The following examples of General Tax Fraud investigations are excerpts from public record documents on file in the court records in the judicial district in which the cases were prosecuted.

California Man Sentenced To 15 Months in Prison for Tax Evasion

On September 30, 2010, in San Francisco, Calif., Anthony Carlos Lim was sentenced to 15 months in prison, followed by three years of supervised release and ordered to pay restitution of nearly $198,000 for tax evasion. According to the plea agreement, beginning in 2003 and continuing through 2006, Lim purchased computers and components at cash auctions, which were held in various vacant parking lots around the San Francisco Bay Area three or four times per year. On each occasion, he paid approximately $10,000 cash for these computers and components.  In 2004, Lim sold these computers on consignment through two technology sales companies which sold the computers on the internet. Lim also sold computers directly to a third technology sales company.  In 2004, Lim was paid more than $300,000 by these companies after consignment commissions were deducted. Between January and March 2004, Lim caused one of the companies to write 17 different checks totaling $60,440 payable to a friend. The defendant convinced the friend to cash the checks at her own bank and then gave the cash to Lim.  Lim also caused one of the companies to issue the consignment sale checks to him in amounts less than $5,000 in order to conceal his income for that year from the IRS.  Even though Lim knew he was required to truthfully report his 2004 income to the IRS, he did not report any of the income from these computer sales. According to court documents and statements at the plea hearing, when Lim was being audited by the IRS, he intentionally deceived the IRS Revenue Agent regarding his income for the years 2003 to 2006 and knowingly supplied the IRS auditors with incomplete statements of income received from the computer sales. For tax years 2003 to 2006, Lim evaded income taxes of $197,778.

Illinois Man Sentenced for Income Tax Evasion

On September, 30, 2010 in Fairview Heights, Ill., Orvil Hassebrock was sentenced to 36 months in prison followed by three years of supervised release and ordered to pay restitution and fines of more than $1.71 million for failing to file tax returns.  According to court documents, Hassebrock was convicted on April 29, 2010 for willfully attempting to evade and defeat the assessment and payment of income tax for 2004 and willful failure to file an income tax return resulting in a tax loss to the IRS of nearly $594,000.  Hassebrock’s restitution includes back taxes, interest, fines and a special assessment.

Philadelphia Businessman Sentenced on Tax Charges

On September 30, 2010, in Philadelphia, Pa., Bruce Huan was sentenced to 21 months in prison, followed by one year of supervised release, and ordered to pay a $100 special assessment and more than $221,000 in restitution to the Internal Revenue Service (IRS).  Huan was indicted on March 24, 2009, on three counts of filing a false tax return and three counts of aiding and assisting in the preparation of a false income tax return.  According to court documents, Huan created a business, Center International Business (CIB), and for tax years 2003 through 2006 filed false corporate tax returns for this business.  The tax returns claimed fraudulent deductions for contracting fees paid by the business to Huan, which resulted in a business loss.  During the same years, Huan filed personal income tax returns with the IRS, on which he falsely claimed as gross receipts the subcontracting fees reported on CIB’s corporate returns and took a deduction on his personal returns for the losses that were reported on CIB’s tax returns.   In fact, during these years, CIB did not conduct any business, did not realize any losses and Huan did not collect the fees he reported on his personal tax return.  By falsely reporting that CIB had business activity during the years 2003 through 2006, claiming that subcontracting fees were paid to him and deducting the fictitious corporate loss on his personal returns, Huan was able to fraudulently claim entitlement to the Earned Income Tax Credit.

Ohio Attorney Sentenced to More Than Seven Years in Prison

On September 27, 2010, in Cleveland, Ohio, Dale P. Zucker, an attorney who owned and operated the law firm “Dale P. Zucker, L.P.A.,” which specialized in medical malpractice and personal injury litigation, was sentenced to 93 months in prison for perpetrating a Ponzi scheme and related crimes.  Zucker, of Chagrin Falls, pleaded guilty earlier this year to two counts of mail fraud, three counts of failing to pay income taxes and one count of failure to appear. According to court documents, Zucker used his position as an attorney and a local businessman to convince clients and acquaintances to loan him money for businesses that either had long-ceased to exist or never existed at all. The Indictment further stated that Zucker lulled investors into a false sense of security by mailing them promissory notes that guaranteed the return of their initial investment at an interest rate of 10% to 25%, depending on the investor.  Zucker knew he would not be able to repay the investors and, rather than fund the businesses as represented, he converted the investments for his own purposes, which included paying earlier investors, the expenses of his law practice and his own personal expenses.  In addition, Zucker filed false federal income tax returns for the years 2003, 2004 and 2005, which failed to report combined income of approximately $588,000.

Former Police Officer Sentenced for Orchestrating Ponzi Scheme

On September 23, 2010, in Cleveland, Ohio, Raymond Thomas was sentenced to 72 months in prison, followed by three years of supervised release, and ordered to pay $987,743 in restitution.  According to court documents, Thomas, a former resident of Mentor, Ohio, was a police officer with the Warrensville Heights Police Department.  In June 2010, Thomas was charged with one count of mail fraud and one count of filing a false tax return.  The Information stated that from 1997 through July 2006, Thomas represented to approximately 25 investors, many of whom included Cleveland area active and retired police officers and firefighters, that he operated three legitimate companies: Strictly Stocks Investment Company, Inc., JR Ventures, and Adams Title Agency.  Thomas represented to investors that Strictly Stocks would make quarterly payments to investors from income derived from “trading only in stocks and options” and that it would provide investors with “above average fixed returns with below average risk.”  In addition, Thomas represented to investors that he also operated JR Ventures, a trucking business that included a car and limousine service, and Adams Title Agency, a real estate management company.  According to the Information, Thomas did not invest the money as he represented but instead he unlawfully commingled investor funds; used investor funds for unauthorized purposes, including making Ponzi payments to previous investors; and misappropriated investor funds for his own purposes and personal use.  Thomas also submitted a false U.S. Individual Tax Return, Form 1040, for the 2006 calendar year in which he understated his total income for the year by more than $186,000.

Montana Man Sentenced on Investment Fraud and Money Laundering Charges

On September 22, 2010, in Billings, Mont., Eric James Schultz, a resident of Bozeman, was sentenced to 20 months in prison, three years of supervised release, and ordered to pay $850,000 in restitution. Schultz was sentenced in connection with his guilty plea to investment fraud and money laundering.  According to information presented in court, Schultz owned and operated two lending businesses – American Mortgage and Big Sky Equity – which did business in Bozeman and Livingston.  The businesses were real estate and mortgage investment enterprises. Using an intermediary, Schultz promoted an investment vehicle to several large investors. Schultz told the investors that their money would be placed in a risk free, short term investment program that offered a maximum rate of return. Some investors wired $140,000 to Schultz for which they were told they would receive $2.8 million return in 60 days.  Schultz did not disclose that he would use any of the investors’ funds for his personal use. From June through August 2008, Schultz received $740,000 from investors.  Of that amount, he diverted over $500,000 to his own personal use and benefit. In September 2008, he invested the remaining amount with a person who was promoting a “zero coupon bond” scheme.  That amount was lost because the “zero coupon bond” scheme was a swindle.

Former Campaign Manager Sentenced for Embezzlement and Tax Evasion

On September 21, 2010, in New Haven, Conn., Michael Ian Sohn, of Fairfield, was sentenced to 37 months in prison, followed by three years of supervised release, for embezzling campaign funds from the Christopher Shays for Congress Committee, and for failing to pay federal income taxes for four years.  Sohn was also ordered to pay full restitution to the Shays Campaign Committee and the Internal Revenue Service (IRS).  According to court documents and statements made in court, Sohn was employed as the campaign manager for the Christopher Shays for Congress Committee from January 2003 through December 2008, and also was employed by the United States House of Representatives from January 2003 through May 2008.  From 2005 to 2008, Sohn embezzled more than $252,000 from the Campaign and stole money from the Campaign by writing himself checks and using the Campaign’s ATM/debit card to withdraw cash and make debit card purchases.  Sohn did not have signature authority on the Campaign’s bank accounts, so he forged the signature of the Campaign Committee Treasurer on the checks that he wrote to himself.  Sohn pleaded guilty to one count of tax evasion stemming from his filing of a fraudulent federal tax return for the 2008 tax year by omitting over $88,000 income.  Sohn also admitted that he failed to report a total of approximately $527,000 in taxable income for calendar years 2005 through 2008, which resulted in a loss of nearly $95,955. 

Illinois Man Sentenced to 276 Months in Prison after Hundreds of Victims Lost More Than $30 Million in 22-Year “Ponzi” Scheme

On September 15, 2010, in Chicago, Ill., Frank A. Castaldi, an accountant and businessman who ran a Ponzi scheme that spanned 22 years, was sentenced to 276 months in prison.  Castaldi was charged in January 2009 after self-reporting his criminal activity to federal law enforcement authorities. He pleaded guilty in August 2009 to one count of mail fraud and one count of impeding the IRS in the collection of taxes. According to court documents, during the early to mid-1980s, Castaldi, his father, and a business partner started two businesses – CZ Travel and CZ Realty. They later purchased ownership interests in First State Travel Service, Inc., Parkway Towers Insurance Agency, Inc., and Cumberland Realty, Inc., which later became known as Remax Cumberland Realty, all of which were located at 4501 North Cumberland in Norridge, with Castaldi acting as the president of each business. Since at least 1986, Castaldi began offering and selling 6-month promissory notes to investors, the majority of whom were people who were referred to him by other investors, and included friends, family members and customers of his businesses. While the vast majority of notes stated that the annual interest rate was zero percent, Castaldi orally guaranteed that he would pay investors annual returns between 10 and 15 percent. Castaldi made false representations to most investors about investing their principal in his various businesses or financial institutions, as well as the source of the funds that he used to make their interest payments. Castaldi obtained loans and used certain investors’ principal payments to make interest payments to other investors, without disclosing the true source of the interest payments. In all, Castaldi raised more than $77 million from some 473 individual and group investors, of which he used approximately $59 million to make payments of principal and interest to earlier investors. When the scheme collapsed in December 2008, Castaldi was left owing approximately $31.6 million to more than 300 individuals and investor groups.

Sacramento Real Estate Investor Sentenced for Filing False Tax Documents with the IRS

On September 14, 2010, in Sacramento, Calif., Wallace Chin, of Sacramento, was sentenced to 12 months and one day in prison, to be followed by six months of home detention, and one year of supervised release. Chin was also required to pay $104,997 in restitution to the Internal Revenue Service (IRS). He pleaded guilty on May 25, 2010, to one count of filing a false tax return. According to court documents, Chin underreported by more than $700,000 the capital gains he received from the sale of property that he owned in Sacramento through a partnership. When Chin’s tax return was later audited by the IRS, Chin submitted a number of false and forged documents purporting to substantiate the false information in his return.

Two Sentenced in Wisconsin in Million Dollar Ponzi Scheme

On September 14, 2010, in Milwaukee, Wis., Jeff Stadelmann was sentenced to 108 months in prison, to be followed by three years of supervised release for wire fraud and money laundering. Donna Kay Lonzo was sentenced to 12 months and a day in prison and three years of supervised release.  In addition, Stadelmann and Lonza were ordered to jointly pay $5,383,019 in restitution. According to court documents, from 2002 thru 2008 Stadelmann, a securities broker and owner of Li’L Bear, LLC, and Donna Lonzo bilked investors of $3.2 million by selling them unregistered securities.  To keep his scheme going, Stadelmann used investors’ money to pay dividends to other investors, stating it was returns on their investments.

Three Sentenced for Their Roles in $3.7 Billion Ponzi Scheme

During the week of September 13, 2010, in Minneapolis, Minn., three individuals were sentenced for their roles in the Tom Petter’s $3.7 billion Ponzi scheme.  Larry Reynolds was sentenced to 130 months in prison; Michael Catain was sentenced to 90 months in prison; and Robert Dean White was sentenced to 60 months in prison.  According to court documents, Reynolds and Catain admitted that from 2002 through September of 2008, they conspired to launder the proceeds of the Ponzi scheme.  Catain started a business called Enchanted Family Buying Co. (EFBC) while Reynolds started Nationwide International Resources, Inc (NIR), which were nothing more than shell corporations. The defendants use the bank accounts of these shell corporations to deposit investor money which was in the accounts of Petters Company, Inc. (PCI). Investors were falsely advised that the money would be used for the purchase of consumer electronics, which, in turn, would be sold by PCI to big-box retail stores for a profit.  In reality, however, the funds were simply wired back to PCI and then used to further the fraud scheme and support the lavish lifestyle of Tom Petters.  Court documents showed that White fabricated documents to make it appear to investors that PCI was purchasing merchandise from two suppliers when that was not the case.  From 2002 through September of 2008, approximately $12 billion was routed through the EFBC and NIR accounts then back to PCI again.  Multiple times each month wire transfers were made in amounts ranging from approximately $2 million to $25 million. Based on an agreement with PCI, Catain and Reynolds kept a percentage of the funds as their “commission.”  That commission totaled more than $3 million for Catain and $9 million for Reynolds.  Catain and Reynolds admitted they knew the wired funds came from investors, and that PCI had made false representations to those investors as to why they needed to send money to EFBC and NIR.  They also admitted they knew the real reason for depositing the funds into the EFBC and NIR accounts was to conceal and disguise the true nature, source, ownership and control of that money.

Former Portland Man Sentenced to 97 Months for Role in Multi-State, Multi-Year Fraud Scheme

On September 13, 2010, in Portland, Ore., Antione Lamont Lawrence, “Tony Montana” or “T”, formerly of Portland, was sentenced to 97 months in prison and five years of supervised release, for his role in a fraud scheme that targeted dozens of cities across the United States from 2001 through 2007. Lawrence was also ordered to pay $688,623 in restitution to his victims. According to information presented in court,  Lawrence led a team of thieves who traveled from Portland to other cities to burglarize commercial office buildings, steal checks, credit cards, and personal information, and then use the stolen items to create false identification documents and checks to commit bank fraud. In May 2010, Lawrence pleaded guilty to one count of bank fraud, and admitted that he and his team committed commercial burglaries in more than forty cities across the United States. Members of the team were experts at gaining entry to office buildings, and once inside they would steal a master key or key card which would allow them to re-enter buildings at will. After rummaging through desks to steal business checks, credit cards, account passwords, and personal information, Lawrence and his team would recruit a team of check cashers to walk into banks to cash the stolen checks in amounts ranging from a few thousand dollars to $50,000. Team members also shopped with the stolen credit cards, buying Rolex watches, designer clothes and high end electronics, or traveled to Las Vegas or area casinos to obtain cash advances on the stolen cards. Also on September 13, 2010, co-defendant Crystal Lynn Tuell, of Portland, was sentenced to five years probation for her role as a check casher for Lawrence’s team. Previously, Donald Wright was sentenced to 51 months in prison; Bradley Maier to 41 months in prison; Reggie Maier to 24 months in prison; Raymond Contreras III to 24 months in prison; and Alfonso Lopez-Ramirez to 71 months in prison, all in connection with this scheme.

Tucson Man Sentenced for Tax Fraud

On September 9, 2010, in Tucson, Ariz., Robert Hayes, of Tucson, was sentenced to 30 months in prison and two years of supervised release following his guilty plea to bankruptcy fraud and filing a false tax return. According to his plea agreement, Hayes operated The Hana Shirt Company, an Internet based vintage Hawaiian shirt sales business.  In April 2005, Hayes filed an accounting of assets in a voluntary bankruptcy proceeding in which he claimed total assets of $3,900, which included $500 in clothes and 50 vintage shirts worth $500.  He admitted that at the time he filed the accounting of assets, he possessed vintage shirts worth more than the $500 declared value. While Hayes was in bankruptcy proceedings, his father incorporated The Hana Shirt Co., and established a checking account for the company on behalf of the defendant, with the agreement that all future Hana Shirt Co., financial transactions be conducted through the business account. Beginning in June 2007, Hana Shirt Co. experienced a sharp increase in sales.  The proceeds from approximately 77.5 percent of the sales proceeds never went into the Hana Shirt Co. business account.  Rather, the proceeds ended up in Hayes's personal bank accounts. Hayes spent the money on personal vehicles, home improvements, vacations and other goods and services for himself and his family. Hayes failed to report the income from the shirt sales that went directly into his personal accounts for tax years 2007 and 2008. The total tax loss for those years was $718,872.

Minnesota Woman Sentenced for Stealing More Than $709,000 from Her Employer

On September 8, 2010, in Minneapolis, Minn., Carol Silus was sentenced to 26 months in prison and ordered to pay full restitution for wire fraud and filing a false tax return.  According to court documents, Silus admitted embezzling more than $709,000 from her employer between 2001 and 2007.  Silus was hired as a nanny and household helper, and her work included bookkeeping, helping with children, and running personal errands.  Starting in 2001, Silus also wrote checks to pay her employer’s bills; and in that capacity, Silus embezzled more than $709,000 over six years.  In addition, Silus admitted filing a false 2007 tax return failing to include approximately $145,000 in income obtained through the fraud scheme.  Silus further admitted failing to report approximately $675,000 in income from the scheme during tax years 2003 through 2007.

Minnesota Woman Sentenced for Her Role in Ponzi Scheme

On September 2, 2010, in St. Paul, Minn., Deanna Coleman was sentenced to 12 months and a day in prison for her role in a $3.7 billion fraud scheme orchestrated by Wayzata businessman Tom Petters. Coleman, of Plymouth, pleaded guilty in October 2008, to one count of conspiracy to commit mail fraud.  According to the evidence gathered in this case, Petters Company, Inc. (PCI), which was formed in 1994 and owned solely by Tom Petters, was used for fraudulent purposes from its inception. As the fraud progressed, Coleman, who was hired by Petters as an office manager and later became an officer of PCI, admittedly began creating false documents that Petters and others used to induce investors to loan billions of dollars to PCI. For example, Coleman fabricated documents that indicated investment funds were used by PCI to purchase merchandise from two suppliers, Enchanted Family Buying Co. and Nationwide International Resources, Inc. In truth, no such purchases were made. Coleman also created fictitious documents highlighting the sale of PCI merchandise to big-box retailers, such as Costco and Sam’s Club. In reality, investment funds were used to make lulling payments to previous investors, pay off those who assisted in the scheme, fund businesses owned or controlled by the co-conspirators, and finance Tom Petters’ increasingly extravagant lifestyle. For her efforts, Coleman received millions of dollars.

Former Labor Union Official Sentenced for Stealing Union Funds and Filing False Tax Return

On August 30, 2010, in Riverside, Calif., Jimmie Leo Miles, of Barstow, who formerly served as the financial secretary and the treasurer of Local 1023 of the International Brotherhood of Electrical Workers (IEBW) Union, was sentenced to 12 months in prison. In addition to the prison term, Miles was ordered to pay $107,749 in restitution; $93,283 to IEBW Local 1023 and $14,466 to the Internal Revenue Service (IRS).  Miles pleaded guilty in June 2010 to embezzling union funds and filing a false income tax return. As part of his guilty pleas, Miles admitted that he embezzled more than $90,000 in union funds from the beginning of 2003 through June 2007. Miles issued and signed more than 350 checks from the union’s bank account without obtaining authorization from the union’s membership or the union’s executive board. Miles wrote checks to himself and used other checks to pay for his personal expenditures, including his mortgage, homeowner’s insurance, automotive repairs, DirecTV, vehicle registrations, state and federal income tax.

Arizona Tax Accountant Sentenced for Stealing Almost $600,000

On August 30, 2010, in Phoenix, Ariz., Gregory A. Peters, of Mesa, Ariz., was sentenced to 32 months in prison and five years of supervised release as a result of his guilty plea to mail fraud, bank fraud and filing a false tax return for the year 2002. According to information presented in court, Peters and his wife owned and operated PBS Tax Firm Inc., a bookkeeping and tax return preparation company in Mesa and Scottsdale, Ariz. Through his company, Peters prepared municipal and State of Arizona sales tax returns for several of his clients. He had agreements with at least three of these clients to have them pay Peters their sales taxes along with his accounting fee. Peters would then prepare and submit the required tax returns as well as remit the taxes to the proper authorities. According to his plea agreement, Peters admitted that he stole almost $600,000 in funds remitted to him by clients for his personal use. He admitted that he prepared and filed false sales tax returns for these clients, showing that little or no sales tax was owed, while at the same time collecting the proper amount of tax from the clients. In some instances, Peters failed to file any sales tax returns at all, despite receiving substantial amounts of sales taxes from a client. Peters took approximately $589,366 of the funds remitted to him by clients for payment of their accrued sales tax obligations and admitted to using the stolen funds for his lavish personal living and family expenses. In June 2006, when applying for a $600,000 home equity line of credit, Peters’ loan application contained a financial statement and copies of U.S. income tax returns that show Peters receiving a greater amount of income then what was actually reflected on the tax returns he filed with the IRS.

Minnesota Man Sentenced to 25 Years in Prison for Swindling 923 Investors out of $158 Million

On August 24, 2010, in Minneapolis, Minn., Trevor Cook was sentenced to 300 months in prison for mail fraud and tax evasion.  According to court documents, Cook admitted that from January 2007 through July 2009, he schemed to defraud people by selling investments in a foreign currency trading program.  Cook diverted a substantial portion of the money provided to him for other purposes, including making payments to previous investors; purchasing ownership interest in two trading firms; buying a real estate development in Panama; paying personal expenses; and acquiring the Van Dusen Mansion in Minneapolis.  To carry out his massive Ponzi scheme, Cook made false statements to potential investors, including promises that the investment program would generate annual returns of ten to twelve percent, and that trading would present little or no risk to the investors’ principal.  He also misrepresented to investors the status of their investments. Cook admitted that on April 15, 2009, he filed a false and fraudulent U.S. Individual Income Tax Return, Form 1040, for calendar year 2008. That return failed to report taxable income of more than $5.2 million, for which more than $1.8 million was due in taxes.

Convenience Store Owner Sentenced for Tax Fraud Scheme

On August 20, 2010, in Richmond, Va., Mohammad Asif Ali, of Midlothian, Virginia, was sentenced to 12 months in prison for failing to report $400,829 of income and $107, 489 of tax on his personal tax returns from 2003 to 2007.  According to information presented in court, Ali owned, operated, and controlled Richmond Miller Mart, a convenience store located at 6500 Jefferson Davis Highway, Richmond, Virginia.  Ali established a subchapter C corporation, In & Out, Inc., in August 2001.  He incorporated another subchapter C corporation, Triple Crown, Inc., with another person in November 2004.  The business of both of these corporations was the operation of the same convenience store.  Ali’s underreporting scheme involved the skimming of corporate receipts in three ways.   First, he deposited substantial sums of currency receipts into his personal bank account rather than the corporate bank account.  Second, he wrote checks from the corporate checking account for personal expenses, such as rent, car payments and gifts to family members in Pakistan.    Third, he diverted checks payable to the corporation to himself by depositing them into his personal account.  He then concealed each of these diversions from the person preparing his personal income tax returns. Ali pleaded guilty to the charge of filing a false tax return for 2007 on which he fraudulently understated his adjusted gross income by $183,056 and his tax due and owing by $56,390.  He admitted, however, that he had also perpetrated the same scheme from 2003 to 2007.  The total additional income for the five year period was $400,829, which resulted in additional unreported income tax liabilities of $107, 489.

Defendant Who Assisted Individuals in Transferring Property to The Order Of Tranquility Sentenced

On August 20, 2010, in Salt Lake City, Utah, Rulon DeYoung, who pleaded guilty to one count of impeding the lawful functions of the IRS and four counts of tax evasion in May, will serve 36 months in federal prison.  As a part of a plea agreement reached with federal prosecutors, DeYoung admitted that he became aware of various individuals who had been assessed taxes by the IRS. He said he knew that these individuals either had tax liens on some piece of property they owned, either in their own names or in the names of a nominee, or that they had received notices from the IRS and were in danger of losing those properties. DeYoung admitted he assisted each of the individuals in transferring their property to The Order of Tranquility in order to evade and defeat the payment of the taxes they owed. After these individuals had transferred their properties to The Order of Tranquility, they continued to use those properties as they had before the transfers. DeYoung also admitted that because of his prior experience, he was aware that the actions these individuals were taking were inconsistent with the laws of the United States as interpreted by the courts of the United States.

Virginia Man Sentenced for Filing False Returns

On August 20, 2010, in Richmond, Va., Mohammad A. Ali was sentenced to 12 months in prison, followed by one year of supervised release, and ordered to pay a $100 special assessment.  In addition, Ali was ordered to cooperate with the Internal Revenue Service (IRS) in the collection of any taxes, interest, and penalties.  Ali owned and operated Richmond Miller Mart, a convenience store located in Richmond, Virginia. Ali pleaded guilty in May 2010 to subscribing to a false return.  According to court documents, for calendar years 2003 to 2007, Ali failed to report on his tax return an additional $400,829 in income he skimmed from his convenience store.  Ali also wrote checks from the corporate checking account for personal expenses, such as rent, car payments, and gifts to family members in Pakistan.

Oklahoma Man Sentenced for Tax Evasion

On August 18, 2010, in Oklahoma City, Okla., Randall Osborn of Shiatook, Oklahoma, was sentenced to 12 months and a day, one year of supervised release and ordered to pay more than $472,000 in restitution for failing to report all income from his business.  According to court documents, Osborn pleaded guilty to falsely reporting his income for the years 2002, 2003, 2004 and 2005.  Over that time he failed to report nearly $619,000 resulting in a tax loss to the government of more than $125,000.

New Jersey CPA Sentenced for Failing to Report Income from Tax Preparation Business

On August 18, 2010, in Newark, N.J., Michael Arizechi, a Certified Public Accountant (CPA), was sentenced to 12 months and a day in prison, followed by three years of supervised release, and ordered to pay a $3,000 fine.  Arizechi pleaded guilty on February 8, 2010 to one count of income tax evasion for failing to report all his income for the 2003 tax year.  According to court documents, Arizechi, owned a tax preparation business in East Orange known as Michael Arizechi CPA & Associates, where he prepared and filed tax returns with the Internal Revenue Service (IRS) on behalf of his clients. As a sole proprietorship, Arizechi was required to report all gross receipts generated by his tax preparation business on Schedule C of his personal income tax return. Arizechi failed to report approximately $143,418 in gross receipts for the 2003 tax year.  Arizechi also admitted that he failed to report gross receipts of approximately $80,836 in 2002 and $126,133 in 2004.

Ohio Man Sentenced for Women, Infants, and Children (WIC) and Food Stamp Program Fraud

On August 17, 2010, in Cleveland, Ohio, Abrahem Jabr was sentenced to 30 months in prison and ordered to pay $1,713,904 in restitution.  Under the Food Stamp program, qualified recipients are issued coupons or Electronic Benefit Transfer (EBT) cards for purchase of eligible food and goods.  The Women, Infants, and Children (WIC) program issues coupons to qualified recipients for purchase of eligible food and goods.  In each program the authorized retailers are reimbursed for redeemed food stamps and WIC coupons.  According to court documents, Abrahem Jabr, along with his brother, Ahmad Jabr, Mahmoud Muntaser, and others defrauded the Food Stamp and WIC programs.  The defendants would buy food stamp coupons, EBT cards, and WIC coupons for cash, sometimes at a discounted price, or allow recipients to use coupons for ineligible items such as beer and cigarettes.  Then the coupons and EBT cards would be redeemed for their full authorized values with the U.S. Department of Agriculture (USDA).  The defendants were compensated with more money than was actually exchange by the transactions.  During 2002 through 2004, one grocery store owned by the defendants fraudulently redeemed approximately $1,995,735 in food stamp and WIC programs. In February 2010, Ahmad Jabr was sentenced to 41 months in prison and ordered to pay $996,944 in restitution.  In August 2009, Mahmoud Muntaser was sentenced to 46 months in prison and ordered to pay $1,995,735 in restitution. 

Four Former Comstock Image Employees Sentenced for Embezzling over $900,000

On August 17, 2010, in Newark, N.J., four former employees of Comstock Images, Inc. were sentenced for their roles in a conspiracy to embezzle approximately $900,000 from their employer through phony and falsely inflated invoices.  Robert Gonzalez, of Lake Mary, Fla., served as the head of information technology (IT) for Comstock; he was sentenced to 40 months in prison and ordered to pay $982,361 in restitution. Geraldine Manuel, of Elmwood Park, N.J., served as head of the finance department for Comstock; she was sentenced to 20 months in prison and ordered to pay $600,000 in restitution. Philip McKenna was sentenced to three months of house arrest and Andrew Edwards was sentenced to two years of probation; McKenna and Edwards were ordered to pay up to $400,000 in restitution.  According to court documents, Gonzalez recruited Manuel and others in Comstock’s finance and IT departments to participate in an embezzlement scheme.  Gonzalez and Manuel used a Comstock American Express card to make personal purchases worth up to thousands of dollars at a time. They attempted to hide the purchases by creating phony expense reports for computer and IT-related equipment approximating the amounts of the personal purchases.  Manuel would then issue Comstock checks to pay the American Express account. In addition, the defendants created fraudulent expense reports as reimbursement for personal expenses, cash, gifts, and trips. Manuel admitted that she issued Comstock checks to herself and her co-conspirators for the purported reimbursement of expense vouchers she knew to be fraudulent. Gonzalez pleaded guilty to conspiracy to commit mail and wire fraud, as well as two counts of tax evasion for failing to report taxable income from the expense report scheme.  Manuel, McKenna, and Edwards pleaded guilty to conspiracy to commit mail and wire fraud. In addition to the prison terms, Gonzalez, Manuel, and McKenna were each sentenced to serve three years of supervised release.

Portland Man Sentenced to 24 Months for Role in Fraud Scheme

On August 12, 2010, in Portland, Ore., Raymond Contreras, III, of Portland, was sentenced to 24 months in prison and three years supervised release, for his role in a fraud scheme that targeted dozens of cities across the United States from 2001 through 2007. Contreras was associated with a team of individuals who traveled from Portland to other cities to burglarize commercial office buildings, steal checks, credit cards, and personal information, and then use the stolen items to create false identification documents and checks to commit bank fraud. In April 2010, Contreras pleaded guilty to one count of conspiracy to commit bank fraud and aggravated identity theft, and admitted that he used false identification documents to cash fraudulent checks at several banks throughout the country. The judge also ordered Contreras to pay $146,000 in restitution to his victims.  Previously, Donald Wright was sentenced to 51 months in prison; Bradley Maier to 41 months in prison; Reggie Maier to 24 months in prison; and Alfonso Lopez-Ramirez to 71 months in prison, all in connection with this scheme. Two additional co-defendants (Antione Lawrence and Crystal Tuell) have pleaded guilty to offenses in connection with the scheme and are awaiting sentencing.

Dallas Realtor Sentenced for Tax Evasion

On August 12, 2010, in Dallas, Texas, John Sheets was sentenced to 40 months in prison and ordered to pay more than $2.4 million in restitution for tax evasion.  According to court documents, Sheets is a licensed realtor and since 1996, Sheets and his wife, Eleanor, have successfully worked as real estate agents and have established multiple closely-held businesses including Eleanor Mowery Sheets, Inc.; Dallas EMS, LLC; and E-Residential, LLC.  Sheets admitted that he has substantial unpaid individual and corporate tax debts from 1997, 1998, 1999, 2001, and 2005 through 2008 totaling approximately $2.7 million, including penalties and interest.  The documents further state that beginning in 1998, rather than pay his substantial tax debts; Sheets used various business entities to conceal the nature and extent of his assets.  Sheets admitted to doing personal business and paying personal creditors with these funds, rather than paying the IRS.  Using these businesses, Sheets commingled funds to pay approximately $436,000 in mortgage interest to three lenders so that he and his wife could live in a $1.3 million home, and to buy personal items including an interest in a private airplane and vehicles.  He also paid numerous personal creditors.  Sheets further admitted that on April 5, 2006, he used a local check-cashing business to avoid paying federal income taxes; he took a $123,000 settlement check to the local check-cashing business, and rather than deposit the check into his personal bank account for free, he paid more than $2,000 to cash that check.  None of the money from that check was used to pay the IRS; he used the funds to pay for personal expenses and other creditors.  

North Carolina Investment Counselor Sentenced for Investment Fraud and Tax Fraud

On August 10, 2009, in Greenville, N.C., Harold Earl Blondeau, of Raleigh, was sentenced to 36 months in prison and ordered to pay $425,694 in restitution to the Internal Revenue Service (IRS) and several entities.  A Criminal Information was filed on April 28, 2009 charging Blondeau with investment advisor fraud and making and subscribing to a false return.  According to the Criminal Information, Blondeau utilized his role as an investment advisor to a particular client to gain access to funds held in trust for the benefit of the individual. Blondeau convert these funds for his own personal use and benefit, including using the money to purchase a beach house, large amounts of wine, and to pay down his own mortgage line of credit.  Blondeau also failed to report or pay any taxes on these ill-gotten proceeds.

Georgia Man Sentenced on Tax Evasion Charges

On August 4, 2010, in Atlanta, Ga., Keith Kim, of Duluth, was sentenced to 21 months in prison on tax evasion charges relating to his failure to report and pay taxes on $1.4 million of his company’s receipts in the period 2003 through 2006.  According to court documents and information presented in court, Kim operated mortgage brokerage businesses under two names, Capital Innovations Group (CIG) and KSK & Associates (KSK).  During closing transactions, real estate attorneys wrote checks to the two companies for the brokerage services provided to lenders.  Kim provided false information regarding the gross receipts of CIG and KSK to the accountants who prepared his corporate and personal income tax reports.  From 2003 until 2006, Kim simply cashed or caused to be cashed approximately $1.4 million in these checks.  For 2003 and 2004, he did not report this income on either his personal or the businesses’ tax returns.  In 2005 and 2006, Kim did not file any corporate or personal tax returns.  As a result, Kim evaded approximately $242,000 in taxes.

Seattle Area Man Sentenced for Operating a Ponzi Scheme

On August 2, 2010, in Seattle, Wash., Kevin Halverson, of Bothell, Washington, was sentenced to 51 months in prison, to be followed by three years of supervised release, and ordered to pay $7,654,639 in restitution.  On April 19, 2010, Halverson was indicted for a Ponzi scheme involving alleged investments in high profile event tickets. Between 2003 and 2006, Halverson induced investors to provide him with $10 million, for a business purchasing tickets to high demand events, and reselling them at a substantial profit. Halverson purchased a small number of tickets to make the business appear legitimate, but primarily used investor money to pay off earlier investors in the manner of a typical Ponzi scheme.

Virginia Car Wash Owners Who Kept Two Sets of Books Sentenced on Tax Charges

On July 30, 2010, in Richmond, Va., Thomas Ellis and his wife, Brenda Ellis, were sentenced to 18 months and 12 months in prison, respectively, for conspiring to defraud the Internal Revenue Service (IRS) of more than $133,000 in tax revenue from 2003 through 2007.  Thomas and Brenda Ellis were the owners of Buzz Thru Car Washes, an automated car wash service that provided washing, waxing, vacuuming and other vendor services after a customer deposited cash or coins into a machine.  According to court documents, from 2003-2007, Thomas Ellis would bring the daily car wash cash receipts to the home office where Brenda Ellis would account for the cash in two sets of records and ledgers.  On one set, she recorded the true amount of cash received by the two car washes.  These amounts were summarized monthly and recorded on ledgers hidden on the back of a desk in the Ellis’ home office.  On another set, however, she recorded a lesser amount of cash received and deposited this amount in a bank account.  They kept the rest of the cash in a safe at the house or used the funds to maintain their lifestyle.  When the defendants met with their accountant to prepare their income tax returns, they only reported as income the lesser amount of cash.  Between 2003 and 2007, the defendants understated $386,397 in income from their car wash businesses on their Schedule C, Profit or Loss From Business, resulting in the non-payment of $133,163 in income taxes.

Oklahoma Man Sentenced for Tax Evasion

On July 30, 2010, in Tulsa, Okla., David Nigh was sentenced to 15 months in prison, one year of supervised release and ordered to pay nearly $55,000 in restitution for filing a false tax return.  According to court documents, Nigh was charged with five counts of filing false tax returns from 2001 through 2005.  Nigh pleaded guilty to one charge admitting that he under-reported his 2005 income, claiming only $113,745 when in fact he made more than twice that amount, $246,952.

California Resident Sentenced to 15 Years in Prison for Investment Fraud Scheme

On July 30, 2010, in Oakland, Calif., Peter C. Son, of Danville, Calif., was sentenced to 180 months in prison for conspiracy to commit wire fraud and conspiracy to commit money laundering. Son was also sentenced to serve three years of supervised release following his prison term and ordered to pay restitution in an amount to be determined.  According to court documents, Son and his business partner, Jin Chung, were the owners of SNC Asset Management, Inc. and SNC Investments, Inc. (Companies).  On April 9, 2010, Son pleaded guilty and admitted he falsely advertised that the Companies had a distinguished record and were highly successful in foreign exchange trading when in fact records reflect that very little foreign exchange trading was done by either company. Son also admitted that potential investors were falsely promised annual returns on their investments of between 24 and 36 percent a year. From the beginning, investors were strongly encouraged to reinvest their profits to avoid having to return funds to the customers. Returns were paid out to only those investors who demanded that the accounts be closed or those who demanded monthly returns be paid instead of reinvested. Court records reflect that from 2003 through October 2008, approximately 500 customers invested approximately $85 million in the Companies, receiving in return approximately $23 million, leaving investors with losses amounting to approximately $62 million. Most of the investors were Koreans living in California and Korea. In October 2008, without any advance warning to employees or customers, Son and Chung failed to report to work. According to court records, Chung remained in Korea, where he had gone on a business trip, and Son failed to report to SNC Pleasanton, Calif. office. Son remained a fugitive until June 8, 2009, when he self surrendered.

CEO of Missouri “Duncan Group” Sentenced to Prison on Multi-Million Dollar Ponzi Scheme

On July 29, 2010, in St. Louis, Mo., Aaron Duncan was sentenced to 53 months in prison and ordered to pay $3.8 million in restitution for mail fraud and money laundering.  According to court documents, Duncan represented that The Duncan Group was involved in real estate investments, including buying, rehabilitating and selling residential real estate. Duncan solicited investors in Missouri and around the United States to participate in his real estate projects through The Duncan Group by making false representations regarding the security of investments and the rates of returns promised.  Bank records revealed that The Duncan Group investment program was a Ponzi scheme.  Investors who were repaid on their principal investments were paid from funds obtained from other investors, rather than from returns on investments in real estate projects as promised and represented Duncan falsely told investors that their principal investments were secured by a specific property.  For example, some investors were told that an investor's name would be placed on a particular deed or that investors were "securitized" by first mortgages on properties.  Bank records also show that beginning in December 2005, Duncan was experiencing personal financial problems and was often late on his home mortgage payments.  The scheme operated from January 2006 until Duncan advised investors of his intention to declare bankruptcy in October 2008.  During the scheme, Duncan received investment principal from more than 50 investors who ultimately lost a total of approximately $3.9 million.  Records recovered during the investigation revealed that Duncan only bought approximately ten (10) properties, and that these ten properties lost money in total.   Investor money was not used as promised and represented; instead, investor money was routinely used to pay other investors, pay routine expenses of the business, and to pay Duncan's personal expenses.

Nevada Company President Sentenced to Prison for Defrauding Hawaii Residents Facing Foreclosure

On July 29, 2010, in Honolulu, Hawaii, John Gilbert Mendoza, was sentenced to 72 months in prison, five years of supervised release, and to pay a special assessment of $1,875. Mendoza was also ordered to pay restitution in the amount of $881,514 to three different victims. Mendoza was originally indicted on May 15, 2008, for conspiracy, mail and wire fraud, and loan fraud. On July 1, 2009, a superseding indictment charged Mendoza with additional counts involving money laundering and failure to file tax returns. On February 10, 2010, Mendoza was convicted of all twenty-two felony counts. According to the evidence admitted during the trial, Mendoza, as President of a Nevada "shell" corporation with bank accounts in Hawaii, befriended Hawaii homeowners who were facing foreclosure and told them that he had a plan for stopping the foreclosure proceedings and for allowing them to keep title to their homes. Contrary to what he told these homeowners, the evidence showed that Mendoza organized the sale of the homes to third party straw buyers, or, buyers who never intended to reside in the property. To purchase the properties, the straw buyers took out loans in their name. The loans contained false statements about how much income the buyers earned, about who was going to reside in the property, and about who was going to make the monthly payments. According to testimony from lending institution representatives, had they known the truth, the loans would not have funded. After the loans were funded, Mendoza deposited the proceeds, which exceeded $431,000, into his own accounts. The loans went into default and the properties were both sold as part of foreclosure proceedings.

Former Manager of Local Medical Group Sentenced to Prison for Tax Evasion

On July 29, 2010, in Corpus Christi, Texas, Gina Holley was sentenced to 24 months in prison followed by three years of supervised release and ordered to pay nearly $298,000 in back taxes for failing to pay taxes on money she embezzled from her employer.  According to court documents, Holley pleaded guilty to tax evasion in April 2010 admitting she failed to pay taxes on the money she embezzled from her employer between 2003 and 2006 while working as the office manager for a medical group. Holley failed to disclose this income on her tax returns which resulted in almost $298,000 in unpaid taxes to the United States.  According to pleadings filed of record in the case, in September 2007 the medical group discovered Holley had been using a company ATM card to make unauthorized withdrawals. Further investigation revealed that in addition to the unauthorized withdrawals, Holley also embezzled money by issuing company checks to herself, writing company checks to pay her credit cards and other expenses and making unauthorized transfers to her checking account. As office manager, Holley had control of accounts payable and the payroll as well as being in charge of bank reconciliations. Holley altered business records to conceal the fraud by making various journal entries and coding the majority of the embezzled funds to medication expenses. She used the embezzled funds to purchase vehicles and a house, and to fund cosmetic surgery and frequent trips to Las Vegas, Nev., New York and Puerto Rico.  The medical group obtained a civil judgment against Holley of more than $1,132,000 in compensatory damages and $2.5 million in exemplary damages as a result of the embezzlement.

West Virginia County Business Owner Sentenced for Failing to Report Nearly $1 Million in Income

On July 28, 2010, in Charleston, W. Va., Alison M. Lambert, of Man, West Virginia, was sentenced to 12 months and one day in prison for tax evasion.  Lambert was also ordered to pay a $10,000 fine and $256,092 in restitution to the Internal Revenue Service (IRS).  Lambert pleaded guilty on April 16, 2010, to evading the payment of taxes on cash income generated from restaurant, bar and motel businesses she owned in Man, West Virginia.  According to court documents, from 2004 to 2008, Lambert failed to report nearly $1 million in cash income derived from her businesses which were operating under the name Colonial Room Motel and Restaurant.  In addition to her prison sentence, Lambert, a former member of the Logan County Board of Education, resigned that position in April 2010 following the entry of her guilty plea.

Former City Employee Sentenced For Role in Schemes Totaling $756,000

On July 26, 2010, in Springfield, Mo., David Griggs was sentenced to 32 months in prison, ordered to pay nearly $273,000 in restitution and forfeit more than $756,000 along with a 1999 Dutchman travel trailer for mail fraud and money laundering.  According to court documents, Griggs pleaded guilty to conspiracy to commit mail fraud, theft from an organization receiving federal funds, and conspiracy to commit money laundering. Griggs was employed by the city of Nixa as a utility worker in the city’s street department from November 6, 2003, to February 8, 2006. Co-defendant Larry Covington pleaded guilty on June 1, 2010, to his role in the conspiracy to defraud the city of Nixa. Griggs and Covington used two fictitious businesses established by Griggs to invoice the city of Nixa for nearly $274,000 in goods and services for the street department that were never provided. During the course of the conspiracy, 122 fraudulent invoices were submitted to the city.   Covington admitted that he prepared purchase orders for street department supplies that were invoiced by the two fictitious businesses. Covington caused the city to prepare purchase orders and falsely acknowledged receiving the items, which were never actually delivered.  Griggs established separate post office boxes for the two businesses. When the city mailed checks payable to the businesses, they were deposited into business bank accounts and Covington and Griggs split the proceeds. Griggs admitted that he conspired with others to conduct financial transactions involving the proceeds of the mail fraud.  Covington also admitted that he registered a third fictitious business which he repeatedly used to invoice the city of Nixa for goods and services that were never provided.  Between December 7, 2004, and February 25, 2009, Covington submitted 150 fraudulent invoices totaling more than $482,000 to the city of Nixa for goods and services that were never provided. Covington repeatedly made false representations to the city that his business would supply goods and services, and falsely represented to the city that goods had been delivered and that services had been performed by signing or initialing fraudulent invoices. Covington also admitted that he participated in a mail fraud conspiracy related to financial transactions involving the proceeds of the mail fraud.  Larry Covington is awaiting sentencing.

Former Fugitive Sentenced in Multi-Million Dollar Fraud Scheme

On July 26, 2010, in Manhattan, N.Y., Avrum David Friesel was sentenced to 27 months in prison, two years of supervised release, and ordered to pay over $11 million in restitution. Friesel pleaded guilty to one count of conspiracy to defraud a number of federal agencies and federal and state programs, including the Pell Grant and Section 8 Housing programs.  Friesel fled to Israel in 1997, than to the United Kingdom in 1999, and finally was extradited to the United States in August 2009.  According to court documents and statements made in court, Friesel and several other co-defendants defrauded a number of federal and state grant, loan, and subsidy programs of millions of dollars for the benefit of themselves and other residents of the Village of New Square, an incorporated village in Rockland County.  Friesel and his co-defendants assisted thousands of New Square residents and others in enrolling in fraudulent postsecondary educational programs in order to obtain tens of millions of dollars in Pell Grants and other forms of student financial aid to which they were not entitled. Most of these students were enrolled in "independent study" programs that did not require the students to attend classes, but instead permitted them to study independently under the guidance of "mentors," who supposedly met with them periodically to gauge their progress and administer examinations. Many of these "students" were actually ineligible to receive financial aid because they were not seeking any certificate or degree, or because they were still in high school. Co-conspirators created entities through which federal and state funds could be fraudulently obtained; submitted fraudulent documentation in order to establish the eligibility of New Square residents and others to participate in these programs; used the funds obtained from these programs for impermissible purposes; and concealed their fraud by using false names and nominee bank accounts. In addition, Friesel and others defrauded other federal programs and departments, including: a Small Business Administration program designed to provide venture capital to small, minority-owned businesses; the Section 8 rental subsidy program funded by the U.S. Department of Housing and Urban Development; the Social Security Administration; and the Internal Revenue Service.

Owner of Missouri Metal Recycling Company Sentenced on Tax & Social Security Fraud Charges

On July 16, 2010, in St. Louis Mo., Carl Neff was sentenced to 18 months in prison and ordered to pay nearly $433,000 in restitution for filing a false tax return and defrauding the Social Security Administration.  According to court documents Neff began operating a business known as Bourbon Metal Recycling located in Bourbon, Mo. In 2002. The business purchased scrap metal from the public and resold it to larger scrap metal companies, mostly in the St. Louis area. Neff paid cash to his customers to purchase the scrap metal.  He was the person in charge of the business and made all the business decisions, such as hiring, firing, prices to be paid for scrap purchased, and decisions about where to resell the scrap metal he purchased. Employees of the business were paid in cash. When Neff filed his federal income tax returns for the years 2003 through 2006, he did not report any income from Bourbon Metal Recycling. His return was prepared by a commercial income tax return preparer, but Neff did not tell them about the business nor provide any financial information. For the calendar years 2003-2006 the business gross receipts were approximately $1,558,000.  None of this income was reported on Neff’s tax returns for those years, and the existence of Bourbon Metal Recycling was totally omitted from the returns.  The total additional tax due and owing for the four years is more than $378,000.  While Neff was operating Bourbon Metal Recycling, he was also receiving Social Security disability payments because of an injury to his hand. In order to receive these payments, he could not be substantially gainfully employed. In addition, Neff periodically had to complete forms for the Social Security Administration which provided information concerning both his disability and his work, including the amount he was earning. Despite the fact that he was operating Bourbon Metal Recycling, and making a significant income doing so, he reported to Social Security that he continued to be disabled and was earning only a small amount of money. From September 2003 through October 2008, Neff fraudulently received Social Security disability payments of more than $54,000.

Louisiana Man Sentenced to 30 Years for Operating a $20 Million Investment Scheme

On July 22, 2010, in New Orleans, La., Matthew B. Pizzolato, of Tickfaw, was sentenced to 360 months in prison, three years of supervised release, and ordered to pay over $15 million in restitution to the victims of his investment scheme.  Pizzolato pleaded guilty on April 1, 2010 to numerous federal charges including mail fraud, wire fraud, money laundering, securities fraud, and witness tampering.  According to court documents, Pizzolato admitted that since 2005, he was affiliated with and/or operated and/or owned Gulf Region Guaranty, Inc. and its affiliated companies. During this time period, Pizzolato operated an investment Ponzi scheme targeting older investors, specifically retirees.  He admitted that he lured his potential victims through advertisements in the local daily newspapers in New Orleans, Baton Rouge and Hammond by promising rates of returns that were higher than market rates for CDs or U.S. Treasury Bills.  These advertisements described Pizzlato's investments as “guaranteed”, “safe”, “conservative”, “insured” and “no-risk.”  Pizzolato admitted that he used the investors’ money to build a new half-million dollar home in Ponchatoula, Louisiana and to purchase luxury vehicles and a $35,000 engagement ring.  He also made payments totaling millions of dollars to friends and family, invested in high-risk futures trading and/or commercial real estate, and made lulling payments to investors in an effort to conceal the true nature of the Ponzi scheme.

New Jersey Contractor Sentenced for Tax Evasion

On July 22, 2010, in Trenton, N.J., Daniel Carlo, owner of a construction company, was sentenced to 12 months and a day in prison to be followed by two years of supervised release.  Carlo pleaded guilty in August 2009 to an Information charging him with tax evasion for failing to report $242,764 in income.  According to court documents and statements made in court, Carlo owned and operated a construction company under the name of “Cartar” from his residence in Barnegat. Carlo admitted that in April 2006, he prepared, signed and filed a false 2005 U.S. Individual Income Tax Return which stated that his taxable income for calendar year 2005 was zero.  Carlo failed to report taxable income of approximately $242,764, resulting in approximately $78,792 in tax due and owing.  Carlo admitted that in an effort to hide the unreported income, he deposited client receipts into bank accounts held in the names of his wife and daughter.

Pennsylvania Couple Sentenced on Tax Evasion Charges

On July 20, 2010, in Scranton, Pa., Frank and Salli Ann Peperno, husband and wife from Old Forge, were sentenced on charges of tax evasion.  Frank Peperno was sentenced to 43 months in prison; Salli Ann Peperno was sentenced to two years probation with six months of home confinement.  According to court documents, Salli Ann was charged with conspiracy to commit tax evasion in conjunction with a gym, Maximum Health & Fitness, owned and operated by herself and her husband. Frank Peperno was charged with tax evasion and mail fraud. Frank Peperno, a former licensed stockbroker, unlawfully converted monies belonging to clients.

Indiana Couple Sentenced to Prison for Income Tax Evasion and Failure to File Tax Returns

On July 13, 2010, in Indianapolis, Ind., Lisa Sorrell was sentenced to 30 months in prison and three years of supervised release for tax evasion and Christopher Sorrell was sentenced to 24 months in prison and one year supervised release.  According to court documents, the Sorrells admitted they evaded the assessment of income tax for the years 2002, 2003 and 2004 by failing to file income tax returns and committing affirmative acts of evasion.  The Sorrells owned a profitable wholesale turkey feather company with locations in Indiana and North Carolina. From 2002 through 2004 they earned approximately $1.4 million. They evaded taxes by using shell corporations, warehouse banks and family members as nominees. As a result of their conviction, the Sorrells paid more than $418,000 of back taxes prior to sentencing and still owe more than $76,000 as restitution. 

Former Atlanta Resident Sentenced for Not Reporting Over $560,000 in Income

On July 9, 2010, in Atlanta, Ga., Wendell White, of Woodland Hills, California, was sentenced to 24 months in prison, to be followed by one year of supervised release, and ordered to pay a $10,000 fine and $233,302 in restitution to the Internal Revenue Service (IRS). White pleaded guilty on January 29, 2010 to the charges of filing false income tax returns.  According to court documents, White, who formerly lived in Atlanta, submitted false income tax returns to the IRS in 2003, 2004, and 2005.  He failed to report over $560,000 of income during those three years. White admitted that at least some of the income he failed to report came from illegal sources.

Escort Service Operator Sentenced To Prison for Tax Evasion

On July 9, 2010, in Salt Lake City, Utah, Jodi Hoskins, who operated Companions, a call-out escort service in Salt Lake City, was sentenced to 36 months in prison, three years of supervised release, and ordered to pay $736,183 in restitution.  In January 2010, Hoskins was found guilty of one count of tax evasion for underreporting to the IRS the gross receipts of the Companions escort service for 2002. According to the court’s findings, Hoskins was actively involved in the management and operation of Companions from its inception in 2000 and was aware of all of the company’s finances.  Her husband, Roy B. Hoskins, was the owner of Companions.  The evidence at trial showed that the husband and wife underreported the gross receipts for Companions by $1,204,354 in 2002, resulting in a tax loss of $485,443.  Roy B. Hoskins was previously sentenced to 60 months’ incarceration after he pleaded guilty to tax evasion.

Florida Man Sentenced for Tax Fraud

On July 7, 2010, in Tampa, Fla., Joseph Christopher Hooker, of Tierra Verde, Florida, was sentenced to 57 months in prison for mail fraud and tax fraud.  In addition, Hooker was ordered to pay restitution of $2,478,423 to Roger William Erdelac, owner of Blue Hawaiian Products, and 819,426 to the Internal Revenue Service (IRS).  According to court documents, from approximately 2002 to November 2006, Hooker, along with another individual, Jack Shaw, executed a scheme to defraud Blue Hawaiian Products, a company that manufactured and sold fiberglass swimming pool shells.  Hooker deposited customer checks made payable to his employer, Blue Hawaiian Products, into a business checking account in the name of Blue Hawaiian Pools and Supplies which Shaw opened.  Hooker then prepared fraudulently altered Blue Hawaiian invoices reflecting substantially lower purchase prices than the true invoices and Shaw purchased cashier checks for the lower prices from the fraudulent account and remitted them to Blue Hawaiian Products in payment of the fraudulent invoice.  Hooker also filed fraudulent Individual Income Tax Returns for years 2003, 2004, 2005, and 2006 that omitted Hooker’s proceeds from the scheme.         

Indiana Construction Company Owner Sentenced for Tax Evasion

On July 1, 2010, in Indianapolis, Ind., David W. Pittman, of Greenwood, was sentenced to 12 months in prison, 18 months’ home detention and two years of supervised release following his plea of guilty to income tax evasion. He must also cooperate with the IRS in determining his income tax liabilities.  Pittman, the owner/operator of Pittman Framing, a residential construction framing company, failed to file income tax returns for the years 1994 through 1998.  The IRS assessed the income tax owed by Pittman for each of these years, but he took steps to evade the payment of these assessed taxes.  The total income tax deficiency owed by Pittman is approximately $497,000.  Pittman also failed to file income tax returns for the years 2003 through 2005 and 2007.  The total income owed by Pittman for those years is approximately $48,000.

Former Business Executive Sentenced for Tax Evasion

On June 30, 2010, Charleston, W.Va., Carl Steward, of Asheville, North Carolina, was sentenced to 24 months in prison for tax evasion.  Steward pleaded guilty in February 2010 and admitted that he failed to file income tax returns for the 2000 and 2001 tax years and filed false income tax returns for the 2002 and 2003 tax years. According to court documents, from approximately 2000 to 2003, Steward was the vice president of marketing for American Canadian Expeditions (ACE), an outdoor adventure company located in Oak Hill, West Virginia.  During this time, Steward received “commissions” from ACE marketing vendors even though he was a salaried employee and not entitled to receive such commissions.  In an effort to disguise the illegal income, Steward directed vendors to make commission payments to the Society for the Preservation of Vaudeville and Variety Arts, Inc. (SPVVA), a charitable entity operating in Florida. Steward opened a local bank account in the name of SPVVA, directed commission payments be made to that account, and then used the SPVVA account for personal use. In addition, in May 2006, Steward lied to an IRS agent by stating that he had filed accurate tax returns for the 2000 through 2003 tax years.   

Oklahoma Woman Sentenced for Filing a False Tax Return

On June 29, 2010, in Oklahoma City, Okla., Robin Ramming, of Hinton, Oklahoma, was sentenced to 28 months in prison, one year of supervised release, and ordered to perform 104 hours of community service during your supervised release.  In addition, she was ordered to pay $395,700 to the Hinton Economic Development Authority and $117,257 to the Internal Revenue Service (IRS); she has already re-paid Wheeler Chevrolet.  According to court documents, until 2006, Ramming was employed at the Hinton Economic Development Authority in Caddo County.  On January 22, 2010, she pleaded guilty to embezzling from that employer by taking cash supposedly to be used at the Sugar Creek Canyon Golf Course over the course of more than six years.  During 2007,  Ramming worked at Wheeler Chevrolet as an accountant.  At her plea hearing on February 4, 2010, Ramming admitted that she embezzled from that employer and used the money for personal expenses.  She pleaded guilty to signing a personal federal income tax return that failed to report the money that she embezzled.

California Man Sentenced in Illegal Stock Compensation Scheme

On June 28, 2010, in Los Angeles, Calif., William Manfei Woo, of San Gabriel, California, was sentenced to 18 months in prison after being convicted of conspiracy and subscribing to a false tax return. Woo was also ordered to spend 18 months on home detention.  According to information in court documents, Woo received American Fire Retardant Corporation stock from Stephen Owens, the company’s president and chief operating officer.  During 2003 and 2004, Owens caused American Fire Retardant Corporation to issue stock to Woo directly and indirectly through two nominees. The stock issued to Woo was issued as free-trading, unrestricted stock of the type issued to employees, consultants, and advisors who provide bona fide services to the company. When he was issued the stock, Woo knew that neither he nor either of his nominees performed bona fide services that justified the amount of stock issued to them. The income Woo failed to report on his 2004 income tax return was compensation he received in the form of stock from American Fire Retardant Corporation.  In connection with the preparation of his 2004 tax return, Woo told his accountant he received the stock as compensation and reported the sale of the stock on the return. Additionally, Woo also reported the cost basis of the shares he received as consulting income on his return. However, Woo falsely deducted as a business expense amounts paid indirectly to Owens, resulting in his underreporting of taxable income on his 2004 tax return. The stock that Woo and his nominees received was sold and Woo transferred the money to accounts he controlled. Additionally, Woo transferred most of the money he and his nominees received from the sale of American Fire Retardant Corporation stock, directly or indirectly, to Owens. Owens previously pleaded guilty to conspiracy, securities fraud and tax charges related to this scheme.

Former Mortgage Broker Sentenced in $1.6 Million Fraud Scheme

On June 23, 2010, in Jackson, Miss., Warren Clifton Pierce was sentenced to 60 months in prison to be followed by three years of supervised release.  Pierce pleaded guilty in June 2009 to his role in a scheme to fraudulently obtain mortgage loans totaling approximately $1.6 million from various out of state lenders. During his guilty plea, Pierce admitted his participation in fabricating documents and giving false information to lenders to fraudulently obtain residential mortgage loans for borrowers who did not qualify financially to receive the loans. According to court documents, Pierce was a mortgage broker doing business as Raintree County Marketing Company and Integrity Mortgage.  As a mortgage broker, Pierce sought out prospective borrowers and tried to qualify them financially to receive a home mortgage. He would obtain basic financial and employment information from the borrower. Then Pierce and his co-conspirators would include false information on the application form to induce the lender to make the loan. Pierce and his co-conspirators also prepared false documents to submit to lenders to support the false information contained on the loan application. These fabricated documents included false Verifications of Deposit, false Verifications of Rent, false forms to verify income, false W-2 forms, false tax returns, false money orders and false Social Security letters.  The fraudulent loan application information and the fraudulent supporting documents caused the lender to believe the borrower had the ability to repay the mortgage loan and also created the appearance of a mortgage marketable as a security on the secondary market. Pierce received broker fees and commissions from those fraudulently obtained mortgage loan proceeds.

North Dakota Man Sentenced for Money Laundering and Defrauding the United States

On June 23, 2010 in Fargo, N.D., Neville Solomon was sentenced to 86 months in prison, followed by three years of supervised release and ordered to forfeit more than $2 million for money laundering and conspiracy to defraud the government.  According to court documents, Solomon and an associate, Frederick Keiser, Jr., bilked investors by having them wire money to a company called MidChina Capital Management, located in Las Vegas, Nevada. The phony investment promoted by Solomon and Keiser involved a fictitious bank trading or bank guarantee program in which bank instruments were to be obtained. Solomon and Keiser convinced their victims that the bank instruments would generate exorbitant yields which would be used to fund other income-generating projects for MidChina, which in turn would result in investors gaining enormous returns. The investors were falsely assured that the investments were safe and secure.  Solomon and Keiser got investors to invest over $2 million dollars into the scheme between August 2001 and December 2002.  Solomon used investor funds to pay his personal living expenses. Investors did not receive their money back from MidChina. Solomon also promoted and assisted in a scheme used to eliminate the necessity to pay income taxes.  Keiser was convicted by a jury in 2007 for his role in this scheme and is serving a 12-year prison sentence.

North Carolina Lawyer Sentenced to 46 Months for Embezzlement and Tax Fraud

On June 22, 2010, in Charlotte, N.C., Thomas Daniel Brown, of Concord, was sentenced to 46 months in prison and ordered to pay over $1.3 million in restitution to his former law firm.  Brown pleaded guilty in July 2009 to wire fraud and tax fraud in connection with the embezzlement of over $1.8 million from his law firm’s trust account.  According to the Bill of Information, Brown was a real estate closing attorney for a small law firm in Charlotte from 2003 through 2008.  As a closing attorney, Brown would receive funds from the buyer and the lender.  The money was supposed to be use to pay off any existing mortgage liens on the property purchased by the buyer.  Instead, Brown embezzled the money to improve his own lifestyle, to make lulling payments to lenders holding unpaid liens, and for other reasons. To make the funds available for embezzlement, Brown prepared closing documents making it appear as though such funds had been applied as directed to pay off existing liens when Brown simply left such funds in his trust account to make them available for embezzlement.

Former Controller Sentenced on Tax Charges

On June 21, 2010, in Detroit, Mich., Pamela Blodgett was sentenced to 36 months in prison, to be followed by one year supervised release, and ordered to pay approximately $570,000 in restitution.  According to court documents, Blodgett was the controller for Vinyl Tech Window Systems. As part of her responsibilities at Vinyl Tech, Blodgett had authority to issue checks for paying legitimate expenses.  She embezzled more than $1.7 million by issuing checks to Valley Lawn Maintenance, a company owned and operated by her husband, William Blodgett.  Pamela Blodgett concealed the embezzlement by making false entries in the corporate check register and computer accounting programs, listing legitimate vendors as the payees of the checks.  She then assisted in the preparation of her joint tax returns for the years 2003 through 2006, failing to report this income, and caused an underpayment of over $570,000 in taxes to the Internal Revenue Service.

Chicago Man Sentenced on Tax Evasion Charges

On June 18, 2010, in Chicago, Ill., Kevin Thomas O’Doherty was sentenced to 24 months in prison and ordered to pay nearly $370,000 in restitution for tax evasion.  According to court documents, O’Doherty failed to file individual federal income tax returns for the years 2001, 2002, and 2003. In December 2009, O’Doherty pleaded guilty to tax evasion for the 2001 calendar year and admitted to failing to pay more than $367,000 in taxes for the three years 2001 through 2003.  O’Doherty was a commodities trader who bought and sold contracts for the future delivery of commodities on the Chicago Mercantile Exchange (CME) and the Chicago Board of Trade (CBOT).  O’Doherty also leased seats on the CME and the CBOT to other commodities traders for monthly fees or a share of the traders’ profits.  In furtherance of his scheme to evade his income taxes, O’Doherty established several entities to attempt to conceal his income and assets from the IRS.  During the tax years 2001 through 2003, O’Doherty earned in excess of $1.1 million from his trading activities and business partnerships with KFX Brokerage and other traders.  O’Doherty used concealed income in bank accounts of business entities for personal purpose, including the purchase of a Florida residence and the purchase of an interest in a Florida racehorse.

Indiana Man Sentenced to 57 Months for $1.6 Million Bank Fraud and Filing False Tax Returns

On June 16, 2010, in Indianapolis, Ind., John Branam was sentenced to 57 months in prison for bank fraud, money laundering and filing a false tax return.  According to court documents, Branam was the office manager of King’s Title & Abstract Company in Shelbyville, Indiana from 1996 until 2007.  Around 2004, Branam began embezzling money from Kings Title by using several fictitious business entities, including Branam Properties, Rocksolid Investments, and Kings. Branam opened bank accounts for each of these businesses in his own name, doing business as the entity’s business name.  None of these entities were legitimate businesses; they were created by Branam solely for the purpose of embezzling money from Kings Title. Branam fraudulently obtained more than $1.6 million from 2004 thru 2007. He conducted numerous money laundering transactions over $10,000 with the proceeds of the fraud and failed to report any of the fraudulently received monies on his 2004 through 2007 federal individual income tax returns, thus avoiding taxes of approximately $360,000 over the four year period.

Tennessee Financial Advisor Sentenced in Fraud Case

On June 14, 2010, in Knoxville, Tenn., Delbert Foster Blount, III, of Ooltewah, was sentenced to 60 months in prison, followed by three years of supervised release, and ordered to pay $2,726,272 in restitution to Ameriprise and $467,169 in restitution to the Internal Revenue Service (IRS).  Blount pleaded guilty In April 2009 to charges of mail fraud, wire fraud, and income tax evasion.  According to his plea agreement, from June 2000 until December 2006, Blount used his position as a financial advisor to encourage people to invest money in various savings and retirement vehicles that included, 401(k) accounts, IRA accounts, and brokerage accounts, but then misappropriated the money for his personal use. Blount admitted that he deposited checks received from investors into a nominee account to hide his theft. Blount then created false statements on his computer and posted them on the internet to lead his clients to believe that he had actually invested their money.  Blount also failed to report the proceeds from the theft of clients' funds on his federal income tax returns for 2002 through 2004; and failed to file income tax returns for tax years 2005 and 2006. These actions resulted in a tax loss to the government of $469,592 for tax years 2002 through 2006.

Maine Lobster Broker Sentenced for Filing False Federal Tax Returns

On June 14, 2010, in Bangor, Maine, Francis E. “Frank” Donnelly was sentenced to 12 months and a day in prison, followed by one year of supervised release, and ordered to pay $89,331 in restitution, a $3,000 fine and a $200 special assessment.  Donnelly pleaded guilty in November 2009 on charges of filing false tax returns.  According to court records, for the tax years 2002 through 2004, Donnelly owned and operated a lobster broker business known as “Down East Exports” in Lamoine, Maine. For those years, Donnelly underreported his income by approximately $500,000 in gross receipts for each year.

New York Man Sentenced to 72 Months in Prison

On June 10, 2010, in Syracuse, N.Y., Donald Geiss, Jr., was sentenced to 72 months in prison, to be followed by three years of supervised release, and ordered to pay $1,671,552 in restitution to Intertek Testing Service located in Cortland, New York.  Geiss, former director of Health and Safety at Intertek, pleaded guilty on February 21, 2010 to one count of tax evasion and one count of money laundering.  According to court documents, Geiss admitted that he prepared and submitted false invoices to Intertek totaling $1,630,407 for services that were never provided.  Geiss caused $1,457,107 of the fraudulently obtained funds to be deposited into the Interest on Lawyer Account (IOLA) of attorney David Pelland. The monies were then withdrawn from the Pelland account to pay various expenses, including Geiss’ personal expenses. All fraudulently obtained funds were omitted from Geiss’ federal income taxes which resulted in an underreporting of income to the Internal Revenue Service. In 2005 alone, Geiss underreported his taxable income by $370,200 thereby evading tax due and owing in the amount of $119,686. David Pelland pleaded guilty on May 4, 2010, and is awaiting sentencing.

Ohio Attorney Sentenced in $2.5 Million Fraud Case

On June 8, 2010, in Cincinnati, Ohio, Robert L. Schwartz, an attorney, was sentenced to 48 months in prison, to be followed by three years of supervised release, and ordered to pay $2,292,469 to Hadassah Hospital and $935,217 in restitution to the Internal Revenue Service (IRS). Schwartz pleaded guilty on June 11, 2009, to mail fraud and filing a false tax return relative to keeping almost $2.5 million from an estate for which he was the executor.  According to court documents, Schwartz helped establish an estate plan and trust agreements for a client in 2003. When the client passed away in 2005, the estate was worth approximately $12 million. Schwartz was supposed to make distributions from the estate, including approximately $2,502,469 to the charitable organization, Hadassah, The Women’s Zionist Organization of America, Inc., also known as Hadassah Hospital. Instead, Schwartz routed the majority of the trust funds through accounts or entities he controlled and used most of the money, more than $9 million, for personal expenditures and asset purchases for family members, employees, friends and close associates.  Schwartz reported gross receipts of $125,702 on his 2007 income tax return, when his correct gross receipts were approximately $932,441.

California Man Sentenced for Filing False Tax Return

On June 7, 2010, in Los Angeles, Calif., Mark Ellis, of Orange County, was sentenced to six months in prison, to be followed by one year of supervised release that will include six months confinement in a halfway house and six months of home detention with electronic monitoring. The court also ordered Ellis to pay $725,956 in restitution.  Ellis pleaded guilty on November 10, 2009, to filing a false tax return for tax year 2004.  According to the plea agreement, Ellis was president, CEO and controlling shareholder of Indiginet, Inc.  Indiginet was a publicly traded corporation that operated as a business development company.  It raised millions of dollars through the sale of stock to investors. During tax year 2004, Ellis received approximately $748,734 from Indiginet for his personal use.  The funds were income to Ellis that he did not report on his federal income tax return for that year.  Ellis used the funds to pay for his personal expenses and to invest in an unrelated business.  In addition, for tax years 2003, 2005, and 2006, Ellis failed to report approximately $1,497,537 as income on his personal income tax returns for those years. The total amount of the tax loss for all four years (2003-2006) is approximately $725,956.

CFO of San Jose Company Sentenced for Investment Fraud Scheme and Tax Evasion

On June 1, 2010, in San Jose, Calif., Gregory Scott Dixon was sentenced to 24 months in prison, to be followed by three years of supervised release, and ordered to pay $614,923 in restitution for his role in an investment fraud scheme. Dixon, of Marysville, Calif., pleaded guilty in September 2009 to wire fraud and tax evasion. According to court documents, Dixon served as Treasurer and, along with a colleague, helped operate Financia Investing, Inc.  He admitted that he and his colleague made false representations to investors that their money would be properly invested. Once they received the funds, they diverted some of the money for their personal use,and used funds from later investors to pay off earlier investors. They invested some of the funds, but at a far lower amount than represented to investors. Dixon also sent out false IRS 1099 forms to investors, representing non-existent earnings on Financia accounts, as well as false monthly earnings statements. According to court documents, whatever limited trading activity Financia had engaged in had completely stopped by July 2006, but Dixon and his colleague continued to receive and accept incoming wire transfers from investors.  Dixon used at least $24,060 from one account to pay his personal American Express bill and withdrew all the money from the other account by way of two cashier’s checks in the amounts of $414,343 and $80,000. He used all the money from these transactions for personal expenses.  Dixon also evaded payment of federal taxes for the income that he took from Financia in 2006 and evaded tax due and owing of approximately $145,150.

Certified Public Accountant Sentenced in Embezzlement Scheme

On May 27, 2010, in Chicago, Ill., Jeffrey Meyer was sentenced to 30 months in prison and one year of supervised release for filing a false tax return.  According to court documents, Meyer, a certified public accountant and the chief financial officer of Cargo, Inc., a freight forwarding company, embezzled from his employer through unauthorized payroll checks and the use of a corporate credit card.  Meyer failed to report this income on his 2000 and 2001 tax returns.  Meyer embezzled nearly $68,000 in unreported income in 2000 and more than $106,000 in 2001.  Meyer has paid back all taxes due for 2000 and 2001.

Connecticut Man Sentenced for Tax Evasion

On May 27, 2010, in Hartford, Conn., Vincent Mavilia, of Warren, was sentenced to 18 months in prison, to be followed by three years of supervised release, and ordered to pay a $5,000 fine.  He was also ordered to pay $359,291 in back taxes, penalties and interest to the Internal Revenue Service (IRS) for evading taxes for more than a decade.  Mavilia pleaded guilty on November 19, 2009, to one count of tax evasion.  According to court documents and statements made in court, Mavilia owned and operated a number of bars and adult entertainment businesses.  However, from 1992 through 2003, Mavilia took steps to conceal from the IRS his ownership of the businesses by placing them in the name of his adult daughter.  Mavilia further attempted to conceal his income from his businesses by using bank accounts in his daughter’s name to deposit funds and make payments of his personal expenses.  Mavilia also purchased and owned real property in Branford, Brookfield, and Danbury, but placed the properties in the names of other individuals to keep them beyond the reach of the IRS.

Former Owner of Tennessee Business Sentenced on Fraud, Money Laundering, and Tax Charges

On May 25, 2010, in Knoxville, Tenn., Joseph Dean Brandenburg, former owner of Extreme Logistics, LLC, was sentenced to 46 months in prison, to be followed by five years of supervised release, and ordered to pay in excess of $3 million in restitution to Suntrust Bank and the Internal Revenue Service (IRS).  Brandenburg pleaded guilty on March 23, 2009 to wire fraud, money laundering, and submitting false tax returns.  According to court documents, from June 2004 into July 2005, Brandenburg submitted fraudulent invoices in order to obtain funding from Prime Financial Services, a subsidiary of Suntrust Bank.  Prime Financial Services agreed to advance funds to Extreme Logistics based upon Extreme Logistics’ submission of invoices for loads that Extreme Logistics had hauled.  Brandenburg’s fraudulent invoices exceeded $3.6 million and represented that loads had been hauled for various customers when, in fact, they had not.  Brandenburg laundered over $1 million in proceeds of the fraud scheme through another business that he controlled and then used funds for his personal benefit, including making substantial improvements to his personal residence in Loudon County.  Additionally, Brandenburg submitted false tax returns for the years 2004 through 2006 by failing to claim the income he received from the money laundering on his Federal income tax returns.

Portland Man Sentenced to 24 Months for Role in Fraud Scheme

On May 25, 2010, in Portland, Ore., Reggie Allan Maier, of Portland, was sentenced to 24 months imprisonment and five years supervised release for his role in a fraud scheme that targeted dozens of cities across the United States from 2001 through 2007. According to information presented in court, Maier was associated with a team of individuals, including his father, who traveled from Portland to other cities to burglarize commercial office buildings, steal checks, credit cards, and personal information, and then use the stolen items to create false identification documents and checks to commit bank fraud. Maier pleaded guilty to one count of bank fraud in February 2010.  He admitted that he participated in a December 2005 shopping spree throughout Portland with other members of the team in which he purchased parts for his BMW at several area retailers using credit cards stolen by his father during an office burglary in Arizona. The judge also ordered Maier to pay $23,000 in restitution to the victims of that December 2005 shopping spree.

San Francisco Real Estate Investor Sentenced to 30 Months in Prison for Filing False Tax Returns

On May 24, 2010, in San Francisco, Calif., Luke D. Brugnara was sentenced to 30 months in prison followed by one year of supervised release for filing false tax returns. The judge also ordered Brugnara to pay $1,904,625 in restitution; a $50,000 fine; and, a $300 special assessment. On January 26, 2010, Brugnara pleaded guilty to filing false tax returns for 2000, 2001, and 2002.  In pleading guilty, and based on statements made in court, Brugnara admitted that he failed to report capital gains from the sale of properties in San Francisco and Las Vegas.  Brugnara, of San Francisco, was charged in a superseding indictment on January 12, 2010, with three counts of filing false tax returns and one count of obstructing the Internal Revenue Service. According to the Indictment, Brugnara failed to report the sale of four properties in San Francisco and one property in Las Vegas in the year the properties were sold. The Indictment further alleged that Brugnara failed to report as income the amounts paid to his corporation related to the mortgage of the home he lived in, automobile loan payments, and other personal expenses. According to documents filed with the court, Brugnara also provided a lender with invoices from a non-existent tax service, unfiled corporate tax returns and a statement that he owned more than $400 million of artwork. According to court documents, in February 1998, the IRS requested copies of Brugnara’s individual income tax returns for 1990 through1996, in addition to copies of tax returns for Brugnara Corporation. Brugnara returned those notices to the IRS with a notation indicating that the tax returns were already filed. Around the same time, Brugnara applied for a gaming license to operate a casino after acquiring the Silver City Casino in Las Vegas.  Also according to court documents, in March 2000, an investigation was started by the Nevada Gaming Control Board as part of his application for a Nevada gaming license. The background investigation included an inspection of his federal and state tax filings. During the background check, the investigators learned that Brugnara had not filed tax returns for 1991through 1998.  

Ponzi Scheme and Mortgage Fraud Mastermind Sentenced to Prison

On May 19, 2010, in San Francisco, Calif., Patricia Morgen, the founder and head of Chicago Development and Planning, was sentenced to 188 months in prison and ordered to pay more than $9 million in restitution for wire fraud, mail fraud, and money laundering. According to her December 2009 plea agreement, Morgen admitted creating a scheme to solicit investors for a company called Chicago Development and Planning, with the promise of substantial guaranteed return profit payments.  Morgen falsely promised investors that their funds would be used to purchase real property to be rented or resold for profit, and that their guaranteed returns would come from profits earned on the real estate investments.  In fact, Morgen paid investors largely with money obtained from new investors, rather than from real estate-related profits.  Morgen admitted that there were more than 400 victims of this Ponzi scheme.  In another scheme, Morgen and a co-defendant submitted fraudulent loan applications to acquire more than 20 properties, most of which were occupied, rent-free, by Chicago Development and Planning employees, including Morgen herself.  The fraudulent loan applications included lies as to the borrowers’ employment and income.

Former Mortgage Brokers Sentenced for $1.2 Million Mortgage Fraud Scheme

On May 18, 2010 in Springfield, Mo., five people were sentenced to prison and ordered to pay restitution for their roles in a mortgage fraud scheme: Charles Davis was sentenced to 51 months in prison and ordered to pay nearly $1.3 million in restitution;  Scott Kassebaum received 24 months in prison and ordered to pay over $200,000; Cheryl Kassebaum was sentenced to 15 months and nearly $500,000;  Steven Spencer received 30 months and nearly $437,000; and Shanda Moore was sentenced to three years probation of which six months will be served in home confinement and ordered to pay nearly $253,000.  According to court documents, Davis, a former mortgage broker who was the owner of Master Marketing Consultants, pleaded guilty to his participation in two separate conspiracies to obtain mortgage loans for the purchase of homes based on false loan applications. Davis knew that the loan applications he prepared and submitted were false because the loan applications included overstatements of income and understatements or omissions of liabilities, falsely represented that the purchaser/borrower intended to reside in the home to be purchased, and, in some cases, stated a false place of employment for the purchaser/borrower.  A significant portion of the loan proceeds was returned to the purchasers of the homes without the lender’s knowledge. Davis facilitated these kickbacks to the purchasers by routing the proceeds through Master Marketing Consultants and, in some cases, through Metro Consulting Group, which was owned by the Kassebaums.  The mortgage fraud schemes involved a total of 20 houses with home mortgage loans ranging from approximately $200,000 to $500,000. The amount of loan proceeds returned to the borrowers ranged from less than $30,000 to more than $100,000. Some of the home purchasers subsequently defaulted on the loans, and the homes have been foreclosed or are in the process of being foreclosed. 

Colorado Man Sentenced to Prison for Fraudulent Loan Scheme

On May 18, 2010, in Denver, Colo., David Gwin, of Aurora, was sentenced to 96 months in prison, to be followed by three years of supervised release, and ordered to pay $933,841 in restitution and ordered to forfeit $933,585.  Gwin pleaded guilty on February 19, 2010, to wire fraud and engaging in monetary transactions in property derived from wire fraud.  According to the stipulated facts contained in the indictment and subsequent plea agreement, from early October 2003 through January 2005, Gwin operated a business called Asset Funding Solutions, Inc. (AFSI), which purported to be in the business of finding private investors to fund loans for investment projects, as well as being the lender itself for such loans.  In February 2005, Gwin and others changed the name of the business to Asset Global Funding, Inc. (AGF), which continued to operate until about August 2005. Gwin told people and companies seeking multi-million dollar loans that they were required to pay a fee in advance of receiving the funding for their loans.  The advanced fee was called a “due diligence fee” or “retainer” or an “application fee.”  In order to persuade the people and companies seeking multi-million dollar loans to send the advanced fee, Gwin falsely told them that the fee was refundable if the loan they sought was not funded.  The advanced fees ranged from $5,000 to $340,000, depending on the size of the loan sought. During the course of the fraudulent scheme, Gwin repeatedly told the people and companies who had sent AFSI/AGF advanced fees that he was meeting with investors to secure their funding, and that funding for their loan would happen soon.  The defendant did not secure funding for the loans and he did not return the vast majority of the advanced fees that were paid.

Former Lawyer Sentenced on Tax Charges

 On May 18, 2010, in Danville, Va., Kevin J. Witasick, a former Arizona attorney and current Woolwich Township, New Jersey resident, was sentenced to 15 months in prison, to be followed by two years of supervised release, and ordered to pay for the cost of his prosecution, approximately $12,000. He was also ordered to cooperate with the Internal Revenue Service in paying back taxes, interest and penalties. According to court documents, Witasick and his wife, Whitney Scott Witasick, were indicted in October 2007 and charged with a multitude of tax charges. Following a seven-day trial in February 2009, Kevin Witasick was found guilty of two counts of tax evasion, two counts of perjury on his tax returns and one count of failing to file taxes for fiscal year 2001. Whitney Witasick was acquitted of all charges against her.  The Indictment charged Witasick with lying on his tax returns regarding the use of the couple’s Stanleytown home, known as Stoneleigh. On his tax returns, Kevin Witasick had claimed that 100 percent of the 51-acre property was being used for his law practice. However, evidence and testimony presented at trial proved that just 11 percent of the property was being used for business purposes. In addition to filing false tax returns in 1999 and 2000 regarding the business use of Stoneleigh, Kevin Witasick failed to file any tax returns for 2001.

Former University of Louisville Dean Sentenced for Tax Evasion, Money Laundering Conspiracy and Mail Fraud

On May 17, 2010, in Louisville, Ky., Robert Felner, former University of Louisville Dean, was sentenced to 63 months in prison and ordered to pay restitution in the following amounts:  $510,000 to the University of Louisville U of L); $88,750 to the Rock Island County Council on Addictions RICCA); and $1,646,972 to the University of Rhode Island (URI).  In addition, the United States seized $449,979 which may be applied towards restitution. Felner also deposited over $250,000 to the Federal District Court to be applied toward restitution.  In January 2010, Felner pleaded guilty to conspiracy to commit money laundering, mail fraud, conspiracy to defraud the Internal Revenue Service (IRS), and tax evasion.  According to court documents, Felner admitted that from 2001 through 2008 he embezzled and conspired to launder approximately $1,646,972 belonging to URI; $510,000 belonging to U of L; and $88,750 belonging to RICCA.  Felner also admitted that he and a co-conspirator fraudulently diverted payments intended for URI from school districts in Atlanta, Georgia, Santa Monica, California, and Buffalo, New York into bank accounts they controlled at Citizens Bank in Rhode Island, A.B.&T. in Illinois, and B.B.&T. in Kentucky.  These three accounts were in the name of the National Center on Public Education and Prevention ("NCPEp”).  From 2001 to 2007, they caused payments from Atlanta totaling $1,005,972, from Buffalo totaling $326,000, and from Santa Monica totaling $375,000 to be diverted from URI and deposited into these NCPEp bank accounts.  A division of URI, the National Center on Public Education and Social Policy (NCPE), actually performed the work for Atlanta, Buffalo, and Santa Monica but Felner and a co-conspirator diverted the payments to the NCPEp bank accounts they controlled.  NCPEp performed no services to any of these school districts. Felner also admitted that he and a co-conspirator used NCPEp to embezzle funds received from U of L under a September 1, 2005, $694,000 federal earmark grant.  Felner  caused U of L to issue $450,000 in payments to NCPEp by fraudulently alleging NCPEp performed work pursuant to the grant.  NCPEp did not perform the work.  These payments were deposited into the three NCPEp bank accounts controlled by Felner and a co-conspirator. There were numerous other embezzlement schemes and payments for work not performed.  Felner also admitted that from 2001 through 2008, approximately $2,245,772 in funds were fraudulently deposited into three bank accounts in the name of NCPEp that were controlled by him and a co-conspirator.  These funds were withdrawn by Felner and a co-conspirator and were used for their personal benefit.  Finally, Felner admitted that he evaded payment of his federal income taxes for the years 2002 through 2007 by failing to report income he received from NCPEp bank accounts and failed to pay a total of approximately $490,000 in taxes on the unreported income in those years.  Felner and a co-conspirator caused false IRS Form 1099s to be issued, or purposely failed to issue Form 1099s, to conceal income from the IRS. 

Man Sentenced on Identity Theft and Money Laundering Charges

On May 17, 2010, in Reno, Nev., William Lyle Snyder was sentenced to 65 months in prison, to be followed by three years of supervised release, and ordered to pay $228,000 in restitution.  On January 19, 2010, Snyder pleaded guilty to one count of aggravated identity theft and one count of money laundering.  According to court documents, beginning on or about August 22, 2005, and continuing to on or about February 9, 2006, Snyder solicited funds under fictitious names for investments in commodities pools through a company known as Verada Wealth Unification Worldwide (Verada). During this period of time, the defendant maintained the financial account at Charles Schwab & Company, Inc., Reno, through which the investors' funds were deposited and withdrawn.  Snyder solicited these funds throughout the United States by faxes that he sent from Reno in which he falsely claimed that his trading accuracy rate exceeded 77 percent and that Verada would pay 15 percent to 20 percent or more every 21 days and that the investment would be compounded every 2 l days. Snyder also falsely claimed that Verada had been trading private ventures with people all over the world for eight years. Neither Snyder nor Verada was registered with the U.S. Commodities Futures Trading Commission and Snyder failed to notify the investors of this fact. He also failed to inform investors of the risks associated with commodity pool trading. During this period of time, Snyder received a total of $228,000 from various investors and he converted these funds to his own personal use.  According to the indictment, Snyder knowingly possessed and unlawfully used the name, date of birth, driver’s license number and social security account number of another individual in violation of federal law.  The indictment also alleges that Snyder knowingly engaged in a monetary transaction with a financial institution involving more than $10,000 in criminally derived property.

Nevada Man Sentenced for Straw Buyer Scheme

On May 13, 2010, in Las Vegas, Nev., Jared Arambel was sentenced to 41 months imprisonment, to be followed by five years of supervised release, and ordered to pay restitution in the amount of $2,664,950 following his guilty plea in January 2010 to one count of Conspiracy to Commit Mail, Wire and Bank Fraud. According to his plea agreement, from about January 1, 2006, to about March 3 I, 2007, Arambel conspired with others to submit mortgage loan applications, which contained materially false information, to financial institutions to finance straw buyer real estate purchases in Nevada. Arambel caused false information to be included on straw buyers' loan applications regarding place of employment, income, assets, and intent to occupy the properties so the straw buyers would qualify for loans for which they would not otherwise qualify. Through these transactions, the conspirators obtained control over the properties and obtained money from the financial institutions by causing the money from the mortgage loans to be diverted to the conspirators for their use and benefit. The conspirators also obtained money from the fees and commissions earned from each loan to straw buyers.

Former Owner of Three District of Columbia Nightclubs Sentenced for Tax Evasion

On May 11, 2010, in Washington, D.C., Abdul Karim Khanu, former owner of the District of Columbia nightclubs DC Live, Platinum, and H20, was sentenced to 38 months in prison, to be followed by three years of supervised release, and ordered to pay $951,520 in restitution. Khanu was found guilty on December 1, 2009, of two counts of tax evasion for the years 2002 and 2003.  According to the facts presented at trial, Khanu owned and operated two nightclubs on F Street in the District, named DC Live (and later VIP) and Platinum, from at least 2000 through 2003.  Khanu skimmed millions of dollars of cash from the club to pay employees cash wages and for personal use. Search warrants executed at the defendant's home yielded $1.9 million in cash as well as numerous records reflecting a double set of books and records. The government presented evidence at trial showing that Khanu’s use of cash far exceeded his known, legitimate sources, and that Khanu evaded the payment of taxes on millions of dollars of revenue.

Escort Service Owner Sentenced for Income Tax Evasion

On May 7, 2010, in Salt Lake City, Utah, Roy B. Hoskins, the owner and operator of Companions escort service in Salt Lake City was sentenced to 60 months in prison, to be followed by three years of supervised release, and ordered to pay $817,895 in restitution.  On May 8, 2009, Hoskins pleaded guilty to an indictment charging him with two counts of tax evasion.  There was no plea agreement in the case. According to the indictment, Hoskins knowingly omitted from his tax returns substantial income from his ownership of Companions. On March 16, 2010, Jodi Hoskins, another operator of Companions, was convicted of tax evasion.

Minnesota Musician and Money Transmitter Sentenced for Evading Payment of More Than $1.1 Million in Taxes

On May 5, 2010, in St. Paul, Minn., Steven Renner was sentenced to 18 months in prison and ordered to cooperate with the IRS in the assessment and payment of taxes still due in connection with his conviction on four counts of tax evasion.  According to court documents, between 2002 and 2005, Renner diverted funds from Cash Cards International (CCI), his Internet-based, stored-value and money-transmission business, to pay his living expenses as well as to make personal investments in coins, oil wells, art, stamps, and vintage musical instruments. He also used CCI funds to promote his blues-rock band, “Stevie Renner and the Renegades.”  From 2001 to 2006, Renner was the sole owner of CCI, which had locations in Minnesota, South Dakota, and Hawaii. Although he knew he was legally obligated to file federal income tax returns and pay all federal taxes owed, he failed to do so for tax years 2002 through 2004, until March 5, 2006, when he also filed his 2005 federal income tax return.

Georgia Man Sentenced for Income Tax Evasion; Under-Reported Income by More Than $1.1 Million in Tax Years 2003-05

On May 3, 2010, in Atlanta, Ga., Robert L. Braddy, of College Park, Georgia, was sentenced to 30 months in prison, followed by three years of supervised release, and ordered to pay $306,906 in restitution.  Braddy pleaded guilty to income tax evasion on February 24, 2010.  According to court documents and information presented in court, when Braddy filed his 2003, 2004 and 2005 federal income tax returns, he willfully attempted to evade a large part of the income tax he owed by filing a false and fraudulent U.S. Individual Income Tax Return (Form 1040). For each of the returns he filed, he knew that his total income and the tax due and owing substantially exceeded the amounts that he reported.  Braddy under-reported his income by more than $1.1 million restuling in a tax loss of $306,906.

Indiana Accountant Sentenced for Embezzlement and Tax Evasion

On April 30, 2010, in Indianapolis, Ind., Thomas Shakespeare was sentenced to 42 months in prison, two years of supervised release, and ordered to forfeit of his home, two cars, and more than $40,000 from his retirement account, as well as pay $583,000 in restitution.  According to court documents, between March 2002 and November 2008, Shakespeare, while working as controller for Advantage Marketing, Inc., a privately-owned local business, made fraudulent entries to the business’s payroll systems over this six and a half year period. These fraudulent entries caused him to receive higher paychecks on 147 different occasions, totaling more than $583,000.  Shakespeare was also convicted of five counts of income tax evasion for the tax years 2003 through 2007. He failed to file income tax returns and failed to pay taxes on the embezzled funds as well as his normal salary.

Mortgage Fraud Defendant Sentenced in Nevada

On April 26, 2010, in Las Vegas, Nev., Brett Gibbs was sentenced to 12 months and a day in prison, to be followed by three years of supervised release, and ordered to pay $307,000 in restitution.  The court also imposed a criminal forfeiture money judgment in the amount of $493.000.  Gibbs pleaded guilty on October 29, 2009, to bank fraud and aiding an abetting in connection with a mortgage fraud scheme.  According to the plea agreement, from January 2005 through February 2007, Gibbs conspired with others to submit mortgage loan applications to financial institutions to finance straw buyer real estate purchases in Nevada.  Gibbs caused materially false information to be included on straw buyers' loan applications regarding place of employment, income, assets, and intent to occupy the properties so straw buyers would qualify for loans for which they would not otherwise qualify.     

California Woman Sentenced for Defrauding Author Danielle Steel out of $768,000

On April 20, 2010, in San Francisco, Calif., Kristy Watts was sentenced to 33 months in prison and ordered to pay nearly $61,000 in restitution.  According to court documents, Watts worked as a bookkeeper for author Danielle Steel for approximately 15 years. Watts was trusted the responsibility for overseeing Steel’s personal and professional financial management, including overseeing bank accounts and credit card statements, payroll, petty cash operations, obtaining foreign currency for international travel, and paying bills.  While handling those duties, Watts devised a scheme to steal more than $760,000 through a scheme encompassed of three main facets:  First, the defendant raided petty cash funds; she took checks that had been made payable to “Cash” and deposited them in her own personal bank account, then used that money for her personal benefit.  Second, in handling payroll responsibilities for other employees of Steel, the defendant had access to the online payroll distribution service Steel used – Automatic Data Processing, Inc.  Watts abused this access by instructing ADP to cause additional salary and bonus payments to Watts that she had not earned.  To conceal this aspect of her scheme, the defendant made false entries in the computer accounting system used to authorize and track payments, such as falsely reporting that certain checks were payable to legitimate vendors for seemingly legitimate expenses.  Third, because of her access to Steel’s financial records and mail, Watts knew that Steel was enrolled in a rewards program through American Express.  Again without authorization, Watts converted hundreds of thousands of Steel’s reward points to her own use.  She used these points to fund trips for herself and her family to several domestic locations, as well as international trips to England, Spain, and Italy.  She also used these reward points to purchase gift cards from various merchandisers for the use of herself and her family.  In all, Watts used the various components of her scheme to fleece Steel out of approximately $768,000.  She paid no taxes on any of these embezzled funds.  As part of her plea agreement, Watts agreed to forfeit assets to Steel; she already has turned over more than $969,000 to Steel as a result of the criminal case and a civil lawsuit Steel filed immediately after Watts pleaded guilty in the criminal case. 

New Jersey Man Sentenced to Prison for Conspiring to Defraud the IRS

On April 19, 2010, in Camden, N.J., Luciano Di Salvatore, of Sicklerville, was sentenced to twelve months and one day in prison, two years of supervised release and ordered to pay $96,038 in restitution and a $5,000 fine.  Di Salvatore pleaded guilty on November 23, 2009, to an Information charging him with conspiracy to defraud the Internal Revenue Service (IRS).  According to court document, Di Salvatore admitted participating in a scheme to shield income generated from the sale of a business called Municipal Code Inspection, Inc.  Municipal Code was a building inspection company which contracted with municipalities to perform building, plumbing, fire, electrical and elevator inspections on behalf of the municipalities.  Di Salvatore admitted that he met with Municipal Code’s accountant, Victor Fabietti, Jr. to discuss that the payment of $165,000 from Municipal Code to Michael Schaffer should be characterized as a loan to make it more favorable to Schaffer for income tax purposes.  Both Fabietti and Schaffer have pleaded guilty in this investigation; they are awaiting sentencing.

Defendant Sentenced in American Fire Retardant Corporation Stock Fraud Investigation

On April 19, 2010, in Los Angeles, Calif., Tarun Mendiratta, of Weston, Connecticut, was sentenced to twelve months and one day in federal prison, six months at a community corrections center, and six months of home detention.  The judge also sentenced Mendiratta to three years of supervised release and ordered him to pay a $150,000 fine.  Mendiratta pleaded guilty to conspiracy and tax evasion charges. According to his plea agreement, between July 2003 and February 2004, Mendiratta received approximately 1.18 billion shares of a type of American Fire stock that is unrestricted and free-trading and issued to employees, consultants, and advisors who provide bona fide services to the company. The stock had a market value of approximately $3.3 million.  Mendiratta received the stock from co-conspirator Stephen F. Owens, the principal of American Fire.  As a part of the scheme, Mendiratta requested that Owens fraudulently issue the American Fire stock to two of his aunts in an effort to conceal his ownership from federal authorities.  Neither Mendiratta nor his aunts performed any bona fide services for American Fire that were worth the amount of stock issued to them.  Mendiratta knew that the stock American Fire had issued to him was unregistered and issued in violation of federal securities laws.  Throughout 2003 and 2004, Mendiratta caused the American Fire stock to be sold in the stock market. Mendiratta also admitted that, with respect to the tax evasion charge, he failed to report approximately $329,811 in income from the sale of Marmion Industries Corporation stock on his 2005 individual tax return.  Mendiratta had received and sold millions of shares of Marmion industries stock in 2005.  His failure to report the sale of his stock on his 2005 tax return resulted in a tax loss of approximately $92,347.

Missouri Man Sentenced for Filing False Tax Return

On April, 16, 2010, in Kansas City, Mo., William Schroff was sentenced to 24 months in prison and ordered to pay more than $48,000 in restitution for filing a false tax return.  According to court documents, during the time of the offenses, Schroff owned and operated several businesses, including an industrial sandblasting and painting company known as ANS Company. Schroff pleaded guilty on December 1, 2009, to filing a Form 1040 with the Internal Revenue Service in which he reported taxable income of $1,075 for the calendar year 2001. In reality, Schroff’s taxable income that year was nearly $132,000.

West Virginia Man Sentenced on Tax Fraud Charges

On April 15, 2010, in Beckley, W.Va., Philip H. Weber, aka Spider, of Raleigh County, was sentenced to 30 months in prison, to be followed by one year of supervised release, and ordered to pay a $100,000 fine.  Weber pleaded guilty to filing a false tax return on August 20, 2009, which resulted in a total tax loss of $592,000.  According to court documents, Weber owned and operated a nationwide motorcycle apparel retail business. From 2000 through 2004, Weber traveled to motorcycle rallies all over the United States and sold items such as leather jackets, chaps and T-shirts. He conducted his business primarily in cash, maintained no business bank accounts, paid employees in cash, falsely claimed a Wyoming residence to avoid state income taxes, failed to maintain customary business records, provided his accountant with false information, and systematically converted cash he received from sales into money orders and cashier checks.  In addition, he instructed his employees to structure their purchases of money orders in amounts that were just under the reporting postal requirements, and transferred a substantial portion of his assets into the name of his ex-wife.

New Jersey CPA Sentenced for Filing Fraudulent Income Tax Returns

On April 15, 2010, in Trenton, N.J., Kevin P. Williamson, of Chester, was sentenced to twelve months and a day in prison, to be followed by one year of supervised release, for filing false personal income tax returns. The judge also ordered Williamson to pay a $1000 fine and to pay all taxes and any penalties owed to the Internal Revenue Service (IRS). Williamson pleaded guilty in September 2009 to an Information charging him with filing a personal income tax return for calendar year 2002 that failed to report $156,631 in business income. As part of his guilty plea, Williamson also admitted to filing personal income tax returns that failed to report business income of $117,953 and $90,937 for calendar years 2003 and 2004, respectively. The total loss in tax revenue to the government arising from these three years exceeded $80,000. At the plea hearing, Williamson admitted that he signed each of his personal income tax returns under the penalty of perjury, and that he knew when he signed them that they contained false statements.

Illinois Man Sentenced to 15 Months in Prison for Tax Offenses

On April 12, 2010, in Springfield, Ill., Richard Schaub, of Lincoln, was sentenced to 15 months in prison for signing false tax returns for tax years 2005 and 2006. Schaub was also ordered to pay $111,857 in restitution to the Internal Revenue Service. According to court records, on December 14, 2009, Schaub pleaded guilty to an Information charging him with two counts of filing false tax returns. During his court appearance and according to the plea agreement, Schaub admitted that beginning in July 2005 through the end of 2006, he sold electrical equipment on eBay and to another company and failed to include net income derived from the sale of that electrical equipment on his 2005 and 2006 income tax returns. Schaub admitted in 2005, he failed to include $94,879 in net income derived from the sale of electrical equipment; in 2006, he failed to include $246,747 in net income, also derived from the sale of electrical equipment. The failure to report this income resulted in Schaub underpaying his income taxes by $31,512 in 2005 and $80,345 in 2006.

Police Benevolent Association Contractor Sentenced for Tax Fraud

On April 9, 2010, in Fort Lauderdale, Fla., John A. Gullett, of Parkland, was sentenced to 51 months in prison, to be followed by three years of supervised release, and ordered to pay $255,000 in restitution to the Internal Revenue Service (IRS). Gullett was convicted of four counts of filing a false tax return by a trial jury on January 22, 2010.  According to statements made in court and evidence presented during trial, Gullet contracted with the Broward County Police Benevolent Association (BCPBA) and the Dade County Police Benevolent Association (DCPBA) to solicit local businesses to buy advertisements in a book that Gullett published listing local businesses. The book was distributed to PBA members. In exchange, Gullett paid BCPBA and DCPBA between $3,000 and $5,000 per month and kept whatever funds he raised in excess of these amounts. Gullett failed to report approximately $3 million of income received from 2002 through 2005.  Gullett used these monies to purchase a personal residence and various luxury automobiles, including two Ferraris and a Lamborghini.

Minneapolis Man Sentenced to 50 Years in Prison for Orchestrating $3.7 Billion Ponzi Scheme

On April 8, 2010, in Minneapolis, Minn., Thomas Joseph Petters, of Wayzata, was sentenced to 600 months in federal prison for orchestrating a $3.7 billion Ponzi scheme. Following a month-long trial, Petters was convicted on December 2, 2009, on charges of wire fraud, mail fraud, conspiracy to commit mail and wire fraud, conspiracy to commit money laundering, and money laundering. According to the evidence presented at trial, Petters, assisted by others, defrauded and obtained billions of dollars in money and property by inducing investors to provide Petters Company, Inc., (PCI) funds to purchase merchandise that was to be resold to retailers at a profit. However, no such purchases were made. Instead, the defendants and co-conspirators diverted the funds for other purposes, such as making lulling payments to investors, paying off those who assisted in the fraud scheme, funding businesses owned or controlled by the defendants, and financing Tom Petters’s extravagant lifestyle.  Other participants in the conspiracy have pleaded guilty and are awaiting sentencing.

Alabama Woman Sentenced for Embezzling More Than $900,000; Filing False Tax Returns

On April 7, 2010, in Birmingham, Ala., Daphne Miller Brooks was sentenced to 24 months in prison, to be followed by three years of supervised release, and ordered to pay over $948,800 in restitution. Brooks pleaded guilty in December 2009 to charges of mail fraud, securities fraud and income tax evasion.  According to court documents, Brooks was the office manager and sole bookkeeper for a Jefferson County company, Equity Development Corporation, a subsidiary of McDonald Management, Inc. From at least June 2006 through March 2008, Brooks embezzled nearly $900,000 from the company by forging company checks and depositing them into her personal bank account and by mailing unauthorized credit card payments to various companies.  Brooks reported false income on her 2007 and 2008 federal tax returns. She reported only $36,821 instead of $153,647 on a 2007 tax return; and reported $26,000 rather than $137,031 on a 2008 tax return.

California Woman Sentenced for Selling Millions of Dollars of Fake Art through Nationwide TV Art Auction Program

On April 5, 2010, in Los Angeles, Calif., Kristine Eubanks, of La Cañada, was sentenced to 84 months in prison for her role in a fake art scam. Eubanks pleaded guilty in April 2007 to conspiracy to commit mail fraud, wire fraud, interstate transportation of stolen property and to filing a false income tax return.  The fake art, including works purported to be by Picasso, Dali and Chagall, were sold through a rigged televised art auction. According to information presented in court, the scam, run through a company called Fine Art Treasures Gallery, falsely told customers that art sold on the company’s television show had been found at “estate liquidations all over the world.” Instead, Eubanks and others sold fake and forged art that they had bought from suppliers, as well as forgeries they had printed themselves and signed on behalf of the artists. To support the scam, Eubanks also forged Certificates of Authenticity for certain pieces and provided falsified appraisals for some of the jewelry that was sold to customers. The scam brought in well over $20 million from more than 10,000 victims across the country.  Eubanks’ husband, Gerald Sullivan awaits sentencing.  As part of the investigation, federal authorities seized approximately $3.8 million from bank accounts controlled by Eubanks and Sullivan. Those funds have been forfeited to the government, which is in the process of notifying thousands of potential victims that they may have purchased bogus artworks.

Georgia Man Sentenced on Tax Charges

On April 2, 2010, in Atlanta, Ga., Walter V. Murray, of Covington, was sentenced to twelve months and one day in prison and ordered to pay $187,659 in restitution.  Murray pleaded guilty to income tax evasion in connection with willfully failing to file a personal tax return for 2006, despite having received taxable income of $116,843 for that year. According to court documents, Murray, a certified public accountant, underreported his taxable income in the amount of $556,080 for the years 2001-2006.  To conceal his personal income from the Internal Revenue Service (IRS), Murray caused his income to be deposited directly into investment and corporate accounts, from which he paid his day-to-day personal expenses. 

Missouri Man Sentenced for Filing False Tax Returns

On April 1, 2010, in St. Louis, Mo., Patrick Moriarty, of Troy, Missouri, was sentenced to 12 months and one day in prison and ordered to pay $135,697 restitution to the Internal Revenue Service (IRS).  Moriarty pleaded guilty in January 2010 to one count of filing a false tax return for the year 2003.  According to court documents, Moriarty falsified his tax return for the year 2003.  For the year 2002, Moriarty underreported his business income.  For 2003, he falsely claimed that he had legal fees of $30,000.  For 2004 and 2005, he falsely claimed that he had over $20,000 in taxes withheld from his earnings.  The total tax loss is $135,697.  

Unlicensed Stock Promoter Sentenced to 51 Months in Prison on Tax Charges

On March 29, 2010, in Los Angeles, Calif., Nicholas Myles Garcia, an unlicensed stock promoter, was sentenced to 51 months in prison, to be followed by three years of supervised release, and ordered to pay $327,980 in restitution to the Internal Revenue Service (IRS).  Garcia pleaded guilty to being a part of a conspiracy to obstruct the IRS and for subscribing to a false tax return.  According to court records, Garcia engaged in a multi-year scheme during which he illegally received stock in numerous public companies. Between 2003 and 2005, Garcia received more than $1 million in stock proceeds that he failed to report as income to the IRS.  In an effort to conceal his compensation from the IRS, Garcia would have the companies whose stock he promoted issue stock in the names of various nominees, including friends, who let Garcia use their bank and brokerage accounts to execute stock trades.  Garcia used these accounts to receive his stock, sell the shares, and transfer the proceeds. Garcia's conduct resulted in a tax loss of more than $327,000 to the federal government.

Pennsylvania Man Sentenced on Tax Evasion Charges

On March 24, 2010, in Scranton, Pa., Richard Harsche, of Paupack Township, Pennsylvania, was sentenced to 20 months in prison, to be followed by one year of supervised release, and ordered to work with the Internal Revenue Service (IRS) in the payment of all taxes due and owing.  Harsche pleaded guilty to tax evasion charges in April 2009.  According to court documents, Harsche attempted to evade a payment due to the IRS in connection with an Offer in Compromise he made relating to outstanding individual tax liabilities for tax years 1992 through 1994. In reaching a compromise with the IRS, Harsche failed to disclose assets, including his ownership interest in a number of corporations.  Harsche also failed to report more than $380,000 in additional income for tax year 2002.

Former Chief Operating Officer Sentenced to 17 1/2 Years in Prison for $20 Million Fraud

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

Michigan Resident Sentenced in Multi-Million Dollar Ponzi Scheme

On March 22, 2010, in Detroit, Mich., Raymond Frank Joseph, of Bloomfield Hills, was sentenced to 66 months in prison, followed by three years of supervised release, and ordered by pay $2.2 million in restitution to victims of his Ponzi scheme. In December 2009, a jury found Joseph guilty of three counts of wire fraud, nine counts of interstate transportation of stolen money or property, and twenty-four counts of conducting monetary transactions in criminally derived property.  According to court records, from 2002 through 2007, Joseph solicited loans of money from several individuals to invest in a number of business ventures. To induce the lenders to give him their money, Joseph fraudulently promised the victims a specific date of repayment with interest resulting from his claimed business investments. When Joseph received the lenders’ money, he did not invest it but instead used the money: (1) to repay other individuals who had earlier loaned Joseph money; and (2) to fund Joseph’s own personal expenses, including his credit card bills, household expenditures, and vehicle costs. As a result of his fraudulent acts, Joseph obtained approximately $2.7 million dollars which he failed to repay his lenders.

Former Telecommunications Project Manager Sentenced to 24 Months in $1 Million Fraud Scheme

On March 22, 2010, in Trenton, N.J., Stephen Lotter was sentenced to 24 months in prison, to be followed by two years of supervised release and ordered to forfeit approximately $800,000 in U.S. currency, a Porsche, an Escalade, and a 2008 Harley Davidson motorcycle.  Lotter pleaded guilty on August 10, 2009, to an Information that charged one count of wire fraud and three counts of tax evasion.  A restitution hearing will be scheduled at a later date.  Lotter was a project manager for a national cellular telecommunications provider identified as Company A in court documents.  At his plea hearing, Lotter admitted that he received more than $1 million in kickback payments from contractors to whom he awarded construction projects and evaded taxes on portions of that income.  As a project manager for Company A, he had the authority to award projects for the construction, maintenance, and repair of its telecommunications facilities, such as cell towers, transmitters, and receivers and had the authority to approve payments to contractors working under his direction.  Lotter admitted that, beginning in or about January 2003, he demanded and received kickbacks of up to 20 percent of the value of project contracts from several contractors.  In order for contractors to recoup the cost of kickback payments, Lotter permitted contractors to present fraudulent invoices for payment.  Lotter admitted that the fraudulent invoices, which he approved, double-billed Company A for work that contractors had previously performed; billed for work that did not need to be performed but nevertheless was performed; and billed for the purported purchase of telecommunications equipment that Lotter provided to contractors at no cost.  Lotter admitted that he received cash, check, and in-kind payments worth more than $1,000,000. Finally, Lotter admitted that he failed to declare approximately $634,000 in kickback payments on his 2004, 2005, and 2006 tax returns, resulting in approximately $216,000 in taxes due and owing for those years.

Diversified Commodities Trader Sentenced for Tax and Other Fraud Charges in $37 Million Ponzi Scheme

On March 19, 2010, in West Palm Beach, Fla., Michael A. Meisner, of Boca Raton, was sentenced to 188 months in prison, to be followed by five years of supervised release. A hearing will be scheduled to determine the amount of restitution Meisner owes to the victims of the fraud.  Meisner pleaded guilty on September 2, 2009, to a three-count Information charging him with mail fraud, loan application fraud, and tax evasion. As set forth in the Information and the written proffer filed with his plea agreement, in approximately October 2001, Meisner, a registered commodity trading advisor, incorporated a company called Phoenix Diversified Investment Corporation (PDIC). Through PDIC, Meisner solicited and accepted more than $37 million from 260 investors through May 2008, when PDIC was placed into receivership and bankruptcy.  To solicit investors, Meisner made materially false statements about his background and about PDIC’s performance.  He lied to prospective investors, telling them that he was a highly successful commodities trader who had developed a commodities index software trading program that consistently resulted in profitable commodity futures trades.  He provided falsified historical performance return sheets that showed high monthly returns on trades. In addition, he told prospective investors that their investments were safe and secure, and that their principal investment was guaranteed and not at risk.  Meisner failed to tell prospective investors that only approximately $13 million of the approximate $37 million in PDIC investor funds were deposited into commodities trading accounts. Though he represented profit to the investors, in reality, trades on these funds showed a net trading loss of more than $6 million. Meisner also failed to tell potential investors that approximately $22 million of PDIC investor monies were not invested but, instead, were used to make fraudulent ponzi-type “interest payments” to prior investors. In addition, Meisner used approximately $6.8 million in PDIC investor monies to support his and his family’s luxurious lifestyle. Meisner also admitted that on or about April 20, 2006, he filed a false application to obtain a $1,000,000 mortgage loan on certain property located in Boca Raton. He further admitted that he evaded the payment of a large part of the $444,581 in federal income tax he reported he owed for 2005.

Owners of East St. Louis Day Care Center Sentenced on Fraud Schemes

On March 18, 2010, in East St. Louis, Ill., Monica M. Owens and Robby L. Owens, both of Clayton, Missouri, and formerly of Fairview Heights, Illinois, and Great Kids, Inc., an East St. Louis Day Care Center, were sentenced on charges relating to evasion of taxes, theft of federal program funds, and food stamp benefit fraud. Monica Owens was sentenced to 25 months in prison, three years of supervised release, and ordered to pay a special assessment of $300.  Robby Owens was sentenced to 25 months in prison, three years of supervised release, and ordered to pay a special assessment of $100. The defendants were also ordered to pay $203,057 in restitution to the Illinois Department of Human Services (DHS) and $249,197 in restitution to the Internal Revenue Service (IRS).  In addition, Great Kids, Inc. was sentenced to five years probation and ordered it to pay criminal restitution to the DHS on its conviction for theft of federal program funds.  According to court documents, Monica and Robby Owens solely owned and operated Great Kids, Inc.  The couple controlled all the business accounts and received all profits earned through Great Kids, Inc.  Monica and Robby Owens, however, attempted to evade or defeat the assessment of income taxes and failed to file a tax return for 2005 and failed to pay income taxes.  Monica Owens and Great Kids, Inc. further obtained payments by fraud by submitting false child care claims to the DHS, claims for child care of children who did not attend or were not present in the child care center. Monica Owens also falsely applied for food stamp benefits by denying that she was receiving a monthly household income from employment.

Former Dallas Businessman Sentenced for Mortgage Fraud Schemes in Collin and Dallas Counties

On March 18, 2010, in Plano, Texas, Micaiah Pruitt was sentenced to 71 months in prison and ordered to pay nearly $1.4 million in restitution for his role in a mortgage fraud scheme.  According to court documents, from March 2005 to October 2006, Pruitt orchestrated a mortgage fraud scheme in which three individuals, Jeanelle Richardson, Pierre Sowell, and Reginald Davis, each bought two or more residential properties from Pruitt, or from someone for whom Pruitt was brokering the sale.  In order to obtain the mortgage loans to make the purchases, Pruitt assisted Richardson, Sowell and Davis in making false statements in the mortgage loan applications, such as overstating income or representing that the borrowers intended to occupy each home as their primary residence.  Pruitt profited from each of the sales and paid the three purchasers for making the purchases.  The purchasers defaulted on all of the mortgage loans.  In February 2010, Richardson was sentenced to 20 months in prison and ordered to pay nearly $469,000 in restitution. Sowell was also sentenced in February 2010 to 20 months in  prison and ordered to pay more than $605,000 in restitution. Davis was sentenced in January 2010 to six months in prison to be followed by six months home confinement.

Texas Man Sentenced in $18 Million Oil and Gas Fraud Scheme

On March 15, 2010, in Plano, Texas, Michael Dannelly was sentenced to 210 months in prison and ordered to pay restitution of nearly $18 million.  According to court documents, from 2004 to 2007, Dannelly owned and operated Oil and Gas Managing Partners and VADC, Inc. These companies raised funds from investors to drill oil and gas wells in Texas and Oklahoma.  Dannelly devised a scheme to defraud investors by selling fraudulent oil and gas securities.  Directly and through his employees, Dannelly made false representations to over 250 victims in order to obtain almost $18 million, most of which was used for personal expenditures.  Dannelly also fraudulently obtained $250,000 from a financial institution in connection with this scheme.

Final Defendant in $6 Million Fraud Case Involving Bills for Nonexistent Ads Sentenced To 66 Months in Prison

On March 15, 2010, in Los Angeles, Calif., Joshua Hoffman, of Malibu, California, was sentenced to 66 months in federal prison for his role in a scheme that collected more than $6 million from companies and organizations that thought they were paying for advertisements that had run in various minority-themed publications. Hoffman also was ordered to pay $2,132,784 in restitution to 277 victims. Hoffman pleaded guilty in May 2009 to conspiring to commit mail fraud and wire fraud, a charge related to a telemarketing scam involving RAB Publications, a company run out of a Tarzana motel room that claimed to put out several publications. According to court documents, Hoffman and others contacted various organizations and collected money based on false claims that the organizations had purchased advertising in publications. Previously in this case, six other defendants were sentenced to prison, including Richard A. Bivona, of Las Vegas, Nevada, who was sentenced to 87 months in prison and ordered to pay $3,057,978 in restitution and Jeff Hillman, of Calabasas, California, who was sentenced to seven months in prison on tax evasion charges and ordered to pay $12,667 in restitution to the Internal Revenue Service (IRS). As a result of the conspiracy, victim entities lost more than $6 million. The victims in the case include the American Red Cross, Southeastern Michigan; ChoicePoint, Inc.; the County of Sacramento; E*Trade Financial; Fed Ex Ground Package System; Instinet; and United Defense.

Massachusetts Sham Investment Advisor Sentenced in Ponzi Scheme

On March 12, 2010, in Springfield, Mass., Lewis Hoff, a former stockbroker, was sentenced to 63 months in prison, to be followed by three years of supervised release, and ordered to pay $892,390 in restitution.  Hoff pleaded guilty in December 2009 to fraud and tax charges in connection with a Ponzi scheme in which he defrauded multiple investors in the western Massachusetts area.  According to court documents, the scheme spanned more than two years during which Hoff solicited funds from friends and acquaintances to invest in securities with a promised quick profit.  Rather than investing the money, Hoff deposited the funds in his own bank account, using the money for personal expenses and to pay off earlier investors.  At the plea hearing, the prosecutor outlined how Hoff met prospective investors in social settings, including on the golf course. Hoff told these individuals that they could make quick and significant returns on their money by investing in securities through him.  When Hoff paid out some investors, the individuals gave him additional funds to invest. 

Alabama Woman Sentenced for Embezzling Nearly $1.2 Million

On March 10, 2010, in Birmingham, Ala., Kimberly Perrin was sentenced to 30 months in prison, to be followed by three years of supervised release and to perform 40 hours of community service.  In addition, Perrin was ordered to pay $1,197,074 in restitution to the Simon-Williamson Clinic and $356,345 to the Internal Revenue Service (IRS).  Perrin also must forfeit $1,197,074 to the government as proceeds of illegal activity. According to court documents, Perrin who worked as comptroller for the Simon-Williamson Clinic in Birmingham embezzled nearly $1.2 million from the clinic.  Perrin carried out her embezzlement scheme by causing the clinic to issue and mail checks both to her, personally, and to third parties to pay for her personal expenses. In order to conceal her conduct, Perrin did not make appropriate entries on the clinic’s books and records. Perrin also did not report the embezzled funds as income on her tax returns for the 2005 through 2008 tax years.

Former New Hampshire Lawyer Sentenced to 51 Months in Prison

On March 9, 2010, in Concord, N.H., Thomas J. Tessier, of Manchester, New Hampshire, was sentenced to 51 months in prison on charges of mail fraud, bank fraud and money laundering.  According to court records, while still practicing as a lawyer, Tessier used fraudulent powers of attorney and other dishonest means to steal more than $295,000 from bank accounts that belonged to a deceased woman whose estate Tessier was appointed to administer. He sold the woman's home that belonged to her oldest son, taking more than $200,000, and stole more than $198,000 from a life insurance policy.  Tessier also took more than $240,000 from two investment accounts that belonged to the woman’s oldest son.  Additionally, Tessier used fraudulent powers of attorney and other dishonest means to steal more than $1.4 million from bank accounts.  Tessier deposited the stolen money into his law firm’s client trust bank account and then issued a check from the client trust account and deposited those funds into one of his personal bank accounts. 

Wife of Diversified Commodities Trader Sentenced for Filing a False Tax Return

On March 5, 2010, in Miami, Fla., Victoria R. Meisner, of Boca Raton, was sentenced to 18 months in prison, to be followed by one year of supervised release, and ordered to pay $345,399 in restitution to the Internal Revenue Service (IRS).  According to court documents, Meisner pleaded guilty in July 2005 to filing a false 2003 joint federal income tax return. Meisner reported total income of $49,626, when she knew that at least $430,000 should have been reported on the return.  Meisner also admitted to filing a false 2004 joint tax return reporting income of $93,631 when she knew that at least $540,294 should have been reported.  On September 4, 2009, Meisner’s husband, Michael A. Meisner, pleaded guilty to charges of mail fraud, loan application fraud, and tax fraud.  According to the Information and written proffer filed with his plea agreement, Michael Meisner, a registered commodity trading advisor, defrauded more than 260 investors in a $37 million fraud scheme perpetrated through a company called Phoenix Diversified Investment Corporation (PDIC). Meisner admitted that approximately $6.8 million in PDIC investors' money was used to support his and his family’s luxurious lifestyle.  Michael Meisner is awaiting sentencing.

Minnesota Woman Sentenced for Orchestrating $7 Million Investment Scam

On March 5, 2010, in St Paul, Minn., Kalin Dao was sentenced to 144 months in prison and ordered to pay more than $7 million in restitution for conspiracy to commit mail fraud, wire fraud and engaging in illegal monetary transactions.  According to court documents, Dao admitted that from April 2006 through September 2008, she, aided by others, devised and executed a scheme to defraud investors out of money through four related companies she created: TD/NLC Financial, Inc.; TD Financial Services, Inc.; NLC Financial Services, Inc.; and NLC Venture Group, LLC. Through these companies, Dao, who identified herself as the CEO, president, and principal officer of each, sold sham investment programs. Then, rather than investing funds as promised, she diverted substantial amounts for her own purposes, including making lulling payments, paying personal expenses, and gambling.  Dao solicited investors through various means, including a website, where she posted alleged testimonials from past investors. Those testimonials detailed the investments programs available as well as their alleged past performances. Investors were told their money would be placed in investment programs targeted at specific markets and industries. They were also told Dao had a “partner” who held a seat on the New York Stock Exchange and “contacts” in the emerging Asian markets as well as in various Las Vegas casinos. In addition, Dao represented that she had developed an exclusive investment software program, which could determine the best time to buy and sell investments, and as a result, investment returns would be as high as 2,200 percent over an 18-month period. Finally, she falsely claimed she and those who worked for her held financial planning licenses and “Series 7" licenses, which are needed to sell securities.  Dao also admitted that in March 2007, she engaged in an illegal monetary transaction involving $20,000 in proceeds from the fraud scheme.

Minnesota Woman Sentenced to 55 Months for Embezzling from Veterans

On March 2, 2010, in Minneapolis, Minn., Connie Hanson was sentenced to 55 months in prison for embezzling nearly $1 million from 33 disabled veterans while acting as their appointed fiduciary.  According to court documents, Hanson pleaded guilty to making a false statement to the U.S. Department of Veterans Affairs (DVA) in an effort to conceal her embezzlement from the veterans.  She also admitted that from 2006 through 2008, she took hundreds of thousands of dollars from the bank accounts of the veterans with whom she worked and used that money to support her gambling habit. Hanson also admitted that in an attempt to cover up her embezzlement, she submitted a false federal fiduciary’s accounting to the DVA.  As part of Hanson’s sentence she will make restitution to the DVA, the Social Security Administration, and a bonding company that has reimbursed the veterans for their losses.

Ice Cream Company Manager Sentenced for Failing to Pay Taxes on Money Stolen from Her Employer

On March 2, 2010, in Baltimore, Md., Katina Virginia Martin, of Aberdeen, Maryland, was sentenced to 18 months in prison, to be followed by one year of supervised release, and ordered to pay $236,175 in restitution.  Martin was an assistant office manager at an ice cream company, responsible for counting the money that was collected by truck drivers who delivered ice cream to the company’s wholesale customers. She compared the total amount of money collected by the drivers to the total amount of money due from each customer as reflected on the drivers’ delivery invoices. According to her plea agreement, Martin admitted that beginning in November 2004, she did not record all of the cash that had been collected. Instead, Martin deposited into her personal bank account $236,175 of the cash collected in 2004 and 2005. She failed to advise the tax preparer who prepared Martin and her husband’s joint income tax returns for 2004 and 2005 of the money she stole from her employer.  As a result, Martin avoided paying $61,738 in federal income taxes she owed to the Internal Revenue Service (IRS) for the years 2004 and 2005.

Former Purchasing Manager Sentenced for Fraud and Tax Evasion

On March 1, 2010, in San Diego, Calif., Brett Bardsley, a former employee of two large corporations with offices in San Diego County, was sentenced to 41 months in prison for mail fraud and filing a false tax return. In addition, Bardsley must serve three years of supervised release following his release from prison and pay $861,757 in restitution to Koch Membrane Systems and BEI Technology. According to information presented in court, Bardsley worked as a materials/purchasing manager at Koch Membrane Systems. Prior to Koch, he held a similar position at BEI Technology in Vista and San Marcos. At Koch and BEI, Bardsley had the power to purchase goods and services and also enter them as received into inventory. According to court documents, Bardsley set up shell companies and then billed over $580,000 for goods and services from Koch that, in reality, were not provided. Also as part of his scheme, Bardsley similarly embezzled more than $200,000 from BEI Technology.  Additionally, as part of his plea, Bardsley admitted that he submitted and signed a false tax return for the year 2005 because it did not contain all of his taxable income.  Bardsley admitted that he willfully filed this false tax return to avoid reporting any of the funds that he had embezzled from Koch. Between 2004 and 2007, Bardsley failed to report $557,623 in taxable income to the IRS, resulting in a tax loss of $199,034.

Former Connecticut Resident Sentenced on Tax Evasion and Cash Structuring Charges

On March 1, 2010, in New Haven, Conn., Terry L. Davis, formerly of Winsted, Connecticut, and currently residing in Las Vegas, Nevada, was sentenced to 30 months in prison, to be followed by three years of supervised release, and ordered to pay a $6,000 fine. In addition, Davis was ordered to pay back taxes, plus penalties and interest, to the Internal Revenue Service (IRS).  Davis pleaded guilty in December 2009, to one count of tax evasion and one count of currency structuring.  According to court documents and statements made in court, on May 1, 2008, Davis attempted to evade paying a large part of the federal income taxes he owed by filing a fraudulent Form 1040 tax return, in which he understated his taxable income by more than $650,000 for the calendar year 2007.  Davis admitted that, for the tax years 2004 through 2007, he failed to pay a total of $463,623 in federal taxes. Additionally, between 2005 and 2007, Davis knowingly structured $534,544 in cash transactions to evade the currency transaction reporting requirements of federal law, which require financial institutions to file a Currency Transaction Report (CTR). In order to avoid any “red flags” or the generation of any CTRs, Davis frequently structured cash withdrawals from several bank accounts, several financial institutions on the same day, and through ATM withdrawals in amounts lower than $10,000. 

Montana Women Sentenced for Tax Fraud

On February 25, 2010, in Missoula, Mont., Tami L. Curley, a resident of Frenchtown, Montana, was sentenced to 51 months in prison, to be followed by three years of supervised release, and ordered to pay $1,000,028 in restitution. Curley was sentenced in connection with her guilty plea to tax evasion and wire fraud. In an Offer of Proof, the government stated it would have proved at trial the following: Curley worked as the office manager for Rawlings Manufacturing Inc. (RMI) in Missoula from 1998 through August 2004.  RMI was owned by John Rawlings. From January 2000 until August 2004, Curley wrote checks and had wire transfers made from the bank accounts of RMI and John Rawlings to “cash” for herself, her husband, her business (Double C Lawn & Maintenance Services Inc.), her credit card companies, and others for her benefit.  Curley also made charges on RMI’s and John Rawlings’ credit cards for her benefit.  According to court records, Curley was not authorized by John Rawlings or anyone else with authority to conduct these transactions.  During 2003, Curley fraudulently obtained taxable income from RMI and John Rawlings which was not disclosed on her federal income tax return.

Owner of Virginia Travel Company Sentenced for Under-Reporting Income

On February 19, 2010, in Alexandria, Va., Muhammad Imtiaz was sentenced to 12 months and one day in prison, to be followed by one year of supervised release, and ordered to pay a $5,000 fine and a $100 assessment.  Imtiaz was the owner and only employee of Monarch Travel.  He pleaded guilty in November 2009 to one count of filing a false tax return.  According to the Statement of Facts, Imtiaz earned substantial income by arranging foreign and domestic travel for clients of Monarch.  Imtiaz under-reported his income by more than $698,000 for tax year 2007 which resulted in a tax loss of more than $243,000.

Former Information Technology Manager of Local Charity Sentenced on Tax Evasion and Mail Fraud Charges

On February 17, 2010, in St. Louis, Mo., Paul Murphy was sentenced to 46 months in prison and ordered to pay more than $622,000 in restitution on charges involving a false invoice scheme which defrauded his employer, the School Sisters of Notre Dame (SSND).  According to court documents, Murphy was head of Information Technology for SSND, a religious and charitable organization in St. Louis.  His responsibilities included ordering and installing computer hardware and software.  Murphy also established his own business known as PC House. From October 2000 thru December 2007, Murphy submitted invoices to SSND under the name PC House for goods and services which had not been rendered.  These fraudulent invoices were approved for payment by Murphy and indicated which accounting categories should be charged for the items billed. Murphy submitted PC House invoices totaling approximately $510,000.   Murphy used this money for personal, mortgage payments, jewelry and restaurants.  Murphy failed to report this fraudulent income on his tax returns for the years 2003 through 2007.  The total amount of additional tax due for the four years is more than $112,000.

Five Who Targeted Homeowners in Default Sentenced in $13 Million Mortgage Fraud Case

On February 17, 2010, in Los Angeles, Calif., Martha Rodriguez, of Downey, California, was sentenced to 120 months in prison for orchestrating a real estate fraud scheme that falsely promised to help homeowners in default on their mortgages and caused nearly $13 million in losses. The scheme ran from May 2003 until November 2005. A second defendant, Edward Seung Ok, of Huntington Beach, was sentenced to 180 months in prison. According to court documents, Rodriguez, Ok and three others used computerized foreclosure databases to locate victims, who were then promised refinancing services. The scheme was operated through Rodriguez’s real estate and escrow agencies, Silvernet Properties in Downey and Bellasi Escrow in Seal Beach. Instead of obtaining refinancing, Rodriguez and her co-conspirators submitted loan applications in the names of “straw buyers” who were purportedly buying the properties. In some cases, the defendants paid the straw buyers for the use of their personal information. In other cases, the defendants used personal information of people without their knowledge. The loan applications for these straw buyers – which always contained false information – caused a series of lenders to fund more than 100 mortgages worth more than $40 million. The loan proceeds were used to pay off the loans in default, sometimes to make a few mortgage payments on the new loans, and to provide some instant cash to homeowners. However, the remaining proceeds, typically representing the bulk of the homeowner’s equity, were skimmed off by Rodriguez and her co-conspirators. Even though they were promised that they would be able to keep their homes, the victim homeowners usually lost title to their homes. The lenders suffered losses when the straw buyers then failed to make loan payments and the new loans went into default. Lenders were often unable to foreclose because the straw buyers did not know the properties were in their names. The scheme targeted commercial lenders and more than 100 homeowners across the Southland. Three other defendants in this case were also sentenced: Cynthia Valenzuela was sentenced 12 months and one day in prison; Vladimir Stefanovic was sentenced to 18 months in prison; and Maria G. Juarez was sentenced to 36 months in prison.

Ohio Mortgage Broker Sentenced to Six Years in Prison

On February 12, 2010, in Columbus, Ohio, Jonathan Boyd, a mortgage broker, was sentenced to 72 months in prison, three years of supervised release, and ordered to pay $468,855 in restitution to 12 victim financial institutions, as well as $211,954 to the Internal Revenue Service (IRS) for his role in a mortgage fraud scheme.  In November 2008, Boyd was found guilty at trial on two counts of income tax evasion, one count of conspiracy to commit wire fraud, and four counts of wire fraud. Boyd was indicted with eight other individuals in August 2007 for allegedly conspiring to exaggerate the value of real estate properties in and around Columbus, Ohio to lending institutions as well as prospective purchasers. According to court documents, prospective buyers were recruited based on their lack of knowledge largely because of real estate and investment practices. The defendants allegedly used fraudulent documents to misrepresent the credit worthiness of those purchasers to lending institutions in order to get the institutions to approve excessive mortgage loans secured by the inflated-value properties.

Pennsylvania Man Sentenced on Tax Evasion Charge

On February 12, 2010, in Pittsburgh, Pa., Wayne P. Scholar was sentenced to 27 months in prison, to be followed by three years of supervised release, and ordered to pay a $100 special assessment.  In addition, Scholar was ordered to pay restitution for his tax liability, including applicable penalties and interest, as determined by the Internal Revenue Service (IRS).  Scholar pleaded guilty in September 2009 one count of tax evasion.  According to court documents, Scholar underreported his income for the tax years 1999 through 2005 by more than $413,000.  He evaded the correct taxes due by, among other things, placing his assets in nominee names.

Connecticut Women Sentenced to Nearly Four Years in Prison for Stealing $1.7 Million

On February 11, 2010, in Bridgeport, Conn., Patricia Baddeley Meehan was sentenced to 46 months in prison, followed by three years of supervised release, and ordered to pay full restitution to her former employer and to pay back taxes, penalties and interest to the Internal Revenue Service (IRS).  According to court documents, between approximately 1998 and May 2007, Baddeley Meehan was an employee of Berman and Russo, a law office based in South Windsor, Connecticut.  As a paralegal that worked primarily on real estate closings, she had signatory authority on a Client Fund Account located at Rockville Bank and also was authorized, by the partners in the Law Office, to use a signature stamp on checks cut from the Client Fund Account. In addition, Baddeley Meehan had access to the check book for the Law Office’s Operating Account and, with others, had signatory authority on the Operating Account. On October 7, 2008, Baddeley Meehan pleaded guilty to mail fraud and filing a false tax return. She admitted that, between August 2003 and May 2007, she carried out a scheme to defraud the Law Office.  Baddeley Meehan had several credit card accounts in her name, which she used to purchase personal items and to take cash advances.  The records reflect that between approximately August 11, 2002 and June 23, 2007, Baddeley Meehan took cash advances at various casinos totaling $1,463,093.  In approximately August 2003, Baddeley Meehan began to cut checks from the Client Fund Account to pay for her credit card bills.  Between August 2003 and May 2007, she wrote or caused to be written 77 checks totaling $1,716,128 from the Client Fund Account and made payable to credit card companies to which she owed money.  Baddeley Meehan filed false tax returns for the years 2004 and 2005 because she failed to report the proceeds of the fraud on her tax returns, resulting in total taxes owed of over $123,000.

Man Sentenced to 37 Months for Fraudulent Stock Scheme

On February 9, 2010, in Boston, Mass., Steven P. Sable, a former resident of Charlestown, Massachusetts, was sentenced to 37 months in prison, three years of supervised release, and a mandatory special assessment of $1,200. In addition, Sable was ordered to pay $825,500 in restitution to the victims of his fraudulent stock promotion scheme. Sable pleaded guilty in September 2009 to mail fraud, securities fraud, and engaging in a monetary transaction in property derived from mail and wire fraud. According to court documents, from June 1999 through April 2002, Sable took at least $800,000 from 16 investors who purchased “units” of an entity called “Diversified Options.” He told prospective investors that Diversified Options controlled very valuable electronic flow measuring technology (called a “flow sensor”), that a lucrative deal for the sale of Diversified Options and/or its technology was imminent, and that shares (or “units”) in Diversified Options were available for purchase prior to the close of the deal. Although the flow sensor was a real device developed by a professor at the University of Cincinnati, it has not yet reached commercial application. Contrary to Sable’s representations to investors, no deals for the sale of Diversified Options or the technology were imminent. Sable misappropriated the investor funds, either depositing them into his personal bank account or transferring them to other accounts that he or his family members controlled. He used the funds to finance a lavish personal lifestyle.

Florida Man Sentenced to Over 21 Years in Prison for $1 Million Securities Fraud

On February 9, 2010, in West Palm Beach, Fla., Donald Platten, of Boca Raton, Fla., was sentenced to 262 months in prison, to be followed by three years of supervised release; the amount of restitution owed to the victims will be determined at a later date. Platten was convicted in August 2009 of conspiracy to commit securities fraud, securities fraud, conspiracy to commit wire fraud, and impeding the internal revenue laws.  According to the Indictment and evidence introduced at trial, Platten was the president of Harvard Learning Centers Inc., a Florida corporation.  From 2004 to 2007, Platten caused Harvard Learning to issue more than $1 million in stock to his wife, his sister, his ex-sister-in-law, and his limousine driver, Eli Goldshor. The stocks were supposedly as repayment of promissory notes, even though Platten knew that the promissory notes were fraudulent and the company did not owe these individuals the money reflected on the notes.  Goldshor kicked back most of the proceeds from the sale of the stock to Platten.  In this manner, Platten caused Harvard Learning to issue stock to repay his own obligations and to enrich himself, his relatives and others.  Platten also caused a subsidiary of Harvard Learning to pay the personal expenses of himself and other family members. According to the indictment and evidence introduced at trial, Platten failed to file corporate federal tax returns for Harvard Learning for the years 2004 through 2007 and failed to file his personal federal tax returns for the years 2004 and 2005.  For the year 2006, Platten failed to report on his personal tax return the income that he received as a result of Harvard Learning's stock issuances and payment of his personal expenses.  In addition, Platten caused Goldshor to purchase a house and obtain a mortgage by providing false information about his income and assets in order to conceal Platten's ownership of the house in Boca Raton.  The day after he purchased the house, Platten caused Goldshor to execute a quit claim deed transferring his interest in the property to Platten's wife.

Leader of $3 Million Fencing Operation and ID Theft Ring Gets Eight And A Half Years in Prison

On February 5, 2010, in Seattle, Wash., Gabriel Jang, of Newcastle, Washington was sentenced to 102 months in prison, five years of supervised release and hundreds of thousands of dollars in restitution for conspiracy to commit bank and wire fraud, access device fraud, structuring currency transactions, and aggravated identity theft.  Jang was also ordered to forfeit three houses purchased with the proceeds of his scheme as well as $116,527 in cash, and hundreds of thousands of dollars worth of stolen goods.  Jang was the leader of an ID theft ring that netted over $3.2 million selling stolen goods over eBay.  According to records filed in the case, members of the conspiracy would frequent work-out facilities and fitness centers in Washington, Oregon and as far away as Georgia, and would break into the lockers of people using the gyms.  Jang provided co-conspirators with mobile computer equipment to quickly manufacture false identity documents, such as drivers licenses, to be used with the stolen credit cards.  The conspirators used the stolen credit cards and fake IDs to purchase high-end electronics. Jang recruited the locker thieves, provided them with equipment and paid them about half the face value of the items they procured with stolen credit cards.  Jang then fenced the stolen electronics over the internet auction website eBay.  PayPal records indicate Jang’s account received more than $3 million between April 2001 and August 2008. Co-conspirator, Billy Morris Britt, of Renton, Washington, was sentenced in November 2009 to 61 months in prison and ordered to pay $466,622 in restitution for his role as one to the locker room thieves.

Owners of Florida Escort Service Sentenced on Conspiracy and Tax Charges

February 3, 2010, in Miami, Fla., Douglas J. Ketcher, aka Brian Davis, of Siloam Springs, Arkansas, and Christina L. Wypych, aka Danyella Valentine, of Broward County, were sentenced for their roles in running an escort service.  Ketcher was sentenced to 23 months in prison and Wypych was sentenced to 22 months in prison.  In addition, the defendants were ordered to forfeit $1,001,086.  Ketcher and Wypych were charged in April 2009 with operating a prostitution ring, money laundering, and tax fraud.  According to court documents, Ketcher was the president, director and sole shareholder of BDDV Associates, Inc, (BDDV), dba “Sweeties,” and Wypych was the vice-president and director of BDDV.  From approximately July 2, 2002 through approximately February 2007, Ketcher and Wypych ran a prostitution business in Broward County and in other states. The defendants advertised their prostitution business as the escort service Sweeties.  Ketcher and Wypych maintained “Sweeties.us,” an adult Internet website, and placed ads in local newspapers to solicit the hiring of “models” and “phone operators.”  According to court documents and in-court statements, prospective customers would call Sweeties to schedule an appointment with the escort, ranging from $250 to $400 per hour.  Ketcher and Wypych enticed escorts to travel to cities outside of Florida to engage in acts of prostitution by promising them large cash rewards, payment of travel expenses and other incentives.  During the plea hearings, Ketcher and Wypych admitted that they impeded the Internal Revenue Service by hiding cash profits, paying employees in unreported cash, and by overstating business travel deductions.

Mortgage Fraud Ponzi Scheme Leads to 97 Month Prison Term and $4.8 Million Restitution Order

On February 2, 2010, in Oklahoma City, Okla, Dawn Quiroga was sentenced to 97 months in prison, three years of supervised release and ordered to pay nearly $4.85 million is restitution for money laundering and failure to file a tax return as part of a mortgage fraud Ponzi scheme.  According to court documents, in June 2006, Quiroga began soliciting investors for a business she called Buyers Solutions Marketing, LLC (BSM).  Quiroga told investors that BSM was a down-payment-assistance program providing short-term, high interest loans for people to use as down payments when purchasing homes. Numerous investors relied on Quiroga’s statements and wired money to her to invest in BSM. Almost immediately after BSM came into existence, it became clear that BSM could not make any money on down-payment-assistance loans. Nevertheless, Quiroga continued to solicit investors falsely claiming that BSM was successful. Instead, BSM became a Ponzi scheme where money from new investors was used to make payments to prior investors over a period of about two years.  During that time period, Quiroga also funneled large amounts of money out of BSM to buy personal items such as new cars, a new home, and furnishings and electronics for the home. As a result, dozens of investors lost money through this fraud scheme. In addition, Quiroga also admitted that she failed to file an income tax return for calendar year 2007 when she had earned over $2.5 million in gross income.

Pennsylvania Woman Sentenced for Filing a False Tax Return

On January 29, 2010, in Pittsburgh, Pa., Michelle A. Lewis was sentenced to 12 months and a day in prison, to be followed by three years of supervised release and ordered to pay $55,000 in restitution and a $200 assessment.  Lewis pleaded guilty in June 2009 to tax evasion and interstate transportation of stolen property.  According to court documents, Lewis stole a check from Reliant Energy/Orion Power Midwest and deposited it into a bank account in the name of A. Lewis Valve, an account which Lewis controlled.  Additionally, Lewis filed a false 2002 tax return by failing to report over $57,000, resulting in additional tax due and owing of over $19,000.

Maryland Cardiologist Sentenced for Evading More Than $16 Million in Taxes

On January 27, 2010, in Greenbelt, Md., Pradeep Srivastava, a cardiologist who maintained offices in Greenbelt and Oxon Hill, was sentenced to 46 months in prison, followed by three years of supervised release, and ordered to pay over $16 million in restitution.  Srivastava was convicted by a trial jury on October 8, 2009 for evading more than $16 million dollars in income taxes for the 1998 and 1999 tax years, and filing a false tax return for 2000. According to evidence presented at trial, Srivastava conducted a huge volume of trading in stocks and stock options. During the late 1990s, the evidence showed that he earned more than $40 million in short-term capital gains. In preparation for filing his tax returns for 1998 and 1999, Srivastava provided his accountant with information about those trades that generated capital losses, but omitted providing information relating to the vast majority of his short-term capital gains. Srivastava then filed tax returns which omitted those capital gains which understated his tax due by $16,344,323 in 1998 and 1999.  In 2000, Srivastava incurred massive capital losses. Disclosure of the full extent of those losses, however, would have potentially alerted the Internal Revenue Service to his undisclosed short-term capital gains for 1998 and 1999, therefore, trial testimony showed that Srivastava filed a false tax return which understated his capital losses for 2000.

Former Furniture Company Executive Sentenced for Conducting "Pay-to-Play" Schemes

On January 15, 2010, in Bridgeport, Conn., Benjy Orbach, of Colchester, was sentenced to 16 months in prison, followed by two years of supervised release for conducting “pay-to-play” schemes that defrauded his employer of more than $500,000. Orbach pleaded guilty in October 2009 to mail fraud, income tax evasion and financial structuring. According to court documents and statements made in court, Orbach worked as Vice President of Operations for Raymour & Flanigan, a furniture retailer with stores in Connecticut and other northeastern states.  In his position, Orbach was able to influence Raymour & Flanigan’s selection of various subcontractors.  From approximately 2005 through October 2008, Orbach received kickbacks from a cleaning subcontractor that provided services to Raymour & Flanigan.  During the scheme, Orbach would receive an unmarked manila envelope containing between $8,500 and $23,000 in cash.  Later, in lieu of the cash payments, Orbach arranged for a representative of the cleaning subcontractor to issue periodic checks to Orbach’s wife as if she worked for the company.  While the subcontractor issued a Form W-2 in the amount of $61,506 to his wife, Orbach failed to report any of the cash payments on his federal tax returns. In addition, Orbach demanded kickbacks from another company that provided delivery services to Raymour & Flanigan.  Between April 2007 and December 2007, Orbach received three dollars for every stop serviced by the delivery company.  The company made regular payments to Orbach or his spouse by check, and issued Forms 1099 to each of them.  Orbach has also paid $526,815 in restitution in to Raymour & Flanigan and paid $267,505 in back taxes, penalties and interest.

Former Army Captain Sentenced to Over Four Years in Prison

On January 12, 2010, in Honolulu, Hawaii, David Silivano Gilliam was sentenced to 50 months in prison and also ordered to pay $450,565 in restitution.  Gilliam pleaded guilty on August 11, 2009 to theft of government property, money laundering, and tax perjury. Gilliam, a former Captain in the United States Army, admitted in court that he stole approximately $400,000 in 2004-2005 while stationed at Kandahar Air Base in Afghanistan as a Disbursing Officer for the Army Alpha Detachment, 125th Finance Battalion out of Schofield Barracks, Hawaii. According to other information produced in court, he smuggled the funds from Afghanistan to Hawaii, where he used the stolen money to engage in a number of financial transactions, one of which involved buying a $254,000 cashier's check with cash brought to the bank in a duffle bag. Gilliam subsequently relocated to South Carolina, taking the stolen funds with him and continuing to spend the proceeds. Gilliam also admitted that he did not report the cash he had stolen on his amended 2005 tax return, filed in 2008.

Bookkeeper Sentenced to 51 Months in Prison for Embezzling from Credit Union

On January 12, 2010, in Hartford, Conn., Melissa LaLiberte of Wallingford was to 51 months in prison, three years of supervised release, and ordered to pay $743,768 in restitution to the National Credit Union Administration and to pay $218,103 in back taxes, plus applicable penalties and interest, to the Internal Revenue Service (IRS). LaLiberte pleaded guilty in September 2009 to one count of embezzlement from a federal credit union and one count of filing a false income tax return.  According to documents filed with the Court and statements made in court, from January 2004 to May 2008, while employed as a bookkeeper for the Meriden Franco-American Federal Credit Union (MFAFCU). LaLiberte admitted that she took unauthorized cash from MFAFCU members that was intended to pay down loan balances, made unauthorized withdrawals from the MFAFCU accounts, drew her salary multiple times a month when she was only entitled to be paid once per month and, without authorization, used MFAFCU checks to pay personal expenses.  Also, LaLiberte failed to post cash withdrawals and loans to her and her husband’s share accounts, presented false reports to MFAFCU’s Board of Directors, and falsified deposits to her own account.

Hedge Fund Manager Who Bilked Relatives Out Of $25 Million Sentenced to Over 10 Years in Prison

On January 11, 2010, in Los Angeles, Calif., Bradley Ruderman was sentenced to 121 months in prison and ordered to pay more than $27.5 million in restitution for running a Ponzi scheme that targeted family and friends.  According to court documents, Ruderman, the founder and manager of two Beverly Hills hedge funds collected more than $44 million from investors and promised annual returns as high as 60 percent.  To carry out his fraud, Ruderman used false and misleading statements to persuade family members, friends and others to invest in his two hedge funds. Ruderman lied about profits made by the funds, repeatedly sent false account statements to investors, and reported that he had $206 million in funds under management, when he actually had only $588,246 under management at the beginning of this year.  Ruderman spent at least $8.7 million of investor money on personal expenses, including $200,000 each summer for a rented beach house in Malibu, two Porsches, $53,930 on sporting events, $896,000 in credit card charges, and $327,000 in cash expenditures. Ruderman further admitted that he lost $5.2 million of investor money in clandestine poker games held on a regular basis in a suite at a luxury Beverly Hills hotel.

Unlicensed Orange County Mortgage Broker Sentenced to Nearly Six Years in Prison in $40 Million Fraud Scheme

On January 11, 2010, in Santa Ana, Calif., Jared Tornow was sentenced to 70 months in prison for tax evasion, mail, credit card and mortgage fraud that caused more than $7 million in losses.  According to court documents, Tornow provided mortgage services from 2001 until 2006 through several companies, including Lucrativo Real Estate Solutions, which he operated with Mikhail Kosachevich during the last two years of the scheme. Tornow solicited home buyers and assisted them in obtaining mortgages, often by submitting fraudulent paperwork to lending banks. As a part of the scheme, Tornow and others inflated borrowers’ income and assets on loan applications, leading lenders to believe that their clients were creditworthy; including creating false W-2 forms, paycheck stubs, bank statements and other documents. Relying upon the false statements made on loan applications by Tornow and others, lenders issued more than $40 million in residential loans to Tornow’s clients. When a number of the properties went into foreclosure, the banks suffered losses of more than $7 million.  Tornow and his co-conspirators received hundreds of thousands of dollars in commissions and payments from loans that were funded based upon their false statements and submission of fraudulent documents to lenders. Tornow concealed his commission income from the IRS and failed to pay more than $300,000 in federal income taxes.

Man Sentenced to Four Years in Prison in Multi-Million Dollar Investment Fraud Scheme

On January 8, 2010, in Oakland, Calif., Brice Carrington was sentenced to 48 months in prison, followed by three years of supervised release and ordered to pay restitution of nearly $4 million to 13 victims, nearly $142,000 in back taxes, forfeit a Lamborghini, Hummer and a Mercedes Benz for wire fraud and tax evasion.  According to court documents, Carrington admitted he falsely represented to investors that he was a three-time Oscar winning sound effects designer and that he was well-established in the entertainment industry and had been involved in many Hollywood productions. Carrington also paid a substantial sum to a Walnut Creek jeweler to have a reproduction of an Oscar statuette made for him to use as a prop to support his claims that he was a Hollywood insider in order to lure investors into investing money with him. Between 2001 and 2005, he received approximately $4,042,480 from investors but used no more than $430,000 of those funds towards designing sound effects. To further his scheme, he purchased with investors money and without their knowledge, a Lamborghini Murcielago, a Hummer H2 and a Mercedes SL 500R, which he used as props to lure investors into investing money with him. Carrington entered into written and oral agreements with at least ten investors and promised them double and even triple returns on various sound effects design projects. He also failed to report $581,500 in gross receipts on his 2003 tax return. Instead he filed a false Form 1040 reporting zero taxes owed.

Former Office Manager Sentenced on Tax Evasion and Embezzlement Charges

On January 7, 2010, in East St. Louis Ill., Mary R. Storer was sentenced to 30 months in prison, followed by three years of supervised release and ordered to pay $266,056 in restitution to her former employer and $76,267 to the Internal Revenue Service.  The sentence stems from her guilty plea to charges of tax evasion and embezzlement.  According to court documents, while Storer was serving as the office manager for a small family-owned business, she began embezzling money from that business.  Almost all of the money that she embezzled was lost gambling.  As part of her plea, Storer admitted she committed tax evasion, embezzled money from the company’s employee benefit plans and failed to pay over employment taxes for the company. 

Former Military Official Sentenced for Participation in Bribery Conspiracy Involving $206 Million Telecommunications Contract in Korea

On January 7, 2010, in Columbus, Ga., Henry Lee Holloway, a former Army and Air Force Exchange Service (AAFES) official, was sentenced to 36 months in prison for his role in a bribery conspiracy involving a multi-million dollar telecommunications contract, and for not reporting the bribes he accepted on his income tax returns.  Holloway also was ordered to pay a $5,000 fine and to forfeit $70,000, the proceeds from his involvement in the conspiracy.  According to court documents, while working as the AAFES general store manager at the Central Exchange in the Republic of Korea, Holloway used his official position to maintain a $206 million contract to provide telecommunications services to U.S. Armed Forces installations in the Republic of Korea. He admitted that in exchange for at least $70,000 worth of stock, entertainment, travel expenses, cash and other things of value, he used official acts and influence to support and expand the contractual relationship, despite his knowledge and belief that the company was underperforming and violating the terms of its contract with AAFES.

Ohio Medical Practice Office Manager Sentenced on Mail Fraud and Tax Charges

January 7, 2010, in Cincinnati, Ohio, Karen S. Schmidt, of Amberley Village was sentenced to 21 months in prison, three years of supervised release, and ordered to pay a $5,000 fine, as well as pay $55,910 in restitution to Ohio Valley Orthopaedics and $10,723 in restitution to the Internal Revenue Service (IRS).  In May 2009, Schmidt pleaded guilty to one count of mail fraud and one count of filing a false federal income tax return with the IRS in connection with stealing money from the medical practice where she worked as office manager.  According to court documents, between May 2005 and November 2007, Schmidt charged personal purchases on company-owned credit cards, pocketed cash received from patients, and created false invoices which she sent to the company and paid them using company checks. As office manager, she attempted to conceal the fraud from auditors.  Schmidt admitted that she failed to report $38,298 taken from her employer on her 2005 federal income tax returns.

Former Vice President of 24 Hour Fitness and Advertising Executive Sentenced to Prison in Kick-Back Scheme

On January 6, 2010, in San Jose, Calif., Susan K. Powell, of San Jose, California, and Michael J. Johnston, of Los Gatos, California, were sentenced for their roles in a kick-back scheme to defraud 24 Hour Fitness. Powell was sentenced to 15 months in prison, followed by three years of supervised release; Johnston was sentenced to five months in prison, followed by three years of supervised release. The defendants were also ordered to pay joint restitution of $350,001. The defendants pleaded guilty in February 2008.  Powell pleaded guilty to conspiracy to commit mail fraud and tax evasion. Johnston pleaded guilty to conspiracy to commit mail fraud and aiding and abetting the preparation of a false tax return. In the plea agreement, the defendants admitted that between 1996 and 2000, Powell was employed as a vice-president of marketing for Fitness Holdings Worldwide, a company which operates workout facilities in the Bay Area and elsewhere under the name “24 Hour Fitness.” In her capacity as vice-president of marketing, Powell came to know Johnston who operated a graphics advertising and design company in Los Gatos, Calif. Beginning 1996 and continuing through January 31, 2000, Powell and Johnston entered into a scheme to defraud 24 Hour Fitness. As a part of the scheme, Powell used her position to outsource a portion of 24 Hour Fitness’s advertising accounts to Johnston’s graphic design company. Johnston falsely inflated the costs on invoices submitted to Powell, and Powell used her executive position to approve payment on the inflated invoices.  After Johnston received payment for the inflated invoices, he “kicked back” a portion of the payments to Powell. The defendants defrauded 24 Hour Fitness out of a total sum of between $70,001 and $500,000 between 1997 and 1999. While conducting the scheme, Powell knowingly and willfully attempted to evade paying taxes on the income she received from the scheme. Johnston agreed to not issue Forms 1099 in an effort to assist Powell in her effort to avoid paying taxes on the full income realized from the scheme.

Owners of Lawn Care Business Sentenced for False Claims to IRS

On January 5, 2010, in Grand Rapids, Mich., Jonathon Lee Fancett and his wife Angela Marie Fancett were sentenced to 24 and 13 months imprisonment, respectively, followed by three years of supervised release. The pair also was ordered to pay restitution in the amount of $241,124 to the Internal Revenue Service (IRS).  According to court records, Jonathon Fancett was the owner of Lakeview Lawn Care and Angela Fancett was the bookkeeper for the company.  The Fancetts made false claims against the United States by filing personal income tax returns claiming that federal income taxes had been withheld from their income and that they were entitled to refunds for the withheld taxes, when in fact no tax had been withheld from their wages and they were not entitled to any refunds.

New York Rabbi Sentenced in Scheme to Defraud the Internal Revenue Service

On December 21, 2009, in Los Angeles, Calif., the Grand Rabbi of Spinka, a religious group within Orthodox Judaism, was sentenced to 24 months in prison for orchestrating a tax evasion scheme. Grand Rabbi Naftali Tzi Weisz, of Brooklyn, New York, pleaded guilty in August 2009 to a criminal conspiracy charge in which he admitting working with others to obstruct the Internal Revenue Service (IRS) by soliciting charitable donations to Spinka-related organizations with secret promises to refund donors the vast majority of the money they “donated.”  Following Weisz’s sentencing, Yaacov Zeivald, the final defendant involved in the scheme, was sentenced four months in prison for participating in the underground money transfer system that allowed some of the donors to be reimbursed for their “donations.”  A total of seven individuals have been sentenced for working together to obstruct the IRS and to operate an unlicensed money transmitting business. Additionally, three donors who “donated” money to Spinka organizations have pleaded guilty to tax evasion and received sentences ranging from three months to six months in prison.  According to court documents, Weisz, several associates and five charitable organizations were indicted by a federal grand jury in which Weisz and his assistant solicited millions of dollars of contributions to the Spinka organizations by promising to secretly refund up to 95 percent of the contributions. In this manner, the contributors could claim as tax deductions the full amounts of their contributions, while actually having contributed as little as 5 percent of the amount they would declare on their tax returns. Weisz's assistant, Gabbai Moshe E. Zigelman, also of Brooklyn, pleaded guilty last year to conspiring with Weisz and was sentenced to two years in federal prison. In some cases, the contributors received cash payments through an underground money transfer network involving various parties, some of whom operated businesses in and around the Los Angeles jewelry district. A second method used to reimburse contributors was wire transfers from Spinka-controlled entities into accounts secretly held at a bank in Israel.

Leader of $47 Million Mortgage Fraud Scheme Sentenced to 60 Months

On December 18, 2009, in Seattle, Wash., Vladislav Baydovskiy, of Bellevue, Washington, was sentenced to 60 months in prison and three years of supervised release for conspiring to commit bank fraud, mail and wire fraud, and filing a false tax return. In addition to the prison sentence, Baydovskiy is forfeiting to the government several automobiles, a yacht, and several bank and investment accounts totaling approximately $2.4 million. A restitution hearing has been schedule in January 2010.  Baydovskiy was a mortgage broker who operated two brokerage companies, Nationwide Home Lending LLC and Kobay Financial Corporation; and established a third company, Emerald City Escrow, to close transactions involving the fraudulently obtained loans. According to records filed in the case, the defendant and others secured through “straw buyers” and otherwise unqualified purchasers at least 68 loans, representing at least $46 million in loan proceeds, based on false and fraudulent representations. All of the fraudulently obtained loans were closed at Emerald City Escrow. Employees and principals at Kobay and Nationwide prepared and submitted falsified loan applications and related verification documents to lenders in a scheme to conceal the fact that buyers were unqualified to obtain loans. Relying on the fraudulent information, lenders extended loans that exceeded the value of the property and the borrower’s ability to re-pay the loan. Employees and principals of Emerald City diverted some of the fraudulently obtained loan proceeds to themselves and others associated with the scheme. False settlement documents were prepared to conceal the diversion from lenders.  Baydovskiy’s wife, Donata Baydovskiy, part owner of Emerald City Escrow was sentenced to time served and two months of electronic home detention. Four other defendants in the case were sentenced last week. Camie Byron, a loan officer, was sentenced to 24 months in prison. Alla Sobol, a mortgage broker, was sentenced to 24 months in prison and her husband, David Sobol, a real estate agent, was sentenced to 24 months in prison. Sandra Thorpe, an accountant who falsified income statements and employment verification letters, was sentenced to probation and 200 hours of community service. The remaining defendant, Viktor Kobzar, a mortgage broker, will be sentenced in January 2010. In total the mortgage fraud scheme defrauded more than a dozen banks and mortgage lenders of more than $47 million.

Pair Sentenced for Embezzling from Health Clubs in Texas and Oklahoma

On December 11, 2009, in Lubbock, Texas, Chad W. Read was sentenced to 18 months in prison and ordered to pay $15,000 in restitution to Reaction Fitness Clubs from whom he and his ex-wife embezzled funds.  Read’s ex-wife, Emily J. Read, was sentenced in September 2009 to 41 months in prison and ordered to pay more than $670,000 in restitution.  According to court documents, Chad and Emily Read embezzled money from a group of health fitness clubs where she worked as a bookkeeper.  Chad Read assisted her in laundering the illegally obtained funds.  The Reads paid for their personal credit card accounts from the Reaction Fitness Clubs bank accounts and purchased many personal items using the money they received from the Fitness Clubs’ account.

Construction Company President Sentenced to Prison in Tulsa Public Works Bribery Case

On December 14, 2009 in Tulsa, Okla., Max Elliot Wolf was sentenced to 57 months in prison for taking part in a bribery scheme involving millions of dollars in taxpayer funds intended for city streets, bridges and other public works projects in the City of Tulsa.  He was also ordered to pay $939,078 in restitution of which will be restored to the City of Tulsa.  According to court documents, Wolf admitted that from mid-2005 until June 2008, he made numerous bribery payments to a former Tulsa Public Works Field Engineering Manager with the intent to influence and reward him for certifying fraudulent inflated invoices submitted by Horizon Construction Company, Inc., where Wolf served as president.

Art Gallery Owner Sentenced to Three Years in Prison for Tax Fraud

On December 14, 2009, in Los Angeles, Calif., Michael Robert Levy, of Long Beach, California, was sentenced to 36 months in prison and one year of supervised release for subscribing to a false tax return upon which he failed to report more than $1.1 million dollars in gross receipts to the Internal Revenue Service (IRS) for the 2006 tax year.  Levy admitted in his plea agreement that during the years 2003 through 2007, he failed to report to the IRS more than $3,000,000 in gross receipts that he received from the operation of his art gallery, Michael Levy Gallery. According to the plea agreement, instead of depositing all of his gross receipts into his business account, Levy converted some 80 customer checks into cashier’s checks which he later converted into cash.  By doing so, Levy hid the unreported gross receipts from his tax return preparer who relied on Levy’s representations that all of the business receipts for the art business were deposited into his business account. The government asserted that the amount of tax that Levy sought to avoid paying exceeded $899,000 for the years 2003 through 2007. 

Businessman and Doctors Sentenced in Naturalization Scheme and for Filing False Returns

On December 8, 2009, in Philadelphia, Pa., Habeeb A. Malik and Ira H. Weiner were sentenced to 50 months and 36 months, respectively, for their participation in a naturalization fraud scheme. The two men, along with a third defendant, Thongchai Vorasingha were convicted at trial in July 2009 of conspiracy and of naturalization fraud. Malik was also convicted of four counts of filing false tax returns that failed to report hundreds of thousands of dollars in taxable income. Vorasingha was sentenced on December 7, 2009, to 24 months in prison. Weiner and Vorasingha are both physicians. Malik owned The Foundation of Human Services in Broomall, Pennsylvania, which purported to assist foreign individuals in becoming naturalized United States citizens. He would refer clients to defendants Weiner and Vorasingha who would “examine” the clients and then complete INS waiver form N-648, falsely stating that the applicants suffered from various permanent maladies that impaired their ability to learn English. Malik charged his clients approximately $2,000 for this service and paid defendants Weiner and Vorasingha approximately $120 for the “examinations.” In addition to the prison term, Malik and Weiner were ordered to pay restitution of $15,000 and $10,000, respectively. Vorasingha was ordered to pay $5,000.

Former Department of Defense Contracting Officer Sentenced to 110 Months in Prison for Filing False Tax Returns

On December 10, 2009, in Washington, D.C., Tijani Ahmed Saani, former civilian employee of the U.S. Department of Defense, was sentenced to 110 months in prison, followed by one year of supervised release, and ordered to pay a $1.6 million fine and $816,485 in restitution to the Internal Revenue Service (IRS).  Saani, a former resident of Kuwait City, Kuwait, and dual U.S./Ghanaian citizen, pleaded guilty on June 25, 2009, to five counts of filing false tax returns. According to court documents, Saani admitted failing to report at least $2.4 million in taxable income for tax years 2003 through 2007, while he served in Kuwait as a contracting officer for the Department of Defense. Saani also admitted he failed to report his ownership interest in foreign bank accounts in five different countries, including Ghana, Switzerland, the Jersey Channel Islands, the Netherlands and the United Kingdom. Saani used these accounts to help conceal his unreported income and to send and receive wire transfers totaling more than $3.5 million.

CEO of Metropolitan Money Store and Two Other Conspirators Sentenced in $37 Million Mortgage Fraud Scheme

On December 7, 2009, in Greenbelt, Md., Jennifer McCall, Chief Executive Officer of the Metropolitan Money Store, was sentenced to 135 months in prison and ordered to pay $16,880,884 in restitution. Wilbur Ballesteros was sentenced to 63 months in prison and ordered to pay $16,859,950 in restitution. Ronald Aaron Chapman, Jr. was sentenced to seven days in prison, 10 months of home detention with electronic monitoring and ordered to pay $268,279 in restitution. All defendants were sentenced to serve five years of supervised release following their prison terms. According to her plea agreement, McCall was a licensed mortgage broker, but was not licensed to provide credit repair. In May 2005, McCall and Joy Jackson incorporated Metropolitan Money Store, located in Lanham, Maryland, which offered foreclosure consultation and credit services to financially distressed homeowners. From September 2004 to June 2007, Jackson, McCall, Ballesteros, Chapman and others conspired to fraudulently promise to help homeowners who were facing foreclosure because of their inability to make monthly mortgage payments to avoid foreclosure and to repair their damaged credit. The homeowners were directed to allow their homes to be titled in the names of third party purchasers (straw buyers). Using the homeowners’ properties, the conspirators applied for mortgages and prepared and submitted fraudulent loan applications to mortgage lenders to obtain inflated loans in the straw buyers’ names. At settlement time, the conspirators imposed numerous fees and required “seller contributions” and imposed fees for services which were not performed, disclosed or explained to the homeowners.  Additionally, they transferred the sale proceeds out of the escrow accounts into the conspirators’ business and personal bank accounts and converted a substantial portion of those funds to their personal use.  Jackson and McCall withdrew these funds and paid for goods and services for themselves. As a result of this scheme, the total loss attributable to Jennifer McCall, including the estimated losses to the mortgage lenders, is $16,880,884.

Detroit Area Businessman Sentenced for Failing to Pay Income Taxes

On November 25, 2009, in Detroit, Mich., Frank Scaramuzzino was sentenced to 24 months in prison to be followed by one year of supervised release, fined $50,000 and ordered to pay $878,011 in restitution to the Internal Revenue Service (IRS).  Scaramuzzino pleaded guilty on May 13, 2009 to two counts of willful failure to pay income taxes for calendar years 2001 and 2002.  According to court records, during the 2001 and 2002 tax years, Scaramuzzino received gross income of $1,567,158 and willfully failed to pay $587,568 in income tax due and owing to the IRS.

Second Tax Conviction for Michigan

On November 25, 2009, in Detroit, Mich., Gary Heraud was sentenced to 18 months imprisonment, followed by three years supervised release, and ordered to pay $197,809 in restitution to the Internal Revenue Service (IRS).  Heraud pleaded guilty in June 2009 to two counts of tax evasion.  According to court records, during the tax years 2003 and 2004, Heraud owned and operated Communicom, Inc., Aceros Inc.,, and Precept, Inc., receiving over $700,000 in taxable income.  On his 2003 federal income tax return, he only reported interest income of $4,140 while reporting a business loss of $5,806.  In 2004, Heraud failed to report any income, while diverting funds through his corporate bank accounts.  This resulted in a tax loss to the IRS of over $197,000.  According to court records, in 1992, Heraud pleaded guilty to a tax evasion charge and was sentenced to one year in prison which was suspended except for six months with conditions. 

Chicago Man Sentenced in Mortgage Fraud Scheme

On November 20, 2009, in Chicago, Ill., Henry Tate, was sentenced to 18 months in prison, to be followed by three years of supervised release, and order to pay $222,138 in restitution for his role in a mortgage fraud scheme.  According to court documents, between at least 2003 and 2006, Tate and his co-conspirators schemed to fraudulently obtain more than $40 million in mortgage loan proceeds from more than a dozen large banks and mortgage companies.  As part of the scheme, loan applications were submitted to lenders falsely representing that the individual applying for the loan was the true purchaser of the property, when, in fact, the applicant was acting as a nominee, or “straw” purchaser. 

Indiana Man Sentenced to 37 Months in Mortgage Fraud Scheme

On November 9, 2009, in Indianapolis, Ind., Timothy A. Brown was sentenced to 37 months in prison, to be followed by three years of supervised release, and ordered to pay restitution in the amount of $1,725,397.  On March 27, 2009, Brown pleaded guilty to money laundering and wire fraud in connection with a mortgage fraud scheme.   According to court documents, from 2004 until April 2005, Brown and other individuals located residential properties for sale in the Indianapolis area and negotiated to purchase the properties at fair market value.  When the sales were closed, an investor was shown on the HUD-1 Settlement Statement as the purchaser, and the sales price shown was much higher than the fair market value price.  The fraudulently obtained funds consisted of the difference between the loan amount (80-90% of the falsely inflated sales price) and the fair market value negotiated with the seller.  Brown and others recruited these investors, who were told that they would be investing their credit for purposes of purchasing real estate in the Indianapolis area, and that they would not be required to make any down payments or other payments on the properties. In turn, the investors were paid a fee, generally $4,000, for their involvement in the venture; money which was illegally obtained from mortgages supplied by the lenders.  In addition, lenders for these properties relied on false loan applications, inflated appraisals and false supporting documentation.  Brown's company, Brown Funding, Inc., along with others, funded and "fronted" the down payment on many of these loans with money borrowed from friends and business associates.  All of the loans went into default and were the subject of various legal actions by the lenders.

Houston Man Sentenced to 20 Years for Mortgage Scam

On November 23, 2009, in Houston Texas, Ted Russell Schwartz Murray was sentenced to 240 months in prison, to be followed by three years of supervised release, for his part in the fraudulent activities associated with the operation of Money Mortgage Corporation of America, a subsidiary of Premiere Holdings LP, a real estate investment program.  According to court documents, Murray committed mail fraud and securities fraud in the course of promoting and marketing the Premiere 72 or “P72" mortgage investment program, as well as making a false statement on tax returns for the years 1999 and 2000.  An expert witness qualified in forensic accounting testified that the P72 program was conducted like a Ponzi scheme, in that the money from new investors was used to pay earlier investors.  Other evidence presented at trial showed that Murray disguised personal expenses as business expenses and deducted a portion of those expenses on his tax returns, including a $29,000 Rolex watch, payments to casinos, payments for a $1 million ownership interest in the building where Premiere Holdings held its offices and gifts to family members.

Rhode Island Couple Sentenced for Tax Evasion

On November 18, 2009, in Providence, R.I., Albert Martin and his wife, Lorraine Martin, were sentenced for committing tax evasion and conspiring to defraud the United States. Albert Martin was sentenced to 51 months in prison and three years of supervised release. Lorraine Martin was sentenced to 12 months and a day in prison and three years of supervised release.  In addition to the prison terms, Albert and Lorraine Martin were ordered to pay $463,988 in restitution to the U.S. Treasury.  According to the indictment and evidence introduced during their trial, Albert Martin and co-conspirator, Bruce Lapierre owned and operated a Woonsocket-based machine shop from which they earned substantial income. From 1997 to 2004, the defendants engaged in an elaborate scheme to conceal from the Internal Revenue Service (IRS) income that they earned through Classic Machine, and thus avoid paying taxes on that income.  Rather than open business accounts for depositing business receipts and income, they allegedly used Lorraine Martin’s personal account to conceal business receipts, as well as an anonymous “private” banking service designed to conceal income from the IRS. The evidence also showed that the defendants, in order to further conceal their assets and income from the IRS, used multiple business names, such as Banner Technologies, Circle Machine, Preferred Enterprises and Royal Enterprises.  The defendants also made extensive use of cash and money orders. In October 2009, Lapierre was sentenced to 51 months in prison for his role in the scheme.

Former Office Manager Sentenced to 41 Months in Prison for Embezzlement of $1.3 Million

On November 17, 2009, in Sacramento, Calif., Regina Schenck, of Herald, California, was sentenced to 41 months in prison, to be followed by three years supervised release, for computer fraud and filing a false tax return related to her embezzlement of approximately $1.3 million from a Sacramento law firm.  Schenck was also ordered to pay $1.3 million in restitution to her former employer and $264,000 in restitution to the Internal Revenue Service (IRS). According to documents presented in court, between 2003 and 2008, Schenck wrote law firm checks to pay her own bills, created false documents, and told lies to cause law firm partners to authorize checks that she secretly used to buy five horses and a horse trailer. She used the law firm’s computer network to inflate her salary, give herself bonuses and benefits, and she omitted her fraud-procured income from her tax return.

Missouri Woman Sentenced for $470,000 Bank Fraud, Money Laundering Scheme

On November, 17, 2009, in Jefferson City, Mo., Lorraine Hess of Lake Ozark was sentenced to 30 months in prison and ordered to pay more than $470,000 in restitution to her employer.  According to court documents, Hess was employed as a bookkeeper at SSL Enterprises from May 2006 through November 2007 and made seven unauthorized wire transfers from an SSL Enterprises bank account to her personal bank account.  Hess also created 18 unauthorized checks that she forged or used a signature stamp payable to her and she deposited them into her personal account.  Hess’s employer had a personal credit card with Wachovia and Hess used 11 customer checks for that account and wrote checks payable to her, forging her employer’s signature on each check and depositing the checks into her personal checking account. SSL Enterprises had a business credit card account with American Express that Hess used to charge various unauthorized personal expenses, including groceries, clothing, spa visits, furniture, Amazon.com purchases and electronic equipment.

President of Metropolitan Money Store Sentenced to Over 12 Years in Prison for $37 Million Mortgage Fraud Scheme

On November 14, 2009, Greenbelt, Md., Joy Jackson, the president of the Metropolitan Money Store, was sentenced to 151 months in prison, five years of supervised release, and ordered to pay $16,880,884 in restitution. In addition, Jackson was ordered to forfeit three residential properties in Maryland and three vehicles. According to her plea agreement, Jackson was a licensed mortgage broker, but was not licensed to provide credit repair. In May 2005, Jackson and co-defendant Jennifer McCall incorporated Metropolitan Money Store, located in Lanham, Maryland, which offered foreclosure consultation and credit services to financially distressed homeowners. From September 2004 to June 2007, Jackson and others conspired to fraudulently promise to help homeowners avoid foreclosure and repair their damaged credit. The homeowners were directed to allow title to their homes to be put in the names of third party purchasers (the straw buyers) for a year. During that time, the Metropolitan Money Store promised to improve the homeowners’ credit ratings, help them obtain more favorable mortgages, and eventually return title to their homes to them. The homeowners were told that the equity withdrawn from the properties would be used to pay the mortgage and expenses on their homes and to repair their credit. The straw buyers were paid up to $10,000 to participate in the scheme and allow the properties to be put in their names. Jackson also served as a straw buyer on several properties in Maryland. Using the homeowners’ properties, the conspirators applied for mortgages to extract the maximum available equity from the homes, and prepared and submitted fraudulent loan applications to mortgage lenders to obtain inflated loans on the target properties in the straw buyers’ names. At settlements, the conspirators imposed numerous fees and required “seller contributions” which were far in excess of industry standards; they imposed fees for services which were not performed, disclosed or explained to the homeowners; and they transferred the sale proceeds out of the escrow accounts into the conspirators’ business and personal bank accounts and converted a substantial portion of those funds to their personal use. During the conspiracy, Jackson provided Wilbur Ballesteros, a licensed real estate agent who served as a closing agent on more than 60 straw buyer properties, with more than $100,000 in kickback payments to process real estate closings quickly.  Jackson directed others to prepare fraudulent settlement documents. Jackson and Kurt Fordham also paid bank employees to provide false income balances for straw buyers to lenders; add straw buyers and others onto accounts for lender verification purposes; transfer money into accounts to show a certain amount of money was in a bank account and thereafter return those funds to the original account; and shift money between Metropolitan Money Store and other accounts to facilitate loans in straw buyer’s names. As a result of this scheme, the total loss attributable to Jackson including the estimated losses to the mortgage lenders is $16,880,884. Ten defendants in this scheme have pleaded guilty; eight have already been sentenced to terms ranging from ten years to one day in prison; two are scheduled to be sentenced in December 2009.

Greenville City Councilman Sentenced on Tax-Related Charges

On November 12, 2009, in New Bern, N.C., Charles R. Craft, a Greenville City Councilman, was sentenced to 12 months and a day in prison and ordered to pay $192,000 in restitution.  Craft pleaded guilty in June 2009 to false statements in a tax return. According to court documents, from 2001 to 2004, Craft, dba Signs Now, earned a total of $599,933, but did not pay taxes. The investigation determined that in total, Craft had not paid taxes in the amount of $190,000, an average of $50,000 per year for the four-year period. 

Small Business Owner Sentenced to Prison for Making False Statement on Tax Returns

On November 6, 2009, in Houston, Texas, Gladys Bishop was sentenced to 36 months in prison, one year of supervised release and ordered to pay nearly $585,000 in restitution for three counts of making false statements on her corporate tax returns.  According to court documents, Bishop, president of Quality Trucking, set up an accounting system at the company and maintained checking accounts at two different banks but only reported checks deposited into one of the checking accounts to the Internal Revenue Service (IRS). The total unreported income for all three years was in excess of $500,000.

Virginia Ponzi Scheme Promoter Sentenced to 90 Months in Prison

On November 6, 2009, in Charlottesville, Va., John Mark Donnelly was sentenced to 90 months in prison, five years of supervised release, and ordered to pay $5,311,038 in restitution to his victims.  Donnelly pleaded guilty to an Information charging him with wire fraud, securities fraud, fraud in connection with futures contracts, and impeding the administration of the tax laws. According to information entered into the court, Donnelly devised and marketed a complex securities and futures market trading strategy and told investors he would be investing their money using this strategy. However, the money received by Donnelly was never traded and was actually distributed to other investors. In order to maintain the scheme, Donnelly sent monthly statements to investors showing fictitious returns. He also sent annual 1099-INT, 1099-MISC and K-1 tax forms to investors. These forms caused many investors to pay income taxes on their fictitious investment returns.  More than 30 investors entrusted over $5 million to Donnelly between 1998 and 2009.

Rhode Island Man Sentenced for Defrauding the Hartford Insurance Company and Tax Evasion

On November 4, 2009, in Hartford, Conn., Michael Young was sentenced to 33 months in prison, followed by two years of supervised release, and ordered to pay $792,933 in restitution to The Hartford, and $507,861 in back taxes to the Internal Revenue Service (IRS).  Young also must forfeit to the government an additional $264,311, which he gained from the scheme. On June 17, 2009, Young pleaded guilty to one count of mail fraud and one count of tax evasion.  According to court documents and statements made in court, from approximately 2001 through July 2005, Young conspired with Todd Olynciw, a Project Procurement Manager for The Hartford, to defraud The Hartford.  As part of the scheme, Young used a relative’s cleaning business to coordinate the delivery and installation of furniture on behalf of The Hartford. Olynciw arranged for The Hartford to award more than $3.6 million in contracts to Young and the cleaning business in exchange for personal payments or kickbacks. Young and Olynciw also stole furniture that was owned by The Hartford and sold the furniture to Young’s employer, who was not aware of the scheme, for more than $2 million.  Young paid Olynciw $207,783 in kickbacks in the form of cash, checks, gifts and, at Olynciw’s direction, payments to third parties for automobile expenses, housing expenses and other personal expenses.  In addition, for tax years 2001 through 2004, Young failed to report much of the profit that he received from his arrangement with Olynciw on his personal tax returns.  Olynciw was sentenced in April 2008 to 28 months in prison for his participation in this scheme.

Virginia Man Sentenced for Running Ponzi Scheme that Bilked Investors of More Than $400,000

On November 4, 2009, in Lynchburg, Va., Jeffery Thomas Tuggle was sentenced to 36 months in prison and ordered to pay $477,115 in restitution to victims and $156,181 to the Internal Revenue Service (IRS).  Tuggle pleaded guilty in August 2009 to tax fraud, wire fraud and failing to file a tax return. According to evidence presented in court, between 2004 and 2006, Tuggle devised a Ponzi scheme which he marketed as “advance fee investment opportunities” that promised potential investors returns of between 30-40 percent. He told investors that he was working with a group of lawyers to provide their clients with immediate money for legal judgments they had won. Tuggle told his victims that he and his investors would be repaid with interest when the clients and attorneys received their settlements. These promises were false and designed to deceive the investors so that Tuggle could enrich himself at their expense. Tuggle admitted to gambling via the internet and on sporting events using the investors’ money. Any payments Tuggle did make to investors were made with other investors’ money or gambling winnings. In all, approximately 17 investors lost more than $400,000.  During the investigation, law enforcement officials discovered that Tuggle failed to file an income tax return for 2004. In addition, the tax returns he did file between 2005 and 2006 contained numerous false statements, including failing to report accurate yearly income.

Blast Fax Fraud Defendant Sentenced to 80 Months in Federal Prison

On November 4, 2009, in Wichita, Kan., Shaun A. Smoker was sentenced to 80 months in federal prison part for his part in a fraudulent scheme in which a company called PBS Global, Inc., collected more than $6.5 million from customers who were looking for help selling their small businesses.  Smoker pleaded guilty to one count of conspiracy and one count of wire fraud.  According to court documents, PBS Global, who used mass fax solicitations for advertising, falsely claimed it had a long record of success finding buyers for small businesses when in fact, during Smoker’s employment, no businesses were sold and PBS did not collect any fees in that way. Instead, PBS collected more than $6.5 million from customers who paid to have their businesses evaluated prior to sale by a third party.  Although the company claimed its analysts were on salary, in fact they received a 40 percent commission on the amount their clients paid to have their businesses evaluated while PBS paid less than $171,000 to the companies that actually prepared the third-party evaluations.  When prospective customers wanted references, the conspirators took turns posing as satisfied customers who had sold their businesses with the help of PBS. During the time he was with PBS, Smoker defrauded approximately 85 clients, generating more than $500,000 in income for PBS.

Fallbrook Couple Sentenced To Federal Prison and $606,770 Judgment For Conspiring to Smuggle Over 100 Aliens and Filing a False Tax Return

On November 2, 2009, in San Diego, Calif., Maria Del Carmen Alvarez and Indalecio Alvarez-Montoya, who pleaded guilty to conspiring to bring in illegal aliens for financial gain, as well as filing a false income tax return, were sentenced to serve 37 months in prison and 21 months in prison, respectively. Both were ordered to serve three years of supervised release. The Court also imposed an Order of Criminal Forfeiture in the amount of $606,770, which represents the total amount of alien smuggling proceeds obtained by the defendants during the years 2000 through 2005. According to their plea agreements, Maria Del Carmen Alvarez and Indalecio Alvarez-Montoya admitted that they were involved in an alien smuggling organization to bring more than 100 illegal aliens into the United States from Mexico since 1996. Maria Del Carmen Alvarez admitted making arrangements to have the illegal aliens brought to the United States from Mexico through the San Ysidro Port of Entry by having the aliens present false immigration documents or by hiding the aliens in the trunk of a vehicle. The defendants further admitted making arrangements to have the illegal aliens transported to their residence in Fallbrook, California and sheltering the illegal aliens in a guesthouse at their Fallbrook property before the aliens’ sponsors wired money to pay the alien smuggling fees. The defendants also filed a materially false U.S. Individual Income Tax Return (Form 1040) that understated their total income and tax due for the year 2003.

St. Louis Area Restaurant Owner Sentenced on Tax Charges

On October 30, 2009, in St. Louis, Mo., Chen Hing Yeung was sentenced to 12 months and a day in prison and fined $10,000 for filing false tax returns.  According to court documents, Yeung filed false returns for tax years 2002-2005 on which he under reported the income he received from the operation of Young’s Chop Suey Restaurant.  When he was interviewed by IRS agents, he stated that his business earned approximately $800 per day. However, the income figures he provided to his return preparer averaged less than $250 per day. As a result of Yeung’s under reporting of his income, he owes additional tax to the Internal Revenue Service for the years 2002-2005 of approximately $190,656. 

Wisconsin Business Owners Sentenced on Tax Charges

On October 30, 2009, in Madison, Wis., Hyungirl Lee was sentenced to 24 months in prison and fined $30,000 for filing a false income tax return.  On October 13, 2009, Lee's wife, Jongyean Lee, was sentenced to 12 months in prison for providing an IRS auditor with a false document during an IRS audit of the Lee's 2003-2005 income tax returns. Mrs. Lee also received a fine of $30,000.  According to court documents, in April 2007, an IRS auditor met with Mrs. Lee to audit the Lees' 2004 tax return. Mrs. Lee provided the auditor with a 2004 purchases journal that supposedly documented the inventory expenses for the Lee's businesses, which included Riley’s Wines of the World, Badger Liquor, Churchkey Bar and Grill, and Vineyard Liquor. When the IRS auditor attempted to reconcile the journal to the cancelled checks written by Mrs. Lee, the auditor found that the purchases journal contained fraudulently inflated amounts. Digits had been added to the entries in order to increase the purchases amounts. This had the effect of understating the Lees' income by $313,989 in 2004. The IRS auditor also found that the gross receipts from the various liquor stores had been understated as well.  For 2005, the IRS auditor found the Lees' business gross receipts had been underreported by $334,453. During the three years from 2003 to 2005, the IRS auditor determined that the Lees had failed to report and pay $199,867 in income taxes.

Florida Man Sentenced on Tax and Mail Fraud Charges

On October 29, 2009, in Tampa, Fla., Jack Randolph Shaw was sentenced to 51 months in prison and ordered to pay $2,478,423 in restitution to Blue Hawaiian Products and $198,451 in restitution to the Internal Revenue Service (IRS). The court also entered a money judgment against Shaw in the amount of $3,413,590 which represented the proceeds of the fraud.  Shaw pleaded guilty in July 2009 to charges of mail fraud and tax fraud. According to court documents, from approximately 2002 to November 2006, Shaw and Joseph Hooker executed a scheme to defraud Blue Hawaiian Products, a company that manufactured and sold fiberglass swimming pool shells. Hooker acquired customer checks that had been sent by private and interstate carrier and made payable to his employer, Blue Hawaiian Products. Those checks were deposited in a business checking account in the name of Blue Hawaiian Pools and Supplies, which was opened by Shaw. Hooker then prepared fraudulently altered Blue Hawaiian invoices reflecting substantially lower purchase prices than the true invoices and Shaw purchased cashier checks for the lower prices from the fraudulent account and remitted them to Blue Hawaiian Products in payment of the fraudulent invoice. Shaw prepared and filed fraudulent tax returns for 2002 through 2005 that omitted his proceeds from the scheme. Hooker pleaded guilty to mail fraud and to willfully subscribing materially false federal income tax returns and is awaiting sentencing.

Man Sentenced for Role in Pennsylvania Investment Fraud Scheme

On October 28, 2009, in Erie, Pa., Robert Eugene Cheney, a resident of Las Vegas, Nevada, was sentenced to 57 months in prison, to be followed by three years of supervised release, and ordered to pay $1,826,110 in restitution.  According to information presented to the court, from 2003 through March 2007, Cheney and a co-defendant devised a scheme to defraud others and to obtain money by means of false and fraudulent pretenses, representations and promises.  The scheme to defraud was based upon false claims that the defendants were affiliated with HARP, Inc. (a supposed charitable humanitarian organization), Eagle Eight Trust (a supposed entity involved in oil production operations in Pennsylvania) and other fraudulent investment opportunities. Investors were offered a quick, high-dollar return on any money that was invested in one of these organizations.  Further, it was claimed to certain victims that Cheney was the chairman of HARP, Inc. and was known as Chief Soaring Eagle, a supposed "high-ranking official" of the "Sovereign Cherokee Nation." Additionally claims were made that Cheney was married to the sister of a government official in Mexico, and whose connections in Central and South America allowed HARP, Inc. to "joint venture" with oil companies and trade in billions of dollars of oil reserves.  It was claimed to other victims that Cheney was a billionaire oil tycoon in Pennsylvania with investment opportunities in Eagle Eight Trust and oil production operations in Pennsylvania. The defendants promised those individuals paying money into the scheme that they would be paid as much as a 100% return in a short period and that the payment of funds by the victims was risk free and was secured by supposedly legitimate written assurances and guarantees.  Further, the defendants created fictitious banking and business documents and used those documents to persuade individual victims that the scheme was legitimate and that their money was coming.  More than $2,000,000 was invested as a result of the scheme, and the majority of the money was converted to the personal use and benefit of the defendants and their associates.

Owner of Chicago Towing Service Sentenced on Mail and Tax Fraud Charges

On October 27, 2009, in Chicago, Ill., James Athans (aka Meatball) was sentenced to 12 months and one day in prison, followed by one year of supervised release in connection with his guilty plea on charges of mail fraud and filing a false tax return.  The mail fraud charges stem from Athans activities as the operator of Collision Towing.  According to his plea agreement, Athans admitted that on two occasions he schemed with other individuals to have their vehicles towed and destroyed for the purpose of facilitating the filing of a false insurance claims requesting reimbursement for car thefts.  During the years 2003 through 2006, Athans towed vehicles from accident scenes and demanded cash payments from customers for his towing service.  At times, when customers could not meet his demands, he filed mechanic's liens, retitled and took possession of their cars.  The retitled vehicles were either sold or traded them in towards the purchase of new cars.  For the 2006 tax year, Athans failed to report $69,700 he received as proceeds from the sale of six retitled cars.  Athans also admitted to similar conduct for the years 2003, 2004 and 2005, which generated $109,433 in unreported income for those years.  As part of his plea, Athans agreed to forfeit his tow truck.  The court ordered restitution to the Internal Revenue Service of $35,691.

Women Sentenced to Prison for Embezzlement

On October 26, 2009, in San Diego, Calif., Shannan Lee Bauman was sentenced to serve 37 months in prison, followed by three years of supervised release for charges arising out of an embezzlement scheme she committed from November 2001 until May 2005. In addition, Ms. Bauman was ordered to pay $473,000 in restitution to Ranch & Sea Management. According to court records, Ms. Bauman entered a guilty plea on August 10, 2009, to conspiracy to commit mail and wire fraud, and to making a false statement on a tax return for calendar year 2002. Additionally, Mydgie Ramirez was sentenced to serve 10 months in prison, followed by three years of supervised release for her role in the same embezzlement scheme. Ms. Ramirez was also ordered to pay $80,310 in restitution to Ranch and Sea Management. According to court records, Ms. Ramirez entered a guilty plea on July 24, 2008, to conspiracy to commit mail and wire fraud, and to making a false statement on a tax return for calendar year 2004. Both defendants were ordered to work with the Internal Revenue Service to repay all back taxes due and owing. According to court documents, Ms. Bauman and Ms. Ramirez admitted that they stole money that was held in trust by Ranch & Sea Management, their former employer, on behalf of its clients. Ms. Bauman was the bookkeeper and Ms. Ramirez was the manager of Ranch & Sea Management’s long-term rental division. In their respective pleas, both Ms. Bauman and Ms. Ramirez admitted that they utilized a variety of different schemes in order to perpetrate the fraud by diverting funds to their personal use by issuing unauthorized checks, altering money orders, and making false entries into the company’s internal accounting system to cover up the theft of funds. Ms. Bauman and Ms. Ramirez further admitted that they caused false monthly accounting statements to be mailed to Ranch & Sea clients, also to conceal the theft of funds.

Branson, Missouri Restaurateur Sentenced on Tax Charges

On October 23, 2009, in Springfield, Mo., Jeffrey Allen Davis of Branson, Mo., was sentenced to 12 months in prison, three years of supervised release, and ordered to pay $59,892 in restitution, for conspiracy to defraud the Internal Revenue Service (IRS) and for filing false tax returns.  Davis was an employee of Bottom Line Employee Services of Missouri, Inc. and the general manager of the Farmhouse Restaurant in Branson, Missouri.  According to court documents, he participated in a conspiracy to defraud the IRS by paying employees in cash, and not reporting the cash compensation to the IRS.  False payroll information, which omitted the cash payments, was transmitted to a bookkeeper who prepared payroll checks and federal employment tax returns for Bottom Line.  Bottom Line then filed false employer’s quarterly federal tax returns for Bottom Line with the IRS that omitted the cash compensation from total wages, tips and other compensation, and thereby understated the amount of federal employment taxes due.  In addition to the conspiracy, Davis was sentenced on four counts of filing false individual income tax returns for the calendar years 2001 through 2004, in which he received substantially greater income than he reported to the IRS.  Davis admitted he did not report cash compensation paid to him for his services at the Farmhouse Restaurant.    

Michigan Businessmen Sentenced on Conspiracy and Tax Evasion Charges

On October 26, 2009, in Detroit, Mich., Timothy Walraven and William Walraven, Jr. were sentenced to serve 40 months in prison and 43 months in prison, respectively, as a result of having pleaded guilty to conspiracy to defraud the Internal Revenue Service (IRS) and tax evasion.  These guilty pleas and sentences are the result of a March 26, 2008, superseding indictment that charged them with one count of conspiracy to defraud the IRS and five counts each of tax evasion. William Walraven, Jr. also was charged with one count of filing a false partnership tax return, while Timothy Walraven was charged with four counts of filing false corporate tax returns, plus an additional charge of aiding and abetting the creation of structured transactions to evade reporting requirements.  According to court records, the Walraven brothers were President and Vice-President of Country Garden Fruit Market, along with being owners and co-partners of Walraven’s Car Wash and other assorted business activities.  Between 1991 and 2006, they skimmed income from their fruit market and hoarded large amounts of currency in their personal residences. They also maintained a false second set of books for the fruit market during this time period, which they provided to their tax return preparers.  During tax years 2001 through 2005, they received taxable income of at least $738,359, while only reporting $159,872 to the IRS.  When IRS Criminal Investigation executed search warrants at the Walraven brothers’ individual residences on January 12, 2006, they discovered more than $1.3 million in cash. 

Cape Cod Business Owner Sentenced to 21 Months for Tax Fraud

On October 23, 2009, in Boston, Mass., Robert J. Belanger, of Centerville, Mass., was sentenced to 21 months in prison, to be followed by one year of supervised release, and ordered to pay a $25,000 fine. As a condition of his supervised release, Belanger was ordered to cooperate with the Internal Revenue Service (IRS) and pay back taxes.  Belanger was convicted by a trial jury in July 2009, to charges of obstructing the IRS in connection with unreported income from his business. Evidence presented during trial showed that Belanger and his son operated Number One Foundations, a concrete foundation business on Cape Cod. The evidence showed that the Belangers failed to report nearly $500,000 of the gross receipts from the business on their 1999 and 2000 tax returns. Additional evidence showed that Belanger routinely directed his son to deposit only a portion of the customer checks into the business’s bank accounts so that some income from customers would not appear on the business’s bank account statements. Belanger attempted to conceal the business’s unreported income from the IRS by negotiating customer checks to buy treasurer’s checks and by limiting the amount of cash withdrawn to less than $10,000 at a time, thereby avoiding bank reports to the IRS regarding cash transactions and avoiding year-end statements to the IRS reflecting interest from bank accounts. Belanger attempted to mislead IRS agents who interviewed him in connection with the investigation of the business’s taxes.

Oklahoman Sentenced to More Than 24 Years in Bond Scheme

On October 23, 2009, in Tulsa, Okla., Joseph Lynn Thornburgh was sentenced to 292 months in federal prison on charges of mail fraud, wire fraud, and money laundering and ordered to pay more than $1 million in restitution.  According to court records, Thornburgh promoted a fraudulent investment scheme in which investors were told “historical bonds,” including bonds issued in the 1850’s by the GH&H Railroad and some issued in early 1900’s by the Republic of China, were the basis for securing lines of credit with European banks.  The value of these bonds was falsely represented to be worth hundreds of millions of dollars when in fact they had no value based on interest payments.   

Alabama Resident Sentenced for Filing False Tax Returns in Connection With Embezzlement Scheme

On October 22, 2009, in Birmingham, Ala., Sims Lawson, Jr. was sentenced to 70 months in prison for filing false tax returns.  According to court documents, Lawson omitted from his tax returns income that he embezzled from an estate that he managed. Lawson was hired in 2002 to co-manage an estate, and his duties included managing the books and records, collecting on loans made by the estate, and determining the estate’s value for tax purposes. In 2005, the estate received an ex-parte court order removing Lawson from his responsibilities as trustee. It was learned that Lawson misappropriated more than $721,000 in 2002, 2003 and 2004, which he also failed to report on his personal tax returns.  Lawson wrote checks from the estate payable to himself and used estate checks to pay his personal expenses.  The estate paid Lawson more than $297,000 in wages that he also failed to report on his individual tax return. 

California Man Sentenced in False Investment Scheme

On October 22, 2009, in Missoula, Mont., William Edward Marlin, a resident of Los Angeles, California, was sentenced to 121 months imprisonment, to be followed by three years of supervised release, and ordered to pay $1,211,300 in restitution. Marlin was sentenced in connection with his guilty plea to mail fraud and money laundering. In an Offer of Proof filed by the United States, the government stated it would have proved at trial the following: Marlin claimed to be a Hollywood businessman who had formed numerous companies that were allegedly associated with the film industry.  Since 1992, Marlin has been associated with six entertainment related companies.  Marlin started Starmax Entertainment in 2004 and solicited over a million dollars of investments for that alleged business. In 2006, the California Board of Corporations issued a cease and desist order to shut the company down since investors had never been paid. Once Starmax was issued a cease and desist order, Marlin adopted the alias K.H. and started a new business called Children's Family Films (CFF).  Using a “boiler room" crew, Marlin solicited investors in CFF promising investors that they would receive 100% of their investment back in three months and then they would in addition receive thousands of dollars per month for the next one to three years.  Investors were told that companies like Home Box Office (HBO) and Disney would purchase and play CFF movies.  In turn, the companies would allegedly pay CFF for the movies and the profits would be passed on to CFF investors.  In reality, CFF never had any contracts with HBO, Disney or any other media or cable television company.  Investors’ money was used to further the scheme and pay for the personal expenses of Marlin and his co-conspirators.  From 2006 to 2008, CFF received approximately $1,754,203 in illegitimate funds.

South Carolina Man Gets Prison for Income Tax Evasion

On October 22, 2009 in Columbia, S.C., Barry Lusk was sentenced to 33 months in prison and three years supervised release for failing to pay income tax.  According to court documents, Lusk was the sole operator of two businesses that he sold for nearly $1.5 million in 2000.  Lusk used the proceeds to buy houses, real estate and purchase an airplane instead of paying the taxes due on the sale of the businesses.  Lusk was part of a movement advocating income tax was not applicable to him and sent a letter to the Internal Revenue Service (IRS) detailing his beliefs.  In 2002, the IRS began a civil audit of Lusk and an IRS representative attempted to contact Lusk regarding his responsibility to file an individual tax return for the year 2000. In 2003, Lusk filed a joint 1040 return for 2000 and claimed that he and his spouse had no income and that there was no tax due or owed. However, he asked for a refund of an estimated tax which had been paid in 2000.  Lusk also filed amended tax returns for two prior tax years attempting to get refunds claiming the original returns were filed in error.  Luck’s income was estimated at more than $843,000, with a tax debt of more than $183,000.

Upstate New York Man Sentenced to 20 Years in Prison in Ponzi Scheme

On October 21, 2009, in Buffalo, N.Y., Richard Piccoli, of Amherst, New York, was sentenced to 20 years in prison on charges of mail fraud and filing a false tax return. According to court documents, Piccoli operated an extensive Ponzi scheme on “discount mortgage” investments for nearly 30 years. Piccoli admitted targeting Catholic clergy and church goers, advertising his investment services in various area Catholic newspapers. Over the course of the scheme, over 800 people invested their funds with Piccoli and his company, Gen See Capital. While the numbers are still not yet finalized, it appears that the initial estimate of losses may be near $20,000,000 to $25,000,000.  As part of the plea agreement, Piccoli, along with the company, which entered a corporate plea, agreed to pay restitution.  The details of the restitution and the amounts each victim can expect to recover will be determined at a later proceeding.

California Resident Convicted In Retail Theft Crime Ring

On October 16, 2009, in Oakland, Calif., Hassan Swaid, of Fremont, California, was sentenced to 78 months in prison for conspiring to purchase stolen merchandise from major retailers shipping the stolen goods to out of state customers, and for structuring his finances to avoid currency transaction reports. Swaid was convicted on June 24, 2009, following a six week jury trial. Evidence presented at the trial showed that Swaid was the president, chief executive officer and owner of Rosemont Wholesale, Inc., from 1998 through February 2007. Swaid paid more than $9 million dollars for stolen goods and then shipped the stolen goods to out-of-state customers. Swaid was involved in a criminal ring that purchased merchandise that included baby formula and over-the-counter medications such as Tylenol, teeth whitening products, and razor blades, which had been stolen by professional shoplifters, drug addicts and thieves from major retailers. Rosemont then sold the goods over the Internet and shipped them to other states. According to the evidence, Swaid had two main sources of stolen goods, the owners of two Oakland convenience stores – Kings Food Market and 1 Star Discount Store – and the owners of a San Francisco convenience store – Jimmy’s Market. These convenience stores bought the stolen goods from professional shoplifters at prices far below their actual value and sold the products to Swaid. The stolen goods were brought to Swaid’s warehouse in Hayward, Calif., and were advertised over the Internet on a Web site owned by Swaid.. The jury determined that Swaid had structured his payments to his illegal sources to evade the filing of Currency Transaction Reports by banks which would have caused scrutiny of these transactions. Five other individuals have been convicted in this case.

Washington State Man Sentenced in Fraudulent $3.2 Million Consumer Debt Discharge Program

On October 15, 2009, in Spokane, Wash., Jason Paul Christensen, formerly of Pasco, Washington, was sentenced to 109 months of imprisonment, to be followed by three years of supervised release.  Christensen was ordered to pay $3,238,997 in restitution to the victims of his scheme.  According to court documents, Christensen fraudulently obtained $3.2 million from over 1,300 victims across the country through a Ponzi-type scheme advertised as a debt elimination program. Christensen pleaded guilty on April 16, 2008, to mail fraud and money laundering charges relating to the scheme he engaged in over a period of about three years through the Internet and a post office box business address in Richland, Washington. In his plea agreement, Christensen admitted that between approximately October 15, 2003, and December 31, 2005, he solicited his victims via websites on which he advertised that his company employed a team of federal attorneys who used loopholes in the law to discharge consumer debts.  When in fact, he did not employ any team of attorneys and no such legal loopholes existed. Christensen promised his customers that his company would fully discharge their debts, his program was 100 percent successful, and customers were guaranteed success or would receive their money back. Customers, however, were required to pay Christensen’s companies amounts of at least $2,500 and as much as $20,970 in advance. He obtained the large number of victims by paying off the loans of some of his “clients” with other victims’ money and then recruiting his satisfied “clients” to become his “consultants” to whom commissions were paid for recruiting their family and friends into the program. After paying his “consultants” their commissions to promote the scheme, Christensen pocketed the rest of the proceeds for his personal use. In total, the scheme netted over $3.2 million from victims seeking debt elimination and located all over the United States.

Connecticut Businessman Sentenced for Failing to Pay Income Taxes

On October 14, 2009, in New Haven, Conn., Leonard Widman, of Sherman, was sentenced to 12 months and one day in prison, followed by three years of supervised release, and ordered to pay $173,355 in restitution to the Internal Revenue Service (IRS).  Widman pleaded guilty on April 30, 2009, to one count of tax evasion.  According to court documents and statements made in court, Widman owned a sole proprietorship known as Phase II Construction, which performed general contracting services in New York and Connecticut.  Phase II Construction had a business checking account, into which Widman deposited all business receipts and from which he paid both his business and personal expenses using checks and debit card transactions. For the tax years 1997 through 1999, Widman filed false individual income tax returns and made false statements and representations to employees of the IRS.  In a series of interviews with IRS agents in 2003 and 2004, Widman falsely represented the nature of dozens of expenditures made from the Phase II Construction checking account as legitimate business expense. These expenditures included tens of thousands of dollars in payments for an extensive renovation done to Widman’s home, personal gym equipment, marina and boat fees, vacations, and furniture.  In addition, Widman told IRS investigators that he had received loans and gifts of cash from family members and friends, which would be non-taxable sources of income, when, in fact, he had not.    From 1997 to 1999, Widman failed to pay $173,355 in federal income tax and self-employment tax.  

Virginia Man Sentenced to 240 Months for Mortgage Fraud

On October 13, 2009, in Newport News, Va., Richard Garries was sentenced to 240 months in prison followed by three years of supervised release for charges related to an elaborate mortgage fraud scheme. He was also ordered to pay more than $900,000 in restitution. On May 20, 2009, Garries was convicted on 24 charges that included conspiracy, wire fraud, mail fraud, money laundering, structuring, and making materially false statements. According to court records and evidence introduced at trial, from the summer of 2005 to May 2008, Garries conspired with others to make money through the resale – or flipping – of residential properties to buyers he brought in through false promises. Garries promised that the properties had been renovated, renters had been arranged for the properties, buyers would not have to spend their own funds, and that buyers would be provided with cash back at closing. To secure mortgage loans for buyers, evidence showed that Garries inflated the buyers’ income levels and bank account balances on loan applications and provided them with money to make it appear the buyers had more funds available to qualify for a loan and/or to have the necessary funds to proceed with closing on the property. Garries arranged for buyers to use lenders selected by him to obtain loan financing, for which Garries received a commission.  At the time of the offense, Garries was on probation from a previous federal conviction for wire fraud, for which he received a 25-month sentence. While on supervised probation, he made numerous false statements to his probation officer concealing income and assets. On June 8, 2009, Garries was ordered to serve 24 months in prison for violating his probation. Garries will serve his 240-month sentence consecutive to the 24-month sentence previously imposed.

Former Co-Owner of Two Arizona Bars Sentenced for Tax Evasion

On October 13, 2009, in Phoenix, Ariz., Peter Lebsock, of Scottsdale, Ariz., the former co-owner of two bars, was sentenced to 24 months in prison. Lebsock pleaded guilty in November 2008 to federal income tax evasion.  According to court documents, Lebsock evaded income tax due while he was co- owner of The Trailer Park Restaurant, Inc., a corporation doing business as The Trailer Park and Dos Gringos-Tempe.  Lebsock admitted that while serving as the on-site manager of The Trailer Park, he assisted in establishing procedures to maintain a separate accounting of a portion of the revenue collected from patrons. In 2004, revenue of $61,754 was stored separately from the claimed corporate revenue and was diverted for the personal benefit of Lebsock and his partner, Brian Roehrich.  Lebsock did not report the amounts of the revenue diverted for his personal benefit to the IRS for the tax years 2002 through 2005. In his plea agreement, Lebsock admitted that the total amount of taxes he evaded between 2002 and 2005 was approximately $177,000. Roehrich was sentenced to 24 months in prison in July 2009.

Virginia Husband and Wife Sentenced in Multi-Million Dollar Fraud Scheme

On October 6, 2009, in Richmond, Va., Darrell Underwood and his wife, Cynthia Underwood, both of Chesterfield, Virginia, were sentenced for their roles in a multi-million dollar fraud scheme.  Darrell Underwood was sentenced to 120 months in prison; Cynthia Underwood was sentenced to 36 months in prison.  Both defendant will serve three years of supervised release following their prison time.  The Underwoods pleaded guilty in June 2009 to conspiracy to commit mail fraud; Darrell Underwood also pleaded guilty to engaging in unlawful monetary transactions.  Darrell and Cynthia Underwood owned and operated Walkwood Properties, a real estate company that offered various home owners an opportunity to save their homes from foreclosure.  In connection with their guilty pleas, the Underwoods admitted to operating a “Ponzi” scheme using an fraudulent investment program.  According to court documents, individuals were induced into investing money with Walkwood Properties by representing that investors’ funds would be funneled directly into investment properties targeted by Walkwood’s foreclosure efforts.  In exchange, the Underwoods promised that the investors would receive returns of up to 50% within 60-120 days.  In 2007, the Underwoods paid their investors a rate of return, but this was rarely taken from the profits of investments.  Instead, the funds used to repay investors were derived from monies paid by subsequent investors, or groups of investors. From April through December 2007, the Underwoods received approximately $18,400,000 in investor funds.  Of that amount, the bank records established that only $2,100,000 was actually paid towards any type of real estate transaction.  During the same time frame, the Underwoods paid approximately $16,200,000 to investors; of that amount, approximately $13,400,000 was derived from investor funds that were simply used to repay other investors.  As of December 13, 2007, the Underwood’s investor account had a balance of $780,557.  As of that same day, the Underwood’s investment program had an outstanding balance of over $14,000,000 owed to various investors.  The final restitution amount for victims will be determined at a hearing in December 2009.

Father and Daughter Who Served as Officers of Mortgage Foreclosure Consulting Companies Sentenced; Ordered to Pay Over $6 Million in Restitution

On October 5, 2009, in Greenbelt, Md., Clifford McCall and his daughter, Chandra Jones, were sentenced for their roles in a mortgage fraud scheme. McCall was sentenced to 48 months in prison, five years of supervised release, and ordered to pay $2,462,107 in restitution.  Jones was sentenced to 33 months in prison, five years of supervised release, and ordered to pay $3,879,093 in restitution.  McCall was president of Burroughs & Smythe Financial Services, Inc., based in Lanham, Maryland, and a director of the Fordham & Fordham (F&F) Investment Group, Ltd., a foreclosure consulting and credit servicing business based in Lanham and Greenbelt, Maryland. These companies, which McCall and others incorporated, assisted the Metropolitan Money Store (MMS). Beginning in September 2004, McCall conspired with others in a scheme to fraudulently promise to help homeowners avoid foreclosure and repair their damaged credit. The homeowners were directed to allow title to their homes to be put in the names of third party purchasers (the straw buyers). The conspirators applied for mortgages by preparing and submitting fraudulent loan applications to mortgage lenders to obtain fraudulently inflated loans on the target properties in the straw buyers’ names.  As a result of this scheme, McCall fraudulently obtained and used for his personal benefit at least $2,462,107 through bank and credit card accounts from 2004 to 2007.  According to Jones’s plea agreement, she was responsible for paying the mortgages on foreclosure reversal program properties and assisting program participants with repairing their credit. Jones was later made vice-president of F&F and a director of Burroughs & Smythe Financial Services, Inc. During the course of the conspiracy, Jones placed $788,978 from F&F’s bank accounts into her personal bank accounts.  At the direction of co-conspirators, Jones transferred funds from the F&F accounts to pay the personal expenses of co-conspirators. Jones also agreed to serve as a straw buyer for two properties, and secure mortgage loans in her own name to do so, because she had a good credit history. Jones was paid $3,600 for serving as a straw buyer for one property and $5,000 for serving as a straw buyer for another property. As a result of this scheme, the total loss attributable to Jones, including the estimated losses to the mortgage lenders, is $4,189,283.

Two Spokane Residents Sentenced to Prison for Embezzlement and Fraud Scheme

On October 5, 2009, in Spokane, Wash., Michelle Anne Wing was sentenced to 86 months in prison, five years of supervised release, and ordered to pay $755,355 in restitution.  Kenneth A. Marsh was sentenced to 14 months in prison, one year of supervised release, and ordered to pay $165,007 in restitution. Wing pleaded guilty to six counts of bank fraud and one count of conspiracy to commit bank fraud; and Marsh pleaded guilty to two counts of filing a false income tax return. According to the plea agreements, beginning about December 2005 and continuing through July 2008, Wing and Marsh engaged in a scheme to embezzle more than $810,000 from Centaur, a Spokane business which was established to provide administrative services to the advertising companies, E. Media and Power Marketing Services, and its two owners. The scheme involved forging checks, making unauthorized withdrawals and deposits between corporate accounts, and through the acquisition of credit cards and credit accounts obtained through unauthorized means and false representations to financial institutions. Wing was hired as a bookkeeper for Centaur in April 2006 after having served as a temporary employee since December 2005. She was responsible for processing checks for payment, reconciling bank records, opening company mail, and paying invoices on behalf of Centaur. Wing’s embezzlement was uncovered when Centaur’s accountant observed high dollar checks being written between bank accounts and high-dollar payments to American West Bank, where Michelle Wing had a credit card issued in her name. Wing was previously directed to destroy that credit card by a Centaur owner. A subsequent review of the company’s internal accounting records discovered that Wing had been forging both owners’ signatures on certain checks that she deposited, which she had made payable to herself, to “cash,” and to others. Approximately $119,000 was embezzled from the various company accounts. Wing and Marsh also fraudulently opened credit card accounts and used them to purchase goods, services and merchandise. Wing failed to report $478,000 the income from her crimes in 2006 and 2007, resulting in her liability to the Internal Revenue Service for over $144,000 in taxes. Marsh failed to report his illegal income to the IRS on his 2006 and 2007 tax returns and is liable for more than $26,000 in taxes.

Texas Man Sentenced to 10 Years for Running Ponzi Scheme

On October 2, 2009, in Lubbock, Texas, Rod Cameron Stringer, of Lamesa, Texas, was sentenced to 120 months in prison and ordered to pay $7,458,238 in restitution, following his guilty plea to money laundering in relation to an investment fraud scheme. According to court documents, Stringer admitted that he created the “RCS Hedge Fund” for the sole purpose of sheltering property from law enforcement. Stringer admitted that from at least January 2001 until January 2009, he ran a Ponzi investment scheme in which approximately 44 victims invested approximately $13,897,988. Of that amount, approximately $7,023,264 was paid back to some of the victims.  As part of his scheme, Stringer portrayed himself as a “day trader” and Hedge Fund Operator, although he was not a licensed securities broker. He solicited and enticed individuals to invest money with him by making false representations and promises, such as: the return on investors’ money would be approximately 50 percent profit; the accounts were liquid and investors could withdraw their money anytime; and he had several computers that watched the trend line of stocks automatically and advised him when he should move money in and out of the market. Stringer used most of the funds deposited into the two bank accounts for his own benefit.  Although Stringer ran other businesses, including a bail bond business, a used car business and a tow truck business, none of these businesses were profitable. 

Owner of Alabama Tire Store Sentenced to Prison for Tax Evasion

On October 2, 2009 in Atlanta, Ga., Timothy Smith, of Cullman, Alabama, was sentenced to 30 months in prison and ordered to pay more than $170,000 in restitution for tax evasion from 2000 through 2003.  According to court documents, Smith is the owner of College Tire in Hanceville, Alabama, and diverted customer receipts for more than $430,000 from his tire business into two personal accounts.  He also directed customers to use cash and cashiers’ checks so he could make payments on his vacation homes in Florida and North Carolina. Smith concealed the funds that were diverted to his personal accounts and his mortgages from his bookkeeper, who prepared both Smith’s business tax returns his joint personal tax returns.  Smith also took substantial fraudulent tax deductions for a farm at his personal residence. As a result, Smith filed false personal and business tax returns for tax years 2000 through 2003.

Maryland Used Car Dealer Sentenced for Failure to File Taxes

On October 2, 2009, in Baltimore, Md., Gino Jones was sentenced to 15 months in prison and one year of supervised release for failing to file tax returns for 2001 and 2002.  According to court documents, Jones operated a used car business under different names. He purchased cars at auctions, refurbished and then resold them on eBay.  The Internal Revenue Service (IRS) analyzed the data kept by eBay, bank records and business records of third parties to determined the profits Jones received from his sales of cars.  Records showed that Jones failed to file nearly $290,000 in additional taxable income with a tax liability of more than $69,000 for the two years.

Owner of North Hollywood Restaurant Sentenced to Prison for Tax Evasion

On October 2, 2009, in Los Angeles, Calif., James Saliba, owner of a North Hollywood restaurant, Barsac Brasserie, was sentenced to 24 months in prison, three years of supervised release and ordered to pay restitution and fines totaling more than $938,000 for failing to report all of the restaurant’s business receipts and overstating business expenses from 2001 through 2005.  According to court documents, Saliba underreported the gross sales of Barsac by using an account he called “Accrued Management Fees” where he recorded some of the sales.  He also overstated expenses by writing corporate checks from Barsac to his wife and then deducting these payments as expenses on the returns for the restaurant. as well as writing checks to “Cash” and expensing them as tips and giving a small portion to employees while skimming the balance for himself.  Saliba hired Irwin Petlak, an owner of a tax preparation business, to provide monthly bookkeeping services and to prepare business and personal tax returns.  Petlak admitted that he created the false accounting entries using the Accrued Management Fees account to offset the legitimate sales of Saliba’s restaurant, in order to hide the restaurant’s true income from the Internal Revenue Service (IRS).  Petlak pleaded guilty in 2007 to preparing false tax returns.

Former New Jersey Firefighter Sentenced to Prison for Tax Evasion

On October 1, 2009, in Newark, N.J., Mathew Fox, of Atlantic City, was sentenced to 18 months in prison, three years of supervised release, and ordered to pay taxes due of more than $110,000 plus interest and penalties for failing to report more than $400,000 in income from 1998 through 2002.  According to court documents, Fox fraudulently avoided reporting cash income he earned as a bouncer and manager at an exotic dance club in Atlantic City.  Initially, Fox received cash tips and hourly pay for the time he worked at the dance club as a bouncer.  Then in August 1999, when he became a manager, Fox received wages from the club and also continued to receive cash tips from the exotic dancers.  Fox failed to report the income received from the exotic dance club for years 1998 through 2002.

Part Owner of Popular Roofing Company Sentenced for Tax Evasion Conspiracy

On October 1, 2009, in Minneapolis, Minn., Amit Sela was sentenced to 42 months in prison, two years of supervised release, and ordered to pay a $200,000 fine for his role in a conspiracy to commit mail fraud and tax evasion.  According to court documents, between September 2001 and September 2004, Sela, who owns a 50-percent interest in Sela Roofing, conspired to steal money from the company and conceal that money from the Internal Revenue Service (IRS) and the Minnesota Department of Revenue. Sela was trying to steal from the other 50-percent owner and evade paying federal income taxes on that money. Sela contracted with vendors who did work for him personally rather than as subcontractors for the company. He also induced vendors to falsify the addresses on invoices so the invoiced work appeared to be part of Sela Roofing jobs, when, in fact, it was work done on Amit Sela’s personal residence, his ex-wife’s home, repairs on his Hummer and other personal expenses. When Sela could not get a false invoice, he altered invoices himself and arranged for all the fraudulent invoices, totaling more than $100,000, to be paid by the company.  Sela also arranged for co-defendant Sam Noaman, a vendor, to submit false invoices to Sela Roofing making it appear work was done on legitimate roofing or remodeling jobs when no work was done. The money paid to Noaman, more than $550,000, was then funneled to Sela.  The federal taxes Sela attempted to evade on the stolen money was shown at trial to be more than $220,000.

Former Government Employee Sentenced to Prison for Receiving Bribes, Filing False Tax Return

On October 1, 2009, in New Haven, Conn., Kevin Malarney of Bradford, Conn., was sentenced to 24 months in prison and two years of supervised released for steering government contracts in exchange for things of value.  According to court documents, Malarney worked for the United States Department of Veterans Affairs in West Haven, Conn., as a plumber and served as a contracting officer’s technical representative (COTR).  As a COTR, Malarney oversaw construction projects for his supervisor and steered VA construction, maintenance, and supply contracts to Escarnio Construction, LLC and Fischer Supply, LLC, in exchange for things of value from Sebastian Ciarcia, an attorney based in Meriden, Conn., and owner of the two companies in order to do business with the VA.   As part of the scheme, Ciarcia paid Malarney’s personal expenses, including auto loan payments, student loans, various insurance policy payments and trips to St. Maarten and New York.  The total value of the bribes that Malarney received from Ciarcia was approximately $45,600.  Between May 2002 and August 2005, Malarney assisted in the awarding of 27 VA contracts worth approximately $303,000 to Ciarcia’s companies.   Malarney also directly authorized or caused to be authorized 48 payments in the total amount of approximately $81,000 to Fischer Supply for services and/or supplies on his government purchase card.  Malarney also admitted filing a false income tax return for 2004, by failing to report the illegal payment of personal expenses as income.  Malarney was ordered to pay to the IRS back taxes, plus penalties and interest, for the 2002 through 2005 tax years.  Ciarcia pleaded guilty to one count of bribery of a public official, and one count of aiding and assisting in the preparation of a false tax return and was sentenced to 24 months in prison followed by two years of supervised release on July 1, 2009.

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