The following examples of general tax fraud investigations are written from public record documents on file in the court records in the judicial district in which the cases were prosecuted.

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.

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 Their Roles in 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, Bank Fraud, 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 in Prison for Scheme that Defrauded Investors of Approximately $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 in Prison on Charges of Filing False Returns and 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 in Prison; 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 in Federal Prison 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 to Prison 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 in Jail 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 of Dollars

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 More Than $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.

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