30, 2010, in Tulsa, Okla., David Nigh was sentenced to 15 months in prison, one year of supervised release and ordered to pay nearly $55,000 in restitution for filing a false tax return. According to court documents, Nigh was charged with five counts of filing false tax returns from 2001 through 2005. Nigh pleaded guilty to one charge admitting that he under-reported his 2005 income, claiming only $113,745 when in fact he made more than twice that amount, $246,952.
California Resident Sentenced to 15 Years in Prison for Investment Fraud Scheme
On July 30, 2010, in Oakland, Calif., Peter C. Son, of Danville, Calif., was sentenced to 180 months in prison for conspiracy to commit wire fraud and conspiracy to commit money laundering. Son was also sentenced to serve three years of supervised release following his prison term and ordered to pay restitution in an amount to be determined. According to court documents, Son and his business partner, Jin Chung, were the owners of SNC Asset Management, Inc. and SNC Investments, Inc. (Companies). On April 9, 2010, Son pleaded guilty and admitted he falsely advertised that the Companies had a distinguished record and were highly successful in foreign exchange trading when in fact records reflect that very little foreign exchange trading was done by either company. Son also admitted that potential investors were falsely promised annual returns on their investments of between 24 and 36 percent a year. From the beginning, investors were strongly encouraged to reinvest their profits to avoid having to return funds to the customers. Returns were paid out to only those investors who demanded that the accounts be closed or those who demanded monthly returns be paid instead of reinvested. Court records reflect that from 2003 through October 2008, approximately 500 customers invested approximately $85 million in the Companies, receiving in return approximately $23 million, leaving investors with losses amounting to approximately $62 million. Most of the investors were Koreans living in California and Korea. In October 2008, without any advance warning to employees or customers, Son and Chung failed to report to work. According to court records, Chung remained in Korea, where he had gone on a business trip, and Son failed to report to SNC Pleasanton, Calif. office. Son remained a fugitive until June 8, 2009, when he self surrendered.
CEO of Missouri “Duncan Group” Sentenced to Prison on Multi-Million Dollar Ponzi Scheme
On July 29, 2010, in St. Louis, Mo., Aaron Duncan was sentenced to 53 months in prison and ordered to pay $3.8 million in restitution for mail fraud and money laundering. According to court documents, Duncan represented that The Duncan Group was involved in real estate investments, including buying, rehabilitating and selling residential real estate. Duncan solicited investors in Missouri and around the United States to participate in his real estate projects through The Duncan Group by making false representations regarding the security of investments and the rates of returns promised. Bank records revealed that The Duncan Group investment program was a Ponzi scheme. Investors who were repaid on their principal investments were paid from funds obtained from other investors, rather than from returns on investments in real estate projects as promised and represented Duncan falsely told investors that their principal investments were secured by a specific property. For example, some investors were told that an investor’s name would be placed on a particular deed or that investors were “securitized” by first mortgages on properties. Bank records also show that beginning in December 2005, Duncan was experiencing personal financial problems and was often late on his home mortgage payments. The scheme operated from January 2006 until Duncan advised investors of his intention to declare bankruptcy in October 2008. During the scheme, Duncan received investment principal from more than 50 investors who ultimately lost a total of approximately $3.9 million. Records recovered during the investigation revealed that Duncan only bought approximately ten (10) properties, and that these ten properties lost money in total. Investor money was not used as promised and represented; instead, investor money was routinely used to pay other investors, pay routine expenses of the business, and to pay Duncan’s personal expenses.
Nevada Company President Sentenced to Prison for Defrauding Hawaii Residents Facing Foreclosure
On July 29, 2010, in Honolulu, Hawaii, John Gilbert Mendoza, was sentenced to 72 months in prison, five years of supervised release, and to pay a special assessment of $1,875. Mendoza was also ordered to pay restitution in the amount of $881,514 to three different victims. Mendoza was originally indicted on May 15, 2008, for conspiracy, mail and wire fraud, and loan fraud. On July 1, 2009, a superseding indictment charged Mendoza with additional counts involving money laundering and failure to file tax returns. On February 10, 2010, Mendoza was convicted of all twenty-two felony counts. According to the evidence admitted during the trial, Mendoza, as President of a Nevada “shell” corporation with bank accounts in Hawaii, befriended Hawaii homeowners who were facing foreclosure and told them that he had a plan for stopping the foreclosure proceedings and for allowing them to keep title to their homes. Contrary to what he told these homeowners, the evidence showed that Mendoza organized the sale of the homes to third party straw buyers, or, buyers who never intended to reside in the property. To purchase the properties, the straw buyers took out loans in their name. The loans contained false statements about how much income the buyers earned, about who was going to reside in the property, and about who was going to make the monthly payments. According to testimony from lending institution representatives, had they known the truth, the loans would not have funded. After the loans were funded, Mendoza deposited the proceeds, which exceeded $431,000, into his own accounts. The loans went into default and the properties were both sold as part of foreclosure proceedings.
Former Manager of Local Medical Group Sentenced to Prison for Tax Evasion
On July 29, 2010, in Corpus Christi, Texas, Gina Holley was sentenced to 24 months in prison followed by three years of supervised release and ordered to pay nearly $298,000 in back taxes for failing to pay taxes on money she embezzled from her employer. According to court documents, Holley pleaded guilty to tax evasion in April 2010 admitting she failed to pay taxes on the money she embezzled from her employer between 2003 and 2006 while working as the office manager for a medical group. Holley failed to disclose this income on her tax returns which resulted in almost $298,000 in unpaid taxes to the United States. According to pleadings filed of record in the case, in September 2007 the medical group discovered Holley had been using a company ATM card to make unauthorized withdrawals. Further investigation revealed that in addition to the unauthorized withdrawals, Holley also embezzled money by issuing company checks to herself, writing company checks to pay her credit cards and other expenses and making unauthorized transfers to her checking account. As office manager, Holley had control of accounts payable and the payroll as well as being in charge of bank reconciliations. Holley altered business records to conceal the fraud by making various journal entries and coding the majority of the embezzled funds to medication expenses. She used the embezzled funds to purchase vehicles and a house, and to fund cosmetic surgery and frequent trips to Las Vegas, Nev., New York and Puerto Rico. The medical group obtained a civil judgment against Holley of more than $1,132,000 in compensatory damages and $2.5 million in exemplary damages as a result of the embezzlement.
West Virginia County Business Owner Sentenced for Failing to Report Nearly $1 Million in Income
On July 28, 2010, in Charleston, W. Va., Alison M. Lambert, of Man, West Virginia, was sentenced to 12 months and one day in prison for tax evasion. Lambert was also ordered to pay a $10,000 fine and $256,092 in restitution to the Internal Revenue Service (IRS). Lambert pleaded guilty on April 16, 2010, to evading the payment of taxes on cash income generated from restaurant, bar and motel businesses she owned in Man, West Virginia. According to court documents, from 2004 to 2008, Lambert failed to report nearly $1 million in cash income derived from her businesses which were operating under the name Colonial Room Motel and Restaurant. In addition to her prison sentence, Lambert, a former member of the Logan County Board of Education, resigned that position in April 2010 following the entry of her guilty plea.
Former City Employee Sentenced For Role in Schemes Totaling $756,000
On July 26, 2010, in Springfield, Mo., David Griggs was sentenced to 32 months in prison, ordered to pay nearly 273,000 in restitution and forfeit more than $756,000 along with a 1999 Dutchman travel trailer for mail fraud and money laundering. According to court documents, Griggs pleaded guilty to conspiracy to commit mail fraud, theft from an organization receiving federal funds, and conspiracy to commit money laundering. Griggs was employed by the city of Nixa as a utility worker in the city’s street department from November 6, 2003, to February 8, 2006. Co-defendant Larry Covington pleaded guilty on June 1, 2010, to his role in the conspiracy to defraud the city of Nixa. Griggs and Covington used two fictitious businesses established by Griggs to invoice the city of Nixa for nearly $274,000 in goods and services for the street department that were never provided. During the course of the conspiracy, 122 fraudulent invoices were submitted to the city. Covington admitted that he prepared purchase orders for street department supplies that were invoiced by the two fictitious businesses. Covington caused the city to prepare purchase orders and falsely acknowledged receiving the items, which were never actually delivered. Griggs established separate post office boxes for the two businesses. When the city mailed checks payable to the businesses, they were deposited into business bank accounts and Covington and Griggs split the proceeds. Griggs admitted that he conspired with others to conduct financial transactions involving the proceeds of the mail fraud. Covington also admitted that he registered a third fictitious business which he repeatedly used to invoice the city of Nixa for goods and services that were never provided. Between December 7, 2004, and February 25, 2009, Covington submitted 150 fraudulent invoices totaling more than $482,000 to the city of Nixa for goods and services that were never provided. Covington repeatedly made false representations to the city that his business would supply goods and services, and falsely represented to the city that goods had been delivered and that services had been performed by signing or initialing fraudulent invoices. Covington also admitted that he participated in a mail fraud conspiracy related to financial transactions involving the proceeds of the mail fraud. Larry Covington is awaiting sentencing.
Former Fugitive Sentenced in Multi-Million Dollar Fraud Scheme
On July 26, 2010, in Manhattan, N.Y., Avrum David Friesel was sentenced to 27 months in prison, two years of supervised release, and ordered to pay over $11 million in restitution. Friesel pleaded guilty to one count of conspiracy to defraud a number of federal agencies and federal and state programs, including the Pell Grant and Section 8 Housing programs. Friesel fled to Israel in 1997, than to the United Kingdom in 1999, and finally was extradited to the United States in August 2009. According to court documents and statements made in court, Friesel and several other co-defendants defrauded a number of federal and state grant, loan, and subsidy programs of millions of dollars for the benefit of themselves and other residents of the Village of New Square, an incorporated village in Rockland County. Friesel and his co-defendants assisted thousands of New Square residents and others in enrolling in fraudulent postsecondary educational programs in order to obtain tens of millions of dollars in Pell Grants and other forms of student financial aid to which they were not entitled. Most of these students were enrolled in “independent study” programs that did not require the students to attend classes, but instead permitted them to study independently under the guidance of “mentors,” who supposedly met with them periodically to gauge their progress and administer examinations. Many of these “students” were actually ineligible to receive financial aid because they were not seeking any certificate or degree, or because they were still in high school. Co-conspirators created entities through which federal and state funds could be fraudulently obtained; submitted fraudulent documentation in order to establish the eligibility of New Square residents and others to participate in these programs; used the funds obtained from these programs for impermissible purposes; and concealed their fraud by using false names and nominee bank accounts. In addition, Friesel and others defrauded other federal programs and departments, including: a Small Business Administration program designed to provide venture capital to small, minority-owned businesses; the Section 8 rental subsidy program funded by the U.S. Department of Housing and Urban Development; the Social Security Administration; and the Internal Revenue Service.
Owner of Missouri Metal Recycling Company Sentenced on Tax & Social Security Fraud Charges
On July 16, 2010, in St. Louis Mo., Carl Neff was sentenced to 18 months in prison and ordered to pay nearly $433,000 in restitution for filing a false tax return and defrauding the Social Security Administration. According to court documents Neff began operating a business known as Bourbon Metal Recycling located in Bourbon, Mo. In 2002. The business purchased scrap metal from the public and resold it to larger scrap metal companies, mostly in the St. Louis area. Neff paid cash to his customers to purchase the scrap metal. He was the person in charge of the business and made all the business decisions, such as hiring, firing, prices to be paid for scrap purchased, and decisions about where to resell the scrap metal he purchased. Employees of the business were paid in cash. When Neff filed his federal income tax returns for the years 2003 through 2006, he did not report any income from Bourbon Metal Recycling. His return was prepared by a commercial income tax return preparer, but Neff did not tell them about the business nor provide any financial information. For the calendar years 2003-2006 the business gross receipts were approximately $1,558,000. None of this income was reported on Neff’s tax returns for those years, and the existence of Bourbon Metal Recycling was totally omitted from the returns. The total additional tax due and owing for the four years is more than $378,000. While Neff was operating Bourbon Metal Recycling, he was also receiving Social Security disability payments because of an injury to his hand. In order to receive these payments, he could not be substantially gainfully employed. In addition, Neff periodically had to complete forms for the Social Security Administration which provided information concerning both his disability and his work, including the amount he was earning. Despite the fact that he was operating Bourbon Metal Recycling, and making a significant income doing so, he reported to Social Security that he continued to be disabled and was earning only a small amount of money. From September 2003 through October 2008, Neff fraudulently received Social Security disability payments of more than $54,000.
Louisiana Man Sentenced to 30 Years for Operating a $20 Million Investment Scheme
On July 22, 2010, in New Orleans, La., Matthew B. Pizzolato, of Tickfaw, was sentenced to 360 months in prison, three years of supervised release, and ordered to pay over $15 million in restitution to the victims of his investment scheme. Pizzolato pleaded guilty on April 1, 2010 to numerous federal charges including mail fraud, wire fraud, money laundering, securities fraud, and witness tampering. According to court documents, Pizzolato admitted that since 2005, he was affiliated with and/or operated and/or owned Gulf Region Guaranty, Inc. and its affiliated companies. During this time period, Pizzolato operated an investment Ponzi scheme targeting older investors, specifically retirees. He admitted that he lured his potential victims through advertisements in the local daily newspapers in New Orleans, Baton Rouge and Hammond by promising rates of returns that were higher than market rates for CDs or U.S. Treasury Bills. These advertisements described Pizzlato’s investments as “guaranteed”, “safe”, “conservative”, “insured” and “no-risk.” Pizzolato admitted that he used the investors’ money to build a new half-million dollar home in Ponchatoula, Louisiana and to purchase luxury vehicles and a $35,000 engagement ring. He also made payments totaling millions of dollars to friends and family, invested in high-risk futures trading and/or commercial real estate, and made lulling payments to investors in an effort to conceal the true nature of the Ponzi scheme.
New Jersey Contractor Sentenced for Tax Evasion
On July 22, 2010, in Trenton, N.J., Daniel Carlo, owner of a construction company, was sentenced to 12 months and a day in prison to be followed by two years of supervised release. Carlo pleaded guilty in August 2009 to an Information charging him with tax evasion for failing to report $242,764 in income. According to court documents and statements made in court, Carlo owned and operated a construction company under the name of “Cartar” from his residence in Barnegat. Carlo admitted that in April 2006, he prepared, signed and filed a false 2005 U.S. Individual Income Tax Return which stated that his taxable income for calendar year 2005 was zero. Carlo failed to report taxable income of approximately $242,764, resulting in approximately $78,792 in tax due and owing. Carlo admitted that in an effort to hide the unreported income, he deposited client receipts into bank accounts held in the names of his wife and daughter.
Pennsylvania Couple Sentenced on Tax Evasion Charges
On July 20, 2010, in Scranton, Pa., Frank and Salli Ann Peperno, husband and wife from Old Forge, were sentenced on charges of tax evasion. Frank Peperno was sentenced to 43 months in prison; Salli Ann Peperno was sentenced to two years probation with six months of home confinement. According to court documents, Salli Ann was charged with conspiracy to commit tax evasion in conjunction with a gym, Maximum Health & Fitness, owned and operated by herself and her husband. Frank Peperno was charged with tax evasion and mail fraud. Frank Peperno, a former licensed stockbroker, unlawfully converted monies belonging to clients.
Indiana Couple Sentenced to Prison for Income Tax Evasion and Failure to File Tax Returns
On July 13, 2010, in Indianapolis, Ind., Lisa Sorrell was sentenced to 30 months in prison and three years of supervised release for tax evasion and Christopher Sorrell was sentenced to 24 months in prison and one year supervised release. According to court documents, the Sorrells admitted they evaded the assessment of income tax for the years 2002, 2003 and 2004 by failing to file income tax returns and committing affirmative acts of evasion. The Sorrells owned a profitable wholesale turkey feather company with locations in Indiana and North Carolina. From 2002 through 2004 they earned approximately $1.4 million. They evaded taxes by using shell corporations, warehouse banks and family members as nominees. As a result of their conviction, the Sorrells paid more than $418,000 of back taxes prior to sentencing and still owe more than $76,000 as restitution.
Former Atlanta Resident Sentenced for Not Reporting Over $560,000 in Income
On July 9, 2010, in Atlanta, Ga., Wendell White, of Woodland Hills, California, was sentenced to 24 months in prison, to be followed by one year of supervised release, and ordered to pay a $10,000 fine and $233,302 in restitution to the Internal Revenue Service (IRS). White pleaded guilty on January 29, 2010 to the charges of filing false income tax returns. According to court documents, White, who formerly lived in Atlanta, submitted false income tax returns to the IRS in 2003, 2004, and 2005. He failed to report over $560,000 of income during those three years. White admitted that at least some of the income he failed to report came from illegal sources.
Escort Service Operator Sentenced To Prison for Tax Evasion
On July 9, 2010, in Salt Lake City, Utah, Jodi Hoskins, who operated Companions, a call-out escort service in Salt Lake City, was sentenced to 36 months in prison, three years of supervised release, and ordered to pay $736,183 in restitution. In January 2010, Hoskins was found guilty of one count of tax evasion for underreporting to the IRS the gross receipts of the Companions escort service for 2002. According to the court’s findings, Hoskins was actively involved in the management and operation of Companions from its inception in 2000 and was aware of all of the company’s finances. Her husband, Roy B. Hoskins, was the owner of Companions. The evidence at trial showed that the husband and wife underreported the gross receipts for Companions by $1,204,354 in 2002, resulting in a tax loss of $485,443. Roy B. Hoskins was previously sentenced to 60 months’ incarceration after he pleaded guilty to tax evasion.
Florida Man Sentenced for Tax Fraud
On July 7, 2010, in Tampa, Fla., Joseph Christopher Hooker, of Tierra Verde, Florida, was sentenced to 57 months in prison for mail fraud and tax fraud. In addition, Hooker was ordered to pay restitution of $2,478,423 to Roger William Erdelac, owner of Blue Hawaiian Products, and 819,426 to the Internal Revenue Service (IRS). According to court documents, from approximately 2002 to November 2006, Hooker, along with another individual, Jack Shaw, executed a scheme to defraud Blue Hawaiian Products, a company that manufactured and sold fiberglass swimming pool shells. Hooker deposited customer checks made payable to his employer, Blue Hawaiian Products, into a business checking account in the name of Blue Hawaiian Pools and Supplies which Shaw opened. Hooker then prepared fraudulently altered Blue Hawaiian invoices reflecting substantially lower purchase prices than the true invoices and Shaw purchased cashier checks for the lower prices from the fraudulent account and remitted them to Blue Hawaiian Products in payment of the fraudulent invoice. Hooker also filed fraudulent Individual Income Tax Returns for years 2003, 2004, 2005, and 2006 that omitted Hooker’s proceeds from the scheme.
Indiana Construction Company Owner Sentenced for Tax Evasion
On July 1, 2010, in Indianapolis, Ind., David W. Pittman, of Greenwood, was sentenced to 12 months in prison, 18 months’ home detention and two years of supervised release following his plea of guilty to income tax evasion. He must also cooperate with the IRS in determining his income tax liabilities. Pittman, the owner/operator of Pittman Framing, a residential construction framing company, failed to file income tax returns for the years 1994 through 1998. The IRS assessed the income tax owed by Pittman for each of these years, but he took steps to evade the payment of these assessed taxes. The total income tax deficiency owed by Pittman is approximately $497,000. Pittman also failed to file income tax returns for the years 2003 through 2005 and 2007. The total income owed by Pittman for those years is approximately $48,000.
Former Business Executive Sentenced for Tax Evasion
On June 30, 2010, Charleston, W.Va., Carl Steward, of Asheville, North Carolina, was sentenced to 24 months in prison for tax evasion. Steward pleaded guilty in February 2010 and admitted that he failed to file income tax returns for the 2000 and 2001 tax years and filed false income tax returns for the 2002 and 2003 tax years. According to court documents, from approximately 2000 to 2003, Steward was the vice president of marketing for American Canadian Expeditions (ACE), an outdoor adventure company located in Oak Hill, West Virginia. During this time, Steward received “commissions” from ACE marketing vendors even though he was a salaried employee and not entitled to receive such commissions. In an effort to disguise the illegal income, Steward directed vendors to make commission payments to the Society for the Preservation of Vaudeville and Variety Arts, Inc. (SPVVA), a charitable entity operating in Florida. Steward opened a local bank account in the name of SPVVA, directed commission payments be made to that account, and then used the SPVVA account for personal use. In addition, in May 2006, Steward lied to an IRS agent by stating that he had filed accurate tax returns for the 2000 through 2003 tax years.
Oklahoma Woman Sentenced for Filing a False Tax Return
On June 29, 2010, in Oklahoma City, Okla., Robin Ramming, of Hinton, Oklahoma, was sentenced to 28 months in prison, one year of supervised release, and ordered to perform 104 hours of community service during your supervised release. In addition, she was ordered to pay $395,700 to the Hinton Economic Development Authority and $117,257 to the Internal Revenue Service (IRS); she has already re-paid Wheeler Chevrolet. According to court documents, until 2006, Ramming was employed at the Hinton Economic Development Authority in Caddo County. On January 22, 2010, she pleaded guilty to embezzling from that employer by taking cash supposedly to be used at the Sugar Creek Canyon Golf Course over the course of more than six years. During 2007, Ramming worked at Wheeler Chevrolet as an accountant. At her plea hearing on February 4, 2010, Ramming admitted that she embezzled from that employer and used the money for personal expenses. She pleaded guilty to signing a personal federal income tax return that failed to report the money that she embezzled.
California Man Sentenced in Illegal Stock Compensation Scheme
On June 28, 2010, in Los Angeles, Calif., William Manfei Woo, of San Gabriel, California, was sentenced to 18 months in prison after being convicted of conspiracy and subscribing to a false tax return. Woo was also ordered to spend 18 months on home detention. According to information in court documents, Woo received American Fire Retardant Corporation stock from Stephen Owens, the company’s president and chief operating officer. During 2003 and 2004, Owens caused American Fire Retardant Corporation to issue stock to Woo directly and indirectly through two nominees. The stock issued to Woo was issued as free-trading, unrestricted stock of the type issued to employees, consultants, and advisors who provide bona fide services to the company. When he was issued the stock, Woo knew that neither he nor either of his nominees performed bona fide services that justified the amount of stock issued to them. The income Woo failed to report on his 2004 income tax return was compensation he received in the form of stock from American Fire Retardant Corporation. In connection with the preparation of his 2004 tax return, Woo told his accountant he received the stock as compensation and reported the sale of the stock on the return. Additionally, Woo also reported the cost basis of the shares he received as consulting income on his return. However, Woo falsely deducted as a business expense amounts paid indirectly to Owens, resulting in his underreporting of taxable income on his 2004 tax return. The stock that Woo and his nominees received was sold and Woo transferred the money to accounts he controlled. Additionally, Woo transferred most of the money he and his nominees received from the sale of American Fire Retardant Corporation stock, directly or indirectly, to Owens. Owens previously pleaded guilty to conspiracy, securities fraud and tax charges related to this scheme.
Former Mortgage Broker Sentenced in $1.6 Million Fraud Scheme
On June 23, 2010, in Jackson, Miss., Warren Clifton Pierce was sentenced to 60 months in prison to be followed by three years of supervised release. Pierce pleaded guilty in June 2009 to his role in a scheme to fraudulently obtain mortgage loans totaling approximately $1.6 million from various out of state lenders. During his guilty plea, Pierce admitted his participation in fabricating documents and giving false information to lenders to fraudulently obtain residential mortgage loans for borrowers who did not qualify financially to receive the loans. According to court documents, Pierce was a mortgage broker doing business as Raintree County Marketing Company and Integrity Mortgage. As a mortgage broker, Pierce sought out prospective borrowers and tried to qualify them financially to receive a home mortgage. He would obtain basic financial and employment information from the borrower. Then Pierce and his co-conspirators would include false information on the application form to induce the lender to make the loan. Pierce and his co-conspirators also prepared false documents to submit to lenders to support the false information contained on the loan application. These fabricated documents included false Verifications of Deposit, false Verifications of Rent, false forms to verify income, false W-2 forms, false tax returns, false money orders and false Social Security letters. The fraudulent loan application information and the fraudulent supporting documents caused the lender to believe the borrower had the ability to repay the mortgage loan and also created the appearance of a mortgage marketable as a security on the secondary market. Pierce received broker fees and commissions from those fraudulently obtained mortgage loan proceeds.
North Dakota Man Sentenced for Money Laundering and Defrauding the United States
On June 23, 2010 in Fargo, N.D., Neville Solomon was sentenced to 86 months in prison, followed by three years of supervised release and ordered to forfeit more than $2 million for money laundering and conspiracy to defraud the government. According to court documents, Solomon and an associate, Frederick Keiser, Jr., bilked investors by having them wire money to a company called MidChina Capital Management, located in Las Vegas, Nevada. The phony investment promoted by Solomon and Keiser involved a fictitious bank trading or bank guarantee program in which bank instruments were to be obtained. Solomon and Keiser convinced their victims that the bank instruments would generate exorbitant yields which would be used to fund other income-generating projects for MidChina, which in turn would result in investors gaining enormous returns. The investors were falsely assured that the investments were safe and secure. Solomon and Keiser got investors to invest over $2 million dollars into the scheme between August 2001 and December 2002. Solomon used investor funds to pay his personal living expenses. Investors did not receive their money back from MidChina. Solomon also promoted and assisted in a scheme used to eliminate the necessity to pay income taxes. Keiser was convicted by a jury in 2007 for his role in this scheme and is serving a 12-year prison sentence.
North Carolina Lawyer Sentenced to 46 Months for Embezzlement and Tax Fraud
On June 22, 2010, in Charlotte, N.C., Thomas Daniel Brown, of Concord, was sentenced to 46 months in prison and ordered to pay over $1.3 million in restitution to his former law firm. Brown pleaded guilty in July 2009 to wire fraud and tax fraud in connection with the embezzlement of over $1.8 million from his law firm’s trust account. According to the Bill of Information, Brown was a real estate closing attorney for a small law firm in Charlotte from 2003 through 2008. As a closing attorney, Brown would receive funds from the buyer and the lender. The money was supposed to be use to pay off any existing mortgage liens on the property purchased by the buyer. Instead, Brown embezzled the money to improve his own lifestyle, to make lulling payments to lenders holding unpaid liens, and for other reasons. To make the funds available for embezzlement, Brown prepared closing documents making it appear as though such funds had been applied as directed to pay off existing liens when Brown simply left such funds in his trust account to make them available for embezzlement.
Former Controller Sentenced on Tax Charges
On June 21, 2010, in Detroit, Mich., Pamela Blodgett was sentenced to 36 months in prison, to be followed by one year supervised release, and ordered to pay approximately $570,000 in restitution. According to court documents, Blodgett was the controller for Vinyl Tech Window Systems. As part of her responsibilities at Vinyl Tech, Blodgett had authority to issue checks for paying legitimate expenses. She embezzled more than $1.7 million by issuing checks to Valley Lawn Maintenance, a company owned and operated by her husband, William Blodgett. Pamela Blodgett concealed the embezzlement by making false entries in the corporate check register and computer accounting programs, listing legitimate vendors as the payees of the checks. She then assisted in the preparation of her joint tax returns for the years 2003 through 2006, failing to report this income, and caused an underpayment of over $570,000 in taxes to the Internal Revenue Service.
Chicago Man Sentenced on Tax Evasion Charges
On June 18, 2010, in Chicago, Ill., Kevin Thomas O’Doherty was sentenced to 24 months in prison and ordered to pay nearly $370,000 in restitution for tax evasion. According to court documents, O’Doherty failed to file individual federal income tax returns for the years 2001, 2002, and 2003. In December 2009, O’Doherty pleaded guilty to tax evasion for the 2001 calendar year and admitted to failing to pay more than $367,000 in taxes for the three years 2001 through 2003. O’Doherty was a commodities trader who bought and sold contracts for the future delivery of commodities on the Chicago Mercantile Exchange (CME) and the Chicago Board of Trade (CBOT). O’Doherty also leased seats on the CME and the CBOT to other commodities traders for monthly fees or a share of the traders’ profits. In furtherance of his scheme to evade his income taxes, O’Doherty established several entities to attempt to conceal his income and assets from the IRS. During the tax years 2001 through 2003, O’Doherty earned in excess of $1.1 million from his trading activities and business partnerships with KFX Brokerage and other traders. O’Doherty used concealed income in bank accounts of business entities for personal purpose, including the purchase of a Florida residence and the purchase of an interest in a Florida racehorse.
Indiana Man Sentenced to 57 Months for $1.6 Million Bank Fraud and Filing False Tax Returns
On June 16, 2010, in Indianapolis, Ind., John Branam was sentenced to 57 months in prison for bank fraud, money laundering and filing a false tax return. According to court documents, Branam was the office manager of King’s Title & Abstract Company in Shelbyville, Indiana from 1996 until 2007. Around 2004, Branam began embezzling money from Kings Title by using several fictitious business entities, including Branam Properties, Rocksolid Investments, and Kings. Branam opened bank accounts for each of these businesses in his own name, doing business as the entity’s business name. None of these entities were legitimate businesses; they were created by Branam solely for the purpose of embezzling money from Kings Title. Branam fraudulently obtained more than $1.6 million from 2004 thru 2007. He conducted numerous money laundering transactions over $10,000 with the proceeds of the fraud and failed to report any of the fraudulently received monies on his 2004 through 2007 federal individual income tax returns, thus avoiding taxes of approximately $360,000 over the four year period.
Tennessee Financial Advisor Sentenced in Fraud Case
On June 14, 2010, in Knoxville, Tenn., Delbert Foster Blount, III, of Ooltewah, was sentenced to 60 months in prison, followed by three years of supervised release, and ordered to pay $2,726,272 in restitution to Ameriprise and $467,169 in restitution to the Internal Revenue Service (IRS). Blount pleaded guilty In April 2009 to charges of mail fraud, wire fraud, and income tax evasion. According to his plea agreement, from June 2000 until December 2006, Blount used his position as a financial advisor to encourage people to invest money in various savings and retirement vehicles that included, 401(k) accounts, IRA accounts, and brokerage accounts, but then misappropriated the money for his personal use. Blount admitted that he deposited checks received from investors into a nominee account to hide his theft. Blount then created false statements on his computer and posted them on the internet to lead his clients to believe that he had actually invested their money. Blount also failed to report the proceeds from the theft of clients’ funds on his federal income tax returns for 2002 through 2004; and failed to file income tax returns for tax years 2005 and 2006. These actions resulted in a tax loss to the government of $469,592 for tax years 2002 through 2006.
Maine Lobster Broker Sentenced for Filing False Federal Tax Returns
On June 14, 2010, in Bangor, Maine, Francis E. “Frank” Donnelly was sentenced to 12 months and a day in prison, followed by one year of supervised release, and ordered to pay $89,331 in restitution, a $3,000 fine and a $200 special assessment. Donnelly pleaded guilty in November 2009 on charges of filing false tax returns. According to court records, for the tax years 2002 through 2004, Donnelly owned and operated a lobster broker business known as “Down East Exports” in Lamoine, Maine. For those years, Donnelly underreported his income by approximately $500,000 in gross receipts for each year.
New York Man Sentenced to 72 Months in Prison
On June 10, 2010, in Syracuse, N.Y., Donald Geiss, Jr., was sentenced to 72 months in prison, to be followed by three years of supervised release, and ordered to pay $1,671,552 in restitution to Intertek Testing Service located in Cortland, New York. Geiss, former director of Health and Safety at Intertek, pleaded guilty on February 21, 2010 to one count of tax evasion and one count of money laundering. According to court documents, Geiss admitted that he prepared and submitted false invoices to Intertek totaling $1,630,407 for services that were never provided. Geiss caused $1,457,107 of the fraudulently obtained funds to be deposited into the Interest on Lawyer Account (IOLA) of attorney David Pelland. The monies were then withdrawn from the Pelland account to pay various expenses, including Geiss’ personal expenses. All fraudulently obtained funds were omitted from Geiss’ federal income taxes which resulted in an underreporting of income to the Internal Revenue Service. In 2005 alone, Geiss underreported his taxable income by $370,200 thereby evading tax due and owing in the amount of $119,686. David Pelland pleaded guilty on May 4, 2010, and is awaiting sentencing.
Ohio Attorney Sentenced in $2.5 Million Fraud Case
On June 8, 2010, in Cincinnati, Ohio, Robert L. Schwartz, an attorney, was sentenced to 48 months in prison, to be followed by three years of supervised release, and ordered to pay $2,292,469 to Hadassah Hospital and $935,217 in restitution to the Internal Revenue Service (IRS). Schwartz pleaded guilty on June 11, 2009, to mail fraud and filing a false tax return relative to keeping almost $2.5 million from an estate for which he was the executor. According to court documents, Schwartz helped establish an estate plan and trust agreements for a client in 2003. When the client passed away in 2005, the estate was worth approximately $12 million. Schwartz was supposed to make distributions from the estate, including approximately $2,502,469 to the charitable organization, Hadassah, The Women’s Zionist Organization of America, Inc., also known as Hadassah Hospital. Instead, Schwartz routed the majority of the trust funds through accounts or entities he controlled and used most of the money, more than $9 million, for personal expenditures and asset purchases for family members, employees, friends and close associates. Schwartz reported gross receipts of $125,702 on his 2007 income tax return, when his correct gross receipts were approximately $932,441.
California Man Sentenced for Filing False Tax Return
On June 7, 2010, in Los Angeles, Calif., Mark Ellis, of Orange County, was sentenced to six months in prison, to be followed by one year of supervised release that will include six months confinement in a halfway house and six months of home detention with electronic monitoring. The court also ordered Ellis to pay $725,956 in restitution. Ellis pleaded guilty on November 10, 2009, to filing a false tax return for tax year 2004. According to the plea agreement, Ellis was president, CEO and controlling shareholder of Indiginet, Inc. Indiginet was a publicly traded corporation that operated as a business development company. It raised millions of dollars through the sale of stock to investors. During tax year 2004, Ellis received approximately $748,734 from Indiginet for his personal use. The funds were income to Ellis that he did not report on his federal income tax return for that year. Ellis used the funds to pay for his personal expenses and to invest in an unrelated business. In addition, for tax years 2003, 2005, and 2006, Ellis failed to report approximately $1,497,537 as income on his personal income tax returns for those years. The total amount of the tax loss for all four years (2003-2006) is approximately $725,956.
CFO of San Jose Company Sentenced for Investment Fraud Scheme and Tax Evasion
On June 1, 2010, in San Jose, Calif., Gregory Scott Dixon was sentenced to 24 months in prison, to be followed by three years of supervised release, and ordered to pay $614,923 in restitution for his role in an investment fraud scheme. Dixon, of Marysville, Calif., pleaded guilty in September 2009 to wire fraud and tax evasion. According to court documents, Dixon served as Treasurer and, along with a colleague, helped operate Financia Investing, Inc. He admitted that he and his colleague made false representations to investors that their money would be properly invested. Once they received the funds, they diverted some of the money for their personal use,and used funds from later investors to pay off earlier investors. They invested some of the funds, but at a far lower amount than represented to investors. Dixon also sent out false IRS 1099 forms to investors, representing non-existent earnings on Financia accounts, as well as false monthly earnings statements. According to court documents, whatever limited trading activity Financia had engaged in had completely stopped by July 2006, but Dixon and his colleague continued to receive and accept incoming wire transfers from investors. Dixon used at least $24,060 from one account to pay his personal American Express bill and withdrew all the money from the other account by way of two cashier’s checks in the amounts of $414,343 and $80,000. He used all the money from these transactions for personal expenses. Dixon also evaded payment of federal taxes for the income that he took from Financia in 2006 and evaded tax due and owing of approximately $145,150.
Certified Public Accountant Sentenced in Embezzlement Scheme
On May 27, 2010, in Chicago, Ill., Jeffrey Meyer was sentenced to 30 months in prison and one year of supervised release for filing a false tax return. According to court documents, Meyer, a certified public accountant and the chief financial officer of Cargo, Inc., a freight forwarding company, embezzled from his employer through unauthorized payroll checks and the use of a corporate credit card. Meyer failed to report this income on his 2000 and 2001 tax returns. Meyer embezzled nearly $68,000 in unreported income in 2000 and more than $106,000 in 2001. Meyer has paid back all taxes due for 2000 and 2001.
Connecticut Man Sentenced for Tax Evasion
On May 27, 2010, in Hartford, Conn., Vincent Mavilia, of Warren, was sentenced to 18 months in prison, to be followed by three years of supervised release, and ordered to pay a $5,000 fine. He was also ordered to pay $359,291 in back taxes, penalties and interest to the Internal Revenue Service (IRS) for evading taxes for more than a decade. Mavilia pleaded guilty on November 19, 2009, to one count of tax evasion. According to court documents and statements made in court, Mavilia owned and operated a number of bars and adult entertainment businesses. However, from 1992 through 2003, Mavilia took steps to conceal from the IRS his ownership of the businesses by placing them in the name of his adult daughter. Mavilia further attempted to conceal his income from his businesses by using bank accounts in his daughter’s name to deposit funds and make payments of his personal expenses. Mavilia also purchased and owned real property in Branford, Brookfield, and Danbury, but placed the properties in the names of other individuals to keep them beyond the reach of the IRS.
Former Owner of Tennessee Business Sentenced on Fraud, Money Laundering, and Tax Charges
On May 25, 2010, in Knoxville, Tenn., Joseph Dean Brandenburg, former owner of Extreme Logistics, LLC, was sentenced to 46 months in prison, to be followed by five years of supervised release, and ordered to pay in excess of $3 million in restitution to Suntrust Bank and the Internal Revenue Service (IRS). Brandenburg pleaded guilty on March 23, 2009 to wire fraud, money laundering, and submitting false tax returns. According to court documents, from June 2004 into July 2005, Brandenburg submitted fraudulent invoices in order to obtain funding from Prime Financial Services, a subsidiary of Suntrust Bank. Prime Financial Services agreed to advance funds to Extreme Logistics based upon Extreme Logistics’ submission of invoices for loads that Extreme Logistics had hauled. Brandenburg’s fraudulent invoices exceeded $3.6 million and represented that loads had been hauled for various customers when, in fact, they had not. Brandenburg laundered over $1 million in proceeds of the fraud scheme through another business that he controlled and then used funds for his personal benefit, including making substantial improvements to his personal residence in Loudon County. Additionally, Brandenburg submitted false tax returns for the years 2004 through 2006 by failing to claim the income he received from the money laundering on his Federal income tax returns.
Portland Man Sentenced to 24 Months for Role in Fraud Scheme
On May 25, 2010, in Portland, Ore., Reggie Allan Maier, of Portland, was sentenced to 24 months imprisonment and five years supervised release for his role in a fraud scheme that targeted dozens of cities across the United States from 2001 through 2007. According to information presented in court, Maier was associated with a team of individuals, including his father, who traveled from Portland to other cities to burglarize commercial office buildings, steal checks, credit cards, and personal information, and then use the stolen items to create false identification documents and checks to commit bank fraud. Maier pleaded guilty to one count of bank fraud in February 2010. He admitted that he participated in a December 2005 shopping spree throughout Portland with other members of the team in which he purchased parts for his BMW at several area retailers using credit cards stolen by his father during an office burglary in Arizona. The judge also ordered Maier to pay $23,000 in restitution to the victims of that December 2005 shopping spree.
San Francisco Real Estate Investor Sentenced to 30 Months in Prison for Filing False Tax Returns
On May 24, 2010, in San Francisco, Calif., Luke D. Brugnara was sentenced to 30 months in prison followed by one year of supervised release for filing false tax returns. The judge also ordered Brugnara to pay $1,904,625 in restitution; a $50,000 fine; and, a $300 special assessment. On January 26, 2010, Brugnara pleaded guilty to filing false tax returns for 2000, 2001, and 2002. In pleading guilty, and based on statements made in court, Brugnara admitted that he failed to report capital gains from the sale of properties in San Francisco and Las Vegas. Brugnara, of San Francisco, was charged in a superseding indictment on January 12, 2010, with three counts of filing false tax returns and one count of obstructing the Internal Revenue Service. According to the Indictment, Brugnara failed to report the sale of four properties in San Francisco and one property in Las Vegas in the year the properties were sold. The Indictment further alleged that Brugnara failed to report as income the amounts paid to his corporation related to the mortgage of the home he lived in, automobile loan payments, and other personal expenses. According to documents filed with the court, Brugnara also provided a lender with invoices from a non-existent tax service, unfiled corporate tax returns and a statement that he owned more than $400 million of artwork. According to court documents, in February 1998, the IRS requested copies of Brugnara’s individual income tax returns for 1990 through1996, in addition to copies of tax returns for Brugnara Corporation. Brugnara returned those notices to the IRS with a notation indicating that the tax returns were already filed. Around the same time, Brugnara applied for a gaming license to operate a casino after acquiring the Silver City Casino in Las Vegas. Also according to court documents, in March 2000, an investigation was started by the Nevada Gaming Control Board as part of his application for a Nevada gaming license. The background investigation included an inspection of his federal and state tax filings. During the background check, the investigators learned that Brugnara had not filed tax returns for 1991through 1998.
Ponzi Scheme and Mortgage Fraud Mastermind Sentenced to Prison
On May 19, 2010, in San Francisco, Calif., Patricia Morgen, the founder and head of Chicago Development and Planning, was sentenced to 188 months in prison and ordered to pay more than $9 million in restitution for wire fraud, mail fraud, and money laundering. According to her December 2009 plea agreement, Morgen admitted creating a scheme to solicit investors for a company called Chicago Development and Planning, with the promise of substantial guaranteed return profit payments. Morgen falsely promised investors that their funds would be used to purchase real property to be rented or resold for profit, and that their guaranteed returns would come from profits earned on the real estate investments. In fact, Morgen paid investors largely with money obtained from new investors, rather than from real estate-related profits. Morgen admitted that there were more than 400 victims of this Ponzi scheme. In another scheme, Morgen and a co-defendant submitted fraudulent loan applications to acquire more than 20 properties, most of which were occupied, rent-free, by Chicago Development and Planning employees, including Morgen herself. The fraudulent loan applications included lies as to the borrowers’ employment and income.
Former Mortgage Brokers Sentenced for $1.2 Million Mortgage Fraud Scheme
On May 18, 2010 in Springfield, Mo., five people were sentenced to prison and ordered to pay restitution for their roles in a mortgage fraud scheme: Charles Davis was sentenced to 51 months in prison and ordered to pay nearly $1.3 million in restitution; Scott Kassebaum received 24 months in prison and ordered to pay over $200,000; Cheryl Kassebaum was sentenced to 15 months and nearly $500,000; Steven Spencer received 30 months and nearly $437,000; and Shanda Moore was sentenced to three years probation of which six months will be served in home confinement and ordered to pay nearly $253,000. According to court documents, Davis, a former mortgage broker who was the owner of Master Marketing Consultants, pleaded guilty to his participation in two separate conspiracies to obtain mortgage loans for the purchase of homes based on false loan applications. Davis knew that the loan applications he prepared and submitted were false because the loan applications included overstatements of income and understatements or omissions of liabilities, falsely represented that the purchaser/borrower intended to reside in the home to be purchased, and, in some cases, stated a false place of employment for the purchaser/borrower. A significant portion of the loan proceeds was returned to the purchasers of the homes without the lender’s knowledge. Davis facilitated these kickbacks to the purchasers by routing the proceeds through Master Marketing Consultants and, in some cases, through Metro Consulting Group, which was owned by the Kassebaums. The mortgage fraud schemes involved a total of 20 houses with home mortgage loans ranging from approximately $200,000 to $500,000. The amount of loan proceeds returned to the borrowers ranged from less than $30,000 to more than $100,000. Some of the home purchasers subsequently defaulted on the loans, and the homes have been foreclosed or are in the process of being foreclosed.
Colorado Man Sentenced to Prison for Fraudulent Loan Scheme
On May 18, 2010, in Denver, Colo., David Gwin, of Aurora, was sentenced to 96 months in prison, to be followed by three years of supervised release, and ordered to pay $933,841 in restitution and ordered to forfeit $933,585. Gwin pleaded guilty on February 19, 2010, to wire fraud and engaging in monetary transactions in property derived from wire fraud. According to the stipulated facts contained in the indictment and subsequent plea agreement, from early October 2003 through January 2005, Gwin operated a business called Asset Funding Solutions, Inc. (AFSI), which purported to be in the business of finding private investors to fund loans for investment projects, as well as being the lender itself for such loans. In February 2005, Gwin and others changed the name of the business to Asset Global Funding, Inc. (AGF), which continued to operate until about August 2005. Gwin told people and companies seeking multi-million dollar loans that they were required to pay a fee in advance of receiving the funding for their loans. The advanced fee was called a “due diligence fee” or “retainer” or an “application fee.” In order to persuade the people and companies seeking multi-million dollar loans to send the advanced fee, Gwin falsely told them that the fee was refundable if the loan they sought was not funded. The advanced fees ranged from $5,000 to $340,000, depending on the size of the loan sought. During the course of the fraudulent scheme, Gwin repeatedly told the people and companies who had sent AFSI/AGF advanced fees that he was meeting with investors to secure their funding, and that funding for their loan would happen soon. The defendant did not secure funding for the loans and he did not return the vast majority of the advanced fees that were paid.
Former Lawyer Sentenced on Tax Charges
On May 18, 2010, in Danville, Va., Kevin J. Witasick, a former Arizona attorney and current Woolwich Township, New Jersey resident, was sentenced to 15 months in prison, to be followed by two years of supervised release, and ordered to pay for the cost of his prosecution, approximately $12,000. He was also ordered to cooperate with the Internal Revenue Service in paying back taxes, interest and penalties. According to court documents, Witasick and his wife, Whitney Scott Witasick, were indicted in October 2007 and charged with a multitude of tax charges. Following a seven-day trial in February 2009, Kevin Witasick was found guilty of two counts of tax evasion, two counts of perjury on his tax returns and one count of failing to file taxes for fiscal year 2001. Whitney Witasick was acquitted of all charges against her. The Indictment charged Witasick with lying on his tax returns regarding the use of the couple’s Stanleytown home, known as Stoneleigh. On his tax returns, Kevin Witasick had claimed that 100 percent of the 51-acre property was being used for his law practice. However, evidence and testimony presented at trial proved that just 11 percent of the property was being used for business purposes. In addition to filing false tax returns in 1999 and 2000 regarding the business use of Stoneleigh, Kevin Witasick failed to file any tax returns for 2001.
Former University of Louisville Dean Sentenced for Tax Evasion, Money Laundering and Mail Fraud
On May 17, 2010, in Louisville, Ky., Robert Felner, former University of Louisville Dean, was sentenced to 63 months in prison and ordered to pay restitution in the following amounts: $510,000 to the University of Louisville U of L); $88,750 to the Rock Island County Council on Addictions RICCA); and $1,646,972 to the University of Rhode Island (URI). In addition, the United States seized $449,979 which may be applied towards restitution. Felner also deposited over $250,000 to the Federal District Court to be applied toward restitution. In January 2010, Felner pleaded guilty to conspiracy to commit money laundering, mail fraud, conspiracy to defraud the Internal Revenue Service (IRS), and tax evasion. According to court documents, Felner admitted that from 2001 through 2008 he embezzled and conspired to launder approximately $1,646,972 belonging to URI; $510,000 belonging to U of L; and $88,750 belonging to RICCA. Felner also admitted that he and a co-conspirator fraudulently diverted payments intended for URI from school districts in Atlanta, Georgia, Santa Monica, California, and Buffalo, New York into bank accounts they controlled at Citizens Bank in Rhode Island, A.B.&T. in Illinois, and B.B.&T. in Kentucky. These three accounts were in the name of the National Center on Public Education and Prevention (“NCPEp”). From 2001 to 2007, they caused payments from Atlanta totaling $1,005,972, from Buffalo totaling $326,000, and from Santa Monica totaling $375,000 to be diverted from URI and deposited into these NCPEp bank accounts. A division of URI, the National Center on Public Education and Social Policy (NCPE), actually performed the work for Atlanta, Buffalo, and Santa Monica but Felner and a co-conspirator diverted the payments to the NCPEp bank accounts they controlled. NCPEp performed no services to any of these school districts. Felner also admitted that he and a co-conspirator used NCPEp to embezzle funds received from U of L under a September 1, 2005, $694,000 federal earmark grant. Felner caused U of L to issue $450,000 in payments to NCPEp by fraudulently alleging NCPEp performed work pursuant to the grant. NCPEp did not perform the work. These payments were deposited into the three NCPEp bank accounts controlled by Felner and a co-conspirator. There were numerous other embezzlement schemes and payments for work not performed. Felner also admitted that from 2001 through 2008, approximately $2,245,772 in funds were fraudulently deposited into three bank accounts in the name of NCPEp that were controlled by him and a co-conspirator. These funds were withdrawn by Felner and a co-conspirator and were used for their personal benefit. Finally, Felner admitted that he evaded payment of his federal income taxes for the years 2002 through 2007 by failing to report income he received from NCPEp bank accounts and failed to pay a total of approximately $490,000 in taxes on the unreported income in those years. Felner and a co-conspirator caused false IRS Form 1099s to be issued, or purposely failed to issue Form 1099s, to conceal income from the IRS.
Man Sentenced on Identity Theft and Money Laundering Charges
On May 17, 2010, in Reno, Nev., William Lyle Snyder was sentenced to 65 months in prison, to be followed by three years of supervised release, and ordered to pay $228,000 in restitution. On January 19, 2010, Snyder pleaded guilty to one count of aggravated identity theft and one count of money laundering. According to court documents, beginning on or about August 22, 2005, and continuing to on or about February 9, 2006, Snyder solicited funds under fictitious names for investments in commodities pools through a company known as Verada Wealth Unification Worldwide (Verada). During this period of time, the defendant maintained the financial account at Charles Schwab & Company, Inc., Reno, through which the investors’ funds were deposited and withdrawn. Snyder solicited these funds throughout the United States by faxes that he sent from Reno in which he falsely claimed that his trading accuracy rate exceeded 77 percent and that Verada would pay 15 percent to 20 percent or more every 21 days and that the investment would be compounded every 2 l days. Snyder also falsely claimed that Verada had been trading private ventures with people all over the world for eight years. Neither Snyder nor Verada was registered with the U.S. Commodities Futures Trading Commission and Snyder failed to notify the investors of this fact. He also failed to inform investors of the risks associated with commodity pool trading. During this period of time, Snyder received a total of $228,000 from various investors and he converted these funds to his own personal use. According to the indictment, Snyder knowingly possessed and unlawfully used the name, date of birth, driver’s license number and social security account number of another individual in violation of federal law. The indictment also alleges that Snyder knowingly engaged in a monetary transaction with a financial institution involving more than $10,000 in criminally derived property.
Nevada Man Sentenced for Straw Buyer Scheme
On May 13, 2010, in Las Vegas, Nev., Jared Arambel was sentenced to 41 months imprisonment, to be followed by five years of supervised release, and ordered to pay restitution in the amount of $2,664,950 following his guilty plea in January 2010 to one count of Conspiracy to Commit Mail, Wire and Bank Fraud. According to his plea agreement, from about January 1, 2006, to about March 3 I, 2007, Arambel conspired with others to submit mortgage loan applications, which contained materially false information, to financial institutions to finance straw buyer real estate purchases in Nevada. Arambel caused false information to be included on straw buyers’ loan applications regarding place of employment, income, assets, and intent to occupy the properties so the straw buyers would qualify for loans for which they would not otherwise qualify. Through these transactions, the conspirators obtained control over the properties and obtained money from the financial institutions by causing the money from the mortgage loans to be diverted to the conspirators for their use and benefit. The conspirators also obtained money from the fees and commissions earned from each loan to straw buyers.
Former Owner of Three District of Columbia Nightclubs Sentenced for Tax Evasion
On May 11, 2010, in Washington, D.C., Abdul Karim Khanu, former owner of the District of Columbia nightclubs DC Live, Platinum, and H20, was sentenced to 38 months in prison, to be followed by three years of supervised release, and ordered to pay $951,520 in restitution. Khanu was found guilty on December 1, 2009, of two counts of tax evasion for the years 2002 and 2003. According to the facts presented at trial, Khanu owned and operated two nightclubs on F Street in the District, named DC Live (and later VIP) and Platinum, from at least 2000 through 2003. Khanu skimmed millions of dollars of cash from the club to pay employees cash wages and for personal use. Search warrants executed at the defendant’s home yielded $1.9 million in cash as well as numerous records reflecting a double set of books and records. The government presented evidence at trial showing that Khanu’s use of cash far exceeded his known, legitimate sources, and that Khanu evaded the payment of taxes on millions of dollars of revenue.
Escort Service Owner Sentenced for Income Tax Evasion
On May 7, 2010, in Salt Lake City, Utah, Roy B. Hoskins, the owner and operator of Companions escort service in Salt Lake City was sentenced to 60 months in prison, to be followed by three years of supervised release, and ordered to pay $817,895 in restitution. On May 8, 2009, Hoskins pleaded guilty to an indictment charging him with two counts of tax evasion. There was no plea agreement in the case. According to the indictment, Hoskins knowingly omitted from his tax returns substantial income from his ownership of Companions. On March 16, 2010, Jodi Hoskins, another operator of Companions, was convicted of tax evasion.
Minnesota Musician and Money Transmitter Sentenced for Evading Payment of More Than $1.1 Million in Taxes
On May 5, 2010, in St. Paul, Minn., Steven Renner was sentenced to 18 months in prison and ordered to cooperate with the IRS in the assessment and payment of taxes still due in connection with his conviction on four counts of tax evasion. According to court documents, between 2002 and 2005, Renner diverted funds from Cash Cards International (CCI), his Internet-based, stored-value and money-transmission business, to pay his living expenses as well as to make personal investments in coins, oil wells, art, stamps, and vintage musical instruments. He also used CCI funds to promote his blues-rock band, “Stevie Renner and the Renegades.” From 2001 to 2006, Renner was the sole owner of CCI, which had locations in Minnesota, South Dakota, and Hawaii. Although he knew he was legally obligated to file federal income tax returns and pay all federal taxes owed, he failed to do so for tax years 2002 through 2004, until March 5, 2006, when he also filed his 2005 federal income tax return.
Georgia Man Sentenced for Income Tax Evasion of More Than $1.1 Million in Tax Years 2003-05
On May 3, 2010, in Atlanta, Ga., Robert L. Braddy, of College Park, Georgia, was sentenced to 30 months in prison, followed by three years of supervised release, and ordered to pay $306,906 in restitution. Braddy pleaded guilty to income tax evasion on February 24, 2010. According to court documents and information presented in court, when Braddy filed his 2003, 2004 and 2005 federal income tax returns, he willfully attempted to evade a large part of the income tax he owed by filing a false and fraudulent U.S. Individual Income Tax Return (Form 1040). For each of the returns he filed, he knew that his total income and the tax due and owing substantially exceeded the amounts that he reported. Braddy under-reported his income by more than $1.1 million restuling in a tax loss of $306,906.
Indiana Accountant Sentenced for Embezzlement and Tax Evasion
On April 30, 2010, in Indianapolis, Ind., Thomas Shakespeare was sentenced to 42 months in prison, two years of supervised release, and ordered to forfeit of his home, two cars, and more than $40,000 from his retirement account, as well as pay $583,000 in restitution. According to court documents, between March 2002 and November 2008, Shakespeare, while working as controller for Advantage Marketing, Inc., a privately-owned local business, made fraudulent entries to the business’s payroll systems over this six and a half year period. These fraudulent entries caused him to receive higher paychecks on 147 different occasions, totaling more than $583,000. Shakespeare was also convicted of five counts of income tax evasion for the tax years 2003 through 2007. He failed to file income tax returns and failed to pay taxes on the embezzled funds as well as his normal salary.
Mortgage Fraud Defendant Sentenced in Nevada
On April 26, 2010, in Las Vegas, Nev., Brett Gibbs was sentenced to 12 months and a day in prison, to be followed by three years of supervised release, and ordered to pay $307,000 in restitution. The court also imposed a criminal forfeiture money judgment in the amount of $493.000. Gibbs pleaded guilty on October 29, 2009, to bank fraud and aiding an abetting in connection with a mortgage fraud scheme. According to the plea agreement, from January 2005 through February 2007, Gibbs conspired with others to submit mortgage loan applications to financial institutions to finance straw buyer real estate purchases in Nevada. Gibbs caused materially false information to be included on straw buyers’ loan applications regarding place of employment, income, assets, and intent to occupy the properties so straw buyers would qualify for loans for which they would not otherwise qualify.
California Woman Sentenced for Defrauding Author Danielle Steel out of $768,000
On April 20, 2010, in San Francisco, Calif., Kristy Watts was sentenced to 33 months in prison and ordered to pay nearly $61,000 in restitution. According to court documents, Watts worked as a bookkeeper for author Danielle Steel for approximately 15 years. Watts was trusted the responsibility for overseeing Steel’s personal and professional financial management, including overseeing bank accounts and credit card statements, payroll, petty cash operations, obtaining foreign currency for international travel, and paying bills. While handling those duties, Watts devised a scheme to steal more than $760,000 through a scheme encompassed of three main facets: First, the defendant raided petty cash funds; she took checks that had been made payable to “Cash” and deposited them in her own personal bank account, then used that money for her personal benefit. Second, in handling payroll responsibilities for other employees of Steel, the defendant had access to the online payroll distribution service Steel used – Automatic Data Processing, Inc. Watts abused this access by instructing ADP to cause additional salary and bonus payments to Watts that she had not earned. To conceal this aspect of her scheme, the defendant made false entries in the computer accounting system used to authorize and track payments, such as falsely reporting that certain checks were payable to legitimate vendors for seemingly legitimate expenses. Third, because of her access to Steel’s financial records and mail, Watts knew that Steel was enrolled in a rewards program through American Express. Again without authorization, Watts converted hundreds of thousands of Steel’s reward points to her own use. She used these points to fund trips for herself and her family to several domestic locations, as well as international trips to England, Spain, and Italy. She also used these reward points to purchase gift cards from various merchandisers for the use of herself and her family. In all, Watts used the various components of her scheme to fleece Steel out of approximately $768,000. She paid no taxes on any of these embezzled funds. As part of her plea agreement, Watts agreed to forfeit assets to Steel; she already has turned over more than $969,000 to Steel as a result of the criminal case and a civil lawsuit Steel filed immediately after Watts pleaded guilty in the criminal case.
New Jersey Man Sentenced to Prison for Conspiring to Defraud the IRS
On April 19, 2010, in Camden, N.J., Luciano Di Salvatore, of Sicklerville, was sentenced to twelve months and one day in prison, two years of supervised release and ordered to pay $96,038 in restitution and a $5,000 fine. Di Salvatore pleaded guilty on November 23, 2009, to an Information charging him with conspiracy to defraud the Internal Revenue Service (IRS). According to court document, Di Salvatore admitted participating in a scheme to shield income generated from the sale of a business called Municipal Code Inspection, Inc. Municipal Code was a building inspection company which contracted with municipalities to perform building, plumbing, fire, electrical and elevator inspections on behalf of the municipalities. Di Salvatore admitted that he met with Municipal Code’s accountant, Victor Fabietti, Jr. to discuss that the payment of $165,000 from Municipal Code to Michael Schaffer should be characterized as a loan to make it more favorable to Schaffer for income tax purposes. Both Fabietti and Schaffer have pleaded guilty in this investigation; they are awaiting sentencing.
Defendant Sentenced in American Fire Retardant Corporation Stock Fraud Investigation
On April 19, 2010, in Los Angeles, Calif., Tarun Mendiratta, of Weston, Connecticut, was sentenced to twelve months and one day in federal prison, six months at a community corrections center, and six months of home detention. The judge also sentenced Mendiratta to three years of supervised release and ordered him to pay a $150,000 fine. Mendiratta pleaded guilty to conspiracy and tax evasion charges. According to his plea agreement, between July 2003 and February 2004, Mendiratta received approximately 1.18 billion shares of a type of American Fire stock that is unrestricted and free-trading and issued to employees, consultants, and advisors who provide bona fide services to the company. The stock had a market value of approximately $3.3 million. Mendiratta received the stock from co-conspirator Stephen F. Owens, the principal of American Fire. As a part of the scheme, Mendiratta requested that Owens fraudulently issue the American Fire stock to two of his aunts in an effort to conceal his ownership from federal authorities. Neither Mendiratta nor his aunts performed any bona fide services for American Fire that were worth the amount of stock issued to them. Mendiratta knew that the stock American Fire had issued to him was unregistered and issued in violation of federal securities laws. Throughout 2003 and 2004, Mendiratta caused the American Fire stock to be sold in the stock market. Mendiratta also admitted that, with respect to the tax evasion charge, he failed to report approximately $329,811 in income from the sale of Marmion Industries Corporation stock on his 2005 individual tax return. Mendiratta had received and sold millions of shares of Marmion industries stock in 2005. His failure to report the sale of his stock on his 2005 tax return resulted in a tax loss of approximately $92,347.
Missouri Man Sentenced for Filing False Tax Return
On April, 16, 2010, in Kansas City, Mo., William Schroff was sentenced to 24 months in prison and ordered to pay more than $48,000 in restitution for filing a false tax return. According to court documents, during the time of the offenses, Schroff owned and operated several businesses, including an industrial sandblasting and painting company known as ANS Company. Schroff pleaded guilty on December 1, 2009, to filing a Form 1040 with the Internal Revenue Service in which he reported taxable income of $1,075 for the calendar year 2001. In reality, Schroff’s taxable income that year was nearly $132,000.
West Virginia Man Sentenced on Tax Fraud Charges
On April 15, 2010, in Beckley, W.Va., Philip H. Weber, aka Spider, of Raleigh County, was sentenced to 30 months in prison, to be followed by one year of supervised release, and ordered to pay a $100,000 fine. Weber pleaded guilty to filing a false tax return on August 20, 2009, which resulted in a total tax loss of $592,000. According to court documents, Weber owned and operated a nationwide motorcycle apparel retail business. From 2000 through 2004, Weber traveled to motorcycle rallies all over the United States and sold items such as leather jackets, chaps and T-shirts. He conducted his business primarily in cash, maintained no business bank accounts, paid employees in cash, falsely claimed a Wyoming residence to avoid state income taxes, failed to maintain customary business records, provided his accountant with false information, and systematically converted cash he received from sales into money orders and cashier checks. In addition, he instructed his employees to structure their purchases of money orders in amounts that were just under the reporting postal requirements, and transferred a substantial portion of his assets into the name of his ex-wife.
New Jersey CPA Sentenced for Filing Fraudulent Income Tax Returns
On April 15, 2010, in Trenton, N.J., Kevin P. Williamson, of Chester, was sentenced to twelve months and a day in prison, to be followed by one year of supervised release, for filing false personal income tax returns. The judge also ordered Williamson to pay a $1000 fine and to pay all taxes and any penalties owed to the Internal Revenue Service (IRS). Williamson pleaded guilty in September 2009 to an Information charging him with filing a personal income tax return for calendar year 2002 that failed to report $156,631 in business income. As part of his guilty plea, Williamson also admitted to filing personal income tax returns that failed to report business income of $117,953 and $90,937 for calendar years 2003 and 2004, respectively. The total loss in tax revenue to the government arising from these three years exceeded $80,000. At the plea hearing, Williamson admitted that he signed each of his personal income tax returns under the penalty of perjury, and that he knew when he signed them that they contained false statements.
Illinois Man Sentenced to 15 Months in Prison for Tax Offenses
On April 12, 2010, in Springfield, Ill., Richard Schaub, of Lincoln, was sentenced to 15 months in prison for signing false tax returns for tax years 2005 and 2006. Schaub was also ordered to pay $111,857 in restitution to the Internal Revenue Service. According to court records, on December 14, 2009, Schaub pleaded guilty to an Information charging him with two counts of filing false tax returns. During his court appearance and according to the plea agreement, Schaub admitted that beginning in July 2005 through the end of 2006, he sold electrical equipment on eBay and to another company and failed to include net income derived from the sale of that electrical equipment on his 2005 and 2006 income tax returns. Schaub admitted in 2005, he failed to include $94,879 in net income derived from the sale of electrical equipment; in 2006, he failed to include $246,747 in net income, also derived from the sale of electrical equipment. The failure to report this income resulted in Schaub underpaying his income taxes by $31,512 in 2005 and $80,345 in 2006.
Police Benevolent Association Contractor Sentenced for Tax Fraud
On April 9, 2010, in Fort Lauderdale, Fla., John A. Gullett, of Parkland, was sentenced to 51 months in prison, to be followed by three years of supervised release, and ordered to pay $255,000 in restitution to the Internal Revenue Service (IRS). Gullett was convicted of four counts of filing a false tax return by a trial jury on January 22, 2010. According to statements made in court and evidence presented during trial, Gullet contracted with the Broward County Police Benevolent Association (BCPBA) and the Dade County Police Benevolent Association (DCPBA) to solicit local businesses to buy advertisements in a book that Gullett published listing local businesses. The book was distributed to PBA members. In exchange, Gullett paid BCPBA and DCPBA between $3,000 and $5,000 per month and kept whatever funds he raised in excess of these amounts. Gullett failed to report approximately $3 million of income received from 2002 through 2005. Gullett used these monies to purchase a personal residence and various luxury automobiles, including two Ferraris and a Lamborghini.
Minneapolis Man Sentenced to 50 Years in Prison for Orchestrating $3.7 Billion Ponzi Scheme
On April 8, 2010, in Minneapolis, Minn., Thomas Joseph Petters, of Wayzata, was sentenced to 600 months in federal prison for orchestrating a $3.7 billion Ponzi scheme. Following a month-long trial, Petters was convicted on December 2, 2009, on charges of wire fraud, mail fraud, conspiracy to commit mail and wire fraud, conspiracy to commit money laundering, and money laundering. According to the evidence presented at trial, Petters, assisted by others, defrauded and obtained billions of dollars in money and property by inducing investors to provide Petters Company, Inc., (PCI) funds to purchase merchandise that was to be resold to retailers at a profit. However, no such purchases were made. Instead, the defendants and co-conspirators diverted the funds for other purposes, such as making lulling payments to investors, paying off those who assisted in the fraud scheme, funding businesses owned or controlled by the defendants, and financing Tom Petters’s extravagant lifestyle. Other participants in the conspiracy have pleaded guilty and are awaiting sentencing.
Alabama Woman Sentenced for Embezzling More Than $900,000; Filing False Tax Returns
On April 7, 2010, in Birmingham, Ala., Daphne Miller Brooks was sentenced to 24 months in prison, to be followed by three years of supervised release, and ordered to pay over $948,800 in restitution. Brooks pleaded guilty in December 2009 to charges of mail fraud, securities fraud and income tax evasion. According to court documents, Brooks was the office manager and sole bookkeeper for a Jefferson County company, Equity Development Corporation, a subsidiary of McDonald Management, Inc. From at least June 2006 through March 2008, Brooks embezzled nearly $900,000 from the company by forging company checks and depositing them into her personal bank account and by mailing unauthorized credit card payments to various companies. Brooks reported false income on her 2007 and 2008 federal tax returns. She reported only $36,821 instead of $153,647 on a 2007 tax return; and reported $26,000 rather than $137,031 on a 2008 tax return.
California Woman Sentenced for Selling Millions of Dollars of Fake Art through Nationwide TV Art Auction Program
On April 5, 2010, in Los Angeles, Calif., Kristine Eubanks, of La Cañada, was sentenced to 84 months in prison for her role in a fake art scam. Eubanks pleaded guilty in April 2007 to conspiracy to commit mail fraud, wire fraud, interstate transportation of stolen property and to filing a false income tax return. The fake art, including works purported to be by Picasso, Dali and Chagall, were sold through a rigged televised art auction. According to information presented in court, the scam, run through a company called Fine Art Treasures Gallery, falsely told customers that art sold on the company’s television show had been found at “estate liquidations all over the world.” Instead, Eubanks and others sold fake and forged art that they had bought from suppliers, as well as forgeries they had printed themselves and signed on behalf of the artists. To support the scam, Eubanks also forged Certificates of Authenticity for certain pieces and provided falsified appraisals for some of the jewelry that was sold to customers. The scam brought in well over $20 million from more than 10,000 victims across the country. Eubanks’ husband, Gerald Sullivan awaits sentencing. As part of the investigation, federal authorities seized approximately $3.8 million from bank accounts controlled by Eubanks and Sullivan. Those funds have been forfeited to the government, which is in the process of notifying thousands of potential victims that they may have purchased bogus artworks.
Georgia Man Sentenced on Tax Charges
On April 2, 2010, in Atlanta, Ga., Walter V. Murray, of Covington, was sentenced to twelve months and one day in prison and ordered to pay $187,659 in restitution. Murray pleaded guilty to income tax evasion in connection with willfully failing to file a personal tax return for 2006, despite having received taxable income of $116,843 for that year. According to court documents, Murray, a certified public accountant, underreported his taxable income in the amount of $556,080 for the years 2001-2006. To conceal his personal income from the Internal Revenue Service (IRS), Murray caused his income to be deposited directly into investment and corporate accounts, from which he paid his day-to-day personal expenses.
Missouri Man Sentenced for Filing False Tax Returns
On April 1, 2010, in St. Louis, Mo., Patrick Moriarty, of Troy, Missouri, was sentenced to 12 months and one day in prison and ordered to pay $135,697 restitution to the Internal Revenue Service (IRS). Moriarty pleaded guilty in January 2010 to one count of filing a false tax return for the year 2003. According to court documents, Moriarty falsified his tax return for the year 2003. For the year 2002, Moriarty underreported his business income. For 2003, he falsely claimed that he had legal fees of $30,000. For 2004 and 2005, he falsely claimed that he had over $20,000 in taxes withheld from his earnings. The total tax loss is $135,697.
Unlicensed Stock Promoter Sentenced to 51 Months in Prison on Tax Charges
On March 29, 2010, in Los Angeles, Calif., Nicholas Myles Garcia, an unlicensed stock promoter, was sentenced to 51 months in prison, to be followed by three years of supervised release, and ordered to pay $327,980 in restitution to the Internal Revenue Service (IRS). Garcia pleaded guilty to being a part of a conspiracy to obstruct the IRS and for subscribing to a false tax return. According to court records, Garcia engaged in a multi-year scheme during which he illegally received stock in numerous public companies. Between 2003 and 2005, Garcia received more than $1 million in stock proceeds that he failed to report as income to the IRS. In an effort to conceal his compensation from the IRS, Garcia would have the companies whose stock he promoted issue stock in the names of various nominees, including friends, who let Garcia use their bank and brokerage accounts to execute stock trades. Garcia used these accounts to receive his stock, sell the shares, and transfer the proceeds. Garcia’s conduct resulted in a tax loss of more than $327,000 to the federal government.
Pennsylvania Man Sentenced on Tax Evasion Charges
On March 24, 2010, in Scranton, Pa., Richard Harsche, of Paupack Township, Pennsylvania, was sentenced to 20 months in prison, to be followed by one year of supervised release, and ordered to work with the Internal Revenue Service (IRS) in the payment of all taxes due and owing. Harsche pleaded guilty to tax evasion charges in April 2009. According to court documents, Harsche attempted to evade a payment due to the IRS in connection with an Offer in Compromise he made relating to outstanding individual tax liabilities for tax years 1992 through 1994. In reaching a compromise with the IRS, Harsche failed to disclose assets, including his ownership interest in a number of corporations. Harsche also failed to report more than $380,000 in additional income for tax year 2002.

Former Chief Operating Officer Sentenced to 17 1/2 Years in Prison for $20 Million Fraud
On March 23, 2010, in Boston, Mass., John F. Doorly, of Peabody, was sentenced to 120 months in prison and fined $1 million. Doorly pleaded guilty in November 2009, on his first day of trial, to mail fraud and money laundering charges, in connection with his scheme to defraud a North Shore company of more than $20 million dollars while he was employed as its Chief Operating Officer. According to court documents, during the period of 1999 through March 2006, Doorly removed millions of dollars from the bank accounts of Tenens Corporation, and used the money for his own purposes including: the acquisition, use and maintenance of three airplanes; the purchase of mortgage free houses and condominiums for family members, friends, and mistresses; and the purchase of golf memberships at exclusive clubs across the United States for himself and his son. Doorly also overcharged for accounting fees, thereby generating a slush fund for himself totaling millions of dollars. In addition, Doorly withdrew large sums of cash and manipulated the company’s internal accounting system, which he controlled, in order to conceal his activity.

Michigan Resident Sentenced in Multi-Million Dollar Ponzi Scheme
On March 22, 2010, in Detroit, Mich., Raymond Frank Joseph, of Bloomfield Hills, was sentenced to 66 months in prison, followed by three years of supervised release, and ordered by pay $2.2 million in restitution to victims of his Ponzi scheme. In December 2009, a jury found Joseph guilty of three counts of wire fraud, nine counts of interstate transportation of stolen money or property, and twenty-four counts of conducting monetary transactions in criminally derived property. According to court records, from 2002 through 2007, Joseph solicited loans of money from several individuals to invest in a number of business ventures. To induce the lenders to give him their money, Joseph fraudulently promised the victims a specific date of repayment with interest resulting from his claimed business investments. When Joseph received the lenders’ money, he did not invest it but instead used the money: (1) to repay other individuals who had earlier loaned Joseph money; and (2) to fund Joseph’s own personal expenses, including his credit card bills, household expenditures, and vehicle costs. As a result of his fraudulent acts, Joseph obtained approximately $2.7 million dollars which he failed to repay his lenders.
Former Telecommunications Project Manager Sentenced to 24 Months in $1 Million Fraud Scheme
On March 22, 2010, in Trenton, N.J., Stephen Lotter was sentenced to 24 months in prison, to be followed by two years of supervised release and ordered to forfeit approximately $800,000 in U.S. currency, a Porsche, an Escalade, and a 2008 Harley Davidson motorcycle. Lotter pleaded guilty on August 10, 2009, to an Information that charged one count of wire fraud and three counts of tax evasion. A restitution hearing will be scheduled at a later date. Lotter was a project manager for a national cellular telecommunications provider identified as Company A in court documents. At his plea hearing, Lotter admitted that he received more than $1 million in kickback payments from contractors to whom he awarded construction projects and evaded taxes on portions of that income. As a project manager for Company A, he had the authority to award projects for the construction, maintenance, and repair of its telecommunications facilities, such as cell towers, transmitters, and receivers and had the authority to approve payments to contractors working under his direction. Lotter admitted that, beginning in or about January 2003, he demanded and received kickbacks of up to 20 percent of the value of project contracts from several contractors. In order for contractors to recoup the cost of kickback payments, Lotter permitted contractors to present fraudulent invoices for payment. Lotter admitted that the fraudulent invoices, which he approved, double-billed Company A for work that contractors had previously performed; billed for work that did not need to be performed but nevertheless was performed; and billed for the purported purchase of telecommunications equipment that Lotter provided to contractors at no cost. Lotter admitted that he received cash, check, and in-kind payments worth more than $1,000,000. Finally, Lotter admitted that he failed to declare approximately $634,000 in kickback payments on his 2004, 2005, and 2006 tax returns, resulting in approximately $216,000 in taxes due and owing for those years.
Diversified Commodities Trader Sentenced for Tax and Other Fraud Charges in $37 Million Ponzi Scheme
On March 19, 2010, in West Palm Beach, Fla., Michael A. Meisner, of Boca Raton, was sentenced to 188 months in prison, to be followed by five years of supervised release. A hearing will be scheduled to determine the amount of restitution Meisner owes to the victims of the fraud. Meisner pleaded guilty on September 2, 2009, to a three-count Information charging him with mail fraud, loan application fraud, and tax evasion. As set forth in the Information and the written proffer filed with his plea agreement, in approximately October 2001, Meisner, a registered commodity trading advisor, incorporated a company called Phoenix Diversified Investment Corporation (PDIC). Through PDIC, Meisner solicited and accepted more than $37 million from 260 investors through May 2008, when PDIC was placed into receivership and bankruptcy. To solicit investors, Meisner made materially false statements about his background and about PDIC’s performance. He lied to prospective investors, telling them that he was a highly successful commodities trader who had developed a commodities index software trading program that consistently resulted in profitable commodity futures trades. He provided falsified historical performance return sheets that showed high monthly returns on trades. In addition, he told prospective investors that their investments were safe and secure, and that their principal investment was guaranteed and not at risk. Meisner failed to tell prospective investors that only approximately $13 million of the approximate $37 million in PDIC investor funds were deposited into commodities trading accounts. Though he represented profit to the investors, in reality, trades on these funds showed a net trading loss of more than $6 million. Meisner also failed to tell potential investors that approximately $22 million of PDIC investor monies were not invested but, instead, were used to make fraudulent ponzi-type “interest payments” to prior investors. In addition, Meisner used approximately $6.8 million in PDIC investor monies to support his and his family’s luxurious lifestyle. Meisner also admitted that on or about April 20, 2006, he filed a false application to obtain a $1,000,000 mortgage loan on certain property located in Boca Raton. He further admitted that he evaded the payment of a large part of the $444,581 in federal income tax he reported he owed for 2005.
Owners of East St. Louis Day Care Center Sentenced on Fraud Schemes
On March 18, 2010, in East St. Louis, Ill., Monica M. Owens and Robby L. Owens, both of Clayton, Missouri, and formerly of Fairview Heights, Illinois, and Great Kids, Inc., an East St. Louis Day Care Center, were sentenced on charges relating to evasion of taxes, theft of federal program funds, and food stamp benefit fraud. Monica Owens was sentenced to 25 months in prison, three years of supervised release, and ordered to pay a special assessment of $300. Robby Owens was sentenced to 25 months in prison, three years of supervised release, and ordered to pay a special assessment of $100. The defendants were also ordered to pay $203,057 in restitution to the Illinois Department of Human Services (DHS) and $249,197 in restitution to the Internal Revenue Service (IRS). In addition, Great Kids, Inc. was sentenced to five years probation and ordered it to pay criminal restitution to the DHS on its conviction for theft of federal program funds. According to court documents, Monica and Robby Owens solely owned and operated Great Kids, Inc. The couple controlled all the business accounts and received all profits earned through Great Kids, Inc. Monica and Robby Owens, however, attempted to evade or defeat the assessment of income taxes and failed to file a tax return for 2005 and failed to pay income taxes. Monica Owens and Great Kids, Inc. further obtained payments by fraud by submitting false child care claims to the DHS, claims for child care of children who did not attend or were not present in the child care center. Monica Owens also falsely applied for food stamp benefits by denying that she was receiving a monthly household income from employment.
Former Dallas Businessman Sentenced for Mortgage Fraud Schemes in Collin and Dallas Counties
On March 18, 2010, in Plano, Texas, Micaiah Pruitt was sentenced to 71 months in prison and ordered to pay nearly $1.4 million in restitution for his role in a mortgage fraud scheme. According to court documents, from March 2005 to October 2006, Pruitt orchestrated a mortgage fraud scheme in which three individuals, Jeanelle Richardson, Pierre Sowell, and Reginald Davis, each bought two or more residential properties from Pruitt, or from someone for whom Pruitt was brokering the sale. In order to obtain the mortgage loans to make the purchases, Pruitt assisted Richardson, Sowell and Davis in making false statements in the mortgage loan applications, such as overstating income or representing that the borrowers intended to occupy each home as their primary residence. Pruitt profited from each of the sales and paid the three purchasers for making the purchases. The purchasers defaulted on all of the mortgage loans. In February 2010, Richardson was sentenced to 20 months in prison and ordered to pay nearly $469,000 in restitution. Sowell was also sentenced in February 2010 to 20 months in prison and ordered to pay more than $605,000 in restitution. Davis was sentenced in January 2010 to six months in prison to be followed by six months home confinement.
Texas Man Sentenced in $18 Million Oil and Gas Fraud Scheme
On March 15, 2010, in Plano, Texas, Michael Dannelly was sentenced to 210 months in prison and ordered to pay restitution of nearly $18 million. According to court documents, from 2004 to 2007, Dannelly owned and operated Oil and Gas Managing Partners and VADC, Inc. These companies raised funds from investors to drill oil and gas wells in Texas and Oklahoma. Dannelly devised a scheme to defraud investors by selling fraudulent oil and gas securities. Directly and through his employees, Dannelly made false representations to over 250 victims in order to obtain almost $18 million, most of which was used for personal expenditures. Dannelly also fraudulently obtained $250,000 from a financial institution in connection with this scheme.
Final Defendant in $6 Million Fraud Case Involving Bills for Nonexistent Ads Sentenced To 66 Months
On March 15, 2010, in Los Angeles, Calif., Joshua Hoffman, of Malibu, California, was sentenced to 66 months in federal prison for his role in a scheme that collected more than $6 million from companies and organizations that thought they were paying for advertisements that had run in various minority-themed publications. Hoffman also was ordered to pay $2,132,784 in restitution to 277 victims. Hoffman pleaded guilty in May 2009 to conspiring to commit mail fraud and wire fraud, a charge related to a telemarketing scam involving RAB Publications, a company run out of a Tarzana motel room that claimed to put out several publications. According to court documents, Hoffman and others contacted various organizations and collected money based on false claims that the organizations had purchased advertising in publications. Previously in this case, six other defendants were sentenced to prison, including Richard A. Bivona, of Las Vegas, Nevada, who was sentenced to 87 months in prison and ordered to pay $3,057,978 in restitution and Jeff Hillman, of Calabasas, California, who was sentenced to seven months in prison on tax evasion charges and ordered to pay $12,667 in restitution to the Internal Revenue Service (IRS). As a result of the conspiracy, victim entities lost more than $6 million. The victims in the case include the American Red Cross, Southeastern Michigan; ChoicePoint, Inc.; the County of Sacramento; E*Trade Financial; Fed Ex Ground Package System; Instinet; and United Defense.
Massachusetts Sham Investment Advisor Sentenced in Ponzi Scheme
On March 12, 2010, in Springfield, Mass., Lewis Hoff, a former stockbroker, was sentenced to 63 months in prison, to be followed by three years of supervised release, and ordered to pay $892,390 in restitution. Hoff pleaded guilty in December 2009 to fraud and tax charges in connection with a Ponzi scheme in which he defrauded multiple investors in the western Massachusetts area. According to court documents, the scheme spanned more than two years during which Hoff solicited funds from friends and acquaintances to invest in securities with a promised quick profit. Rather than investing the money, Hoff deposited the funds in his own bank account, using the money for personal expenses and to pay off earlier investors. At the plea hearing, the prosecutor outlined how Hoff met prospective investors in social settings, including on the golf course. Hoff told these individuals that they could make quick and significant returns on their money by investing in securities through him. When Hoff paid out some investors, the individuals gave him additional funds to invest.
Alabama Woman Sentenced for Embezzling Nearly $1.2 Million
On March 10, 2010, in Birmingham, Ala., Kimberly Perrin was sentenced to 30 months in prison, to be followed by three years of supervised release and to perform 40 hours of community service. In addition, Perrin was ordered to pay $1,197,074 in restitution to the Simon-Williamson Clinic and $356,345 to the Internal Revenue Service (IRS). Perrin also must forfeit $1,197,074 to the government as proceeds of illegal activity. According to court documents, Perrin who worked as comptroller for the Simon-Williamson Clinic in Birmingham embezzled nearly $1.2 million from the clinic. Perrin carried out her embezzlement scheme by causing the clinic to issue and mail checks both to her, personally, and to third parties to pay for her personal expenses. In order to conceal her conduct, Perrin did not make appropriate entries on the clinic’s books and records. Perrin also did not report the embezzled funds as income on her tax returns for the 2005 through 2008 tax years.
Former New Hampshire Lawyer Sentenced to 51 Months in Prison
On March 9, 2010, in Concord, N.H., Thomas J. Tessier, of Manchester, New Hampshire, was sentenced to 51 months in prison on charges of mail fraud, bank fraud and money laundering. According to court records, while still practicing as a lawyer, Tessier used fraudulent powers of attorney and other dishonest means to steal more than $295,000 from bank accounts that belonged to a deceased woman whose estate Tessier was appointed to administer. He sold the woman’s home that belonged to her oldest son, taking more than $200,000, and stole more than $198,000 from a life insurance policy. Tessier also took more than $240,000 from two investment accounts that belonged to the woman’s oldest son. Additionally, Tessier used fraudulent powers of attorney and other dishonest means to steal more than $1.4 million from bank accounts. Tessier deposited the stolen money into his law firm’s client trust bank account and then issued a check from the client trust account and deposited those funds into one of his personal bank accounts.
Wife of Diversified Commodities Trader Sentenced for Filing a False Tax Return
On March 5, 2010, in Miami, Fla., Victoria R. Meisner, of Boca Raton, was sentenced to 18 months in prison, to be followed by one year of supervised release, and ordered to pay $345,399 in restitution to the Internal Revenue Service (IRS). According to court documents, Meisner pleaded guilty in July 2005 to filing a false 2003 joint federal income tax return. Meisner reported total income of $49,626, when she knew that at least $430,000 should have been reported on the return. Meisner also admitted to filing a false 2004 joint tax return reporting income of $93,631 when she knew that at least $540,294 should have been reported. On September 4, 2009, Meisner’s husband, Michael A. Meisner, pleaded guilty to charges of mail fraud, loan application fraud, and tax fraud. According to the Information and written proffer filed with his plea agreement, Michael Meisner, a registered commodity trading advisor, defrauded more than 260 investors in a $37 million fraud scheme perpetrated through a company called Phoenix Diversified Investment Corporation (PDIC). Meisner admitted that approximately $6.8 million in PDIC investors’ money was used to support his and his family’s luxurious lifestyle. Michael Meisner is awaiting sentencing.
Minnesota Woman Sentenced for Orchestrating $7 Million Investment Scam
On March 5, 2010, in St Paul, Minn., Kalin Dao was sentenced to 144 months in prison and ordered to pay more than $7 million in restitution for conspiracy to commit mail fraud, wire fraud and engaging in illegal monetary transactions. According to court documents, Dao admitted that from April 2006 through September 2008, she, aided by others, devised and executed a scheme to defraud investors out of money through four related companies she created: TD/NLC Financial, Inc.; TD Financial Services, Inc.; NLC Financial Services, Inc.; and NLC Venture Group, LLC. Through these companies, Dao, who identified herself as the CEO, president, and principal officer of each, sold sham investment programs. Then, rather than investing funds as promised, she diverted substantial amounts for her own purposes, including making lulling payments, paying personal expenses, and gambling. Dao solicited investors through various means, including a website, where she posted alleged testimonials from past investors. Those testimonials detailed the investments programs available as well as their alleged past performances. Investors were told their money would be placed in investment programs targeted at specific markets and industries. They were also told Dao had a “partner” who held a seat on the New York Stock Exchange and “contacts” in the emerging Asian markets as well as in various Las Vegas casinos. In addition, Dao represented that she had developed an exclusive investment software program, which could determine the best time to buy and sell investments, and as a result, investment returns would be as high as 2,200 percent over an 18-month period. Finally, she falsely claimed she and those who worked for her held financial planning licenses and “Series 7″ licenses, which are needed to sell securities. Dao also admitted that in March 2007, she engaged in an illegal monetary transaction involving $20,000 in proceeds from the fraud scheme.
Minnesota Woman Sentenced to 55 Months for Embezzling from Veterans
On March 2, 2010, in Minneapolis, Minn., Connie Hanson was sentenced to 55 months in prison for embezzling nearly $1 million from 33 disabled veterans while acting as their appointed fiduciary. According to court documents, Hanson pleaded guilty to making a false statement to the U.S. Department of Veterans Affairs (DVA) in an effort to conceal her embezzlement from the veterans. She also admitted that from 2006 through 2008, she took hundreds of thousands of dollars from the bank accounts of the veterans with whom she worked and used that money to support her gambling habit. Hanson also admitted that in an attempt to cover up her embezzlement, she submitted a false federal fiduciary’s accounting to the DVA. As part of Hanson’s sentence she will make restitution to the DVA, the Social Security Administration, and a bonding company that has reimbursed the veterans for their losses.
Ice Cream Company Manager Sentenced for Failing to Pay Taxes on Money Stolen from Her Employer
On March 2, 2010, in Baltimore, Md., Katina Virginia Martin, of Aberdeen, Maryland, was sentenced to 18 months in prison, to be followed by one year of supervised release, and ordered to pay $236,175 in restitution. Martin was an assistant office manager at an ice cream company, responsible for counting the money that was collected by truck drivers who delivered ice cream to the company’s wholesale customers. She compared the total amount of money collected by the drivers to the total amount of money due from each customer as reflected on the drivers’ delivery invoices. According to her plea agreement, Martin admitted that beginning in November 2004, she did not record all of the cash that had been collected. Instead, Martin deposited into her personal bank account $236,175 of the cash collected in 2004 and 2005. She failed to advise the tax preparer who prepared Martin and her husband’s joint income tax returns for 2004 and 2005 of the money she stole from her employer. As a result, Martin avoided paying $61,738 in federal income taxes she owed to the Internal Revenue Service (IRS) for the years 2004 and 2005.
Former Purchasing Manager Sentenced for Fraud and Tax Evasion
On March 1, 2010, in San Diego, Calif., Brett Bardsley, a former employee of two large corporations with offices in San Diego County, was sentenced to 41 months in prison for mail fraud and filing a false tax return. In addition, Bardsley must serve three years of supervised release following his release from prison and pay $861,757 in restitution to Koch Membrane Systems and BEI Technology. According to information presented in court, Bardsley worked as a materials/purchasing manager at Koch Membrane Systems. Prior to Koch, he held a similar position at BEI Technology in Vista and San Marcos. At Koch and BEI, Bardsley had the power to purchase goods and services and also enter them as received into inventory. According to court documents, Bardsley set up shell companies and then billed over $580,000 for goods and services from Koch that, in reality, were not provided. Also as part of his scheme, Bardsley similarly embezzled more than $200,000 from BEI Technology. Additionally, as part of his plea, Bardsley admitted that he submitted and signed a false tax return for the year 2005 because it did not contain all of his taxable income. Bardsley admitted that he willfully filed this false tax return to avoid reporting any of the funds that he had embezzled from Koch. Between 2004 and 2007, Bardsley failed to report $557,623 in taxable income to the IRS, resulting in a tax loss of $199,034.
Former Connecticut Resident Sentenced on Tax Evasion and Cash Structuring Charges
On March 1, 2010, in New Haven, Conn., Terry L. Davis, formerly of Winsted, Connecticut, and currently residing in Las Vegas, Nevada, was sentenced to 30 months in prison, to be followed by three years of supervised release, and ordered to pay a $6,000 fine. In addition, Davis was ordered to pay back taxes, plus penalties and interest, to the Internal Revenue Service (IRS). Davis pleaded guilty in December 2009, to one count of tax evasion and one count of currency structuring. According to court documents and statements made in court, on May 1, 2008, Davis attempted to evade paying a large part of the federal income taxes he owed by filing a fraudulent Form 1040 tax return, in which he understated his taxable income by more than $650,000 for the calendar year 2007. Davis admitted that, for the tax years 2004 through 2007, he failed to pay a total of $463,623 in federal taxes. Additionally, between 2005 and 2007, Davis knowingly structured $534,544 in cash transactions to evade the currency transaction reporting requirements of federal law, which require financial institutions to file a Currency Transaction Report (CTR). In order to avoid any “red flags” or the generation of any CTRs, Davis frequently structured cash withdrawals from several bank accounts, several financial institutions on the same day, and through ATM withdrawals in amounts lower than $10,000.
Montana Women Sentenced for Tax Fraud
On February 25, 2010, in Missoula, Mont., Tami L. Curley, a resident of Frenchtown, Montana, was sentenced to 51 months in prison, to be followed by three years of supervised release, and ordered to pay $1,000,028 in restitution. Curley was sentenced in connection with her guilty plea to tax evasion and wire fraud. In an Offer of Proof, the government stated it would have proved at trial the following: Curley worked as the office manager for Rawlings Manufacturing Inc. (RMI) in Missoula from 1998 through August 2004. RMI was owned by John Rawlings. From January 2000 until August 2004, Curley wrote checks and had wire transfers made from the bank accounts of RMI and John Rawlings to “cash” for herself, her husband, her business (Double C Lawn & Maintenance Services Inc.), her credit card companies, and others for her benefit. Curley also made charges on RMI’s and John Rawlings’ credit cards for her benefit. According to court records, Curley was not authorized by John Rawlings or anyone else with authority to conduct these transactions. During 2003, Curley fraudulently obtained taxable income from RMI and John Rawlings which was not disclosed on her federal income tax return.
Owner of Virginia Travel Company Sentenced for Under-Reporting Income
On February 19, 2010, in Alexandria, Va., Muhammad Imtiaz was sentenced to 12 months and one day in prison, to be followed by one year of supervised release, and ordered to pay a $5,000 fine and a $100 assessment. Imtiaz was the owner and only employee of Monarch Travel. He pleaded guilty in November 2009 to one count of filing a false tax return. According to the Statement of Facts, Imtiaz earned substantial income by arranging foreign and domestic travel for clients of Monarch. Imtiaz under-reported his income by more than $698,000 for tax year 2007 which resulted in a tax loss of more than $243,000.
Former Information Technology Manager of Local Charity Sentenced on Tax Evasion and Mail Fraud Charges
On February 17, 2010, in St. Louis, Mo., Paul Murphy was sentenced to 46 months in prison and ordered to pay more than $622,000 in restitution on charges involving a false invoice scheme which defrauded his employer, the School Sisters of Notre Dame (SSND). According to court documents, Murphy was head of Information Technology for SSND, a religious and charitable organization in St. Louis. His responsibilities included ordering and installing computer hardware and software. Murphy also established his own business known as PC House. From October 2000 thru December 2007, Murphy submitted invoices to SSND under the name PC House for goods and services which had not been rendered. These fraudulent invoices were approved for payment by Murphy and indicated which accounting categories should be charged for the items billed. Murphy submitted PC House invoices totaling approximately $510,000. Murphy used this money for personal, mortgage payments, jewelry and restaurants. Murphy failed to report this fraudulent income on his tax returns for the years 2003 through 2007. The total amount of additional tax due for the four years is more than $112,000.
Five Who Targeted Homeowners in Default Sentenced in $13 Million Mortgage Fraud Case
On February 17, 2010, in Los Angeles, Calif., Martha Rodriguez, of Downey, California, was sentenced to 120 months in prison for orchestrating a real estate fraud scheme that falsely promised to help homeowners in default on their mortgages and caused nearly $13 million in losses. The scheme ran from May 2003 until November 2005. A second defendant, Edward Seung Ok, of Huntington Beach, was sentenced to 180 months in prison. According to court documents, Rodriguez, Ok and three others used computerized foreclosure databases to locate victims, who were then promised refinancing services. The scheme was operated through Rodriguez’s real estate and escrow agencies, Silvernet Properties in Downey and Bellasi Escrow in Seal Beach. Instead of obtaining refinancing, Rodriguez and her co-conspirators submitted loan applications in the names of “straw buyers” who were purportedly buying the properties. In some cases, the defendants paid the straw buyers for the use of their personal information. In other cases, the defendants used personal information of people without their knowledge. The loan applications for these straw buyers – which always contained false information – caused a series of lenders to fund more than 100 mortgages worth more than $40 million. The loan proceeds were used to pay off the loans in default, sometimes to make a few mortgage payments on the new loans, and to provide some instant cash to homeowners. However, the remaining proceeds, typically representing the bulk of the homeowner’s equity, were skimmed off by Rodriguez and her co-conspirators. Even though they were promised that they would be able to keep their homes, the victim homeowners usually lost title to their homes. The lenders suffered losses when the straw buyers then failed to make loan payments and the new loans went into default. Lenders were often unable to foreclose because the straw buyers did not know the properties were in their names. The scheme targeted commercial lenders and more than 100 homeowners across the Southland. Three other defendants in this case were also sentenced: Cynthia Valenzuela was sentenced 12 months and one day in prison; Vladimir Stefanovic was sentenced to 18 months in prison; and Maria G. Juarez was sentenced to 36 months in prison.
Ohio Mortgage Broker Sentenced to Six Years in Prison
On February 12, 2010, in Columbus, Ohio, Jonathan Boyd, a mortgage broker, was sentenced to 72 months in prison, three years of supervised release, and ordered to pay $468,855 in restitution to 12 victim financial institutions, as well as $211,954 to the Internal Revenue Service (IRS) for his role in a mortgage fraud scheme. In November 2008, Boyd was found guilty at trial on two counts of income tax evasion, one count of conspiracy to commit wire fraud, and four counts of wire fraud. Boyd was indicted with eight other individuals in August 2007 for allegedly conspiring to exaggerate the value of real estate properties in and around Columbus, Ohio to lending institutions as well as prospective purchasers. According to court documents, prospective buyers were recruited based on their lack of knowledge largely because of real estate and investment practices. The defendants allegedly used fraudulent documents to misrepresent the credit worthiness of those purchasers to lending institutions in order to get the institutions to approve excessive mortgage loans secured by the inflated-value properties.
Pennsylvania Man Sentenced on Tax Evasion Charge
On February 12, 2010, in Pittsburgh, Pa., Wayne P. Scholar was sentenced to 27 months in prison, to be followed by three years of supervised release, and ordered to pay a $100 special assessment. In addition, Scholar was ordered to pay restitution for his tax liability, including applicable penalties and interest, as determined by the Internal Revenue Service (IRS). Scholar pleaded guilty in September 2009 one count of tax evasion. According to court documents, Scholar underreported his income for the tax years 1999 through 2005 by more than $413,000. He evaded the correct taxes due by, among other things, placing his assets in nominee names.
Connecticut Women Sentenced to Nearly Four Years in Prison for Stealing $1.7 Million
On February 11, 2010, in Bridgeport, Conn., Patricia Baddeley Meehan was sentenced to 46 months in prison, followed by three years of supervised release, and ordered to pay full restitution to her former employer and to pay back taxes, penalties and interest to the Internal Revenue Service (IRS). According to court documents, between approximately 1998 and May 2007, Baddeley Meehan was an employee of Berman and Russo, a law office based in South Windsor, Connecticut. As a paralegal that worked primarily on real estate closings, she had signatory authority on a Client Fund Account located at Rockville Bank and also was authorized, by the partners in the Law Office, to use a signature stamp on checks cut from the Client Fund Account. In addition, Baddeley Meehan had access to the check book for the Law Office’s Operating Account and, with others, had signatory authority on the Operating Account. On October 7, 2008, Baddeley Meehan pleaded guilty to mail fraud and filing a false tax return. She admitted that, between August 2003 and May 2007, she carried out a scheme to defraud the Law Office. Baddeley Meehan had several credit card accounts in her name, which she used to purchase personal items and to take cash advances. The records reflect that between approximately August 11, 2002 and June 23, 2007, Baddeley Meehan took cash advances at various casinos totaling $1,463,093. In approximately August 2003, Baddeley Meehan began to cut checks from the Client Fund Account to pay for her credit card bills. Between August 2003 and May 2007, she wrote or caused to be written 77 checks totaling $1,716,128 from the Client Fund Account and made payable to credit card companies to which she owed money. Baddeley Meehan filed false tax returns for the years 2004 and 2005 because she failed to report the proceeds of the fraud on her tax returns, resulting in total taxes owed of over $123,000.
Man Sentenced to 37 Months for Fraudulent Stock Scheme
On February 9, 2010, in Boston, Mass., Steven P. Sable, a former resident of Charlestown, Massachusetts, was sentenced to 37 months in prison, three years of supervised release, and a mandatory special assessment of $1,200. In addition, Sable was ordered to pay $825,500 in restitution to the victims of his fraudulent stock promotion scheme. Sable pleaded guilty in September 2009 to mail fraud, securities fraud, and engaging in a monetary transaction in property derived from mail and wire fraud. According to court documents, from June 1999 through April 2002, Sable took at least $800,000 from 16 investors who purchased “units” of an entity called “Diversified Options.” He told prospective investors that Diversified Options controlled very valuable electronic flow measuring technology (called a “flow sensor”), that a lucrative deal for the sale of Diversified Options and/or its technology was imminent, and that shares (or “units”) in Diversified Options were available for purchase prior to the close of the deal. Although the flow sensor was a real device developed by a professor at the University of Cincinnati, it has not yet reached commercial application. Contrary to Sable’s representations to investors, no deals for the sale of Diversified Options or the technology were imminent. Sable misappropriated the investor funds, either depositing them into his personal bank account or transferring them to other accounts that he or his family members controlled. He used the funds to finance a lavish personal lifestyle.
Florida Man Sentenced to Over 21 Years in Prison for $1 Million Securities Fraud
On February 9, 2010, in West Palm Beach, Fla., Donald Platten, of Boca Raton, Fla., was sentenced to 262 months in prison, to be followed by three years of supervised release; the amount of restitution owed to the victims will be determined at a later date. Platten was convicted in August 2009 of conspiracy to commit securities fraud, securities fraud, conspiracy to commit wire fraud, and impeding the internal revenue laws. According to the Indictment and evidence introduced at trial, Platten was the president of Harvard Learning Centers Inc., a Florida corporation. From 2004 to 2007, Platten caused Harvard Learning to issue more than $1 million in stock to his wife, his sister, his ex-sister-in-law, and his limousine driver, Eli Goldshor. The stocks were supposedly as repayment of promissory notes, even though Platten knew that the promissory notes were fraudulent and the company did not owe these individuals the money reflected on the notes. Goldshor kicked back most of the proceeds from the sale of the stock to Platten. In this manner, Platten caused Harvard Learning to issue stock to repay his own obligations and to enrich himself, his relatives and others. Platten also caused a subsidiary of Harvard Learning to pay the personal expenses of himself and other family members. According to the indictment and evidence introduced at trial, Platten failed to file corporate federal tax returns for Harvard Learning for the years 2004 through 2007 and failed to file his personal federal tax returns for the years 2004 and 2005. For the year 2006, Platten failed to report on his personal tax return the income that he received as a result of Harvard Learning’s stock issuances and payment of his personal expenses. In addition, Platten caused Goldshor to purchase a house and obtain a mortgage by providing false information about his income and assets in order to conceal Platten’s ownership of the house in Boca Raton. The day after he purchased the house, Platten caused Goldshor to execute a quit claim deed transferring his interest in the property to Platten’s wife.
Leader of $3 Million Fencing Operation and ID Theft Ring Gets Eight And A Half Years in Prison
On February 5, 2010, in Seattle, Wash., Gabriel Jang, of Newcastle, Washington was sentenced to 102 months in prison, five years of supervised release and hundreds of thousands of dollars in restitution for conspiracy to commit bank and wire fraud, access device fraud, structuring currency transactions, and aggravated identity theft. Jang was also ordered to forfeit three houses purchased with the proceeds of his scheme as well as $116,527 in cash, and hundreds of thousands of dollars worth of stolen goods. Jang was the leader of an ID theft ring that netted over $3.2 million selling stolen goods over eBay. According to records filed in the case, members of the conspiracy would frequent work-out facilities and fitness centers in Washington, Oregon and as far away as Georgia, and would break into the lockers of people using the gyms. Jang provided co-conspirators with mobile computer equipment to quickly manufacture false identity documents, such as drivers licenses, to be used with the stolen credit cards. The conspirators used the stolen credit cards and fake IDs to purchase high-end electronics. Jang recruited the locker thieves, provided them with equipment and paid them about half the face value of the items they procured with stolen credit cards. Jang then fenced the stolen electronics over the internet auction website eBay. PayPal records indicate Jang’s account received more than $3 million between April 2001 and August 2008. Co-conspirator, Billy Morris Britt, of Renton, Washington, was sentenced in November 2009 to 61 months in prison and ordered to pay $466,622 in restitution for his role as one to the locker room thieves.
Owners of Florida Escort Service Sentenced on Conspiracy and Tax Charges
February 3, 2010, in Miami, Fla., Douglas J. Ketcher, aka Brian Davis, of Siloam Springs, Arkansas, and Christina L. Wypych, aka Danyella Valentine, of Broward County, were sentenced for their roles in running an escort service. Ketcher was sentenced to 23 months in prison and Wypych was sentenced to 22 months in prison. In addition, the defendants were ordered to forfeit $1,001,086. Ketcher and Wypych were charged in April 2009 with operating a prostitution ring, money laundering, and tax fraud. According to court documents, Ketcher was the president, director and sole shareholder of BDDV Associates, Inc, (BDDV), dba “Sweeties,” and Wypych was the vice-president and director of BDDV. From approximately July 2, 2002 through approximately February 2007, Ketcher and Wypych ran a prostitution business in Broward County and in other states. The defendants advertised their prostitution business as the escort service Sweeties. Ketcher and Wypych maintained “Sweeties.us,” an adult Internet website, and placed ads in local newspapers to solicit the hiring of “models” and “phone operators.” According to court documents and in-court statements, prospective customers would call Sweeties to schedule an appointment with the escort, ranging from $250 to $400 per hour. Ketcher and Wypych enticed escorts to travel to cities outside of Florida to engage in acts of prostitution by promising them large cash rewards, payment of travel expenses and other incentives. During the plea hearings, Ketcher and Wypych admitted that they impeded the Internal Revenue Service by hiding cash profits, paying employees in unreported cash, and by overstating business travel deductions.
Mortgage Fraud Ponzi Scheme Leads to 97 Month Prison Term and $4.8 Million Restitution Order
On February 2, 2010, in Oklahoma City, Okla, Dawn Quiroga was sentenced to 97 months in prison, three years of supervised release and ordered to pay nearly $4.85 million is restitution for money laundering and failure to file a tax return as part of a mortgage fraud Ponzi scheme. According to court documents, in June 2006, Quiroga began soliciting investors for a business she called Buyers Solutions Marketing, LLC (BSM). Quiroga told investors that BSM was a down-payment-assistance program providing short-term, high interest loans for people to use as down payments when purchasing homes. Numerous investors relied on Quiroga’s statements and wired money to her to invest in BSM. Almost immediately after BSM came into existence, it became clear that BSM could not make any money on down-payment-assistance loans. Nevertheless, Quiroga continued to solicit investors falsely claiming that BSM was successful. Instead, BSM became a Ponzi scheme where money from new investors was used to make payments to prior investors over a period of about two years. During that time period, Quiroga also funneled large amounts of money out of BSM to buy personal items such as new cars, a new home, and furnishings and electronics for the home. As a result, dozens of investors lost money through this fraud scheme. In addition, Quiroga also admitted that she failed to file an income tax return for calendar year 2007 when she had earned over $2.5 million in gross income.
Pennsylvania Woman Sentenced for Filing a False Tax Return
On January 29, 2010, in Pittsburgh, Pa., Michelle A. Lewis was sentenced to 12 months and a day in prison, to be followed by three years of supervised release and ordered to pay $55,000 in restitution and a $200 assessment. Lewis pleaded guilty in June 2009 to tax evasion and interstate transportation of stolen property. According to court documents, Lewis stole a check from Reliant Energy/Orion Power Midwest and deposited it into a bank account in the name of A. Lewis Valve, an account which Lewis controlled. Additionally, Lewis filed a false 2002 tax return by failing to report over $57,000, resulting in additional tax due and owing of over $19,000.
Maryland Cardiologist Sentenced for Evading More Than $16 Million in Taxes
On January 27, 2010, in Greenbelt, Md., Pradeep Srivastava, a cardiologist who maintained offices in Greenbelt and Oxon Hill, was sentenced to 46 months in prison, followed by three years of supervised release, and ordered to pay over $16 million in restitution. Srivastava was convicted by a trial jury on October 8, 2009 for evading more than $16 million dollars in income taxes for the 1998 and 1999 tax years, and filing a false tax return for 2000. According to evidence presented at trial, Srivastava conducted a huge volume of trading in stocks and stock options. During the late 1990s, the evidence showed that he earned more than $40 million in short-term capital gains. In preparation for filing his tax returns for 1998 and 1999, Srivastava provided his accountant with information about those trades that generated capital losses, but omitted providing information relating to the vast majority of his short-term capital gains. Srivastava then filed tax returns which omitted those capital gains which understated his tax due by $16,344,323 in 1998 and 1999. In 2000, Srivastava incurred massive capital losses. Disclosure of the full extent of those losses, however, would have potentially alerted the Internal Revenue Service to his undisclosed short-term capital gains for 1998 and 1999, therefore, trial testimony showed that Srivastava filed a false tax return which understated his capital losses for 2000.
Former Furniture Company Executive Sentenced for Conducting “Pay-to-Play” Schemes
On January 15, 2010, in Bridgeport, Conn., Benjy Orbach, of Colchester, was sentenced to 16 months in prison, followed by two years of supervised release for conducting “pay-to-play” schemes that defrauded his employer of more than $500,000. Orbach pleaded guilty in October 2009 to mail fraud, income tax evasion and financial structuring. According to court documents and statements made in court, Orbach worked as Vice President of Operations for Raymour & Flanigan, a furniture retailer with stores in Connecticut and other northeastern states. In his position, Orbach was able to influence Raymour & Flanigan’s selection of various subcontractors. From approximately 2005 through October 2008, Orbach received kickbacks from a cleaning subcontractor that provided services to Raymour & Flanigan. During the scheme, Orbach would receive an unmarked manila envelope containing between $8,500 and $23,000 in cash. Later, in lieu of the cash payments, Orbach arranged for a representative of the cleaning subcontractor to issue periodic checks to Orbach’s wife as if she worked for the company. While the subcontractor issued a Form W-2 in the amount of $61,506 to his wife, Orbach failed to report any of the cash payments on his federal tax returns. In addition, Orbach demanded kickbacks from another company that provided delivery services to Raymour & Flanigan. Between April 2007 and December 2007, Orbach received three dollars for every stop serviced by the delivery company. The company made regular payments to Orbach or his spouse by check, and issued Forms 1099 to each of them. Orbach has also paid $526,815 in restitution in to Raymour & Flanigan and paid $267,505 in back taxes, penalties and interest.
Former Army Captain Sentenced to Over Four Years in Prison
On January 12, 2010, in Honolulu, Hawaii, David Silivano Gilliam was sentenced to 50 months in prison and also ordered to pay $450,565 in restitution. Gilliam pleaded guilty on August 11, 2009 to theft of government property, money laundering, and tax perjury. Gilliam, a former Captain in the United States Army, admitted in court that he stole approximately $400,000 in 2004-2005 while stationed at Kandahar Air Base in Afghanistan as a Disbursing Officer for the Army Alpha Detachment, 125th Finance Battalion out of Schofield Barracks, Hawaii. According to other information produced in court, he smuggled the funds from Afghanistan to Hawaii, where he used the stolen money to engage in a number of financial transactions, one of which involved buying a $254,000 cashier’s check with cash brought to the bank in a duffle bag. Gilliam subsequently relocated to South Carolina, taking the stolen funds with him and continuing to spend the proceeds. Gilliam also admitted that he did not report the cash he had stolen on his amended 2005 tax return, filed in 2008.
Bookkeeper Sentenced to 51 Months in Prison for Embezzling from Credit Union
On January 12, 2010, in Hartford, Conn., Melissa LaLiberte of Wallingford was to 51 months in prison, three years of supervised release, and ordered to pay $743,768 in restitution to the National Credit Union Administration and to pay $218,103 in back taxes, plus applicable penalties and interest, to the Internal Revenue Service (IRS). LaLiberte pleaded guilty in September 2009 to one count of embezzlement from a federal credit union and one count of filing a false income tax return. According to documents filed with the Court and statements made in court, from January 2004 to May 2008, while employed as a bookkeeper for the Meriden Franco-American Federal Credit Union (MFAFCU). LaLiberte admitted that she took unauthorized cash from MFAFCU members that was intended to pay down loan balances, made unauthorized withdrawals from the MFAFCU accounts, drew her salary multiple times a month when she was only entitled to be paid once per month and, without authorization, used MFAFCU checks to pay personal expenses. Also, LaLiberte failed to post cash withdrawals and loans to her and her husband’s share accounts, presented false reports to MFAFCU’s Board of Directors, and falsified deposits to her own account.
Hedge Fund Manager Who Bilked Relatives Out Of $25 Million Sentenced to Over 10 Years in Prison
On January 11, 2010, in Los Angeles, Calif., Bradley Ruderman was sentenced to 121 months in prison and ordered to pay more than $27.5 million in restitution for running a Ponzi scheme that targeted family and friends. According to court documents, Ruderman, the founder and manager of two Beverly Hills hedge funds collected more than $44 million from investors and promised annual returns as high as 60 percent. To carry out his fraud, Ruderman used false and misleading statements to persuade family members, friends and others to invest in his two hedge funds. Ruderman lied about profits made by the funds, repeatedly sent false account statements to investors, and reported that he had $206 million in funds under management, when he actually had only $588,246 under management at the beginning of this year. Ruderman spent at least $8.7 million of investor money on personal expenses, including $200,000 each summer for a rented beach house in Malibu, two Porsches, $53,930 on sporting events, $896,000 in credit card charges, and $327,000 in cash expenditures. Ruderman further admitted that he lost $5.2 million of investor money in clandestine poker games held on a regular basis in a suite at a luxury Beverly Hills hotel.
Unlicensed Orange County Mortgage Broker Sentenced to Nearly Six Years in $40 Million Fraud Scheme
On January 11, 2010, in Santa Ana, Calif., Jared Tornow was sentenced to 70 months in prison for tax evasion, mail, credit card and mortgage fraud that caused more than $7 million in losses. According to court documents, Tornow provided mortgage services from 2001 until 2006 through several companies, including Lucrativo Real Estate Solutions, which he operated with Mikhail Kosachevich during the last two years of the scheme. Tornow solicited home buyers and assisted them in obtaining mortgages, often by submitting fraudulent paperwork to lending banks. As a part of the scheme, Tornow and others inflated borrowers’ income and assets on loan applications, leading lenders to believe that their clients were creditworthy; including creating false W-2 forms, paycheck stubs, bank statements and other documents. Relying upon the false statements made on loan applications by Tornow and others, lenders issued more than $40 million in residential loans to Tornow’s clients. When a number of the properties went into foreclosure, the banks suffered losses of more than $7 million. Tornow and his co-conspirators received hundreds of thousands of dollars in commissions and payments from loans that were funded based upon their false statements and submission of fraudulent documents to lenders. Tornow concealed his commission income from the IRS and failed to pay more than $300,000 in federal income taxes.
Man Sentenced to Four Years in Prison in Multi-Million Dollar Investment Fraud Scheme
On January 8, 2010, in Oakland, Calif., Brice Carrington was sentenced to 48 months in prison, followed by three years of supervised release and ordered to pay restitution of nearly $4 million to 13 victims, nearly $142,000 in back taxes, forfeit a Lamborghini, Hummer and a Mercedes Benz for wire fraud and tax evasion. According to court documents, Carrington admitted he falsely represented to investors that he was a three-time Oscar winning sound effects designer and that he was well-established in the entertainment industry and had been involved in many Hollywood productions. Carrington also paid a substantial sum to a Walnut Creek jeweler to have a reproduction of an Oscar statuette made for him to use as a prop to support his claims that he was a Hollywood insider in order to lure investors into investing money with him. Between 2001 and 2005, he received approximately $4,042,480 from investors but used no more than $430,000 of those funds towards designing sound effects. To further his scheme, he purchased with investors money and without their knowledge, a Lamborghini Murcielago, a Hummer H2 and a Mercedes SL 500R, which he used as props to lure investors into investing money with him. Carrington entered into written and oral agreements with at least ten investors and promised them double and even triple returns on various sound effects design projects. He also failed to report $581,500 in gross receipts on his 2003 tax return. Instead he filed a false Form 1040 reporting zero taxes owed.
Former Office Manager Sentenced on Tax Evasion and Embezzlement Charges
On January 7, 2010, in East St. Louis Ill., Mary R. Storer was sentenced to 30 months in prison, followed by three years of supervised release and ordered to pay $266,056 in restitution to her former employer and $76,267 to the Internal Revenue Service. The sentence stems from her guilty plea to charges of tax evasion and embezzlement. According to court documents, while Storer was serving as the office manager for a small family-owned business, she began embezzling money from that business. Almost all of the money that she embezzled was lost gambling. As part of her plea, Storer admitted she committed tax evasion, embezzled money from the company’s employee benefit plans and failed to pay over employment taxes for the company.
Former Military Official Sentenced for Participation in Bribery Conspiracy Involving $206 Million Telecommunications Contract in Korea
On January 7, 2010, in Columbus, Ga., Henry Lee Holloway, a former Army and Air Force Exchange Service (AAFES) official, was sentenced to 36 months in prison for his role in a bribery conspiracy involving a multi-million dollar telecommunications contract, and for not reporting the bribes he accepted on his income tax returns. Holloway also was ordered to pay a $5,000 fine and to forfeit $70,000, the proceeds from his involvement in the conspiracy. According to court documents, while working as the AAFES general store manager at the Central Exchange in the Republic of Korea, Holloway used his official position to maintain a $206 million contract to provide telecommunications services to U.S. Armed Forces installations in the Republic of Korea. He admitted that in exchange for at least $70,000 worth of stock, entertainment, travel expenses, cash and other things of value, he used official acts and influence to support and expand the contractual relationship, despite his knowledge and belief that the company was underperforming and violating the terms of its contract with AAFES.
Ohio Medical Practice Office Manager Sentenced on Mail Fraud and Tax Charges
January 7, 2010, in Cincinnati, Ohio, Karen S. Schmidt, of Amberley Village was sentenced to 21 months in prison, three years of supervised release, and ordered to pay a $5,000 fine, as well as pay $55,910 in restitution to Ohio Valley Orthopaedics and $10,723 in restitution to the Internal Revenue Service (IRS). In May 2009, Schmidt pleaded guilty to one count of mail fraud and one count of filing a false federal income tax return with the IRS in connection with stealing money from the medical practice where she worked as office manager. According to court documents, between May 2005 and November 2007, Schmidt charged personal purchases on company-owned credit cards, pocketed cash received from patients, and created false invoices which she sent to the company and paid them using company checks. As office manager, she attempted to conceal the fraud from auditors. Schmidt admitted that she failed to report $38,298 taken from her employer on her 2005 federal income tax returns.
Former Vice President of 24 Hour Fitness and Advertising Executive Sentenced to Prison in Kick-Back Scheme
On January 6, 2010, in San Jose, Calif., Susan K. Powell, of San Jose, California, and Michael J. Johnston, of Los Gatos, California, were sentenced for their roles in a kick-back scheme to defraud 24 Hour Fitness. Powell was sentenced to 15 months in prison, followed by three years of supervised release; Johnston was sentenced to five months in prison, followed by three years of supervised release. The defendants were also ordered to pay joint restitution of $350,001. The defendants pleaded guilty in February 2008. Powell pleaded guilty to conspiracy to commit mail fraud and tax evasion. Johnston pleaded guilty to conspiracy to commit mail fraud and aiding and abetting the preparation of a false tax return. In the plea agreement, the defendants admitted that between 1996 and 2000, Powell was employed as a vice-president of marketing for Fitness Holdings Worldwide, a company which operates workout facilities in the Bay Area and elsewhere under the name “24 Hour Fitness.” In her capacity as vice-president of marketing, Powell came to know Johnston who operated a graphics advertising and design company in Los Gatos, Calif. Beginning 1996 and continuing through January 31, 2000, Powell and Johnston entered into a scheme to defraud 24 Hour Fitness. As a part of the scheme, Powell used her position to outsource a portion of 24 Hour Fitness’s advertising accounts to Johnston’s graphic design company. Johnston falsely inflated the costs on invoices submitted to Powell, and Powell used her executive position to approve payment on the inflated invoices. After Johnston received payment for the inflated invoices, he “kicked back” a portion of the payments to Powell. The defendants defrauded 24 Hour Fitness out of a total sum of between $70,001 and $500,000 between 1997 and 1999. While conducting the scheme, Powell knowingly and willfully attempted to evade paying taxes on the income she received from the scheme. Johnston agreed to not issue Forms 1099 in an effort to assist Powell in her effort to avoid paying taxes on the full income realized from the scheme.
Owners of Lawn Care Business Sentenced for False Claims to IRS
On January 5, 2010, in Grand Rapids, Mich., Jonathon Lee Fancett and his wife Angela Marie Fancett were sentenced to 24 and 13 months imprisonment, respectively, followed by three years of supervised release. The pair also was ordered to pay restitution in the amount of $241,124 to the Internal Revenue Service (IRS). According to court records, Jonathon Fancett was the owner of Lakeview Lawn Care and Angela Fancett was the bookkeeper for the company. The Fancetts made false claims against the United States by filing personal income tax returns claiming that federal income taxes had been withheld from their income and that they were entitled to refunds for the withheld taxes, when in fact no tax had been withheld from their wages and they were not entitled to any refunds.
New York Rabbi Sentenced in Scheme to Defraud the Internal Revenue Service
On December 21, 2009, in Los Angeles, Calif., the Grand Rabbi of Spinka, a religious group within Orthodox Judaism, was sentenced to 24 months in prison for orchestrating a tax evasion scheme. Grand Rabbi Naftali Tzi Weisz, of Brooklyn, New York, pleaded guilty in August 2009 to a criminal conspiracy charge in which he admitting working with others to obstruct the Internal Revenue Service (IRS) by soliciting charitable donations to Spinka-related organizations with secret promises to refund donors the vast majority of the money they “donated.” Following Weisz’s sentencing, Yaacov Zeivald, the final defendant involved in the scheme, was sentenced four months in prison for participating in the underground money transfer system that allowed some of the donors to be reimbursed for their “donations.” A total of seven individuals have been sentenced for working together to obstruct the IRS and to operate an unlicensed money transmitting business. Additionally, three donors who “donated” money to Spinka organizations have pleaded guilty to tax evasion and received sentences ranging from three months to six months in prison. According to court documents, Weisz, several associates and five charitable organizations were indicted by a federal grand jury in which Weisz and his assistant solicited millions of dollars of contributions to the Spinka organizations by promising to secretly refund up to 95 percent of the contributions. In this manner, the contributors could claim as tax deductions the full amounts of their contributions, while actually having contributed as little as 5 percent of the amount they would declare on their tax returns. Weisz’s assistant, Gabbai Moshe E. Zigelman, also of Brooklyn, pleaded guilty last year to conspiring with Weisz and was sentenced to two years in federal prison. In some cases, the contributors received cash payments through an underground money transfer network involving various parties, some of whom operated businesses in and around the Los Angeles jewelry district. A second method used to reimburse contributors was wire transfers from Spinka-controlled entities into accounts secretly held at a bank in Israel.
Leader of $47 Million Mortgage Fraud Scheme Sentenced to 60 Months
On December 18, 2009, in Seattle, Wash., Vladislav Baydovskiy, of Bellevue, Washington, was sentenced to 60 months in prison and three years of supervised release for conspiring to commit bank fraud, mail and wire fraud, and filing a false tax return. In addition to the prison sentence, Baydovskiy is forfeiting to the government several automobiles, a yacht, and several bank and investment accounts totaling approximately $2.4 million. A restitution hearing has been schedule in January 2010. Baydovskiy was a mortgage broker who operated two brokerage companies, Nationwide Home Lending LLC and Kobay Financial Corporation; and established a third company, Emerald City Escrow, to close transactions involving the fraudulently obtained loans. According to records filed in the case, the defendant and others secured through “straw buyers” and otherwise unqualified purchasers at least 68 loans, representing at least $46 million in loan proceeds, based on false and fraudulent representations. All of the fraudulently obtained loans were closed at Emerald City Escrow. Employees and principals at Kobay and Nationwide prepared and submitted falsified loan applications and related verification documents to lenders in a scheme to conceal the fact that buyers were unqualified to obtain loans. Relying on the fraudulent information, lenders extended loans that exceeded the value of the property and the borrower’s ability to re-pay the loan. Employees and principals of Emerald City diverted some of the fraudulently obtained loan proceeds to themselves and others associated with the scheme. False settlement documents were prepared to conceal the diversion from lenders. Baydovskiy’s wife, Donata Baydovskiy, part owner of Emerald City Escrow was sentenced to time served and two months of electronic home detention. Four other defendants in the case were sentenced last week. Camie Byron, a loan officer, was sentenced to 24 months in prison. Alla Sobol, a mortgage broker, was sentenced to 24 months in prison and her husband, David Sobol, a real estate agent, was sentenced to 24 months in prison. Sandra Thorpe, an accountant who falsified income statements and employment verification letters, was sentenced to probation and 200 hours of community service. The remaining defendant, Viktor Kobzar, a mortgage broker, will be sentenced in January 2010. In total the mortgage fraud scheme defrauded more than a dozen banks and mortgage lenders of more than $47 million.
Pair Sentenced for Embezzling from Health Clubs in Texas and Oklahoma
On December 11, 2009, in Lubbock, Texas, Chad W. Read was sentenced to 18 months in prison and ordered to pay $15,000 in restitution to Reaction Fitness Clubs from whom he and his ex-wife embezzled funds. Read’s ex-wife, Emily J. Read, was sentenced in September 2009 to 41 months in prison and ordered to pay more than $670,000 in restitution. According to court documents, Chad and Emily Read embezzled money from a group of health fitness clubs where she worked as a bookkeeper. Chad Read assisted her in laundering the illegally obtained funds. The Reads paid for their personal credit card accounts from the Reaction Fitness Clubs bank accounts and purchased many personal items using the money they received from the Fitness Clubs’ account.
Construction Company President Sentenced to Prison in Tulsa Public Works Bribery Case
On December 14, 2009 in Tulsa, Okla., Max Elliot Wolf was sentenced to 57 months in prison for taking part in a bribery scheme involving millions of dollars in taxpayer funds intended for city streets, bridges and other public works projects in the City of Tulsa. He was also ordered to pay $939,078 in restitution of which will be restored to the City of Tulsa. According to court documents, Wolf admitted that from mid-2005 until June 2008, he made numerous bribery payments to a former Tulsa Public Works Field Engineering Manager with the intent to influence and reward him for certifying fraudulent inflated invoices submitted by Horizon Construction Company, Inc., where Wolf served as president.
Art Gallery Owner Sentenced to Three Years in Prison for Tax Fraud
On December 14, 2009, in Los Angeles, Calif., Michael Robert Levy, of Long Beach, California, was sentenced to 36 months in prison and one year of supervised release for subscribing to a false tax return upon which he failed to report more than $1.1 million dollars in gross receipts to the Internal Revenue Service (IRS) for the 2006 tax year. Levy admitted in his plea agreement that during the years 2003 through 2007, he failed to report to the IRS more than $3,000,000 in gross receipts that he received from the operation of his art gallery, Michael Levy Gallery. According to the plea agreement, instead of depositing all of his gross receipts into his business account, Levy converted some 80 customer checks into cashier’s checks which he later converted into cash. By doing so, Levy hid the unreported gross receipts from his tax return preparer who relied on Levy’s representations that all of the business receipts for the art business were deposited into his business account. The government asserted that the amount of tax that Levy sought to avoid paying exceeded $899,000 for the years 2003 through 2007.
Businessman and Doctors Sentenced in Naturalization Scheme and for Filing False Returns
On December 8, 2009, in Philadelphia, Pa., Habeeb A. Malik and Ira H. Weiner were sentenced to 50 months and 36 months, respectively, for their participation in a naturalization fraud scheme. The two men, along with a third defendant, Thongchai Vorasingha were convicted at trial in July 2009 of conspiracy and of naturalization fraud. Malik was also convicted of four counts of filing false tax returns that failed to report hundreds of thousands of dollars in taxable income. Vorasingha was sentenced on December 7, 2009, to 24 months in prison. Weiner and Vorasingha are both physicians. Malik owned The Foundation of Human Services in Broomall, Pennsylvania, which purported to assist foreign individuals in becoming naturalized United States citizens. He would refer clients to defendants Weiner and Vorasingha who would “examine” the clients and then complete INS waiver form N-648, falsely stating that the applicants suffered from various permanent maladies that impaired their ability to learn English. Malik charged his clients approximately $2,000 for this service and paid defendants Weiner and Vorasingha approximately $120 for the “examinations.” In addition to the prison term, Malik and Weiner were ordered to pay restitution of $15,000 and $10,000, respectively. Vorasingha was ordered to pay $5,000.
Former Department of Defense Contracting Officer Sentenced to 110 Months for Filing False Tax Returns
On December 10, 2009, in Washington, D.C., Tijani Ahmed Saani, former civilian employee of the U.S. Department of Defense, was sentenced to 110 months in prison, followed by one year of supervised release, and ordered to pay a $1.6 million fine and $816,485 in restitution to the Internal Revenue Service (IRS). Saani, a former resident of Kuwait City, Kuwait, and dual U.S./Ghanaian citizen, pleaded guilty on June 25, 2009, to five counts of filing false tax returns. According to court documents, Saani admitted failing to report at least $2.4 million in taxable income for tax years 2003 through 2007, while he served in Kuwait as a contracting officer for the Department of Defense. Saani also admitted he failed to report his ownership interest in foreign bank accounts in five different countries, including Ghana, Switzerland, the Jersey Channel Islands, the Netherlands and the United Kingdom. Saani used these accounts to help conceal his unreported income and to send and receive wire transfers totaling more than $3.5 million.
CEO of Metropolitan Money Store and Conspirators Sentenced in $37 Million Mortgage Fraud Scheme
On December 7, 2009, in Greenbelt, Md., Jennifer McCall, Chief Executive Officer of the Metropolitan Money Store, was sentenced to 135 months in prison and ordered to pay $16,880,884 in restitution. Wilbur Ballesteros was sentenced to 63 months in prison and ordered to pay $16,859,950 in restitution. Ronald Aaron Chapman, Jr. was sentenced to seven days in prison, 10 months of home detention with electronic monitoring and ordered to pay $268,279 in restitution. All defendants were sentenced to serve five years of supervised release following their prison terms. According to her plea agreement, McCall was a licensed mortgage broker, but was not licensed to provide credit repair. In May 2005, McCall and Joy Jackson incorporated Metropolitan Money Store, located in Lanham, Maryland, which offered foreclosure consultation and credit services to financially distressed homeowners. From September 2004 to June 2007, Jackson, McCall, Ballesteros, Chapman and others conspired to fraudulently promise to help homeowners who were facing foreclosure because of their inability to make monthly mortgage payments to avoid foreclosure and to repair their damaged credit. The homeowners were directed to allow their homes to be titled in the names of third party purchasers (straw buyers). Using the homeowners’ properties, the conspirators applied for mortgages and prepared and submitted fraudulent loan applications to mortgage lenders to obtain inflated loans in the straw buyers’ names. At settlement time, the conspirators imposed numerous fees and required “seller contributions” and imposed fees for services which were not performed, disclosed or explained to the homeowners. Additionally, they transferred the sale proceeds out of the escrow accounts into the conspirators’ business and personal bank accounts and converted a substantial portion of those funds to their personal use. Jackson and McCall withdrew these funds and paid for goods and services for themselves. As a result of this scheme, the total loss attributable to Jennifer McCall, including the estimated losses to the mortgage lenders, is $16,880,884.
Detroit Area Businessman Sentenced for Failing to Pay Income Taxes
On November 25, 2009, in Detroit, Mich., Frank Scaramuzzino was sentenced to 24 months in prison to be followed by one year of supervised release, fined $50,000 and ordered to pay $878,011 in restitution to the Internal Revenue Service (IRS). Scaramuzzino pleaded guilty on May 13, 2009 to two counts of willful failure to pay income taxes for calendar years 2001 and 2002. According to court records, during the 2001 and 2002 tax years, Scaramuzzino received gross income of $1,567,158 and willfully failed to pay $587,568 in income tax due and owing to the IRS.
Second Tax Conviction for Michigan
On November 25, 2009, in Detroit, Mich., Gary Heraud was sentenced to 18 months imprisonment, followed by three years supervised release, and ordered to pay $197,809 in restitution to the Internal Revenue Service (IRS). Heraud pleaded guilty in June 2009 to two counts of tax evasion. According to court records, during the tax years 2003 and 2004, Heraud owned and operated Communicom, Inc., Aceros Inc.,, and Precept, Inc., receiving over $700,000 in taxable income. On his 2003 federal income tax return, he only reported interest income of $4,140 while reporting a business loss of $5,806. In 2004, Heraud failed to report any income, while diverting funds through his corporate bank accounts. This resulted in a tax loss to the IRS of over $197,000. According to court records, in 1992, Heraud pleaded guilty to a tax evasion charge and was sentenced to one year in prison which was suspended except for six months with conditions.
Chicago Man Sentenced in Mortgage Fraud Scheme
On November 20, 2009, in Chicago, Ill., Henry Tate, was sentenced to 18 months in prison, to be followed by three years of supervised release, and order to pay $222,138 in restitution for his role in a mortgage fraud scheme. According to court documents, between at least 2003 and 2006, Tate and his co-conspirators schemed to fraudulently obtain more than $40 million in mortgage loan proceeds from more than a dozen large banks and mortgage companies. As part of the scheme, loan applications were submitted to lenders falsely representing that the individual applying for the loan was the true purchaser of the property, when, in fact, the applicant was acting as a nominee, or “straw” purchaser.
Indiana Man Sentenced to 37 Months in Mortgage Fraud Scheme
On November 9, 2009, in Indianapolis, Ind., Timothy A. Brown was sentenced to 37 months in prison, to be followed by three years of supervised release, and ordered to pay restitution in the amount of $1,725,397. On March 27, 2009, Brown pleaded guilty to money laundering and wire fraud in connection with a mortgage fraud scheme. According to court documents, from 2004 until April 2005, Brown and other individuals located residential properties for sale in the Indianapolis area and negotiated to purchase the properties at fair market value. When the sales were closed, an investor was shown on the HUD-1 Settlement Statement as the purchaser, and the sales price shown was much higher than the fair market value price. The fraudulently obtained funds consisted of the difference between the loan amount (80-90% of the falsely inflated sales price) and the fair market value negotiated with the seller. Brown and others recruited these investors, who were told that they would be investing their credit for purposes of purchasing real estate in the Indianapolis area, and that they would not be required to make any down payments or other payments on the properties. In turn, the investors were paid a fee, generally $4,000, for their involvement in the venture; money which was illegally obtained from mortgages supplied by the lenders. In addition, lenders for these properties relied on false loan applications, inflated appraisals and false supporting documentation. Brown’s company, Brown Funding, Inc., along with others, funded and “fronted” the down payment on many of these loans with money borrowed from friends and business associates. All of the loans went into default and were the subject of various legal actions by the lenders.
Houston Man Sentenced to 20 Years for Mortgage Scam
On November 23, 2009, in Houston Texas, Ted Russell Schwartz Murray was sentenced to 240 months in prison, to be followed by three years of supervised release, for his part in the fraudulent activities associated with the operation of Money Mortgage Corporation of America, a subsidiary of Premiere Holdings LP, a real estate investment program. According to court documents, Murray committed mail fraud and securities fraud in the course of promoting and marketing the Premiere 72 or “P72″ mortgage investment program, as well as making a false statement on tax returns for the years 1999 and 2000. An expert witness qualified in forensic accounting testified that the P72 program was conducted like a Ponzi scheme, in that the money from new investors was used to pay earlier investors. Other evidence presented at trial showed that Murray disguised personal expenses as business expenses and deducted a portion of those expenses on his tax returns, including a $29,000 Rolex watch, payments to casinos, payments for a $1 million ownership interest in the building where Premiere Holdings held its offices and gifts to family members.
Rhode Island Couple Sentenced for Tax Evasion
On November 18, 2009, in Providence, R.I., Albert Martin and his wife, Lorraine Martin, were sentenced for committing tax evasion and conspiring to defraud the United States. Albert Martin was sentenced to 51 months in prison and three years of supervised release. Lorraine Martin was sentenced to 12 months and a day in prison and three years of supervised release. In addition to the prison terms, Albert and Lorraine Martin were ordered to pay $463,988 in restitution to the U.S. Treasury. According to the indictment and evidence introduced during their trial, Albert Martin and co-conspirator, Bruce Lapierre owned and operated a Woonsocket-based machine shop from which they earned substantial income. From 1997 to 2004, the defendants engaged in an elaborate scheme to conceal from the Internal Revenue Service (IRS) income that they earned through Classic Machine, and thus avoid paying taxes on that income. Rather than open business accounts for depositing business receipts and income, they allegedly used Lorraine Martin’s personal account to conceal business receipts, as well as an anonymous “private” banking service designed to conceal income from the IRS. The evidence also showed that the defendants, in order to further conceal their assets and income from the IRS, used multiple business names, such as Banner Technologies, Circle Machine, Preferred Enterprises and Royal Enterprises. The defendants also made extensive use of cash and money orders. In October 2009, Lapierre was sentenced to 51 months in prison for his role in the scheme.
Former Office Manager Sentenced to 41 Months in Prison for Embezzlement of $1.3 Million
On November 17, 2009, in Sacramento, Calif., Regina Schenck, of Herald, California, was sentenced to 41 months in prison, to be followed by three years supervised release, for computer fraud and filing a false tax return related to her embezzlement of approximately $1.3 million from a Sacramento law firm. Schenck was also ordered to pay $1.3 million in restitution to her former employer and $264,000 in restitution to the Internal Revenue Service (IRS). According to documents presented in court, between 2003 and 2008, Schenck wrote law firm checks to pay her own bills, created false documents, and told lies to cause law firm partners to authorize checks that she secretly used to buy five horses and a horse trailer. She used the law firm’s computer network to inflate her salary, give herself bonuses and benefits, and she omitted her fraud-procured income from her tax return.
Missouri Woman Sentenced for $470,000 Bank Fraud, Money Laundering Scheme
On November, 17, 2009, in Jefferson City, Mo., Lorraine Hess of Lake Ozark was sentenced to 30 months in prison and ordered to pay more than $470,000 in restitution to her employer. According to court documents, Hess was employed as a bookkeeper at SSL Enterprises from May 2006 through November 2007 and made seven unauthorized wire transfers from an SSL Enterprises bank account to her personal bank account. Hess also created 18 unauthorized checks that she forged or used a signature stamp payable to her and she deposited them into her personal account. Hess’s employer had a personal credit card with Wachovia and Hess used 11 customer checks for that account and wrote checks payable to her, forging her employer’s signature on each check and depositing the checks into her personal checking account. SSL Enterprises had a business credit card account with American Express that Hess used to charge various unauthorized personal expenses, including groceries, clothing, spa visits, furniture, Amazon.com purchases and electronic equipment.
President of Metropolitan Money Store Sentenced to Over 12 Years in Prison for $37 Million Mortgage Fraud Scheme
On November 14, 2009, Greenbelt, Md., Joy Jackson, the president of the Metropolitan Money Store, was sentenced to 151 months in prison, five years of supervised release, and ordered to pay $16,880,884 in restitution. In addition, Jackson was ordered to forfeit three residential properties in Maryland and three vehicles. According to her plea agreement, Jackson was a licensed mortgage broker, but was not licensed to provide credit repair. In May 2005, Jackson and co-defendant Jennifer McCall incorporated Metropolitan Money Store, located in Lanham, Maryland, which offered foreclosure consultation and credit services to financially distressed homeowners. From September 2004 to June 2007, Jackson and others conspired to fraudulently promise to help homeowners avoid foreclosure and repair their damaged credit. The homeowners were directed to allow title to their homes to be put in the names of third party purchasers (the straw buyers) for a year. During that time, the Metropolitan Money Store promised to improve the homeowners’ credit ratings, help them obtain more favorable mortgages, and eventually return title to their homes to them. The homeowners were told that the equity withdrawn from the properties would be used to pay the mortgage and expenses on their homes and to repair their credit. The straw buyers were paid up to $10,000 to participate in the scheme and allow the properties to be put in their names. Jackson also served as a straw buyer on several properties in Maryland. Using the homeowners’ properties, the conspirators applied for mortgages to extract the maximum available equity from the homes, and prepared and submitted fraudulent loan applications to mortgage lenders to obtain inflated loans on the target properties in the straw buyers’ names. At settlements, the conspirators imposed numerous fees and required “seller contributions” which were far in excess of industry standards; they imposed fees for services which were not performed, disclosed or explained to the homeowners; and they transferred the sale proceeds out of the escrow accounts into the conspirators’ business and personal bank accounts and converted a substantial portion of those funds to their personal use. During the conspiracy, Jackson provided Wilbur Ballesteros, a licensed real estate agent who served as a closing agent on more than 60 straw buyer properties, with more than $100,000 in kickback payments to process real estate closings quickly. Jackson directed others to prepare fraudulent settlement documents. Jackson and Kurt Fordham also paid bank employees to provide false income balances for straw buyers to lenders; add straw buyers and others onto accounts for lender verification purposes; transfer money into accounts to show a certain amount of money was in a bank account and thereafter return those funds to the original account; and shift money between Metropolitan Money Store and other accounts to facilitate loans in straw buyer’s names. As a result of this scheme, the total loss attributable to Jackson including the estimated losses to the mortgage lenders is $16,880,884. Ten defendants in this scheme have pleaded guilty; eight have already been sentenced to terms ranging from ten years to one day in prison; two are scheduled to be sentenced in December 2009.
Greenville City Councilman Sentenced on Tax-Related Charges
On November 12, 2009, in New Bern, N.C., Charles R. Craft, a Greenville City Councilman, was sentenced to 12 months and a day in prison and ordered to pay $192,000 in restitution. Craft pleaded guilty in June 2009 to false statements in a tax return. According to court documents, from 2001 to 2004, Craft, dba Signs Now, earned a total of $599,933, but did not pay taxes. The investigation determined that in total, Craft had not paid taxes in the amount of $190,000, an average of $50,000 per year for the four-year period.
Small Business Owner Sentenced to Prison for Making False Statement on Tax Returns
On November 6, 2009, in Houston, Texas, Gladys Bishop was sentenced to 36 months in prison, one year of supervised release and ordered to pay nearly $585,000 in restitution for three counts of making false statements on her corporate tax returns. According to court documents, Bishop, president of Quality Trucking, set up an accounting system at the company and maintained checking accounts at two different banks but only reported checks deposited into one of the checking accounts to the Internal Revenue Service (IRS). The total unreported income for all three years was in excess of $500,000.
Virginia Ponzi Scheme Promoter Sentenced to 90 Months in Prison
On November 6, 2009, in Charlottesville, Va., John Mark Donnelly was sentenced to 90 months in prison, five years of supervised release, and ordered to pay $5,311,038 in restitution to his victims. Donnelly pleaded guilty to an Information charging him with wire fraud, securities fraud, fraud in connection with futures contracts, and impeding the administration of the tax laws. According to information entered into the court, Donnelly devised and marketed a complex securities and futures market trading strategy and told investors he would be investing their money using this strategy. However, the money received by Donnelly was never traded and was actually distributed to other investors. In order to maintain the scheme, Donnelly sent monthly statements to investors showing fictitious returns. He also sent annual 1099-INT, 1099-MISC and K-1 tax forms to investors. These forms caused many investors to pay income taxes on their fictitious investment returns. More than 30 investors entrusted over $5 million to Donnelly between 1998 and 2009.
Rhode Island Man Sentenced for Defrauding the Hartford Insurance Company and Tax Evasion
On November 4, 2009, in Hartford, Conn., Michael Young was sentenced to 33 months in prison, followed by two years of supervised release, and ordered to pay $792,933 in restitution to The Hartford, and $507,861 in back taxes to the Internal Revenue Service (IRS). Young also must forfeit to the government an additional $264,311, which he gained from the scheme. On June 17, 2009, Young pleaded guilty to one count of mail fraud and one count of tax evasion. According to court documents and statements made in court, from approximately 2001 through July 2005, Young conspired with Todd Olynciw, a Project Procurement Manager for The Hartford, to defraud The Hartford. As part of the scheme, Young used a relative’s cleaning business to coordinate the delivery and installation of furniture on behalf of The Hartford. Olynciw arranged for The Hartford to award more than $3.6 million in contracts to Young and the cleaning business in exchange for personal payments or kickbacks. Young and Olynciw also stole furniture that was owned by The Hartford and sold the furniture to Young’s employer, who was not aware of the scheme, for more than $2 million. Young paid Olynciw $207,783 in kickbacks in the form of cash, checks, gifts and, at Olynciw’s direction, payments to third parties for automobile expenses, housing expenses and other personal expenses. In addition, for tax years 2001 through 2004, Young failed to report much of the profit that he received from his arrangement with Olynciw on his personal tax returns. Olynciw was sentenced in April 2008 to 28 months in prison for his participation in this scheme.
Virginia Man Sentenced for Running Ponzi Scheme that Bilked Investors of More Than $400,000
On November 4, 2009, in Lynchburg, Va., Jeffery Thomas Tuggle was sentenced to 36 months in prison and ordered to pay $477,115 in restitution to victims and $156,181 to the Internal Revenue Service (IRS). Tuggle pleaded guilty in August 2009 to tax fraud, wire fraud and failing to file a tax return. According to evidence presented in court, between 2004 and 2006, Tuggle devised a Ponzi scheme which he marketed as “advance fee investment opportunities” that promised potential investors returns of between 30-40 percent. He told investors that he was working with a group of lawyers to provide their clients with immediate money for legal judgments they had won. Tuggle told his victims that he and his investors would be repaid with interest when the clients and attorneys received their settlements. These promises were false and designed to deceive the investors so that Tuggle could enrich himself at their expense. Tuggle admitted to gambling via the internet and on sporting events using the investors’ money. Any payments Tuggle did make to investors were made with other investors’ money or gambling winnings. In all, approximately 17 investors lost more than $400,000. During the investigation, law enforcement officials discovered that Tuggle failed to file an income tax return for 2004. In addition, the tax returns he did file between 2005 and 2006 contained numerous false statements, including failing to report accurate yearly income.
Blast Fax Fraud Defendant Sentenced to 80 Months in Federal Prison
On November 4, 2009, in Wichita, Kan., Shaun A. Smoker was sentenced to 80 months in federal prison part for his part in a fraudulent scheme in which a company called PBS Global, Inc., collected more than $6.5 million from customers who were looking for help selling their small businesses. Smoker pleaded guilty to one count of conspiracy and one count of wire fraud. According to court documents, PBS Global, who used mass fax solicitations for advertising, falsely claimed it had a long record of success finding buyers for small businesses when in fact, during Smoker’s employment, no businesses were sold and PBS did not collect any fees in that way. Instead, PBS collected more than $6.5 million from customers who paid to have their businesses evaluated prior to sale by a third party. Although the company claimed its analysts were on salary, in fact they received a 40 percent commission on the amount their clients paid to have their businesses evaluated while PBS paid less than $171,000 to the companies that actually prepared the third-party evaluations. When prospective customers wanted references, the conspirators took turns posing as satisfied customers who had sold their businesses with the help of PBS. During the time he was with PBS, Smoker defrauded approximately 85 clients, generating more than $500,000 in income for PBS.
Fallbrook Couple Sentenced To Federal Prison and $606,770 Judgment For Conspiring to Smuggle Over 100 Aliens and Filing a False Tax Return
On November 2, 2009, in San Diego, Calif., Maria Del Carmen Alvarez and Indalecio Alvarez-Montoya, who pleaded guilty to conspiring to bring in illegal aliens for financial gain, as well as filing a false income tax return, were sentenced to serve 37 months in prison and 21 months in prison, respectively. Both were ordered to serve three years of supervised release. The Court also imposed an Order of Criminal Forfeiture in the amount of $606,770, which represents the total amount of alien smuggling proceeds obtained by the defendants during the years 2000 through 2005. According to their plea agreements, Maria Del Carmen Alvarez and Indalecio Alvarez-Montoya admitted that they were involved in an alien smuggling organization to bring more than 100 illegal aliens into the United States from Mexico since 1996. Maria Del Carmen Alvarez admitted making arrangements to have the illegal aliens brought to the United States from Mexico through the San Ysidro Port of Entry by having the aliens present false immigration documents or by hiding the aliens in the trunk of a vehicle. The defendants further admitted making arrangements to have the illegal aliens transported to their residence in Fallbrook, California and sheltering the illegal aliens in a guesthouse at their Fallbrook property before the aliens’ sponsors wired money to pay the alien smuggling fees. The defendants also filed a materially false U.S. Individual Income Tax Return (Form 1040) that understated their total income and tax due for the year 2003.
St. Louis Area Restaurant Owner Sentenced on Tax Charges
On October 30, 2009, in St. Louis, Mo., Chen Hing Yeung was sentenced to 12 months and a day in prison and fined $10,000 for filing false tax returns. According to court documents, Yeung filed false returns for tax years 2002-2005 on which he under reported the income he received from the operation of Young’s Chop Suey Restaurant. When he was interviewed by IRS agents, he stated that his business earned approximately $800 per day. However, the income figures he provided to his return preparer averaged less than $250 per day. As a result of Yeung’s under reporting of his income, he owes additional tax to the Internal Revenue Service for the years 2002-2005 of approximately $190,656.
Wisconsin Business Owners Sentenced on Tax Charges
On October 30, 2009, in Madison, Wis., Hyungirl Lee was sentenced to 24 months in prison and fined $30,000 for filing a false income tax return. On October 13, 2009, Lee’s wife, Jongyean Lee, was sentenced to 12 months in prison for providing an IRS auditor with a false document during an IRS audit of the Lee’s 2003-2005 income tax returns. Mrs. Lee also received a fine of $30,000. According to court documents, in April 2007, an IRS auditor met with Mrs. Lee to audit the Lees’ 2004 tax return. Mrs. Lee provided the auditor with a 2004 purchases journal that supposedly documented the inventory expenses for the Lee’s businesses, which included Riley’s Wines of the World, Badger Liquor, Churchkey Bar and Grill, and Vineyard Liquor. When the IRS auditor attempted to reconcile the journal to the cancelled checks written by Mrs. Lee, the auditor found that the purchases journal contained fraudulently inflated amounts. Digits had been added to the entries in order to increase the purchases amounts. This had the effect of understating the Lees’ income by $313,989 in 2004. The IRS auditor also found that the gross receipts from the various liquor stores had been understated as well. For 2005, the IRS auditor found the Lees’ business gross receipts had been underreported by $334,453. During the three years from 2003 to 2005, the IRS auditor determined that the Lees had failed to report and pay $199,867 in income taxes.
Florida Man Sentenced on Tax and Mail Fraud Charges
On October 29, 2009, in Tampa, Fla., Jack Randolph Shaw was sentenced to 51 months in prison and ordered to pay $2,478,423 in restitution to Blue Hawaiian Products and $198,451 in restitution to the Internal Revenue Service (IRS). The court also entered a money judgment against Shaw in the amount of $3,413,590 which represented the proceeds of the fraud. Shaw pleaded guilty in July 2009 to charges of mail fraud and tax fraud. According to court documents, from approximately 2002 to November 2006, Shaw and Joseph Hooker executed a scheme to defraud Blue Hawaiian Products, a company that manufactured and sold fiberglass swimming pool shells. Hooker acquired customer checks that had been sent by private and interstate carrier and made payable to his employer, Blue Hawaiian Products. Those checks were deposited in a business checking account in the name of Blue Hawaiian Pools and Supplies, which was opened by Shaw. Hooker then prepared fraudulently altered Blue Hawaiian invoices reflecting substantially lower purchase prices than the true invoices and Shaw purchased cashier checks for the lower prices from the fraudulent account and remitted them to Blue Hawaiian Products in payment of the fraudulent invoice. Shaw prepared and filed fraudulent tax returns for 2002 through 2005 that omitted his proceeds from the scheme. Hooker pleaded guilty to mail fraud and to willfully subscribing materially false federal income tax returns and is awaiting sentencing.
Man Sentenced for Role in Pennsylvania Investment Fraud Scheme
On October 28, 2009, in Erie, Pa., Robert Eugene Cheney, a resident of Las Vegas, Nevada, was sentenced to 57 months in prison, to be followed by three years of supervised release, and ordered to pay $1,826,110 in restitution. According to information presented to the court, from 2003 through March 2007, Cheney and a co-defendant devised a scheme to defraud others and to obtain money by means of false and fraudulent pretenses, representations and promises. The scheme to defraud was based upon false claims that the defendants were affiliated with HARP, Inc. (a supposed charitable humanitarian organization), Eagle Eight Trust (a supposed entity involved in oil production operations in Pennsylvania) and other fraudulent investment opportunities. Investors were offered a quick, high-dollar return on any money that was invested in one of these organizations. Further, it was claimed to certain victims that Cheney was the chairman of HARP, Inc. and was known as Chief Soaring Eagle, a supposed “high-ranking official” of the “Sovereign Cherokee Nation.” Additionally claims were made that Cheney was married to the sister of a government official in Mexico, and whose connections in Central and South America allowed HARP, Inc. to “joint venture” with oil companies and trade in billions of dollars of oil reserves. It was claimed to other victims that Cheney was a billionaire oil tycoon in Pennsylvania with investment opportunities in Eagle Eight Trust and oil production operations in Pennsylvania. The defendants promised those individuals paying money into the scheme that they would be paid as much as a 100% return in a short period and that the payment of funds by the victims was risk free and was secured by supposedly legitimate written assurances and guarantees. Further, the defendants created fictitious banking and business documents and used those documents to persuade individual victims that the scheme was legitimate and that their money was coming. More than $2,000,000 was invested as a result of the scheme, and the majority of the money was converted to the personal use and benefit of the defendants and their associates.
Owner of Chicago Towing Service Sentenced on Mail and Tax Fraud Charges
On October 27, 2009, in Chicago, Ill., James Athans (aka Meatball) was sentenced to 12 months and one day in prison, followed by one year of supervised release in connection with his guilty plea on charges of mail fraud and filing a false tax return. The mail fraud charges stem from Athans activities as the operator of Collision Towing. According to his plea agreement, Athans admitted that on two occasions he schemed with other individuals to have their vehicles towed and destroyed for the purpose of facilitating the filing of a false insurance claims requesting reimbursement for car thefts. During the years 2003 through 2006, Athans towed vehicles from accident scenes and demanded cash payments from customers for his towing service. At times, when customers could not meet his demands, he filed mechanic’s liens, retitled and took possession of their cars. The retitled vehicles were either sold or traded them in towards the purchase of new cars. For the 2006 tax year, Athans failed to report $69,700 he received as proceeds from the sale of six retitled cars. Athans also admitted to similar conduct for the years 2003, 2004 and 2005, which generated $109,433 in unreported income for those years. As part of his plea, Athans agreed to forfeit his tow truck. The court ordered restitution to the Internal Revenue Service of $35,691.
Women Sentenced to Prison for Embezzlement
On October 26, 2009, in San Diego, Calif., Shannan Lee Bauman was sentenced to serve 37 months in prison, followed by three years of supervised release for charges arising out of an embezzlement scheme she committed from November 2001 until May 2005. In addition, Ms. Bauman was ordered to pay $473,000 in restitution to Ranch & Sea Management. According to court records, Ms. Bauman entered a guilty plea on August 10, 2009, to conspiracy to commit mail and wire fraud, and to making a false statement on a tax return for calendar year 2002. Additionally, Mydgie Ramirez was sentenced to serve 10 months in prison, followed by three years of supervised release for her role in the same embezzlement scheme. Ms. Ramirez was also ordered to pay $80,310 in restitution to Ranch and Sea Management. According to court records, Ms. Ramirez entered a guilty plea on July 24, 2008, to conspiracy to commit mail and wire fraud, and to making a false statement on a tax return for calendar year 2004. Both defendants were ordered to work with the Internal Revenue Service to repay all back taxes due and owing. According to court documents, Ms. Bauman and Ms. Ramirez admitted that they stole money that was held in trust by Ranch & Sea Management, their former employer, on behalf of its clients. Ms. Bauman was the bookkeeper and Ms. Ramirez was the manager of Ranch & Sea Management’s long-term rental division. In their respective pleas, both Ms. Bauman and Ms. Ramirez admitted that they utilized a variety of different schemes in order to perpetrate the fraud by diverting funds to their personal use by issuing unauthorized checks, altering money orders, and making false entries into the company’s internal accounting system to cover up the theft of funds. Ms. Bauman and Ms. Ramirez further admitted that they caused false monthly accounting statements to be mailed to Ranch & Sea clients, also to conceal the theft of funds.
Branson, Missouri Restaurateur Sentenced on Tax Charges
On October 23, 2009, in Springfield, Mo., Jeffrey Allen Davis of Branson, Mo., was sentenced to 12 months in prison, three years of supervised release, and ordered to pay $59,892 in restitution, for conspiracy to defraud the Internal Revenue Service (IRS) and for filing false tax returns. Davis was an employee of Bottom Line Employee Services of Missouri, Inc. and the general manager of the Farmhouse Restaurant in Branson, Missouri. According to court documents, he participated in a conspiracy to defraud the IRS by paying employees in cash, and not reporting the cash compensation to the IRS. False payroll information, which omitted the cash payments, was transmitted to a bookkeeper who prepared payroll checks and federal employment tax returns for Bottom Line. Bottom Line then filed false employer’s quarterly federal tax returns for Bottom Line with the IRS that omitted the cash compensation from total wages, tips and other compensation, and thereby understated the amount of federal employment taxes due. In addition to the conspiracy, Davis was sentenced on four counts of filing false individual income tax returns for the calendar years 2001 through 2004, in which he received substantially greater income than he reported to the IRS. Davis admitted he did not report cash compensation paid to him for his services at the Farmhouse Restaurant.
Michigan Businessmen Sentenced on Conspiracy and Tax Evasion Charges
On October 26, 2009, in Detroit, Mich., Timothy Walraven and William Walraven, Jr. were sentenced to serve 40 months in prison and 43 months in prison, respectively, as a result of having pleaded guilty to conspiracy to defraud the Internal Revenue Service (IRS) and tax evasion. These guilty pleas and sentences are the result of a March 26, 2008, superseding indictment that charged them with one count of conspiracy to defraud the IRS and five counts each of tax evasion. William Walraven, Jr. also was charged with one count of filing a false partnership tax return, while Timothy Walraven was charged with four counts of filing false corporate tax returns, plus an additional charge of aiding and abetting the creation of structured transactions to evade reporting requirements. According to court records, the Walraven brothers were President and Vice-President of Country Garden Fruit Market, along with being owners and co-partners of Walraven’s Car Wash and other assorted business activities. Between 1991 and 2006, they skimmed income from their fruit market and hoarded large amounts of currency in their personal residences. They also maintained a false second set of books for the fruit market during this time period, which they provided to their tax return preparers. During tax years 2001 through 2005, they received taxable income of at least $738,359, while only reporting $159,872 to the IRS. When IRS Criminal Investigation executed search warrants at the Walraven brothers’ individual residences on January 12, 2006, they discovered more than $1.3 million in cash.
Cape Cod Business Owner Sentenced to 21 Months for Tax Fraud
On October 23, 2009, in Boston, Mass., Robert J. Belanger, of Centerville, Mass., was sentenced to 21 months in prison, to be followed by one year of supervised release, and ordered to pay a $25,000 fine. As a condition of his supervised release, Belanger was ordered to cooperate with the Internal Revenue Service (IRS) and pay back taxes. Belanger was convicted by a trial jury in July 2009, to charges of obstructing the IRS in connection with unreported income from his business. Evidence presented during trial showed that Belanger and his son operated Number One Foundations, a concrete foundation business on Cape Cod. The evidence showed that the Belangers failed to report nearly $500,000 of the gross receipts from the business on their 1999 and 2000 tax returns. Additional evidence showed that Belanger routinely directed his son to deposit only a portion of the customer checks into the business’s bank accounts so that some income from customers would not appear on the business’s bank account statements. Belanger attempted to conceal the business’s unreported income from the IRS by negotiating customer checks to buy treasurer’s checks and by limiting the amount of cash withdrawn to less than $10,000 at a time, thereby avoiding bank reports to the IRS regarding cash transactions and avoiding year-end statements to the IRS reflecting interest from bank accounts. Belanger attempted to mislead IRS agents who interviewed him in connection with the investigation of the business’s taxes.
Oklahoman Sentenced to More Than 24 Years in Bond Scheme
On October 23, 2009, in Tulsa, Okla., Joseph Lynn Thornburgh was sentenced to 292 months in federal prison on charges of mail fraud, wire fraud, and money laundering and ordered to pay more than $1 million in restitution. According to court records, Thornburgh promoted a fraudulent investment scheme in which investors were told “historical bonds,” including bonds issued in the 1850’s by the GH&H Railroad and some issued in early 1900’s by the Republic of China, were the basis for securing lines of credit with European banks. The value of these bonds was falsely represented to be worth hundreds of millions of dollars when in fact they had no value based on interest payments.
Alabama Resident Sentenced for Filing False Tax Returns in Connection With Embezzlement Scheme
On October 22, 2009, in Birmingham, Ala., Sims Lawson, Jr. was sentenced to 70 months in prison for filing false tax returns. According to court documents, Lawson omitted from his tax returns income that he embezzled from an estate that he managed. Lawson was hired in 2002 to co-manage an estate, and his duties included managing the books and records, collecting on loans made by the estate, and determining the estate’s value for tax purposes. In 2005, the estate received an ex-parte court order removing Lawson from his responsibilities as trustee. It was learned that Lawson misappropriated more than $721,000 in 2002, 2003 and 2004, which he also failed to report on his personal tax returns. Lawson wrote checks from the estate payable to himself and used estate checks to pay his personal expenses. The estate paid Lawson more than $297,000 in wages that he also failed to report on his individual tax return.
California Man Sentenced in False Investment Scheme
On October 22, 2009, in Missoula, Mont., William Edward Marlin, a resident of Los Angeles, California, was sentenced to 121 months imprisonment, to be followed by three years of supervised release, and ordered to pay $1,211,300 in restitution. Marlin was sentenced in connection with his guilty plea to mail fraud and money laundering. In an Offer of Proof filed by the United States, the government stated it would have proved at trial the following: Marlin claimed to be a Hollywood businessman who had formed numerous companies that were allegedly associated with the film industry. Since 1992, Marlin has been associated with six entertainment related companies. Marlin started Starmax Entertainment in 2004 and solicited over a million dollars of investments for that alleged business. In 2006, the California Board of Corporations issued a cease and desist order to shut the company down since investors had never been paid. Once Starmax was issued a cease and desist order, Marlin adopted the alias K.H. and started a new business called Children’s Family Films (CFF). Using a “boiler room” crew, Marlin solicited investors in CFF promising investors that they would receive 100% of their investment back in three months and then they would in addition receive thousands of dollars per month for the next one to three years. Investors were told that companies like Home Box Office (HBO) and Disney would purchase and play CFF movies. In turn, the companies would allegedly pay CFF for the movies and the profits would be passed on to CFF investors. In reality, CFF never had any contracts with HBO, Disney or any other media or cable television company. Investors’ money was used to further the scheme and pay for the personal expenses of Marlin and his co-conspirators. From 2006 to 2008, CFF received approximately $1,754,203 in illegitimate funds.
South Carolina Man Gets Prison for Income Tax Evasion
On October 22, 2009 in Columbia, S.C., Barry Lusk was sentenced to 33 months in prison and three years supervised release for failing to pay income tax. According to court documents, Lusk was the sole operator of two businesses that he sold for nearly $1.5 million in 2000. Lusk used the proceeds to buy houses, real estate and purchase an airplane instead of paying the taxes due on the sale of the businesses. Lusk was part of a movement advocating income tax was not applicable to him and sent a letter to the Internal Revenue Service (IRS) detailing his beliefs. In 2002, the IRS began a civil audit of Lusk and an IRS representative attempted to contact Lusk regarding his responsibility to file an individual tax return for the year 2000. In 2003, Lusk filed a joint 1040 return for 2000 and claimed that he and his spouse had no income and that there was no tax due or owed. However, he asked for a refund of an estimated tax which had been paid in 2000. Lusk also filed amended tax returns for two prior tax years attempting to get refunds claiming the original returns were filed in error. Luck’s income was estimated at more than $843,000, with a tax debt of more than $183,000.
Upstate New York Man Sentenced to 20 Years in Prison in Ponzi Scheme
On October 21, 2009, in Buffalo, N.Y., Richard Piccoli, of Amherst, New York, was sentenced to 20 years in prison on charges of mail fraud and filing a false tax return. According to court documents, Piccoli operated an extensive Ponzi scheme on “discount mortgage” investments for nearly 30 years. Piccoli admitted targeting Catholic clergy and church goers, advertising his investment services in various area Catholic newspapers. Over the course of the scheme, over 800 people invested their funds with Piccoli and his company, Gen See Capital. While the numbers are still not yet finalized, it appears that the initial estimate of losses may be near $20,000,000 to $25,000,000. As part of the plea agreement, Piccoli, along with the company, which entered a corporate plea, agreed to pay restitution. The details of the restitution and the amounts each victim can expect to recover will be determined at a later proceeding.
California Resident Convicted In Retail Theft Crime Ring
On October 16, 2009, in Oakland, Calif., Hassan Swaid, of Fremont, California, was sentenced to 78 months in prison for conspiring to purchase stolen merchandise from major retailers shipping the stolen goods to out of state customers, and for structuring his finances to avoid currency transaction reports. Swaid was convicted on June 24, 2009, following a six week jury trial. Evidence presented at the trial showed that Swaid was the president, chief executive officer and owner of Rosemont Wholesale, Inc., from 1998 through February 2007. Swaid paid more than $9 million dollars for stolen goods and then shipped the stolen goods to out-of-state customers. Swaid was involved in a criminal ring that purchased merchandise that included baby formula and over-the-counter medications such as Tylenol, teeth whitening products, and razor blades, which had been stolen by professional shoplifters, drug addicts and thieves from major retailers. Rosemont then sold the goods over the Internet and shipped them to other states. According to the evidence, Swaid had two main sources of stolen goods, the owners of two Oakland convenience stores – Kings Food Market and 1 Star Discount Store – and the owners of a San Francisco convenience store – Jimmy’s Market. These convenience stores bought the stolen goods from professional shoplifters at prices far below their actual value and sold the products to Swaid. The stolen goods were brought to Swaid’s warehouse in Hayward, Calif., and were advertised over the Internet on a Web site owned by Swaid.. The jury determined that Swaid had structured his payments to his illegal sources to evade the filing of Currency Transaction Reports by banks which would have caused scrutiny of these transactions. Five other individuals have been convicted in this case.
Washington State Man Sentenced in Fraudulent $3.2 Million Consumer Debt Discharge Program
On October 15, 2009, in Spokane, Wash., Jason Paul Christensen, formerly of Pasco, Washington, was sentenced to 109 months of imprisonment, to be followed by three years of supervised release. Christensen was ordered to pay $3,238,997 in restitution to the victims of his scheme. According to court documents, Christensen fraudulently obtained $3.2 million from over 1,300 victims across the country through a Ponzi-type scheme advertised as a debt elimination program. Christensen pleaded guilty on April 16, 2008, to mail fraud and money laundering charges relating to the scheme he engaged in over a period of about three years through the Internet and a post office box business address in Richland, Washington. In his plea agreement, Christensen admitted that between approximately October 15, 2003, and December 31, 2005, he solicited his victims via websites on which he advertised that his company employed a team of federal attorneys who used loopholes in the law to discharge consumer debts. When in fact, he did not employ any team of attorneys and no such legal loopholes existed. Christensen promised his customers that his company would fully discharge their debts, his program was 100 percent successful, and customers were guaranteed success or would receive their money back. Customers, however, were required to pay Christensen’s companies amounts of at least $2,500 and as much as $20,970 in advance. He obtained the large number of victims by paying off the loans of some of his “clients” with other victims’ money and then recruiting his satisfied “clients” to become his “consultants” to whom commissions were paid for recruiting their family and friends into the program. After paying his “consultants” their commissions to promote the scheme, Christensen pocketed the rest of the proceeds for his personal use. In total, the scheme netted over $3.2 million from victims seeking debt elimination and located all over the United States.
Connecticut Businessman Sentenced for Failing to Pay Income Taxes
On October 14, 2009, in New Haven, Conn., Leonard Widman, of Sherman, was sentenced to 12 months and one day in prison, followed by three years of supervised release, and ordered to pay $173,355 in restitution to the Internal Revenue Service (IRS). Widman pleaded guilty on April 30, 2009, to one count of tax evasion. According to court documents and statements made in court, Widman owned a sole proprietorship known as Phase II Construction, which performed general contracting services in New York and Connecticut. Phase II Construction had a business checking account, into which Widman deposited all business receipts and from which he paid both his business and personal expenses using checks and debit card transactions. For the tax years 1997 through 1999, Widman filed false individual income tax returns and made false statements and representations to employees of the IRS. In a series of interviews with IRS agents in 2003 and 2004, Widman falsely represented the nature of dozens of expenditures made from the Phase II Construction checking account as legitimate business expense. These expenditures included tens of thousands of dollars in payments for an extensive renovation done to Widman’s home, personal gym equipment, marina and boat fees, vacations, and furniture. In addition, Widman told IRS investigators that he had received loans and gifts of cash from family members and friends, which would be non-taxable sources of income, when, in fact, he had not. From 1997 to 1999, Widman failed to pay $173,355 in federal income tax and self-employment tax.
Virginia Man Sentenced to 240 Months for Mortgage Fraud
On October 13, 2009, in Newport News, Va., Richard Garries was sentenced to 240 months in prison followed by three years of supervised release for charges related to an elaborate mortgage fraud scheme. He was also ordered to pay more than $900,000 in restitution. On May 20, 2009, Garries was convicted on 24 charges that included conspiracy, wire fraud, mail fraud, money laundering, structuring, and making materially false statements. According to court records and evidence introduced at trial, from the summer of 2005 to May 2008, Garries conspired with others to make money through the resale – or flipping – of residential properties to buyers he brought in through false promises. Garries promised that the properties had been renovated, renters had been arranged for the properties, buyers would not have to spend their own funds, and that buyers would be provided with cash back at closing. To secure mortgage loans for buyers, evidence showed that Garries inflated the buyers’ income levels and bank account balances on loan applications and provided them with money to make it appear the buyers had more funds available to qualify for a loan and/or to have the necessary funds to proceed with closing on the property. Garries arranged for buyers to use lenders selected by him to obtain loan financing, for which Garries received a commission. At the time of the offense, Garries was on probation from a previous federal conviction for wire fraud, for which he received a 25-month sentence. While on supervised probation, he made numerous false statements to his probation officer concealing income and assets. On June 8, 2009, Garries was ordered to serve 24 months in prison for violating his probation. Garries will serve his 240-month sentence consecutive to the 24-month sentence previously imposed.
Former Co-Owner of Two Arizona Bars Sentenced for Tax Evasion
On October 13, 2009, in Phoenix, Ariz., Peter Lebsock, of Scottsdale, Ariz., the former co-owner of two bars, was sentenced to 24 months in prison. Lebsock pleaded guilty in November 2008 to federal income tax evasion. According to court documents, Lebsock evaded income tax due while he was co- owner of The Trailer Park Restaurant, Inc., a corporation doing business as The Trailer Park and Dos Gringos-Tempe. Lebsock admitted that while serving as the on-site manager of The Trailer Park, he assisted in establishing procedures to maintain a separate accounting of a portion of the revenue collected from patrons. In 2004, revenue of $61,754 was stored separately from the claimed corporate revenue and was diverted for the personal benefit of Lebsock and his partner, Brian Roehrich. Lebsock did not report the amounts of the revenue diverted for his personal benefit to the IRS for the tax years 2002 through 2005. In his plea agreement, Lebsock admitted that the total amount of taxes he evaded between 2002 and 2005 was approximately $177,000. Roehrich was sentenced to 24 months in prison in July 2009.
Virginia Husband and Wife Sentenced in Multi-Million Dollar Fraud Scheme
On October 6, 2009, in Richmond, Va., Darrell Underwood and his wife, Cynthia Underwood, both of Chesterfield, Virginia, were sentenced for their roles in a multi-million dollar fraud scheme. Darrell Underwood was sentenced to 120 months in prison; Cynthia Underwood was sentenced to 36 months in prison. Both defendant will serve three years of supervised release following their prison time. The Underwoods pleaded guilty in June 2009 to conspiracy to commit mail fraud; Darrell Underwood also pleaded guilty to engaging in unlawful monetary transactions. Darrell and Cynthia Underwood owned and operated Walkwood Properties, a real estate company that offered various home owners an opportunity to save their homes from foreclosure. In connection with their guilty pleas, the Underwoods admitted to operating a “Ponzi” scheme using an fraudulent investment program. According to court documents, individuals were induced into investing money with Walkwood Properties by representing that investors’ funds would be funneled directly into investment properties targeted by Walkwood’s foreclosure efforts. In exchange, the Underwoods promised that the investors would receive returns of up to 50% within 60-120 days. In 2007, the Underwoods paid their investors a rate of return, but this was rarely taken from the profits of investments. Instead, the funds used to repay investors were derived from monies paid by subsequent investors, or groups of investors. From April through December 2007, the Underwoods received approximately $18,400,000 in investor funds. Of that amount, the bank records established that only $2,100,000 was actually paid towards any type of real estate transaction. During the same time frame, the Underwoods paid approximately $16,200,000 to investors; of that amount, approximately $13,400,000 was derived from investor funds that were simply used to repay other investors. As of December 13, 2007, the Underwood’s investor account had a balance of $780,557. As of that same day, the Underwood’s investment program had an outstanding balance of over $14,000,000 owed to various investors. The final restitution amount for victims will be determined at a hearing in December 2009.
Father and Daughter Who Served as Officers of Mortgage Foreclosure Consulting Companies Sentenced; Ordered to Pay Over $6 Million in Restitution
On October 5, 2009, in Greenbelt, Md., Clifford McCall and his daughter, Chandra Jones, were sentenced for their roles in a mortgage fraud scheme. McCall was sentenced to 48 months in prison, five years of supervised release, and ordered to pay $2,462,107 in restitution. Jones was sentenced to 33 months in prison, five years of supervised release, and ordered to pay $3,879,093 in restitution. McCall was president of Burroughs & Smythe Financial Services, Inc., based in Lanham, Maryland, and a director of the Fordham & Fordham (F&F) Investment Group, Ltd., a foreclosure consulting and credit servicing business based in Lanham and Greenbelt, Maryland. These companies, which McCall and others incorporated, assisted the Metropolitan Money Store (MMS). Beginning in September 2004, McCall conspired with others in a scheme to fraudulently promise to help homeowners avoid foreclosure and repair their damaged credit. The homeowners were directed to allow title to their homes to be put in the names of third party purchasers (the straw buyers). The conspirators applied for mortgages by preparing and submitting fraudulent loan applications to mortgage lenders to obtain fraudulently inflated loans on the target properties in the straw buyers’ names. As a result of this scheme, McCall fraudulently obtained and used for his personal benefit at least $2,462,107 through bank and credit card accounts from 2004 to 2007. According to Jones’s plea agreement, she was responsible for paying the mortgages on foreclosure reversal program properties and assisting program participants with repairing their credit. Jones was later made vice-president of F&F and a director of Burroughs & Smythe Financial Services, Inc. During the course of the conspiracy, Jones placed $788,978 from F&F’s bank accounts into her personal bank accounts. At the direction of co-conspirators, Jones transferred funds from the F&F accounts to pay the personal expenses of co-conspirators. Jones also agreed to serve as a straw buyer for two properties, and secure mortgage loans in her own name to do so, because she had a good credit history. Jones was paid $3,600 for serving as a straw buyer for one property and $5,000 for serving as a straw buyer for another property. As a result of this scheme, the total loss attributable to Jones, including the estimated losses to the mortgage lenders, is $4,189,283.
Two Spokane Residents Sentenced to Prison for Embezzlement and Fraud Scheme
On October 5, 2009, in Spokane, Wash., Michelle Anne Wing was sentenced to 86 months in prison, five years of supervised release, and ordered to pay $755,355 in restitution. Kenneth A. Marsh was sentenced to 14 months in prison, one year of supervised release, and ordered to pay $165,007 in restitution. Wing pleaded guilty to six counts of bank fraud and one count of conspiracy to commit bank fraud; and Marsh pleaded guilty to two counts of filing a false income tax return. According to the plea agreements, beginning about December 2005 and continuing through July 2008, Wing and Marsh engaged in a scheme to embezzle more than $810,000 from Centaur, a Spokane business which was established to provide administrative services to the advertising companies, E. Media and Power Marketing Services, and its two owners. The scheme involved forging checks, making unauthorized withdrawals and deposits between corporate accounts, and through the acquisition of credit cards and credit accounts obtained through unauthorized means and false representations to financial institutions. Wing was hired as a bookkeeper for Centaur in April 2006 after having served as a temporary employee since December 2005. She was responsible for processing checks for payment, reconciling bank records, opening company mail, and paying invoices on behalf of Centaur. Wing’s embezzlement was uncovered when Centaur’s accountant observed high dollar checks being written between bank accounts and high-dollar payments to American West Bank, where Michelle Wing had a credit card issued in her name. Wing was previously directed to destroy that credit card by a Centaur owner. A subsequent review of the company’s internal accounting records discovered that Wing had been forging both owners’ signatures on certain checks that she deposited, which she had made payable to herself, to “cash,” and to others. Approximately $119,000 was embezzled from the various company accounts. Wing and Marsh also fraudulently opened credit card accounts and used them to purchase goods, services and merchandise. Wing failed to report $478,000 the income from her crimes in 2006 and 2007, resulting in her liability to the Internal Revenue Service for over $144,000 in taxes. Marsh failed to report his illegal income to the IRS on his 2006 and 2007 tax returns and is liable for more than $26,000 in taxes.
Texas Man Sentenced to 10 Years for Running Ponzi Scheme
On October 2, 2009, in Lubbock, Texas, Rod Cameron Stringer, of Lamesa, Texas, was sentenced to 120 months in prison and ordered to pay $7,458,238 in restitution, following his guilty plea to money laundering in relation to an investment fraud scheme. According to court documents, Stringer admitted that he created the “RCS Hedge Fund” for the sole purpose of sheltering property from law enforcement. Stringer admitted that from at least January 2001 until January 2009, he ran a Ponzi investment scheme in which approximately 44 victims invested approximately $13,897,988. Of that amount, approximately $7,023,264 was paid back to some of the victims. As part of his scheme, Stringer portrayed himself as a “day trader” and Hedge Fund Operator, although he was not a licensed securities broker. He solicited and enticed individuals to invest money with him by making false representations and promises, such as: the return on investors’ money would be approximately 50 percent profit; the accounts were liquid and investors could withdraw their money anytime; and he had several computers that watched the trend line of stocks automatically and advised him when he should move money in and out of the market. Stringer used most of the funds deposited into the two bank accounts for his own benefit. Although Stringer ran other businesses, including a bail bond business, a used car business and a tow truck business, none of these businesses were profitable.
Owner of Alabama Tire Store Sentenced to Prison for Tax Evasion
On October 2, 2009 in Atlanta, Ga., Timothy Smith, of Cullman, Alabama, was sentenced to 30 months in prison and ordered to pay more than $170,000 in restitution for tax evasion from 2000 through 2003. According to court documents, Smith is the owner of College Tire in Hanceville, Alabama, and diverted customer receipts for more than $430,000 from his tire business into two personal accounts. He also directed customers to use cash and cashiers’ checks so he could make payments on his vacation homes in Florida and North Carolina. Smith concealed the funds that were diverted to his personal accounts and his mortgages from his bookkeeper, who prepared both Smith’s business tax returns his joint personal tax returns. Smith also took substantial fraudulent tax deductions for a farm at his personal residence. As a result, Smith filed false personal and business tax returns for tax years 2000 through 2003.
Maryland Used Car Dealer Sentenced for Failure to File Taxes
On October 2, 2009, in Baltimore, Md., Gino Jones was sentenced to 15 months in prison and one year of supervised release for failing to file tax returns for 2001 and 2002. According to court documents, Jones operated a used car business under different names. He purchased cars at auctions, refurbished and then resold them on eBay. The Internal Revenue Service (IRS) analyzed the data kept by eBay, bank records and business records of third parties to determined the profits Jones received from his sales of cars. Records showed that Jones failed to file nearly $290,000 in additional taxable income with a tax liability of more than $69,000 for the two years.
Owner of North Hollywood Restaurant Sentenced to Prison for Tax Evasion
On October 2, 2009, in Los Angeles, Calif., James Saliba, owner of a North Hollywood restaurant, Barsac Brasserie, was sentenced to 24 months in prison, three years of supervised release and ordered to pay restitution and fines totaling more than $938,000 for failing to report all of the restaurant’s business receipts and overstating business expenses from 2001 through 2005. According to court documents, Saliba underreported the gross sales of Barsac by using an account he called “Accrued Management Fees” where he recorded some of the sales. He also overstated expenses by writing corporate checks from Barsac to his wife and then deducting these payments as expenses on the returns for the restaurant. as well as writing checks to “Cash” and expensing them as tips and giving a small portion to employees while skimming the balance for himself. Saliba hired Irwin Petlak, an owner of a tax preparation business, to provide monthly bookkeeping services and to prepare business and personal tax returns. Petlak admitted that he created the false accounting entries using the Accrued Management Fees account to offset the legitimate sales of Saliba’s restaurant, in order to hide the restaurant’s true income from the Internal Revenue Service (IRS). Petlak pleaded guilty in 2007 to preparing false tax returns.
Former New Jersey Firefighter Sentenced to Prison for Tax Evasion
On October 1, 2009, in Newark, N.J., Mathew Fox, of Atlantic City, was sentenced to 18 months in prison, three years of supervised release, and ordered to pay taxes due of more than $110,000 plus interest and penalties for failing to report more than $400,000 in income from 1998 through 2002. According to court documents, Fox fraudulently avoided reporting cash income he earned as a bouncer and manager at an exotic dance club in Atlantic City. Initially, Fox received cash tips and hourly pay for the time he worked at the dance club as a bouncer. Then in August 1999, when he became a manager, Fox received wages from the club and also continued to receive cash tips from the exotic dancers. Fox failed to report the income received from the exotic dance club for years 1998 through 2002.
Part Owner of Popular Roofing Company Sentenced for Tax Evasion Conspiracy
On October 1, 2009, in Minneapolis, Minn., Amit Sela was sentenced to 42 months in prison, two years of supervised release, and ordered to pay a $200,000 fine for his role in a conspiracy to commit mail fraud and tax evasion. According to court documents, between September 2001 and September 2004, Sela, who owns a 50-percent interest in Sela Roofing, conspired to steal money from the company and conceal that money from the Internal Revenue Service (IRS) and the Minnesota Department of Revenue. Sela was trying to steal from the other 50-percent owner and evade paying federal income taxes on that money. Sela contracted with vendors who did work for him personally rather than as subcontractors for the company. He also induced vendors to falsify the addresses on invoices so the invoiced work appeared to be part of Sela Roofing jobs, when, in fact, it was work done on Amit Sela’s personal residence, his ex-wife’s home, repairs on his Hummer and other personal expenses. When Sela could not get a false invoice, he altered invoices himself and arranged for all the fraudulent invoices, totaling more than $100,000, to be paid by the company. Sela also arranged for co-defendant Sam Noaman, a vendor, to submit false invoices to Sela Roofing making it appear work was done on legitimate roofing or remodeling jobs when no work was done. The money paid to Noaman, more than $550,000, was then funneled to Sela. The federal taxes Sela attempted to evade on the stolen money was shown at trial to be more than $220,000.
Former Government Employee Sentenced to Prison for Receiving Bribes, Filing False Tax Return
On October 1, 2009, in New Haven, Conn., Kevin Malarney of Bradford, Conn., was sentenced to 24 months in prison and two years of supervised released for steering government contracts in exchange for things of value. According to court documents, Malarney worked for the United States Department of Veterans Affairs in West Haven, Conn., as a plumber and served as a contracting officer’s technical representative (COTR). As a COTR, Malarney oversaw construction projects for his supervisor and steered VA construction, maintenance, and supply contracts to Escarnio Construction, LLC and Fischer Supply, LLC, in exchange for things of value from Sebastian Ciarcia, an attorney based in Meriden, Conn., and owner of the two companies in order to do business with the VA. As part of the scheme, Ciarcia paid Malarney’s personal expenses, including auto loan payments, student loans, various insurance policy payments and trips to St. Maarten and New York. The total value of the bribes that Malarney received from Ciarcia was approximately $45,600. Between May 2002 and August 2005, Malarney assisted in the awarding of 27 VA contracts worth approximately $303,000 to Ciarcia’s companies. Malarney also directly authorized or caused to be authorized 48 payments in the total amount of approximately $81,000 to Fischer Supply for services and/or supplies on his government purchase card. Malarney also admitted filing a false income tax return for 2004, by failing to report the illegal payment of personal expenses as income. Malarney was ordered to pay to the IRS back taxes, plus penalties and interest, for the 2002 through 2005 tax years. Ciarcia pleaded guilty to one count of bribery of a public official, and one count of aiding and assisting in the preparation of a false tax return and was sentenced to 24 months in prison followed by two years of supervised release on July 1, 2009.
Examples of IRS General Tax Fraud Investigations – Fiscal Year 2009
Indiana Man Sentenced to 30 Months in Mortgage Fraud Scheme
On September 29, 2009, in Indianapolis, Ind., Jerry J. Jaquess was sentenced to 30 months in prison for his participation in a large mortgage fraud. Jaquess was also ordered to serve three years of supervised release and to pay $824,614 in restitution to Homecomings Financial and Argent Mortgage Company. According to court documents, Jaquess owned and operated Homevestors LLC, a company involved in the development and construction of new real estate properties, as well as the purchase and sale of existing residential real estate properties. Jaquess and other individuals entered into contracts to purchase 186 duplexes on the east side of Indianapolis. They negotiated to purchase all of the duplexes for $50,000 each. Jaquess used Homevestors to negotiate the purchase and sale of the first 11 properties. On each of the properties, he entered into a land contract (and other documents) immediately preceding the closing, showing that Homevestors was purchasing the property from the owner for $50,000. He also entered into agreements to sell the properties to investors for $120,000 each. In early February 2005, prior to actually owning the properties, Jaquess and his associates listed three of the 11 properties for sale at $120,000 each. A few days after these properties closed, Jaquess and his associates listed the three sales on the Multiple Listing Service which allowed the sold properties to be used as comparables on appraisals to be prepared for the remaining properties, thus making it appear that each of the remaining properties was worth $120,000. Jaquess signed the loan closing documents on behalf of Homevestors, including the false HUD-1 Settlement Statements, showing that the investors were providing the down payments, which he knew to be untrue. After the closing, Jaquess received checks to Homevestors for the amount of the fraudulent loan proceeds. Jaquess then caused Homevestors to issue checks disbursing the fraudulent loan proceeds. Included in these checks were payments totaling approximately $42,000 payable to Jaquess personally or a family member, as well as checks to repay the individuals “fronting” the down payment and checks to pay the investors $4,000 for each property purchased.
New Orleans Doctor Sentenced For Tax Evasion
On September 29, 2009, in Texarkana, Texas, Malcolm David MacHauer was sentenced to 33 months imprisonment, to be followed by three years of supervised release, and ordered to pay restitution in the amount of $222,782. MacHauer was found guilty by a jury on June 17, 2009, of three counts of attempting to evade and defeat paying federal income taxes. The judge also ordered MacHauer to pay restitution of $222,782 and additional costs of prosecution in the amount of $5,437.19. According to information presented in court, although MacHauer received income from Wadley Medical Center in Texarkana, Texas, for his services as a doctor, he failed to pay the appropriate federal income taxes. Instead, MacHauer placed his income into his corporation, transferring the money to the MacHauer Family Trust, and then withdrawing money from that Trust to pay his personal expenses without paying income tax.
Former Arizona Casino Employee Sentenced to 37 Months
On September 30, 2009, in Tucson, Ariz., Adam Vega was sentenced to 37 months in prison and ordered to pay more than $644,000 in restitution for tax evasion. According to court documents, between October 2005 and July 2007, while employed as a slot floor person at the Desert Diamond Casino in Tucson, he created 585 fraudulent jackpot override tickets. All of the false jackpot tickets were for amounts under $1,200 to avoid generating a W-2G federal tax withholding form. Vega submitted a total of $644,422 in jackpot tickets to the casino cage cashiers which were all cashed over the three year period. Vega also failed to report any of the money as income on his 2005 through 2007 tax returns, avoiding tax payments of more than $204,000.
Securities Broker Sentenced for Tax and Mail Fraud
On September 30, 2009, in Tucson, Ariz., David Holst was sentenced to 18 months in prison for filing a false tax return and mail fraud. A hearing on restitution is scheduled in January 2010. According to court documents, in May 2007, while a securities broker in Tucson, Holst began a financial advisory company known as DRH. Holst solicited clients to invest in mutual funds through DRH. However, Holst gambled the money intended for investment in the mutual funds. Investment payments were not forwarded to mutual fund companies, and clients were defrauded of approximately $353,000. Holst created fictitious account statements for the clients, making it appear that monies were sent to the mutual funds. Holst also failed to report the illegal income on his 2006 and 2007 individual income tax returns. In addition to the prison sentence, Holst was ordered to cooperate with the Internal Revenue Service to file amended tax returns and pay any outstanding tax liability.
Man Sentenced to 100 Years for Ponzi Scheme that Cost Victims $39 Million
On September 29, 2009 in Riverside, Calif., Richard Harkless was sentenced to 100 years in prison and ordered to repay more than $35,400 in restitution to approximately 600 victims. According to court documents, Harkless was the mastermind of a Ponzi scheme that collected more than $60 million through his company, MX Factors. Harkless was convicted on three counts of mail fraud, three counts of wire fraud and one count of money laundering. Harkless and a team of salespeople at MX Factors raised funds by telling potential investors that MX Factors provided short-term loans to commercial construction companies that had guaranteed government-backed contracts. Harkless created the company, controlled its bank accounts, hired and paid agents to solicit investors and created MX Factors promotional literature. Investors were promised returns of up to 14 percent every two or three months, at which time investors could either receive their investments back or roll over their investments into the next investment period. The vast majority of MX Factors investors were “reloaded,” meaning that they were convinced to invest money more than once. As the scheme began to collapse, Harkless diverted millions of dollars to Belize and Mexico. Once Harkless knew he was under investigation by various state regulators, he accelerated his fundraising and accelerated the transfer of funds to his accounts in Belize. During the scheme, the bulk of the money raised from investors was used to pay off earlier investors, to pay agent commissions, to fund Harkless’ crabbing business in Ensenada, Mexico and to pay for various personal expenses. Harkless fled to Mexico shortly after the Ponzi scheme collapsed and federal authorities executed search warrants in February 2004. Harkless was arrested by special agents with IRS-Criminal Investigation two years ago when he traveled to Phoenix. Three of Harkless’ sales agents – Daniel Berardi, Thomas Hawkesworth and Randall Harding – pleaded guilty and received sentences of up to six years in federal prison.
Former Minneapolis Police Officer Sentenced for Filing False Returns and Unauthorized Access to a Protected Computer
On September 22, 2009, in Minneapolis, Minn., Michael D. Roberts, a former Minneapolis Police officer, was sentenced to 12 months in prison followed by one year of supervised release. Roberts pleaded guilty on May 14, 2009 to three counts of filing false tax returns and one count of unauthorized access to a protected computer. According to his plea agreement, Roberts admitted he worked off-duty security jobs for several businesses and was paid in excess of $100,000 in cash between 2004 and April 2008. Roberts failed to report or pay taxes on that income. In entering his plea, Roberts admitted that during August 2007, he used a police radio to obtain non-public information from the Minnesota Driver and Vehicle Services database; the data search was not law enforcement related. He received $100 in cash from the person requesting the search and failed to claim this cash on his tax return.
Senior Loan Officer Sentenced in Mortgage Fraud Scheme
On September 21, 2009, in Greenbelt, Md., Winston Thomas, of New Carrollton, Md., was sentenced to 37 months in prison, followed by three years of supervised release, and ordered to pay $58,418 to the Internal Revenue Service (IRS). In addition, a forfeiture judgment was entered against Thomas and his co-conspirators for $2,228,878, which represents the proceeds of the criminal activity. Thomas pleaded guilty in April 2009 to charges of failure to file federal tax returns and conspiracy to commit wire fraud. The charges were in connection with a scheme in which he and others offered to help individuals save their homes from foreclosure, but instead defrauded homeowners and mortgage lenders. According to his plea agreement, from at least 2004 until May 2008, television advertisements targeting financially-vulnerable individuals promised to improve the homeowners’ credit, save their homes from foreclosure, and assist in bankruptcy procedures. Homeowners were induced to sell their property to co-conspirator Earnest Lewis. Thomas and others told homeowners that the “good credit” of Earnest Lewis would be used to temporarily refinance their homes. The homeowners signed their homes over to Earnest Lewis with the promise that they could repurchase the homes in roughly one year, or once they regained their financial footing. During the interim, they could remain in their homes only by paying inflated “rent” and fees, which were directly debited from their bank accounts to an account belonging to co-conspirator. Finally, Thomas failed to file individual federal income tax returns for the years 2004 to 2006, resulting in a total tax loss of $57,830.
California Ponzi Scheme Operator Sentenced to Nearly 20 Years
On September 15, 2009, in Sacramento, Calif., Stefan Wilson of Folsom, California was sentenced to 236 months in prison, three years of supervised release and ordered to pay more than $12 million in restitution for running a Ponzi scheme that financially devastated 80 families. According to court documents, Wilson solicited money from investors with the promise of an 18–24 percent return on their money. Most investors were not wealthy and could not come up with the $100,000 minimum investment required to invest in the “Christians in Crisis” (CIC) Investment Fund. Wilson encouraged investors to refinance their homes, draw upon their life savings, or dip into a 401(k) to come up with the investment money. To lure prospective investors, Wilson represented to investors that his CIC Investment Fund was extremely profitable, and the return on investment was more than sufficient to pay the promised rates of return. He also told investors that he had a reserve fund that would continue to pay investors the promised return even if the fund sustained losses. Wilson collected approximately $13 million from investors, and placed approximately $6.5 million of these funds into a brokerage account, which he used to buy and sell stock. Virtually all of that money was lost, suffering a 99.42 percent decline. Despite the losses, Wilson continued to represent to investors that the fund was doing well and sent monthly statements and checks to investors showing that they were receiving the promised return. The $6.5 million not deposited in the brokerage account was left in a bank account Wilson used to make lulling payments to investors and to pay for a lavish lifestyle. Wilson failed to file any of this income on his 2006 tax return.

Contact the Joe Griffith Law Firm immediately to discuss your legal rights.

Joseph P. Griffith, Jr.
SC Criminal Defense Attorney
SC Tax Fraud Lawyer
SC Tax Evasion Law Firm
SC IRS Defense Attorney
SC White Collar Criminal Lawyer
Joe Griffith Law Firm, LLC
7 State Street
Charleston, South Carolina 29401
(843) 225-5563

http://www.joegriffith.com

Chief Recruiter Sentenced for Embezzlement
On September 9, 2009, in Columbia, S.C., Jonathan Moses was sentenced to 96 months in prison for his role in a scheme to embezzle more than $5.2 million dollars from the Department of Social Services (DSS). Moses pleaded guilty on June 30, 2009, to conspiracy to commit mail fraud, wire fraud, theft of government property and money laundering. According to court documents, Moses admitted cashing six DSS checks that were illegally obtained and to recruiting approximately fifteen people who in turn, recruited hundreds of others to cash additional checks. Paul Moore, DSS Finance Director, was indicted in February 2009 for allegedly authorizing hundreds of DSS checks averaging $7,000 each between May 2004 and October 2008. The checks were made payable to names provided by Moses. Moore is awaiting trial.
Vermont Bookkeeper Sentenced to 41 Months in Prison
On September 8, 2009, in Burlington, Vt., Deborah Whitney was sentenced to 41 months in prison and ordered to repay $556,488 to the proprietors of Arthur’s Department Store (ADS), as well as repay other victims of her fraud. Whitney pleaded guilty in April 2009 to wire fraud, mail fraud, and tax fraud, based upon a series of frauds committed against several Vermont victims. According to the indictment, Whitney owned D&DD Bookkeeping and served as a bookkeeper for several businesses in Vermont. The Court determined that Whitney, over the past decade, had taken $673,768. Beginning in the late 1990s, Whitney began forging signatures on ADS checks made payable to her totaling approximately $600,000. Additionally in 2003 and 2004, Whitney embezzled more than 100 checks totaling over $150,000 from Stanley Wescom Construction, Inc, a construction business in Eden, Vermont.
California Man Sentenced in Counterfeit Treasuries Case
On September 8, 2009, in Medford, Ore., Barton Buhtz of Sunland, California, was sentenced to 36 months in prison followed by five years of supervised release for his part of a conspiracy to pass approximately $3.8 million in false U.S. Treasury instruments and multiple counts of passing fictitious financial instruments. According to court documents, Buhtz conspired with Rebecca Shollenburg, Steven Shollenburg, Richard Aquila, and Steven Kelton to use fake checks drawn on non-existent Treasury accounts to pay property taxes in Jackson and Coos Counties; to pay federal income taxes; and to buy property, recreational vehicles and other goods and services. Buhtz, a self-styled consumer advocate, sold the idea of a “Redemption” process that convinced citizens that government funds are placed in secret accounts at the U.S. Treasury upon the birth of each person born in the United States. Buhtz’ presentations convinced people to join the Redemption movement and encouraged them to use his bills of exchange (fraudulent Treasury checks) to access these secret Treasury accounts. Buhtz provided his services for “voluntary donations.”
Ohio Businessman Sentenced to 97 Months in Prison
On September 1, 2009 in Dayton, Ohio, William Appleton was sentenced to 97 months in prison and ordered to pay $6.2 million in restitution to 14 victims, including more than $1 million to the Internal Revenue Service (IRS). Appleton operated two businesses in Cincinnati that provided investors with investment strategies he claimed to have developed. He claimed he would invest client funds in the financial markets, but instead, used the money for personal living expenses and payment to earlier investors looking to withdraw their profits. Appleton used false account statements and transferred funds through multiple banks trying to conceal the income from the investors and the IRS.
Texas Woman Sentenced for Embezzling More Than $600,000 from Health Clubs in Texas and Oklahoma
On August 28, 2009, in Lubbock, Texas, Emily J. Read, aka Emily Joe Khalili Read, was sentenced to 41 months in prison and ordered to pay more than $670,000 in restitution. Read pleaded guilty in March 2009 to one count of money laundering and one count of uttering counterfeit obligations of the U.S. In her plea agreement, Read admitted that from late 2002 through at least 2006, she embezzled more than $663,000 from a group of health clubs known generally as Reaction Fitness, that operated in Lubbock and Corpus Christi, Texas, and in Lawton and Tulsa, Oklahoma. Emily Read was employed by Reaction Fitness as a bookkeeper. Her then husband, Chad W. Read, assisted her in laundering more than $110,000 of the illegally obtained funds. Emily Read also passed counterfeit notes to a variety of retail stores in the Lubbock and Highland Park, Texas areas. Chad Read has pleaded guilty and is awaiting sentencing. Many of the embezzled checks were laundered through the Read’s personal bank accounts disguised as tax payments to the Internal Revenue Service. Emily Read recorded these transactions in the books of Reaction Fitness as federal employment tax payments.
Louisiana Woman Sentenced for Embezzling Money and Making False Statement on Her Tax Returns
On August 27, 2009, in Shreveport, La., Marilyn A. Camp was sentenced to 18 months in prison, to be followed by one year of supervised release and ordered to pay $30,650 in restitution to the Internal Revenue Service (IRS) and $200,000 in restitution to the company she embezzled from. Camp pleaded guilty in March 2009 to one count of making false statements on an income tax return. According to her plea agreement, Camp admitted that while working as a bookkeeper for a local company, she used the company credit cards and company checks to make unauthorized purchases for personal items. In an effort to conceal her conduct from both her employer and the IRS, Camp failed to report a total of $118,642 in income for the tax years 2002, 2003 and 2004.
Former IRS Official Sentenced for Tax Fraud as a Leader of Renaissance ‘Tax Dream Team’
On August 26, 2009, in Topeka, Kan., Jesse Ayala Cota, of Vista, Calif., was sentenced to 24 months in prison. Cota, a former Internal Revenue Service (IRS) District Director, pleaded guilty in April 2007 to one count of conspiracy to defraud the IRS. In his plea, Cota admitted advising taxpayers how to defraud the U.S. government using methods devised by a Topeka-based company called Renaissance, the Tax People, Inc. According to court documents, after retiring from the IRS, Cota went to work in July 1999 for Renaissance, a company that sold tax services. Through the filing of false tax returns by Renaissance members, Cota defrauded the U.S. government of more than $1.3 million and earned more than $300,000 while working for Renaissance. Court documents further explain that owners of home-based businesses who paid to become members of Renaissance received services including tax preparation, tax advice and socalled “audit protection.” The so-called “Tax Advantage System” offered by Renaissance was based on fraudulent claims that business owners could legally reduce the taxes they paid by converting personal expenses to business deductions. Cota and other defendants falsely assured Renaissance clients that the tax reduction methods were legal. In fact, tax returns filed using Renaissance’s methods were based on providing false and fraudulent information to the IRS. Three co-defendants, Michael Craig Cooper, founder of Renaissance, the Tax People; Todd Eugene Strand, vice president of Renaissance, the Tax People; and Daniel Joel Gleason, a tax return preparer, are all awaiting sentencing. Five other co-defendants have already been sentenced to terms of 46 months in prison to 24 months probation.
Owner and Operator of Brothel Sentenced on Racketeering and Tax Charges
On August 26, 2009, in Covington, Ky., Yong Williams was sentenced to 25 months in prison, to be followed by three years of supervised release, and ordered to pay over $23,000 in back taxes, as well as forfeit more than $100,000 seized by government agents from various bank accounts. According to court documents, Williams owned and operated a brothel fronting as a massage parlor called the Temporal Zone in Florence, Ky. In November 2008, Williams pleaded guilty to conspiracy to engage in racketeering and filing false tax returns stemming from her failure to disclose her illegal income from the brothel business. According to court documents, Williams acknowledged that she deposited more than $500,000 into bank accounts from 2005 to 2006 alone. Also Williams admitted to committing immigration law violations, such as doctoring immigration papers for an illegal alien who worked in a Tennessee brothel. In May 2008, federal agents conducted a series of raids at the local massage parlors. Williams’ parlor and the parlors of the other principal defendants were part of a wide-ranging government investigation into such local parlors that operated as brothels. So far, the May 2008 raids have led to 9 convictions and hundreds of thousands of dollars in criminal forfeitures.
Louisville Man Sentenced For Defrauding Employer and Investors
On August 17, 2009, Eric L. Lewis, of Louisville, Illinois, was sentenced to 60 months in prison, three years of supervised release, and ordered to pay $7,586,991 in restitution. Lewis pleaded guilty in May 2009 to mail fraud and money laundering arising from a scheme involving the illegal sales of corn and soybean sales. According to court documents, Lewis misused his position as a District Sales Manager with Crow’s Hybrid Corn Company to engage in a series of transactions that were intended to benefit and enrich himself in violation of his employer’s established policies. The charges stated in an Indictment allege that Lewis secretly entered into seed contracts with investors, where Lewis manipulated sales prices in order to personally profit from the sale of the seed, while also increasing his sales volume, thereby increasing his commissions and performance bonuses. Lewis misapplied approximately $229,000 of seed payment money to pay for the construction of his personal residence. Evidence presented to the Court established that Lewis concealed the scheme by offering additional seed for sale at below-market prices to customers in order to generate money from new orders that were misapplied to bring old accounts current. The scheme resulted in $4,247,391 of seed shipments to customers for which Crow’s Hybrid Corn Company was not paid. The scheme also resulted in investors losing $3,339,600 that was invested in corn and soybean seed but was misapplied to other customer accounts to conceal the scheme to defraud.
Texas Woman Sentenced For Tax Crimes
On August 19, 2009, in Tyler, Texas, Donna Nelson, of Sulphur Springs, Texas, was sentenced to one year and one day in federal prison. Nelson pleaded guilty on January 13, 2009, to an Information charging her with filing a fraudulent tax return. According to information presented in court, Nelson admitted to filing a false Form 1040 federal tax return for tax years 2002 through 2006. During that time, she underreported her adjusted gross yearly income by a total of $479,781 representing additional taxes owed of $135,171.
Former Virginia Resident Sentenced for Embezzling from Her Employer
On August 18, 2009, in Abingdon, Va., Anna Laura Howell was sentenced to 36 months in prison, to be followed by three years of supervised release, and ordered to pay approximately $15,000 in additional restitution to the Jessee Read Law Firm and its insurance company. Howell previously reimbursed the firm $35,600. In June 2009, Howell pleaded guilty to charges of money laundering and mail fraud. According to court documents, Howell used her position at the Jessee Read Law Firm to issue stop payment orders on various checks written by the firm. She then redirected those funds for her personal use. In all, Howell redirected approximately $42,000 from the firm into her possession.
Two Virginia Residents Sentenced for Scheme to Defraud Clients of Funds Allegedly Held in Trust
On August 13, 2009, in Richmond, Va., two former employees of Edward H. Okun were sentenced for their roles in a scheme to defraud and obtain approximately $126 million in client funds held by The 1031 Tax Group LLP (1031TG). Lara Coleman, the former chief operating officer of Investment Properties of America (IPofA), was sentenced to 120 months in prison and ordered to pay full restitution. Coleman pleaded guilty on January 6, 2009, to conspiring to commit mail and wire fraud and to making a material false statement to federal investigators. According to the plea agreement and statement of facts, Coleman and others used 1031TG and its subsidiaries in a scheme to obtain millions of dollars of client funds by false pretenses. Section 1031 of the Internal Revenue Code allows investment property owners to defer the capital gains tax that would otherwise be due on properties sold, if the proceeds are used to purchase new property in a specified time frame. To facilitate such exchanges, investment property owners deposit the proceeds from the sale of their property with qualified intermediaries and sign exchange agreements, which include various promises by the qualified intermediaries to clients regarding the safekeeping of exchange funds in trust. In the plea agreement and statement of facts, Coleman admitted that after obtaining clients’ exchange proceeds with that false promise, she and others misappropriated approximately $132 million in client funds. In addition, Coleman admitted that she lied to federal investigators about statements she made in 2006 to internal attorneys for Investment Properties of America about the amount of money she and others had misappropriated. Robert D. Field II was sentenced to 60 months in prison and was ordered to pay full restitution for his participation in the conspiracy to defraud 1031TG customers. Field was the chief financial officer of a holding company that was set up, in part, to oversee both IPofA and 1031TG, although neither company was ever officially made a subsidiary of the holding company.
California Man Sentenced for Fraud and Tax Evasion
On August 13, 2009, in Los Angeles, Calif., Steven Kent Austin, the owner of American Film Ventures, LLC (AFV), was sentenced to 36 months in prison, to be followed by three years of supervised release, for defrauding investors and filing a false income tax return. The court also ordered Austin to pay restitution in the amount of $17,332,971 to the victims of his fraud. According to the indictment, from approximately May 2004 until December 2006, AFV offered investments in a partnership called Funny Money the Movie Limited Partnership (Partnership). Austin telephoned the victims and advised them that AFV would use the victims’ money to finance part of the development, production, marketing and distribution of a full-length motion picture called “Funny Money.” Austin promised the investors they would receive a high rate of return for their investments within a short period of time after “Funny Money” was released. In fact, Austin was not a producer of “Funny Money” and neither AFV nor the Partnership had any oral or written agreement to develop, produce, market or distribute “Funny Money.” In addition, in 2005, Austin filed a joint individual income tax return that reported no taxable income for tax year 2003 when he knew he had between $475,000 and $874,500 in taxable income for that tax year.
Two Ohio Men Sentenced on Drug and Tax Evasion Charges
On August 11, 2009, in Columbus, Ohio, Robert M. Fusner and Joseph Marasco were each sentenced to 24 months in prison, followed by five years of supervised release, and ordered to pay $84,000 in restitution to the Internal Revenue Service (IRS). Both Fusner and Marasco pleaded guilty to one count of willfully filing a fraudulent income tax return and to one count of conspiracy to possess with the intent to distribute over 100 kilograms of marijuana. According to an Indictment filed in July 2008, Fusner and Marasco conspired to traffic in illegal drugs and launder the proceeds of the crime, as well as filing false income tax returns. Neither Marasco nor Fusner reported the profits from the sale of marijuana on their federal income tax returns, nor did they pay any federal income taxes on these profits.
Texas Man Sentenced for Filing Fraudulent Tax Returns
On August 10, 2009, in Sherman, Texas, Samuel Perez, of Corinth, Texas, was sentenced to 41 months imprisonment, to be followed by three years of supervised release, for filing fraudulent tax returns for tax years 2002 and 2003. The court also order Perez to pay a $100 special assessment, and $303,324 in restitution. According to the indictment, Perez filed a Individual Tax Returns for tax years 2002 and 2003 that reported income of $77,561 and $77,686 respectively, when in fact, he knew his income for those tax years was in excess of those amounts due to income he received and concealed in the form of checks that were made payable to third parties.
West Virginia Dentist Sentence for Tax Evasion
On August 7, 2009, in Charleston, W.Va., Alan C. Vance, D.D.S. was sentenced to twelve months and a day in prison. Vance pleaded guilty in March 2009 to tax evasion. According to court documents, Vance admit that he evaded the payment of approximately $242,000 in federal income taxes from 2000-2003. During that time, Vance was a practicing dentist in Charleston and owned Pressed for Time, a dry cleaning business. In 2001- 2003, Vance failed to report large amounts of cash generated by his dental practice.
Bellevue Woman Sentenced to Over 7 Years for “Pump And Dump” Securities Scheme Involving More Than 3,000 Victims
On August 7, 2009, in Seattle, Wash., Beverlee Kamerling, of Bellevue, Washington, was sentenced to 90 months in prison for her role in a “pump and dump” securities fraud scheme in which more than 3,300 investors lost over $2.4 million. As part of the scheme, the conspirators acquired publicly traded “shell” companies, hid their association with the companies, falsified and concealed material information on disclosure documents made available to the investing public, and then used faxes and press releases to try to boost the stock price. The conspirators then sold stock through nominees at a profit and laundered the money overseas. The companies named in the Indictment were all Washington corporations: America Asia Energy Corporation, Coattec Industries, Inc., Detex Security Systems, Inc, and Global Gaming Network, Inc. Kamerling was ordered to pay $2,471,784 in restitution. Ten individuals were convicted of various offenses in connection with the case. Last week, Joel Ramsden, of Delray Beach, Florida, was sentenced to six years in prison, and Kamerling’s son, Nicholas J. Alexander, who resided in Bellevue and in Florida, was sentenced to 41 months in prison. Disbarred Bellevue lawyer Tolan S. Furusho was sentenced last month to 13 months in prison for his role in the scheme, and for failing to file federal income tax returns. Several other defendants were convicted of perjury for false statements they made to the grand jury in Seattle that was investigating the scheme or for other efforts to obstruct justice.
Former Pastor Sentenced on Charges of Tax Evasion and Filing False Documents for Tax Exemption
On August 4, 2009, in Baltimore, Md., Otis Ray Hope, of Aiken, South Carolina, was sentenced to 37 months in prison, followed by three years of supervised release, and ordered to pay $2,422,320 in restitution. Hope pleaded guilty in June 2009 to tax evasion, subscribing to a false document in connection with the filing of a federal tax exemption, and conspiracy to commit bank fraud. According to his plea agreement, in 1996 Hope was the senior pastor for Montrose Baptist Church located in Rockville, Maryland. He supervised the Montrose Christian School and the “English as a Second Language” (ESL) Program. In 2001, Hope formed his own company called the Maryland International Student Association (MISA), to take over the management of the ESL program. MISA had no general business ledgers and it never filed a federal or state tax return. Upon taking over the management of the ESL program, MISA substantially increased the price of tuition from approximately $7,400 to $12,500. From approximately June 2001 to December 2003, foreign students who were admitted into the ESL program wired approximately $1.35 million in tuition payments into MISA bank accounts, which Hope controlled. Hope diverted much of the tuition payments to cover his personal expenses, including investments in Shiloh Ministries of Hagerstown, Inc. Hope filed joint tax returns in 2001, 2002 and 2003, in which he failed to report approximately $958,236 of MISA tuition receipts he used, resulting in the evasion of $287,131 in taxes. Then from August 2006 through March 2007, Hope was one of the trustees of the Shiloh Company which operated the Shiloh Conference and Retreat Center in Hagerstown. Maryland. In September 2006, Hope and a co-conspirator applied for a commercial loan on behalf of the Shiloh Company, in the amount of $1.75 million to refinance the mortgage on the Conference and Retreat Center and to release $108,835 being held in escrow by the previous lender. In order to obtain approval of the loan, the bank required submission of the company’s financial statements, minutes from annual meetings, and a corporate resolution authorizing the company to borrow the money. Hope and his co-conspirator made false representations to the bank, including fraudulent financial statements overstating the company’s assets and monthly cash flow. The bank granted the $1.75 million loan and $108,835 was released from the previous lender’s escrow accounts. After paying off the outstanding loan balance and fees owed to the previous lender, the settlement company wired $77,640, the net proceeds of the closing, to a bank account controlled by Hope. Finally, Hope subscribed to a false application for exemption from federal taxes for Shiloh Ministries, in which Hope claimed that the recipients did not pay for services provided by Shiloh Ministries; that the company’s financial support was derived from donations; and that the company conducted worship services. In fact, the company charged recipients for its services; the company’s financial support was derived from rental fees and other charges; and the company did not conduct worship services.
Salesman for Union Trade Newspaper Sentenced for Tax Evasion
On August 4, 2009, in Newark, N.J., Gary Weisbrot, a salesman for a labor union trade newspaper, was sentenced to 18 months in prison and ordered to pay a $10,000 fine. Weisbrot pleaded guilty in November 2008 to tax evasion and admitted concealing approximately $351,800 in income from the Internal Revenue Service (IRS). Co-defendant, Samuel Jay Travin, of Delray Beach, Fla., was sentenced to five years probation, with one year of home confinement, and ordered to pay a $15,000 fine. Travin pleaded guilty in October 2008 to conspiracy to defraud the United States. The Indictment charged both defendants with cheating the IRS out of taxes due and owing by concealing approximately $1 million. According to court documents, Travin was the owner and president of Trade Union Media Group, Inc., a company in New York that publishes the Trade Union Courier, a labor union publication. Weisbrot was employed by Trade Union as a commissioned salesman who sold advertising. Travin issued company checks to Weisbrot in the name of Louis Keltan, a fictitious employee. Thereafter, Weisbrot cashed the Keltan checks, deposited the cash into various bank accounts in his name, and then transferred the money to a Charles Schwab investment account in his name. Travin then assisted Weisbrot in the preparation of his federal income tax returns. Specifically, in March 2002, Weisbrot filed a federal income tax return that concealed approximately $351,800 in income for tax year 2001. Under the terms of his plea agreement, Weisbrot is required to settle any outstanding tax issues with the IRS, including the payment of all outstanding taxes, penalties, and interest.
Ex-Wife of Former Home Depot Employee Sentenced for Filing a False Tax Return
On August 3, 2009, in Atlanta, Ga., Melissa Deaton Tesvich, of Mobile, Alabama, was sentenced to 24 months in prison, to be followed by one year of supervised release, and ordered to pay $264,397 in restitution. She is already forfeiting three automobiles and two pieces of real property, worth a total of approximately $400,000, in a related civil action taken by the United States. Tesvich pleaded guilty in May 2009 and admitted filing a false tax return in connection with her ex-husband’s scheme to defraud Home Depot. According to court documents, in May 2006, Tesvich and her former husband, Anthony Tesvich, filed a joint federal income tax return in which they intentionally underreported their taxable income by $1,073,683 and underreported the amount of taxes owed by $386,997. From October 2002 through October 2007, Anthony Tesvich participated in a conspiracy to defraud Home Depot by taking kickbacks from vendors seeking to do business with Home Depot, paying kickbacks to fellow employees to further that scheme while he worked for Home Depot, and continuing to pay kickbacks to his former colleagues when he left Home Depot. Melissa Tesvich acted as a bookkeeper and participated in running a number of her former husband’s side businesses. She also ignored her tax advisor’s advice to report the income from those side businesses. On June 11, 2009, Anthony Tesvich was sentenced to 78 months in prison and ordered to pay $8,292,949 in restitution and forfeit all assets obtained with proceeds of the fraud scheme.
Southern Illinois Construction Company Owner Sentenced For Tax Evasion
On July 30, 2009, in Benton, Ill., Ricki Lee Jones, of Wood River, Illinois, was sentenced to 15 months imprisonment, two years of supervised release, and ordered to pay a $100 special assessment and a $114,654 fine. The court also ordered restitution totaling $3,642,507, which Jones paid at the time of sentencing. According to information presented in court, Jones was the owner of Triad Industries, Inc., a construction company located in Madison County, Illinois. Between 2002 and 2005, Triad and its subcontractors performed construction work, in part at the request of a client for the client’s facility. During the calendar year 2003, Jones caused Triad to bill its client for both construction work that Triad and its subcontractors performed for the client and for construction work that Triad and its subcontractors had performed for the benefit of Jones and others. Included in the billing was a 7% mark-up for work performed by sub-contractors. The client paid the invoices that it received from Triad, but the client was not aware that it was being billed for construction work that Triad performed for Jones and others. To carry out his attempt to evade taxes, Jones gave his accountant numerous documents indicating that Triad had invoiced the client for construction work that Triad and its subcontractors had performed. In fact, much of the work for which Triad billed the client was actually work performed by Triad and its subcontractors for the personal benefit of Jones and others rather than for the client. Jones falsely stated that his taxable income for the calendar year 2003 was $1,738,882, and that the amount of tax due and owing was $537,9l2. However, the correct amount of taxable income was $5,248,345 and the correct tax due and owing was $1,766,224.
Upstate New York Man Sentenced for Tax Fraud and Copyright Infringement
On July 28, 2009, in Buffalo, N.Y., Christopher Boyd was sentenced to 46 months in prison, to be followed by three years of supervised release as a result of his conviction on charges that he committed copyright infringement and filed false tax returns. In addition, Boyd was ordered to pay nearly $2 million in restitution to General Electric Healthcare, Inc. and Nexsys Electronics Incorporated, dba Medweb. According to court documents, Boyd operated B&L Medical which sold teleradiological software that was under copyright by General Electric Healthcare and Nexsys Electronics. The software related mostly to the preservation and transmission of digital x-rays for physicians. Numerous medical groups throughout the United States unwittingly purchased the illegal teleradiological software from B&L Medical. In addition to selling unauthorized software, Boyd was also convicted of tax evasion and ordered to pay an additional nearly $368,000 to the Internal Revenue Service in restitution. In March 2009, Boyd’s wife, Robin Boyd, received a sentence of one year probation after she pleaded guilty to a misdemeanor charge of aiding and abetting a copyright infringement. To date, the government has secured over $1.9 million in assets which will be used to provide restitution to the victims in the case.
Illinois Concert Promoter Sentenced for Tax Fraud
On July 28, 2009, in Chicago, Ill, Manilen Mendoza, of Schiller Park, Illinois, was sentenced to 30 months in prison, to be followed by one year of supervised release, following her conviction on three counts of filing false tax returns. The tax fraud charges relate to her activity as the owner and operator of a concert promotion business called, Infinity Productions, and later called, Prestige Entertainment, Inc (Prestige). According to the indictment and information presented in court, from the beginning of 2004 until the end of 2006, Mendoza fraudulently obtained money from investors by making false statements about famous performers with which she had contracts. In fact, she did not have contracts with any of the famous celebrities that she named. Mendoza solicited and received investments from individuals in excess of $400,000 to host four specific concerts which were never held. Mendoza converted the funds she received from these investors for her own purposes, including to fund unrelated businesses. Over the three years, 2004 through 2006, the total amount of gross income that Mendoza did not report to the IRS was $532,354.
Mortgage Broker/Real Estate Developer Sentenced To 10 Year Prison Term
On July 28, 2009, in Houston, Texas, Richard Bell, president and CEO of Harborside Mortgage Corporation, was sentenced to 121 months in prison for bank fraud and money laundering, to be followed by five years of supervised release. Bell was also ordered to pay restitution to his victims in an amount to be determined within 90 days. According to court documents, in 2005 Bell entered into a contract to purchase 97 acres of land in Rosharon, Texas, for approximately $1.1 million. The contract specified Bell would make an earnest money down payment of $385,000 and obtain a loan for the balance of the purchase price. Bell made application to First National Bank for a loan of $720,000. As part of the loan application package, Bell submitted false and fraudulent documents, including false financial statements, false income tax returns and copies of false and fraudulent cashier’s checks as proof of the $385,000 down payment. The cashier’s checks totaling $385,000 were in reality two money orders obtained from Wells Fargo Bank with a true value of $35. According to Wells Fargo Bank records, Bell purchased a $25 money order November 8, 2005, and a $10 money order December 9, 2005. The money orders were altered using an optical scanner and computer software to make them appear to be cashier’s checks in the amount of $135,000 and $250,000. The settlement statement for the closing of the sale of the property was signed by Bell and the seller and reflected the cash down payment of $385,000.
Massachusetts Resident Sentenced for Nationwide Internet Prescription Drug Scheme
On July 27, 2009, in Concord, N.H., Christopher Chase, of Lynn, Mass., was sentenced to 42 months imprisonment and three years of supervised release. On February 25, 2009, Chase pleaded guilty to a two count indictment charging him and two co-defendants with conspiracy and money laundering. The indictment alleged that the defendant conspired to smuggle and illegally distribute anabolic steroids, human growth hormone (HGH), insulin-like growth factor (IGF-1), and clenbuterol. The indictment also alleged that Chase laundered money by sending it to various foreign countries including China and Moldova. The indictment alleged Chase and two co-defendants illegally imported the drugs and introduced them into interstate commerce without the prescription of a licensed medical doctor or other licensed medical professional. Once the prescription drugs entered the United States, they were distributed over the internet through websites and customers paid for the prescription drugs using credit cards and cash payments sent through the mail or by Western Union, MoneyGram, Pay Pal and PayByCheck. To enable the customers to pay for the illegally distributed prescription drugs, defendant Chase obtained 20 merchant accounts in his own name and also in the names of the other participants in the scheme. Chase used the merchant bank accounts to sell the prescription drugs through websites that were not disclosed to the banks. Using the merchant bank accounts, credit card sales in the amount of approximately $671,465 were processed and electronically transferred to eleven bank accounts belonging to Chase and other participants. Thereafter, approximately $549,047 was withdrawn, $425,890 of which was wire transferred overseas at Chase’s direction.
Texas Man Sentenced For Fraud Scheme
On July 24, 2009, in Plano, Texas, Donald Patrick Blair, of Plano, was sentenced to 24 months in prison and ordered to pay $1.5 million in restitution. Blair pleaded guilty to an Information in March 2009 charging him with mail fraud and making false statements on his tax returns. According to information presented in court, between 2000 and 2007, Blair served as the business administrator for a local church in Carrollton, Texas. During this time, he embezzled more than $1.2 million from the church by diverting these funds to his personal expenditures. In connection with his scheme to defraud, Blair understated the amounts of his taxable income for tax years 2001 through 2006, thereby owing an additional $262,663 in taxes.
Upstate New York Man Sentenced in Fraud Scheme
On July 22, 2009, in Buffalo, N.Y., Gregory Fisher, of North Tonawanda, New York, was sentenced 36 months in prison for his conviction of wire fraud and filing a false tax return. In addition, Fisher was ordered to pay $400,000 in restitution. The government had already recovered over $2 million which has been used as additional restitution to the victims of Fisher’s fraud scheme. According to court documents, Fisher was involved in an elaborate scheme which allowed him to fraud automobile dealerships, banks, and even the Internal Revenue Service (IRS), out of over $2 million which he used to buy over 100 lbs. of gold and over a hundred thousand dollars worth of gift cards. In or about March 2007, Fisher approached a sales manager with the West Herr Automotive Group and informed the manager that he owned two companies who had been pre-approved by Ford Motor Credit and DaimlerChrysler Truck Financial to purchase and “upfit” several vehicles. The upfitting involved accessorizing the vehicles with sophisticated and expensive generators and various other electronic and mechanical equipment allegedly used by his companies in their business operations. Fisher further advised the sales manager that the business handling the upfitting would be VRTS Sales & Development Corporation (VRTS). However, VRTS existed on paper only and had no ability to perform any upfitting. Between April and June 2007, Fisher purchased a total of 49 vehicles from the West Herr Automotive Group. The vehicles were financed through a consortium of financial institutions and were to be upfitted by VRTS. The upfitting costs for each vehicle ranged from approximately $18,000 to $116,000 and were purportedly to be fully financed by either Ford Motor Credit or DaimlerChrysler Truck Financial. Subsequently, West Herr paid over $1 million to VRTS for its share of the upfitting costs. The checks were deposited into in a VRTS account. Additionally, in June and July 2007, checks from other financial institutions were also deposited into VRTS’s account. In June 2007, Fisher wire transferred over $1,000,000 to the Coin & Stamp Gallery, Inc. (CSGI) in Phoenix, Arizona in order to purchase 1,470 one ounce gold ingots and 306 $20 dollar Liberty Double Eagle coins. In addition, Fisher purchased over $100,000 in gift cards and numerous items of electronic equipment with the proceeds of his fraudulent scheme. Fisher had, for tax years 2004, 2005, and 2006, falsely claimed on his tax returns, to have had over $1.3 million in federal income tax withheld from his earnings, when in fact he had nothing withheld.
Tennessee Businessman Entered into Fraudulent Offer in Compromises with IRS
On July 16, 2009, in Memphis, Tenn., Michael R. Aldridge was sentenced to 51 months in prison, followed by three years of supervised release, and ordered to pay $261,892 in restitution to the Internal Revenue Service (IRS). Aldridge was convicted by a trial jury in March 2009, for tax evasion for tax years 1991 through 1997. Evidence presented during the trial revealed that beginning in January 1999 through May 2001, Aldridge signed and submitted false Forms 433-A and 433-B with two Offers in Compromise to the IRS and made false statements and submitted false documents during the negotiation of these Offers in Compromise. Evidence also revealed that in 2004, Aldridge liquidated the assets of his corporation, Pro Oil, for a substantial profit of $433,000, and through an elaborate scheme, diverted these funds for his own benefit. In an attempt to conceal the scheme, Aldridge made it appear that various relatives had loaned the corporation money. Testimony showed that Aldridge directed his attorney to disburse the proceeds of this sale to various relatives. Most of these relatives had not made loans to the corporation and they were instructed by Aldridge to deposit $50,000 checks into their personal bank accounts. Aldridge then directed these relatives to either withdraw the funds in cash increments or return these monies back to him, or to use the funds to make payments on his assets that he directed them to put in their names. Additionally, Aldridge purchased vehicles in the names of family members and friends during tax years 2001, 2003, and 2004 and purchased a residence using two different nominees between 1992 and 2005.
New York Accountant Sentenced for Failing to Report Over $698,000 in Income
On July 10, 2009, in Utica, N.Y. Bernard J. LaClair, of Potsdam, NY, was sentenced to 30 months in federal prison to be followed by three years of supervised release. LaClair pleaded guilty in March 2009 to one count tax evasion for the year 2005. According to the plea agreement, LaClair, while working as an accountant, embezzled funds from a client of the accounting firm where he was employed and failed to report the embezzled funds on his federal tax return. LaClair perpetrated the embezzlement from 2004 through 2006 by writing checks from his clients payroll account to himself. In addition to the embezzlement of funds from the clients payroll account, LaClair also admitted to embezzling funds from his employers travel account from 2002 through 2004. Altogether, from 2002 through 2006, LaClair failed to report approximately $698,947 in income he received from embezzled funds.
South Dakota Man Sentenced for Conspiring to Defraud United States
On July 6, 2009, in Rapid City, S.D., Edward Finley, of Spearfish, was sentenced to twelve months and one day in prison, to be followed by one year of supervised release, and ordered to pay $158,413 in restitution to the Internal Revenue Service (IRS) and to pay a $100 special assessment. Finley was indicted in December 2008 for falsifying tax returns for another person in the years 2001-2003. On April 16, 2009, he pleaded guilty to conspiracy to defraud the United States. According to court documents, Finley opened trading accounts in the name of his son Victor’s and report them as Victor’s income. Then Finley prepared, and had Victor file, false tax returns for tax years 2001-2003. The total amounts of unreported income for years 2001 and 2002 were $467,551 of which tax due and owing was $158,413. Additionally, in 2003, there was a capital loss of $3,316 which was also improperly reported as being a loss to his son, Victor Finley.
Las Vegas Personal Injury Lawyer Sentenced to Five Years in Prison for Tax Evasion
On July 15, 2009, in Las Vegas, Nev., Edmund C. Botha, a personal injury attorney who was convicted last year of tax evasion and owes almost $4 million to the IRS, was sentenced to five years in prison, to be followed by three years of supervised release, and ordered to pay $685,505 in restitution to the IRS. Botha was convicted of one count of willful evasion of payment of income tax for the tax years 1998 through 2001. According to the court records and evidence presented at trial, Botha evaded the taxes by purchasing luxury vehicles in his ex-girlfriend’s name; transacting all of his business in cash and cashier’s checks; and entering into a sham child support agreement requiring him to pay about $20,000 per month for two children. Testimony at trial showed that Botha conducted over $2 million in cash transactions from 1998 through 2003, and paid his rent, utilities, payroll, and other business expenses with cash or cashier’s checks. Evidence further showed that Botha purchased more than 10 vehicles worth more than $400,000 over a six-year period in his ex-girlfriend’s name, while at the same time having only a 15-year-old car with over 100,000 miles on it in his name.
Denver Loan Officer Sentenced to Federal Prison for Mortgage Fraud Scheme
On July 15, 2009, in Denver, Colo., Linda Carnagie, of Bennett, Colorado, was sentenced to 41 months in prison to be followed by three years of supervised release. Carnagie was order to pay $206,693 in restitution, to forfeit $41,205, which represents the proceeds of her illegal activities, and to pay a $2,100 special assessment to a victim of crime fund. According to the indictments, as well as evidence presented during the trial, Linda Carnagie was an independent contractor who worked with Highland Mortgage of Evergreen, Colorado. Starting in February 1999 and continuing through July 2004, Carnagie conspired with others to defraud the United States. As part of the scheme, she falsified information in loan applications and supporting documentation submitted to mortgage companies and to FHA/HUD for the purpose of obtaining mortgage loans and FHA/HUD mortgage insurance. Carnagie and others working with her would illegally assist buyers who could not qualify for an FHA-insured mortgage legitimately by falsifying the borrowers’ social security numbers, verifications of employment, and prepare and submit false income information, including false W2’s (wage and tax statements), pay stubs, prepare false credit reports, and other false documents. Carnagie and others would take the false information about the borrowers and then submit it to the mortgage companies, and thereafter forwarded to FHA/HUD, for the purpose of falsely representing that the borrowers were financially qualified to undertake their mortgage obligations.
Husband and Wife Sentenced on Tax Evasion Charges
On July 10, 2009, in Boston, Mass., Charles McCarthy and his wife Katherine McCarthy, of Webster, Mass., were sentenced for failing to report income from their home heating and cooling business. Charles McCarthy was sentenced to 15 months in prison and Katherine McCarthy was sentenced to 12 months and one day in prison. When released from prison, both defendants will serve two years of supervised release, during which time they have been ordered to cooperate with the Internal Revenue Service (IRS) in its assessment of taxes, fines and penalties owed. The McCarthys have also been ordered to pay $280,774 in restitution to the IRS. The McCarhtys pleaded guilty on April 1, 2009 to four counts of tax evasion. According to evidence at their plea hearing, Charles McCarthy owned F&F Heat and Air Conditioning. Katherine McCarthy kept the books and records of F&F and was responsible for the preparation and filing of the couple’s joint income tax returns. During the four year period 2002 through 2005, the McCarthys failed to report more than $850,000 in income from F&F, resulting in a tax loss of approximately $280,000.
Arizona Woman Sentenced On Money Laundering and Tax Charges
On July 8, 2009 in Tucson, Ariz., Aurora Duron, of Tucson, was sentenced to 18 months in prison, to be followed by three years of supervised release which includes six months of home confinement with electronic monitoring. In addition, the judge ordered forfeiture of approximately $22,000 and ordered restitution of approximately $1.4 million to be paid to the Otis Elevator Company. Duron pleaded guilty to conspiracy to commit money laundering and one count of failing to file a federal income tax return in October 2008. Duron was indicted along with three others in November 2005. The three co-defendants remain fugitives. According to the indictment, the defendants engaged in a scheme to defraud the Otis Elevator Company between August 2000 and April 2004. The scheme involved the defendants creating fraudulent purchase orders from within Otis Elevator Company in Mexico, which were purportedly for the purchase of pallets, crates or other services. The defendants then prepared fraudulent invoices seeking payment for fulfilling the fraudulent purchase orders. When Otis Elevator Company employees processed and paid the fraudulent invoices, the defendants were notified by telephone that the payments were available for pick up. The payments were deposited into U.S. bank accounts opened by Duron in the names of the two companies that submitted the fraudulent invoices. The proceeds of the fraud scheme were disbursed among the defendants, who used them for personal expenses and purchases.
Arizona Bar Owner Sentenced to Two Years in Prison for Tax Evasion
On July 8, 2009, in Phoenix, Ariz., Brian C. Roehrich, the former owner of several Scottsdale establishments, was sentenced to 24 months in federal prison. Roehrich attempted to evade the income tax due while he was the president and sole owner of Joe’s Apartment, Inc., a corporation doing business as Sugar Daddy’s; the president and sole owner of Dos Gringos, Inc.; and the president and co-owner of The Trailer Park Restaurant, Inc., a corporation also known as Trailer Park and Dos Gringos-Tempe. Roehrich pleaded guilty on December 2, 2008 to four counts of federal income tax evasion for 2003. At that time, he admitted that he established procedures to maintain a separate accounting of cover charge revenue collected from the patrons of Sugar Daddy’s and a portion of the revenue collected from the patrons of Dos Gringos and Trailer Park. The cover charge and other revenue was stored separately from the claimed corporate revenue and was diverted from the corporate structures for the personal benefit of Roehrich. Roehrich did not reveal the amount of cover charge and other revenue diverted from the corporate structures for his personal benefit to the accountant hired to prepare the corporate income tax returns and his individual income tax returns for the tax years 2002 through 2005. In Roehrich’s plea agreement, he admitted that he evaded $525,000 in taxes for 2003. He also admitted that the total amount of taxes he evaded in the period of 2002-2005 was approximately $1,945,000.
Texas Restaurant Owners Sentenced on False Income Tax Return Charges
On July 6, 2009, in Houston, Texas, Francisco Javier Camarena and Pablo Garza were sentenced to federal prison for filing false income tax returns relating to their Taqueria Arandas restaurants. Camarena was sentenced to 15 months, while Garza received four months. Both were also ordered to serve one year under court supervision upon release from prison. Camarena owned and operated two Taqueria Arandas restaurants in Houston. In his plea agreement, Camarena admitted to filing 10 false federal income tax returns for these restaurants and for himself for tax years 2001 through 2006 and underpaying income taxes by $961,203. Under the terms of his plea agreement, Camarena was ordered to make full restitution to the Internal Revenue Service (IRS) and, to date, those payments total approximately $165,000. Garza owned and operated a Taqueria Arandas restaurant in Houston. In his plea agreement, Garza admitted that between 2001 and 2006, he filed 22 false employment tax returns from which he omitted approximately $906,000 in taxable wages resulting in the underpayment of $182,861 in federal employment taxes. Prior to his sentencing, Garza paid $316,983 in restitution which also included $134,122 in estimated penalties and interest. Camarena and Garza become the fourth and fifth of eight local Taqueria Arandas Restaurant owners to be sentenced on charges of filing false federal income and employment tax returns for their restaurants. These eight convicted defendants have paid the IRS almost $4.7 million in delinquent taxes, penalties and interest and all remain subject to audit and further assessment of taxes, penalties and interest.
Connecticut Attorney Sentenced for Bribery and Tax Evasion Scheme
On July 1, 2009, in Hartford, Conn., Sebastian S. Ciarcia, an attorney, was sentenced to 24 months in prison, followed by two years of supervised release, for his participation in a bribery and tax fraud scheme. Ciarcia pleaded guilty in February 2009 to one count of bribery of a public official and one count of aiding and assisting in the preparation of a false tax return. According to court documents and statements made in court, Ciarcia managed and controlled Escarnio Construction, LLC and Fischer Supply, LLC which conducted business with the U.S. Department of Veteran Affairs (VA). Beginning in approximately May 2002, Ciarcia gave things of value to Kevin Malarney, a VA employee, in exchange for Malarney recommending and steering VA contracts for services and supplies to Escarnio Construction and Fischer Supply. The value of the bribes given by Ciarcia to Malarney was approximately $45,600. Between May 2002 and August 2005, Malarney assisted in the awarding of 27 VA contracts worth approximately $303,000 to Ciarcia’s companies. Malarney also directly authorized or caused to be authorized 48 payments in the total amount of approximately $81,000 to Fischer Supply for services and/or supplies on his government purchase card. Although Ciarcia contolled the two businesses, the principal and owner of both companies was listed as Janet Escarnio. In his plea agreement, Ciarcia admitted that he assisted in the preparation of Janet Escarnio’s individual federal income tax returns for business income received by the companies for the 2003, 2004 and 2005 calendar years. The returns were fraudulent because the Schedule Cs of both companies under-reported the gross receipts, causing a tax loss of approximately $18,000 for the three calendar years.
Doctor Sentenced to Prison for Filing False Income Tax Return
On July 1, 2009, in Chicago, Ill., Robert Weinstein, a medical doctor and businessman, was sentenced to 18 months in prison, to be followed by one year of supervised release, and ordered to pay a $75,000 fine, and to complete 300 hours of community service. Weinstein previously pleaded guilty to filing a false 2003 Federal Income Tax Return. According to documents presented in court, Weinstein was a member of the board of trustees of the Rosalind Franklin University of Medicine and Science, formerly known as the Finch University of Health Sciences/the Chicago Medical School (CMS), and a member of the board of trustees of the Northshore Supporting Organization (NSO), a charitable organization created with the sole purpose of providing financial support to CMS. In about July 2001, Weinstein, in his positions as president and sole director of another charitable organization, called IDDRS, caused the transfer of approximately $17.9 million from IDDRS to NSO. Thereafter, in or about July 2002, Weinstein and Stuart Levine, another trustee of CMS and NSO, caused a total of $6 million to be transferred from NSO to Weinstein and Levine in exchange for two promissory notes, with NSO transferring $3 million to a business entity controlled by Weinstein and $3 million to a business entity controlled by Levine. In December 2002, Weinstein caused NSO to agree to substitute himself and Levine as the borrowers of the $6 million making each personally responsible for repayment of $ 3 million plus interest to NSO. At the time of the substitutions, Weinstein and Levine had agreed to cause NSO to “donate” the two promissory notes to CMS and then to themselves in a series of transactions designed to give Weinstein and Levine the promissory notes as “gifts” and to purport to excuse their repayment of $6 million to NSO. Because the return of the notes to Weinstein and Levine were not true gifts motivated by detached and disinterested generosity, the $3 million qualified as income to Weinstein. Weinstein knowingly failed to report the receipt of the $3 million as other income on his 2003 tax return.
Florida Man Sentenced to 22 Years in Prison in $30 Million Mortgage Fraud Scheme
On June 30, 2009, in Fort Myers, Fla., Ronald Luczak, of Cape Coral, was sentenced to 264 months in prison for his role in a large mortgage fraud scheme. Luczak must also pay approximately $5.9 million in restitution to his victims. He had pleaded guilty to wire fraud and money laundering charges on September 10, 2008. According to court documents, between September 2005 and December 2006, Luczak and his company, Cape Coral Equity and Development (CCEDG), obtained more than $30 million worth of mortgages on at least 37 Cape Coral properties. Despite that CCEDG was responsible for making the mortgage payments, CCEDG recruited 33 “straw buyers” and reported on the mortgage applications that the straw buyers were purchasing the properties. CCEDG also falsely inflated the properties’ values, fraudulently reported the purported buyers’ incomes, provided false schedules of real estate and assets supposedly owned by the buyers, falsely reported the buyers’ occupations and employment, and falsely stated that the buyers intended to use the properties for their primary residences. Luczak paid the straw buyers’ mortgage obligations with other straw buyers’ mortgage proceeds in a Ponzi-type arrangement. Luczak and CCEDG personally received more than $5.8 million from the scheme. Luczak’s wife, Lisa Luczak, and Sandra Mainardi, a New Jersey loan processor, previously were sentenced to 46 months each for their part in the scheme.
New Jersey Man Sentenced to 30 Years for Scheme that Defrauded Investors of About $5.8 Million
On June 30, 2009, in Camden, N.J., Glyn Richards, former president and CEO of All Freight Logistics, Inc., was sentenced to 360 months in prison to be followed by three years of supervised release. In addition, the Judge scheduled a restitution hearing for September 28 to determine the appropriate amount of restitution Richards must pay to the victims of his scheme. Richards pleaded guilty in June 2008 to a two-count Information, which charged mail fraud and money laundering in connection with his Ponzi scheme to defraud investors of approximately $5.8 million. At his plea hearing, Richards stated that prior to May 2005 he incorporated All Freight Logistics, Inc. in New Jersey and served as the company’s president and CEO. According to court documents, in May 2005, Richards began soliciting investments in the company and provided investors with a contract describing the nature of the investment in All Freight Logistics and the profits to the investors. Additionally, Richards admitted that the contract stated that All Freight Logistics was in the business of transporting military equipment for the U.S. Department of Defense. Furthermore, the contract stated that the investment funds were to be utilized to pay “up-front costs and expenses to overseas agents and steamship lines” in connection with the transportation of equipment. Typically a contract provided for a 120-day investment of $25,000 in exchange for a 44% return on the investment, which was paid out over the next four months. Richards also admitted that All Freight Logistics never transported military equipment for the Department of Defense.
Third Taqueria Arandas Restaurant Owner Sentenced For Filing False Income Tax Returns
On June 29, 2009, in Houston, Texas, Chris Anthony Renaud, of Houston, was sentenced to 12 months and one day in prison for filing false income tax returns. Renaud Enterprises Inc. operated a restaurant called Taqueria Arandas No. 1 in Houston. Renaud executed a plea agreement on November 10, 2008, in which he admitted that he had filed Corporate Income Tax Returns for Renaud Enterprises Inc. for calendar/tax years 2001 and 2002 that under-reported sales by approximately $725,427, and underpaid income taxes by approximately $245,995. As required by his plea agreement, Renaud paid the Internal Revenue Service (IRS) $485,533 in delinquent taxes, penalties and interest prior to his sentencing. Renaud was also ordered to serve one year under court supervision upon release from prison. Under the terms of his plea agreement, Renaud remains subject to audit and further assessment of taxes, penalties and interest for tax years 2001 and 2002. Renaud is one of eight Houston Taqueria Arandas restaurant owners who have entered guilty pleas to filing false tax return. He is the third to be sentenced. To date, these eight defendants have paid the IRS approximately $4.5 million in delinquent taxes, penalties and interest and all remain subject to audit and further assessment of taxes, penalties and interest.
Illinois Businessman Sentenced for Mail Fraud and Money Laundering
On June 25, 2009, in Benton, Ill., John Robert Hoole, of Marion, Illinois, was sentenced to 60-months in prison and ordered to pay $753,422 in restitution to the victims of his investment scheme. Hoole pleaded guilty on February 26, 2009, to charges of mail fraud and engaging in a monetary transaction over $10,000 in criminally derived property. As part of his plea, Hoole admitted that from approximately July 11, 2003, and continuing until approximately April 2008, he engaged in a fraudulent investment scheme by willfully making misrepresentations to victims in order to solicit their investments. Hoole routinely told his investors that the investments were low risk and guaranteed, when in fact, Hoole knew that he was going to use the investor’s money to pay back other investors or to pay for his personal expenses. Hoole promised investors he would provide them with the documentation for their investments, but instead gave them little or no documentation. The documentation that he did give investors was fraudulent. Hoole admitted as part of his plea that his scheme resulted in a net loss of at least $753,422.
Business Manager of Ophthalmology Practice in Pennsylvania Sentenced for Defrauding Employer
On June 25, 2009, in Philadelphia, Pa., Susan Russell was sentenced to 40 months in prison, to be followed by three years of supervised release and ordered to pay $991,486 in restitution. At time of sentencing, she had already paid $327,203. Russell pleaded guilty in February 2009 to charges of wire fraud and money laundering stemming from a scheme to defraud her employer, Ophthalmic Associates (OA), an ophthalmology practice in Lansdale and Fort Washington, Pennsylvania. According to court documents, between 2004 and 2007, Russell, as the business manager for the practice, fraudulently inflated her salary by submitting false information to the payroll company that handled OA’s payroll. During the fraud period, Russell falsely claimed to work on average approximately 8,000 to 9,000 hours per year. By submitting this false information to the payroll company, Russell caused OA to pay her at least $783,000 more than she was entitled. Russell concealed the fraud from her employer by recording her income in numerous employment categories in OA’s financial records. She also paid some of the expenses of the company with her personal credit card so that the partners in the practice would not investigate financial shortfalls that, at least in part, she caused by engaging in this fraud scheme. She used the proceeds of her offense to make substantial tuition payments to Villanova University.
Two New Jersey Men Sentenced in Kickback Scheme with Physicians
On June 24, 2009, in Trenton, N.J., two Hopewell Township men were sentenced for tax evasion and conspiring to violate the federal anti-kickback statute by agreeing to pay doctors to refer blood work to a lab they operated. Asim Niaz and Taquir Khan were each sentenced to 15 months in prison and ordered to pay a $10,000 fine. According to court documents, both men pleaded guilty on March 24, 2008 to income tax evasion for failing to pay more than $150,000 in federal income taxes for the years 1994, 1995, 1996 and 1998. They also pleaded guilty to conspiring with each other to pay doctors to refer blood work to Nu-Tek Diagnostic Laboratories, a lab they operated in Langhorne, Pa. In connection with the case, a medical group, Mercerville Medical Associates (MMA), pleaded guilty in April 2008 to obstructing a healthcare fraud investigation. Three of MMA’s doctors, Louis Tsarouhas, of Hopewell Township; Giacomo Mangiaracina, of Langhorne, Pa.; and Brian Shaffer, of Pennington, pleaded guilty in April 2008 to tax evasion charges in connection with the kickback scheme involving Nu-Tek. They admitted failing to pay taxes on cash payments they received from Niaz and Khan in return for referring blood work to Nu-Tek.
Owner of Scrap Metal Yards in New York is Sentenced on Tax Evasion Charges
On June 24, 2009, in Syracuse, N.Y., Richard R. Murtaugh, of Central Square, New York, was sentenced to 21 months in prison, to be followed by two years of supervised release, and ordered to pay a $10,000 fine. Murtaugh was convicted by a trial jury on charges of tax evasion and filing false federal tax returns. According to court documents, Murtaugh was the president of a business known as “Murtaugh Recycling” and “Crosby Hill Auto Recycling” (hereinafter “Murtaugh Recycling”). Murtaugh Recycling had scrap metal yards in Fulton, N.Y. and Rome, N.Y. where it purchased and stored scrap metal and junk automobiles from individuals and resold them to larger scrap metal processors for profit. In addition, Murtaugh Recycling owned and rented commercial property in Pierrepont Manor, N.Y. Murtaugh also owned and rented residential property in West Monroe, N.Y. Evidenced presented at trial in February 2009 demonstrated that Murtaugh failed to report more than $300,000 of income from scrap metal sales and rental payments on his personal tax returns for the years 2003 and 2004, and evaded more than $108,000 in taxes. In addition, proof at trial established that Murtaugh deliberately falsified the individual and business tax returns in 2003 and 2004.
Massachusetts Man Sentenced to 15 Years in Prison; Ordered to Pay Over $14 Million
On June 23, 2009, in Boston, Mass., Jeffrey S. Windle was sentenced to 180 months in prison, to be followed by three years of supervised release, and ordered to pay $14,580,501 in restitution and pay a $2,400 special assessment. Windle pleaded guilty in March 2009 to numerous charges of mail fraud, wire fraud, money laundering, and tax evasion. According to court documents, Windle was the Director of Budget and Finance at Cambium Learning, Inc. which provides instructional materials, services and technology to educators of struggling and challenged students. Sopris West Educational Services is a subsidiary of Cambium and is located in Longmont, Colorado. As stated in the Superseding Indictment, from about November 2004 to about April 2008, Windle defraud Cambium by misappropriating and diverting corporate funds totaling close to $14 million, which he used for his own personal benefit. Additionally, Windle directed the Operations Manager at Mile High Banks in Colorado to wire transfer funds from the Sopris West accounts to beneficiaries identified by Windle. The court documents state that in addition to working at Cambium, Windle was the treasurer for the Congregational Church of South Dennis (CCSD) and was responsible for handling the finances of CCSD. From September 2003 through April 2008, during his tenure as treasurer of CCSD, Windle misappropriated and diverted church funds totaling close to $650,000. For tax years 2004 through 2007, Windle failed to report as income the money he embezzled from his schemes on his tax returns. In total, he failed to report over $12 million in income from Cambium and CCSD. As part of his plea agreement, Windle will forfeiture U.S. currency, seized bank accounts, and real property.
Owner of California Nursing Home Staffing Companies Sentenced For Tax Fraud
On June 22, 2009, in San Jose, Calif., Nwadinaume Uba, currently a resident of Henderson, Nev., was sentenced to 18 months in prison, followed by one year of supervised release, and ordered to pay a $5,000 fine and to pay $258,741 in restitution for filing false tax returns. Uba pleaded guilty on March 16, 2009, to three counts of filing false tax returns. According to the plea agreement, Uba owned and operated TLC Prostaffing and Evergreen Health Care Connection, staffing businesses for nursing care facilities located in San Jose, Calif. On her 2001, 2002, and 2003 personal income tax returns, Uba admitted that she omitted a significant amount of gross receipts on her Schedule C (Profit or Loss from Business). She failed to provide her bookkeeper/tax return preparer with any information about one of her businesses, Evergreen Health Care Connection. Uba also concealed from her bookkeeper/tax return preparer some bank accounts for TLC Prostaffing to which income was deposited. As a result, the amounts reported as annual gross receipts on her federal tax returns were substantially understated and income taxes owed were not reported to the Internal Revenue Service.
Owner of Recruiting Service Sentenced to 27 Months in Prison for Scheme to Defraud Investor
On June 18, 2009, in Oakland, Calif., John Kevin Thompson was sentenced to 27 months in prison, to be followed by three years of supervised release, and ordered to pay $595,833 in restitution for charges relating to an investment fraud scheme. Thompson pleaded guilty on February 25, 2009, to one count of mail fraud. According to the plea agreement, Thompson was the president of TUSK, a software recruiting service company in Pleasanton, Calif. Between January and June 2004, Thompson promoted his company to a Newport Beach, Calif., investor and other investors as a business that had ongoing contracts with SUN Microsystems. Thompson told investors that the funds would be used for expenses such as office space, equipment, personnel, insurance and payroll. He used investor’s funds to pay TUSK’s operating costs and to cover money that he withdrew for himself from TUSK’s bank. The fraudulently obtained investment funds were used with the intent to promote the fraud scheme by repaying earlier investors. Thompson further admitted that he made false statements alleging he had a new, large contract with SUN Microsystems which never existed. He provided falsified financial documents including spreadsheets and falsified SUN Microsystems contract documents. He convinced one of the investors that his investment was at risk unless he came up with additional funds. This investor located more investors and came up with the additional funds which that investor secured with his own real property. Thompson was unable to repay the investors leaving the first investor, who secured the investments with his real property, liable to repay the other investors.
Louisiana Businessman Sentenced for Filing False Tax Returns
On June 16, 2009, in Monroe, La., Gary Hoover was sentenced to 12 months in a prison for his role in filing fraudulent returns and other documents. According to court documents, Hoover admitted to filing 23 false documents with the Internal Revenue Service (IRS) between September 2002 and June 2004 involving five automobile dealerships which he and other family members owned. Hoover, along with other family members, owned interests in Ruston Ford Lincoln Mercury, Twin City Imports, Diamond Dodge Chrysler Jeep, Rayville Autoplex, and LaPlace Dodge Chrysler Jeep. The ownership interests were held by Hoover and his relatives, either directly or indirectly, through Vision Quest, LLC. Each member of the Hoover Group owned a 25% share of Vision Quest. Hoover, a CPA himself, directed his accountant to over-allocate net operating losses to the Hoover Group and Vision Quest, although Hoover knew that the ownership percentages given to the accountant for allocation of the losses were incorrect. Hoover then hired another CPA to carry these net operating losses back to prior years by filing amended tax returns, which caused Hoover and relatives to receive refunds of taxes previously paid to the IRS. The loss to the government for the misrepresentations of Hoover total $550,019 for criminal purposes for all of the involved returns. Calculations to determine what civil assessment was due to the government, including interest and penalties, total $2,339,550, an amount collected from Hoover at the time of the plea.
Illinois Office Manager Sentenced For Fraud and Tax Evasion
On June 16, 2009, in Peoria, Ill., Jennifer Campbell was sentenced to 51 months in prison, to be followed by five years of supervised release and ordered to pay of $1,053,504 in restitution to Dowd Development Company. Charged in February 2009 with mail fraud and tax evasion, Campbell immediately entered a plea of guilty to both charges. Campbell admitted to taking more than $800,000 from her employer, Dowd Development Company, and failing to report the embezzled income on her 2005 tax return. In her capacity as the office manager of Dowd Development, Campbell wrote company checks payable to herself. To conceal her theft, Campbell altered the company’s records, forged signatures and diverted bank correspondence to her post office box. In secrecy, Campbell removed the cancelled checks from the bank’s correspondence to conceal the funds that were diverted to her. The embezzled funds were used for Campbell’s personal benefit, including jewelry, home improvements and vehicles.
CEO of Manufacturing Business Sentenced to 27 Months in Prison for Filing False Tax Returns, Ordered to Pay $772,373 in Restitution
On June 15, 2009, in Los Angeles, Calif., Steve Alderman, the former CEO and president of California Headwear, aka Apparel Associates, Inc., and who also now operates a tax preparation and accounting business, was sentenced to serve 27 months in federal prison for filing false employment tax returns. In addition to the prison term, Alderman was sentenced to serve one year supervised release and ordered to pay restitution in the amount of $772,373 to the Internal Revenue Service (IRS), of which $600,000 was to be paid immediately. According to his plea agreement, Alderman filed six false employment tax returns with the IRS for Apparel Associates Inc., during calendar years 2002 and 2003. Alderman well knew that the “Total Deposits” figures on all six returns were false because he had made little or no deposits to the IRS for employment taxes for each quarter. Alderman withheld at least $592,092.28 in employment taxes, but did not deposit the funds with the IRS. Alderman told the controller of his company that he had actually made the deposits for the employment taxes, when he knew that he had not made them. Additionally, Alderman has agreed that he is liable for the civil fraud penalty, which is computed at a rate of 75 percent of the taxes due, on his underpayment of employment taxes to the IRS.
Chief Financial Officer Sentenced to Federal Prison
On June 15, 2009, in Medford, Ore., Gary Alan Green, of Brookings, Oregon, was sentenced to over 66 months in prison for mail fraud and money laundering. The court also ordered Green to pay $402,706 in restitution to the victim, Tidewater Contractors, Inc., of Brookings, Oregon. According to court documents, between September 2007 and September 2008, while serving as Tidewater’s chief financial officer, Green devised a sophisticated scheme to defraud the company, embezzling over half a million dollars. The scheme involved creating bogus invoices to have Tidewater pay for fictitious company insurance policies, professional services and geotechnical consulting services for the company. Green diverted the funds to pay for credit card convenience checks he utilized for investments in mutual fund companies, to honeymoon in Greece, to purchase a 53-foot sailboat, and to pay other personal expenses. The embezzlement was first noticed and brought to the attention of Tidewater by the fraud investigation division of Chase Credit Card Services resulting in a criminal investigation by federal and state law enforcement authorities.
Michigan Appraisal Business Owner Sentenced for Filing a False Tax Return
On June 12, 2009, in Detroit, Mich., Peter Arndt, of Gaylord, Michigan, was sentenced to one year and one day in prison after having pleaded guilty to willfully filing a false federal income tax return. Following his release from prison, Arndt will be placed on a one-year term of supervised release. The court also ordered Arndt to pay $117,433 in restitution to the Internal Revenue Service (IRS). According to court records, during 1996 through 2003, Arndt was self-employed as a real estate appraiser, earning substantial income. During those years, he failed to file his federal income tax returns. In 2004, as part of divorce proceedings, he was directed to submit his tax returns. He prepared, but deliberately failed to advise the return preparer of the full amount of his gross income from his real estate appraisal business, materially understating his income. During these years, the tax loss to the IRS totaled over $117,000.
New Orleans Man Sentenced for Role in Citywide Mortgage House Flipping Scam
On June 11, 2009, in New Orleans, La., Calvin Davis was sentenced to 40 months in prison and ordered to pay $1,018,449 in restitution to the Department of Housing and Urban Development and the Internal Revenue Service (IRS). Davis pleaded guilty in July 2007 to conspiracy to commit mail fraud, making false statements to obtain HUD insurance and making false statements on income tax returns. According to the court documents, Davis purchased various properties, obtained fraudulent appraisals and arranged for “straw buyers” to purchase them. He then sent the “straw buyers” to Citywide Mortgage to obtain loans by using fraudulent employment and credit documents as well as false tax returns. These loans were approved by Michelle Cochrane, a former underwriter at Citywide Mortgage. Cochrane admitted in her guilty plea, that she participated in the house flipping scheme with Davis and others. Based on the fraudulent applications, the Department of Housing and Urban Development (HUD) insured the loans. Citywide then sold the loans to another mortgage company. Various properties eventually went into default and HUD became responsible for paying off those loans. Additionally, Davis failed to report the income he was generating from these various schemes on his income tax returns. Davis is the fifth person to be sentenced for offenses stemming from this investigation.
North Carolina Man Sentenced for Underreporting Income
On June 5, 2009, in New Bern, N.C., Mark Kenneth Smith, of Wilmington, North Carolina, was sentenced to 12 months and one day in prison, to be followed by three years supervised release, and ordered to pay $207,222 in restitution. Smith pleaded guilty in December 2008 to making and subscribing to a false tax return. According to court documents, for the tax year 2001, Smith reported his annual earnings as $47,473 and failed to provide Form W-2 as supporting documentation. However, it was learned during the course of the investigation that Smith had earnings in excess of $248,000 for that year.
Missouri Man Sentenced for Failure to File Tax Returns; Owes More Than $450,000 to IRS
On June 3, 2009, in Springfield, Mo., Terry Edward Elliott, of Nixa, Mo., was sentenced to 21 months in prison for failure to file federal tax returns for three years. Elliott pleaded guilty on December 22, 2008, to three counts of willfully failing to file federal tax returns. Elliott, who has not filed a timely return since 1993, owes approximately $457,400 to the Internal Revenue Service (that amount includes penalties but not interest, which accrues until the taxes are paid). According to court documents, Elliott owned and operated TE Mortgage Corporation, which was organized as an S corporation, and was also employed by a software company and a title company. For each of the years 2001 through 2006, Elliott failed to file income tax returns at the time he was required to do so. In October 2004, after being notified of a civil audit for 2000 and 2001, he filed those returns. However, Elliott’s 2002 through 2006 returns, all of which were delinquent, were filed only after he was informed in December 2007 of the criminal investigation.
Defendant Sentenced for Filing False Returns
On May 29, 2009, in Allentown, Pa., Debra G. Snow, of Cherry Creek, NY, was sentenced to 33 months in prison and ordered to pay $409,740 in restitution. According to court documents, between February 2003 and March 2007, Snow embezzled approximately $310,940 from her employer, JRNA Inc., dba Unclaimed Freight. She pleaded guilty in July 2008 to three counts of wire fraud and three counts of filing false federal income tax returns for calendar years 2004, 2005 and 2006. Snow failed to report the substantial additional taxable income on her federal income tax returns.
Former Virgin Islands Senator Sentenced For Failure to File Income Tax Returns
On May 28, 2009, in St. Thomas, Virgin Islands, Alicia “Chucky” Hansen. former Virgin Islands Senator, was sentenced to three years in prison for failure to file income tax returns. The judge suspended all three years of the sentence and placed Hansen on probation for three years and imposed strict conditions of supervision. Hansen was found guilty on December 10, 2008, following a jury trial, of three counts of failure to file income tax returns under the Virgin Islands income tax laws. If Hansen fails to comply with the conditions of probation imposed by the Court, the Court could revoke her release and send her to jail. Hansen is required to file all delinquent income tax returns for the years which she did not file income tax returns before September 1, 2009. She is also required to pay all taxes due or enter into a payment plan and make payments to the Virgin Island Bureau of Internal Revenue. In addition, Hansen must perform 600 hours of community service at the direction of the probation office.
Florida Man Sentenced to Five Years in Tax Refund Scheme
On May 28, 2009, in Miami, Fla., Willie Bernard Cameron was sentenced to 60 months in prison. This sentence is to run consecutively to a three year sentence that the defendant is currently serving on two violations of supervised release. On March 19, 2009, Cameron pleaded guilty to filing a false 2007 U.S. Individual Income Tax Return, Form 1040, in which he claimed a tax refund in the amount of $2,975,000,000.
Judge Sentences in Holy Land Foundation (HLF) and Five Leaders of HLF
On May 27, 2009, in Dallas, Texas, the Holy Land Foundation for Relief and Development (HLF) and five of its leaders were sentenced on charges of providing material support to Hamas, a designated foreign terrorist organization. HLF was incorporated by Shukri Abu Baker, Mohammad El-Mezain, and Ghassan Elashi. Mufid Abdulqader and Abdulrahman Odeh worked as fund raisers. Together, with others, they provided material support to the Hamas movement. Shukri Abu Baker, of Garland, Texas, was sentenced to 65 years in prison. He was convicted of conspiracy to provide, and the provision of, material support to a designated foreign terrorist organization; conspiracy to provide, and the provision of, funds, goods and services to a Specially Designated Terrorist; conspiracy to commit, and the commission of, money laundering; conspiracy to impede and impair the Internal Revenue Service (IRS); and filing a false tax return. Mohammad El-Mezain, of San Diego, California, was sentenced to 15 years in prison. He was convicted of conspiracy to provide material support to a designated foreign terrorist organization. Ghassan Elashi, of Richardson, Texas, was sentenced to 65 years in prison. He was convicted on the same counts as Abu Baker, and one additional count of filing a false tax return. Mufid Abdulqader, of Richardson, Texas, was sentenced to 20 years in prison. He was convicted of conspiracy to provide material support to a designated foreign terrorist organization, conspiracy to provide goods, funds, and services to a specially designated terrorist, and conspiracy to commit money laundering. Abdulrahman Odeh, 49, of Patterson, New Jersey, was sentenced to 15 years in prison. He was convicted on the same counts as Abdulqader.
HLF, now defunct, was convicted of conspiracy to provide, and the provision of, material support to a designated foreign terrorist organization; conspiracy to provide, and the provision of, funds, goods and services to a Specially Designated Terrorist; and conspiracy to commit, and the commission of, money laundering. The Court reaffirmed the jury’s $12.4 million money judgment against all the defendants, with the exception of El-Mezain, who was not convicted of money laundering. From its inception, HLF existed to support Hamas. Before HLF was designated as a Specially Designated Terrorist by the Treasury Department and shut down in December 2001, it was the largest U.S. Muslim charity. The “material support statute,” as it is commonly referred to, was enacted in 1996 as part of the Antiterrorism and Effective Death Penalty Act. That statute recognizes that money is fungible and that money in the hands of a terrorist organization – even if for so called charitable purposes – supports that organization’s overall terrorist objectives. The government presented evidence at trial that, as the U.S. began to scrutinize individuals and entities in the U.S. who were raising funds for terrorist groups in the mid-1990s, the HLF intentionally hid its financial support for Hamas behind the guise of charitable donations. HLF and these five defendants provided approximately $12.4 million in support to Hamas and its goal of creating an Islamic Palestinian state by eliminating the State of Israel through violent jihad.
Attorney Sentenced To Prison for Filing False Income Tax Returns
On May 20, 2009, in Benton, Ill., Morris J. Nead, attorney at law for his own law firm, located in Albion, Edwards County, Illinois, and former Public Defender for Wabash County, Illinois, was sentenced to 366 days in federal prison as a result of his conviction of the criminal tax charge of making and subscribing a false 2003 federal income tax return with the Internal Revenue Service. Nead admitted that he filed false income tax returns for 2003, 2004, and 2005 which failed to report income of approximately $204,531. Nead was also ordered to serve one year of supervised release following his release from prison and was ordered to pay restitution to the Internal Revenue Service in the amount of $56,602 and to cooperate with the Internal Revenue Service in filing all returns and paying all taxes as required.
Owner of Escape Lounge Studios Sentenced to Prison for Evading Taxes on Prostitution Proceeds
On May 15, 2009, in Houston, Texas, Randall Bradley Jones was sentenced to 33 months in prison, to be followed by three years of supervised release, and ordered to pay $15,000 in restitution to the Internal Revenue Service (IRS). According to his plea agreement, Jones was the sole owner of Amazing Promotions Group, Inc., which involved prostitutes performing services at each of six studios in the Houston area named Escape Lounge. The prostitutes at the Escape Lounge studios received cash from their customers and a portion of the money was placed in envelopes which were then left in a safe at each Escape Lounge. Amazing Promotions Group Inc. created records, including spreadsheets, of the cash income received from each Escape Lounge. During the execution of a search warrant the Houstion police department seized of corporate records of Amazing Promotions Group Inc. The Houston police department turned the seized records over to the IRS. Jones pleaded guilty in January 2009 to evading taxes on his 2003 individual income tax return. He admitted to failing to report the cash distributions received from Amazing Promotions Group Inc. Jones also admitted that while his 2003 income tax return reflected taxable income of only $140,444, his true taxable income was approximately $667,000. For purposes of determining relevant conduct in this criminal case, the total individual and corporate income tax loss to the IRS is $665,962.
Florida Defendants Sentenced in Fraudulent Internet Bank Guarantee Scheme
On May 15, 2009, in West Palm Beach, Fla., Amal Rampadaruth was sentenced to 33 months in prison, to be followed by three years of supervised release, and ordered to pay $300,000 in restitution and an additional $250,000 in related forfeitures. His father and co-defendant, Jadoomanee Rampadaruth, who previously pleaded guilty to filing a false tax return, was sentenced to 8 months in prison on March 20, 2009. According to the written proffers filed with their plea agreements, Amal and Jadoomanee Rampadaruth ran a fraudulent scheme through two Florida corporations: Alps Resources Bankers, Inc. (ALPS) and Amalgamated Resources Holdings, Inc. (ARH.). The defendants offered what they claimed were various financial products, including alleged “bank guarantees.” They claimed the alleged bank guarantees, purportedly from foreign financial institutions, could be used by purchasers as collateral to obtain substantial loans from domestic financial institutions, and as assurance to domestic lenders that any financing granted would be repaid if any default on such loans should occur. The defendants advertised their financial services through a website. In July and August 2005, one victim of the defendants’ fraud wired $300,000 to the defendants to purchase one of these alleged bank guarantees. The victim was attempting to obtain collateral for a substantial loan from a domestic lender in order to obtain financing for a multi-million dollar project. The defendants never delivered the alleged bank guarantee to the victim’s lender despite the fact that the victim paid all monies requested. In addition, Jadoomanee Rampadaruth filed a false 2006 federal income tax return. He admitted that the return was false in that it failed to disclose that he was receiving substantial income from ALPS and ARH.
Former Shell Oil Executive Sentenced for Tax Evasion and Mail Fraud
On May 13, 2009, in New Orleans, La., Gregory L. Courtney, formerly a resident of Mandeville, Louisiana, was sentenced to 18 months in prison, to be followed by three years of supervised release, and ordered to pay $486.771 in restitution to the Internal Revenue Service (IRS) and $1,335,540 to Shell Oil. According to court documents, while employed as an engineer for Shell Deepwater Development, Courtney acquired control of Mercury Equipment and Services, Inc., a Shell vendor, which was in violation of Shell policy. Courtney then caused Mercury to invoice Shell for a fraudulent maintenance contract for storage boxes on offshore oil rigs. Court documents indicated that little if any maintenance was performed. Courtney diverted more than $1 million to his personal use from the Mercury maintenance contract. Courtney failed to report the Mercury income to the IRS for the tax years 2001, 2002, and 2003.
Ohio Woman Sentenced for Defrauding Her Mother and Filing False Tax Returns
On May 14, 2009, in Columbus, Ohio, Erin M. Stewart, of Fleming, Ohio, was sentenced to 30 months in prison, five years of supervised release, and ordered to pay $402,526 in restitution. Steward pleaded guilty in November 2008 to wire fraud and filing false tax returns. According to court records, beginning in April 1995, Stewart knowingly devised a scheme to defraud her mother, Judith O’Maille of Marietta, Ohio, and to obtain her mother’s money and property by means of false and fraudulent pretenses, representations and promises. Stewart was given her mother’s power-of-attorney over retirement trust accounts previously established for her mother by her father for the purposes of providing financial support for her mother. Instead of using those trust funds only for her mother, Stewart systematically looted them by creating unauthorized withdrawals over several years, typically in the form of electronic wire transfers from annuity accounts titled only to Judith O’Maille. The money went from O’Maille’s account to a checking account titled “Stewart Cabinetry,” a company owned by Stewart’s husband and where Erin Stewart kept the company’s books and records. Stewart’s mother was not an authorized signer on the “Stewart Cabinetry” account and therefore did not have access to those misappropriated, funds. With the additional money from her mother’s accounts, Stewart and her husband enhanced their standard of living and pay personal expenses. For the years 2000, 2001, and 2002, Stewart caused false tax returns to be filed for herself and her husband that substantially under-reported their income. Specifically, Stewart failed to report $402,526 of her income, which represents the amount of money she defrauded from her mother.
Maryland Commercial Realtor Sentenced to Three Years on Charges of Filing False Returns & Tax Evasion
On May 7, 2009, in Baltimore, Md., Henry Cole, a commercial real estate broker from Lutherville, Maryland, was sentenced to 36 months in prison, followed by three years of supervised release, and ordered to pay a $200,000 fine. In addition, Cole was ordered to cooperate with the Internal Revenue Service (IRS) to resolve his tax liability. Cole was convicted by a federal jury on February 3, 2009 on charges of filing false federal tax returns and tax evasion. According to testimony presented during trial, Cole filed individual federal tax returns for tax years 2001 through 2003 in which he falsely claimed $2 million as capital gains to be offset by carry-forward losses, when in fact the money was ordinary income. He also failed to include an additional $98,200 in income on his 2003 tax return. As a result of his criminal activity Cole had evaded at least $477,000 in taxes.
Former Chairman of the Mashpee Wampanoag Tribe Sentenced on Campaign Finance Violations and Tax Fraud
On May 7, 2009, in Boston, Mass., Glenn A. Marshall, former Chairman of the Mashpee Wampanoag Tribe was sentenced to 41 months in prison, to be followed by three years of supervised release and ordered to pay $383,009 in restitution to the Mashpee Wampanoag Indian Tribal Council and to pay $84,603 to the Social Security Administration. Marshall pleaded guilty in February 2009 to making illegal campaign contributions to members of Congress on behalf of the Tribe, embezzling funds from the Tribe, filing false tax returns for himself and the Tribe, and fraudulently receiving Social Security Disability Benefits. According to court documents, Marshall committed these offenses from 2001 to 2007 in connection with his service as Chairman of the Mashpee Wampanoag Tribal Council, the Tribe’s governing body. As Tribal Chairman, Marshall oversaw the Tribe’s effort to become officially recognized by the federal government, which would qualify the Tribe for an array of federal program benefits, and render it eligible under the Indian Gaming Regulatory Act to build a casino on its lands. Beginning in 1999, the Tribe’s efforts for recognition was underwritten by a Michigan-based investment company called AtMashpee LLC, which provided the Tribe millions of dollars for its operations and for legal, lobbying and other professional services. In September 2002, after consulting with another officer of the Tribal Council, Marshall directed a political consultant to find a Washington, D.C. lobbyist who would be more effective in presenting the Tribe’s case for recognition to relevant federal officials, including Members of Congress and officials in the Department of the Interior (DOI). The political consultant contacted an associate of lobbyist Jack Abramoff, who advised Marshall and other Tribal Council members that in order to advance its recognition effort, the Tribe needed to make significant political contributions to certain members of Congress. Marshall arranged to have AtMashpee fund the Tribal Council for the payment of such services by passing Tribal funds through an account in the name of the Mashpee Fisherman’s Association. From 2003 to 2007, AtMashpee paid approximately $4 million into the Fisherman’s account, a sum that Marshall willfully omitted to report to the IRS on the Tribal Council’s federal tax returns. Marshall used most of the money to pay for legal, lobbying and public relations expenses in connection with the Tribe’s recognition effort. Marshall was aware that federal law prohibited corporations, including the Tribal Council, from making contributions to federal campaigns. In order to disguise the fact that the Tribal Council was making contributions to federal campaigns, Marshall solicited various individuals to act as straw contributors. From in or about 2003 to 2007, Marshall caused the Tribal Council, through payments from the Fisherman’s account, to reimburse straw contributors of $49,950 to federal campaigns and another $10,550 to elected state officials. Marshall paid all of the reimbursements by check or cash drawn from the Tribal Council funds in the Fisherman’s account. During the same period, Marshall used approximately $380,000 from the Fisherman’s account for personal expenses, knowing that the funds belonged to the Tribal Council. Marshall willfully failed to report these expenses as personal income on his tax returns.
Owner and Operator of a Detroit Market Sentenced on Food Stamp Fraud
On May 5, 2009, in Detroit, Mich., Fatima Shalhout, and her husband Wasfi Shalhout, both of Dearborn, Michigan, were sentenced to 30 months and 36 months respectively. The Shalhouts pleaded guilty to charges of conspiracy to commit wire fraud and money laundering involving a scheme to defraud the United States Department of Agriculture (USDA) of approximately $1,261,943 in Food Stamp Program Benefits. The defendants were also ordered to pay restitution in the amount of $1,171,577. The information presented to the court at the time of the plea established that from May 2005 to February 2008, Fatima Shalhout, who was the President, Vice President, Secretary and Treasurer of Ranyah Management, doing business as Ann’s Market, located in Detroit, Michigan, and her husband Wasfi Shalhout, who was the Operations and Business Manager of Ann’s Market, engaged in a scheme to defraud the USDA of approximately $1,261,943. Fatima and Wasfi Shalhout illegally paid food stamp beneficiaries cash in exchange for the food stamp benefits held via their EBT (Electronic Benefit Transfer) debit cards. Under federal law, food stamps cannot be traded or sold for cash, and they cannot be used to buy non-food items such as gasoline, tobacco or alcoholic beverages. The fraudulently obtained funds were deposited into Ann’s Market’s business account and were subsequently withdrawn by Fatima and Wasfi Shalhout for their own personal use. During the investigation, in excess of $80,000 was seized by federal law enforcement during search and seizure warrants. Those funds will be forfeited to the government.
New York Merchant Sentenced to 41 Months in Prison on Tax Charges
On April 30, 2009, in White Plains, N.Y., Yehezkel Elia was sentenced to 41 months in prison on tax fraud charges. In July 2008, following a jury trial, Elia was convicted of conspiracy, tax evasion, and related crimes arising from his diversion of cash from his retail stores, SneakerMania, Inc., PizzaMania Inc. and Final Touch Jewelry, Inc. At trial, Elia’s brother, David Elyaho, was convicted of tax evasion with regard to his individual tax returns and was sentenced on January 7, 2009, to 15 months in prison. According to trial evidence, Elia siphoned millions of dollars of cash out of his businesses, daily traveling from store to store to collect cash receipts. To hide the cash, Elia converted it into more than 12,000 money orders during a 4 ½ year period. He also hid cash in investment accounts that he held in the names of others, in Israel and in various parcels of real property in Florida and New York. Elia was assisted in hiding his assets by a businessman who deposited the cash into his own business account, through a series of small deposits, and then transferred the money to accounts that Elia maintained in the names of others, to Elia’s corporate bank accounts, and abroad. One such transfer of $250,000 to Elia’s business account was disguised as a “loan” from the businessman’s corporation. David Elyaho managed Final Touch Jewelry, Inc., at the Cross County Shopping Center, and maintained a book where he kept track of the cash that he and Elia siphoned from the business, while both claimed no or minimal income from the business on their respective tax returns.
Owner of NASCAR’s Morgan-McClure Motorsports Sentenced for Tax Fraud
On April 28, 2009, in Abingdon, Va., Larry Allen McClure was sentenced to 18 months in prison, to be followed by one year of supervised release, and ordered to pay $59,852 in restitution. McClure pleaded guilty on January 15, 2009, to filing false federal income tax returns for the years 2002, 2003, and 2004. Specifically, McClure did not report a total of $269,037 in cash payments that he received from an individual as payment for race services provided to the individual in the American Racing Club of America (ARCA) series. McClure also pleaded guilty to two counts of obstructing the investigation. According to court documents, in April 2006, Internal Revenue Service (IRS) investigators interviewed an individual in Florida relating to cash payments made by that individual to McClure. The individual confronted McClure about the agents’ questions. On or about May 3, 2006, McClure spoke with the individual by phone to tell the individual he was going to pay the total amount of $325,000 and they would call it a loan repayment. McClure was interviewed on June 5, 2006 by IRS investigators and McClure falsely stated to the investigators that he had borrowed money from the individual three or four times while he was going through problems with Kodak and he recently paid the individual back by means of a $325,000 check written by his wife. The statement was false because there was no loan between the individual and McClure. The individual had paid McClure for racing services and McClure had not included those payments as income. In addition to the sentence of imprisonment, McClure was ordered to make restitution to the Eastman Kodak Company in the amount of $59,852, pay a $40,000 fine, pay $25,000 in investigative costs to the IRS, and pay a $500 special assessment.
Chattanooga Man Sentenced for Filing False Tax Returns
On April 23, 2009, in Chattanooga, Tenn., Christopher Kidwell was sentenced to 15 months in prison, to be followed by three years of supervised release, and ordered to pay a $500 special assessment. In addition, during his supervised release, Kidwell will continue to pay any financial obligations he has with the Internal Revenue Service (IRS). According to an indictment filed in April 2008, Kidwell filed false income tax returns with the IRS for 2002 through 2004 and then also filed a false amended income tax return for 2004. The indictment claims that Kidwell’s returns omitted over $420,000 in income during those years.
Maryland Woman Sentenced in $12 Million Contracting Fraud Scheme
On April 23, 2009, in Baltimore, Md., Georgette Richie, of Dillwyn, Va., was sentenced to 37 months in prison, to be followed by three years of supervised release, and ordered to pay $4,071,000 in restitution, including forfeiting several properties in Virginia and one in West Palm Beach, Florida. Richie was sentenced for conspiring to commit mail fraud, money laundering and filing a false tax return, in connection with a scheme to defraud the company where her ex-husband worked of over $12 million. AMPORTS, Inc. operated a national import/export car processing service for automobile manufacturers from five locations. Georgette’s former husband, Phillip M. Richie, was AMPORTS’ director of engineering, responsible for receiving and analyzing bids from contractors for capital expenditures and maintenance of AMPORTS’ facilities. He approved invoices for payment once the contracts were completed. Phillip Richie was named as an alleged co-conspirator in the scheme, although he was never charged; he died in November 2004. According to court document, Georgette and Phillip Richie created two companies, Webster General, Inc. and Geo Tech Systems, Inc., using the name and social security number of a dead man as the president of both companies, in order to conceal their ownership and control of Webster General and Geo Tech from AMPORTS. Court documents state that from September 2000 to July 2003, Phillip Richie awarded AMPORTS construction contracts to these companies. Geo Tech and Webster General received over $12 million which they used to pay various subcontractors who performed the actual work, and the Richies pocketed about $4 million in profits. As part of the scheme, Phillip Richie changed the scope of the contract work in discussions with subcontractors to reduce expenses. The Richies opened accounts with internet banks for which the purported “president” of Webster General and Geo Tech would not have to appear in person to establish the account. They hired employees for Webster General and Geo Tech to sit in a construction trailer located at AMPORTS in Baltimore to create the appearance that Webster General and Geo Tech were actual companies. Georgette Richie also prepared the 2001 and 2002 corporate tax returns for Webster General and Geo Tech which substantially understated their gross income. For 2001 and 2002, Webster General received $2,341,000 more than Richie reported to the IRS, creating additional income tax liability of $811,159 for the two years. For 2002, Geo Tech received over $3 million more than Richie reported to the IRS, creating additional income tax liability of $1,034,845. In addition, Georgette Richie falsely reported her own income on her personal tax returns by willfully understating her gross income by $40,000 in tax year 2001 and $998,472 in tax year 2002. Her unreported income results in additional tax due of $370,075 for the two years. The total amount of proceeds attributable to the scheme is $4,071,000.
President of Missouri Investment Firm Sentenced Involving Multi-Million Dollar Ponzi Scheme
On April 22, 2009, in St. Louis, Mo., Scott Luster, of Belleville, Ill., President of Rate Search, Inc. was sentenced to 70 months in prison on fraud and tax charges involving his scheme to divert customer funds. In addition to the prison sentence, Luster was ordered to pay restitution of $5,190,862. The bulk of this amount will go to the victims of the fraud scheme; $255,984 of the restitution will go to the IRS. Co-defendant Clark Schultz, President of Clayton Analytical Services, Inc., of University City, Mo., was sentenced to eight months in prison. Rate Search, Inc. was in the business of marketing, brokering and purchasing certificates of deposit (“CDs”) at financial institutions throughout the United States with investment moneys of its customers, and operated out of several offices in the St. Louis area. Clayton Analytical Services, Inc. was a Missouri corporation established in 1998, and engaged in the business of assisting in the running of the operations of Rate Search. Luster marketed and brokered CDs through Rate Search to its customers, and directed the day to day activities of Rate Search. Between January 2000 and June 30, 2007, Luster and Rate Search participated in a scheme to defraud Rate Search customers of millions of dollars. Luster and Rate Search failed to purchase CDs for its customers, despite having received directions and funds from them to purchase CDs, and failed to advise them that their CDs had not been purchased. The customers’ money and funds were used instead for unrelated business purposes and for personal use. Additionally, Luster and Rate Search failed to “roll over” customer CDs when requested and failed to disburse funds received by Rate Search from the non “rolled over” CDs to the Rate Search customers. These funds were also used by Luster for unrelated business purposes and for personal use. Additionally, for the taxable years 2002 through 2006, Luster failed to report funds he received through Rate Search and other sources of approximately $807,911. Luster pleaded guilty in February to one felony count of mail fraud and one felony count of filing a false tax return. Schultz, who pleaded guilty to related charges, was responsible for finding the rates for the bank CDs and placing the CDs for the customers of Rate Search.
Promoter of High-Yield Investment Scheme Sentenced to Federal Prison
On April 20, 2009, in Phoenix, Ariz., Dennis D. Cope, of Mesa, Ariz., was sentenced to 84 months in federal prison and also ordered to pay restitution to numerous victims for a total of $3,949,947. Beginning in June 1998 through July 2003, Cope and co-conspirator Edgar Mills Bias operated several businesses created for the purpose of soliciting individuals to invest in high-yield producing “trading programs.” The bogus programs involved the use of investor funds as collateral for the purchase and sale of purported medium-term bank notes offered by financial institutions located outside the United States. Investors were promised yields as high as 120%.Other investment opportunities offered by Cope and Bias included purported restaurant acquisitions and multi-national oil pipeline development projects. Victims invested over $18.5 million, of which $8.6 million was paid to investors as seeming returns on their investments. This led investors to believe their investment was safe and earning the stated rate of return. The apparent success of the original investors convinced subsequent individuals to make their own investments, thus affecting a Ponzi scheme. Edgar Mills Bias, of Phoenix, was sentenced to 96 months in prison in December 2008.
Three Defendants Sentenced for Submitting False Bills in Contractor Fraud Scheme
On April 17, 2009, in Pittsburgh, Pa., three defendants were sentenced for their role in a scheme to commit fraud in connection with construction projects including PNC Park, the Petersen Events Center at the University of Pittsburgh, and the reconstruction of the Pentagon after the 9/11 terrorist attack. Thomas J. Cousar, the former president of Capco Construction Company, a defunct McKeesport, Pennsylvania, painting and interior construction contractor, was sentenced to 63 months in prison. Catherine L. Bradica, the company’s former office manager, was sentenced to 41 months in prison. Daniel D. Monte, a Capco supervisor during the Pentagon job was sentenced to 21 months in prison. Each defendant was also sentenced to three years supervision following release from prison and was ordered to pay restitution. Cousar and Bradica were ordered to pay a joint total of $1.1 million in restitution for the three projects combined; Monte was ordered to pay restitution jointly with Cousar and Bradica, but relating only to the Pentagon project, in the amount of $800,000. According to information presented to the court, the defendants defrauded the United States and the other victims by submitting false time and material bills for work performed by Capco. The false bills overstated actual hours devoted to projects, and at the Pentagon, also overstated actual materials utilized. In some instances, the falsely billed labor hours and materials represented work by Capco in 2002 performed instead on other projects, including a commercial complex adjacent to the Capco office in McKeesport constructed to house businesses to be owned by Cousar and Bradica. At the Pentagon, Capco was permitted to bill on a time and material basis rather than under a fixed price between September 2001 and May 2002, because of the emergency circumstances that existed following the terrorist attack. Special circumstances affecting the PNC Park and Petersen Events Center projects also triggered limited use of time and materials billing on those jobs, which the defendants exploited during the fraudulent scheme.
New Jersey Husband and Wife Sentenced for Stealing from Investors
On April 15, 2009, in Newark, N.J., Charles and Janet Neely, husband and wife, were sentenced for participating in a scheme to defraud investors out of nearly $2.5 million and to evade the payment of federal income taxes. Charles Neely was sentenced to 20 months in prison; Janet Neely was sentenced to 97 months in prison. Both husband and wife were ordered to forfeit approximately $2.5 million. The Neelys pleaded guilty on November 6, 2008, to conspiracy to commit mail fraud, mail fraud and tax evasion. According to court documents, Janet Neely solicited clients, mostly tax-preparation clients, to invest money with Neely Associates under the false representation that their money would be invested in municipal bond funds, would be safe and earn tax-free interest. To further induce investors, the Neelys provided fabricated account statements that made it appear as if the investors’ money had been invested as promised. From about January 2002 through February 2008, the Neelys admitted that they defrauded approximately 47 investors of almost $2.5 million. The Neelys gambled away some of the investors’ money at casinos in New Jersey and elsewhere, and spent some of the money on cruises, cars, tow trucks, collectibles, electronics and other personal items.
Washington State Man Sentenced to 10 Years in Prison for $2.4 Million Embezzlement from Lumber Mill
On April 10, 2009, in Tacoma, Wash., Brett M. Smith, of Puyallup, Washington, was sentenced to 10 years in prison, three years of supervised release and ordered to pay $2,476,913 in restitution. Smith was the leader of a scheme to embezzle $2.4 million from Manke Lumber Company. Smith and seven other people, including Smith’s brother, Bryan M. Smith, were indicted in June 2008, for mail fraud and conspiracy to commit money laundering. Brett Smith pleaded guilty January 9, 2009. According to the indictment, in September 2004 Brett Smith became a “Scaler” for Manke. A scaler weighs, measures and inspects logs delivered to the lumber mill to determine their grade and value. Based on that information, Manke Lumber would mail checks to those people who were being compensated for the logs. Between November 2004 and July 2006, Smith and others entered into a scheme to create false records that prompted Manke to send checks to conspirators for logs that were never delivered to the mill. In his plea agreement, Smith admits he submitted false paperwork for more than 1,500 loads of logs worth more than $2.5 million. In all, Smith submitted false log intake information in at least twenty different names. More than a dozen additional defendants have been prosecuted and sentenced in connection with the scheme. The majority were charged with tax crimes for failing to report the income they took from the scheme.
Connecticut Woman Sentenced to Federal Prison for Stealing $816,129 from Employer
On April 9, 2009, in Bridgeport, Conn., Leslie Tavolacci, of Southbury, Conn., was sentenced to 27 months in prison, followed by three years of supervised release, for embezzling more than $800,000 from her former employer. She was also ordered to pay her victim restitution in the amount of $816,129 and must pay the Internal Revenue Service (IRS) back taxes in the amount of $141,679, plus penalties and interest.. On April 3, 2008, Tavolacci pleaded guilty to one count of wire fraud and one count of income tax evasion stemming from the scheme. According to documents filed with the court and statements made in court, Tavolacci was a part-time employee of RZM Imports, Inc. As part of her duties, Tavolacci opened and sorted incoming mail, and then deposited checks received by RZM Imports from customers into RZM’s bank account. Tavolacci has admitted that she unlawfully took a large number of checks payable to RZM Imports and deposited them into other checking accounts she had opened under the RZM Imports Inc. name. She then withdrew the money from these accounts, usually using bank debit cards, and used the funds for her own use and enrichment. Through this scheme, Tavolacci embezzled approximately $816,129 between 1997 and 2004. She also failed to pay federal taxes on the embezzled funds.
Massachusetts Man Sentenced for Failing to Report Over $250,000 in Income
On April 8, 2009, in Boston, Mass., Rimba B. Handojo, of Westford, Massachusetts was sentenced to 24 months in prison on his conviction of conspiracy, mail fraud and tax evasion. In addition to his term of imprisonment, Handojo was ordered to pay $283,144 in restitution to his employer and to pay $124,268 to the Internal Revenue Service (IRS), as well as a forfeiture of $283,144. Handojo, a citizen of Indonesia, will be subject to deportation upon his release from prison. On June 6, 2008, Handojo was indicted on charges of conspiracy, mail fraud, and tax evasion. According to court documents, Handojo was employed by Nortel Networks, Inc. (Nortel) from 1999 through 2004 to set up and test computer and telephone equipment. While employed at Nortel, Handaojo stole computer equipment, valued at more than $250,000, and sold the equipment to a Nortel employee in Malaysia to resell. According to the Indictment, Handojo received over $280,000 in income from this illegal business in 2002 and 2003, but omitted this income from his 2002 taxes, failed to file a return for his 2003 taxes, and sent a false Social Security number to one of his customer to prevent them from reporting his income accurately to the IRS.
Defendant Sentenced to 78 Months After Admitting to Stealing Millions of Dollars Worth of Equipment from Cisco Systems, Inc.
On April 8, 2009, in Portland, Ore., Steven Edward Miller was sentenced to 78 months in prison, followed by three years of supervised release, and ordered to pay $3,713,107 in restitution. Miller previously pleaded guilty on December 9, 2008 to charges of money laundering and mail fraud. According to court records, Miller created PDX USA with the intention of providing telecommunication/internet services for residents. Between approximately August 2004 and November 2006, Miller used the entity names PDX USA, The New CB Shop, and others to interact with Cisco Systems, Inc., a leading manufacturer and seller of computer networking equipment and services based in San Jose, California. Miller rented office space for the two aforementioned entities in downtown Portland, Oregon. Miller devised a scheme to defraud Cisco Systems Inc. of more than $3.7 million in computer equipment and parts. He made false warranty claims to Cisco for replacement parts for computer equipment. Cisco shipped the parts to Miller at the Portland office space and to Miller’s residences in Everett and Marysville, Washington, expecting that Miller would return the defective parts he allegedly had. In reality, Miller did not have any defective Cisco computer parts. Once he obtained the new parts from Cisco, he sold them via the Internet and kept the proceeds for himself.
First of Eight Local Taqueria Arandas Restaurant Owners Sentenced for Filing False Income Tax Return
On April 8, 2009, in Houston, Texas, Carlos Garcia was sentenced to a year and one day in federal prison and ordered to pay $245,786 in restitution above the $700,000 already paid for filing false income tax returns for Taqueria Arandas No. 12 Inc., through which he operated a restaurant at 10403-A Gulf Freeway in Houston. Garcia pleaded guilty on October 24, 2008, admitting in pleadings filed that day that he had filed Corporate Income Tax Returns for Taqueria Arandas No. 12 Inc., for tax years 2001 through 2004 that under-reported sales by approximately $2,813,156. He also admitted that, as a result, he and his corporation underpaid income taxes by approximately $945,786. Prior to his sentencing, Garcia paid the Internal Revenue Service $700,000 in delinquent taxes. Under the terms of his plea agreement, Garcia remains subject to audit and further assessment of taxes, penalties and interest for tax years 2001 through 2004. Garcia is the first of eight local Taqueria Arnadas Restaurant owners to be sentenced.
Arizona Man Sentenced to 18 Months for Filing False Tax Returns
On April 7, 2009, in Phoenix, Ariz., Lee B. Woodbury of Gilbert, Ariz., was sentenced to 18 months in prison and ordered to pay $97, 232 in restitution. Woodbury pleaded guilty on August 18, 2008, to willfully filing a false tax return. According to court documents, between 1998 and 2001, Woodbury engaged in a number of income producing activities. Until contacted by the Internal Revenue Service, Criminal Investigation Division, he had not filed returns for tax years 1998 through 2001. Woodbury willfully made and subscribed a 1998, 1999 and 2001 U.S. Individual Income Tax return, Form 1040, that under-reported his taxable income. In total, the tax loss as a result of Woodbury’s willfully filing false tax returns was $35,633.
Owner of Sonshine Tours in North Carolina Sentenced for Securities Fraud and Tax Evasion
On April 6, 2009, in Statesville, N.C. Paul Stephen Young, Jr. was sentenced to 24 months in prison, to be followed by three years of supervised release, and ordered to pay $527,987 in restitution to the victims of the scheme. Young owned and operated Sonshine Tours & Travel, Inc., a travel agency located in Mooresville, N.C. which operated from 1997 to August 2007. Young pleaded guilty in May 2008 to charges of committing fraud upon investors and others in connection with the sale of securities, to wit: Sonshine Stock Sales Certificates and tax evasion for the 2005 tax year. According to court documents and evidence brought forth at today’s sentencing hearing, through Sonshine Tours & Travel, Young provided travel agency services to, among others, senior citizen and church groups. Information presented in court today showed that beginning about July 1999 and continuing through May 2007, Young advertised sale of Sonshine Stock to the public through mailings to clients and existing shareholders. In these mailings, Young falsely promised that all shareholders would receive guaranteed dividends of 8% a year. Young not only misled investors by claiming his business was profitable and growing when it was not, but when he received proceeds from the stock sale, he deposited the funds into Sonshine’s operating account and used the funds to continue to operate his failing business and pay his personal living expenses. Information was presented in court indicated that Young collected more than $120,000 from investors during the course of the scheme. Many investors failed to receive any dividends, and when Sonshine went out of business in August 2007, Young failed to return any investment principal to the individuals who purchased Sonshine stock. As part of his plea agreement, Young agreed to provide full restitution to the victims harmed by his conduct, including those who purchased stock in the securities fraud scheme and customers who paid for travel packages that they never received.
Man Sentenced to 20 Years in Prison in $32 Million Scam that Bilked More Than 500 Victims in Coal Mines and a Secret Gold Transaction
On April 3, 2009, in Los Angeles, Calif., Henry Jones, a record company executive, formerly of Marina Del Rey, California, was sentenced to 20 years in federal prison having been found guilty in connection with a Ponzi-scheme. Two other defendants, Arthur Simburg, of Portland, Oregon, formerly of Los Angeles, and Robert Jennings, a pastor from Perris, California, were sentenced in November 2008 to 9 and 12 years in federal prison, respectively. The three men were convicted of defrauding more than five hundred investors out of more than $32 million through a bogus investment scheme. Jones was also ordered to pay $28 million in restitution. Evidence at trial showed that Jones, Simburg, and Jennings solicited investors for a coal mine venture and an alleged international gold transaction that was highly secretive and allegedly involved the sale of 20,000 tons of gold between Israel and the United Arab Emirates. The solicitation of investments was accomplished largely through nightly call-in telephone conference calls in which investors were promised huge rates of return on the investments, as much as 200 to 300 percent within sixty days. Despite their promises of profitable investments, Jones spent over $21 million of the victim-investors’ money on his own extravagant personal expenses and to fund his Marina Del Rey-based music business. In addition to his music business, Jones used the victim-investors’ money to purchase a house in Marina Del Rey, a condominium in Culver City, and Ferrari Spider and Porsche Cayenne automobiles. Simburg and Jennings also used victim-investors’ funds for personal expenses. The victim-investors ultimately lost more than $28 million to Jones,
Simburg, and Jennings.
Embezzler Sentenced to 366 Days in Federal Prison for Tax Evasion
On April 3, 2009, in Fairview, Ill., Kay Floarke, of Waterloo, Illinois, was sentenced to one year and one day in federal prison for tax evasion. Additionally, Floarke was sentenced to serve three years of supervised release following her release from prison. Floarke was also ordered to pay $122,771 in restitution to a victim of the embezzlement and to pay $40,688 in restitution to the Internal Revenue Service. According to court documents, Floarke was employed as the office manager for an insurance company and embezzled money from 2002 through 2006. Additionally, as office manager, she prepared false W-2 earnings statements which covered her embezzled income.
Self-Employed Consultant Sentenced on Tax Charges
On April 2, 2009, in Atlanta, Ga., Maurice Delmar Edwards, II, was sentenced to 12 months and one day in prison, to be followed by three years of supervised release, and ordered to pay $88,551 in restitution to the Internal Revenue Service (IRS). Edwards was indicted on eight counts of tax fraud in April 2008; he pleaded guilty to one count of tax evasion in January 2009. The indictment states that Edwards was self-employed as an independent consultant for the orthopedic industry. According to court documents, Edwards has not filed tax returns since at least 1994. During calendar years 2001-2004, Edwards earned income of $423,972, resulting in $88,551 in federal tax due and owing to the IRS. He concealed his income from the IRS by giving a social security number used to generate Forms 1099-MISC and to open a checking account. In addition, Edwards established a nominee business, Clinical & Surgical Solutions, to receive payment from Blackstone Medical, Inc.
Two Former Home Depot Employees Sentenced for Participating in Vendor Kickback Scheme and Filing False Tax Returns
On April 1 and 2, 2009, in Atlanta, Ga., Ronald K. Johnston and James P. Robinson were sentenced to federal prison on charges of conspiracy to commit wire fraud and filing false tax returns in connection with a scheme to defraud Home Depot. Johnston was sentenced to serve 46 months in prison, to be followed by three years of supervised release and ordered to pay $1,785,115 in restitution. Robinson was sentenced to 63 months in prison, to be followed by three years of supervised release and ordered to pay $1,170,308 in restitution. According to information presented in court, between 2005 and 2007, Johnston, a former Home Depot Merchant for Flooring, participated in a conspiracy to defraud Home Depot by taking kickbacks from foreign suppliers seeking to do business with Home Depot. He arranged for Home Depot to purchase items for resale on less than the most advantageous terms to the company. Johnston filed false tax returns by underreporting approximately $186,000 in income for tax years 2005 and 2006. Robinson, a former Home Depot Divisional Merchandising Manager for Flooring, also participated in the conspiracy to defraud Home Depot by taking similar kickbacks from foreign suppliers seeking to do business with Home Depot. Robinson also filed false tax returns by underreporting his income by $765,879 for tax years 2005 and 2006. In addition, Robinson has consented to forfeiture of more than $575,000 in relation to his criminal conviction. Johnston has consented to forfeiture of more than $219,376 in personal items and a forfeiture money judgment in the amount of $135,119. Additional forfeiture was agreed upon. Another former Home Depot employee, Anthony Tesvich, who pleaded guilty last June to similar offenses, received millions of dollars in bribes from foreign suppliers and passed on to Johnson through kickbacks in the hundreds of thousands of dollars and also made payments to a home improvement company for work on Johnston’s residence. He also passed kickbacks to Robinson through hundreds of thousands of dollars and other items of value, including a luxury SUV. Tesvich is scheduled to be sentenced by on June 11, 2009.
Restaurant owners sentenced for tax evasion, conspiracy to harbor illegal aliens
On March 31, 2009 in Benton, Ill., Duo Chen and Justin Qiu, both of Herrin, Ill., were sentenced in federal court following their convictions for tax evasion and conspiracy to harbor illegal aliens. Chen was sentenced to serve a 16 month term of imprisonment, was fined $6,000, and was ordered to pay restitution to the United States in the amount of $228,238. Chen was also ordered to forfeit $78,000 to the United States. Following service of his term of imprisonment, Chen will serve a 3 year term of supervised release. Qiu was sentenced to serve a 5 year term of probation and 10 weekends in jail, was fined $10,000, and was ordered to pay restitution to the United States in the amount of $16,310. Qiu was also ordered to forfeit $45,000 to the United States. According to factual stipulations filed at the time of the pleas, Duo Chen owned and operated Kew Gardens Chinese restaurant located in Herrin, Illinois. Chen skimmed significant amounts of funds from Kew Gardens for his personal use and failed to report the income on his personal tax returns. Chen shared in the ownership of Southern Grill, Inc., which operated as Wok N’ Roll in Marion, Illinois, with his brother-in-law, Justin Qiu. From approximately March 2004 through April 2006, Chen and Qiu conspired to defraud the United States by evading taxes. Chen and Qiu had an agreement that they would skim large sums of cash obtained from the operation of Wok N’ Roll, while concealing the receipt of that cash from the IRS and their accountants. For the tax years 2004 and 2005, Chen and Qiu caused others to prepare and file false tax returns with the IRS on behalf of Southern Grill, Inc.
Arizona Man Sentenced to Federal Prison for “Ponzi” Scheme
On March 26, 2009, in Phoenix, Ariz., Michael A. Dawes, a resident of Sierra Vista and Green Valley, Arizona, was sentenced to 24 months imprisonment, to be followed by three years of supervised release, following a guilty plea to mail fraud and money laundering. In addition, the court will determine the amount of restitution Dawes must pay to each of his victims at a later date. According to court documents, Dawes was an investment broker for a securities brokerage firm from 1998 to 2007. After Dawes lost money speculating in the options market in 1993, he began borrowing money from some of his brokerage clients in an effort to recoup his losses. Dawes told these clients they could earn an extremely high rate of return for loaning money to him for what Dawes described to some investors as being similar to an off-shore investment account for tax purposes. Investors tendered the money directly to Dawes. The promised interest rates ranged from 10 to 30 percent. Dawes did not tell his clients the “investment opportunity” was fictitious and did not exist. By primarily using new investors’ funds to pay old investors, Dawes operated a fraudulent scheme commonly referred to as a “Ponzi scheme.” From approximately 1998 to 2006, Dawes received approximately $4 million in loans from at least 80 investors. The estimated loss is $1.7 million.
Pennsylvania Man Sentenced for Embezzling $3 Million from Employer and Evading Taxes
On March 26, 2009, in Philadelphia, Pa., Brian J. Rowland, of Gilbertsville, PA, was sentenced to 63 months in prison for embezzling more than $3 million from the Delaware County advertising firm where he worked as a bookkeeper. Rowland pleaded guilty in December 2008 to one count of wire fraud and one count of tax evasion. According to court document, the fraud scheme went on for more than 10 years, between 1994 and 2006, and consisted of Rowland writing checks to “Business Management Concepts”, a fictitious company. Rowland would then deposit the checks into a bank account in the name “Brian Rowland T/A Business Management Concepts”. Rowland would then use the money in that account for his own personal expenditures. Additionally, between 2003 and 2006, Rowland evaded paying $343,506 in income tax on the proceeds of his embezzlement.
Louisiana Attorney Sentenced to Over 15 Years in Prison on Federal Charges Including Bank and Tax Fraud
On March 25, 2009, in New Orleans, La., James G. Perdigao was sentenced to 188 months in prison, to be followed by three years of supervised release, and ordered to pay $23,517,538 in restitution and a $3,000 special assessment. Additionally, while incarcerated, the defendant can only use a computer with internet access while under supervision. On October 31, 2008, Perdigao pleaded guilty to the Second Superseding Indictment on charges of mail fraud, bank fraud, interstate transportation of stolen funds, money laundering, income tax evasion, filing false income tax returns, obstruction of justice, unlawful computer intrusion and unlawful access to stored communications. Perdigao, a former partner at the law firm of Adams and Reese, provided legal services to companies in Louisiana’s gambling industry. He admitted to stealing checks belonging to Adams and Reese and depositing those checks into accounts he controlled. Further, Perdigao admitted to stealing a tax refund check in the amount of $485,000 payable to Horseshoe Entertainment, which was being acquired by Harrah’s. Once these checks were deposited, they became available for withdrawal and thus exposed the banks to the risk of civil liability and financial loss. In his plea agreement, Perdigao also admitted to concocting a fraudulent billing scheme whereby he would submit phony invoices to his clients including Pinnacle Entertainment, Inc. and Boomtown, causing them to remit millions of dollars in fraudulent payments. According to court records, during a one-week period in October 2004, Perdigao wired nearly $20,000,000 to a Swiss bank account that he controlled in Zurich, Switzerland. Additionally, Perdigao pleaded guilty to tax evasion and filing false tax returns for the tax calendar years 2000 through 2004. The tax due and owing by Perdigao exceeds approximately $5 million as indicated in the indictment. By failing to report substantial taxable income and utilizing fraudulent losses on these tax returns, Perdigao qualified himself for the earned income tax credit. The earned income tax credit is a refundable federal income tax credit for low-income, working individuals and families.
Attorney Sentenced in Mortgage “Rescue” Scheme
On March 24, 2009, in Richmond, Va., Colin C. Connelly was sentenced to 24 months in prison and ordered to pay $376,464 in restitution to the victims of his criminal conduct. According to court records, Connelly was involved with others in a mortgage fraud conspiracy that spanned from February through November 2007. During that time period, Connelly owned and operated Connelly & Associates, P.C., located in Chester, Virginia. Acting through that business, Connelly assisted representatives from Walkwood Properties, Inc., Midlothian, Virginia, in closing a number of housing transactions under Walkwood’s real estate purchase program. This program offered various home owners an opportunity to sell their home to someone associated with Walkwood Properties in an attempt to save the home from foreclosure. As Connelly has admitted, however, the real estate purchase program was executed without full disclosure of how each transaction worked and a significant portion of the equity in the victim’s homes was skimmed to Walkwood Properties and other entities. In executing the scheme, Connelly assisted representatives from Walkwood Properties in making a number of false representations in connection with the transactions to allow the loans to go through. In connection with his guilty plea, Connelly agreed that if the true nature of the transactions had been revealed to the mortgage lenders, the loans would not have been approved. Overall, Connelly agreed to his involvement in six different mortgage transactions resulting in a total loss of $376,464.
Three California Men Involved In Stealing Gold from Oakland Area Manufacturer Sentenced
On March 20, 2009, in Oakland, Calif., three men were sentenced for their roles in a gold stealing conspiracy. Carlos Coronado was sentenced to one year and one day in prison and ordered to pay $496,055 to his former employer, Systron Donner and $485,000 to the IRS. Coronado was charged on Auguast 14, 2008, in a Superseding Information with conspiracy, transportation of stolen goods in interstate commerce and making and subscribing a false tax return. He pleaded guilty on September 19, 2008. Also sentenced was Jerry Kahue who will spend one year in home confinement and was ordered to pay $80,000 to Systron Donner and $16,221 to the IRS. He pleaded guilty on November 21, 2008. David Siharath was sentenced to three years probation and ordered to pay $18,500 to Systron Donner. According to the Information, the men worked at automotive parts manufacturer Systron Donner. They stole gold used in the manufacture of stability control systems for high-end automobiles, and sold and shipped the gold to a business in New York. The defendants failed to claim the income from the gold on their tax returns.
Maryland Man Sentenced to Three Years in Prison for Filing False Tax Returns
On March 16, 2009, in Greenbelt, Md., Wayne Eric Matthews, of Bowie, Maryland, was sentenced to 36 months in prison, followed by three years of supervised release, and ordered to pay $231,560 in restitution. Matthews was convicted on December 10, 2008, on two counts of filing a false claim with the Internal Revenue Service (IRS). According to testimony at his trial, Matthews sent to the IRS a tax return for 2006 in the name of the “WAYNE MATTHEWS TRUST” and listed “Wayne Eric Matthews” as the fiduciary. Matthews claimed that the trust had income of $694,680 and a deduction of $694,680 for fiduciary fees. Matthews also claimed that $231,560 in federal income tax withheld had been paid to the IRS, and therefore that the Trust was owed a refund of $231,560. Matthews did not include any trust documents, designation of beneficiaries, proof of income, or proof of withholding with the return when he submitted it to the IRS, nor did the IRS have any evidence of income or withholdings for the Trust. Less than two months later, on May 15, 2007, Matthews filed an almost identical return for tax year 2005, also claiming a refund of $231,560.
Niece of Leader in D.C. Property Tax Refund Fraud Scheme Sentenced to 9 Years in Prison
On March 16, 2009, in Greenbelt, Md., Jayrece Turnbull, of Bowie, Maryland, was sentenced to 108 months in prison, followed by three years of supervised release, and ordered to pay $24,521,720 and to forfeit three residences, a Mercedes Benz, designer handbags, fur hats, shoes, china, three plasma televisions, jewelry and monies held in 26 bank accounts. Turnbull is the niece of Harriette Walters, a former manager within the District of Columbia Office (DC) of Tax and Revenue. According to court documents, Walters embezzled money from the District of Columbia by preparing fraudulent property refund vouchers that listed entities created by Walters’ co-conspirators. Illegitimate property refund checks were then issued based on the fraudulent vouchers that were prepared by Walters. In October 2008, Turnbull pleaded guilty to receipt of stolen property, conspiracy to commit money laundering, tax evasion and mail fraud, in connection with a property tax refund scheme in which over $48 million was stolen from the DC Office of Tax and Revenue. In her plea agreement, Turnbull admitted that from January 2001 to April 2007, she deposited 82 fraudulent DC checks totaling $24,521,720 into accounts for which Turnbull had signatory authority. The deposits ranged from $74,299 to over $450,000. During the course of the scheme, Turnbull also wrote personal checks totaling $226,000 to Walter Jones, then a Bank of America employee involved in the scheme. Also, Turnbull failed to file a tax return for 2007, failing to report the taxable income she gained from this fraudulent scheme. Other defendants sentenced in this scheme were Harriette M. Walters who received 20 years in prison; Ricardo R. Walters was sentenced to 78 months in prison; Richard Walters was sentenced to 51 months in prison; Robert O. Steven received 46 months imprisonment; Patricia A. Steven was sentenced to 70 months in prison; Walter Jones was sentenced to 78 months in prison; and Marilyn Yoon received 12 months and one day in prison. These defendants were also ordered to pay millions of dollars in restitution and to forfeit assets and currency gained from their illegal activity.
Accountant for Connecticut Trash Companies Sentenced to 29 Months in Federal Prison
On March 12, 2009, in New Haven, Conn., Christopher Rayner was sentenced to 29 months in prison, followed by five years of supervised release, for crimes he committed while serving as the accountant for companies formerly owned by James Galante of Danbury. Rayner was also ordered to forfeit $150,000 to the government and to pay a $7,500 fine. On August 28, 2008, Rayner pleaded guilty to one count of conspiring to violate the federal Racketeer Influenced and Corrupt Organizations Act (RICO), one count of conspiring to defraud the Internal Revenue Service (IRS), and one count of conspiring to commit wire fraud. According to statements made in court, Rayner was the principal accountant and de facto chief financial officer for 25 trash companies located in western Connecticut operated by James Galante, including Automated Waste Disposal (AWD), Diversified Waste Disposal (DWD), Superior Waste Disposal (SWD) and Transfer Systems, Inc. (TSI). Rayner admitted that he knew about the operation of the “property rights system,” which was an illegal agreement between various carting companies to fix prices for trash hauling services in Connecticut and New York, and efforts made by his co-conspirators to further the system. Rayner specifically admitted that, in 2005, he attempted to assist in fixing a bid for the operation of a transfer station in Connecticut. James Galante wanted to insure that the transfer station would be operated by a specific individual and directed several of his co-conspirators, including Rayner, to attempt to rig the bid. As for Rayner’s participation in the conspiracy to defraud the IRS, Rayner, Galante and others operated a multiple object scheme to defraud the IRS with respect to both Galante’s personal returns and certain corporate returns. In part, this scheme involved placing a number of no-show employees on the payrolls of trash hauling companies and deducting the expenses related to these employees, including their salaries, health care costs, and expenses associated with the use of free cars, on corporate tax returns.
Vermont Man Sentenced to 70 Months in Federal Prison on Charges of Tax Evasion, Money Laundering and Wire Fraud
On March 10, 2009, in Burlington, Vt., Kenneth MacKay was sentenced to 70 months in prison, to be followed by three years of supervised release, and ordered to pay over $5.3 million in restitution to his employer. The court also ordered MacKay to forfeit $4 million, his interest in the Williston residence, a condominium in Orlando, Florida, and approximately $240,000 seized from five 529 Qualified Tuition Plans that MacKay opened for his children and funded with some money obtained through his frauds. MacKay pleaded guilty in September 2008 to charges of wire fraud, tax evasion, and money laundering in connection with a multi-million dollar embezzlement scheme. According to court documents, beginning in or about 2000 and continuing until in or about February 2008, MacKay devised a scheme to defraud his employer, Willis Management (Vermont) Ltd., and its clients and affiliated companies by embezzling in excess of $5 million and using this money for his own personal benefit. Additionally, between 2002 and 2007, MacKay willfully evaded paying over $1.2 million in income taxes to the United States and he illegally engaged in numerous monetary transactions in criminally derived property using accounts he fraudulently opened at the Chittenden Bank as part of his scheme to defraud Willis Management.
City of Cleveland Retired Water Pipe Repair Supervisor Sentenced to 18 Months in Prison
On March 10, 2009, in Cleveland, Ohio, Oscar Wells, retired water pipe repair supervisor, was sentenced to 18 months in prison, three years of supervised release, and ordered to pay $40,000 in restitution to the city of Cleveland and a special assessment of $400. Wells was convicted in October 2008 by a jury on three counts of Hobbs Act bribery and one count of conspiracy to violate the Hobbs Act. Wells was at the center of two bribery schemes. In the first scheme, he demanded cash payments totaling approximately $35,000 to $40,000 from Liberator Noce in connection with Noce’s contracts to repair and replace fire hydrants for the city of Cleveland Water Division (CWD). The bribes were in exchange for Wells processing Noce’s invoices for payment, and in exchange for Wells giving Noce job orders under Noce’s contract with the CWD. In addition, Wells suggested that Noce inflate his invoices to the CWD to fund the bribe payments. The CWD paid Noce approximately $3.8 million during the period 2002 through 2004. In the second scheme, Wells solicited and received two bribes, one of $200 and one of $100, from a second hydrant contractor in 2004. Wells is the last of 13 defendants to be sentenced in the investigation of corruption in the city of Cleveland Water Division. The other defendants were sentenced from 60 months in prison to probation.
Ohio Man Sentenced to 57 Months; Failed to Report Over $390,000 in Income for Four Tax Years
On March 6, 2009, in Cleveland, Ohio, Flavio G. Varone, of Chester Township, was sentenced to 57 months in prison followed by three years of supervised release. Varone was also ordered to pay $555,169 in restitution to the victims of his scheme. In December 2008, Varone had been found guilty by a trial jury of three counts of interstate transportation of stolen property and four counts of attempted income tax evasion. Varone was a financial representative, a broker-dealer and investment adviser registered with the Securities and Exchange Commissioner (SEC) and worked at several companies. According to the indictment, Varone promoted and sold investments that appeared to be through his broker-dealer firms. To induce clients to follow his money management recommendations, he falsely represented that client funds would be invested and used to purchase annuities and other investments. However, Varone used clients’ funds to pay his personal debts and expenses. At times, Varone used investor funds to make payments to earlier investors. According to the indictment, Varone underreported his income for tax years 2003 through 2006 by omitting approximately $397,140.
Mississippi Physician Sentenced for Filing False Federal Tax Returns
On March 5, 2009, in Jackson, Miss., Dr. Calvin Ramsey of Lexington, Mississippi, was sentenced to 27 months in prison, followed by one year of supervised release, and ordered to pay $232,117 in restitution to the Internal Revenue Service (IRS). In addition, Ramsey was ordered to pay $7,547 for the government’s costs in prosecuting the case. Ramsey was indicted by a federal grand jury on November 7, 2007. According to the indictment, Ramsey was charged with filing false returns, whereby he failed to report substantial gross receipts from his business for calendar years 2000 and 2001. On October 16, 2008, a federal jury convicted Ramsey of filing false tax returns for years 2000 and 2001.
Former Employee of Danbury Trash Companies Sentenced to 37 Months in Federal Prison
On March 3, 2009, in New Haven, Conn., Eric Romandi was sentenced to 37 months in prison, followed by three years of supervised release, and agreed to forfeit $75,000. Romandi pleaded guilty in July 2008 to conspiring to violate the federal Racketeer Influenced and Corrupt Organizations Act (RICO) and conspiring to defraud the Internal Revenue Service (IRS). According to documents filed with the court and statements made in court, Romandi formerly was the General Manager of companies owned and operated by James Galante, and most recently held the title of Route Supervisor at Automated Waste Disposal (AWD) and its affiliated companies based in Danbury. Romandi admitted that he conspired to perpetuate a system, commonly called the “property rights system,” through which participating carters agreed not to service or compete for other carters’ customers. The property rights system essentially destroys free enterprise, allowing the participating carters to artificially inflate their prices and leaving waste removal customers with no other options. In this scheme, which was directed at commercial and municipal customers, participating carters agreed to quote inflated prices to customers controlled by other carters. According to court documents, in the summer of 2005, the federal grand jury investigating the carting industry issued subpoenas to many AWD employees. The investigation revealed that shortly after the subpoenas were issued, Romandi told a witness to provide untruthful testimony to the grand jury regarding cash payments that Galante provided to Matthew Ianniello. Romandi also told the witness to deny knowledge of cash that Romandi and another individual gave to Galante on a weekly basis, as well as fraudulent expenses claimed by Galante. This cash was a payroll kickback that was a material fact in the Government’s tax investigation. Thirty-three individuals were charged as a result of the investigation. All have pleaded guilty.
Father and Son Sentenced for Their Roles in a Fraudulent Credit Card Debt Elimination Scheme
On February 27, 2009, in Columbus, Ohio, Dan Wickline and his son, Chad Wickline, were sentenced for their roles in operating a Canal Winchester-based company that fraudulently advertised it could eliminate people’s credit card debt. Dan Wickline was sentenced to 18 months in prison. Chad Wickline was sentenced to 30 months in prison. The defendants were also ordered to pay restitution to victims and to pay all federal income taxes owed, plus interest and penalties. According to court documents, the Wicklines sold customers a product through their company, Liberty Resources, that they guaranteed would eliminate customers’ credit card debt if they paid a fee ranging from a few hundred to several thousand dollars. If the product was purchased, the customers received a document claiming that they were relieved from their credit card debt. The debt elimination product was based on what they claimed was a “loophole” in the banking laws. Liberty Resources defrauded 450 victims out of more than $2 million between 2002 and 2006.
California CPA Involved in Massive Fraud Against Financial Institution is Sentenced to 30 Months in Federal Prison
On February 27, 2009, in Los Angeles, Calif., Richard Po-Chun Wong, a former CPA, was sentenced to 30 months in prison and ordered to pay full restitution for tax evasion and wire fraud. In his 2006 guilty plea, Wong admitted that he caused approximately $46 million in losses to HSBC Business Credit (USA) in several elaborate schemes. Wong prepared false financial documents for his clients and helped them fraudulently obtain credit lines. During the years 1998 through 2001, Wong prepared false financial documents for Nikko Importer, Inc., dba Wing Shing Food Company, a San Gabriel Valley Asian food wholesaler that was operated by Co Tro “Sammy” Lam. As part of this scheme, Wong “re-did” the books and records for Nikko in order to make the company look more profitable when it sought lines of credit from HSBC. After HSBC issued $9 million worth of credit lines to Nikko, Wong assisted Nikko in continuing the fraud by regularly completing false reports that were required to be submitted to HSBC on a bi-weekly basis. Wong instructed Lam to sign blank reports, which Wong completed with false information that caused HSBC to extend further credit advances. Nikko ultimately defaulted on the full $9 million credit line. Wong also admitted to failing to report nearly $1 million in income, including a $400,000 payment he received after fraudulently securing the credit lines for Nikko. At Wong’s request, he was paid the $400,000 fee using multiple fictitious companies to make a series of smaller payments. Wong omitted these payments and other sums from his tax returns. In total, Wong failed to report more than $900,000 on his tax returns, and he attempted to evade the payment of more than $370,000 in income taxes.
Four Georgia Residents Sentenced in $5 Million Diesel Fuel Tax Credit Scheme
On February 26, 2009, in Albany, Ga., four defendants were sentenced for their participation in a fraud scheme involving the filing of fraudulent claims for refund based on fictitious diesel fuel tax credits. Clinton Hughes was sentenced to 48 months in prison and ordered to pay $3,969,831 in restitution to the Internal Revenue Service (IRS); Pamela Hughes received 33 months in prison and ordered to pay $3,969,831 in restitution; and Robin and Rodger Bennett were each sentenced to 12 months in prison and ordered to pay $219,459 in restitution. All defendants pleaded guilty to conspiracy to file false claims with the government. In addition, the Bennetts pleaded guilty to filing false tax returns with the Internal Revenue Service (IRS) for the years 2001, 2002, and 2003. Sole proprietors and businesses who purchase diesel fuel on which federal excise taxes have already been paid (known as “undyed fuel”), and then use that fuel in off-highway business equipment, qualify for a tax credit for the excise taxes paid. According to court documents, the claims for refund in this investigation were fraudulent because the defendants did not purchase, nor did they use, the undyed fuel in their off-highway business equipment. The scheme was lead by Clinton and Patricia Hughes, who prepared the tax returns which contained the false claims to the IRS beginning in 1998 through 2003. Hughes allowed the co-conspirators, all of whom claimed to be associated with the logging industry, to supply Hughes with false fuel invoices and driving logs to document the fuel that was either never purchased or was never used in the reported businesses. Rodger and Robin Bennett, owners of B Tree Service & Stump Removal, participated in the scheme by claiming fuel tax credits for fictitious businesses called B Logging and B&B Forestry & Chipping. The total amount of fraudulent claims in the scheme was approximately $5,190,000.
Real Estate Agent and Two Others Sentenced To Prison for Role in Mortgage Fraud Scheme
On February 26, 2009, in Phoenix, Ariz., Micah Bowens, of Henderson, Nevada was sentenced to 48 months in prison for his conviction in July 2008 for leading a mortgage fraud scheme in Phoenix, San Diego and Las Vegas. Jennifer Sellers, a real estate agent, of Las Vegas, was sentenced to 24 months in prison on February 23, 2009 and Alonzo Love, of San Diego, was sentenced to 14 months on February 17, 2009. Bowens pleaded guilty to 23 counts, Sellers pleaded guilty to two counts and Love pleaded to one count all related to mortgage fraud, including mail and wire fraud, false loan applications, money laundering, conspiracy and other offenses related to the use of a social security number belonging to someone else, all as part of a 37-count indictment. The indictment indicates the defendants participated in a five-year conspiracy involving the purchase of 19 properties and 10 vehicles using fraudulent loan documents. From May 2002 through May 2007, Bowens, Sellers and Love fraudulently submitted mortgage loan applications, on behalf of straw buyers, under false pretenses, obtaining and disbursing the proceeds of fraudulently obtained loans, including directing portions of the proceeds to bank accounts controlled by the defendants. As a real estate agent and loan originator, Sellers prepared the mortgage loan applications misrepresenting salary, assets and liabilities. Bowens, Sellers and Love further submitted to lending institutions fraudulent W-2s, bank statements and employment verifications to purchase real estate and vehicles. The trio used the proceeds from the fraud to live a lavish lifestyle including purchasing several expensive homes, luxury vehicles, jewelry and other personal expenses. Lending institutions lost approximately $2.5 million as a result of the conspiracy.
Owner of Valley Technology Services Sentenced to 15 Months in Prison for Tax Evasion
On February 23, 2009, in San Jose, Calif., Huy Quoc Nguyen was sentenced to 15 months in prison and ordered to pay $549,000 restitution, plus interest and penalties for tax evasion. Nguyen, owner of Valley Technology Services (VTS), pleaded guilty in November 2008, admitting in his plea agreement that during an IRS audit, he told a revenue agent that his business checking account was used strictly for business and that he had used that account to prepare his Schedule C (Profit or loss from business) for his 2000 tax return. Nguyen told the revenue agent that all deposits made to the business checking account were due to business income and that all checks from that account were for business expenses. Later in the process of conducting the audit, the revenue agent noted that there was numerous non-business checks that did not reconcile to any of the expense categories stated on the Schedule C. Nguyen admitted that those checks were for personal and not business expenses. Nguyen further admitted that he knowingly failed to report gross receipts, ordinary income and interest income from VTS. He also improperly deducted non-business expenses as well as mortgage interest payments and real estate tax payments for property that he did not own. Nguyen admitted that the total amount of tax loss arising from his false 2000 and 2001 personal income tax returns was $549,000.
Former Consultant to Catholic Religious Order Sentenced to Additional Two Years for Perjury
On February 20, 2009, in St. Louis, Mo., William Davidson, a former consultant to a Catholic Church religious order already serving a ten year sentence for fraud, money laundering and tax evasion, was sentenced to another two years imprisonment for perjury. According to the indictment, Davidson lied in an affidavit saying he had no money in a financial institution when he had $480,000. Davidson was involved in computer and other business consulting for the Vincentians beginning in 1995. The Vincentians are formally known as the Congregation of the Mission, Midwest Province, which serves Missouri, Colorado, Illinois, Kansas and Kenya. Davidson, a resident of St. Louis County, pleaded guilty in May 2008 to one count of conspiracy to commit wire and mail fraud, one count of bank fraud, one count of money laundering and one count of tax evasion. He was sentenced to ten years imprisonment and also ordered to make restitutions to the Vincentians for more than $700,000 and to the Internal Revenue Service for more than $653,000.
Maine Woman Sentenced for Income Tax Evasion
On February 9, 2009, in Portland, Maine, Shirley St. Pierre was sentenced to 27 months imprisonment, to be followed by two years of supervised release, and ordered to pay a $75,000 fine and approximately $5,100 of costs incurred by the government in conducting her trial. St. Pierre was convicted by a trial jury in October 2008 of tax evasion for the year 2002 and attempting to obstruct an Internal Revenue Service (IRS) audit of her and her company, the Staab Agency. St. Pierre was the sole owner of the Staab Agency, a Jefferson business that acts as an agent for out of state businesses and individuals registering vehicles and truck trailers in the State of Maine. According to evidence introduced during trial, St. Pierre failed to report approximately $1.2 million dollars of business income during a three-year period from 2000 through 2002. This resulted in her underpayment of about $511,000 of federal income taxes. The government also presented evidence that during the IRS tax audit, which led to the criminal investigation and trial, false documentation was presented to the IRS in an effort to conceal the understatement of income. The jury convicted St. Pierre of tax evasion for the 2002 tax year, and an additional charge of obstructing the IRS. She was acquitted of two other tax evasion charges relating to the 2000 and 2001 tax years. St. Pierre has repaid all back taxes and interest.
Las Vegas Minister and Conspirator Sentenced in Tax Evasion Scheme
On February 6, 2009, in Las Vegas, Nev., Minister Michael Haynes and David Jett were sentenced to 37 months in prison and five years probation, respectively. Haynes and Jett were also ordered to pay restitution of $834,000 and $150,000, respectively, to the U.S. Treasury. In September 2008, a jury convicted Haynes for conspiring to evade taxes through a scheme involving the fraudulent sale of One Voice Technologies, Inc. stock. Jett pleaded guilty to conspiracy in March 2008. According to the indictment and evidence presented at trial, Haynes and Jett orchestrated the fraudulent sale of $7 million in One Voice stock. Haynes and Jett used at least 10 stock certificates to generate the $7 million in gross proceeds; all of these stock certificates were in different nominee names. As part of the scheme, new stock certificates in the name of One Voice were issued to at least five nominees, two of whom testified at trial. With the assistance of the transfer agent for One Voice, Haynes had the nominees sign documents that stated they had lost their original stock certificates and assigned their rights to the stock. According to court documents and evidence presented at trial, Haynes directed the $7 million in stock proceeds to be deposited in a nominee bank account at the Bank of Nova Scotia. At Haynes’ instruction, the proceeds were transferred via checks and wire transfers to U.S. bank accounts in his and Jett’s control. Jett and Haynes then used funds obtained from the sale of One Voice stock for their personal benefit. Haynes failed to report the proceeds of the stock sale on his personal income taxes.
Underground Cabling Company Owners Sentenced to Prison for Filing a False Partnership Tax Return
On February 5, 2009, in Oklahoma City, Okla., James E. Newman, Quanah K. Newman, and Glenda J. Robertson were sentenced to prison terms of 12 months, five months, and five months, respectively, for submitting a false federal partnership income tax return. All three defendants are former owners of Terra Tech, LLC, a company that installed underground cables for utilities and other businesses. In July 2008, they all pleaded guilty admitting that they caused a 2002 partnership return to be filed with the IRS, knowing that $5.1 million reported as Terra Tech’s gross receipts was false. The crime involved the diversion of certain gross receipts of Terra Tech into personal bank accounts and the exclusion of those gross receipts from both the partnership tax returns and the defendants’ personal tax returns. Newman was also ordered to pay $117,785 in restitution to the IRS. He remains subject to penalties and interest that may be imposed by the IRS.
Former Liberty, Missouri Pathologist Sentenced for Failing to File Tax Returns
On February 5, 2009, in Kansas City, Mo., Pathologist Miles J. Jones was sentenced to 18 months in prison, fined $20,000, and ordered to pay $79,225 in restitution to the IRS for failing to file federal income tax returns. Jones pleaded guilty in August 2008 to two violations of failing to file federal tax returns for tax years 2002 and 2003. Jones was a medical doctor with his own practice, Consultative and Diagnostic Pathology, during those years. Jones earned $267,800 in 2002 and $271,000 in 2003. The taxes due and owing on his unfiled 2002 return were $63,498 and the taxes due and owing on his 2003 tax returns was $10,231.
Four Participants in Mortgage Fraud Scheme Sentenced to Prison
On February 4, 2009, in Columbus, Ohio, four people were sentenced for their roles in schemes that fraudulently secured more than $2.6 million in mortgage loans in 2003, 2004 and 2005. Donald F. Green was sentenced to 36 months in prison, followed by five years of supervised release, and ordered to pay $1,282,514 in restitution to Stillwater Capital Partners and 23 victim banks, jointly with his co-conspirators, and ordered to pay $230,376 in restitution to the Internal Revenue Service (IRS). Green pleaded guilty in April 2008 to one count each of conspiracy, income tax evasion, and bank fraud. George T. Jordan was sentenced to 12 months and one day in prison, followed by three years of supervised release, 416 hours of community service, and ordered to pay $1,182,691 in restitution to ABN Amro. Jordan pleaded guilty in April 2008 to one count of conspiracy and one count of money laundering. Aryeh M. Schottenstein was sentenced to 42 months imprisonment, followed by three years of supervised release, 416 hours of community service, and ordered to pay $3,740,173 in restitution to the victim financial institutions. Schottenstein pleaded guilty in May 2008 to one count each of conspiracy and money laundering. Jeffrey M. Lieberman was sentenced to 16 months in prison, followed by three years of supervised release, and ordered to pay $400,000 in restitution to Stillwater Capital Partners. Lieberman pleaded guilty in April 2008 to one count each of conspiracy and money laundering. Jordan is a real estate agent who generated a mortgage fraud scheme, selling houses at inflated prices and splitting the excess funds received from the mortgage lender with his co-conspirator, Griffin. Schottenstein and Lieberman solicited funds from private investors interested in renovating houses in distressed neighborhoods. A substantial amount of those funds was used to purchase houses from Green, who owned hundreds of houses in distressed areas of Columbus, at prices well in excess of their true values. Griffin helped locate “straw buyers” for those houses and also received funds for renovation purposes.
Florida Man Sentenced to 9 Years in Prison in Foreign Currency Investment Scheme
On January 30, 2009, in West Palm Beach, Fla., Frank DeSantis was sentenced to 108 months in prison, followed by three years of supervised release. Restitution will be determined at a later date. DeSantis pleaded guilty in August 2008 to charges of conspiring to commit mail and wire fraud and conspiracy to defraud the Internal Revenue Service (IRS). During his plea, DeSantis admitted his participation in operating, and having a financial interest in, several investment and telemarketing rooms throughout South Florida. To execute the scheme, DeSantis made, and caused others to make, misrepresentations of material investment facts to potential investors, in order to convince them to invest in foreign currency options known as “forex.” For example, investors were told that they could expect to make high profits with very little risk. DeSantis and others deliberately failed to tell the investors that more than 95 percent had lost money and that DeSantis had been previously barred by the national Futures Association from acting as a broker. Through this scheme, investors were defrauded out of millions of dollars during 2002 through 2005. In addition, DeSantis conspired with others to impede and obstruct the IRS by failing to report, account, and pay approximately $2,097,326 in income taxes during tax years 2002 through 2005.
Dallas Restaurant Owner Sentenced to 14 Months on Fraud and False Statement Conviction
On January 29, 2009, in Dallas, Texas, restaurant owner Gricelda Ramirez was sentenced to 14 months in prison following her October 2008 guilty plea to one count of fraud and false statements. Ramirez has been in federal custody since surrendering to federal authorities in June 2008. She is a U.S. citizen, but according to a detention order entered in the case, since 2003, she has lived in Mexico with her husband, a Mexican citizen, and her two children, who attend school in Mexico. According to the factual resume filed in the case, Ramirez admitted that she omitted reporting approximately $560,000 in her business’s 2005 gross receipts on her 2005 personal income tax return. Ramirez admitted that in 2005, her restaurant business had gross receipts of $1,056,201, when in reality, her business had gross receipts of at least $1,614,740. As part of her plea agreement with the government, Ramirez paid $170,532 in restitution. This is the amount of federal income tax that was remaining due for the 2004 and 2005 tax years. According to court documents, including a complaint for forfeiture and a detention order, federal agents seized approximately $1.4 million from a residence in Dallas, as well as financial records concerning Gricelda Ramirez and Taqueria El Paisano during a narcotics investigation in 2006. As a result of the seizure, law enforcement began investigating Gricelda Ramirez’s restaurant. The investigation of the seized financial records revealed that approximately $1.8 million in currency was deposited into three bank accounts. Photographs and testimony provided by employees at the bank indicated that both Gricelda Ramirez and a relative made these deposits. During this time, no single deposit exceeding $10,000 was made to any of the three accounts. In August and September 2006, $1,023,990 was seized from the three bank accounts during the execution of federal search warrants. According to the complaint for forfeiture, federal income tax returns filed by Ramirez for 2002 – 2005, indicate that she operated Taqueria El Paisano as a sole proprietorship and had no other income than that derived from the restaurants. The complaint for forfeiture further states that the total net profits reported on her 2002 – 2005 returns do not explain the large amount of currency seized in the case.
Former Oklahoma State Auditor Sentenced to Prison for Conspiracy to Defraud the United States
On January 26, 2009, in Muskogee, Okla., former Oklahoma State Auditor Jeff McMahan and his wife, Lori McMahan, were sentenced to 97 months imprisonment and 78 months imprisonment, respectively. The McMahans were found guilty in June 2008 by a federal jury of conspiring with each other and with others, to engage in interstate travel in aid of racketeering and conspiracy to defraud the United States. The defendants received bribes and gratuities in exchange for favorable treatment by Jeff McMahan. During Jeff McMahan’s campaign for Oklahoma State Auditor, Jeff McMahan, Lori McMahan and others, on McMahan’s behalf, received cash, jewelry, other items of value and straw contributions which far exceeded the legal limits of allowed contributions.
Illinois Business Owner Sentenced on Child Pornography and Tax Evasion
On January 21, 2009 in Chicago, Ill, James Mecca, a Melrose Park, Illinois businessman, was sentenced to 23 months imprisonment, followed by two years of supervised release and ordered to pay $30,999 in restitution to the Internal Revenue Service (IRS). Mecca owned and operated Casino Magic, a business which distributed slot machines in the Chicago area. In October 2008, pursuant to a plea agreement, Mecca pleaded guilty to tax evasion and other federal charges. According to the plea agreement, Mecca admitted that from 1999 through 2005, he sought to evade reporting his income and evade the payment of taxes on his income from Casino Magic. To conceal his income from the IRS, Mecca engaged in cash sales, using his nephew’s bank account to pay personal expenses and using ATM machines to make cash withdrawals. Mecca purposely kept his name and social security number from being listed on the Casino Magic business account and also used that account to pay his personal expenses.
Owner of Tractor Trailer Training School Sentenced for Tax Evasion and Illegal Firearm Possession
On January 27, 2009, in Hartford, Conn., Charles Donald Lane, of Danbury, was sentenced to 21 months in prison, followed by three years of supervised release, and ordered to pay $229,000 to the Internal Revenue Service (IRS) in back taxes plus interest. On June 4, 2008, Lane pleaded guilty to one count of tax evasion and one count of being a previously convicted felon in possession of a firearm. According to court documents and statements made in court, Lane owned and operated D & L Tractor Trailer Training School (D&L), which offered instruction to students seeking to obtain their Class A or Class B truck drivers’ licenses. D&L also provided practical training to students, and charged them tuition to attend the school. From 1999 to 2003, Lane devised a scheme to skim a substantial amount of D&L’s cash receipts and failed to report this income to the IRS. In order to carry out his scheme to skim cash from D&L, Lane instructed employees to solicit cash payments from prospective students offering discounts on tuition to those students willing to make payments in cash. To ensure that cash receipts were not reported to the IRS, Lane ordered his employees to turn over all cash payments directly to him. He further directed them not to deposit any cash into the bank account of the business without his authorization. As a result of this conduct, for the tax years 1999 through 2003, Lane failed to pay approximately $154,860 in taxes to the IRS.
Connecticut Man Who Ran Multi-Million Dollar Ponzi Scheme Sentenced to Four Years in Prison
On January 26, 2009, in New Haven, Conn., Dale L. Graybill was sentenced to 48 months in prison, followed by three years of supervised release, and ordered to pay $10,672,876 in restitution to the victims of his scheme and $93,293 to the Internal Revenue Service (IRS). As of this date, the court-appointed receiver has collected approximately $817,000 in funds that will be distributed to victims of Graybill’s multi-million dollar Ponzi scheme in which he solicited funds for fictitious investment programs. According to court documents and statements made in court, Graybill falsely represented to investors that he had special access to exclusive, government-backed trading programs that were originally opened only to the very wealthy. Graybill held meetings at his former residence in Branford and solicited potential investors to invest in “trading programs.” He told investors that he would place their investment funds in safe, exclusive, offshore, high-yield bank debenture “trading programs” that would produce greater than market rates of returns of up to 25 percent per month at little or no risk. Graybill further told investors that their funds would be used to facilitate the purchase and sale of newly issued currency and fresh-cut bank debentures at a discount, and that the financial instruments would be sold at a substantial profit, which would generate high returns. However, after receiving the funds from investors, Graybill would divert the funds for his own personal use and benefit, including paying business expenses and making lulling payments to earlier investors. On June 15, 2005, Graybill pleaded guilty to one count of mail fraud and one count of making and subscribing a false 2002 tax return. Graybill failed to declare the funds he received from the Ponzi scheme as income on his tax return, resulting in a tax loss of $93,293 for the 2002 tax year.
California Businessman Sentenced For Filing False Tax Returns
On January 26, 2009, in Fresno, Calif., Michael Ray Gorden was sentenced to 15 months in prison for his conviction on one count of conspiring to defraud the United States and two counts of making and subscribing to false tax returns. He pleaded guilty in August 2008. Gorden, president and sole shareholder of Mike Gorden Software Solutions, Inc. (MGSS), caused MGSS to pay at least $339,792 of his personal expenses between 2001 and 2005. He then falsely concealed the true nature of the expenses and deducted them as business expenses on MGSS’s U.S. Corporation Income Tax Returns (Form 1120s) for tax years ending June 2002, June 2003, and June 2004. In addition, Gorden failed to disclose at least $266,454 in disguised personal income that was intentionally omitted from the income reported on his U.S. Individual Income Tax Returns (Form 1040s) for tax years 2001 through 2004, and thereby caused MGSS’s corporate income tax for the corporate tax years ending June 2002, June 2003, and June 2004 to be under-reported by at least $93,770. This also caused his individual income tax for tax years 2001 through 2004 to be under-reported by at least $117,525. Before his guilty plea, Gorden repaid approximately $500,000 to the IRS, consisting of restitution to the United States in the amount of $211,295, plus additional taxes, penalties, and interest due and owing based on the IRS’s civil audit of his tax returns for the 2001 through 2004 tax years.
Former New York Power Authority Employee Sentenced to 37 Months for Bribery and Fraud Scheme
On January 23, 2009, in Brooklyn, N.Y., Edward P. Goldblatt, a former employee of the New York Power Authority (NYPA), was sentenced to 37 months in prison and ordered to pay $253,836 in restitution and to pay a $5,000 criminal fine for his role in a kickback and bribery scheme. Goldblatt pleaded guilty on August 26, 2008, to conspiring to defraud NYPA in a bribery scheme where he accepted $167,000 in kickback payments from a vendor. Goldblatt also caused NYPA to pay approximately $86,000 in fraudulent overcharges. In addition, Goldblatt pleaded guilty to income tax evasion for failing to report as income any of the kickbacks that he received for the years 2005 through 2007. NYPA is a nonprofit energy corporation established by New York State for the public benefit of the citizens of New York by providing low-cost power to government agencies, municipalities and private entities. NYPA finances its projects through bond sales to private investors and does not use tax revenue or state credit. According to court documents, Goldblatt was responsible for purchasing and awarding contracts for millions of dollars in goods and services annually for NYPA’s plants and offices. In addition, Goldblatt was responsible for issuing purchase orders, reviewing and authorizing vendor invoices for payment, and monitoring warehouse stock levels. NYPA’s policies and procedures include a competitive bidding policy to which Goldblatt was expected to adhere.
Texas Couple Sentenced for Identity Theft and Filing False Tax Returns
On January 22, 2009, in Dallas, Texas, Levander Carlton McLean, and his wife, Rita Murphy McLean, of Garland, Texas, were sentenced to 60 months in prison and 51 months in prison, respectively, for conspiracy to unlawfully use identification documents and filing false tax returns. The McLeans were also ordered to pay $208,600 in restitution. According to court documents, in July 2001, Levander and Rita Murphy McLean convinced their nephew, a Texas Department of Public Safety driver’s license technician, to provide a fraudulent Texas driver’s license and a Texas identification card in the names of two innocent people living in North Carolina and South Carolina. The McLeans used these identification documents, as well as a fraudulent Michigan driver’s license that Rita McLean obtained in the name of an innocent Texas resident, to open several fraudulent bank accounts in Dallas, Michigan, and North Carolina. From 2002 through 2004, the McLeans deposited more than $200,000 in proceeds from more than 130 false federal income tax returns, which had been filed in the names of real taxpayers using stolen W-2s, into these fraudulent accounts. The couple was convicted at trial in September 2008.
Former City of Newark Technology Contractor Gets 60 Months for Defrauding Cisco Systems of Millions
On January 20, 2009, in Newark, N.J., Michael Kyereme, aka Michael Appiahkyeremeh, a former information technology contractor for the city of Newark, was sentenced to 60 months in prison and ordered to pay $3,689,280 in restitution to Cisco Systems, Inc. Kyereme pleaded guilty on July 2, 2008, to charges of mail fraud and tax evasion. According to court documents, Kyereme fraudulently obtained Cisco replacement computer parts which he resold for millions of dollars. According to the Information to which he pleaded guilty, Kyereme, an independent contractor hired to provide information technology support to Newark, was responsible for assisting Newark employees when computer problems arose that required technical support. If it was determined that a computer-related problem could not be solved without outside assistance or a replacement part, Kyereme was authorized to contact Cisco Systems, Inc. for technical assistance and, if necessary, to request replacement parts. Kyereme admitted that between about August 28, 2002, and about March 2, 2007, he fraudulently requested and received Cisco replacement parts, after falsely claiming that certain components in Newark’s computer system had failed. Kyereme then resold them to a third party in California and kept the proceeds. Kyereme further admitted that on or about April 15, 2007, he filed a fraudulent personal tax return, with the IRS, which stated that his taxable income for the calendar year 2006 was approximately $81,494 and claiming a refund of approximately $4,034. In fact, Kyereme admitted, that tax return failed to include approximately $1,242,483 in additional taxable income. He admitted that an additional tax of approximately $429,826 was due the United States. In addition, Kyereme also admitted that his personal income tax returns for 2003, 2004 and 2005 also understated the amount of taxable income he received for those calendar years. Kyereme admitted that for tax years 2003 through 2006, a total additional tax of approximately $669,234 was due the United States.
Maryland Man Sentenced for Fraudulently Claiming $647,060 in Fuel Tax Credits
On January 16, 2009, in Greenbelt, Md., James Hallmon, of Ft. Washington, Maryland, was sentenced to 21 months in prison, followed by three years of supervised release, and ordered to pay $343,967 in restitution. Hallmon pleaded guilty in September 2008 to charges of mail fraud and filing a false claim with the Internal Revenue Service (IRS). According to his plea agreement, for the tax years 2005, 2006 and 2007, Hallmon filed federal corporate tax returns in the names of J&J Masonry, Inc.; Big J Trucking, Inc.; Big Jim Trucking, Inc.; Sunshine Trucking, Inc.; Black Alley Trucking, Inc.; Hallmon 1 Construction; Hallmon 33 Transport; and HHTTL Freight Trucking; in which he fraudulently claimed a total of $647,060 in fuel tax credits. Neither Hallmon nor any corporation owned by him purchased any fuel on which the tax refund claims were based.
Michigan’s U.S. Signal, Inc. Director of Operations Sentenced to Prison for Scheme
On January 13, 2009, in Grand Rapids, Mich., Timothy Hall, director of operations for U.S. Signal, Inc., was sentenced to 46 months in prison and ordered to pay $4.7 million in restitution to U.S. Signal and $192,000 to the Internal Revenue Service (IRS). Hall pleaded guilty in August 2008 to mail fraud and filing a false tax return. According to court records, Hall, along with Barry Raterink, of Middleville, Michigan, and Douglas Lautenbach, of Caledonia, Michigan, were part owners of Turnkey Network Solutions, Inc. They participated in a scheme to illegally sell property stolen from U.S. Signal, Inc. and submitted false construction and maintenance billing invoices from Turnkey Network Solutions, Inc., to U.S. Signal, Inc. The maintenance work was not being performed and the contract prices for the construction work were artificially inflated by using Hall’s “insider” knowledge within U.S. Signal, Inc. Hall was instrumental in these schemes, as he was in a fiduciary position with U.S. Signal to provide final approval on the fraudulent contracts provided by Turnkey Network Solutions. The fraudulent schemes caused U.S. Signal to lose more than $4.7 million. Also, according to court records, Hall filed a false 2006 tax return, on which he omitted over $210,000 in taxable income. On January 6, 2009, Raterink was sentenced to 60 months imprisonment and ordered to pay $4.88 million in restitution with over $200,000 of it to be paid first to the IRS. Lautenbach pleaded guilty in August 2008, to mail fraud and filing a false tax return. He is scheduled to be sentenced in late January 2009.
Nursing “Temp” Agency President Sentenced to 18 Months for Filing False Tax Returns
On January 9, 2009, in San Francisco, Calif., Digna Roldan Garrett was sentenced to 18 months in prison and ordered to pay a $4,000 fine and $138,784 in restitution for filing false tax returns. Garrett pleaded guilty in October 2008 to five counts of filing a false tax return. According to her plea agreement, Garrett admitted that as president of Friendly Available Service Today (FAST) Corporation, a nursing “temp” agency, since 1993, she under-reported $1.1 million in corporate gross receipts. A tax audit of Garrett’s corporate tax returns revealed that Garrett treated some of her employees as contractors to avoid the related payroll taxes. In an attempt to hide the payments to employees, Garrett altered corporate ledgers and cancelled checks and presented the altered documents to an IRS revenue agent. As a result of the audit, Garrett amended her 2002 and 2003 corporate tax returns, but continued to hide income from the IRS. She deposited cash and checks from clients into her personal bank accounts. With some of the money she diverted from the company, she purchased luxury items such as an automobile, purses, shoes, clothes and trips to Las Vegas, Nevada and the Philippines. Most of the diverted funds were used to pay employees under-the-table.
Indiana Man Sentenced to Prison for $221,000 Income Tax Fraud
On January 6, 2009, in Muncie, Ind., Steven R. Kreps was sentenced to 24 months imprisonment, ordered to file and pay his taxes, and fined $10,000 for filing false federal income tax returns. Kreps, owner and operator of Best Heating and Cooling (“Best”), pleaded guilty to the charges earlier. According to court documents, he admitted to preparing false Forms W-2, purported to have been issued to him from Best and submitting the fraudulent Forms W-2 to his tax return preparer for use in preparing his income tax returns. The false W-2s reported employee wages and income tax withholdings regarding Kreps that were not actually paid and withheld. As the owner of Best, Kreps was not an “employee.” During the same time, Kreps also prepared false Forms W-2 for four other individuals employed by Best, which also purported to have been issued from Best. The false Forms W-2 reported inflated wages and federal income tax withholding. Kreps prepared written draft income tax returns for each of these individuals using the false Forms W-2. Kreps then accompanied three of these individuals when they had their returns prepared. Kreps referred the fourth individual to H&R Block for return preparation. The false Forms W-2 were used by the tax preparers to prepare the income tax returns. Kreps received kickbacks from these individuals by charging them a portion of their falsely inflated tax refunds for his services.
Ohio Accountant Sentenced on Filing False Returns
On December 19, 2008, in Cleveland, Ohio, Paul E. Sabatino was sentenced to 18 months in prison, followed by three years of supervised release. Conditions of the supervised release include performing 150 hours of community service, continuing to participate in out-patient treatment for his gambling addiction, and cooperating with the Internal Revenue Service (IRS) in the determination and payment of his taxes. According to court documents, during 2002 through 2005, Sabatino embezzled approximately $1,676,247 from a client of the CPA firm where he worked as an accountant, by causing checks to be written for his benefit and use on a bank account of the client. During that period Sabatino incurred gambling losses exceeding the amount of the embezzlement and he used most of the embezzled funds directly to pay his gambling expenses. During the years 2002 through 2004, Sabatino deposited approximately $1,184,029 of the embezzled funds into a bank account he maintained in the name of a non-existent landscaping business, Northcoast Landscape Design. He reported only $228,200 of those funds on his tax returns, by showing them as Schedule C business receipts of the purported landscaping business. Starting in May 2005, Sabatino began laundering the embezzled funds by providing checks to his friend, Jonathan S. Solonche, either payable to Solonche or payable to a defunct business of Solonche’s. At Sabatino’s direction, Solonche deposited the checks and provided most of the deposited funds back to Sabatino, keeping approximately $37,517 for his own use. Solonche was sentenced on July 14, 2008, to two years probation and ordered to make restitution to the IRS.
Former Owner of Sign Company in Dallas Sentenced To Federal Prison on Tax Conviction
On December 18, 2008, in Dallas, Texas, Dong Choi Kim, the former president of Giant Sign Corporation, was sentenced to 12 months and one day in prison for making a false statement on an income tax return. According to the factual resume filed in Court, from 2001 through 2003, Kim would use check cashing stores to cash customers’ checks in order to obtain cash and convert it to his own use, omitting proceeds from the reported gross receipts of his business. As a result of this scheme, Kim was able to avoid the full payment of his taxes based on the true total income derived from his sign business for calendar years 2001, 2002 and 2003, resulting in total taxes due and owing of $81,181.
California Man Sentenced to Prison for Tax and Firearms Violations
On December 18, 2008, in Los Angeles, Calif., Guy Richard Moore was sentenced to 12 months and one day in prison, to be followed by three years of supervised release, and ordered to pay $400,000 in restitution to the Internal Revenue Service (IRS) and a $6,000 fine. According to court papers, Moore failed to report on his 2001 Form 1040 over $543,000 in taxable income he received from a family investment which resulted in a tax due of approximately $217,000. Court papers detailed that Moore agreed that he owed the IRS a total of approximately $400,000 in tax for the years 1999 through 2002. The tax owed by Moore was based upon over $1.2 million in income Moore failed to report to the IRS on his 1999 through 2002 tax returns. In addition to the tax charge, Moore pleaded guilty to being a previously convicted felon in possession of a firearm.
Former Director of Archives of the Mariners’ Museum and His Wife are Sentenced
On December 17, 2008, in Newport News, Va., Lester F. Weber and his wife, Lori E. Childs, were sentenced for their roles in a scheme related to the theft and subsequent sale of property from The Mariners’ Museum in Newport News, Virginia. The Mariners’ Museum, which receives annual federal funding, collects, preserves and displays maritime related objects and documents. Weber was sentenced to 48 months in prison, followed by three years of supervised release, and ordered to pay $172,357 in restitution. Childs received 15 months in prison. Weber pleaded guilty on June 10, 2008 to mail fraud, making and subscribing a false tax return, and theft from an organization receiving federal funds. Lori E. Childs pleaded guilty on September 4, 2008, to making and subscribing a false tax return for the 2005 tax year. According to court documents and proceedings, Weber was employed by The Mariners’ Museum as an archivist from 2000 through September 2006. Weber was promoted to Director of Archives in March 2006. In such capacity, Weber had archival and custodial duties for various types of historical nautical materials, including brochures, documents and pictures. From approximately 2002 through September 2006, Weber and Childs, operated a home based business that sold approximately $172,357 in maritime merchandise and other collectible items on the eBay auction website. Weber and Childs received the proceeds of the eBay sales by check, PayPal transfer, money order and Western Union; however, they failed to list on tax returns any of the receipts earned through the sale of items on the eBay website.
Texas Man Sentenced for Defrauding Hundreds of Victims in Investment Scheme and for Filing a False Tax Return; Ordered to Pay Approximately $2.6 Million Restitution
On December 17, 2008, in Dallas, Texas, Ronald Keith Owens, of Mineral Wells, Texas, was sentenced to 63 months in prison and ordered to pay a total of $2,582,376 in restitution to the hundreds of victims of his crime. In addition, once (if) that is paid off, Owens must pay $550,304 to the Internal Revenue Service (IRS). Owens operated an investment business known as Executive Investors, Inc. (EII), which was also known as Newlife Trade Group (NTG). According to court documents, through EII, NTG, and individually, Owens solicited money from individuals throughout the U.S. to invest in offshore “Bank Credit Instrument Trading,” supposedly located in Nassau, Bahamas, Germany and Switzerland; however, those financial instruments did not exist. Owens ran his scheme from approximately March 2000 through September 2007. As part of the scheme, he created promotional literature for buying and selling bank credit instruments that fraudulently reflected high investment returns, such as a 30% monthly return, with 10% of the return paid each month with the remaining 20% added to the principal investment and compounded. He also promoted investments in the offshore programs through group leaders who recruited investors and formed joint ventures to make investments. To keep his scheme going, he created and sent more than 200 lulling emails to investors about his supposed efforts to liquidate investments in foreign bank credit instruments and return principle and interest amounts to investors, well knowing the emails contained false information. As a result of Owens’ scheme, investors lost a total $2,471,267. Owens also admitted that he filed a false income tax return in 2003, reporting that he had $107,877 of gross income in 2002 when in fact he had approximately $1,142,322.
Arizona Businessman Sentenced to 18 Months in Prison for Filing a False Tax Return
December 15, 2008, in Phoenix, Ariz., Thomas Rikki Farr, of Scottsdale, Ariz., was sentenced to 18 months in prison for willfully filing a false income tax return. Farr will also be placed on one year of supervised release upon his release from federal custody. When Farr pleaded guilty in June 2008, he acknowledged that on his 2004 U.S. Individual Income Tax Return he reported $3,820 for total income when in fact he had received $743,346 in additional commission income from his association with Zylux Acoustic, Hong Kong, China. Farr also acknowledged that during 2005, he received $385,356 in additional commission income from his association with Zylux Acoustic which should have been reported on his 2005 U.S. Individual Income Tax Return.
Investment Fraud Scheme Promoter Sentenced to 6 ½ Years in Federal Prison
On December 15, 2008, in Los Angeles, Calif., Deandre Marcel Lawrence, the owner of American Growth fund LLC, was sentenced to 78 months in prison, three years of supervised release, and ordered to pay $1,826,971 in restitution for wire fraud and structuring of cash transactions related to his scheme that defrauded a victim- investor out of approximately $1.8 million. According to court papers, Lawrence admitted that he contacted his victim-investor and falsely represented that he was an investment advisor. Beginning in late 2002 and continuing into 2007, Lawrence induced his victim to send him money by telling her that he had successfully invested her money and had already earned large profits when he had not done so. Lawrence made many false representations to his victim, including claiming that he had been a licensed Wall Street stock broker and that he had over 100 clients investing with him. Further, Lawrence misrepresented to his victim that he had made over $100 million in profits investing her money when, in truth, Lawrence used virtually all of the money he received from the victim for personal purposes, including gambling in casinos. In an effort to avoid the cash transaction reporting requirements that banks are required to follow, Lawrence structured cash withdrawals, in amounts less than $10,000, from the American Growth Fund LLC bank account he controlled. Specifically, in September 2007, Lawrence structured a series of cash withdrawals to avoid these transaction reporting requirements. Lawrence admitted that he withdrew virtually all of his victim’s money sent to him in a similar fashion from the American Growth Fund LLC account.
Maryland Home Improvement Contractor Sentenced for Tax Evasion; Failed to Report over $1.4 Million
On December 15, 2008, in Greenbelt, Md., Jeffrey Sarris, of Bethesda, Maryland, was sentenced to 12 months and one day in prison, to be followed by three years of supervised release, for tax evasion. According to his plea agreement, since 2000, Sarris operated Bethesda Home Improvement Corporation (BHIC), a home improvement/contracting company. Sarris cashed BHIC customers’ payment checks at a restaurant in Rockville, Maryland, negotiating more than $884,000 in checks in 2002, more than $957,000 in 2003 and more than $1,246,000 in 2004. Sarris saved large amounts of cash in a safe deposit box and did not maintain a personal bank account. Sarris frequently used cash in the day-to-day business activities of BHIC, including paying employees in cash, using cash to pay all or a portion of subcontractors’ bills, to purchase building materials from suppliers, and to reimburse his family for obtaining credit for BHIC. Court documents indicate that Sarris failed to file individual income tax returns for 1994, 1995 and 1997 through 2003 and failed to file employment tax forms for BHIC until 2002. Sarris did not respond to IRS notices of tax delinquencies and deficiencies relating to his personal and business employment tax returns from 1988 through 2003. In May 2005, during an interview with an IRS Revenue Agent, Sarris made several false statements, including denying that he had accumulated cash savings, denying cashing checks at the restaurant in Rockville, and claiming that he deposited all checks into his business bank account. After meeting with the IRS, on September 19, 2005, Sarris removed the cash from his safe deposit box and purchased checks, which he used to pay $900,000 of his personal and BHIC’s employment tax liabilities (including interest and penalties on both) and an estimated tax payment for 2005. Sarris admitted that for the years 2000 through 2004, he failed to report $1,424,754 in income and was responsible for a total tax loss of $981,549.
Former Chief Financial Officer of Catholic Diocese of Cleveland Sentenced for Tax Crimes
On December 11, 2008, in Cleveland, Ohio, Joseph H. Smith, a CPA and attorney, was sentenced to 12 months and a day in prison for his participation in a scheme to defraud the Internal Revenue Service (IRS). Following a six-week trial, a jury in Cleveland convicted Smith of one count of conspiracy to defraud the United States and IRS, four counts of filing false tax returns, and one count of corruptly endeavoring to impede the IRS. According to court documents and evidence presented at trial, Smith was the treasurer, chief financial officer, and eventually the financial and legal secretary for the Catholic Diocese of Cleveland. Co-conspirator Anton Zgoznik, a former diocese employee, owned and operated several corporations that provided accounting, tax, financial and computer technology services for the diocese on an outsourced basis. During trial, it was shown that Smith and Zgoznik entered into a scheme to defraud the IRS. Entities that Zgoznik owned and controlled paid Smith more than $784,000 from 1997 to 2003. Smith and Zgoznik disguised these payments as compensation earned for “consulting” or “legal” services that Smith purportedly provided for the Zgoznik entities. Smith failed to report, and improperly reported, a portion of the payments on his income tax returns. In addition, Smith received $270,000 of unreported income from the diocese by means of two checks in 1996 and 1997, which were deposited into a brokerage account he controlled in the name and tax identification number of the diocese. Evidence at trial established that Smith also failed to report dividends and capital gains he earned on the investments in that account. Zgoznik was convicted, in October 2007, in a separate trial on counts of conspiracy to commit mail fraud and mail fraud (related to a scheme to defraud the Diocese of Cleveland), the corrupt endeavor charge described above, and four counts of aiding and assisting in the preparation of a false return. A sentencing date for Zgoznik has not yet been set.
Nebraska Business Owner Sentenced for Avoiding Cash Reporting Transactions
On December 10, 2008, in Omaha, Neb., David E. Wortman was sentenced to 30 months imprisonment, ordered to pay $200,903 in restitution and to forfeit $236,728 for harboring illegal aliens and structuring financial transactions to evade currency reporting requirements. Wortman, who owned Cloudburst Underground Sprinkler Systems, admitted to hiring undocumented workers who were unlawfully present in the United States. He also admitted in his plea agreement to cashing customer checks written to his company in such a way as to avoid triggering federal cash transaction reporting requirements. Wortman cashed groups of customer checks, ranging in number from 22 checks to 108 checks, in amounts always totaling more than $9,000 but never more than $10,000. Wortman used cash to pay his undocumented workers and paid his documented employees with check.
Maui Real Estate Agent/Broker Sentenced for Tax Offenses
On December 8, 2008, in Honolulu, Hawaii, Bruce Robert Travis was sentenced to 24 months in prison for obstructing and impeding the lawful administration of the tax laws by the Internal Revenue Service (IRS) and filing a false amended federal individual income tax return for the calendar year 2000. Travis, a Kihei, Maui resident, was also ordered to pay $14.958 in restitution to the IRS, as well as $17,828 for the costs of prosecution and a $5,000 fine. According to the July 2007 Indictment, Travis, who worked as a real estate agent and broker, conducted his real estate business on Maui through Americorp International Limited, incorporated in the State of Hawaii, for which Travis was the owner, president, treasurer and director before its dissolution around 2004. Also around 2004, Travis became president, partner and manager of Americorp International LLC, through which he continued to conduct his real estate business. The indictment states that Travis signed and filed Form 1040 tax returns for 2003 and 2004 wherein he falsely claimed charitable deductions for payments he made to two entities belonging to or operated by Royal Lamarr Hardy, who was convicted of tax crimes in 2005 in Honolulu. According to the plea agreement, Travis, while an IRS audit of him was ongoing, also signed and filed false amended individual income tax returns wherein he improperly claimed itemized deductions equal to the adjusted gross income he previously reported on his original Form 1040 tax returns. As a result, Travis falsely claimed that he owed no income taxes for each of the years under audit; which were 1996 through 2000. Beginning around March 2004, he sought and obtained a fraudulent arbitration award from the Western Arbitration Council in the amount of $300,000 against both the IRS and the IRS employee who conducted the aforementioned audit. Travis obtained the fraudulent arbitration award in an attempt to hinder IRS collection efforts. Travis’ sentence was based on information produced for the court that the tax loss to the United States for the years 1996 through 2004, without any interest or penalties, totaled over $400,000.
North Dakota Attorney Sentenced for Tax Evasion & Mail Fraud
On December 8, 2008, in Bismarck, N.D., Douglas D. Sletten was sentenced to 41 months in prison and ordered to pay $614,247 in restitution for income tax evasion and mail fraud. In his August 2008 plea agreement, Sletten admitted that he failed to file tax returns in 2005, 2006 and 2007, and that he owed more than $70,000 in unpaid taxes. In addition, Sletten raided his law office’s trust account to pay for daily living expenses, college tuition for his children, travel, and other personal expenses. Sletten mailed letters containing false and misleading information to his clients, whose funds were deposited in the trust account, which resulted in the mail fraud charge.
California Man Sentenced To Prison for Tax Evasion and Ordered to Pay $311,587 in Back Taxes
On December 8, 2008, in Oakland, Calif., Richard Wayne Cutshall was sentenced to 12 months and 1 day in prison and ordered to pay restitution of $311,587 for income tax evasion. Cutshall pleaded guilty on June 25 to two counts of tax evasion and admitted in his plea agreement he intentionally did not file tax returns on income he received as an independent consultant/contractor for General Automation (GA Express) in Irvine, Calif. To hide his income and assets from the IRS, Cutshall arranged for his compensation to be paid to “LVR Holdings,” a limited liability company. Some of the cashier’s checks were deposited into a bank account held by LVR Holdings, which he and his wife had control over. Cutshall failed to report receipts of $1,467,290 and thereby evaded tax due and owing of $311,587.
Las Vegas Lawyer Sentenced to 15 Months in Prison for Tax Evasion
On December 1, 2008, in Las Vegas, Nev., Attorney Mark A. Lobello was sentenced to 15 months in prison and ordered to pay $141,667 in restitution to the Internal Revenue Service (IRS) for tax evasion and willfully failing to file federal income tax returns. Lobello was indicted in November 2006 and later pleaded guilty to failing to pay taxes for five years. According to court filings, Lobello earned more than $600,000 in income between the years 1997 and 2001, but willfully failed to file federal income tax returns or pay any federal income taxes for the those years, even though he owed the IRS over $140,000. Lobello also attempted to conceal his income from the IRS by dealing in cash; mixing business funds with personal funds; using multiple taxpayer identification numbers; holding assets in the names of nominees; filing frivolous motions to quash IRS requests for his records; and demanding that clients withdraw IRS paperwork indicating he had earned taxable income.
Florida Man Sentenced to Three Year Prison Term for Failing to Report $1.6 Million in Internet Pharmacy Income
On November 25, 2008, in Cedar Rapids, Iowa, Alexis Avello, of Coral Gables, Florida, was sentenced to 36 months in prison and ordered to pay $558,566 in restitution to the Internal Revenue Service (IRS) for failing to report more than $1.6 million in income. Avello, an officer of an Internet pharmacy business, pleaded guilty on June 6, 2008. At his plea hearing, Avello admitted he falsely filed a federal income tax return in 2005 in which he claimed his taxable income for 2004 was $5,929 when his actually income was really $1.66 million. Avello agreed as part of the plea agreement to litigate the civil forfeiture of more than $3.8 million he received from Pharmacom, an Internet pharmacy business for which he was a corporate officer until early 2004.
Owner of California Supper Club Sentenced to 46 Months for Tax Fraud
On November 21, 2008, in Santa Ana, Calif., Rene Boudewijn Kohler was sentenced to 46 months in prison, to be followed by one year of supervised release. According to court documents, Kohler was the owner of Ozz Supper Club bar and restaurant in Buena Park, California from 1990 to 2005. He was convicted in May 2008 by a trial jury on five counts of submitting false tax returns to the Internal Revenue Service (IRS), for tax years 1999 through 2003. Kohler failed to report over $2 million in cash revenues generated by the door fee Ozz Supper Club charged patrons to enter the premises. According to court documents, Kohler maintained records of the daily revenues generated by Ozz Supper Club that included the door fees. According to Kohler’s bookkeeper, monthly income ledgers were prepared that contained, among other things, a column that detailed the door income. At Kohler’s request, monthly profit and loss statements were prepared that also reflected the door income. In addition to preparing the profit and loss statements that showed the door income, Kohler also asked his bookkeeper to prepare year-end profit and loss statements that left blank the door income figure. Kohler provided his tax preparer the profit and loss statements that did not include the door income.
Seven Defendants Sentenced to Prison for Filing Fraudulent Claims for Fuel Tax Credits
On November 21, 2008, in Valdosta, Ga., the United States Attorney announced that seven defendants were sentenced for defrauding the Internal Revenue Service (IRS). The defendants participated in a fraud scheme involving the filing of fraudulent claims for refund based on fictitious diesel fuel tax credits. When businesses purchase diesel fuel on which federal excise taxes have already been paid (known as “undyed fuel”) and use that fuel in off-highway business equipment, the businesses qualify for a tax credit for the excises taxes paid. However, the claims for refund in this investigation were fraudulent because the defendants did not purchase, nor did they use, the undyed fuel in their off-highway business equipment. The seven defendants sentenced were collectively responsible for fraudulent claims for federal income tax refunds totaling $3,214,231. The defendants were sentenced as follows: Dana K. Swain was sentenced to 36 months in prison, three years of supervised release, and ordered to pay $1,597,809 in restitution; Mason E. Coddington was sentenced to 24 months in prison, three years of supervised release, and ordered to pay $414,440 in restitution; Misty Kelly Linn was sentenced to five months in prison, five months of home confinement, three years of supervised release, and ordered to pay $118,356 in restitution; Lonnie Cason was sentenced to twelve months of home confinement, five years probation and ordered to pay $460,218 in restitution; Rev. Marvin W. Swain was sentenced to one year home confinement, five years probation, and ordered to pay $309,835 in restitution; Linda Cason was sentenced to six months home confinement, five years of probation, ordered to pay $349,023 in restitution; Rachel K. Swain was sentenced to five months in prison, five months home confinement, one year of supervised release and ordered to pay $528,284 in restitution. The defendants filed the false claims with the IRS through the tax preparation services of Clinton Basil Hughes and Pamela Hughes who are currently awaiting sentencing.
Louisiana Man Sentenced for Tax Fraud
On November 20, 2008, in New Orleans, La., Alvin Gautreaux, Jr., a resident of Hammond, Louisiana, was sentenced to 15 months in prison, to be followed by three years of supervised release, and ordered to pay $73,565 to the Internal Revenue Service (IRS). According to court documents, Gautreaux admitted that on his 2003 tax return, he claimed that he had an overpaid tax withheld and was entitled to a refund. To substantiate this overpayment, Gautreaux admitted that he prepared a false Form W-2 which was submitted along with his tax return to the IRS.
Two Men Sentenced in $32 Million Scam that Bilked more than 500 Victims
On November 19, 2008, in Los Angeles, Calif., Pastor Robert Jennings was sentenced to 12 years in prison for his role in an investment scam that led more than 500 victims to lose over $28 million after being told they could make money in coal mines and a gold transaction. A second man involved in the scheme, Arthur Simburg, of Portland, Oregon, was sentenced on November 17, 2008, to nine years in federal prison. The two were ordered to pay $28 million in restitution. While the scheme collected more than $32 million, some of the money was returned to investors as part of the Ponzi scheme. A third defendant involved in the plot, Henry Jones, a record company executive, will be sentenced at a later date. Jennings was found guilty in July following a three-week jury trial. The evidence at trial showed that Jones, Simburg and Jennings solicited investors for a coal mine venture and an alleged international gold transaction that purportedly involved the sale of 20,000 tons of gold between Israel and the United Arab Emirates. They duped investors largely through nightly conference calls in which investors were promised huge rates of return on their investments – as much as 300 percent within 60 days. Most of the conference calls included group prayer, during which investors were told that the gold transaction was “divinely inspired” and that it was God’s will for it to come to fruition. Jones spent more than $21 million of the victims’ money on his own extravagant personal expenses and to fund his music business.
Minnesota Man Sentenced for Defrauding Elderly Couple
On November 12, 2008, in Minneapolis, Minn., Joseph William Hughes was sentenced to 46 months in prison and ordered to pay $456,970 in restitution to a financial services company for his role in a scheme to defraud and obtain money and property from an elderly and vulnerable Elkton, Minn. couple. Hughes was indicted on April 23 and pleaded guilty on July 8 to one count of mail fraud and one count of tax evasion. According to his plea agreement, from May 2004 through December 2006, Hughes was a registered representative of financial services company, AXA Advisors LLC. AXA sold insurance and investment products, and retirement planning services. An elderly couple became clients in June 2005 after the husband suffered a stroke that impaired his ability to manage the family’s finances. After the stroke, the couple provided more than $400,000 to Hughes for investment in AXA investment accounts. In June 2005, Hughes began executing a scheme to embezzle over $400,000 by diverting funds from the couple’s AXA accounts for his own use and benefit. In furtherance of the scheme to defraud, on June 29, 2005, Hughes mailed a letter containing a $33,000 check from the victims to AXA’s offices in New York, which he then diverted to his own use and benefit. The funds embezzled by Hughes were income that he was required to report on his income tax returns. However, Hughes willfully attempted to evade and defeat a large part of the income tax due and owing by preparing false and fraudulent income tax returns.
Ohio Man Sentenced to Prison for Tax Evasion
On November 5, 2008, in Cleveland, Ohio, Joseph Michael Cahlik, formerly of Garfield Heights, Ohio, was sentenced to 46 months in prison, followed by two years of supervised release for tax evasion. Cahlik pleaded guilty to two counts of tax evasion on August 19, 2008. According to the indictment filed on April 2, 2008, Cahlik received taxable income of approximately $899,610 during the years 2001 and 2002. During those years Cahlik attempted to evade income taxes due and owing of approximately $275,740 by concealing from the IRS his true and correct income through the use of nominee bank accounts and extensive use of currency.
Operator of Online Pharmacies Net Doctor and Male Clinic Sentenced for Tax Fraud
On November 4, 2008, in Los Angeles, Calif., Roy Colina Alivio, an online pharmacy operator who specialized in distributing Viagra, was sentenced to 21 months in prison after having been found guilty of tax fraud earlier this year. A jury convicted Alivio on six counts of subscribing to false federal income tax returns that he filed with the Internal Revenue Service (IRS). According to court documents, Alivio filed tax returns with the IRS for his businesses, Net Doctor and Male Clinic, as well as for himself, for the years 1999 and 2000. When Alivio filed his 1999 business tax return for Net Doctor with the IRS, he failed to include over $1.1 million in sales receipts as income on the return. Additionally, when Alivio filed his tax year 2000 partnership return for Net Doctor, he failed to include over $1.7 million in sales receipts. The returns Alivio filed for his other business, Male Clinic, failed to include over $661,000 and $792,000 in sales receipts for the tax years 1999 and 2000, respectively. On each of the returns filed for his businesses, Alivio reported zero gross receipts from sales. Alivio’s net profits from the operation of his two business entities for the years 1999 and 2000 totaled over $800,000. Alivio was also convicted for subscribing to false 1999 and 2000 personal tax returns as well. According to the indictment, Alivio reported on his 1999 tax return $3,471 in income, when the total income he knew he received in 1999 was at least $324,720. Further, for the 2000 tax year, Alivio reported total income of $4,357, when the total income he knew he had received was at least $568,667. Alivio did not pay approximately $230,000 in income tax to the IRS for the 1999 and 2000 tax years.
Former General Services Administration (GSA) Contractor Employee and Four Subcontractors Sentenced in Kickback Scheme
On October 31, 2008, in Washington, DC, Charles Anthony Wehausen, a former General Services Administration (GSA) contractor employee, was sentenced to 33 months in prison, to be followed by three years of supervised release. In addition, Wehausen was also ordered to pay $188,941 in restitution to the GSA and $55,260 for unpaid taxes to the Internal Revenue Service (IRS). The sentence also included an order of forfeiture in the amount of $188,941. Wehausen pleaded guilty in February 2008 to a charge of conspiracy to commit mail fraud and a charge of income tax evasion. According to the government’s evidence, from 2000 through mid-2003, Wehausen was a chief engineer and project manager at the Washington, DC office of PM Services, Inc., a building maintenance services company, which provided building maintenance services for the GSA at several federal buildings in Washington, DC. Wehausen’s job duties included locating subcontractors to perform more extensive mechanical work outside of the routine maintenance handled by PM Services. He was also responsible for preparing the paperwork necessary to hire and pay the subcontractors. After paying subcontractors for their work, PM Services would obtain reimbursement from GSA. Wehausen conspired with four subcontractors to artificially and fraudulently inflate job costs listed in purchase orders and invoices. These fraudulent documents were sent to the headquarters office of PM Services where company officials sent payments to the subcontractors. The subcontractors, in turn, gave a portion of the payments to Wehausen as kickback payments. The total amount of fraudulent payments as a result of the conspiracy was approximately $384,500, a loss suffered by the GSA. Wehausen also evaded the reporting and payment of federal income taxes on the payments he received from the subcontractors, resulting in losses to the taxpaying public of $55,260. Earlier in the year, four co-conspirators were sentenced to terms ranging from 60 days in prison to six months home confinement to five years probation. Together they were ordered to pay a total of $198,942 in restitution.
Florida Boiler Room Trader Sentenced to 48 Months on Tax and Fraud Charges
On October 31, 2008, in Miami, Fla., Jeffrey Jedlicki, of Delray Beach, Florida, was sentenced to 48 months in prison and ordered to pay $6,029,279 in restitution. In August 2008, Jedlicki pleaded guilty to an Information charging him with conspiring to commit mail and wire fraud and to defraud the United States. According to court documents and statements made in court, while working at multiple boiler rooms throughout South Florida, Jedlicki misled investors into investing in foreign currency options. Jedlicki falsely told investors that they could expect to make high profits while being exposed to little risk. Jedlicki, however, knowingly failed to tell the investors that over 95 percent of those who had invested with him had lost their money and that he had been previously barred from acting as a broker by the National Futures Association. In addition to misleading investors, Jedlicki failed to report to the Internal Revenue Service nearly $1 million in income he had earned during tax years 2003 and 2004. Jedlicki would divert his salary and commissions to a newly created corporation, and then falsely deduct as business expenses his personal expenses, including payments for his car, credit card bills, and meals.
Wyoming Man Sentenced to 24 Month Prison Term for Tax Fraud
On October 28, 2008, in Casper, Wyo., Rudy Marn was sentenced to 24 months in prison and ordered to pay $618,938 in restitution. According to court documents, Marn filed a false tax return in 2003. He reported that his income on the tax return was $169,888 when he knew that his income was substantially more. Marn’s unreported tax income resulted in a tax loss to the government of approximately $239,847.
Business Owner Sentenced to Prison for Tax Evasion
On October 28, 2008 in Madison, Wis., Godofredo Macapugay was sentenced to twelve months plus one day in prison and ordered to cooperate with the Internal Revenue Service (IRS) in filing and paying his unpaid income taxes. Macapugay pleaded guilty in August 2008 to filing a false Form 1040 for tax year 2004 that substantially underreported his joint income with his wife. According to the government, Macapugay and his wife underreported $367,918 in income earned from their business, Midwest Heating and Air Conditioning, for the tax years 2001 through 2004. The defendants evaded $110,067 in federal income taxes. Macapugay’s wife, Elizabeth, pleaded guilty to income tax evasion and was sentenced to 36 months probation. She also faces deportation.
Utah Roofing Company Owner Sentenced for Tax Evasion
On October 27, 2008, in Salt Lake City, Utah, David Roger Hemmert, was sentenced to twelve months and a day in prison and ordered to pay $134,614 in restitution for federal income tax evasion. Hemmert, owner and operator of Northwind Roofing, Inc. (Northwind), pleaded guilty in August 2008 to one count of tax evasion. He deposited third party checks from Northwind’s customers into a bank account and received cash back, ranging from $1,000 to $9,500 per deposit. Hemmert acknowledged the he knowingly and willfully failed to report some of that cash as taxable income on his personal federal tax returns.
Missouri Man Sentenced for Filing False Tax Returns
On October 24, 2008, in St. Louis, Mo., Royal Adams was sentenced to 18 months in prison and ordered to pay $252,219 in restitution to the Internal Revenue Service (IRS) for filing false tax returns. Adams pleaded guilty in June 2008 admitting that he created a corporate entity, Royal Personnel in 1990. In 1998, he entered into an informal agreement with David Icke, a British author and public speaker to split the net profits from the sale of Icke’s books, with 75 percent going to Icke and 25 percent going Adams. In 2005, Icke and Adams ceased doing business together and Icke sent Adams a Notice of Termination to terminate their verbal agreement. For the years 2001, 2002, and 2003, Adams understated his income and overstated his deductions on his tax returns. The IRS identified income not reported on his personal tax returns for the years 2001 through 2003 in the amount of $581,868. A substantial portion of these proceeds were generated by the sale of Icke’s books. The IRS calculated the total tax loss for those years as $252,219.
Illinois Man Sentenced to 89 Month Prison Term for Ponzi Scheme
On October 22, 2008 in Chicago, Ill., Brian Jines was sentenced to 89 months in prison and ordered to pay $4.9 million in restitution for mail fraud and structuring cash transactions. Jines was charged in a 20 count indictment in March 2007 for his role in a Ponzi scheme. In February 2008, Jines pleaded guilty, admitting that he and a co-defendant used false and fraudulent statements to persuade investors to invest in a business called Bank Watch. Jines falsely claimed that investor funds would be invested in CDs at FDIC insured institutions. However, investor funds were converted to cash by transferring and withdrawing the money in amounts under $10,000 to avoid the creation of cash transaction reports that are required to be sent to the government. In furtherance of the fraudulent scheme, Jines placed advertisements for Bank Watch in newspapers across the country, targeting areas populated by “baby boomers.” Additionally, Jines opened bank accounts in nominee names in several states to further the fraud scheme. The court ordered forfeiture of $831,547 in 16 bank accounts and three other sources.
Nevada Resident Sentenced in Ohio for Tax Fraud
On October 21, 2008, in Cleveland, Ohio, Fayez Damra, aka Alex Damra, was sentenced to 21 months in prison and ordered to pay $274,389 in restitution to the IRS. Damra, a Henderson, Nevada resident, was convicted by a jury on May 4, 2007, of conspiring to defraud the United States in an alleged conspiracy in which he distributed funds from his computer software design corporation, known as Applied Innovation Management, Inc. (AIM), to members of the Damra family, then deducted those funds as AIM expenses. Fayez was also convicted of a violation for attempting to evade and defeat approximately $184,788 in corporate income tax due from AIM for its 1999 tax year.
Arizona Physician Sentenced to 51 Months in Prison on Tax and Fraud Charges
On October 21, 2008, in Phoenix, Ariz., Carlin Grant Bartschi, M.D. was sentenced to 51 months in prison and ordered to cooperate with the Internal Revenue Service (IRS) in paying more than $570,000 in taxes, interest and penalties. Bartschi was found guilty in June 2008, of 18 felony counts relating to tax evasion and mail fraud. Trial evidence showed that Bartschi created and presented five different fictitious financial obligations for payment of federal tax assessments. The fictitious obligations were prepared to appear as if they were drawn upon a nonexistent account at the U.S. Department of Treasury. In submitting the fictitious obligations to the IRS and the District Court, Bartschi was found to have used the U.S. Postal Service in attempting to execute a scheme to defraud. From 1995 through 2003, Bartschi was employed as an independent contractor and emergency room physician for hospitals in Globe and Phoenix, Ariz., and regularly earned well over $100,000 per year.
Georgia Businessman Sentenced to 60 Months in Federal Prison
On October 16, 2008, in Macon, Ga., George McKinnon was sentenced to 60 months in prison, followed by three years of supervised release. In addition, McKinnon was ordered to make restitution in the sum of $4,000,050 to United Agri Products (UAP) of Moultrie, Georgia. He was also ordered to pay $1,357,572 to USDA Farm Services against which $369,059 has been offset by the Tobacco Transition Payment Program leaving a balance of $988,512. The defendant will be credited against that balance by future installment payments by tobacco payments. The court stated that the defendant will pay $988,512 to the Farm Services Agency in Douglas, Georgia. In February 2008, McKinnon pleaded guilty to conspiracy to commit an offense against the United States, wire fraud, money laundering and making a false, fictitious or fraudulent claim. According to court documents, McKinnon conspired with Nolan Ross, a former manager of UAP, to exploit a weakness in UAP’s electronic inventory ordering system’s internal controls to divert UAP products. Ross provided the stolen inventory to McKinnon, who then sold the inventory to unauthorized third parties. In an attempt to hide the scheme from UAP, Ross charged some of the sales to accounts of other UAP customers without their knowledge. Ross was sentenced in June 2008 to 42 months in prison.
Rhode Island Business Owner Sentenced for Tax Fraud Related to a Kickback Scheme
On October 16, 2008, in Hartford, R.I., Louis G. Xifaras, of Bristol, Rhode Island, was sentenced to 12 months and one day in prison, followed by one year of supervised release in home confinement under electronic monitoring. Xifaras was also ordered to pay a $50,000 fine and $222,078 in back taxes within 30 days, as well as pay to the Internal Revenue Service (IRS) $166,558 in penalties and $164,142 in interest. On May 2, 2008, Xifaras pleaded guilty to one count of filing a false income tax return. According to documents filed with the court and statements made in court, Xifaras formerly owned and operated Innovative Network Solutions (INS) of Pawtucket, Rhode Island, a company that provided computer Internet services including server installations. In 1999, an employee of Southwestern Bell Communications (SBC) approached Xifaras with a proposal that he would ensure INS received subcontracting work from SBC in exchange for kickbacks being paid to the SBC employee. The method by which the kickbacks were paid to the SBC employee was to put his wife on INS’ payroll as a “no-show” employee. INS was an S Corporation which means that the company’s income and expenses were reported on the owner’s income tax return. In 2002, Xifaras reported income of $968,070, deducting $272,882 that INS paid to the SBC employee’s wife. However, kickbacks disguised as salary for a no-show job are not deductible business expenses, so Xifaras should have reported taxable income of $1,240,952.
Minnesota Man Sentenced for Mail Fraud, Wire Fraud, and Failing to File Tax Returns
On October 16, 2008, in Minneapolis, Minn., Neulan Midkiff was sentenced to 180 months in prison and ordered to pay $18.9 million in restitution following his August conviction on mail fraud, wire fraud, conspiracy to commit mail fraud, and failure to file tax returns. Midkiff was sentenced for defrauding 519 people out of approximately $30 million in an investment scheme. He promised investors a 6 to 8 percent per month return on their investment and told them that other investors were obtaining high rates of return on their investment, when he knew that the investment was not producing any interest payments. Midkiff’s company, “Central Financial Services of Minnesota,” entered into an agreement to invest money that he and his co-defendant collected from investors with West Wing Financial. Midkiff provided West Wing $1 million, and in exchange, West Wing promised to pay a minimum of 8 percent interest per month for 14 months. Later, Midkiff learned that most of the $1 million they sent to West Wing had been stolen by West Wing. Midkiff did not inform investors, but concealed the disappearance by paying investors’ monthly “interest” payments. Midkiff and his co-defendant solicited new investors and used their money to fund monthly payments to previous investors. Midkiff paid himself or otherwise used for personal expenses in excess of $2.5 million out of the funds provided by investors.
Connecticut Man Sentenced for Filing False Tax Returns
On October 14, 2008, in New Haven, Conn., Bernard Rynecki, Jr., of Simsbury, was sentenced to 12 months and one day in prison, followed by three years of supervised release, and ordered to pay $47,265 to the Internal Revenue Service (IRS) in back taxes and interest. Rynecki pleaded guilty on June 13, 2008, to making false claims for tax refunds. According to documents filed with the court and statements made in court, Rynecki filed five false tax returns for tax years 2002 and 2003. The tax returns falsely claimed that Rynecki and two of his children received income from an entity known as “Research and Measurements,” had taxes withheld, and were entitled to refunds. Rynecki also altered genuine IRS W-2 Forms received by one or more of his children and submitted that false information with some of the five false tax returns.
Missouri Businessman Sentenced for Filing False Tax Returns
On October 15, 2008, in St. Louis, Mo., Eddie Hasan was sentenced to 12 months and one day in prison for filing false tax returns. Hasan operated MOKAN CCAC, and provided consulting services for minority owned businesses, minority business training, and monitored minority participation in construction contracts, including construction contracts entered into by the St. Louis Public School District. Hasan opened a bank account at Gateway Bank in the name of MOKAN Public Schools, separate from MOKAN’s ordinary operating accounts so that the money paid by the school district to Hasan through MOKAN would not be reported on his W-2 Wage and Tax Statement. Hasan also jointly owned and operated MOKAN/ADECS, a separate entity which was also paid to monitor minority participation in construction contracts in the city of St. Louis. Hasan admitted that he failed to report approximately $470,144 in income from MOKAN for tax years 2001 through 2005, leaving tax due of approximately $105,996. According to the U.S. Attorney, Hasan did not file an income tax return for tax years 2004 and 2005 even though he earned income during those years.
Alabama Bookkeeper Sentenced for Tax Evasion
On October 8, 2008, in Montgomery, Ala., Dina Michelle Starnes was sentenced to 24 months in prison. After her release from prison, Starnes will serve three years of supervised release, during which she will be required to make restitution payments to the Internal Revenue Service. In June 2008, Starnes pleaded guilty to the tax evasion. According to court records, from December 2003 through August 2007, Starnes was employed as a bookkeeper at an accounting firm in Opelika. From 2004 through 2007, Starnes embezzled approximately $529,000. At first, Starnes would write payroll checks to herself (using variations of her actual name) and would then either deposit or cash the checks. Later, Starnes began writing checks for much larger amounts, covering her illegal activities by making entries in the books to make it appear as if the checks had been written to legitimate vendors. Starnes did not file a federal income tax return for 2004, and she filed tax returns for 2005 and 2006 that failed to declare the embezzled $529,000 as income. The total tax evaded from 2004 through 2006 was approximately $115,159.
Minnesota Man Sentenced for Filing False Tax Returns
On October 8, 2008, in St. Paul, Minn., Kevin J. Morse was sentenced to 30 months in prison and one year of supervised release on five counts of filing false tax returns for tax years 1996-2000. Morse was convicted by a federal jury in February 2008 following a five-day trial. He had previously been convicted in 1999 of filing false tax returns for tax years 1991-1994. Morse, a farmer, filed returns showing no taxable income or tax owing for four of the five years, and less than $1,000 in taxes owing for 2000. Trial evidence showed that between 1996 and 2000, Morse netted more than $680,000 on more than $1 million in revenue from farming, interest and dividends, government farm subsidies and rental of his land to other farmers. A tax preparer who prepared returns for Morse in 2002 testified that he calculated Morse would owe more than $100,000 in back taxes. But instead of filing those returns, Morse filed returns in which he deducted all of his income using an irrelevant section of the tax code, and thereby claimed to owe virtually no taxes. The court concluded that Morse owed more than $120,000 in taxes for the years involved.
Florida Construction Business Owner Sentenced for Understating Gross Receipts on Tax Returns
On October 2, 2008, Jacksonville, Fla., Joseph Barney Wainwright, Jr., was sentenced to 18 months in prison, to be followed by one year of supervised release, and ordered to pay the Internal Revenue Service (IRS) for all under-reported gross receipts for the years 2000 through 2007, plus interest and penalties. Wainwright’s total tax bill will be more than $600,000. Wainwright pleaded guilty on September 13, 2007 to filing false federal income tax returns. In his plea agreement, Wainwright admitted that he knowingly and willfully filed false federal income tax returns for the years 2000 and 2001. On the false returns, Wainwright substantially understated gross receipts from his business, Wainwright Construction. For the year 2000, Wainwright’s tax return understated gross income from his business by more than $1 million. Likewise, for the year 2001, his tax return understated gross receipts by more than $600,000. There were also other false entries on his tax returns for both years.
Oklahoma School Superintendent Sentenced to Prison for Embezzlement and Filing a False Tax Return
On October 1, 2008, in Muskogee, Okla., former school Superintendent Larry Duane Couch was sentenced to 24 months in prison and ordered to pay $4,000 for embezzlement of government funds and making and subscribing a false tax return and forfeiture of $979,000. Couch admitted that while working as the superintendent of the Marble City School District, he embezzled and converted to his own use, property over the value of $5,000. He also admitted to filing a false individual income tax return on which he claimed an adjusted gross income of $24,062, while his actual adjusted gross income was $142,312. Couch was ordered to forfeit $979,000, which represented the money the defendant embezzled from government funds.
Examples of IRS General Tax Fraud Investigations in Fiscal Year 2008
Oklahoma Man Sentenced to 10 Years in Prison; Ordered to Pay $1 Million in Restitution for Fraudulent Investment Scheme
On September 30, 2008, in Muskogee, Okla., Phillip Levaughn Raglin, of Wagoner, Oklahoma, was sentenced to 120 months in federal prison and ordered to pay $1 million in restitution to victims for money laundering. Raglin pleaded guilty in May 2008 to money laundering in a fraudulent investment scheme. His business, Raglan Industries, LLC was not a registered investment advisor or broker-dealer. From July 2006 through December 2006, Raglin devised a scheme where he sold memberships in Raglin Industries. He held himself out to be a multi-millionaire businessman experienced in investments and described his company to potential investors as a highly profitable company investing in securities and real estate around the world. He also described his company as an investment firm possessing unique computer software under patent application which enabled him to make optimum trading decisions to maximize profit. Raglin assured investors a 30 percent monthly return on their investments with guaranteed monthly pay-outs and promised investors that their principal investment was without risk because it was insured. Raglin paid early investors using money from later investors in order to lull investors into believing Raglin Industries legitimately invested their funds to promote future investments by new investors, and to prevent early detection of the scheme to defraud. Raglin did not invest funds as investors were told, but instead deposited investor funds into several bank accounts in his control for his own personal benefit and for the benefit of his family and associates.
Former President of Operating Engineers Local 825 Sentenced to 27 Months in Prison for Union Corruption and Tax Evasion
On September 16, 2008, in Newark, N.J., Peter O. Strannemar, the former president of Local 825 of the International Union of Operating Engineers, was sentenced to 27 months in prison for tax evasion and conspiring with others to demand and receive labor bribes totaling approximately $112,000 from construction contractors that worked at the Goldman Sachs construction project in Jersey City. Strannemar pleaded guilty on May 28, 2008. At his hearing, Strannemar admitted that beginning about May 2001, he conspired with Anthony Mann, a lead engineer at the project, and Craig Wask, a Local 825 business agent, to unlawfully demand and receive cash payments and other things of value from two construction companies at the project – a steel erector company and a plumbing company. Strannemar acknowledged that he requested and received free household appliances, valued at approximately $1,900, from the plumbing company, and that the appliances were delivered to his residence by Mann. In total, Strannemar acknowledged that he and his co-conspirators unlawfully received approximately $112,000 in labor bribe payments from the steel erector company and plumbing company. In addition, Strannemar admitted that on or about April 15, 2004, he filed a federal tax return that concealed approximately $50,000 in taxable income that he had received in 2003.
Montana Woman Sentenced to 75 Months in Prison for Tax Evasion
On September 16, 2008, in Helena, Mont., Susan Tocci Campbell was sentenced to 75 months in prison and ordered to pay $973,866 in restitution for embezzlement, income tax evasion and aggravated identity theft. Campbell was an accountant for the Facilities Management Bureau of the Montana Department of Administration General Services Division in Helena. According to court records, Campbell’s husband had a maintenance contract with the agency from 2002 until 2007. In 2007, it was discovered that Campbell continued to issue agency checks to her husband’s business for maintenance work that was never performed. The total amount of money embezzled between December 2002 and June 2007 was $739,312. Shortly after depositing the checks into Jack’s Technical Assistance’s bank account, Campbell wrote checks payable to herself, her son and her daughter-in-law by signing her husband’s name.
Iowa Man Sentenced to Prison for Filing False Tax Returns
On September 12, 2008, in Cedar Rapids, Iowa, Thomas Dillavou was sentenced to 12 months and one day in prison for filing false income tax returns. According to a plea agreement, Dillavou, co-owner of Plastic Injection Molders, Inc., admitted to diverting approximately $598,172 in company funds and spending the money in a variety of ways, including a personal investment scheme overseas, paying for repairs and remodeling for his personal residence, making payments for personal loans, and paying for vacation expenses. Dillavou admitted to failing to report the funds he diverted from the company as personal income on tax returns for 1997 through 2000. Tax returns for these four years were eventually filed in 2002 and 2003.
Minnesota Man Sentenced to 134 Months for Tax Evasion
On September 11, 2008, in Minneapolis, Minn., Robert B. Beale, the founder and former chief executive officer of a computer parts firm, Comtrol Corp., was sentenced to 134 months in prison and ordered to pay a $175,000 fine for conspiracy to defraud the U.S., tax evasion and failing to appear in federal court. Beale, with the assistance of Lee Stagni, the former president of Comtrol, engaged in a concerted effort to conceal and disguise Beale’s salary from the Internal Revenue Service (IRS). Stagni was convicted in 2006 and was sentenced to 43 months in prison. According to court documents, prior to July 2000, Beale was paid as an employee of Comtrol using an automated payroll system, with standard withholdings for state and federal taxes. In July 2000, although his duties at Comtrol had not changed, Beale directed the company’s payroll department to change his employment designation from “employee” to “consultant.” Beale began submitting invoices to Comtrol for his salary under the name of the Chayil Corp., a shell corporation which served no purpose other than as a pass-through entity for concealing Beale’s income from the IRS. From 2000 to September 2004, Comtrol failed to report to the IRS more than $5.1 million in income paid to Beale. According to court records, Beale never personally reported the income, and never filed a tax return or paid any income taxes on the money. A warrant was issued for his arrest after he failed to appear for the start of his tax evasion trial on Aug. 14, 2006. U.S. Marshals captured him in Orlando, Fla. in November 2007. Beale was convicted by a jury on April 30, 2008 following an eight-day trial.
Florida CPA Sentenced on Tax Charges
On September 4, 2008, in Miami, Fla., Orlando Benjamin Roche, Jr., of Marathon, Florida, was sentenced to 18 months in prison for his guilty plea to failing to pay Federal Insurance Contributions Act (FICA) and withholding taxes, and failing to file individual income tax returns. He was ordered to file amended tax returns and cooperate with the Internal Revenue Service (IRS) in its determination, assessment, and collection of income taxes relating to the years 2001 through 2004. According to court documents, Roche will also relinquish his CPA license.
Owner of Trash Empire Sentenced to More Than Seven Years in Federal Prison
On September 3, 2008, in New Haven, Conn., James Galante was sentenced to 87 months of imprisonment and ordered to pay $1.6 million to the IRS and fined $100,000 for racketeering, conspiring to defraud the IRS, and wire fraud. Galante’s sentencing follows a long-term investigation into the waste-hauling industry in Connecticut and eastern New York. According to court documents, Galante was the majority owner of 25 trash companies in western Connecticut. He admitted to fixing a bid for the operation of a transfer station in Connecticut. To insure that the transfer station would be operated by a specific individual, Galante directed several co-conspirators to rig the bid. Galante also admitted to defrauding the IRS on his personal tax returns and corporate returns. His scheme involved: preparing false and fraudulent expense checks that were paid to himself; placing a number of no-show employees on the payrolls of trash hauling companies and deducting the expenses related to these employees, including their salaries, health care costs, and expenses associated with the use of free cars, on corporate tax returns; filing false tax returns for 530 Main Street North, a company whose only asset was a house occupied by a co-conspirator; providing payroll kickbacks to Galante from certain employees who received an extra paycheck that was cashed and provided to Galante; and, skimming cash from various business operations. In addition, Galante admitted to instructing another co-conspirator to tamper with a witness scheduled to appear before the grand jury. As the owner of the Danbury Trashers a United Hockey League team, during the 2004-2005 season, Galante admitted to mail fraud by circumventing the League’s $275,000 annual salary cap by causing other co-conspirators to prepare and fax approximately 30 fraudulent salary cap reports to the UHL office in Iowa. Galante knew the salary cap reports were false, as he was aware that several Trashers players were receiving income above what was reported to the League. Additionally, several Trashers players and/or their spouses were on the payroll of various waste hauling companies even though they performed no work for those companies. Certain players also received additional unreported compensation in the form of double housing allowance payments and/or cash bonuses that were not reported to the League. As part of his guilty plea, Galante forfeited his ownership interests in 25 trash hauling companies; a residence located in Southbury, Connecticut and adjoining parcels of land; six race cars; and $448,153 in currency. As a condition of his guilty plea, Galante is required to withdraw from participating in the trash industry in the United States. Thirty-three individuals and 10 businesses have been charged with various offenses as a result of this investigation. Thirty-two individuals have pleaded guilty.
Texas Man to Serve Two Years in Federal Prison for Failing to Report Nearly $400,000 In Lawsuit Settlement Proceeds on His Income Tax Return
On August 26, 2008, in Dallas, Texas, Malcolm M. Kelso was sentenced to 24 months in prison and ordered to pay a $50,000 fine for filing a false tax return. Kelso pleaded guilty in May 2008 to one count of making and subscribing to a false tax return under penalty of perjury. According to the United States Attorney, Kelso admitted that he received $399,981 in proceeds from the settlement of a lawsuit. Those proceeds were income to Kelso and he signed and filed his 2004 individual income tax return knowing that he did not report the the proceeds from the settlement of the lawsuit as income.
Ohio Women Sentenced on Identity Theft and Tax Fraud Charges
On August 25, 2008, in Toledo, Ohio, Wendy Hakeos was sentenced to 18 months in prison, to be followed by three years of supervised release, and ordered to pay $224,000 in restitution. Hakeos pleaded guilty to one count of identity theft and one count of filing false income tax returns in March 2008. According to her plea agreement, Hakeos signed the name of her employer on checks drawn on the employer’s bank accounts, signed her employer’s name on credit card convenience checks drawn on the employer’s credit cards, and signed her employer’s name to an authorization to transfer funds from her employer’s investment account to the employer’s bank account. She further admitted that her actions facilitated the theft of $175,000 from her employer. The plea agreement also stated that Hakeos failed to report as income the stolen funds and caused a tax loss of $49,000.
Illinois Man Sentenced to 30 Years for $5 Million Ponzi Scheme
On August 19, 2008, in Chicago, Ill., Frank Panice was sentenced to 360 months in prison and ordered to pay $4.9 million in restitution for money laundering, unlawful structuring of transactions, mail fraud and transportation of stolen securities. Panice was indicted by a federal grand jury in December 2005. While free on bond, Panice was charged by complaint and arrested in December 2006 on separate charges related to a new multi-million dollar Ponzi scheme he started while he was free on bond for his 2005 charges. In March 2007, Panice was charged again, this time in a 20 count indictment related to running a Ponzi scheme. To perpetrate his scheme, Panice established a business called Bank Watch. He induced 87 investors and prospective investors to invest more than $5 million with Bank Watch, falsely representing to them that their funds would be invested in CDs maintained at FDIC-insured institutions. In fact, rather than investing their funds in FDIC-insured CDs, Panice converted the victims’ funds to his personal benefit. Investor funds were converted to cash by structuring cash withdrawals from financial accounts into which investors’ checks had been deposited.
Member of Chicago Outfit Sentenced to Over Three Years in Prison
On August 14, in Chicago, Ill., Joseph Venezia was sentenced to 40 months in prison for conspiracy to commit tax fraud and operating an illegal gambling business. Venezia was among the 14 “Family Secrets” defendants indicted in April 2005. Prior to the landmark Chicago trial, Venezia pleaded guilty to the charges and admitted to conducting an illegal gambling business that operated for the financial benefit of the Chicago Outfit. For approximately seven years, Venezia was employed by “M&M Amusements,” a large-scale illegal gambling business owned solely by Michael (Mickey) Marcello, brother of Outfit boss, James Marcello. M&M Amusements placed and maintained video gambling machines at various taverns, restaurants and clubs in the Chicago area. Venezia’s incarceration will be followed by 36 months of supervised release.
Ponzi Scheme Operator Sentenced to 17 ½ Years in Prison for Defrauding Investors of $25 Million and Failure to File Tax Returns
On August 13, 2008, in Dallas, Texas, James Ray Phipps was sentenced to 210 months in prison. Phipps was convicted in April 2007 of mail fraud, wire fraud, money laundering, corrupt endeavor to obstruct and impede the Internal Revenue Service (IRS) laws, and income tax evasion. According to court documents, from 1998 to 2006, Phipps received more than $25 million from the more than 30,000 participants in his “Life Without Debt” pyramid scheme. He used unsolicited faxes, unsolicited mailings, weekly conference calls and live seminars that encouraged others to become members and contribute money to “Life Without Debt,” promising that in return, they would receive money for recruiting other members. Members contributed between $2,000 and $100,000. The larger the contribution to “Life Without Debt,” the larger the supposed return of money from the plan. Contributions were restricted to cash and money orders only, but eventually Phipps began requiring payments in cash only. Phipps represented that he would collect a four percent fee for administering “Life Without Debt” and would distribute the remainder of the contributed money to people above them in the pyramid matrix. Evidence at trial showed that even after Phipps was indicted in April 2006, he continued to hold conference calls to recruit new members. At trial, the government presented evidence that Phipps failed to report any income on a tax return since 1987 and failed to file a tax return since 1988. Further, he responded to legal IRS correspondence with frivolous arguments that he was a “sovereign” citizen not subject to the jurisdiction or tax laws of the United States.
Home Healthcare Service Provider Sentenced for Tax Fraud
On August 11, 2008, in Los Angeles, Calif., Maria Cecilia Sy Chico, aka Mario Chico, the owner and operator of several home healthcare service providers, was sentenced to 18 months in prison and one year of supervised release. In addition, Chico was ordered to pay all outstanding taxes due for the years of conviction. In April 2008, Chico was convicted of tax fraud charges related to her participation in a scheme to divert income from the business she and a co-defendant controlled to their personal benefit. According to the indictment, Chico owned and operated RBJ Management, Inc., dba Helping Hands Health Care, from 2000 through 2004. During this time, Chico also operated three additional healthcare related businesses, including Total Quality Home Care, Inc., Four Seasons Quality Home health, Inc., and Global Management Support Services, Inc. For the tax years 2000 and 2001, Chico failed to report hundreds of thousands of dollars in income on her federal income tax returns – income that included payments disguised as loan repayments, payments to third parties on her behalf, and payments to her gambling account at Caesar’s Palace. Specifically, Chico failed to report to the Internal Revenue Service approximately $220,000 on her 2000 federal income tax return and approximately $87,000 on her 2001 tax return.
Florida Lottery Winner Sentenced for Filing False Return
On August 8, 2008, in Tampa, Fla., Rhoda Toth was sentenced to 24 months in prison, to be followed by one year of supervised release, and ordered to pay $1,110,458 in restitution and to pay a $100 special assessment. Toth pleaded guilty in November 2007 to subscribing to a false income tax return. According to court documents, in 1990, Rhoda and Alex Toth won $13.3 million in the Florida State Lottery. In 1999, they exchanged their annual payments from the lottery for one lump sum payment. The sentencing memorandum states that Rhoda Toth failed to report the lump sum payment on her 1999 income tax return.
Internet Entrepreneur Sentenced for Filing a False Tax Return
On August 6, 2008, in Seattle, Wash., Lyle R. Larson was sentenced to 18 months in prison and ordered to pay $879,252 in restitution. Larson, the owner of the software development company Red Planet Corp., pleaded guilty in April 2008 to filing a false tax return. As part of the plea, Larson admitted that he had significantly under-reported his business income and failed to report self-employment taxes on his 2000 through 2003 income tax returns. According to documents filed in this case and statements made in court, from 2000 to 2003 Larson earned over $2.8 million in compensation and commissions as a self-employed computer programmer and consultant. However, he reported only $38,035 in business income on his income tax returns. Additionally, Larson filed no personal income tax returns for 2004, 2005, or 2007.
“Diploma Mill” Promoter Sentenced to Prison; Ordered to Forfeit Over $500,000 in Cash, Bank Accounts, and Assets
On August 5, 2008, in Spokane, Wash., Steven Karl Randock, Sr. was sentenced to 36 months in prison, to be followed by three years of supervised release, and ordered to forfeit his interest in over $500,000 in seized cash and various bank accounts, real property and a 2001 Jaguar XK8. According to the plea agreements, from August 1999 until August 2005, Steven Karl Randock, Sr. and seven others operated an Internet-based diploma business selling false and fraudulent academic products. These products included high school degrees, college and graduate-level degrees, fabricated academic transcripts, and “Professorships.” During this period, the diploma business sold approximately $6,282,679 of fraudulent academic products to over nine thousand individuals located in the United States and elsewhere. The counterfeit diplomas and academic products were purportedly from legitimate academic institutions, as well as fictitious institutions created by the defendants. According to the plea agreement for co-defendant Richard Novak, between October 2002 and September 2004, approximately $19,200 was wired from an account in the State of Washington controlled by Dixie Ellen Randock and Steven Karl Randock, Sr., to a bank account in Maryland in the name of the Liberian Consul. Previously, Dixie Ellen Randock was sentenced to a 36 month term of imprisonment, followed by three years of court supervision; her daughter, Heidi Kae Lorhan was sentenced to 12 months and one day imprisonment, followed by two years of court supervision; and Roberta Markishtum was sentenced to a 4 month term of imprisonment followed by one year of court supervision.
Missouri Residential Property Project Manager Sentenced for Tax Evasion
On August 5, 2008, in St. Louis, Mo., Edward Barrier was sentenced to 30 months in prison for tax evasion. According to court documents, during the years 2002 through 2005, Barrier was self-employed as a project manager supervising the development of high-end residential property in the St. Louis area. Barrier also identified properties for development, and was paid substantial sums of money for these services during each of these years. His total income for those four years was $2.46 million. However, Barrier did not file any federal income tax returns for those years. The total tax liability for the four years after allowing for expenses and deductions totaled $796,514. Barrier was audited by the IRS and additional taxes were assessed against him for tax years 1987 through 1994. Barrier failed to pay the taxes due and quit filing tax returns. After the audit, the IRS sent Barrier numerous notices regarding his tax liabilities; however, he did not pay any of the taxes or dispute the assessment. Instead, according to the U.S. Attorney, Barrier attempted to evade the payment of these taxes by doing business in cash; not acquiring any assets in his own name; residing with his mother; titling vehicles in the name of an unregistered business entity and limiting his use of bank accounts. The total tax due, including the unpaid liabilities for the years 2002 and 2005, and the liabilities assessed for the years 1987 through 1994 totaled $1 million. Barrier also began structuring his cash transactions in 2002 to prevent detection of his income by the IRS. He took the checks he earned from his property and construction management services to the bank on which the check was drawn and obtained a combination of cash and cashiers checks from that bank. Barrier usually obtained an amount of cash under $10,000 and structured over $700,000 in these types of transactions between August 2002 and January 2006.
Former Indiana Fire Department Treasurer Sentenced to 30 Months in Prison
On August 1, 2008, in Indianapolis, Ind., Susan D. Wargel was sentenced to 30 months imprisonment and ordered to pay $263,331 in restitution to the German Township Fire Department and $40,378 restitution to the IRS. Wargel was a volunteer firefighter and treasurer for the German Township Fire Department in Vanderburgh County, Indiana. In 2004, Wargel became a full-time employee of the fire department. She held a position of a firefighter with the rank of captain and was responsible for the fire department’s bookkeeping duties. In 2007, the fire department discovered that approximately $263,331 was missing. A criminal investigation began, and in April 2007, Wargel was charged with forgery and four counts of filing false federal returns. Wargel pleaded guilty to the charges and admitted to forging the signature of a fire department official on approximately 352 checks from the fire department’s checking account for her personal benefit, and that she concealed her theft by making false entries in the check ledger. The forged checks were traced to Wargel’s personal payments for furniture, clothing, a vacation and a Caribbean cruise. From 2003 through 2006 Wargel had failed to report the funds she obtained from the forgery scheme on her tax returns.
Wife and Husband Sentenced in Embezzlement Scheme and Ordered to Pay Over $870,000 in Restitution
On July 29, 2008, in Boston, Mass., Natalie and Thomas Fleury were sentenced to 36 months in prison and 18 months in prison, respectively. Both defendants were also sentenced to two years of supervised release. Natalie Fleury was ordered to pay $755,479 in restitution; Thomas Fleury was ordered to pay $118,034 in restitution. According to the Indictment, Natalie was the office manager and bookkeeper of Florence Crittenton League (FCL) Adoption Agency, a non-profit organization located in Lowell, Mass., that provided adoption services for prospective parents in the United States seeking to adopt children from Russia, China and other foreign countries. The Indictment states: from on or about December 16, 1998, through on or about March 28, 2006, Natalie Fleury devised and executed a scheme to defraud FCL of approximately $637,444 by means of false and fraudulent pretenses, representations, and promises. Natalie Fleury altered checks to make them payable to her after those checks were signed by the director of FCL. The indictment further charged both Natalie and Thomas Fleury with tax evasion for the tax years 2000 through 2005. The Fleurys failed to report $562,744 on their income tax returns over those five tax years.
Three Defendants in Minnesota Mortgage Fraud Scandal Sentenced
On July 31, 2008, in Minneapolis, Minn., the owners of Parish Marketing and Development Corp. (PMDC), a long-time Minnesota homebuilder, were sentenced for conspiring to commit mortgage fraud and money laundering in connection with a scheme involving approximately 200 residences and $100 million in loan proceeds. According to the Minnesota United States Attorney, Michael Alan Parish was sentenced to 156 months in prison; Ardith Ann Parish was sentenced to 60 months in prison; and Christopher David Troup was sentenced to 120 months. According to their November 2007 guilty pleas, PMDC utilized “straw buyers” to buy about 200 properties built by PMDC. Their scheme generated nearly $100 million in loan proceeds, with PMDC receiving in excess of $25 million from these loan proceeds. The defendants acknowledged that they completed loan applications for the straw purchases, which included false information; executed loan documents in the names of the straw buyers; and, manufactured and provided false documentation, such as false representations of employment and false verifications of deposit, to obtain loans to buy the properties from PMDC. The straw buyers did not execute the sales documents and loan documentation, which were instead signed by the defendants, and they made no payments on the mortgages that were taken out in their names. Instead, PMDC made the payments or allowed the mortgages to go into foreclosure. Often, PMDC utilized proceeds from the sale of one residence to a straw buyer to make monthly payments for the mortgages held on other residences in the names of other straw buyers.
Former Lead Salesman of Danbury Trash Companies Sentenced to 46 Months in Prison
On July 29, 2008, in New Haven, Conn., Richard Galietti, of Fort Myers, Florida, was sentenced to 46 months in prison, followed by three years of supervised release, for conspiring to violate the federal Racketeer Influenced and Corrupt Organizations (RICO) Act and for making a false statement to a federal law enforcement officer. Galietti pleaded guilty to the charges on May 8, 2008. According to court documents and statements made in court, Galietti, a former lead salesman at Automated Waste Disposal (AWD) an affiliated Danbury-based companies operated by James Galante, conspired with other carting companies to perpetuate the “property rights system.” Carters engaged in the property rights system would not service or compete for other carters’ customers. The property rights system essentially destroys free enterprise, allowing the participating carters to artificially inflate their prices and leaving waste removal customers with no other options. Galietti and others participated in the affairs of the enterprise by agreeing to respect the unwritten rules of the property rights system. The false statement charge to which Galietti pleaded guilty stems from an Indictment from the Middle District of Florida. On December 14, 2006, special agents of the Internal Revenue Service, Criminal Investigation Division executed a search warrant at a business in Fort Myers, Florida. On that date, Galietti, who had been released on bond following his June 2006 arrest in Connecticut and was employed by the Florida business being searched, was encountered by federal agents executing the warrant and asked if he worked for the company. Galietti falsely stated that he did not, and that he simply was “dropping by to say ‘hello.” As a condition of his plea agreement, Galietti agreed to forfeit $130,750 to the government.
Former Government Services Administration (GSA) Employee Sentenced for Bribery and Tax Evasion Involving Over $130 Million in Federal Contracts
On July 28, 2008, in Greenbelt, Md., Dessie Ruth Nelson, of Oakland, California, a former longtime employee of General Services Administration (GSA), was sentenced to 60 months in prison, followed by three years of supervised release, and ordered to forfeit $138,500 and to pay $38,780 in restitution to the Internal Revenue Service (IRS). In January 2008, Nelson pleaded guilty to accepting over $100,000 in bribes and evading income taxes on the bribe payments she accepted in return for her assistance in awarding three federal contracts worth over $130 million. According to the plea agreements of Nelson and Michael Holiday, Nelson was responsible for contracting on behalf of GSA with private companies to provide security to GSA managed buildings. Former Montgomery County police officer Michael Holiday was the chief executive officer and owner of Holiday International Security, Inc. (HIS) which provided federal facilities with physical security, primarily through armed guards. In May 2003, HIS changed its name to USProtect Corporation. Between 2000 and 2003, Holiday and other contractors provided Nelson with cash, vacations and other benefits worth over $100,000, in exchange for her assistance, including the award of three multi-million dollar contracts to HIS. GSA solicited bids for a contract to provide security services to California federal facilities in November 1999. Although HIS’s bid was almost $10 million higher than the lowest bid received by GSA, Nelson awarded the contract to HIS in May 2000. From 2000 through 2004, GSA paid HIS and USProtect more than $54 million pursuant to this contract. Nelson admitted that in return for her assistance in obtaining several contracts, Holiday provided her with, among other benefits, cash and a Caribbean cruise. In addition, Nelson admitted that she failed to report the cash and other illicit payments from Holiday and other contractors as income on her federal individual income tax returns for 2000 through 2003. Nelson concealed the income by arranging to make cash deposits into her bank accounts in amounts that did not exceed $10,000, in order to evade federal reporting requirements regarding cash transactions. Holiday was sentenced to 48 months in prison and ordered to pay $400,000 in restitution to the IRS on July 14, 2008.
Jordanian Citizen Sentenced to 42 Months in Prison; Ordered to Forfeit More Than $3 Million in Cash and Property
On July 23, 2008, in Bridgeport, Conn., Fares Khraisat, a citizen of Jordan, last residing in Easton, Connecticut, was sentenced to 42 months in prison for his participation in a commercial bribery scheme, and for violating federal tax and immigration laws. Khraisat was ordered to forfeit more than $3 million in cash, real estate and other items, and to pay a $30,000 fine. On February 11, 2008, Khraisat pleaded guilty to mail fraud, conspiracy to commit money laundering, making a false statement on an immigration application, and making a false statement on a tax return. According to documents filed with the court and statements made in court, Khraisat owned and operated Zam-Zam Telecard, Inc., a Bridgeport-based phone card company. In pleading guilty, Khraisat admitted that he paid more than $400,000 in bribe payments to Jonathan Kaplan, a co-defendant, in order to receive favorable treatment from Kaplan’s company. Khraisat also admitted that he and others provided between $400,000 and $500,000 in cash, which represented proceeds of illegal activity, to several other co-defendants, who then transferred the funds to a bank account in Jordan. Khraisat also admitted that he made false statements on an immigration application and on his 2005 tax return. Khraisat is subject to deportation after serving his prison term. On November 14, 2007, Jonathan Kaplan pleaded guilty to wire fraud and tax evasion. He awaits sentencing.
South Bend Man Sentenced to 294 Months for Scams Targeting Seniors
On June 23, 2008, in South Bend, Ind., Perry F. Motolo was sentenced to 294 months in prison and ordered to pay $2.6 million in restitution to his victims and $592,133 to the IRS. Motolo pleaded guilty to an Indictment which charged him with mail fraud, tax evasion, failure to file tax returns and money laundering. According to the Indictment, Motolo targeted senior citizen clients; convincing them he would set up trust accounts for them and persuaded them to fund the accounts by transferring their assets into his control. Instead of setting up the trusts as promised, Motolo transferred most of the client’s funds into a brokerage account he controlled. He used the proceeds to pay for personal expenses. Motolo convinced clients that his dealings with them had to be confidential so that the trust would be preserved. As part of his scam, Motolo created various business entities which he used as nominees in order to evade taxes.
Former President of Frazier Historical Arms Museum Sentenced to Two Years in Prison for Failing to Pay Taxes
On July 22, 2008, in Louisville, Ky., Michael K. Salisbury, of Owens Crossroads, Alabama, was sentenced to 24 months in prison, to be followed by one year of supervised release, and ordered to pay a $25,000 fine. In January 2008, Salisbury was found guilty on two counts of willfully failing to pay taxes in 2000 and 2002. The Indictment filed against Salisbury alleged that he had conspired to defraud a local philanthropist and his former employer, the Frazier Historical Arms Museum, between September 17, 1997 and September 18, 2002, and that he evaded paying taxes on the substantial income he made from those crimes in the tax years 1999 through 2002. Evidence at trial showed Salisbury made over $1.75 million from inflating the prices he paid for antique firearms in those years, resulting in a tax liability of $655,702.
Seattle Spammer Sentenced to 47 Months in Prison for Mail Fraud, Spam and Tax Charges
On July 22, 2008, in Seattle, Wash., Robert Alan Soloway, owner of Newport Internet Marketing Corporation (NIM), was sentenced to 47 months in prison for mail fraud, electronic mail fraud, and willful failure to file a tax return. Soloway pleaded guilty in March 2008. Soloway was dubbed the “Spam King” by investigators, because of his prolific and prolonged spamming. According to court records, Soloway offered a “broadcast e-mail” software product and “broadcast e-mail” services. These products and services constituted criminal “spam” i.e. bulk, high volume commercial e-mail messages that contained false and forged headers and were relayed using networks of proxy (botnet) computers. Soloway and NIM made false and fraudulent claims about the products and services on their Web site. Among them was a claim that the e-mail addresses used for the product and services were “opt-in” e-mail addresses. The Web site promised a satisfaction guarantee with a full refund to customers who purchased the broadcast e-mail product. However, customers who later complained were threatened with additional financial charges and referral to a collection agency. In his plea agreement, Soloway admitted that in tax year 2005 he earned $309,725 in gross revenue, but failed to file an income tax return.
Dentist Sentenced to 120 Months in Prison for Multi-Million Dollar Mortgage Fraud
On July 21, 2008, in Trenton, N.J., Terrance D. Stradford, aka Wayne Sellers, was sentenced to 120 months in prison and ordered to pay $592,000 in restitution. On September 26, 2007, a jury convicted Stradford on 24 federal charges including tax evasion, wire fraud and money laundering. During the trial, the jury heard how Stradford, a former Staten Island, N.Y., dentist, operated a scheme in which he fraudulently obtained approximately $2.76 million in mortgage loans, and spent the proceeds on luxury items including the purchase of a 46-foot yacht and a North Carolina residence. Stradford and others used fraudulent documents, made false statements, and established fictitious companies and opened bank accounts in various company names to fraudulently obtain mortgages secured by a property at Commerce Lane in Berlin Township. At the trial, evidence showed that in October 1999, Stradford formed a limited liability company called 412-414 Commerce Lane, LLC (412-414 LLC). In December 1999, Stradford, acting through 412-414 LLC, purchased the Commerce Lane property for $337,500 with a first mortgage in the amount of $310,000 held by American Business Credit Inc. In September 2002, Stradford encumbered the Commerce Lane property with a second mortgage in the amount of $244,756. The evidence presented to the jury showed that in June 2004, Stradford used the Commerce Lane property as collateral for a $500,000 mortgage loan from Quantum Corporate Funding, Ltd. In obtaining the loan, Stradford provided fraudulent documents to Quantum, including income tax returns containing a fake social security number and a commitment for title insurance which falsely indicated that there were no current mortgages on the Commerce Lane property. In August 2004, Stradford used the Commerce Lane property as collateral for a $585,000 mortgage loan from Eastern Savings Bank. In September 2004, the defendants repeated the scheme to obtain a $275,000 mortgage loan. In addition to the $1.36 million in loans at issue in the Superseding Indictment, at sentencing, the judge held the defendant responsible for an additional $1.4 million in fraudulently obtained loans. These included a $595,000 loan that Stradford fraudulently obtained from GE Capital, which Stradford had represented would be used to purchase medical equipment for his dental practice, as well as two mortgages obtained from Countywide Home Loans, in which Stradford fraudulently represented that he had sold certain properties to his father. The judge also entered a $720,000 criminal forfeiture judgment against the Stradford, which the government sought as proceeds derived from the scheme.
New Jersey Man Sentenced to 46 Months for Tax Evasion; Ordered to Pay Restitution of $5.8 Million to Investors
On July 21, 2008, in Trenton, N.J., Brian Winters was sentenced to 46 months in prison and ordered to pay approximately $5.8 million in restitution to investors whom Winters scammed into buying interests in fictitious private hedge funds. In April 2008, Winters pleaded guilty to one count of tax evasion for not reporting approximately $481,402 in income for tax year 2002. At his plea hearing, Winters admitted that during the tax years 2002 and 2003, he owned and operated Global Trading Investments (GTI) and the Wyndham Group (WG), both located in Lacey Township. Winters admitted that through GTI and WG, he sold interests in fictitious private hedge funds to investors and then commingled the investment funds in his business accounts. Winters withdrew and used the investment funds for his own personal use. In January 2004, Winters filed a U.S. Individual Income Tax Return, Form 1040, for tax year 2002, which stated his taxable income for that year was $96,787. He failed to disclose and report additional taxable income from the fraudulent scheme of approximately $481,402, upon which an additional tax of approximately $187,413 was due. Winters also admitted that he failed to pay an additional tax of $751,716 due the United States for tax year 2003. As part of Winters’ plea agreement, he will be responsible for restitution to the victim investors of GTI and WG.
Montana Woman Sentenced for Embezzlement Scheme
On July 18, 2008, in Missoula, Mont., Jamee Lee Ferlic was sentenced to 18 months in prison and ordered to pay $103,293 in restitution for tax evasion. Ferlic worked as the office manager at Jerome’s Drilling, a water well drilling company in Missoula. Her duties included preparing payroll documents, billing, bill paying, and other general office work. During a routine check of business records by a credit union upon Ferlic’s application for a loan, auditors discovered a discrepancy between the salary she listed on her application and deposits to her bank accounts. Further investigation revealed that she embezzled approximately $380,000 from her employer. According to evidence presented at trial, Ferlic stole the money by changing the payee on expenses entered into Jerome’s Drilling’s accounting system to show the names of vendors that the company dealt with on a regular basis. Ferlic then wrote checks to herself and coded transactions to make it look as if the check was written to a vendor. She had no authority to sign business account checks and also, business checks required two signatures. To overcome this obstacle, Ferlic obtained pre-signed checks and wrote the checks to herself and to personal creditors to pay off personal debt. On her federal income tax returns Ferlic failed to add the additional income she embezzled from Jerome’s Drilling.
Former Attorney Sentenced to Nine Years in Prison on Fraud and Tax Charges
On July 15, 2008, in Boston, Mass., Alan Mason, of Princeton, Mass., was sentenced to 108 months in prison, to be followed by three years of supervised release, and ordered to pay $6,628,119 in restitution. Mason, dba Alan Mason Legal Services, Inc., was an attorney whose law practice was centered on providing legal services in connection with real estate closings. According to court documents, Mason from at least June 2001 through June 2006, engaged in a fraudulent scheme in which he took funds he received from banks for the purpose of paying off prior liens on properties for closings he was handling, and converted those funds for his own personal and business purposes. Mason prepared documents, including checks and HUD-1 forms, which made it appear that he had in fact paid off the prior liens. Instead, Mason made monthly mortgage payments to the prior lienholders in order to prevent the loans from going into default and thus alerting the buyers, sellers and new lenders that the prior lien had not been paid off. His scheme defrauded more than ten lenders, including several federally insured financial institutions and Stewart Title, of more than $6.6 million. Mason also evaded the payment of more than $3 million in taxes by, among other things, setting up and controlling multiple real estate trusts and bank accounts using the names of employees and relatives but which did not identify Mason’s interest in writing to prevent the tax authorities from attaching those assets.
Former CEO of Security Company Sentenced in Bribery Scheme Involving $130 Million in Federal Contract
On July 14, 2008, in Greenbelt, Md., Michael B. Holiday, a former Montgomery County police officer, was sentenced to 48 months in prison, followed by three years of supervised release, and was ordered to pay $400,000 in restitution to the Internal Revenue Service (IRS). According to his plea agreement, Holiday was the chief executive officer and owner of Holiday International Security, Inc. (HIS), based in Silver Spring, Maryland. In May 2003, HIS changed its name to USProtect Corporation. Dessie Ruth Nelson, a former longtime employee of General Services Administration (GSA), was responsible for contracting on GSA’s behalf with private companies to provide security to GSA-managed buildings. According to court documents, between 2000 and 2003, Holiday provided Nelson with cash, vacations and other benefits in exchange for Nelson’s assistance in awarding three multi-million dollar contracts to HIS. One contract involved GSA-managed federal buildings in San Diego and three other counties in southern California. GSA solicited bids for a contract to provide security services to these federal facilities in November 1999. Holiday caused HIS to submit a bid of approximately $50 million. Although the company’s bid was almost $10 million higher than the lowest bid received by GSA, Nelson awarded the contract to HIS in May 2000. From 2000 through 2004, GSA paid HIS and USProtect more than $54 million pursuant to this contract. Nelson also caused several other multi-million dollar contracts to be awarded to HIS and USProtect in exchange for cash and a Caribbean cruise. Holiday also received substantial compensation from HIS and companies he controlled from 2001 to 2004 for which he failed to file federal income tax returns and failed to pay more than $400,000 in taxes owed to the IRS. Instead, Holiday tried to conceal his income, including transferring funds into bank accounts of companies he controlled. Dessie Ruth Nelson is awaiting sentencing.
Virginia Business Owner Sentenced for Tax Evasion
On July 11, 2008, in Alexandria, Va., John Marcus Green was sentenced to 30 months in prison, followed by two years of supervised release, and ordered to pay a $6,000 fine and to pay $942,352 in restitution to the government. Green pleaded guilty on March 31, 2008, to federal tax evasion charges. According to court documents, Green was the founder, chief executive, and part-owner of Germane Systems, a Chantilly, Virginia, computer engineering firm that did business primarily as a subcontractor for the Department of Defense. Despite earning substantial income in 2002, 2003, and 2004, Green evaded his income taxes for those years by failing to file tax returns, by concealing his ownership in Germane through the use of a nominee company held by another for Green’s benefit, and by having Green’s monthly salary payments deposited into the account of another nominee.
Two Individuals Sentenced for Bilking City of New Orleans of Over $1 Million
On July 9, 2008, in New Orleans, La., Stanford Barre and Reginald Walker were sentenced for their involvement in a kickback scheme. Barre was sentenced to 60 months in prison to be followed by three years of supervised release. Walker was sentenced to 30 months in prison to be followed by three years of supervised release. In addition, they were ordered to pay more than $1,064,000 in restitution to the city of New Orleans. In January 2007, Barre and Walker pleaded guilty to charges of conspiracy, mail fraud, and obstruction of justice. According to court documents, Johnson Controls, Inc, was a company contracted by the city of New Orleans to increase energy efficiency through the replacement and upgrading of fixtures and equipment such as chillers and boilers. In their plea agreements, Barre and Walker admitted to bilking the city of New Orleans through concealed kickbacks and fraudulent billing practices. As a result of the fraud scheme, the citizens of the city of New Orleans were denied millions of dollars in benefits intended to be achieved by the energy saving contract with Johnson Controls, Inc.
Georgia Mother Sentenced in Fraud Scheme
On July 7, 2008, in Gainesville, Ga., Molly A. Smith, of Lula, Georgia, was sentenced to 57 months in prison and ordered to pay restitution of $413,847 to the Internal Revenue Service (IRS) and $777,901 to the state of North Carolina following her guilty plea to program fraud and tax fraud. Smith operated Georgia Nutrition Program, Inc. (GNP), a Lula, Georgia, non-profit corporation that sponsored day care centers in North Carolina and Georgia. Smith admitted to altering applications and to submitting false information to the North Carolina Department of Health and Human Services in order to receive more than $775,000 in Department of Agriculture funds. Those funds were deposited into a GNP financial account. Smith then wrote a substantial number of checks from GNP’s accounts payable to herself, her husband, and her daughter, Maykie Blevins. They deposited those checks and used the money to buy property, jewelry, home improvements, and expensive vehicles. Smith then deceived her accountant by providing copies of the checks to him after they were altered to make it appear that the checks had been written for GNP expenses; specifically, as payments made to the day care centers that GNP sponsored. The money the defendants received was not reported as income on Smiths’ or Blevins’ individual federal income tax returns.
Colorado Man Sentenced to Prison for Ponzi Scheme
On July 3, 2008, in Denver, Colo., David William Thomas was sentenced to 42 months in prison and ordered to pay $4.4 million in restitution for conspiracy to commit securities fraud and money laundering. Thomas operated several businesses and falsely told potential investors that the companies were involved in the installation of high-speed data transmission equipment in hotels, the production and installation of tracking devices in long-haul trucks and investments in power companies. Thomas also mailed investors false periodic earning statements and checks that represented earnings from their investments. The checks were funded by contributions from other investors. Thomas’ scheme involved more than 50 victims who lost as much as $7 million.
Veteran of Foreign Wars (VFW) Commander Sentenced for Scheme to Defraud Insurance Company
On June 30, 2008, in Bowling Green, Ky., Donald Mudd was sentenced to 121 months in prison and ordered to pay $271,160 in restitution for conspiracy to defraud the IRS, illegal gambling, arson and mail fraud. His co-defendant, Martha Towe received a 68 month prison sentence for illegally structuring the purchase of an automobile, conspiracy to defraud the IRS, illegal gambling and mail fraud. Both Mudd and Towe were also ordered to pay $259,988 in restitution to the Bowling Green Veterans of Foreign Wars (VFW). Mudd and Towe were found guilty for the arson of the Veterans of Foreign Wars Post, and of mail fraud for stealing VFW proceeds from the sale of pull-tab games. Mudd also operated video slot machines at the Post, which violated Kentucky law. Mudd devised a scheme to defraud an insurance company following the arson by providing false and fraudulent claims about the fire. Westport Insurance Corporation issued $246,688 to the VFW Post and Mudd diverted the money for his personal benefit. From 1999 through 2004, Mudd and Towe conspired to defraud the IRS by structuring their cash transactions over $10,000 in order to avoid the filing of currency transaction reports with the IRS.
“Mafia Cop” Author Sentenced for Felony Tax Offense
On July 1, 2008, in Las Vegas, Nev., Louis Eppolito, author of the paperback book, “Mafia Cop,” was sentenced to 18 months in prison and ordered to pay $102,108 in restitution to the Internal Revenue Service (IRS) following his guilty plea to making and filing a false income tax return. According to court documents, Eppolito and his wife, Frances Eppolito, were indicted in January 2006 and charged with making and subscribing false income tax returns. Frances Eppolito will be permitted to enter into a diversion agreement for the tax charges, while Louis Eppolito pleaded guilty to that offense in February 2008. In the plea agreement, the parties stipulated that on about April 13, 2001, Louis and Frances Eppolito filed an individual income tax return for the calendar year 2000 reporting total income of $127,386, when they knew their true income for that year was $327,386. Additionally, Louis Eppolito failed to declare $130,000 in income in 2001 and $45,000 in income in 2002. The resulting tax loss to the IRS because of these omissions was $102,108.
West Virginia Woman Sentenced for Tax Evasion; She Embezzled Over $1 Million from Physician’s Group
On June 30, 2008, in Huntington, W.Va., Diann Richmond, of Fort Gay, West Virginia, was sentenced to 30 months in prison, to be followed by five years of supervised release, and ordered to pay $1.174 million in restitution. In February 2008, Richmond pleaded guilty to income tax evasion. According to court documents, she admitted to embezzling over $1.174 million from the Huntington Emergency Physician’s Group from 2000 through 2004. Richmond was employed to handle the Group’s payroll and billing when working for an accountant in Huntington, West Virginia. Richmond failed to pay over $300,000 of taxes resulting in her conviction for income tax evasion.
Rhode Island Man Sentenced for Participation in E-Rate Program Fraud Scheme
On June 26, 2008, in Hartford, Conn., Joseph E. Mello, of Pawtucket, Rhode Island, was sentenced to 18 months in prison, followed by three years of supervised release, the first 12 months of which Mello must spend in home confinement. Mello was also ordered to pay back taxes, plus penalties and interest, on $175,199 that he failed to report to the Internal Revenue Service. On October 9, 2007, Mello pleaded guilty to federal charges related to a scheme to defraud the Federal Communications Commission (FCC) in connection with the E-Rate program, which provides funding to qualifying school districts nationwide to upgrade their Internet access capabilities. In Connecticut, the Hartford, New London, New Haven and Bridgeport school districts received E-Rate funding. Each school district selected SBC/Southern New England Telephone (SNET) as the prime contractor to perform its Internet upgrades. In October 2003, Mello left his position as Director of Project Management for SBC and became Vice President of Operations for Innovative Network Solutions (INS), a first-tier subcontractor of SBC for performing E-Rate funded telecommunication upgrades. According to court documents, Mello admitted that, from October 2003 through March 2004, he participated in a scheme to defraud the FCC with SBC account Managers Richard E. Brown and Keith J. Madeiros. Mello, in his position with INS, agreed to accept invoices submitted to INS by two fictitious companies, Responsive Communication Services, Inc. (RCS) and Chariho Associates (Chariho), created by Madeiros and Brown, respectively, for work purportedly performed on E-Rate funded school district projects. INS made payments on those invoices – $161,933 to RCS and $446,572 to Chariho – and then passed the costs on to SBC. The kickbacks to Mello were paid through BAJ Consulting, a company establish for the sole purpose of receiving money from the scheme. Today, Mello was also ordered to pay, jointly and severally with Brown, restitution in the amount of $608,565. On August 29, 2007, Brown was sentenced to 27 months of imprisonment, and on December 7, 2007, Madeiros was sentenced to nine months of imprisonment.
Owners and Former Bookkeeper of Construction Firm Sentenced in Million Dollar Tax Fraud Scheme
On June 20, 2008, in Atlanta, Ga., Gerald Marchelletta, Jr., Gerald Marchelletta, Sr., and Theresa Kottwitz were sentenced on charges of committing and conspiring to commit tax fraud. Marchelletta, Jr. was sentenced to 36 months in prison, followed by three years of supervised release, and ordered to pay a $50,000 fine. Marchelletta, Sr. was sentenced to 33 months in prison, followed by three years of supervised release, and ordered to pay a $50,000 fine. Kottwitz was sentenced to 24 months in prison, to be followed by one year of supervised release. Although the defendants have paid a substantial portion of taxes owed, the judge ordered the Marchellettas to cooperate with the Internal Revenue Service (IRS) in paying back the remainder, approximately $200,000, as a condition of their supervised release following their prison term. According to information presented in court, the Marchellettas are the owners of Circle Industries, Inc., a multi-million dollar international commercial construction firm based in Alpharetta. Kottwitz served as the bookkeeper of the business. Circle has been the principal construction firm on many prominent Atlanta area projects, including the construction of the Olympic Village in downtown Atlanta in 1996 and the Atlantis hotel and casino on Paradise Island in the Bahamas. Evidence at trial revealed that the Marchellettas paid millions in company money for their own personal benefit. Kottwitz falsely recorded these expenses as purported job-related or other business expenses.
Missouri Man Sentenced for $1 Million Securities Fraud, Filing a False Tax Return
On June 18, 2008, in Springfield, Mo, Mark Leon Henry, of Joplin, Missouri was sentenced to 78 months in prison and ordered to pay $1.1 million in restitution to his victims and to the Internal Revenue Service (IRS). Henry pleaded guilty in November 2007 to a securities scheme that defrauded more than $1 million from his victims and he admitted to filing a false federal income tax return. Henry operated a financial brokerage business as an investment advisor for Investment Centers of America (ICA) from November 1996 to August 2005. ICA terminated its business relationship with Henry in September 2005, but he continued to operate his office and advertise himself as an ICA representative. After September 2005, Henry lied about being an agent for Harbour Investments, despite the fact that he was not a licensed securities broker. In 1996, Henry devised a scheme to defraud at least 14 investors, including his father and his stepmother. At various times, Henry, acting as a stockbroker for ICA, recommended legitimate securities or investments for his customers. Instead of investing the funds provided by his customers, Henry deposited the funds into his own bank accounts for his own personal benefit. In order to hide this scheme, Henry provided his customers with fictitious account statements that falsely represented their securities holdings and account values. In his plea, Henry admitted that he filed a 2002 income tax return that failed to report $187,206 in income. According to court documents, the amount of unreported income that Henry failed to report on his 2002 through 2005 tax returns totaled $538,449, which resulted in a total tax loss to the Government was $102,126.
Pennsylvania Business Man Sentenced on Conspiracy and Tax Evasion Charges
On June 13, 2008, in Philadelphia, Pa., Thomas L. Root was sentenced to 66 months in prison, followed by three years of supervised release, and ordered to pay $25,069 in restitution to the Internal Revenue Service (IRS). Root was convicted in March 2008 on charges of conspiracy and tax evasion. According to court documents, beginning in approximately September 1996, Root was employed by Reading Broadcasting, Inc. (RBI), a Pennsylvania corporation which owned a local television station. Root and Francis D. McCracken, as president of RBI, agreed to divert their commissions to companies they owned and controlled to prevent disclosure to the IRS. On or about November 2001, Root and McCracken directed the RBI bookkeeper to issue Root’s commission checks to New Perspectives, LLC and instructed the bookkeeper not to issue IRS Forms 1099 to New Perspectives. As a result, no federal income taxes were withheld from his commissions or income reported to the IRS.
Texas Attorney Sentenced for Tax Evasion
On June 13, 2008, in Dallas, Texas, Attorney Carl Edmond Gaines was sentenced to 24 months in prison and ordered to pay $90,838 in restitution to the Internal Revenue Service (IRS) for tax evasion. According to court documents, Gaines and his law firm handled both criminal and personal injury matters. From 2003 to 2006, the law firm defrauded the private health care system by diverting settlement monies from the firm’s trust account. Insurance settlement proceeds were deposited into the firm’s trust account. The funds were specifically held in trust by the firm for firm clients as settlement proceeds reimbursing the victim for personal injury and for reimbursement of medical providers that provided service to the client for treatment of the sustained injury. Gaines withdrew money from the trust account and spent it for personal benefit. Gaines, an attorney, admitted that he knew that he was required to file a corporate tax return for the firm and further admitted that he did not file returns for 2003 and 2004, resulting in $80,438 taxes evaded.
Owner of Virgin Islands Bar Sentenced to Prison for Filing False Tax Returns and Structuring Currency Transactions
On June 12, 2008, in St. Thomas, Virgin Islands, Allan J. MacPhee was sentenced to 20 months in prison, to be followed by three years of supervised release, and ordered to pay a $7,500 fine and $200 special assessment. In addition, MacPhee was ordered to make full restitution to the Internal Revenue Service (IRS) and the Virgin Islands Bureau of Internal Return in the total amount of $446,002 and to forfeit $223,117 to the United States. On October 17, 2008, MacPhee pleaded guilty to willfully filing false tax returns and structuring currency transactions to avoid reporting requirements. According to court documents, MacPhee willfully filed materially false income tax, self employment, and Virgin Islands gross receipts tax returns involving the 2000 through 2005 tax years, because he omitted income he earned from his sole proprietorship, The Beach Bar. MacPhee kept two sets of books for The Beach Bar; one reflecting the true and correct gross income of the business; and, the other a reduced amount of income which the accountant received to prepare the tax returns. MacPhee consistently under reported large amounts of income and knowingly gave his accountant false gross income figures to prepare his tax returns. The end result was that MacPhee evaded approximately $446,002 in taxes for the 2000 through 2005 tax years. In addition, between December 2002 and March 2005, MacPhee made or directed others to make 27 cash deposits from The Beach Bar in amounts all below $10,000 into his bank accounts to avoid the currency transaction reporting requirements.
Michigan Insurance Agent Sentenced to Jail for Failing to File Tax Returns
On June 16, 2008, Detroit, Mich., William Arce, a self-employed insurance agent, was sentenced to one year and one day imprisonment, followed by two years supervised release and ordered to pay $444,742 restitution to the Internal Revenue Service. According to court records, an August 2007 information charged Arce with five counts of failure to pay tax for the years 1998 through 2002, and two counts of failure to file tax returns. In addition, from 1998 through 2004, Arce received over $1 million in taxable income and failed to pay over $200,000 in taxes due and owing. Despite being advised by the IRS and his CPA, he did not withhold the appropriate amount of money, resulting in large amounts of outstanding taxes. Arce contended that he was not in a financial position to pay the taxes owed, even though he took numerous vacations to Florida, Las Vegas, and Hawaii and maintained a membership with a golf country club.
Former USProtect Chairman Sentenced for Concealing Prior Civil Fraud Judgments and Evading Taxes on More Than $1million in Unreported Income
On June 13, 2008, in Greenbelt, Md., Richard S. Hudec, former Chief Operating Officer of Holiday International Security, Inc. (HIS), now known as USProtect Corporation, was sentenced to 33 months in prison, to be followed by three years of supervised release, ordered to forfeit $1.25 million, and ordered to pay a $10,000 fine and $290,360 in restitution to the Internal Revenue Service (IRS). According to court documents, Hudec attempted to evade federal income taxes and conceal numerous civil fraud judgments from federal contracting officials to obtain federal security contracts worth over $150 million. In May 2003, Hudec’s wife purchased HIS and changed the name to USProtect Corporation. By 2005, the company provided armed and unarmed security guards for 18 federal agencies at 120 installations in 32 states and territories. From 2001 through February 2005, Hudec assisted in preparing and submitting the company’s proposals to provide security to federal agencies. As of October 2001, Hudec had been convicted of fraud in four separate federal criminal prosecutions and had numerous civil judgments for fraud and false statements entered against him. However, in proposals submitted in 2002 and 2004 to provide physical security to Social Security Administration (SSA) facilities in Baltimore and the FBI Academy in Quantico, Virginia, Hudec, as either the chief financial officer or chief operating officer, caused the company to falsely certify that no principal of the company had a civil judgment for fraud or false statements rendered against him within the three years preceding the company’s proposal. This resulted in SSA awarding the company contracts worth more than $50 million and the FBI awarding the company contracts worth $3.5 million. In November 2002, the same false certifications were made in the company’s application to the General Services Administration (GSA) to be eligible for contracts under the Federal Supply Schedule. Beginning in 2004, the company was awarded several federal security contracts, including more than $100 million in contracts to provide security to more than 12 bases operated by the U.S. Air Force. As a result of this scheme, the company obtained contracts worth more than $150 million through proposals that concealed the prior judgments against Hudec. Between 2001 and 2003 Hudec received more than $1 million for his services as an officer with the company. Yet for tax years 2002 and 2003 Hudec reported income of only $18,000 and $21,000 respectively, in order to evade the assessment of more than $200,000 in income taxes for those years.
Former Bookkeeper Sentenced for Embezzling More Than $1.5 Million from Heating Oil Company
On June 9, 2008, in Newark, N.J., James Grey was sentenced to 63 months in prison, to be followed by three years of supervised release, and ordered to pay $1,515,942 in restitution, a $5,000 fine and a $200 special assessment. Grey pleaded guilty in November 2007 to one count each of mail fraud and filing a false income tax return in connection with his fraud against the Bonded Oil Company. At his plea hearing, Grey admitted that between January 2001 and December 2003, he issued more than 150 fraudulent Bonded Oil checks to embezzle more than $1.5 million from the company. He used the money to pay for various personal expenses, which included credit card expenses, financial support for a girlfriend, mortgage payments, expensive vehicle leases for his family members, and to maintain a horse named “Nike,” valued at approximately $30,000. In addition, Grey admitted that he attempted to conceal his illegal activities by, among other things, creating phony invoices from Bonded Oil vendors in the amounts corresponding to the Bonded Oil checks to make it appear as though the checks that he wrote were used to pay for legitimate company expenses. Grey also admitted that he filed a false 2003 tax return that failed to report the income he received in 2003 from his illegal activities. In addition, Grey’s plea agreement acknowledges that he also filed false tax returns for the tax years of 2001 and 2002.
Husband and Wife Sentenced in Embezzlement Scheme
On June 9, 2008, in Portland, Maine, Johanne M. Elie and Ricky L. Elie, of Biddeford, Maine, were sentenced for their roles in an embezzlement scheme. Johanne M. Elie, who pleaded guilty on February 12, 2008, to wire fraud and tax evasion charges, was sentenced to 37 months in prison to be followed by three years of supervised release and ordered to pay $7,600 in assessments. Her husband, Ricky L. Elie, who pleaded guilty on February 14, 2008, to tax evasion charges, was sentenced to 18 months in prison to be followed by three years of supervised release and ordered to pay $400 in assessments. The defendants were also ordered to pay $395,000 in restitution to Provencher Fuels, Inc. (Provencher) and $49,683 to the Internal Revenue Service (IRS). According to court documents, from 2000 until September 12, 2005, Johanne Elie worked as the treasurer and/or office manger for Provencher, a family-owned fuel oil and propane delivery and burner service company. In her capacity, Johanne Elie was responsible for handling all of Provencher’s financial affairs and had full check writing authority with respect to Provencher’s checking account. Between 2000 and 2005, Ricky Elie was employed at Provencher as an assistant office manager. According to Provencher’s payroll records, between January 2001 and December 2004, Johanne Elie received a net paycheck of between $491 and $644 per week and Ricky Elie received a net paycheck of between $375 and $513 per week. However, between December 2000 and October 2005, the defendants charged over $195,000 for, among other things, jewelry, recreational vehicles, boats, vacations, and sporting events and memorabilia. Both defendants failed to report the embezzled funds on their joint federal tax returns for 2001 through 2004, thereby evading $49,863 in income taxes. Johanne Elie was also found responsible for embezzling about $180,000 in cash from Provencher.
Bookkeeper Sentenced for Embezzling $687,674 from Law Firm Employer and Employer’s Mother
On June 9, 2008, in Hartford, Conn., Karen Davis-Jennings was sentenced to 16 months in prison, followed by two years of supervised release, and ordered to pay $621,174 in restitution for embezzling money from her former employer and his elderly mother. On August 22, 2007, Davis-Jennings pleaded guilty to three counts of mail fraud and one count of filing a false tax return. According to court documents and statements made in court, Davis-Jennings worked as a paralegal and bookkeeper of a law firm in West Hartford, Connecticut. As part of her responsibilities at the law firm, Davis-Jennings also handled some personal finances for the principal of the law firm and his mother, an elderly woman who suffers from dementia. Davis-Jennings admitted that, between approximately September 1998 and May 2005, she devised a scheme to defraud the law office, its principal and the principal’s elderly mother of approximately $687,674. As part of the scheme, Davis-Jennings wrote checks on the law office’s operating account to pay for her mortgage and credit card bills. In order to conceal the theft of the funds from the operating account, Davis-Jennings falsified entries in the law firm’s accounting system. In addition, Davis-Jennings wrote checks on a joint account in the name of the principal and his mother to pay for her personal expenses. Since she did not have signatory authority on the account, Davis-Jennings forged the signature of the principal’s mother. On approximately August 15, 1999, without the authority and knowledge of the principal, Davis-Jennings activated a debit card connected to the joint account and used the debit card to pay for personal expenses, including gambling expenses at the Mohegan Sun Casino. Davis-Jennings also falsely reported that she worked overtime for the law firm, which resulted in a payroll service issuing checks to her in the amount of $96,788 for hours that she never worked. Finally, Davis-Jennings filed false income tax returns for the years 2001 through 2004, resulting in a tax loss of approximately $142,259.
Ohio Woman Sentenced for $1.5 Million Embezzlement Scheme
On June 4, 2008, in Columbus, Ohio, Rebecca Johnson was sentenced to 60 months in prison, to be followed by five years of supervised release, and ordered to pay over $1.8 million in restitution. Johnson pleaded guilty in January 2008 to a three count Bill of Information charging her with willfully filing a fraudulent federal income tax return with the Internal Revenue Service (IRS), money laundering, and bank fraud relative to an approximate $1.5 million embezzlement scheme. According to court documents and testimony, between April 2005 and July 2006, Johnson used her position as the controller of Saint Gobain Autover USA, Incorporated (SGA) and devised a scheme to embezzle approximately $1.5 million from SGA. Johnson fraudulently opened a business checking account in the name of SGA at Fifth Third Bank without the knowledge, consent, or authorization of SGA. Johnson stole checks made payable to SGA and deposited them into the Fifth Third Bank account. In addition, Johnson made false entries into SGA’s books and records in an effort to hide the embezzlement from SGA. Furthermore, Johnson stole and destroyed SGA computers and documents in an attempt to conceal her fraudulent scheme. Johnson accomplished this theft by staging a break-in at the office in which she worked. In total, Johnson deposited $1,507,269 into the Fifth Third Bank account, and proceeded to withdraw the money and spend the illegally obtained proceeds on personal living expenses. Johnson willfully filed a fraudulent federal income tax return with the IRS for the 2005 income tax year, in which she failed to report approximately $1,082,045 of the embezzled funds. On the 2005 federal income tax return that Johnson filed with the IRS, she reported total income in the amount of $66,557.
Law Firm Co-Founder Sentenced to 30 Months in Prison for Racketeering
On June 2, 2008, in Los Angeles, Calif., Melvyn I. Weiss, a founding partner of the New York law firm now known as Milberg LLP, was sentenced to 30 months in prison and ordered to forfeit $9.75 million and to pay a criminal fine of $250,000. Weiss admitted in April 2008 that he and others, including former law firm partners William S. Lerach, David J. Bershad and Steven G. Schulman, participated in a scheme that paid millions of dollars in secret kickbacks to people in exchange for them serving as named plaintiffs in more than 225 class-action and shareholder derivative-action lawsuits that were filed across the United States. Weiss and others named friends and relatives to serve as plaintiffs in the lawsuits. To conceal the illegal kickback scheme from judges presiding over the lawsuits and other parties involved in the cases, participants in the conspiracy allegedly made false and misleading statements in court documents and in under-oath depositions. The illegal kickbacks were secretly paid by Milberg Weiss to the named plaintiffs in cash or through various intermediary law firms and lawyers selected by the paid plaintiffs.
Alabama Construction Company Bookkeeper Sentenced on Tax and Mail Fraud Charges
On May 28, 2008, in Birmingham, Ala., Beverly Ann Byers, of Leeds, Alabama, was sentenced to 33 months in prison, to be followed by three years of supervised release, and ordered to pay $249,454 plus interest in restitution to her former employer, Plateau Construction Company, Inc. Additionally, she was ordered to pay $23,952 to the Internal Revenue Service (IRS). According to court documents, Byers was the bookkeeper for Plateau Construction Company in Leeds. Between December 5, 2002 and December 25, 2005, she mailed 44 letters to herself containing unauthorized company checks totaling almost $249,454. She also failed to report approximately $90,576 of the embezzled funds on her 2004 income tax return which resulted in her failure to pay $23,952 in tax.
Telemarketer who Pitched Bogus Investments to Elderly Victims Sentenced to 12½ Years in Prison
On May 20, 2008, in Los Angeles, Calif., Alan David Libman was sentenced to 150 months in prison for mail fraud and money laundering. Libman ran a Beverly Hills-based company called Investment Strategies, which purported to provide short-term investments in art, coins and other collectibles. Through Investment Strategies and other companies he ran from 1994 until 2004, Libman offered short-term investments in high-grade collectibles, including rare historical documents, presidential memorabilia and other rare items. He falsely promised investors returns of 20 to 30 percent over a 90-day period, with the suggestion that the returns could increase as larger investments were made. Libman offered to maintain custody of the collectibles, which he said would help facilitate their resale. However, Libman used very little investor funds to purchase collectibles. While collecting approximately $5.5 million from investors, he spent only $100,000 on collectibles. He used investor funds to finance a lavish lifestyle and to make payments to investors as part of his Ponzi scheme. According to court filings by the government, over the 10-year period that he ran various fraudulent companies, more than $20 million moved through Libman’s bank accounts.
Virginia Man Sentenced to 20 Years in Prison on Federal Charges Including Money Laundering, Conspiracy, Tax Evasion, and Obstruction of Justice
On May 19, 2008, in Abingdon, Va., Timothy Carl Ling, of Hurley, Virginia, was sentenced to 20 years in prison for orchestrating and directing multiple fraud schemes in which he, his mother, and his father participated and benefitted financially. Timothy Ling pleaded guilty in August 2007 to a variety of charges, including obstruction of justice, Social Security fraud, conspiracy to commit mail fraud, conspiracy to commit bank fraud, conspiracy to commit income tax evasion, money laundering and aggravated identity theft. According to evidence presented in court, Ling began portraying himself as a quadriplegic in January 2004 in order to avoid being sent to prison for a probation violation. In the course of his fraudulent conduct, Ling applied for, and received, benefits from the Social Security Administration and Medicaid. In addition, Ling and his family defrauded the Virginia Consumer Services Fund and Clinch Independent Living Services, Inc., which provided funding for, among other things, a specially equipped van and the construction of ramps at his mother’s home. Additionally, Ling’s fabricated medical condition led to the payment of over $200,000 of his medical bills by Medicaid and $19,000 in social security benefits, payments to which he was not entitled. The investigation also uncovered that Ling and his mother, Carol Irene Estep, had perpetrated a credit card fraud scheme between the summer of 2005 and October 2006 in which they defrauded five separate credit card companies incurring a total loss $344,465. In order to hide their criminal activity, Ling and Estep used the social security number and date of birth of another family member. Some of the proceeds from the fraud were used to establish a recycling business known as “The Yard.” Although “The Yard” had gross profits of $210,641 during 2005 and 2006, the profits were divided between Ling, Estep, and others. None of these individuals reported the income earned from “The Yard” to the Internal Revenue Service (IRS) or the Social Security Administration. Timothy Ling, Estep, and Herman Ling, Timothy’s father, actively tried to hide this income from the IRS by engaging in money laundering transactions. Carol Irene Estep was sentenced to 94 months in prison in March 2008. Herman Scott Ling is currently serving a five-year probation sentence. All three family members were ordered to pay more than $500,000 in restitution and ordered to forfeit two parcels of property.
California Man Sentenced to Federal Prison for Obstructing the IRS and Loan Fraud-Related Charges
On May 16, 2008, in Los Angeles, Calif., Steven Jyegeo Shia, also known as Steven Shaw, of San Gabriel, was sentenced to 27 months in prison and ordered to pay $882,404 in restitution to State Street Bank International for conspiring to obstruct and impair the Internal Revenue Service (IRS) in its collection of taxes owed and making false statements to lenders. Shia pleaded guilty in October 2007. He was the vice president and co-owner of Full Shine Enterprise, Inc., a buyer and seller of paper goods for export. Shia obtained a $12 million line of credit for Full Shine through State Street Bank International. Shortly after obtaining the line of credit, Shia and a co-defendant submitted inaccurate and false loan requests so that the bank would loan Full Shine more money. Shia admitted that he and his co-defendant owed the IRS more than $57,000 and that they impeded and obstructed the IRS in the collection of the taxes that they owed. To do this, Shia opened a bank account in the name of another company and diverted money that should have been reported to the IRS. Further, neither Shia nor Ning used the diverted funds to pay the debt they owed to the IRS.
Former Beauty School Owner Sentenced to One Year in Prison for Filing False Tax Returns
On May 12, 2008, Minneapolis, Minn., Viet Quoc Nguyen, the former owner and operator of Rose Beauty School in St. Paul, was sentenced to 12 months in prison for filing false income tax returns. Nguyen was indicted in June 2007, and pleaded guilty in October 2007. According to court documents, Nguyen’s school provided retail cosmetic services to customers and took fees from students who sought cosmetic services training. Nguyen, however, deposited only some of the receipts into the school’s bank account. The remainder of the receipts was deposited into Nguyen’s personal account, spent in cash or hidden. Nguyen filed a tax return with the Internal Revenue Service (IRS) for 2001 which reported no tax due and a net loss from the school, when Nguyen knew his net profit was at least $51,256. This resulted in an underpayment of approximately $17,961 in taxes to the IRS. Also on April 15, 2002, Nguyen reported $501 in taxes due and a net profit of $6,209 for tax year 2002, when he knew his net profit was at least $92,144. This resulted in an underpayment of approximately $35,369 in taxes. On April 15, 2004, Nguyen reported a $76 refund and a net profit of $3,521 for tax year 2003, when he knew his net profit was at least $48,732. This resulted in an underpayment of $15,877 in taxes.
Wife of Former Manager of Air Force Base Exchange Services Sold Stolen Merchandise on eBay
On May 5, 2008, in Columbia, S.C., Annette Shockley, the wife of the former store manager of the Army and Air Force Exchange Services (AAFES) Base Exchange located at Shaw Air Force Base, was sentenced to 18 months in prison and ordered to pay $44,799 in restitution to the Internal Revenue Service (IRS). According to court documents, the Shockleys were selling a large quantity of electronics on the internet site eBay which were similar to merchandise offered at the Shaw Base Exchange where Paul Shockley worked as the manager. The investigation revealed that between 2003 and 2006, the Shockleys sold hundreds of items on eBay, including camcorders, digital cameras, Microsoft XBox 360 systems, Apple iPod units, and Nintendo DS systems. Investigators confirmed that Paul Shockley stole the merchandise from the Shaw Base Exchange inventory, and Annette Shockley listed the stolen items for sale on eBay. An audit of the Shaw Base Exchange inventory confirmed the fraud, and investigators were able to track down purchasers of the stolen merchandise and match serial numbers on the auctioned items to those listed in inventory records for the Shaw Base Exchange. The Shockleys hid the illicit income from the IRS to evade taxes. Paul Shockley pleaded guilty in November 2007 and was sentenced on April 29, 2008, to 37 months of in prison.
Former Fairbanks Mayor and Wife Sentenced to Prison for Conspiracy, Misapplication of Government Grant Funds, Money Laundering and Filing False Tax Returns
On May 2, 2008, in Fairbanks, Alaska, Murilda C. “Chris” Hayes and James C. “Jim” Hayes were sentenced to 36 months and 66 months respectively for illegally diverting government funds and money laundering. The Hayes’s diverted charitable funds for their personal use and for building and furnishing a Fairbanks church. Chris Hayes was the executive director of Love Social Services Center (LSSC), a charitable organization, set up to provide social and educational services to low income and disadvantaged youth in the Fairbanks community. Jim Hayes, her husband and the pastor of Lily of the Valley Church of God in Christ (LOVCOGIC), was also a board member of LSSC. Between 2001 and 2005, LSSC received over $2.7 million in government grants from the Department of Housing and Urban Development and the Department of Justice Office of Juvenile Programs. LSSC used the original grant money to purchase the old LOVCOGIC church building. LOVCOGIC then built a new and larger church across the street from its old location. When construction costs for LOVCOGIC’s new church exceeded its sources of funding, Chris Hayes and Jim Hayes illegally diverted LSSC government grant funds to pay construction bills and provide furnishings and operating expenses for the new church. The Hayes also used government funds to pay for personal bills and expenditures such as a plasma television for their home, a family wedding reception, credit card bills and old debts, and other personal items. Chris Hayes concealed the source of the above payments by causing the charity to write checks to cash that she then converted to money orders and cashier’s checks to make the illegal payments.
Illinois Man Sentenced in Nike Shoe Scam to Serve 13 Months for Tax Evasion
On May 1, 2008, in Peoria, Ill., Kent R. Randolph was sentenced to 13 months in prison and two years of supervised release for tax evasion. Randolph was indicted in August 2007 on conspiracy charges and four counts of tax evasion. Randolph was a sales representative responsible for placing orders for Nike shoes on behalf of authorized retailers. The authorized retailers were billed directly by Nike. Through the use of a separate corporation, formed by Randolph, he executed a scheme to re-route the Nike shoes to unauthorized retailers. The payments Randolph received from the unauthorized dealers for the Nike merchandise were not reported on his tax returns. In November 2007, Randolph entered a guilty plea to one count of tax evasion. He was also ordered to cooperate with the IRS in paying his tax bill.
Hawaii Businessman Sentenced to Prison for Filing False Tax Returns
On April 29, 2008, in Honolulu, Hawaii, Andy S. S. Yip was sentenced to 66 months in prison and ordered to pay $1.76 million in restitution to the Internal Revenue Service for subscribing to false tax returns and related tax offenses. Yip pleaded guilty to four charges of filing false tax returns for the years 1995 through 1998 and was convicted by a jury of filing a false 1999 tax return by failing to disclose his interest in financial accounts in Hong Kong as well as a related conspiracy charge. According to evidence introduced during the trial, Yip, a Hawaii resident, ran an “off the books” business which grossed approximately $4 million in receipts in the form of Japanese yen during the period 1995 to 1998 that he converted to U.S. currency. Yip’s sentence was based on information that the tax loss to the United States was $733,302 and the state of Hawaii was $319,693.
Colorado Man Sentenced to 330 Years in Prison for Multi-Million Dollar “High Yield” Investment Fraud
On April 29, 2008, in Denver, Colo., Norman Schmidt was sentenced to serve 330 years in prison and ordered to forfeit $38.4 million for his role in a fraudulent “high yield investment scheme.” Schmidt was found guilty in May 2007 following an eight week jury trial, of conspiracy to commit mail fraud, wire fraud and securities fraud, as well as substantive counts of mail fraud, wire fraud and securities fraud, and separately, money laundering. Schmidt’s wife, Jannice Schmidt, was previously sentenced to serve nine years in prison. Investors gave Schmidt tens of millions of dollars on the premise that he would invest the victims’ money with return rates of 2 percent to 400 percent per month. To perpetuate the scheme, the defendants sent investors fraudulent monthly statements which falsely reflected the growth of and earnings on their invested funds. To further their scheme, the defendants created corporate alter egos through which the investment program was offered. Entities involved in the scheme included the Reserve Foundation Trust, Smitty’s Investments, Capital Holdings, Monarch Capital Holdings, and Fast Track. The Schmidts and others used investor funds for purposes other than those represented to investors, such as making loans or payments to the defendants, personal expenses, acquisition of unrelated businesses and assets, payments to other investors, and payments of monthly commissions or “overrides” to members of a network of individuals, acquaintances, and insurance agents recruited by the defendants to obtain new investors in the fraudulent program. Authorities seized money in approximately 60 bank accounts and eight NASCAR race cars, one race truck, as well as other race related vehicles and items. Federal agents seized assets, including cash and property, worth approximately $24 million. To date over $18 million in forfeited funds have been returned to the crime victims.
Colorado Man Sentenced for His Role in “High Yield” Investment Fraud
On April 30, 2008, in Denver, Colo., Charles Lewis, of Littleton, Colorado, was sentenced to 30 years in prison and ordered to pay restitution to his victims for his role in a fraudulent “high yield investment scheme.” A jury returned a guilty verdict against Lewis in May 2007, following an eight week trial. He was convicted of conspiracy to commit mail fraud, wire fraud, securities fraud, mail fraud, wire fraud and securities fraud, and money laundering. The scheme’s leader, Norman Schmidt, was sentenced to serve 330 years in prison. Lewis, Schmidt, and others obtained tens of millions of dollars from hundreds of investors, and used the money for the defendants’ own personal gain. The defendants engaged in a scheme to defraud investors by implementing a “high-yield investment program.” Schmidt, with assistance from others, led investors to believe that they would invest the victims’ money, promising rates of return up to 400 percent per month. To perpetuate the scheme, the defendants sent investors fraudulent monthly statements which falsely reflected the growth and earnings of their invested funds. To lure and reassure investors, the defendants said that the investments were safe because invested funds could not be moved, and that the investments were insured by insurance companies. Defendants also misled investors by using false legal opinion letters concerning the status of insurance on investor funds. To further their scheme, the defendants created corporate alter egos through which the investment program was offered. The defendants then used investor funds for their own benefit.
Investment Fraud Scheme Promoter Sentenced to 60 Months for Tax Evasion
On April 29, 2008, in Los Angeles, Dante Marco Fala, of Canoga Park, was sentenced to 60 months in prison and ordered to pay $16.9 million restitution for tax evasion. During 2002, Fala failed to report over $316,888 in taxable income to the IRS. As a result of his actions, Fala evaded over $105,981 in federal income tax. Fala admitted that he owned and operated Harrison Asset Management, Inc., Money Asset Management, Inc., and Cash Asset Management, Inc. as a part of a scheme to defraud investors. Fala’s asset management companies purported to offer investments into distressed debt portfolios. Fala diverted funds from accounts of the asset management companies to other accounts he controlled and then used the money for his own personal purposes. Fala also had telemarketers working for him called victims and offered investments in the debt portfolios they had acquired. As a part of the solicitation, Fala and the telemarketers claimed that they acquired distressed debt portfolios at deep discounts and that the asset management companies were highly successful, making profits and distributing dividends to investors from these supposed profits. In truth, the asset management companies collected far less on the debt portfolios they acquired than they had spent on their purchase, the companies used victim investors’ money for unauthorized expenses such as excessive and undisclosed commissions, expenditures were made to bring in additional victim funds, and money was used to allow Fala to engage in the day trading of stocks.

Colorado’s Internet Spammer Sentenced to Federal Prison for Tax Evasion
On April 28, 2008, in Denver, Colo., Edward “Eddie” Davidson, of Louisville, Colorado, was sentenced to 21 months in prison and ordered to pay $714,139 in restitution to the IRS for tax evasion and falsifying header information to send spam electronic mail. Davidson was also ordered to forfeit property, including gold coins, with the ill gotten proceeds of his offense. Davidson pleaded guilty in December 2007. He operated Power Promoters, a business that sent unsolicited commercial electronic messages (“spamming”). The spamming was designed to promote the visibility and sale of products offered by various companies. From 2005 through 2006, Davidson sent spam on behalf of a Texas company to promote the sale of the company’s stock. Davidson, aided by several sub-spammers sent unsolicited e-mail messages worldwide, touting the company’s penny stock as an excellent investment. Davidson’s e-mail messages contained false header information, which concealed the actual sender from the recipient of the e-mail. Between 2003 and 2006, Davidson received about $1.4 million from the Texas company. He avoided filing and paying his income taxes from 2003 through 2006, using several tactics, such as: providing a false social security number for the Texas company to used in issuing his Forms 1099s; providing a false social security number to his bank; having money deposited in a bank account held in the name of his girlfriend; and making cash withdrawals in amount less than $10,000 to avoid the filing of currency transaction reports with the Treasury Department. The total tax due and owing to the IRS as determined from the IRS criminal investigation was $714,139.
Former Vice President of New Jersey Company Involved in Fraud Scheme Sentenced to 27 Months
On April 24, 2008, in Hartford, Conn., Jerry D’Aquino, of Lagrangeville, New York, was sentenced to 27 months of in prison to be followed by three years of supervised release. In addition, D’Aquino was ordered to pay $4.7 million in restitution and pay back taxes in the amount of $73,939, plus penalties and interest. D’Aquino pleaded guilty in September 2007 to charges of mail fraud in connection with the defrauding a commercial lender, Siemens Financial Services, Inc., out of approximately $11.5 million, and for conspiring to defraud the Internal Revenue Service (IRS). According to court documents, D’Aquino was the vice president of Operations of Haband, a New Jersey-based apparel company that uses direct mail solicitations. Thomas Rueli was the president and owner of Total Logistic Services, Inc. (TLSI), a Connecticut-based mail consolidation and transportation provider. In June 2004, Siemens and TLSI entered into a Loan and Security Agreement pursuant to which Siemens agreed to provide a line of credit to TLSI of up to $12 million. The amount of money TLSI was able to borrow under the loan agreement was based upon a specified percentage of accounts receivable due to TLSI from its customers. Under the loan agreement, Siemens had a security interest in all of TLSI’s assets, including its accounts receivable. On June 1, 2004, the day of the closing of the loan agreement, Rueli represented to Siemens that TLSI’s current accounts receivable totaled approximately $10 million. The vast majority of this amount was false and fraudulent. D’Aquino used his position at Haband to assist Rueli with the scheme. On the date of the closing, Siemens called D’Auino to verify the amount of TLSI accounts receivable from D’Aquino’s company. D’Aquino falsely verified to Siemens that the receivable balance was $4.8 million. However, D’Aquino well knew that the amount was truthfully approximately $258,000. In addition, D’Aquino formed an entity called International Products Corporation (IPC), to which Rueli regularly sent between $2,000 and $4,000. From June 2001 through December 10, 2005, these payments totaled approximately $314,000. D’Aquino made clear to Rueli that TLSI should not issue an IRS Form 1099 for these payments, as D’Aquino did not want to report this income to the IRS. In fact, D’Aquino did not report these payments as income on either IPC’s federal income tax returns – IPC filed no such returns with the IRS for the tax years 2001, 2002 or 2003 – or on his personal federal income tax returns. The tax loss to the government resulting from the conspiracy to defraud was $73,939. On October 31, 2006, Rueli pleaded guilty to two counts of mail fraud and one count of conspiracy to defraud the IRS. On June 28, 2007, he was sentenced to 57 months of imprisonment.
Actor Wesley Snipes Sentenced to Three Years in Prison; Co-Defendants Receive 10 Years and Four and a Half Years in Prison
On April 24, 2008, in Ocala, Fla., Wesley Trent Snipes was sentenced to 36 months in prison for charges of failing to file income tax returns. Snipes was found guilty by a jury on February 1, 2008. Eddie Ray Kahn, of Sorrento, Florida, was sentenced to 120 months in prison and Douglas P. Rosile, of Venice, Florida, was sentenced to 54 months in prison. The same jury found Kahn and Rosile guilty of conspiracy to defraud the Internal Revenue Service and presenting a fraudulent claim for payment to the IRS. Kahn was the founder and leader of American Rights Litigators (ARL) based in Lake County, Florida. Rosile prepared returns for ARL clients, such as Snipes. According to an indictment filed in October 2006, Kahn and Rosile through ARL promoted a fraudulent tax scheme based on the so-called “861 argument,” asserting that United States citizens and residents could be taxed only on income derived from certain foreign-based activities and not on wages and other income earned within the United States. The argument has been consistently rejected by courts.
Former District of Columbia Employee Sentenced to 51 Months in Prison
On April 24, 2008, in Washington, D.C., Stephanie Emerson Olds, a former District of Columbia employee, was sentenced to 51 months in prison to be followed by three years of supervised release for the federal charges and five years of probation for the District of Columbia charge. She was also ordered to pay $88,050.33 in restitution to the United States and District of Columbia governments. Olds pleaded guilty in November 2007 to charges of filing false claims, first-degree fraud, and theft from a program receiving federal funds. According to the proffer of evidence by the government at the time of the plea, Olds filed a false federal income tax return in 2001 and false District of Columbia income tax returns in 2001 and 2002. Olds provided her tax preparer with forged W-2 forms stating that an employer, for whom Olds no longer worked, withheld from her salary large amounts of money for federal and District of Columbia taxes. As a result, the tax preparer filed false returns on Olds’s behalf claiming over $58,000 in fraudulent refunds. In addition, in 2003, Olds was employed at the District of Columbia Child and Family Services Agency (CFSA) as a budget analyst. Her duties included processing invoices for the agency. In the summer and fall of 2003, Olds obtained checks from businesses that owed money to CFSA. She then deposited these checks into her personal bank account. In this scheme, Olds stole over $24,000 from CFSA.
Wisconsin City Employee Sentenced to Prison for Using City Resources to Operate Private Business
On April 22, 2008, in Madison, Wis., Robert D’Angelo was sentenced to 12 months plus one day in prison and ordered to pay a $4,000 fine for mail fraud and filing a false income tax return. On October 10, 2007, a federal grand jury sitting in Madison returned a 39 count indictment against D’Angelo. The indictment charged D’Angelo with 15 counts of mail fraud, 15 counts of wire fraud, four counts of filing false federal income tax returns, four counts of money laundering, and one count of asset forfeiture. The mail and wire fraud counts alleged that D’Angelo defrauded the city of Madison by operating two side businesses from his city office, using city resources, including his office computer, office employees, office supplies and equipment, and office storage facilities. The indictment also alleged that D’Angelo filed false income tax returns for the years 2001 through 2004. On January 31, 2008, D’Angelo entered guilty pleas to a mail fraud count and a false tax return count. D’Angelo admitted that he used city resources to operate his used book business and consulting business.
Wisconsin Businessman Sentenced for Tax Evasion and Money Laundering
On April 21, 2008, in Milwaukee, Wis., Ronald Miserendino was sentenced to 48 months in prison for tax evasion and conspiracy to commit money laundering. Miserendino owned Trace Corporation, a Wisconsin corporation primarily engaged in the business of renting and developing real estate. Miserendino’s wife filed for divorce and sought a division of the couple’s property, including the assets of his businesses. Miserendino’s took action to reduce his assets. He named his son the president and owner of Trace Corporation and gave him 49 percent of his company. He received $4.5 million in loans and a $500,000 line of credit from a bank purportedly for buying investment property. He liquidated $10 million in treasury bonds owned by Trace and sold real estate. Miserendino traveled to Australia where he opened accounts and leased safe deposit boxes at various banks. On these trips, Miserendino took proceeds from his activities and placed cash into safe deposit boxes. In 2001, Miserendino filed a tax return stating that his income was $4.3 million. On his federal tax return, he did not report all of the proceeds from various transactions in 2001. Failure to report the loans and revenue on his tax return was estimated to be between $400,000 and $1 million in additional income.
Man Who Took Money from Trust Sentenced to 8½ Years in Federal Prison for Wire Fraud and Money Laundering Scheme
On April 17, 2008, in Anchorage, Alaska, Mark J. Avery was sentenced to 8½ years in prison and ordered to pay $52.125 million in restitution for wire fraud and money laundering. Avery’s sentencing is the result of his guilty plea in March 2006, to seven counts of wire fraud and seven counts of money laundering in connection with his actions in arranging for, and spending $52 million dollars secured by the assets of the May Smith Trust, a trust created for the care and maintenance of May Wong Smith, for which he was an appointed trustee. Evidence obtained from search warrants for Avery businesses, including Security Aviation, Inc., included thousands of pages of documents detailing his breach of fiduciary duty as Trustee. The court was told during the sentencing hearing that the matter was a massive breach of trust in that none of Avery’s purchases nor his business plans were in any way designed to benefit May Wong Smith or her personal trust but were in fact designed to benefit Avery and the businesses he purchased.
Texas Man Sentenced for Tax Fraud
On April 16, 2008, in Tyler, Texas, Jimmy Max Wilson was sentenced to 24 months in federal prison and ordered to pay $73,554 in restitution for tax fraud. Wilson was indicted in September 2007 and charged with presenting false claims against the Internal Revenue Service (IRS). He pleaded guilty to that charge on November 20, 2007. According to the factual statement filed in court, Wilson admitted filing false claims against the IRS using identities that he knew were false and that he claimed refunds he knew that he was not entitled to receive. Wilson also used false identifications to open bank accounts and apply for loans.
Oregon Resident and Corporation Sentenced in Securities Fraud Scheme
On April 15, 2008, in Eugene, Ore., Michael Marks Rich (also known as Richard Forbes Williams and Michael Richard Brown), former president and chief executive officer of Pac Equities, Inc., was sentenced to serve 20 years in prison and ordered to pay $10.4 million in restitution to his victims. Rich and Pac Equities were found guilty in December 2007 of securities fraud, wire fraud, mail fraud, bank fraud, attempted bank fraud, money laundering, obstruction of justice and tax fraud. Rich and Pac Equities solicited investors to invest in real estate development projects and loans promising annual returns of at least 10 percent. They claimed that the investments were secured by trust deeds and always had at least 30 percent in equity, with no more than 70 percent loan to value ratio. Rich and Pac Equities created the facade of a successful business by using investor principal to make monthly payments to investors. They claimed that the payments constituted interest earned from profitable investment and loan activity, then used this facade to recruit additional investors and retain existing investors, knowing that the only sources of income for Pac Equities were from a few projects and loans. These amounts were insufficient to meet monthly interest obligations which Pac Equities owed its investors. Rich misrepresented his educational background, his employment history, and the nature and security of the contracts, which caused over 300 people to invest more than $18 million with Pac Equities. The money laundering charges were based upon Rich’s use of investor money to pay personal expenses. The obstruction of justice charges were based on evidence Rich that hid from authorities. The tax fraud charges were based upon $139,500 Rich failed to report to the IRS in 2003 and $155,000 Rich failed to report to the IRS in 2004.
California Real Estate Developer Sentenced for Filing a False Tax Return and Failure to Disclose Foreign Bank Accounts to IRS
On April 14, 2008, in Santa Ana, Calif., Igor Olenicoff, founder and president of real estate company Olen Properties Corp., was sentenced to two years probation and 120 hours of community service for filing a false 2002 tax return related to foreign bank accounts he failed to disclose to the IRS. As part of his December 2007 plea Olenicoff also paid $52 million to the IRS for six years of back taxes, penalties and interest. According to court documents, during the years 1992 through 2004, Olenicoff owned financial accounts outside of the United States. As early as August 1997, Olenicoff listed himself as chairman of Sovereign Bancorp LTD and president and director of National Depository Corporation, Ltd on signature cards for Barclays Bank in the Bahamas, which also listed Olenicoff as an authorized signatory on these accounts. During this period, Olenicoff also had signatory authority and controlled several financial accounts with Solomon Smith Barney, which were held in the London, England office of Solomon Smith Barney. Olenicoff’s accounts in the England offices of Solomon Smith Barney were held in the names of Sovereign Bancorp, Ltd., National Depository Corporation, Ltd., Guardian Guarantee Company, Ltd, Continental Realty Funding Corporation, and Swiss Finance Corporation. Olenicoff opened several accounts at UBS (formerly known as Union Bank of Switzerland), in Switzerland, in which Olenicoff had signatory authority and listed himself as vice president and director of accounts under the name of Guardian Guarantee Company Ltd. and New Guardian Bancorp APS. In addition, Olenicoff also had signatory authority and control over several financial accounts at Neue Bank in Liechtenstein, including an account in the name New Guardian Bancorp APS. According to the plea agreement, Olenicoff filed his personal income tax returns with the IRS for the respective tax years but he failed to report the foreign bank accounts and the names of the financial institutions on IRS Schedule B, Part III. Line 7a of Schedule B asks: “At any time during [calendar year], did you have an interest in or a signature or other authority over a financial account in a foreign country, such as a bank account, securities account, or other financial account?” On his tax returns, Olenicoff falsely answered “no”.
Fraudulent Investment Company Operator Sentenced to 108 Months in Prison
On April 7, 2008, in Los Angeles, Calif., William Richard Vorburger, Jr. was sentenced to 108 months in prison, to be followed by three years of supervised release, and ordered to pay $1,009,407 in restitution to the victim investors. Vorburger, who operated Valley Precision Imaging and Desert Medical Imaging, both body scanning clinics, and Multivision, an internet shopping website, pleaded guilty last year to mail fraud and money laundering charges related to an investment scheme. As detailed in his plea agreement, Vorburger admitted that he fraudulently told investors that he would use their money to further the businesses which, in turn, would result in high rates of return. Further, Vorburger admitted that none of the businesses ever actually started running and none ever made a profit. Further, the victims lost all of the money they had invested with Vorburger based upon his fraudulent claims. In sentencing position papers filed with the court, the government detailed that Vorburger put undue pressure on his mostly elderly victims. Vorburger told his victims that if they did not send in more money, they would lose everything they had already invested when, in fact, Vorburger had already spent all the money the victims had sent him. In total, Vorburger induced approximately 15 victims to send over $1 million to his fraudulent investment companies.
Two Mississippi Mortgage Brokers Sentenced in Separate Mortgage Fraud Schemes
On April 4, 2008, in Jackson, Miss., David Kennedy and LaVonne Hamilton, two former mortgage brokers, were sentenced for their roles in separate mortgage fraud schemes. David Kennedy was sentenced to 24 months in prison followed by three years of supervised release. LaVonne Hamilton was sentenced to 16 months in prison followed by two years of supervised release. In November 2007, Kennedy and Hamilton each pleaded guilty to conspiracy to commit money laundering of the proceeds from their individual mortgage fraud schemes. According to court documents, Kennedy and Hamilton conspired with others to submit false information to mortgage lenders and secure fraudulent mortgage loans for others by using interstate wires. From these fraudulent proceeds Hamilton and Kennedy and their co-conspirators received numerous fees, commissions and other profits to which they were not entitled. To promote the continuation of the mortgage fraud schemes, from the proceeds of these fraudulent loans Kennedy and Hamilton each received additional profit from the real estate transactions to which they were not entitled under the guise of payments to fictitious creditors which were actually alter ego companies associated with Hamilton or Kennedy. As a result of the fraudulent information submitted to the various mortgage lenders by Hamilton, Kennedy and their co-conspirators in each of these cases, fraudulent mortgage loans exceeding $835,000 were collectively disbursed.
Waste Hauler Involved in Racketeering Conspiracy Sentenced to One Year in Prison
On April 3, 2008, in New Haven, Conn., Dennis Bozzuto was sentenced to 12 months in prison, followed by three years of supervised release, and ordered to pay a $10,000 fine. Bozzuto pleaded guilty on November 16, 2006, to conspiring to violate the federal Racketeer Influenced and Corrupt Organizations (RICO) Act. According to court documents and statements made in court, Bozzuto, while he was an owner and operator of John’s Refuse of Northford, Connecticut, conspired with others to perpetuate a system, commonly called the “property rights system.” Carters engaged in the property rights system would not service or compete for other carters’ customers. The property rights system essentially destroys free enterprise, allowing the participating carters to artificially inflate their prices and leaving waste removal customers with no other options. In this scheme, which was directed at commercial and municipal customers, Bozzuto admitted that he participated in the affairs of the enterprise by agreeing to respect the unwritten rules of the property rights system. To date, 33 individuals and 10 businesses have been charged with various offenses stemming from a long-term investigation into the waste-hauling industry in Connecticut and eastern New York.
Former Employee at Regional Medical Center at Memphis Sentenced to Five Years in Prison
On April 1, 2008, in Memphis, Tenn., Cassandra J. Stanfield, a former employee at the Regional Medical Center at Memphis, was sentenced to 60 months in prison, followed by six years of supervised release, and ordered to pay $2.8 million in restitution. Stanfield pleaded guilty to embezzling monies from the medical center and income tax evasion on September 24, 2007. As part of her plea agreement, Stanfield agreed to forfeit her interest in all property derived from her criminal conduct and to pay restitution to all identifiable victims who suffered losses as a result of her criminal conduct. In pleading guilty to income tax evasion, Stanfield admitted that for calendar year 2004 she did not file a tax return despite the fact that she received taxable income in the approximate amount of $968,523 on which she owed approximately $317,051 in taxes.
Leader of $17 Million Investment Fraud Scheme Sentenced to 37 Months in Prison
On March 27, 2008, in Baltimore, Md., Joseph Poteat was sentenced to 37 months in prison, followed by three years of supervised release for conspiracy to commit mail fraud and conspiracy to commit money laundering in connection with a fraudulent investment scheme. According to his plea agreement, Poteat controlled a “private membership organization” known as the CEP Group, and JLR Development, Ltd., both of which operated out of Danville, Virginia. Poteat represented to potential investors that JLR was an entity that invested in offshore ventures. In order to invest in JLR, individuals had to first join CEP by paying a membership fee of $80. Poteat and others recruited individuals from throughout the United States to join CEP, making misleading representations to the investors as to how their investment in JLR would work and the amount of guaranteed return. Poteat would send the investors monthly and quarterly statements containing false information about the returns the investors were earning. According to court documents, between 1999 and 2001, Poteat and his co-conspirators collected approximately $17 million from investors in JLR and from members in CEP. In order to lull investors into believing that their investments were earning returns, Poteat and his co-conspirators made several million dollars in payments to investors by providing them with funds invested by newer investors. Between 1999 and 2001, Poteat engaged in a series of financial transactions through which he and/or family members received approximately $700,000 in CEP member and JLR investor funds. During that same time frame, Poteat made periodic transfers of funds from JLR and/or CEP bank accounts into bank accounts controlled by Marie Bellamy. Bellamy admitted she willfully failed to report some of the funds from JLR as income on her tax returns for tax years 1999 and 2000, and that she did not file a federal income tax return for tax year 2001. Ultimately, Poteat and his co-conspirators caused the investors to lose more than $7 million. Co-defendant Marie Bellamy was sentenced to 18 months probation with the first six months to be served in home detention with electronic monitoring, for filing a false tax return. Bellamy was also ordered to pay $56,768 in restitution to the Internal Revenue Service.
California Executive Assistant Sentenced to 20 Months in Prison for Embezzling $1.4 Million and Filing False Tax Returns
On March 24, 2008, in San Jose, Calif., Suzie Moy Yuen was sentenced to 20 months in prison, followed by three years of supervised release, and ordered to pay $182,000 in restitution. Yuen pleaded guilty on October 9, 2007, to mail fraud and to willfully subscribing to a false tax return. According to her plea agreement, Yuen served as an executive assistant to an individual for over ten years and that during that time her duties included paying the individual’s bills and recording the payments in a general ledger. To permit her to do her job, the victim, who is now 99 years old, had given Yuen signature authority over two of his checking accounts. Between 1999 and 2003, Yuen fraudulently used the victim’s checking accounts to pay her own personal credit card bills and made false entries in the general ledger to conceal her fraud. Yuen admitted to embezzling over $1.4 million. She further admitted that she failed to report the money she embezzled as income on her tax returns for the 1999 to 2003 tax years. As a result, Yuen owes the IRS, excluding interest and penalties, a total of $492,646 in taxes.
Georgia Businessman Skimmed Over a Half-Million Dollars from His Company
On March 21, 2008, in Gainesville, Ga., Robert Merickle, owner of East Coast Marketing, dba Blue Haven Pools, was sentenced to 12 months and one day in federal prison, to be followed by one year of supervised release, and ordered to cooperate with the IRS in determining an amount of restitution. Merickle pleaded guilty on December 20, 2007, to the charges of filing a false tax return in 2001. According to court documents and information presented in court, in 2001, Merickle spent over $200,000 out of his company’s account for personal expenses, including the financing of a 55′ luxury yacht, but treated those expenses as business expenses. He also accepted tens of thousands of dollars in cash from customers, which he kept off of the company’s books and therefore off of its tax returns. Merickle engaged in similar conduct in 2000, 2002 and 2003, which along with 2001, amounted to over $500,000 in unreported income.
Owner of Company Involved in Waste-Hauling Conspiracy Sentenced to 15 Months in Prison
On March 20, 2008, in New Haven, Conn., Arthur Wallinger, aka AJ Wallinger, was sentenced to 15 months in prison, to be followed by three years of supervised release, and ordered to forfeit $25,000 to the United States. Wallinger, who is the owner and operator of AJ Waste Systems, a carting company located in Cheshire, pleaded guilty in June 2007 to conspiring to violate the federal Racketeer Influenced and Corrupt Organizations (RICO) Act. According to court documents and statements made in court, Wallinger and others conspired to perpetuate a system, commonly called the “property rights system.” Carters engaged in the property rights system do not service or compete for other carters’ customers. The property rights system essentially destroys free enterprise, allowing the participating carters to artificially inflate their prices and leaving waste removal customers with no options. To date, 33 individuals and 10 businesses have been charged with various offenses stemming from a long-term investigation into the waste-hauling industry in Connecticut and eastern New York.
Virginia Woman Sentenced to 94 Months in Prison for Role in Fraud and Tax Evasion Schemes
On March 18, 2008, in Abingdon, Va., Carol Irene Estep, of Hurley, Va., was sentenced to 94 months in prison for her role in a wide ranging fraud scheme involving herself, her son and her ex-husband. Estep pleaded guilty in August 2007 to one count of conspiracy to commit mail fraud, one count of conspiracy to commit bank fraud, one count of conspiracy to defraud the United States, one count of aggravated identity theft, one count of money laundering, and one count of Social Security fraud. According to court documents, Estep, Timothy Carl Ling, her son, and Herman Scott Ling, her ex-husband, entered into a scheme in which the family defrauded the Virginia Consumer Services Fund and received money to which they were not entitled by falsely claiming that Timothy Carl Ling was a quadriplegic. The Virginia Consumer Services Fund and Clinch Independent Living Services, Inc., which provides funding and services to disabled individuals so that they may live a more independent life, purchased a specially equipped van and built ramps at Estep’s home based upon the pair’s fraudulent representations that Timothy Carl Ling was a quadriplegic. According to testimony presented at the sentencing hearing, the agencies spent more than 50 staff hours and more than $14,000 assisting Timothy Carl Ling and Estep. Additionally, Timothy Carl Ling and Estep perpetrated a credit card fraud scheme between the summer of 2005 and October 2006 in which they defrauded five separate credit card companies and incurred a loss to these companies and merchants of $344,465. None of these individuals reported their income to the Internal Revenue Service (IRS) or the Social Security Administration Office and Timothy Carl Ling, Estep, and Herman Ling actively tried to hide this income from the IRS by engaging in money laundering transactions.
Connecticut Man Sentenced for Embezzling Nearly $2 Million and Filing False Tax Returns
On March 10, 2008, in Hartford, Conn., Jeffrey M. Bourke was sentenced to 18 months in prison, to be followed by three years of supervised release, and ordered to pay $1,985,123 in restitution. On October 2, 2007, Bourke pleaded guilty to four counts of mail fraud and one count of filing a false tax return. According to documents filed with the court and statements made in court, from approximately June 2001 through August 2006, Bourke was an employee of a major health insurer in Connecticut. Bourke worked in the company’s East Region marketing area and had responsibilities in the areas of finance, vendor management, and operations. In September 2003, Bourke formed, in name only, a sham company called Health Management Solutions LLC. Starting in October 2003, Bourke used Health Management Solutions as a means to embezzle money from his employer. As part of his employment duties, Bourke was involved in vendor services and aware of the types of goods and/or services for which his employer contracted. Using this knowledge, he created fictitious invoices that falsely represented goods and/or services provided by Health Management Solutions. Bourke then presented the false invoices to company management for authorization. As a result, the company mailed checks totaling approximately $1,985,123 to Bourke. Bourke spent the money for his own personal use. Bourke also filed false tax returns for the years 2003 through 2005 because he either failed to report the money that he had embezzled or reported some of the embezzled funds as gross receipts and then reported false expense deductions to reduce his income. As a result, Bourek owes back taxes in the total amount of $428,260, plus penalties and interest.
Indiana Woman Sentenced to 48 Months for Million Dollar Fraud
On March 7, 2008, in Indianapolis, Ind., Anne Geyman, former treasurer of the Switzerland County School Corporation was sentenced to 48 months in prison and ordered to pay $1.15 million in restitution for filing false federal tax returns and mail fraud. Geyman pleaded guilty in January 2008 to embezzling $1.1 million from the Switzerland School Corporation. She illegally wrote 200 checks to pay for personal credit card debts and altered bank statements and canceled checks to hide the embezzlement. The scheme was discovered during a 2007 audit by the Indiana State Board of Accounts. In addition, when she worked as the treasurer of Madison Regatta, Inc., a not-for-profit organization, Geyman used organization funds to pay $24,489 in personal debts. In another scheme, she perpetrated a $76,074 fraud on a car dealership. Through a public auction arranged by federal authorities, Geyman has already repaid $56,773 to the school corporation.
Michigan Man Sentenced for Tax Evasion
On March 6, 2008, in Grand Rapids, Mich., Charles E. Hughes, of Dansville, Mich., was sentenced to 15 months in prison and ordered to pay restitution of $37,559 to the U.S. Treasury for tax evasion. Hughes was convicted by a federal jury of four counts of tax evasion on December 6, 2007. Hughes, a sprinkler fitter, purchased a “16th Amendment Reliance Defense Package” for $3,500 in 2000 from William Benson, of Chicago, Ill. This package of material purports to establish that the federal income tax, as applied to individuals, is unconstitutional. Although the legal analysis and claims contained in the package have been thoroughly discredited, some persons who buy these kinds of packages have used it in attempts to justify their decision to stop paying federal income taxes. Hughes failed to file his 2000 through 2002, and 2004 federal tax returns, despite having more than $300,000 in income over that period. In addition to his failure to file returns, Hughes also avoided having federal tax withheld from his income.
Former Securities Broker Sentenced to 42 Months in Federal Prison for Stock and Extortion Schemes
On March 3, 2008, in Camden, N.J., Rhett Howard Kirchhoff, a former securities broker, was sentenced to 42 months in prison and ordered to pay $11.6 million in restitution. Kirchhoff pleaded guilty on March 13, 2006, to a four count Information that charged him with conspiracy to commit securities and wire fraud; conspiracy to commit money laundering; conspiracy to affect commerce by extortion; and bankruptcy fraud. At his plea hearing, Kirchhoff admitted his involvement in an intricate stock fraud and money laundering scheme that cost public investors more than $15 million in losses and a scheme to extort money and stock from several stock promoters and corporate insiders through the use of threats and violence. From 1995 until 1998, Kirchhoff, who was licensed to sell securities by the NASD, owned and controlled DiMedio Kirchhoff & Co., Inc. and was an employee of the Kirchhoff Organization, Ltd. Both companies were registered securities brokerages with offices in Cherry Hill, Marlton and Ocean City. Kirchhoff admitted that he conspired with Robert P. Gordon, of St. Petersburg, Fla., who was the chairman and CEO of TeleServices Internet Group, Inc., (TSIG) and others in a scheme in which they used deceptive and manipulative practices in connection with the fraudulent issuance, purchase and resale of stock of TSIG from December 1996 through October 2000. On April 9, 2007, with the assistance of Kirchhoff’s cooperation and testimony, Gordon was convicted by a jury of one count each of conspiracy to commit securities and wire fraud and conspiracy to commit money laundering. Gordon, who was the ringleader of the scheme, was sentenced to 240 months in federal prison on September 24, 2007.
Leaders of Multi-Million Dollar Immigration and Tax Scam Sentenced to Prison
On March 3, 2008 in Grand Rapids, Mich., Richard M. Rosenbaum, of Longwood, Fla.; Edward Scott Cunningham, of West Palm Beach, Fla.; and Christina A. Flocken, of Longwood, Fla., were sentenced for tax evasion and operating a nationwide janitorial service staffed almost exclusively with illegal aliens. Rosenbaum, the former president of Rosenbaum-Cunningham International (RCI), was sentenced to 10 years in prison for conspiring to defraud the United States and harboring illegal aliens. Cunningham, the company’s former vice president, was sentenced to a four year and three month prison term. Flocken, the company’s former controller was sentenced to two years and six months in prison. In addition, Rosenbaum was ordered to pay $16.9 million; Cunningham was ordered to pay $16.3 million; and Flocken was ordered to pay $15.7 million. The three also forfeited numerous bank accounts, life insurance policies and $3 million derived from their illegal activity. According to the Indictment and a Superseding Felony Information, RCI operated as a cleaning and grounds-maintenance service company for theme restaurant chains and hospitality venues throughout the United States. It was staffed predominantly with illegal aliens. By failing to collect and pay federal income, Social Security and Medicare, and federal employment taxes on the wages it paid to its workforce, RCI evaded $15.7 million in employment taxes. Much of the money was used by Rosenbaum, Cunningham and Flocken to support extravagant lifestyles.
Doctor and Son Sentenced for Conspiracy to Evade Federal Income Taxes
On March 3, 2008, in Jackson, Miss., Dr. Billy Ray Shows of Newton, Mississippi, and his son, Billy Ray Shows, II, of Jackson, Mississippi, were sentenced for conspiring to evade federal income taxes. Dr. Shows was also sentenced on three counts of attempted tax evasion for the years 1999, 2000, 2001. Dr. Billy Ray Shows was ordered to serve 27 months in prison, to be followed by three years of supervised release, and ordered to pay a $50,000 fine. Billy Ray Shows II was sentenced to serve 24 months in prison, to be followed by three years of supervised release. In addition, the two defendants must jointly pay $9,946 for costs of prosecution. Evidence at trial showed that Dr. Shows practiced medicine at Shows Medical Clinic and at various emergency rooms throughout the state. Billy Ray Shows II was the alleged owner of the building in which Shows Medical Clinic was located. The Shows established a sham business which was used to divert and conceal the income of Dr. Billy Ray Shows and to reduce the taxable income of Billy Ray Shows II. This was accomplished by Dr. Billy Ray Shows diverting income to his son and claiming such income as “rental payments,” which Dr. Billy Ray Shows then would record as rental business expenses on his books and records. Billy Ray Shows II in return used the income he received from Dr. Billy Ray Shows to purchase assets and invest in businesses that were not in Dr. Billy Ray Shows’ name but were controlled by him. Further, Billy Ray Shows II actually diverted some of this money in the form of “rental payments” back to Dr. Billy Ray Shows for his personal use. This money was paid back to Dr. Shows in the form of checks written to him and checks made payable to “Cash” which were deposited into Dr. Shows’s personal checking account. When the defendants were confronted by the IRS special agents investigating the matter, the Shows made false statements and representations to the agents in order to disguise Dr. Show’s income and conceal his interest in certain property and businesses.
Michigan Certified Public Accountant Goes to Jail for Filing False Tax Returns
On February 28, 2008, in Detroit, Mich., Certified Public Accountant Abraham Nicola Nunu, of Dearborn Heights, was sentenced to a year and a day imprisonment and ordered to pay a $3,000 fine and restitution to the Internal Revenue Service (IRS) for filing false tax returns. According to court records, Nunu filed false 2000 and 2001 personal income tax returns with the IRS that reflected taxable income of approximately $99,000, when his actual taxable income for those tax years was approximately $337,000. Nunu pleaded guilty on October 31, 2007.
Former Wisconsin Restaurant Owner Receives Prison Term for Evading Income Taxes
On February 27, 2008, in Madison, Wis., Sabi Atteyih was sentenced to 12 months and one day in prison, to be followed by a three year term of supervised release for income tax evasion. On January 2, 2008, Atteyih pleaded guilty to evading his income taxes for 2002. While owning the Casbah Restaurant in Madison, Atteyih underreported his taxable income from the restaurant from 2002 through 2005 by $349,673 and he evaded income taxes totaling $128,938.
International Money Launderer Extradited from Switzerland Sentenced to 63 Months in Prison
On February 19 2008, in West Palm Beach, Fla., Gabriel MacEnroe was sentenced to 63 months in prison, to be followed by three years of supervised release and ordered to pay a $10,000 fine. According to court documents, MacEnroe, a citizen of Ireland, maintained finance businesses, Commercial Capital Finance (CCF), in St. Gallen, Switzerland, and Commercial Capital Establishment (CCE), in Liechtenstein. In 2000, MacEnroe received approximately $2.8 million through a pyramid scheme that targeted United States victims. MacEnroe deposited the funds into his CCF and CCE bank accounts. Thereafter, in furtherance of the money laundering conspiracy, MacEnroe caused over $1 million in pyramid scheme fraud funds to be wired back into the United States. In May 2007, the United States was successful in extraditing MacEnroe from Switzerland.
Former Owner of Adult Entertainment Clubs is Sentenced to Prison
On February 15, 2008, in Memphis, Tenn., Ralph Lunati, former owner of adult entertainment establishments throughout the country, was sentenced to 18 months in prison following enforcement actions involving two Memphis adult entertainment clubs, Platinum Plus and Tunica Caberet. In November 2007, Lunati pleaded guilty to conspiracy to facilitate the carrying on of an unlawful activity, specifically a business enterprise involving prostitution and promoting prostitution. Lunati agreed to forfeit any property derived from proceeds obtained directly or indirectly as a result of the unlawful activity, including over $200,000 in United States currency and real estate property.
Ex-Restaurant Owner Sentenced to Prison for Tax & Bankruptcy Fraud
On February 15, 2008 in San Diego, Calif., Karl James, the former owner and operator of more than 50 Taco Bell franchises in southern California and Arizona, was sentenced to serve 36 months in prison and ordered to pay $1.12 million in restitution to the victims of his bankruptcy fraud and $1.17 in restitution to the Internal Revenue Service (IRS) for unpaid taxes. James pleaded guilty on October 19, 2005 to bankruptcy fraud and tax evasion. In his plea agreement, James, who at that time was the president and chief executive officer of Golden West Tacos Inc. (GWT), admitted that from May 2, 1998, through June 5, 2001, he fraudulently diverted more than $3 million in GWT income and assets for his personal use, including beverage and food supplier rebate checks issued to GWT and expensive residences purchased with the company’s funds. James admitted to hiding the scheme by transferring GWT assets to “off book” company accounts and accounts in the name of others, including his late father, his stepmother, and Sea Horse Enterprises LLC, a limited liability company that James owned and controlled. He further admitted that he transferred residences in Rancho Santa Fe and Palm Springs, Calif., to his nominees and concealed these transfers by making false entries in GWT’s books and records. In pleading guilty, James admitted that in filing Chapter 11 bankruptcy petitions, he concealed the existence and fraudulent diversion of approximately $2 million. James also admitted that he filed fraudulent individual income tax returns for the tax years 1998, 1999 and 2000 and failed to report more than $3 million in diverted GWT funds. In doing so, James evaded more than $1.1 million in personal income taxes for the three years.
Second-in-Command in Massive Mortgage Fraud Scheme Sentenced to 7 Years in Prison; Ordered to Pay Over $40 Million in Restitution
On February 14, 2008, in Atlanta, Ga., Leslie Rector was sentenced to 84 months in prison to be followed by three years of supervised release, and ordered to pay $40.2 million in restitution. Rector was convicted by a trial jury on March 14, 2007 on charges of conspiracy, loan fraud, mail and wire fraud, and money laundering. According to the information presented in court, Rector was the right-hand man of co-conspirator, Phillip E. Hill, and assisted Hill in orchestrating a massive mortgage fraud scheme that targeted the Atlanta area from 2000 through 2003. The criminal activities related to mortgages obtained in the sale of over 50 homes and over 250 condominiums in eight Atlanta-area condominium complexes. Each property was sold at an inflated price to a “straw purchaser” who applied for a mortgage loan based upon the inflated price. Such a fraudulent transaction is called a mortgage “flip.” The straw purchasers who participated in these mortgage flips were paid a kickback out of the excess loan proceeds for the use of their name and credit. The victim lenders granted the loans based upon numerous false representations and documents regarding the credit qualifications of the straw purchaser as well as false representations that the straw purchaser had paid a down payment, would reside in the home, and would be responsible for the loan payment. In addition, the lenders were induced to make the loans based on fraudulently inflated appraisals. Some of the properties were “flipped” more than one time. Hill was sentenced in September 2007 to 28 years in prison. Also convicted at trial with Rector and Hill were eight other co-defendants. In addition, eleven other individuals pleaded guilty to mortgage fraud charges related to the scheme.
North Carolina Resident Sentenced for Filing False Income Tax Returns
On February 8, 2008, in Winston-Salem, N.C., Louie George Sinclair, of Durham, N.C., was sentenced to 18 months in prison and ordered to pay $62,203 in restitution to the United States Department of the Treasury for filing false federal income tax returns during a wire fraud scheme. Sinclair was originally indicted by a federal grand jury in Greensboro in February 2007. According to court documents, Sinclair persuaded a friend that he had expertise in financial planning and tax preparation, she provided him with her tax information and agreed to allow him to file timely personal income tax returns for her for the tax years 2000 and 2001. Although the friend actually owed additional taxes and directed Sinclair to pay those taxes, Sinclair instead filed fraudulent returns without the friend’s knowledge that claimed inflated medical and employment expenses and requested large refunds. Sinclair also filed a third return entirely without the friend’s knowledge for 2003 that requested an additional refund to which she was not entitled. Sinclair’s scheme was uncovered when his friend attempted to file her own income tax return for 2003 and was notified by the Internal Revenue Service that a return for that year had already been filed for her and a refund had been issued.
Former Auburn University Professor Sentenced to 63 Months in Prison; Ordered to Pay Over $1.3 Million in Restitution
On February 5, 2008, in Montgomery, Ala., Loyd Frank Lawing, Jr., a former Auburn University professor and Army Lt. Col., was sentenced to 63 months in prison without parole for singlehandedly embezzling nearly $100,000 from the Small Business Administration (SBA) in 9/11 disaster relief funds and over $940,000 from the Auburn University branch of Alpha Tau Omega (ATO). Lawing was ordered to pay nearly $1 million to ATO, nearly $100,000 to the SBA, and over $300,000 to the Internal Revenue Service (IRS). In August 2007, Lawing pleaded guilty to embezzling over $940,000 in monies he was entrusted with as chapter advisor, secretary, and treasurer of the Auburn University branch of the social fraternity Alpha Tau Omega. Lawing also pleaded guilty to tax evasion and to a fraud in connection with Small Business Administration 9/11 Disaster Loans. During his plea hearing, Lawing admitted that from approximately June 2002, and continuing until approximately July 13, 2005, he had access to the fraternity’s banking accounts and embezzled nearly all the fraternity’s funds from area Auburn banks. Lawing was able to accomplish the scheme because he controlled proceeds of the fraternity’s sale of its building, totaling nearly $1 million. Lawing also admitted that he implemented a series of lulling tactics designed to conceal the fraternity’s increasingly depleted funds. These tactics first included false assurances that the initial proceeds from the sale of the property had been invested in a CD and a money market account. Later, Lawing falsely assured that a “nest egg” had been created in the form of a fraternity trust with the assistance of a local Auburn, Alabama, attorney. Finally, Lawing admitted that he failed to report his embezzled income on his and his wife’s federal income tax return.
Rhode Island Businessman is Sentenced for Tax Evasion
On February 1, 2008, in Providence, R.I., Neil Stierhoff was sentenced to 46 months in prison and ordered to pay a $40,000 fine for tax evasion. A jury found Stierhoff guilty of failing to pay taxes on about $1.2 million in income he earned from selling electronic testing equipment between 1999 and 2002. He sold the equipment by mail, in person, and through eBay. To conceal his income, Stierhoff did business under several aliases, including Joseph Adams, Adams Associates, and Universal Audio. To further distance himself from his income, Stierhoff used mail drops in Providence and White Plains, New York. He also extensively used cash, regularly withdrawing money from ATMs and using money orders to pay debts. The evidence showed that he withdrew approximately $240,000 from ATMs between 1999 and 2002. A Rhode Island State Police detective testified during the trial that he found more than $100,000 in cash in Stierhoff’s room. Stierhoff will also have to pay all back taxes, plus interest and penalties.
Pennsylvania Businessman Sentenced in Payroll Tax Scheme
On January 31, 2008, in Philadelphia, Penn., Kheirallah Ahmad was sentenced to 48 months in prison and ordered to pay $1.2 in restitution to the Internal Revenue Service for conspiracy and for filing a false tax return. Ahmad, chief executive officer of the Cousins Food Market (CFM) chain in North Philadelphia, pleaded guilty to the charges in July 2007. According to court documents, Ahmad paid some of his employees in cash and he did not withhold federal, state or local payroll taxes as required by law. Ahmad paid more than $3.6 million in wages under-the-table. In an effort to hide the scheme, Ahmad and others skimmed approximately $7.7 million of receipts from his company’s revenues and intentionally failed to report these receipts to their accountant for inclusion on CFM’s income tax returns. Ahmad admitted that his 20-year conspiracy resulted in tax losses totaling more than $1.5 million.
Attorney for Former Chairman of Palm Beach County Commission Sentenced to Prison
On January 25, 2008, in Miami, Fla., Attorney William R. Boose, III, of Palm Beach Gardens, Fla., was sentenced to 24 months in prison and fined $25,000. Boose also forfeited $400,000 as part of his plea agreement. Boose was involved in a public corruption conspiracy stemming from Anthony R. Masilotti’s unlawful use of his official position as an elected county commissioner to promote and conceal Masilotti’s honest services fraud. Boose admitted to helping Masilotti’s secret participation in a land deal, which involved the sale of land to the South Florida Water Management District (SFWMD). Masilotti admitted that he misused his official position in this transaction to advocate and publicly endorse the SFWMD’s purchase of the land without publicly disclosing his ownership interest in the property. To hide his ownership interest in the property, Boose created a secret land trust to buy the property. After a complicated series of transactions, during which the SFWMD was deceived as to the true sellers of the property, Masilotti made $1.7 million from the sale. Boose admitted knowing of the secret scheme and then taking steps to hide the crime.
Virginia Man Sentenced for Filing False Federal Tax Returns
On January 25, 2008, in Alexandria, Va., Robert Main, was sentenced to 12 months and one day in prison and ordered to pay a $5,000 fine for filing false federal income tax returns. Main pleaded guilty to four counts of filing a false federal income tax return on October 24, 2007. According to court documents, Main underreported Schedule E rental income by $1.6 million and falsely claimed refunds totaling $56,131 for tax years 2001 through 2004. He was assessed $844,115 back taxes, penalties and interest. The investigation of Main began when law enforcement officers noticed that he was making cash deposits into his money market account on consecutive days, over a short period of time, in round numbers just under $10,000, the amount that triggers the filing of a Currency Transaction Report required by the IRS. Main agreed as part of the investigation to forfeit $52,010 that was seized from his bank account.
Former Girl Scout Troop Leader Sentenced to 10 Years for Filing False IRS Claims and Identity Theft
On January 24, 2008, in Pensacola, Fla., Holley M. Barnes was sentenced to 120 months in prison and ordered to pay $87,976 in restitution to the Internal Revenue Service (IRS) and to pay $5,720 in restitution to the Navy Exchange Service. In October 2007, Barnes pleaded guilty to 19 counts of filing false and fictitious tax refund claims to the IRS, 15 counts of identity theft and one count of theft of government property. In her October plea hearing, Barnes admitted to having used her position of trust as a Girl Scout leader in Pea Ridge, Fla., to obtain personal history information from the members of her Girl Scout Troop. Barnes created a fraudulent “Girl Scout Medical Release” form in order to get personal information, such as the children’s Social Security Numbers (SSN). Barnes used the SSN’s of the children to prepare and file electronic federal income tax returns with the IRS, submitting false information regarding income and employment. The false refunds were then transferred into five bank accounts which Barnes controlled.
Cannon Falls Woman Sentenced to Nearly Four Years for Mail Fraud and Money Laundering
On January 24, 2008, in St. Paul, Minn., Susan Ann Von was sentenced to 46 months in prison, ordered to serve three years of supervised release and pay restitution for executing a scheme to defraud her former employer out of more than $700,000. Von pleaded guilty in May 2007 to one count of mail fraud, one count of money laundering and two counts of tax evasion. According to her plea agreement, Von was employed as the finance manager for Sustane, a division of Natural Fertilizer of America, Inc. She had access and authority to sign checks drawn on the company’s bank account. During her employment, Von admitted to fraudulently writing checks from Sustane’s bank account to pay for personal credit card charges. Von also fraudulently entered transactions in the company’s records to make it appear that checks had been issued for a legitimate business purposes. In total, Von stole approximately $739,834 from Sustane. Von also admitted to income tax evasion from 2000 through 2005 by filing federal income tax returns which did not report any of the income she unlawfully obtained from Sustane. According to the plea agreement, Von owes the Internal Revenue Service $208,240.
Connecticut Man Sentenced to Prison His Role in a Federal E-Rate Program Fraud Scheme
On January 23, 2008, in Hartford, Conn., Thomas J. Kennedy, III, of Spring Hill, Fla., formerly of Monroe, Conn., was sentenced to 21 months of in prison and ordered to pay $485,202 in restitution for defrauding Southwestern Bell Communications (SBC) and the Federal Communications Commission (FCC) in connection with the E-Rate program. In August 2007, Kennedy pleaded guilty to mail fraud and filing a false tax return. The federal E-Rate program funds internet access upgrades to school districts from money collected through surcharges added to customer’s telephone bills. In Connecticut, three school districts that received E-Rate funding selected SBC/Southern New England Telephone (SNET) to perform their internet upgrades. Kennedy was an account manager for an information technology company that had a partnership arrangement with SBC. Kennedy and three SBC employees hired engineers for certain E-Rate funded school district projects, the costs for which would be billed first to SBC/SNET, and later an SBC/SNET subcontractor. Kennedy arranged for the hiring of engineers and also arranged for the billings to SBC/SNET and to the subcontractor for their services. However, those billings, which SBC/SNET paid and then invoiced to the FCC, were inflated by more than $500,000. That money was split among Kennedy and the three SBC employees, with Kennedy receiving $249,525.
Carting Company Sales Representative Involved in Racketeering Conspiracy Sentenced to Federal Prison
On January 22, 2008 New Haven, Conn., Timothy Arciola, of Washington, Conn., was sentenced to 15 months in prison, followed by three years of supervised release and ordered to forfeit $15,000. On May 11, 2007, Arciola pleaded guilty to one count of conspiring to violate the federal Racketeer Influenced and Corrupt Organizations (RICO) Act. According to documents filed with the court and statements made in court, Arciola, while a sales representative at Automated Waste Disposal, Inc., conspired to perpetuate a scheme in which participating carters artificially inflated their prices and left waste removal customers with no option but to retain the service at increased rates. In this scheme, which targeted both commercial and municipal customers, participating carters agreed to quote inflated prices to customers controlled by other carters.
Connecticut Man Sentenced to Three Years in Prison for Embezzling More Than $5.3 Million from Employer
On January 18, 2008, in New Haven, Conn., Jeffrey F. Grous was sentenced to 36 months in prison and ordered to pay a $10,000 fine for wire fraud, mail fraud, tax evasion and filing a false tax return. Grous pleaded guilty to a decade long scheme in which he embezzled approximately $5.3 million from his former employer. According to court documents and statements, Grous was an investment firm employee specializing in fixed-income products. Between 1991 and 2005, Grous held various positions at the investment firm, including assistant vice president, assistant controller and controller. Grous admitted to defrauding the investment firm and spending the money for his own personal use, including buying $449,219.02 worth of watches, the construction of a luxury home and the purchase of expensive cars, clothing, and vacations. As part of his scheme, Grous formed two sham companies, Equity Analysis and Research Consultants. He then submitted false invoices for consulting services by these sham companies and approved the fraudulent requests, or forged the signature of an officer at the investment firm with the authority to approve the payment requests. Those actions resulted in the investment firm paying approximately $1.86 million to Equity Analysis and $1.25 million to Research Consultants. In addition, Grous submitted to the investment firm AMEX charges and fraudulent payment forms, including a false description that the expenses were for business purposes of officers of the investment firm. Grous approved, or forged the signature of others for approval, AMEX charges, which resulted in the investment firm making payments of approximately $2.24 million to AMEX for Grous’ personal expenses. Finally, Grous filed false income tax returns for the years 2000 through 2002 and evaded the payment of taxes for the years 2003 and 2004.
St. Louis City Man Sentenced to 44 Months in Prison on Mortgage Fraud and Money Laundering Charges
On January 16, 2008, in St. Louis, Mo., Dack Daugherty was sentenced to 44 months in prison and ordered to pay $576,390 to twenty-one different banks and mortgage companies on conspiracy and money laundering charges in connection with a mortgage fraud ring. According to court documents, Daugherty and a number of others, including real estate appraisers and loan officers, arranged for the fraudulent purchase of 52 properties. As part of the scheme, Daugherty convinced corrupt appraisers to inflate the values of properties he would arrange to buy. He then convinced corrupt loan officers to make up favorable information about the income and assets of the buyers that he had lined up. In all, Daugherty admitted to defrauding lenders of more than $500,000 and agreed to pay that money back. Daugherty also admitted laundering the proceeds of the scheme through a local credit union. In an unusual twist, Daugherty admitted to a second fraud scheme, which resulted in an increased sentence. In a rare post-plea filing, Daugherty admitted going on a “spending spree” as his criminal indictment for mortgage fraud loomed, borrowing hundreds and thousands of dollars for classic cars, a grand piano, motorcycles, commercial equipment and even a high-end Jacuzzi spa. Just as his borrowers did in the fraud scheme, Daugherty lied in his credit applications for these items and, after successfully deceiving the lenders, never made a payment on any of these purchases. Most of the items have been successfully repossessed.
Memphis Businessman Sentenced on Tax Charges
On January 14, 2008, in Memphis, Tenn., Lawrence M. Simmons was sentenced to 18 months in prison, followed by two years of supervised release, and ordered to pay $184,642 in restitution to the Internal Revenue Service (IRS). According to court documents, Simmons was president of Simmons Industries, Inc., an outdoor sign manufacturing company located in Memphis, from 1994 through 2000. In August 2005, he was indicted on three counts of income tax evasion pertaining to his 1998, 1999 and 2000 federal income tax returns. Simmons pleaded guilty on October 5, 2007, to one of those counts. According to his plea agreement, Simmons admitted that from 1998 and into 2000 he orchestrated a scheme where he diverted funds from Simmons Industries to pay his personal expenses. Simmons utilized accounts maintained at various local banks in the name of Simmons Industries to divert in excess of $370,000. Simmons admitted that he failed to report approximately $646,675 in income for 1998 through 2000, resulting in a tax loss to the United States of approximately $184,641.
Connecticut Man Sentenced to Federal Prison for Fraud Schemes
On January 9, 2008, in Bridgeport, Conn., Ronald A. Lupica, of Norwalk, Conn., was sentenced to 15 months of imprisonment, followed by three years of supervised release. Lupica pleaded guilty in July 2007 to bankruptcy fraud, tax evasion and mail fraud. According to court documents, Lupica and Daniel Arciola, an employee of Advanced Recycling Corporation (“ARC”), diverted waste paper from ARC for delivery to paper mills for recycling. From approximately mid-1999 to August 2002, Lupica and Arciola issued invoices to mills from Empire Trucking with the understanding that it was a subsidiary of ARC. Empire Trucking was a nonexistent trucking company over which Lupica had sole control. The mills would then mail checks to Empire Trucking as payments for the waste paper. The receipts of this fraud totaled approximately $1.4 million. With respect to the tax evasion offense, Lupica received taxable income of approximately $323,727 from Empire Trucking in 2000 and owed $104,124 in federal taxes. However, in order to hide receipt of this income, Lupica failed to file a tax return for the 2000 tax year, failed to pay the Internal Revenue Service the federal taxes owed, and deposited funds received for diverted recycled materials into the bank accounts of Empire Trucking. Lupica agreed to repay Advance Recycling Corporation $1.4 million and to repay the U.S. Treasury all taxes for the 1999 through 2002 tax years. Arciola pleaded guilty to tax evasion and was sentenced to 12 months and one day of imprisonment in December 2007.
Former Pennsylvania Police Officer Sentenced for Filing False Tax Return
On January 8, 2008, in Pittsburgh, Pa., former Police Officer Christopher Floyd was sentenced to 24 months in prison followed by one year of supervised release for filing a false federal tax return. Floyd pleaded guilty to one count of filing a false tax return in July 2007. According to the court’s sentencing memorandum, Floyd filed false employment tax returns for Blessed Dawn Watch, an organization he operated. He also filed false personal tax returns from 2000 through 2004 that failed to correctly report his income.
Two Massachusetts Men Receive Prison Terms for Tax Violations
On January 7, 2008, in Boston, Mass., Joseph A. Yerardi and John J. Toyias were sentenced for conspiring to defraud the United States by engaging in a scheme to divert income from their businesses to their personal benefit without reporting that income to the Internal Revenue Service. Yerardi was also sentenced for tax evasion for failing to pay $180,000 in taxes for the 2002 tax year. He received a 30 month sentence and was ordered to pay $454,639 in restitution. Toyias was also sentenced for filing a false tax return for tax year 2000 that understated his total taxable income by over $100,000. He received a year and a day prison sentence and was ordered to pay $115,093 in restitution. Yerardi and Toyias conspired to divert proceeds from their respective businesses to several sham bank accounts, which they used to pay themselves and their employees without reporting the income to the IRS. In some instances, Toyias created fictitious invoices to make it appear that the payments to the hidden bank accounts were for legitimate business purposes. Yerardi and Toyias diverted at least $1.4 million to themselves and their employees through the hidden bank accounts.
Lawyer Sentenced for Evading More Than $600,000 in Taxes
On December 19, 2007, in Bridgeport, Conn., Joseph Richichi, an attorney, was sentenced to 16 months in prison, to be followed by two years of supervised release, and ordered to pay a $15,000 fine. According courts documents filed and statements made in court, Richichi evaded paying taxes on more than $1.8 million he earned from the practice of law during the years 2000 through 2005. In total, Richichi admitted that he failed to pay more than $600,000 in taxes that were due for those tax years. Richichi has paid full restitution of $614,231 to the Internal Revenue Service, and an additional $763,076 in civil fraud penalties and interest.
Birmingham Pastor Sentenced for Under-Reporting Income
On December 18, 2007, in Birmingham, Ala., Gregory Louis Clarke was sentenced to 21 months in prison and ordered to pay $35,684 in restitution. Clarke was convicted by a federal jury in July 2007 of filing false income tax returns for the 2000, 2001 and 2002 tax years. At trial, evidence revealed that Clarke had under-reported his income by approximately $110,000 for the three tax years. Also at trial, the jury found that the unreported income was compensation to Clarke from the New Hope Baptist Church, the New Hope Christian School, the New Hope Federal Credit Union, and other sources. Specifically, Clarke attempted to conceal receipt of funds by directing payment from New Hope Baptist Church directly to his creditors. Court filings showed that some of those unreported funds included a “bonus” in the amount of $51,125 from New Hope Baptist Church, or payment in that approximate amount, went directly from the church bank account to Clarke’s creditors. Funds in the amount of $16,090 were paid to Clarke’s housing allowance account for his service as interim manager of New Hope Federal Credit Union. Other amounts of income not reported by Clarke included $14,906.67 as a car allowance, more than $15,000 in life insurance and disability premiums, and more than $11,000 in payments to Clarke from other sources.
Defendant Sentenced to Prison for Tax Evasion
On December 18, 2007, in Bridgeport, Conn., Daniel J. Arciola was sentenced to 12 months and one day in prison, to be followed by three years of supervised release, for evading the payment of federal income taxes. According to court documents, Arciola filed a false and fraudulent 2000 income tax return reporting that his taxable income for 2000 was only $37,476. In fact, Arciola had received additional taxable income of approximately $162,273 in cash from Empire Trucking in 2000 and therefore owed an additional $60,711 in federal taxes. During 2000, in order to conceal his receipt of this additional income, Arciola regularly made cash expenditures and avoided making bank deposits of the cash he had received from Empire Trucking. Arciola has agreed to pay to the IRS $155,019 for additional taxes owed for 1999 through 2002, plus penalties and interest.

West Virginia Man Sentenced on Tax Evasion Charges
On December 17, 2007, in Beckley, W.Va., Luther T. Wills, Jr., was sentenced to 12 months and one day in prison, to be followed by three years of supervised release and ordered to pay a $100 special assessment and a $100,000 fine. Wills was indicted in February 2007 and pleaded guilty in July 2007 to willfully evading income taxes for the period 1998, 1999, and 2000. According to the indictment, Wills engaged in several different small business enterprises which generated cash. Therefore, some business transactions were not documented nor deposited in a bank account. In addition, Wills took steps to disguise a portion of his income, specifically Wills used a nominee name to purchase certificates of deposits between January 1999 and July 2000 in amounts totaling over $649,000.
California Couple Sentenced for Defrauding Employer and Evading Taxes
On December 11, 2007, in Sacramento, Calif., Susan Michelle Pruett, and her husband, Kenneth R. Pruett, were sentenced to 51 months and 21 months in prison, respectively. On July 31, 2007, Michelle Pruett pleaded guilty to mail fraud and three counts of tax evasion; Ken Pruett pleaded guilty to three tax evasion charges. According to court documents, Michelle Pruett embezzled $756,139 from her employer, Cal Worthington, when she was a bookkeeper at Folsom Imports. The couple failed to report the embezzled funds as income on their federal tax returns for three years, resulting in the tax evasion charges. The court ordered Michelle Pruett to repay Worthington the money she stole from him, and ordered both Pruetts to pay $133,807 in restitution to the Internal Revenue Service (IRS). The Department of Justice will take steps to give to Cal Worthington – in partial satisfaction of Michelle Pruett’s restitution obligation – nearly $500,000 in funds seized by the IRS after she won a million dollar grand prize in a video poker tournament. The judge also imposed a restriction on Kenneth Pruett that he not work in a fiduciary capacity unless his probation officer verifies that he has fully disclosed his criminal history to the potential employer.
Illinois Self-employed Insurance Salesman Sentenced for Obstructing IRS
On December 7, 2007, in Chicago, Ill., Walter M. Helwich, of Homer Glen, Illinois, was sentenced to 27 months in prison and ordered to pay $388,000 in restitution to the Internal Revenue Service (IRS). On July 25, 2007, following a three-day jury trial, Helwich was convicted of corruptly obstructing and impeding the IRS from 1997 through 2000. Helwich filed purported income tax returns on behalf of “Senior America Estate Planning Trust.” On those returns, he reported his own income and claimed that it was the trust’s income. He further claimed that the trust owed no taxes. Additionally, Helwich filed federal tax returns for the years 1997 through 2003 on behalf of himself and his spouse. On those returns he claimed he did not earn any taxable income, when in fact he had earned approximately $740,000 during the years under investigation. His corrupt endeavor was further demonstrated by not cooperating with IRS audits and by making outstanding income tax payments using checks on a closed bank account. From 2002 through 2004, Helwich submitted approximately 40 checks to the IRS, written on a closed account. Throughout the adjudication of the case, Helwich challenged the authority of the federal judge, the U.S. Court and the IRS to prosecute him on obstruction charges. Helwich filed motions claiming the Department of Justice and IRS used fraud to deny his constitutional rights. In 2007, Helwich filed a motion for acquittal or a new trial claiming that the government knowingly used false testimony to convict him. Despite Helwich’s argument that the U.S. court lacked jurisdiction on his case, Helwich was ordered by Judge Robert W. Gettleman to begin serving his sentence.
Massachusetts Man Sentenced For Tax Evasion
On December 5, 2007, in Boston, Mass., Gerald R. Coulstring, the owner of Jerico Concrete Cutting, Inc., was sentenced to 14 months in prison for tax evasion. Coulstring pleaded guilty in August 2007 to an Information charging him with evading taxes in 2002. According to the Information, from 1998 through 2002, Coulstring took more than $600,000 in customer payments, cashed them at a check cashing business in South Boston, and diverted the cash for his own personal use. Coulstring did not report the cashed checks, either on his personal income tax returns or on Jerico’s corporate tax returns. By failing to report the cashed checks, Coulstring evaded approximately $254,000 in federal income taxes.
Former Fire Safety Manager Sentenced for Fraud
On December 4, 2007, in Providence, R.I., Patrick Clyne was sentenced to 27 months in prison, ordered to repay the Rhode Island School of Design (RISD) $981,794 and ordered to forfeit property he bought in Ireland. Clyne admitted to mail and tax fraud in a fraudulent billing scheme that defrauded the RISD. According to the U.S. Attorney, Clyne, a fire safety manager for RISD, set up a shell company that billed RISD for work that was never performed. Clyne also admitted to filing a false income tax return for 2003. As a condition of supervised release, Clyne was ordered to file accurate income tax returns and pay all due taxes, plus interest and penalties.
Texas Oil and Gas Manager Sentenced to Prison for Embezzlement Scheme
On December 3, 2007, in Houston, Texas, Mario M. Garza was sentenced to 37 months in prison to be followed by three yeras of supervised release. Garza, a former Anadarko Petroleum Corporation manager, embezzled more than $800,000 from Anadarko and filed a false income tax return. In 1996, Anadarko formed two subsidiary companies to explore for oil and gas in Peru and named Garza as the project manager. Garza submitted fraudulent invoices to Anadarko for services the subsidiary companies never performed. Anadarko issued the checks and Garza accessed the money by arranging for Anadarko to give checks to him, which he, in turn, cashed or deposited into bank accounts over which he had control. Garza used the funds to pay personal expenses, including an automobile loan, a health club membership and credit card bills. Garza obtained approximately $809,440 from Anadarko through this scheme. He failed to report this income on his Form 1040 Individual Tax Returns for tax years 2000 through 2003, which he signed under penalties of perjury. The omitted income in these tax years resulted in an underpayment of federal income taxes of $267,874.
Missouri Woman Sentenced for Embezzling $440,000 from Her Employer
On November 30, 2007, in Kansas City, Mo., Jenifer Lyne Merriman was sentenced to 37 months in prison and ordered to pay $440,430 in restitution for mail fraud, identity theft and filing a false tax return. Merriman was employed as the office manager of Boschert Equipment Company (BECO), a small, family-owned business that distributed industrial parts for process heating in North Kansas City, Mo. Merriman maintained the computerized accounting and payroll systems and printed payroll checks for the company’s owner to review and sign. She also performed secretarial duties, including picking up mail from the company’s post office box. On August 7, 2007, Merriman pleaded guilty to printing payroll checks in her own name, forging her employer’s signature and depositing the checks into her personal bank accounts. Merriman also admitted that she drafted company checks to pay for her personal credit card bills. Merriman admitted that she failed to report the money she embezzled as income on her annual income tax returns. Under the terms of the plea agreement, Merriman must pay the Internal Revenue Service $116,602 in back taxes.
Montana Inmate Sentenced for Stealing from Employer
On November 21, 2007, in Billings, Mont., John C. Kuchinski was sentenced to 71 months in prison for his conviction on charges of mail fraud and filing a false tax return, to run consecutively with a child pornography prison sentence that he currently serves. Kuchinski was also ordered to pay $1.4 million restitution, with $1.2 million going to his former employer and $209,546 for the Internal Revenue Service. Kuchinski admitted that from 1992 until 2004, he worked for Wyoming Feeders Inc. and had signature authority over its checking account. In 1992, Kuchinski also opened an account at Yellowstone Bank in Laurel under the name “Agri Systems, John Kuchinski.” Over 12 years, Kuchinski wrote about $1.4 million in checks from Wyoming Feeders to Argi Systems, deposited them in the Yellowstone Bank account and spent the money on himself. Kuchinski also filed a false income tax return for 2004 in which he did not report $140,000 he took from Wyoming Feeders. Kuchinski nurtured a trust relationship with the company’s owner and gained a position that had access to the checkbook. Kuchinski then started writing himself checks, taking $10,000 to $20,000 a year in the beginning up and as much as $177,000 a year toward the end. Kuchinski was previously sentenced to five years and four months in prison for receipt and possession of more than 19,000 child porn images child porn found on his computer. Kuchinski caught the attention of law enforcement officers who were investigating prostitution in Billings and uncovered extortion of Kuchinski over pictures involving a juvenile prostitute.
Landscaping and Contracting Business Owner Sentenced to Prison for Tax Evasion
On November 20, 2007, in Newark, N.J., Christopher M. Aldarelli, Sr., was sentenced to 15 months in prison and ordered to pay the Internal Revenue Service (IRS) more than $864,000 in back taxes, penalties and interest. Aldarelli, owner of a large landscaping and contracting business, pleaded guilty in April 2007 to tax evasion. According to the Indictment, Aldarelli reported to the IRS that his taxable income was $66,232 with a resulting tax of $12,121. During his plea hearing, Aldarelli admitted that he intentionally failed to include an additional $300,000 in personal income. The additional income stemmed from the receipt of cash for work his companies performed, as well as from cash he withdrew from business accounts but used for personal expenses. In addition, he admitted to writing checks to himself from the business accounts and using the funds for personal and non-business-related expenses. Aldarelli failed to report more than $700,000 in taxable income during a three year period and he failed to pay approximately $317,000 in income taxes.
Four Mortgage Fraud Defendants Sentenced to Prison
On November 20, 2007, in Atlanta, Ga., three defendants were sentenced for their roles in a mortgage fraud scheme. Eric Friedman, of Atlanta, Ga., was sentenced to 70 months in prison, to be followed by three years of supervised release, and ordered to pay $1,689,222 in restitution; Brianne Friedman, Tucker, Ga., was sentenced to 12 months and one day in prison, to be followed by six months of home confinement and then three years of supervised release, and ordered to pay $196,058 in restitution; and Timothy Bauer, of Braselton, Ga., was sentenced to 12 months probation and ordered to pay $545 in restitution. Co-defendant Michael Hipe, of Cumming, Ga., was sentenced on November 16, 2007, to 30 months in prison, to be followed by three years of supervised release, and ordered to pay $289,370 in restitution. According to the indictment and evidence in court, beginning in 2000, Eric Friedman and Michael Hipe became involved in a mortgage fraud scheme in order to finance “Hipe Motors,” an Atlanta-based used car business in which Hipe was an investor and Eric Friedman ran daily operations. They purchased and sold properties to finance Hipe Motors, drawing money out of each loan under false pretenses. Some of the lenders were part of the sub-prime mortgage industry. For each property, the defendants obtained a loan in their own names or in the names of family or friends using false financial information and tax returns to qualify for the loans. Also, between 1996 and 2002, Eric Friedman illegally evaded paying $659,739 in federal income taxes by concealing his income and assets from the Internal Revenue Service.
Indianapolis Man Sentenced for Filing False Income Tax Returns
On November 20, 2007, in Indianapolis, Ind., Javier Varela-Sanchez was sentenced to 12 months and one day in prison and ordered to pay $94,447 in restitution to the Internal Revenue Service. Varela’s sentencing follows his earlier guilty pleas to filing false individual and corporate income tax returns. Varela, a Mexican citizen and legal resident of the United States, operated a drywall finishing business called Red Monster, Inc. in Indianapolis between 1996 and 1998. Varela was a part owner of the corporation and was responsible for the financial aspects of the business, including preparing books and records and tax returns and providing information to the tax return preparer for preparation of corporate returns. Varela received the gross receipts for Red Monster, Inc. in the form of checks made out to the business or to himself. Instead of depositing all of the gross receipts to the corporate bank accounts, Varela diverted a portion of the checks by cashing them at the banks on which they were drawn or at check cashing stores. Varela diverted almost $600,000 in corporate gross receipts. This money was not reported on the corporation’s income tax returns, and subsequently Varela’s income was not reported on his personal income tax returns and he did not report and pay over $90,000 in individual income taxes.
Former U.S. Forest Service Employee Sentenced to Prison for Embezzlement and Tax Fraud Charges
On November 20, 2007, in Portland, Ore., Debra Kay Durfey was sentenced to 21 months in prison, followed by three years of supervised release and ordered to pay $642,319 in restitution to the U. S. Forest Service. Durfey pleaded guilty in June 2007 to single counts of embezzlement and theft of public money or property and aiding and assisting in the presentation of a false and fraudulent tax document. According to court documents, Durfey was employed by the U. S. Forest Service since 1986 as a Local Agency Program Coordinator (LAPC) for their Purchase Card program, a system by which the Forest Service pays vendors for goods and services. As the LAPC for the Umatilla, Malheur, and Wallowa-Whitman National Forests, Durfey’s responsibilities included oversight of purchase card transactions and writing checks to pay Forest Service vendors. In her plea agreement, Durfey admitted she stole money from the Forest Service’s account by depositing the Forest Service checks into her personal account. She then used the money to gamble, shop and make payments on her car and mortgage. Durfey also caused a false Form 1099 to be filed with the IRS on behalf of Hollinger, attributing around $137,000 of the embezzled funds to him in an attempt to hide her embezzlement.
Arkansas Woman Sentenced for Mortgage Fraud and Filing a False Tax Return
On November 19, 2007, in Little Rock, Ark., Debby Cossitt was sentenced to 30 months in prison, followed by three years of supervised release, and ordered to pay $120,000 in restitution to victims of her fraud and $9,560 to the Internal Revenue Service. The Judge also barred Cossitt from working in the loan industry during her period of supervised release. In December 2006, Cossitt pleaded guilty to one count of conspiracy to commit mortgage loan fraud and one count of filing a false income tax return for 1998. Cossitt, owner/manager/operator of several manufactured home sales companies in Searcy, Batesville, Jonesboro, and Harrison, Arkansas, admitted to fraudulently submitting falsified mortgage loan applications and supporting document to lenders in order to increase sales. These misrepresentations included falsified customer bank statements with inflated balances, falsified cashier’s checks reflecting an inflated customer down payment, inflated W-2 forms, falsified pay stubs or wage and earning statements, and falsified customer loan applications. Additionally, Cossitt participated in “telephone audits” with mortgage lenders, impersonating customers and/or directing customers to make misrepresentations directly to lenders. These actions allowed higher credit risk customers to appear more qualified for mortgage loans. Additionally, Cossitt admitted to not reporting over $32,000 in income on her 1998 federal income tax return. This income was derived from cash sales for wheels and axles no longer needed once manufactured homes were delivered to customers. During Cossitt’s sentencing hearing, evidence was presented which revealed that even after her plea in December 2006, Cossitt continued to commit the similar fraudulent loan actions to which she pleaded guilty to as part of the scheme.
Indiana Man Sentenced for Income Tax Evasion
On November 19, 2007, in Indianapolis, Ind., Jerry D. Rutherford, of Scottsburg, Ind., was sentenced to 18 months imprisonment following his guilty plea to three counts of income tax evasion. Rutherford admitted that he did not report a substantial amount of the income he received from 1998 to 2001 on his personal federal income tax returns. Rutherford owes between $200,000 and $400,000 in federal income tax, the exact amount of which will be determined by Internal Revenue Service Examination in a civil proceeding.
California Man Sentenced to Nine Years in Prison in Multi-Million Dollar Fraud Scheme
On November 16, 2007, in Oakland, Calif., Francis William (Bill) Reimers was sentenced to 108 months in prison and ordered to pay $9.6 million in restitution to the victims of his fraud schemes. Reimers pleaded guilty on March 23, 2007, to mail fraud and money laundering charges. According to his plea agreement, Reimers admitted that he established an entity called Advisory Services Group (ASG), purportedly to provide financial and investment management services to individual investors. Reimers provided investors with a series of false statements in order to convince them to give him control of their money. Reimers also admitted that he did not invest his client’s funds, but instead he used their money to pay his mortgage and to buy luxury cars, vacations, and hunting trips. He also used client money to fund two other businesses he owned and operated, Plan Compliance Group (PCG) and Univest Capital Management (UCM). PCG and UCM were created to handle third-party administration of 403(b) accounts of school employees (PCG) and third-party administration of benefits for federal government employees (UCM). As third-party administrators, PCG and UCM collected payroll distributions from thousands of employees and remitted them to institutional investment companies and to insurance providers, as directed by the employees. However, Reimers used PCG and UCM cash flow to pay off ASG investors who requested monthly dividends or who asked to close their account. To perpetuate and to conceal his scheme, Reimers sent fictitious account statements to his clients which falsely reflected that his clients’ funds were invested in various mutual funds and tax-free money market funds.
Former Maryland State Senator Sentenced to 7 Years on Charges of Racketeering Conspiracy and Filing a False Tax Return
On November 16, 2007, in Baltimore, Md., former Maryland State Senator Thomas L. Bromwell, Sr., of Baltimore, was sentenced to seven years in prison and ordered to forfeit more than $2 million for racketeering conspiracy and filing a false tax return. Bromwell’s wife, Mary Patricia Bromwell, was also sentenced to 12 months and a day in prison for mail fraud arising from a related minority-contracting fraud scheme. Bromwell and his wife, along with David Stoffregen, who was the president of the Poole and Kent Corporation (P&K), and others conspired to engage in a criminal money-making enterprise in which the Bromwells accepted benefits from Stoffregen and others in exchange for Senator Bromwell using his official influence and position to intervene in business disputes on behalf of P&K. The conspiracy further involved the use of a minority front company, Namco Services Corporation, to obtain construction contracts for P&K. Stoffregen used the front company to disguise payments made to the Bromwells in the course of the conspiracy. Mary Patricia Bromwell posed as an employee of Namco in order to deceive state inspectors. Thomas Bromwell admitted that he had filed false tax returns in which he failed to report both personal and business income for the 2000 and 2001 years, and that he had made false statements to federal investigators.
Montana Man Sentenced for Tax Fraud
On November 15, 2007, in Helena, Mont., Rolan Ralph Becker, of Ronan, Mont., was sentenced to 27 months in prison, ordered to pay $91,794 in restitution and $50,000 in fines, to be followed by three years of supervised release. Following a three day trial, a jury found that Becker committed tax fraud by failing to file and pay federal taxes in 2000, 2001 and 2002.
North Carolina Woman Sentenced for $7 Million Embezzlement
On November 13, 2007, in Columbia, S.C., Angela Timmons was sentenced to 70 months in prison for embezzling approximately $7 million from her former employer, Peace Textiles, Inc. Timmons was ordered to make full restitution and to transfer to Peace Textiles approximately $2.8 million in cash, real estate, automobiles, and other personal property she bought with the stolen money. According to court documents, Timmons was employed by Peace Textile for 10 years as the director of finance. In June 2007, Timmons pleaded guilty admitting that between 2003 and 2006, she devised a scheme to skim money from the company’s accounts for herself and to buy real estate, jewelry, expensive automobiles, and other luxury items. As the director of finance, she was able to hide the thefts from other company officials by altering or omitting financial records and making false statements on the company’s banking documents.
Former Seaport Museum Head Sentenced to 15 Years
On November 2, 2007, in Philadelphia, Pa., John S. Carter was sentenced to 15 years in prison, ordered to pay $1.3 million in restitution and to forfeit $1.56 million for fraud and tax evasion stemming from his schemes to defraud the Independence Seaport Museum, a Philadelphia non-profit corporation. Carter pleaded guilty in June 2007 to mail fraud and tax evasion. He made numerous purchases for personal use in the Seaport Museum’s name and used Seaport Museum vessels for his own personal enjoyment. His actions defrauded the museum of more than $900,000. Carter fraudulently obtained ownership of a “split dollar” life insurance policy by forging the signatures of two Seaport Museum board members intending to cause losses of approximately $1.1 million. Carter also failed to report on his tax returns more than $1.5 million in fraud proceeds that he received.
North Dakota Man Sentenced to 12 Years in Prison for Defrauding Investors
On November 2, 2007, Frederick W. Keiser, Jr. of Minot, N.D., was sentenced to serve 12 years in federal prison, followed by three years of supervised release. A restitution hearing was scheduled for November 29, 2007. Keiser was sentenced for his role in two fraudulent international bank debenture schemes and his involvement in a conspiracy to defraud the Internal Revenue Service by concealing income to avoid federal income taxes through the use of foreign corporations, offshore bank accounts, debit cards, and document destruction. Between approximately July 1999 and April 2001, Keiser and others devised a scheme to defraud and obtain money from potential investors by inducing them to invest in a so-called international bank debenture trading program through a Grenada, West Indies, company called Preferred Trust and Management, Ltd. (PTM). The PTM scheme involved investments exceeding $14 million and 500 victims. As part of the scheme, Keiser solicited in excess of $2 million from over 200 investors for PTM’s fictitious bank trading program. Over a one year period from approximately January 2000 to January 2001, Keiser received nearly $950,000 in bonuses from investors’ funds. During that same one year period that Keiser received the bonus money, the vast majority of those who invested in PTM through Keiser received nothing. The North Dakota securities commissioner issued a cease and desist order to halt Keiser’s activities related to PTM in January 2001. Keiser then became involved with a second bank debenture investment scheme affiliated with a company called Mid-China Capital Management. Keiser again promoted the scheme to investors, and approximately $2 million dollars was invested in the new scheme between August 2001 and December 2002.
Massachusetts Man Sentenced to Two Years for Tax Evasion
On November 2, 2007, in Boston, Mass., Robert D. Epstein, was sentenced to 24 months in prison and ordered to assist the Internal Revenue Service in its collection of his unpaid taxes in an attempt to evade more than $2 million in income taxes. Epstein pleaded guilty on March 28, 2007, to failing to report $5.95 million in income that he secretly removed from his law partnership. By failing to record the money he took from the partnership, Epstein evaded approximately $2.2 million in federal income taxes.
Owners of Tire Store in Sacramento Underreported Income on Tax Returns; Ordered to Pay Over $100,000 in Restitution
On October 30, 2007, Sacramento, Calif., Mohammad Ahad Parvez and Ijaz Ghani were sentenced to 16 months in prison and 10 months of imprisonment/home detention, respectively. In May 2007, Parvez and Ghani, owners of A & A Tires, pleaded guilty and admitted that they maintained two sets of accounting books for A & A, one which accurately reflected the gross receipts or sales for the business, and one which substantially understated the gross sales for the business. In 2004, A & A had gross sales of approximately $1,586,998 and each defendant, a 50% partner, had to declare that he had received approximately $793,499, on his individual tax return. However, on his 2004 tax return, Parvez reported only $30,732 in income from another unrelated business and did not report any of the $793,499 in income he had received from A & A. Ghani reported on his 2004 tax return that he received $329,065 of gross receipts associated with A & A, but falsely failed to report that he had received $464,434 of additional income from A & A in that year. Their underreporting of income resulted in a tax loss of $57,051 from Parvez and $52,832 from Ghani. In addition, Parvez acknowledged as part of his plea agreement that, on a series of occasions, he purposefully made deposits at various local banks in amounts less than $10,000 or “structured deposits” in order to avoid the currency transaction reporting requirements. As part of the plea and sentence, Parvez forfeited approximately $24,000 from one of his business bank accounts and paid full restitution of $57,051 to the IRS for his owed taxes. Ghani has paid restitution of $52,832 to the IRS for his owed taxes and was ordered to pay a fine of $3,000.00.
Texas Man Sentenced to Nearly Four Years in Federal Prison
On October 30, 2007, in Amarillo, Texas, James R. Lyon was sentenced to 46 months in prison and ordered to pay $144,701 restitution to the Internal Revenue Service. Lyon pleaded guilty in August to two counts of income tax evasion and agreed to pay restitution. He agreed that he failed to report a total of $603,213 in income, which resulted in a total tax loss due and owing of $144,701. According to the documents filed in this case, Lyon stated his taxable income for 2003 was $37,058, and that the amount of tax due was $4,180.00. Lyon admitted that he knew his taxable income for 2003 was $225,836 and that he owed an income tax of $54,750. Lyon also admitted in court documents that he stated his taxable income for 2004 was $12,902 and that he owed $645 in tax. He further admitted that he knew that his taxable income for 2004 was $253,432 and that he owed an income tax of $61,571. The court documents further reveal that beginning in 2001, Lyon was employed by Amarillo Natural Gas (ANG) and he diverted checks from ANG and deposited them into his personal account and his partnership, Spanky’s Outdoor Services.
Former Investment Broker Receives 42 Months in Prison for Role in CD Scam
On October 29, 2007, in San Jose, Calif., Vincent Joseph Ferro, a former principal with the Capital Advisory Group investment firm, was sentenced to 42 months in prison to be followed by three years of supervised release. According to the indictment and his plea agreement, Ferro began selling brokered Certificates of Deposit (CDs) using Advent Trust Company, formerly based in Houston, Texas, as the custodian in approximately 1997. The “brokered” CDs were fractional interests in long-term, “zero coupon” jumbo CDs, held by Advent Trust as the custodian and not in the purchasers’ own names, in which all of the principal and interest was to be paid at maturity. Ferro admitted that he knew that his elderly clients were not interested in holding those CDs to maturity. In order to induce them to invest, Ferro admitted that he made several false and misleading representations regarding the investments. The brokered CDs were advertised and sold as if there were no commissions. In fact, substantial up-front commissions were taken from investors’ principal. However, statements mailed to the investors reflected the full amount of the client’s purchase and did not reveal the amount taken as commissions. Ferro also admitted that he told his customers that although they were buying longer-term instruments, they could, at any time after one year, redeem their CD with “no fixed early withdrawal penalty,” or words to that effect. This statement was intentionally misleading, because the ability to fulfill that promise depended upon Ferro’s ability to re-sell the redeemed CD to another buyer. In his plea agreement and sentencing papers, Ferro agreed to accept an order requiring him to make full restitution to his victims.
Four Defendants Sentenced in Scheme to Defrauded Microsoft Corporation of Over $29 Million Worth of Discounted Software
On October 24, 2007, in Oakland, Calif., four individuals were sentenced for their roles in devising a scheme to defraud Microsoft Corporation by obtaining discounted software under false pretenses. The scheme involved purchasing more than $29 million worth of software that was steeply discounted for academic institutions, and selling it to non-academic entities, in violation of the Microsoft agreement. Mirza and Sameena Ali, husband and wife, were sentenced to 60 months in prison, to be followed by three years of supervised release, and ordered to forfeit $5,105,977, as well as to pay $20,000,000 in restitution to Microsoft Corporation and $3,000 in special assessments. Keith Griffen was sentenced to 33 months in prison, to be followed by three years of supervised release, and ordered to pay $20,000,000 in restitution to Microsoft Corporation and to pay $900 in special assessments. William Glushenko was sentenced to one year probation and 100 hours of community service. The Alis, former owners of Samtech Research Inc., were convicted on November 28, 2006, of 30 counts of conspiracy, mail fraud, wire fraud, and money laundering. Griffen was convicted of nine counts of conspiracy, mail fraud, and wire fraud. Glushenko pleaded guilty to misprision. According to the trial evidence, the Alis and Griffen formed several nominee corporations and purchased existing corporations holding Microsoft licensing agreements for the purpose of participating in Microsoft’s Authorized Education Reseller (AER) program. Through the life of the scheme, the Alis and their co-conspirators purchased more than $29 million worth of AER software from Microsoft and sold this software to non-academic entities for a profit of more than $5 million. The Alis were also convicted of laundering the proceeds of this scheme, including purchasing real property in the name of their college age son and wiring more than $300,000 of the proceeds from the illegal sales of the Microsoft educational software to Pakistan.
Defendant Sentenced for Role in Mortgage Fraud Scheme
On October 17, 2007, in Anchorage, Alaska, Azem Limani was sentenced to 18 months in prison for violations of wire fraud and engaging in monetary transactions in criminally derived property related to a mortgage fraud scheme. In addition to prison time, Limani was ordered to pay $190,000 in restitution to Countrywide Home Loans and FNMA. According to the information presented to the court, Limani engaged in a wide ranging mortgage fraud scheme using a number of others to obtain a series of nominee loans that hid the true borrower. Limani was aided in the scheme by his co-defendant, Kourosh Partow, who was a loan officer and branch manager of Countrywide Home Loans and arranged for fraudulent loans to be issued to the nominees by falsifying their income, assets and other matters on the loan applications. Partow was previously sentenced to a term of 25 months in prison.
Pennsylvania Burial Services Company Owner Sentenced on Tax and Fraud Charges
On October 17, 2007, in Pittsburgh, Pa., Joseph M. Stabile, president of Celestial Burial Company, was sentenced to 77 months in prison to be followed by three years of supervised release. In April 2007, Stabile pleaded guilty to fraud and tax charges. According to court documents, Stabile admitted to taking approximately $2.5 million that his customers paid him for preplanned burial merchandise instead of placing the money in trust accounts. Stabile also admitted not paying the Internal Revenue Service approximately $14.8 million in taxes he withheld from his employees.
Bookkeeper Sentenced to 30 Months for Bilking Clients out of Thousands of Dollars and Evading Taxes
On October 15, 2007, in Nashville, Tenn., Mary K. Barber, of Clarksville, Tenn., was sentenced to 30 months in prison in connection with embezzling hundreds of thousands of dollars from clients for whom she performed bookkeeping services. Barber pleaded guilty in July 2007 to a two-count Information charging her with bank fraud and income tax evasion. According to court documents, Barber, operating a bookkeeping business as “NUNYA Business,” engaged in a scheme to steal and embezzle funds totaling nearly $300,000 from four businesses and two individuals, and then evaded payment of income tax on the funds she received from her theft and embezzlement. When Barber filed her federal income tax return for the calendar year 2005, she intentionally failed to report $224,946 of income she had received by her criminal acts. She also intentionally failed to report additional income, including cash she stole from her clients.
Airport Advertising Consultant Sentenced on Tax Evasion and Fraud Charges
On October 15, 2007, in Philadelphia, Pa., Joseph Moderski, owner of J.C. Moderski, Inc., was sentenced to 37 months in prison, to be followed by three years of supervised release, and ordered to pay $1,293,339 in restitution. According to courts documents, J.C. Moderski, Inc., was marketed as providing services to companies and individuals wanting to secure and/or maintain display advertising business in the Philadelphia metropolitan area and New Jersey, or to secure various types of business at the Philadelphia International Airport (PIA). Moderski was indicted in January 2007 and charged with evading more than $600,000 in income taxes for the years 1999 through 2004 and defrauding both the City of Philadelphia and advertising company JCDecaux of approximately $180,000 in advertising fees. In July 2007, Moderski pleaded guilty to one court of tax evasion, ten counts of filing false tax returns, and ten counts of mail fraud. In his plea agreement, Moderski admitted that he under-reported his income in calendar years 1999 through 2004 by over $1.9 million, resulting in a $764,215 tax loss.
Eleven Defendants Sentenced to Prison for Mortgage Fraud Scheme
On October 12, 2007, in Oklahoma City, Okla., eleven defendants were sentenced for their role in a mortgage fraud scheme involving the prestigious Oak Tree properties in Edmond, Okla. Evidence at trial showed that Brandon L. Baum, a real estate agent, acted as the buyers’ agent in the purchases of properties and told them that they could receive substantial funds at the time of closing under the guise of “repair costs,” which they could use for their personal benefit, if they agreed to purchase homes at an inflated price. Charles E. Caldwell, Jr., a broker, facilitated the submission of fraudulent loan applications to lenders for buyers who could not qualify to purchase the homes at the artificially inflated prices. In some cases, certain defendants and/or others would provide temporary loans to buyers for down payments with the understanding they would be reimbursed at closing. Mortgages were approved by lenders based on false statements and fraudulent representations contained in the loan applications and other documents required by the lenders prior to closing. Baum, Caldwell, and other co-conspirators received commissions from the sales of the homes. Prior to the closing on each of the properties, loan proceeds were wire-transferred from lenders to the bank accounts of closing companies.
The defendants were convicted or pleaded guilty to various federal charges, including engaging in a monetary transaction in criminally derived property, money laundering, and wire fraud. They were sentenced to the following terms: Brandon L. Baum was sentenced to 87 months in prison, followed by three years of supervised release, and ordered to pay $511,735 in restitution; Gayle L. Caldwell was sentenced to 18 months in prison followed by two years of supervised release; Charles E. Caldwell, Jr. was sentenced to 18 months in prison, followed by two years of supervised release, and ordered to pay $185,740 in restitution; Joseph Conrad Therrien was sentenced to 12 months and one day in prison, followed by two years of supervised release, and ordered to pay $59,771 restitution; Teresa M. Therrien was sentenced to one month in prison, followed by two years of supervised release which will include 90 days home detention, and ordered to pay $82,710 in restitution; Rusty Real Therrien was sentenced to 18 months in prison, followed by two years of supervised release, and ordered to pay $82,710 in restitution; Timothy J. McDanie was sentenced to six months in prison, followed by two years of supervised release, and ordered to pay $57,641 in restitution; Anthony Jew was sentenced to 12 months in prison, followed by three years of supervised release, to perform 104 hours of community service, and ordered to pay $13,700 in restitution; Dalton Joe Alford was sentenced to eight months in prison, followed by two years of supervised release, to perform 104 hours of community service, and ordered to pay $172,489 in restitution; Toney Charles Mykel was sentenced to six months in prison, followed by one year of supervised release, to perform 104 hours of community service, and ordered to pay $263,489 in restitution; Theresa Ann Campbell (a/k/a Ann Campbell) was sentenced previously to two months in federal prison, followed by two years supervised release, and ordered to pay a $4,000 fine and $52,490 in restitution.
Office Manager Sentenced to 18 Months for Tax Evasion
On October 10, 2007, in Oklahoma City, Okla., Margaret Renee Schram, of Enid, Okla., was sentenced to 18 months in prison, to be followed by three years of supervised release, and ordered to pay $278,429 in restitution to M. Crow Construction, Inc. and $69,118 in restitution to the Internal Revenue Service (IRS). According to court documents, Schram was employed as the office manager of M. Crow Construction, also known as Grant Construction, during 2000 through 2002. Her duties included assisting in the preparation of documents relating to employment taxes for the company’s employees. On March 7, 2007, a federal grand jury indicted her for evading personal income taxes by failing to file returns and for filing four false quarterly employment tax returns on behalf of M. Crow Construction. The indictment also charged her with a scheme to embezzle money from her employer through interstate wire transmissions. During a plea hearing in June 2007, Schram admitted that in early 2003, she created a false Form W-2 for herself for the 2002 calendar year by including her salary of $19,740 but not including tens of thousands of additional dollars that she received from the company during 2002.
Former Stock Options Administrator Sentenced on Tax Evasion and Fraud Charges
On October 9, 2007, in San Diego, Calif., Vencent A. Donlan was sentenced to 46 months in prison, to be followed by two years of supervised release, and ordered to pay $6,252,715 in restitution to Wireless Facilities, Inc. (WFI) and $2,202,917 to the Internal Revenue Service (IRS). Donlan, the former stock options administrator at WFI, a San Diego based company with shares of common stock sold on the NASDAQ, pleaded guilty on July 3, 2007, to stealing more than $6 million worth of WFI’s stock during his employment. In his plea agreement, Donlan admitted that between November 2002 and November 2003, he used his position as WFI’s stock option administrator to issue without authorization 728,229 shares of WFI stock to a brokerage account he controlled and that he sold the stock for a net gain of $6,252,715. He also admitted that he evaded paying $2,202,917 in federal income taxes for calendar years 2002 and 2003 by failing to declare the income he derived from the fraudulent WFI stock sales. For calendar year 2002, Donlan falsely declared a capital loss of $42,743 on the fraudulent WFI stock transactions, instead of the $594,917 gain he received from the sale of the stock. For calendar year 2003, he falsely declared only $9,955 in capital gains from the fraudulent WFI stock transaction, instead of the $5,580,235 he received from the sale of the stock.
Three Sentenced in Scheme to Sell Fraudulent Certificates of Deposits
On October 4, 2007, in San Jose, Calif., three defendants who were involved in a scheme to defraud investors, many of them elderly, were sentenced this week. Mark C. Selby, formerly of Campbell, Calif., was sentenced to 18 months in prison. Kummel Heir, of San Jose, was placed on five years probation, to include 12 months of home confinement and the payment of a $15,000 fine. Walter Zlotnicki, of Thousand Oaks, was placed on two years probation. According to the indictment and defendants’ respective plea agreements, beginning in about 1996, Selby began selling brokered Certificates of Deposit (CDs) using Advent Trust Company, formerly based in Houston, Texas, as the custodian. Heir began selling those brokered CDs, with Selby as her broker in 1997. The brokered CDs were not certificates of deposit in the traditional sense. They were, instead, interests in long-term, “zero coupon” jumbo CDs, held by Advent Trust as the custodian and not in the purchasers’ own names, in which all of the principal and interest was to be paid at maturity. According to the indictment and plea agreements, the brokered CDs were advertised and sold as if there were no commissions. This representation was false. In fact, substantial up-front commissions were taken from investors’ principal. The statements mailed to the investors by Advent Trust furthered the fraud, as they reflected the full amount of the client’s purchase and did not reveal the amount taken as commissions. Additionally, customers were advised that, although they were buying longer-term instruments, they could, at any time after one year, redeem their CD with “no fixed early withdrawal penalty,” or words to that effect. This statement was intentionally misleading. The ability to fulfill that promise depended upon Selby and Heir’s ability to re-sell the redeemed CD in the “secondary market,” meaning sell it to another buyer.
Walter Zlotnicki worked for another CD broker, Vincent Ferro, of Westlake Village, Calif. According to his plea agreement, Zlotnicki began working for Capital Advisory Group, in 1997, as a sales associate. In admitting to misprision of a felony, Zlotnicki acknowledged that, toward the end of his employment with Capital Advisory Group, he came to realize that clients were being misled. Zlotnicki further admitted that, rather than informing the authorities regarding the misconduct he had observed, he instead concealed the crime by attempting to reassure the customers or, if that failed, simply passing their calls on to Capital Advisory.
Pennsylvania Man Sent to Prison for Tax Evasion
On October 4, 2007, in Johnstown, Pa., Tye Dively was sentenced to 16 months in prison and ordered to pay $10,000 and forfeit $50,000 for tax evasion. Dively was also ordered to pay back taxes to the Internal Revenue Service. Dively pleaded guilty to falsifying his tax return for tax years 2000 through 2003.
Defendant Sentenced to 130 Months in Prison for Defrauding Victims across U.S. and Switzerland out of $6 Million
On October 1, 2007, in Los Angeles, Calif, Steven M. Ferguson was sentenced to 130 months in prison for running a scheme that bilked several victims out of more than $5 million with promises of huge returns on their investments that they thought were being used to make “bridge loans” or to invest in projects such as a waste-treatment plant in New Jersey. In addition to the 10 year, 10 month prison term, Ferguson was ordered to pay $6,335,146 in restitution to 13 victims of his crimes. In June 2007, a federal jury convicted Ferguson of 23 felony counts, including obstruction of justice, money laundering, mail fraud, and tax evasion. The evidence presented at trial showed that Ferguson solicited money from investors by posing as a successful businessman and promising that investments would yield large returns. However, instead of investing any of the money, Ferguson used most of the investors’ money to pay for his lavish lifestyle, which included part ownership of a Lear jet, golf trips to Pebble Beach, and luxury homes. Ferguson attempted to shield himself from detection by setting up a series of shell companies and obtaining credit in the names of his victims. The fraud scheme was run out of a Beverly Hills shell company called Global Venture Group and, prior to that, a company called Environmental Technologies International Holdings. Ferguson also allegedly used an entity known as S. M. Ferguson & Associates.
Los Angeles Man Sentenced for Failure to Report $600,000 in Income to IRS
On October 1, 2007, in Los Angeles, Carl Orlando was sentenced to 40 months in federal prison after pleading to tax evasion for failing to report approximately $600,000 on his 2002 federal tax return. In addition to time in prison, Orlando was ordered to pay a $30,000 fine. According to court document, Orlando used false identifications and several bank accounts to conceal his income from the Internal Revenue Service (IRS). Orlando was initially scheduled to be sentenced on September 17, but he failed to appear and a bench warrant was issued for his arrest. He was arrested on September 26.
The foregoing examples of General Tax Fraud investigations are excerpts from public record documents on file in the court records in the judicial district in which the cases were prosecuted as set forth on the IRS website.
The Major IRS Criminal Statutes are set forth below:
Title 26 USC § 7201 — Attempt to evade or defeat tax
Any person who willfully attempts to evade or defeat any tax imposed by this title or the payment thereof shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof:
• Shall be imprisoned not more than 5 years
• Or fined not more than $250,000 for individuals ($500,000 for corporations)
• Or both, together with the costs of prosecution

Title 26 USC § 7202 — Willful failure to collect or pay over tax
Any person required under this title to collect, account for, and pay over any tax imposed by this title who willfully fails to collect or truthfully account for and pay over such tax shall, in addition to penalties provide by the law, be guilty of a felony
• Shall be imprisoned not more than 5 years
• Or fined not more than $250,000 for individuals ($500,000 for corporations)
• Or both , together with the costs of prosecution

Title 26 USC § 7203 — Willful failure to file return, supply information, or pay tax
Any person required under this title to pay any estimated tax or tax, or required by this title or by regulations made under authority thereof to make a return, keep any records, or supply any information, who willfully fails to pay such estimated tax or tax, make such return, keep such records, or supply such information, at the time or times required by law or regulations, shall, in addition to other penalties provided by law, be guilty of a misdemeanor and, upon conviction thereof:
• Shall be imprisoned not more than 1 years
• Or fined not more than $100,000 for individuals ($200,000 for corporations)
• Or both, together with cost of prosecution

Title 26 USC § 7206(1) — Fraud and false statements
Any Person who… (1) Declaration under penalties of perjury – Willfully makes and subscribes any return, statement, or other document, which contains or is verified by a written declaration that is made under the penalties of perjury, and which he does not believe to be true and correct as to every material matter; shall be guilty of a felony and, upon conviction thereof;
• Shall be imprisoned not more than 3 years
• Or fined not more than $250,000 for individuals ($500,000 for corporations)
• Or both, together with cost of prosecution

Title 26 USC § 7206(2) — Fraud and false statements
Any person who…(2) Aid or assistance – Willfully aids or assists in, or procures, counsels, or advises the preparation or presentation under, or in connection with any matter arising under, the Internal Revenue laws, of a return, affidavit, claim, or other document, which is fraudulent or is false as to any material matter, whether or not such falsity or fraud is with the knowledge or consent of the person authorized or required to present such return, affidavit, claim, or document; shall be guilty of a felony and, upon conviction thereof:
• Shall be imprisoned not more than 3 years
• Or fined not more than $250,000 for individuals ($500,000 for corporations)
• Or both, together with cost of prosecution

Title 26 USC § 7212(A) — Attempts to interfere with administration of Internal Revenue laws
Whoever corruptly or by force endeavors to intimidate or impede any officer or employee of the United States acting in an official capacity under this title, or in any other way corruptly or by force obstructs or impedes, or endeavors to obstruct or impede, the due administration of this title, upon conviction:
• Shall be imprisoned not more than 3 years
• Or fined not more than $250,000 for individuals ($500,000 for corporations)
• Or both

Title 18 USC § 371 — Conspiracy to commit offense or to defraud the United States
If two or more persons conspire either to commit any offense against the United States, or to defraud the United States, or any agency thereof in any manner or for any purpose, and one or more of such persons do any act to effect the object of the conspiracy, each:
• Shall be imprisoned not more than 5 years
• Or fined not more than $250,000 for individuals ($500,000 for corporations)
• Or both

CONCLUSION
South Carolina taxpayers must have an understanding of the basics of tax fraud and tax evasion in order to properly assess potential criminal liability if they have been involved in a tax fraud/evasion scheme and in order to protect themselves if they have been the victim of a tax fraud/evasion scam. South Carolina white collar criminal defense attorneys must understand the basics of tax evasion in order to adequately represent clients who have been charged or indicted with tax evasion or tax fraud violations. A white collar tax fraud or tax evasion criminal conviction can have life altering consequences for those defendants convicted of the same. A defendant who is charged or indicted with the federal crime of tax fraud should consult with a SC criminal lawyer who is knowledgeable about the substantive law regarding federal tax evasion/fraud as well as the applicable federal sentencing guidelines.

Joseph P. Griffith, Jr.
SC Tax Fraud Criminal Attorney
SC Tax Evasion Lawyer
SC Criminal Defense Tax Crimes Law Firm
Joe Griffith Law Firm, LLC
7 State Street
Charleston, South Carolina 29401
(843) 225-5563

http://www.joegriffith.com

South Carolina Attorney Joe Griffith is a former SC federal prosecutor who handles IRS tax fraud cases, federal criminal tax evasion cases, IRS tax fraud scheme cases, failure to file income tax return cases, in South Carolina and the United States.

The Joe Griffith Law Firm services the following South Carolina towns, municipalities and cities:

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The Joe Griffith Law Firm services the following South Carolina (SC) Counties:

• Abbeville County
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Contact the Joe Griffith Law Firm immediately to discuss your legal rights.

Joseph P. Griffith, Jr.
SC Criminal Defense Attorney
SC Tax Fraud Lawyer
SC Tax Evasion Law Firm
SC IRS Defense Attorney
SC White Collar Criminal Lawyer
Joe Griffith Law Firm, LLC
7 State Street
Charleston, South Carolina 29401
(843) 225-5563

http://www.joegriffith.com

About Joe Griffith 2

A South Carolina Criminal Lawyer, Attorney, Law Firm that practices white collar criminal law in SC. A SC criminal defense lawyer for antitrust crimes, bank fraud, bankruptcy fraud, breach of trust, child pornography crimes, criminal conspiracy, defense contractor fraud, embezzlement, environmental crimes, foreign corrupt practices (FCPA), fraud, government contracting fraud, health care fraud, hospice fraud, hospital fraud, investment fraud, medical fraud, medicare fraud, medicaid fraud, obscenity charges, physician fraud, ponzi schemes,public corruption, securities fraud, stock fraud, tax evasion, tax fraud, tax crimes, telemarketing fraud, theft. Griffith also handles qui tam, whistleblower, false claims act, whistleblower protection cases. Joe Griffith Law Firm serves the following South Carolina (SC) Counties: Abbeville County, Aiken County, Allendale County, Anderson County, Bamberg County, Barnwell County, Beaufort County, Berkeley County, Calhoun County, Charleston County, Cherokee County, Chester County, Chesterfield County, Clarendon County, Colleton County, Darlington County, Dillon County, Dorchester County, Edgefield County, Fairfield County, Florence County, Georgetown County, Greenville County, Greenwood County, Hampton County, Horry County, Jasper County, Kershaw County, Lancaster County, Laurens County, Lee county, Lexington County, Marion County, Marlboro County, McCormick County, Newberry County, Oconee County, Orangeburg County, Pickens County, plea agreement, Richland County, Saluda County, Spartanburg County, Sumter County, Union County, and Williamsburg County. Contact the Joe Griffith Law Firm immediately to discuss your legal rights at www.joegriffith.com.
This entry was posted in Criminal Conspiracy, Criminal Defense Lawyer, Criminal Law, Criminal Law - Tax Evasion, Fraud, Government Fraud, Qui Tam-Whistleblower, South Carolina Attorney, South Carolina Criminal Defense Lawyer, South Carolina Fraud Lawyer, South Carolina Law Firm, South Carolina Lawyer, Tax Fraud, U.S. Attorney, White Collar Crimes and tagged , , , , , , , , , , , , , , , , , , . Bookmark the permalink.

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