Examples of General Fraud Investigations - Fiscal Year 2011
The following examples of general fraud investigations are written from public record documents on file in the court records in the judicial district in which the cases were prosecuted.
Florida Man Sentenced in Separate Wire and Mortgage Fraud Conspiracies
On September 30, 2011, in Miami, Fla., Manetirony Clervrain, also known as “Kevin Rusell,” of Broward County, Florida was sentenced to 108 months in prison and three years of supervised release. On July 22, 2011, Clervrain pleaded guilty to one count of conspiracy to commit mail and wire fraud and one count of conspiracy to commit wire and bank fraud in connection with two separate fraudulent schemes. According to court documents, between December 2005 and February 2006, Clervrain and his co-conspirators defrauded a number of companies by impersonating other victim companies and individuals to obtain lines of credit and goods and services from the retailers, resulting in losses of over $300,000. In the second scheme, between February 2007 and June 2007, Clervrain and his co-conspirators purchased 25 units at the Club Caribe Project, using bank loans obtained through fraud. Clervrain and his co-conspirators obtained more than $5.7 million in fraudulent mortgage loans and diverted the proceeds for their personal use, with one of Clervrain’s companies collecting $50,000 as “contractor dues” and “assignment fees” at the closing of each property.
Michigan Man Sentenced for Defrauding Investors
On September 29, 2011, in Detroit, Mich., Stephen Sparks, of Temperance, Michigan, a business partner of Global Points, was sentenced to 24 months in prison, three years of supervised release and ordered to pay $1.3 million in restitution. According to court records, during 2006 through 2009, Sparks took part in a scheme that solicited over $1 million from individual investors known to him as family, friends and former church members. Sparks represented to these investors that his business, Global Points, had an opportunity to purchase a warehouse full of Chinese electronic equipment and sell it in the United States at a substantial profit, returning over five times the amount invested. Sparks also represented that Global Point was in a position for a second deal to acquire CD and DVD players that had been seized in Chicago and were being sold for the payment of back taxes. Sparks indicated that there would be a quick turn around and the profit would be twice the original investment. Sparks knowingly failed to inform the investors that he gave most of their money to his uncle, Barry Sparks, who had past criminal convictions for fraud. Sparks continued to provide excuses for deals failing to close and continued to solicit additional funds, claiming that the closings were imminent. Regarding the specific charges, in 2007, Sparks withdrew $12,000 in cash from his bank account knowing that these funds had been wired from Ohio to Michigan by an investor and, therefore, derived from the proceeds of wire fraud.
Rothstein Associates Sentenced on Conspiracy to Commit Wire Fraud in Connection with Fraudulent Investment Scheme
On September 28, 2011, in Miami, Fla., William Corte, of Plantation, Florida, and Curtis Renie, of Ft. Lauderdale, Florida, were each sentenced to 37 months in prison and three years of supervised release. Corte and Renie were also held jointly and severally liable for $62,388,521 in restitution. The evidence presented in court established that the defendants were employed by the law firm of Rothstein Rosenfeldt and Adler P.A. (RRA) in the IT Department. Renie was employed as the director of information technology and Corte was a systems engineer. Renie and Corte created a fictitious web site counterfeiting the legitimate web site of a bank. At Scott Rothstein’s direction, the defendants posted false account balances and fraudulent incoming and outgoing wire transfers on the fictitious web site to make it appear as if the accounts were well funded. On more than one occasion, the defendants modified the fictitious bank web site to reflect that RRA held up to $1.1 billion on deposit at the legitimate bank. In fact, no such funds were in the accounts. The false account balances were shown to investors to induce them to invest into the fraudulent investment scheme.
Former U.S. Head of Al-Haramain Islamic Foundation Sentenced on Tax and Conspiracy Charges
On September 27, 2011, in Eugene, Ore., Perouz Sedaghaty, aka Pete Seda, was sentenced to 33 months in prison. Sedaghaty was convicted by a jury in September 2010 of filing a false tax return and criminal conspiracy based on his attempt to hide the trail of a $150,000 donation that Al-Haramain received in 2000 from Egypt. According to court documents, Sedaghaty is the former U.S. head of the Al-Haramain Islamic Foundation, Inc., which was headquartered in Ashland, Oregon before it was declared a Specially Designated Global Terrorist organization in 2004 by the United States Government. The $150,000 was wire transferred by an Egyptian donor from an account in London, England to an Al-Haramain account in Oregon. Sedaghaty and a fugitive co-defendant named Soliman Al-But’he controlled the Oregon bank account. Sedaghaty and Al-But’he converted $130,000 of the funds into traveler’s checks and the remainder was withdrawn in the form of a cashier’s check. The funds were hand carried by Al-But’he from Oregon to Saudi Arabia. The traveler’s checks were cashed for Saudi Riyals at the Al Rajhi bank and were ultimately smuggled into Chechnya. Al-But’he deposited the cashier’s check into a bank account in Saudi Arabia. In attempting to account for the funds with the Internal Revenue Service - which monitors charities to assure they are not using funds for improper purposes - Sedaghaty falsely reported in Al-Haramain’s tax return that most of the $150,000 was used by Al-Haramain to purchase a building in Missouri.
New Hampshire Man Sentenced for Tax Evasion and Conspiracy
On September 27, 2011, in Boston, Mass., Christopher McGadden, of Windham, N.H., was sentenced to 12 months and one day in prison two years of supervised release, a $7,500 fine, and ordered to pay $178,735 in restitution to the Internal Revenue Service. In March, McGadden pleaded guilty to charges of conspiracy to defraud the United States through the evasion of the assessment of income taxes and tax evasion. According to his plea agreement, McGadden engaged in a conspiracy with Raymond Stebbins to divert monies from Xcel Fire Protection, Inc. (Xcel) to various corporate bank accounts, which the two men then used to pay themselves without reporting the income to the IRS. The conspiracy began in 2000 and continued until May 2009. According to the government, Stebbins submitted fictitious invoices to Xcel, allegedly billing for goods provided and/or services rendered by one of several companies Stebbins operated. McGadden ensured that these bogus invoices were paid and also provided the checks in payment of the bogus invoices to Stebbins. Stebbins also opened several business bank accounts which were used to deposit checks from Xcel. Thereafter, Stebbins structured cash withdrawals from the business bank accounts, keeping a 10 percent fee for himself and giving the remaining 90 percent to McGadden. McGadden and Stebbins also diverted checks from Xcel customers to Stebbins’ business accounts, sharing the proceeds of those checks using the same 90/10 split. Neither McGadden nor Stebbins reported the funds that they received under their scheme as income on their federal income tax returns. In addition, McGadden separately concealed other income from the IRS that was rightfully the property of Xcel, including checks from Xcel customers and Stebbins’ payroll checks.
Niagara Falls Man Sentenced To Prison for Fraud; Obstructing the IRS
On September 22, 2011, in Buffalo, N.Y., Randall McGovern, of Niagara Falls, N.Y., was sentenced to 87 months in prison for gift card fraud and 36 months in prison for obstructing the Internal Revenue Service. The sentences are to run concurrently. McGovern was also ordered to pay $193,635 in restitution to the U.S. Treasury and approximately $90,000 to Home Depot and Lowe’s. According to court records, McGovern defrauded Home Depot and Lowe’s out of $90,000 while serving a state prison term late in 2005 and early in 2006. While at the Livingston Correctional Facility, the defendant used the prison’s phone system to make three–way calls to the toll free gift card numbers of Home Depot and Lowe’s and made unauthorized gift card orders in the names of several businesses. The cards were delivered to designated addresses, which included abandoned houses. In addition, McGovern sold construction equipment he knew was encumbered by IRS tax liens, and failed to notify the IRS that he had done so, obstructing efforts of the IRS in 2008 and 2009 to collect approximately $193,000 in taxes.
Restaurant Owner, Manager Sentenced For Tax Fraud Conspiracy
On September 21, 2011, in Kansas City, Mo., Ismael Onate, of Clarksville, Tenn., was sentenced to 37 months in prison. On September 22, 2011, Javier Posada, of Warrensburg, was sentenced to 18 months in prison. The court also ordered the two defendants to pay $382,296 in restitution to the IRS. According to court documents, Onate was the president of four Missouri corporations that operated El Vaquero Mexican Restaurant businesses in Warrensburg, Mexico, Hannibal, Kirksville, Moberly and Wentzville. Onate pleaded guilty on May 18, 2011, to participating in a conspiracy to under-report income received at the restaurants to avoid paying federal taxes. Posada, manager of the Warrensburg restaurant, pleaded guilty on April 28, 2011, to his role in the conspiracy, which lasted from June 2002 to August 2008. The conspirators removed cash from the cash register or directed others to remove cash from the cash register, and the restaurants failed to report the receipt of that cash for tax purposes. They also created fraudulent sales ledgers and destroyed guest tickets. Co-defendant Miguel Angel Vega, of Mexico, Mo., a resident alien and citizen of Mexico, was manager of the El Vaquero Mexican Restaurant in Mexico, Mo. Vega pleaded guilty on July 26, 2011, to his role in the conspiracy and awaits sentencing.
Idaho Falls Man Sentenced in $29 Million Ponzi Scheme
On September 20, 2011, in Pocatello, Idaho, Daren Palmer, formerly of Idaho Falls, was sentenced to 96 months in prison, three years of supervised release and ordered to perform 200 hours of community service for his role in a Ponzi investment scheme in which investors lost over $29 million. Palmer was also ordered to pay $29,842,731 in restitution. Palmer pleaded guilty to charges of wire fraud and money laundering in May 2011. According to court documents, from 2002 through December 2008, Palmer owned and operated Trigon Group LLC in Idaho Falls and solicited clients to invest money in the Trigon Group. Palmer admitted that in September 2008, he solicited a client to invest $500,000 with Trigon, promising the client a favorable rate of return and a safe investment. Palmer did not tell the client that he would use the invested funds to pay other investors or that Trigon was already in financial trouble. The plea agreement further states that between 2002 and December 2008, Palmer received approximately $75.8 million from 68 investors, who then lost more than $20 million. Palmer also acknowledged that he laundered money by using funds from the Trigon bank account to make a personal purchase of $110,550 from a jewelry store.
Montana Woman Sentenced on Money Laundering Charges
On September 16, 2011, in Missoula, Mont., Stacey Marie Hebuck was sentenced to 42 months in prison, three years supervised release and ordered to pay $468,482 in restitution in connection with her guilty plea to wire fraud and money laundering. From August 2005 until June 2008, Hebuck was the escrow officer for Pinnacle Title and Escrow. In June 2008 she bought the business and started calling it New Pinnacle Title LLC. Also in June 2008, before buying the business, Hebuck began diverting funds from Pinnacle and using the money for her own personal use and benefit. Hebuck manipulated the financial transactions associated with five different real estate closings that Pinnacle handled from June 2008 until January 2009. During each closing, when Pinnacle received the buyer’s financing, Hebuck diverted the funds to her personal bank accounts by issuing checks drawn on Pinnacle’s trust or operating accounts. When Hebuck deposited the checks into her personal account, she caused an interstate wire between her bank and a federal reserve bank outside of Montana. Rather than use the funds to pay off the existing mortgages, she spent the majority of the diverted funds on herself for living and other expenses. In some cases, she continued to make the monthly mortgage payments on loans that were supposed to have been closed and in two cases, which involved smaller payoff amounts, Hebuck eventually paid the entire balance.
Former Bookkeeper Sentenced On Bank Fraud & Tax Evasion Charges
On September 15, 2011, in St. Louis, Mo., Sherri Berry was sentenced to 12 months and one day in prison and ordered to pay $328,226 in restitution for embezzling money from her employer and failing to report the extra income on her tax returns. According to court documents, between February 2004 and December 2007, Berry wrote 144 unauthorized checks from her employer's bank account and deposited them into her personal credit card account. In all, Berry stole $379,500 from her employer. She used the stolen money to pay for a variety of personal expenditures including her children's private school tuition, travel, car payments, and interest on her credit card accounts. Additionally, she attempted to evade and defeat income taxes due and owing to the United States for calendar years 2004 through 2007 by failing to report the stolen money as income.
Wisconsin Man Sentenced to Prison for Income Tax Fraud
On September 15, 2011, in Milwaukee, Wis., David Jensen, of Oconomowoc, Wisconsin, was sentenced to 18 months in prison based on his conviction for filing a false federal income tax return. According to court records, Jensen was the owner and former operator of Payroll Data Services, a payroll services company with offices located in Hartland and Madison. Jensen no longer operates this business. From 2003 through 2005, Jensen diverted more than $3.5 million from accounts maintained by his business into which clients deposited funds that were to be used to pay payroll and payroll taxes. Jensen used these funds for his own benefit and did not notify his clients or obtain his clients’ consent for these transfers. He also did not report these transfers as income on the tax returns he filed for tax years 2004 and 2005. As a result of this conduct, Jensen under reported his federal income taxes by more than $400,000.
Former UBS Financial Advisor Sentenced for Stealing Over $5 Million from Clients
On September 14, 2011, in Oakland, Calif., Steven Kobayashi, a former financial advisor for the United Bank of Switzerland Financial Services, Inc. (UBS), was sentenced to 65 months in prison, three years of supervised release, for a fraudulent scheme in which he converted more than $5.4 million of his clients’ funds to his personal bank accounts for his own benefit. According to his plea agreement, between 2006 and 2009, Kobayashi was employed at UBS’s Walnut Creek office. As a financial advisor, he had access to his client’s UBS accounts and routinely made financial trades on behalf of his clients when authorized to do so. Beginning in the latter part of 2006, without the knowledge or proper authorization from the affected clients, Kobayashi began to transfer funds from his clients’ UBS accounts to his own bank accounts. At times he received authorization to withdraw funds from investors’ accounts by falsely representing to the investors that the withdrawals were required to purchase investments. At other times, he forged investors’ signatures on the authorization forms, or copied documents bearing investors’ signatures and pasted the signatures to documents authorizing withdrawals. Between 2006 and 2009, Kobayashi fraudulently transferred $5,431,600 from his clients’ UBS accounts to his own. He has failed to return any portion of the funds to the rightful owners. The full amount of restitution Kobayashi will be ordered to pay to the victims will be decided at a court hearing scheduled for October 19, 2011.
Connecticut Plumber Sentenced to Prison for Tax Evasion
On September 14, 2011, in Bridgeport, Conn., Carl Taylor, of Stratford, was sentenced to 13 months in prison, three years of supervised release for tax evasion and ordered to pay approximately $130,365 in restitution to the Internal Revenue Service. Taylor pleaded guilty on April 27, 2011. According to court documents and statements made in court, Taylor is the owner of Fairfield County Plumbing, a sole proprietorship located in Stratford. Between 2003 and 2006, Taylor willfully attempted to evade paying his federal income taxes by skimming gross receipts of his plumbing business and paying personal expenses from his business accounts and claiming them as business expenses. As part of his tax evasion scheme, Taylor instructed several of his employees to solicit checks from clients payable in his name, “Carl Taylor,” rather than in the name of the business. Taylor then cashed the checks made payable to him and did not deposit the monies into his business’ bank account. Since this money was not recorded on the books of the business, nor deposited into the business’ account, Taylor did not include these gross receipts on his income tax return. Taylor also deducted personal expenses as business expenses and similarly lowered the figures on his Schedule C profit, thereby substantially reducing his tax for tax years 2003 through 2006.
Owner of Asbestos Abatement Training School Sentenced to Prison
On September 13, 2011, in Boston, Mass., Albania DeLeon, formerly of Andover, Mass., was sentenced to 87 months in prison, followed by three years of supervised release and ordered to pay $1,200,939 in restitution to the Internal Revenue Service and $369,015 to AIM Mutual Insurance Company. DeLeon, the former owner of the country’s largest asbestos abatement training school, was sentenced after having fled the United States after her trial in November 2008. According to court documents, from approximately 2001 to 2006, Deleon owned and operated Environmental Compliance Training (ECT), a certified asbestos training school located in Methuen. ECT normally offered training courses on a weekly basis at its Methuen offices; however, many of the recipients of the certificates never took the required course. Instead, with Deleon’s knowledge and approval, ECT’s office employees issued certificates of completion to thousands of individuals who did not take the course. These individuals filed the certificates with the Massachusetts Division of Occupational Safety to be authorized to work in the asbestos removal industry. Many of the recipients were illegal aliens who wished to skip the four-day-long course so that they would not forego a week’s pay. Since ECT’s training course records were subject to inspection, Deleon sought to cover up ECT’s practice of issuing certificates to untrained applicants by having the applicants sign final examination answer sheets that already had been completed and graded, which she maintained in ECT’s files. Based on the evidence at trial and information supplied by the Division of Occupation Safety, ECT issued training certificates to over 2,000 untrained individuals. Most of the individuals were employed by Methuen Staffing, Deleon’s temporary employment agency that specialized in asbestos abatement. Deleon paid most of these employees “under-the-table,” without taxes withheld, and reported to the IRS and her workers compensation insurance carriers only those employees that actually had taxes withheld, saving her over a $1 million in tax and insurance payments. Deleon was originally scheduled to be sentenced on March 23, 2009, but three days before, she fled without warning, eventually making her way out of the United States. On October 30, 2010, law enforcement authorities in the Dominican Republic, working in conjunction with the U.S. Marshal’s Service, arrested her in Santo Domingo. She was extradited to the United States in November.
Ohio Man Sentenced for Evading Income Taxes
On September 9, 2011, in Cleveland, Ohio, Anthony Spitalieri was sentenced to six months in prison, six months of home detention, and two years supervised release for attempting to evade his income taxes for the years 2004 through 2007. According to court documents, from 2004 through 2007, Spitalieri received income in the form of wages, non-salary payments, and corporate payments for his personal expenses. Personal expenses included payments for his property taxes, a down payment and loan payments for his daughter’s vehicle, utility payments for defendant’s personal residence, payments for a furnace, air conditioner, air cleaner and humidifier, his wife’s automobile insurance, college tuition for his nephew, a repair to his wife’s vehicle, payments to or for the benefit of his daughter and/or son-in-law, and payments on personal credit cards. For the tax years 2004 and 2005, Spitalieri filed tax returns reporting his wages, but omitted the non-salary checks paid to him as well as the corporate payments made to his personal expenses. Spitalieri failed to file Form 1040 individual income tax returns for the years 2006 and 2007. Through this conduct, Spitalieri attempted to evade $167,590 in taxes.
Two Defendants Sentenced for Their Roles in Multi-Million Dollar Investment Fraud Scheme
On September 7, 2011, in Oakland, Calif., Lal Bhatia, of Walnut Creek, Calif., and Steven Eugene Shelton, of Las Vegas, were sentenced for their roles in a multi-million dollar investment fraud scheme. Bhatia was sentenced to 63 months in prison and ordered to pay $1,987,250 in restitution. Shelton was sentenced to 6 months in prison and ordered to pay $1,575,250 in restitution. According to the plea agreements, beginning in June 2003 and continuing until April 2004, Bhatia, along with co-defendants Henri Berger, Marzban Mody, and Steven Shelton, devised and executed an advance fees scheme to defraud two entities. The scheme involved the creation and portrayal of fictional individuals and a fictitious company called Sherwin & Noble Ltd. that was the purported source of the loan funding. The defendants created a glossy brochure falsely reflecting their financial status and a money transfer receipt that showed the transfer of $105 million to support the false representation that they had available funds to finance the loan. To induce the victims to pay the advance fees, a meeting at a private club in Las Vegas was staged in November 2003. At the meeting, the prospective borrowers were falsely informed that any advance fees they paid would be refunded with modest deductions for expenses if the loans were not funded. According to court documents, following the meeting in Las Vegas, the borrowers made three advance payments totaling $1,978,250. After the advance fees were paid, the defendants received calls from representatives of the borrowers asking when the loans would be funded. The defendants responded with false statements with the intent to lull the borrowers into believing the scheme was not fraudulent. Henri Berger, of Beverly Hills, Calif., was sentenced on June 21, 2011, to one day in prison and ordered to pay $1,987,250 in restitution. Marzban Mody, of Culver City, Calif., was sentenced on July 20, 2011 to three years probation for his guilty plea to structuring monetary transactions to avoid reporting requirements.
Missouri CPA Sentenced to 42 Months in Prison for Mail Fraud and Tax Evasion
On September 7, 2011, in Springfield, Mo., Murphy Hubbard, a Springfield, Mo., CPA, was sentenced to 42 months in prison for his mail fraud and tax evasion convictions. The judge also ordered Hubbard to pay full restitution to the victims in this case and to the IRS. Hubbard previously pleaded guilty to two counts of mail fraud and one count of tax evasion. According to court documents, Hubbard owned and operated an accounting and tax business known as The Hubbard Group PC. Hubbard embezzled more than $400,000 from two trusts placed under his control by local families between 1998 and 2009. The first of these trusts, created by Ms. Hazel Beatrice S. Hirst of Springfield, designated four local charities as the beneficiaries of her life’s savings. The second trust, established by the heirs of Mr. Noel C. Rummens of Rogersville, Mo., was created for the express purpose of funding educational expenses for Mr. Rummens’s surviving heirs and relatives. Rather than fulfilling the wishes of these families by faithfully executing their trust agreements, Hubbard instead took the vast majority of this money for himself, using it to pay personal expenses, to buy items such as automobiles and farm equipment and for travel. Virtually all of the money taken from these trusts went unreported to the IRS, resulting in a tax loss of approximately $79,434.
Former Minnesota Department of Revenue Employee Sentenced For Stealing $1.9 Million in State Funds
On September 7, 2011, in Minneapolis, Minn., Pamela Marie Dellis, of Lindstrom, was sentenced to 60 months in prison for conspiracy to commit mail fraud and money laundering. Dellis was charged along with two co-defendants on January 7, 2011, and pleaded guilty on March 7, 2011. On August 9, 2011, Dellis’s niece, Laurie R. Sondrall, of Minneapolis, was sentenced to 27 months on one count of conspiracy. Dellis’s sister, Nancy T. Sondrall, of Brooklyn Center, awaits sentencing. All three defendants will be required to pay back more than $1.9 million in restitution. In their plea agreements, the defendants admitted that from January 12, 2005, through September 17, 2010, they conspired to defraud the State of Minnesota by embezzling funds by creating false tax refund checks. According to court documents, as an auditor with the Minnesota Department of Revenue, Dellis’s job, in part, was to process tax overpayments. In numerous instances, however, she falsified records to create the impression that a taxpayer was owed a refund due to an overpayment when, in fact, that was not the case. Then, she drafted a refund check or a “transfer of funds,” made payable to her sister or niece, for the false refund amount. Dellis admitted using variations of her co-conspirators’ names on the checks and transfers to make it more difficult to detect that the refunds were not legitimate. To cash the checks, Dellis and her co-conspirators sometimes sought the services of a check-cashing business and then divided the check proceeds. On other occasions, the checks were deposited into an account, in an effort to conceal the source of the funds, and then withdrawn and shared by the co-conspirators. In all, Dellis was responsible for more than 200 fraudulent tax refund payments, totaling approximately $1.9 million.
Rothstein Associate Sentenced on Conspiracy to Commit Wire Fraud in Connection with Fraudulent Investment Scheme
On September 2, 2011, in Miami, Fla., Howard Kusnick of Tamarac, Florida, was sentenced to 24 months in prison, followed by two years of supervised release and ordered to pay $310,000 in restitution. Kusnick pleaded guilty in June 2011 to conspiracy to commit wire fraud. According to the documents filed with the court and statements made in court, Kusnick, while an attorney working at a law firm, engaged in a scheme to defraud two clients of the law firm by authoring a letter purporting to settle pending litigation in the clients’ favor. In fact, however, no such litigation had been instituted and no such settlement existed. Rather, the purpose of the letter was to lull the clients into believing that the law firm was pursuing litigation on their behalf.
Los Angeles Tax Preparer and Wife Sentenced for Visa and Tax Fraud
On September 1, 2011, in Los Angeles, Calif., Samuel Klein, a tax preparer, was sentenced to 63 months in prison and three years of supervised release for orchestrating a multi-faceted fraud scheme that included filing false tax returns and making false claims to enable aliens to obtain religious worker visas. On August 31, 2011, Zipora Klein, Samuel's wife, was sentenced to 27 months in prison and one year of supervised release. The couple was also ordered to pay more than $765,000 in restitution. According to court documents, Samuel Klein owned a business called Smartax and filed fraudulent visa applications on behalf of clients, falsely claiming they were religious workers wanted for employment by New York religious institutions. In addition to the visa fraud scheme, the Kleins filed false tax returns with the Internal Revenue Service (IRS) that substantially understated their income. From 2003 to 2006, the Kleins understated their income by more than $2 million, which caused the IRS and California Franchise Tax Board to suffer losses that totaled more than $757,000.
Two Sentenced for Conspiracy to Evade Taxes
On September 1, 2011, in Greenville, Miss., Jack Holleman, a real estate agent and investor, was sentenced to 12 months and a day in prison, followed by three years of supervised release, and ordered to pay $260,447 in restitution. On September 6, 2011, Gary Hamilton, a certified public accountant, was sentenced to two years probation and ordered to pay $214,000 in restitution. According to court documents, Hamilton opened a business partnership, PMBMH Investments, LLC, to assist Holleman in his business of buying and selling real estate. On or about December 21, 2000, Hamilton opened a nominee bank account for PMBMH. From 2001 through 2005, Hamilton paid Holleman for his services by depositing Holleman's commissions into the account. In addition, Holleman deposited other personal income into this account. The PMBMH account was established for Holleman's personal use as a means to avoid Internal Revenue Service (IRS) tax liens and conceal income from the IRS.
Illinois Tobacco Store Owner Sentenced To Prison for $5.45 Million State and Federal Tax Fraud
On September 1, 2011, in Chicago, Ill., Abbas Ghaddar, formerly of Frankfort, was sentenced to 76 months in prison and was ordered to pay $4.8 million in restitution to the State of Illinois and $650,452 to the United States. Ghaddar pleaded guilty in June to cheating the State of Illinois and the United States of tax revenue by deliberately hiding and failing to report cash receipts from his tobacco business, Tobacco House, Inc. According to court documents, at various times between 2001 and 2009, Ghaddar operated retail tobacco stores in Frankfort, Tinley Park, Orland Park, Glendale Heights and Bradley, Ill., which sold cigarettes, cigars, and other tobacco products. An analysis of cash receipts and expenditures showed that the stores generated more than $102 million in gross revenues, at least $60 million of which were cash receipts. However, Ghaddar deposited less than one percent of those cash receipts into his corporate bank accounts and declared little, if any, of those cash receipts on his corporate tax returns. As part of his tax fraud scheme, Ghaddar filed false federal income tax returns for calendar years 2003, 2004 and 2005; failed to file federal income tax returns for calendar years 2006, 2007 and 2008; and filed false sales tax returns with the Illinois Department of Revenue from 2002 through 2009. Overall, Ghaddar under-reported his corporate gross receipts by more than $74 million from January 2002 through November 2009. Ghaddar’s failure to report these revenues resulted in a tax loss of more than $4.8 million to the State of Illinois and a tax loss to the United States of $650,452, resulting in a total tax revenue loss of more than $5.45 million. A native of Lebanon and a naturalized U.S. citizen, Ghaddar was arrested in December 2009 in Germany and was extradited to the U.S. in May 2010 to face charges in a 13- count federal indictment. Ghaddar used the money he failed to report, in part, to fund a lavish lifestyle in Lebanon, where he spent considerable time and built a luxurious home, purchased a farm worth hundreds of thousands of dollars, and became a successful owner of a soccer club.
Brothers sentenced for operating a $4 million mortgage fraud scheme
On September 1, 2011, in Minneapolis, Minn., the second of two brothers was sentenced for orchestrating a $4 million mortgage fraud scheme that defrauded 24 area lenders. Baretta Dean Bork, of Mound, was sentenced to 60 months in prison for conspiracy to commit mortgage fraud and income tax refund fraud. Bork, who was charged on January 31, 2011, along with his brother, Xavier Willis Bork, pleaded guilty on March 9, 2011. On August 26, 2011, Xavier Bork, of Eden Prairie, was sentenced to 60 months in prison for conspiracy to commit mortgage fraud and income tax refund fraud. In their plea agreements, the brothers admitted that between December of 2003 and March of 2008 they engaged in a scheme that resulted in more than $4 million in losses to mortgage lenders. The brothers worked as loan officers through several mortgage brokerage companies located primarily in the Mankato area. Through their work, they recruited straw buyers to purchase 33 properties. To prompt lenders to grant loans to the straw buyers, the Borks exaggerated income figures and lied about the employment status of those straw buyers. They also omitted from the loan applications information regarding other loan obligations the straw buyers already had incurred. As part of the scheme, the properties were purchased at inflated prices and upon receipt of the mortgage loans, the loan proceeds were distributed to the straw buyers and the defendants. In addition, the Borks admitted to recruiting 26 people to file false U.S. Individual Income Tax Returns claiming refunds totaling more than $154,000. The defendants provided those filers with false W-2 forms that indicated they worked for the Borks. To facilitate their tax scheme, the Borks also established two shell companies.
Oregon Man Sentenced for $840,000 Investment Scheme and Tax Fraud
On August 31, 2011 in Eugene, Ore., Hussein Ali Mehdi was sentenced to 51 months in prison and ordered to pay more than $840,000 in restitution for his role in an investment scheme and tax fraud. According to court documents, Mehdi submitted more than 192 fraudulent claims in more than 70 class-action settlements associated with various securities litigation and received more than $740,000 of fraudulent proceeds through this fraudulent investment scheme. In the fraudulent claims, Mehdi falsely asserted that he and others held stock in the companies subject to the class-action settlements. To support the false claims, he created fraudulent brokerage account statements purported to be from various investment brokerage firms that falsely represented that he and others owned shares of the securities covered by the settlements. To pull off this sophisticated scheme, Mehdi used several nominees, including his wife, sister, and father, at least eight different addresses in three different states, and 14 different bank accounts. In addition, Mehdi admitted filing a false federal income tax return on which he severely understated his income by more than $290,000.
Missouri Man Sentenced For False Claims on Tax Returns
On August 30, 2011, in Kansas City, Mo., Byron K. Meeks, of Independence, Missouri, was sentenced to two years in prison, three years of supervised release and ordered to pay $439,926 in restitution to the Internal Revenue Service for making false statements on an income tax return. On December 14, 2010, Meeks pleaded guilty to submitting at least 15 fraudulent income tax returns, falsely claiming total refunds of $688,007. According to court documents, Meeks prepared federal income tax returns for himself, friends, and family containing materially false and fraudulent claims of federal withholding from Forms W-2 and Forms 1099; Schedule C business profit and loss; and first-time home buyer tax credits. The false claims were designed to cause refunds to be issued that the filer was not entitled to receive. The refunds were deposited directly into bank accounts that Meeks controlled. In some instances, Meeks gave a portion of the refund to the person under whose name he filed the return; in other instances, Meeks kept the entire refund.
Rothstein Associate Sentenced on Conspiracy to Commit Wire Fraud in Connection with Fraudulent Investment Scheme
On August 24, 2011, in Miami, Fla., Stephen Caputi was sentenced to 60 months in prison, followed by three years of supervised release and ordered to pay restitution of $28,130,073. On June 15, 2011, Caputi pled guilty to conspiracy to commit wire fraud in connection with his involvement in a fraudulent investment scheme (the scheme) regarding the sale of purported confidential settlement agreements in sexual harassment and/or whistle blower cases purportedly being handled by attorneys at Rothstein, Rosenfeldt and Adler, P.A. According to the documents filed with the court and statements made in court, Caputi posed as a banker and as a purported plaintiff during meetings with persons who were investors in the scheme. Specifically, Caputi, posing as an official from TD Bank, provided investors with fraudulent bank statements that reflected purported balances of trust accounts at TD Bank. In this way, Caputi lulled the investors into believing that the account balances were sufficient to fund their investments. On another occasion, Caputi posed as a plaintiff during a meeting with potential investors who had requested to meet with plaintiffs. Caputi pretended to be a plaintiff who had purportedly executed a $10,000,000 settlement agreement, thus raising potential investors’ confidence in the deal.
California Man Sentenced for Investment Fraud Scheme
On August 23, 2011, in Sacramento, Calif., Luis Fernandez, of Folsom, was sentenced to 57 months in prison to be followed by three years of supervised release for running a Ponzi scheme that resulted in losses to approximately 50 victims and their families. Fernandez was also ordered to pay restitution. According to court documents, Fernandez was the owner and president of Fernandez Financial Inc. (FFI) in Folsom. Between September 2004 and March 2009, Fernandez collected approximately $7.4 million from investors by promising them a 3 percent monthly return on their money. Fernandez actually invested only about half the money he received, reserving the rest for Ponzi payments to the investors and withdrawals to himself. Of the money that Fernandez did invest he sustained losses in five of the six calendar years that the scheme operated. After subtracting monthly payments to investors totaling approximately $5.3 million, Fernandez caused a total loss to investors of approximately $2.1 million. According to court documents, Fernandez and most of the victims of the fraud were natives of the Dominican Republic. To lure investors into the scheme, Fernandez falsely represented to investors that FFI was profitable in both good markets and bad, and that it was consistently generating a return that was sufficient to pay the promised 3 percent rate of return. To lull existing investors into keeping their money with FFI, Fernandez, and others, acting at Fernandez's direction, concealed the losses and falsely represented that FFI continued to do well, going so far as to provide investors with false documentation purporting to show stock market gains. Despite sustaining losses in the market, Fernandez paid himself nearly $1 million. This included a home in Folsom and a late model Corvette, both of which were purchased with investor money.
Former Hawaiian Stock Broker Sentenced for Fraud and Tax Offenses
On August 22, 2011, in Honolulu, Hawaii, Ryan Kimura was sentenced to 57 months in prison for wire fraud, bank fraud, filing a false federal tax return and money laundering. In addition, Kimura was ordered to pay $1.5 million in restitution to his former employer, Morgan Stanley Dean Witter (MSDW), and to pay $505,429 to the Internal Revenue Service (IRS) for combined tax losses for the calendar years 2000 through 2007, plus interest. According to information presented in court, Kimura, while a stock broker at MSDW in Honolulu, induced members of his former wife’s family to deposit more than $2.1 million in accounts with MSDW by making false and fraudulent representations and omitting facts. They unknowingly applied for and received MSDW checks, which Kimura used without their knowledge. Court documents further reflect that Kimura also made stock trades with a Japanese company’s funds resulting in losses of approximately $360,000, received a commission for each of those stock trades, and manufactured reports of interest allegedly earned. Kimura embezzled $1.5 million from his victims through forging signatures on 206 checks and using the Japanese company’s funds without authorization.
Texas Woman Sentenced To Federal Prison for Income Tax Fraud
On August 22, 2011, in Beaumont, Texas, Cynthia Watts Riggins, of Allen, Texas, was sentenced to 30 months in prison and ordered to pay $1,224,801 in restitution to McLean Orthopedics, her former employer, and the Internal Revenue Service. In March 2011, Riggins pleaded guilty to filing a false tax return for calendar year 2005. According to information presented in court, from 1998 to 2008 Riggins was employed as the office manager for McLean Orthopedics in Nacogdoches, Texas. During that time, she embezzled more than $1 million from her employer. Riggins failed to report the embezzled funds as taxable income.
Florida Resident Sentenced in Multi-Million Dollar Mortgage Fraud Conspiracy
On August 5, 2011, in Miami, Fla., Jose Arnaldo Rosario, of Miami-Dade County, Florida, was sentenced to 46 months in prison and three years of supervised release. In July 2011, Rosario pleaded guilty to a one-count Criminal Information charging him with conspiracy to commit money laundering and wire fraud. According to the Information and statements made during the plea hearing, from at least November 2005 to January 1, 2007, Rosario and his co-conspirators purchased two units using bank loans they obtained through fraud, including the submission of false financial information, inflated property values, and straw buyers, among other misrepresentations. According to court documents, Rosario and his co-conspirators used the mortgage loan proceeds to purchase the properties, using little or no money of their own. Then, the defendants distributed among themselves the difference between the inflated property value and the true value of the property. For about one year, to further the scheme and avoid detection, Rosario made monthly payments on the loan. Ultimately, Rosario stopped making payments and allowed the properties to go into foreclosure. At his plea hearing, Rosario acknowledged that the loss resulting from his actions was approximately $2.51 million.
Two Owners of Southern California Environmental Companies Sentenced on Tax Charges
On August 5, 2011, in Los Angeles, Calif., David J. Feuerborn, of Camarillo, was sentenced to 48 months in prison. On August 1, 2011, Thomas R. Jennings, of Anaheim Hills, was sentenced to 48 months in prison. In addition to the prison terms, Feuerborn and Jennings were ordered to pay $1,074,248 in restitution – $842,965 to the IRS and $231,283 to the California Franchise Tax Board. According to court documents, for roughly the past decade, Jennings and Feuerborn owned and operated a series of companies they claimed had developed technology that could separate oil from dirt and other materials without producing any hazardous waste. All of the companies had names that were variants of ESS, such as Environmental Soil Sciences in Camarillo, ESS Environmental in Placentia, and Environmental Services and Support in Anaheim. Evidence presented during trial showed that Jennings and Feuerborn used a bank account under a name very similar to an ESS vendor to funnel to themselves several million dollars that they used for their personal benefit, including the purchase of numerous cars, motorcycles, and recreational vehicles, as well as country club payments and interior design work at their residences. Jennings and Feuerborn received substantial income that they failed to report to the IRS. Jennings received at least $1 million and Feuerborn received at least $2 million, none of which they reported to the IRS.
Detroit-Area Strip Club Owner Sentenced for Using Computer Program to Delete Clubs’ Sales to Cheat on Taxes
On August 4, 2011, in Detroit, Mich., Nicholas J. Faranso, of Farmington Hills, Michigan, was sentenced to 12 months and one day in prison, two years of supervised release, and ordered to pay $6,000 in restitution for conspiring to defraud the United States. Faranso pleaded guilty on January 12, 2011. According to court documents, Faranso was the owner of two strip clubs: BT’s in Dearborn, Mich., and Tycoon’s in Detroit. From 2001 through 2004, both establishments used a computerized point of sales system which produced guest checks and electronically tracked and recorded sales. In 2001, Faranso purchased a computer software program, called Journal Sales Remover, from Theodore Kramer, a self-employed computer software salesman. This computer software program removed a portion of the actual sales from the computerized point of sales systems to make it appear that Faranso’s clubs received less income than they actually did. Faranso purchased the Journal Sales Remover program to help him cheat on his business taxes. From about 2001 to about 2004, at Faranso’s request, Kramer periodically visited Faranso’s clubs to run the Journal Sales Remover program to remove a substantial amount of the actual sales from the computerized sales systems. Faranso then provided the reduced sales figures to his accountant. As a result, Faranso falsified the clubs’ tax returns by understating their gross receipts by more than $500,000.
Iowa Couple Sentenced To Prison On Federal Immigration, Tax and Fraud Charges
On August 3, 2011, in Cedar Rapids, Iowa, Chan Duong and Phung Ca “Polly” Long, both from Vinton, Iowa, were sentenced to prison for harboring illegal aliens and other tax and fraud charges. Duong was sentenced to 78 months in prison and three years of supervised release after pleading guilty in December 2010 to harboring illegal aliens and filing a false 2007 federal income tax return. Long was sentenced to 30 months in prison, three years of supervised release and ordered to pay $22,695 in restitution to Iowa Medicaid after pleading guilty in November 2010 to harboring illegal aliens and health care fraud. In their plea and sentencing agreements, Long and Duong admitted they engaged in criminal activity that included wire fraud, mail fraud, health care fraud, filing false federal income tax returns, hiring illegal aliens, money laundering, and harboring and transporting illegal aliens. Chan Duong filed false federal income tax returns resulting in a tax loss of over $400,000 over four years. The pair operated the Peony Chinese Restaurants in Vinton and Tama, Iowa and routinely hid their personal income and business earnings from state and federal authorities, paid their employees in cash to avoid taxes, purchased property to house the illegal aliens that worked for them, and hired, harbored and transported illegal aliens as a principle means of operating their restaurant. Following their guilty pleas, the couple continued their previous criminal activity. A second set of search warrants, issued in May 2011 for their home and businesses, found evidence of money laundering, mail fraud and state sales tax evasion. In related forfeiture actions, Long and Duong have forfeited or agreed to forfeit cash, vehicles and real property worth more than $1.5 million.
San Rafael Man Sentenced to Six Months in Prison for Filing False Tax Return
On August 2, 2011, in San Francisco, Calif., Jack Aaron Nissim was sentenced to six months in prison, one year of supervised release with 6 months home confinement and 300 hours of community service for filing a false tax return. According to the plea agreement, Nissim intentionally signed false joint U.S. Individual Income Tax Returns for the tax years 2003 through 2007. He admitted that he knowingly under reported $518,563 in gross receipts. The unreported gross receipts resulted in a tax loss of $204,445. Nissim omitted a significant amount of Schedule C gross receipts by providing false information to his bookkeeper and by not identifying all of the commissions he earned during those tax years. Nissim agreed to pay $173,292, plus interest, in restitution to the IRS and $31,153.26, plus interest, to the State of California.
Illinois Businessman Sentenced to Prison
On August 1, 2011, In Peoria, Ill., Mark Swank was sentenced to 21 months in prison, two years of supervised release and ordered to pay $800,000 in restitution to Soy Capital Bank. In April 2011, Swank pleaded guilty to bankruptcy fraud and engaging in a prohibited monetary transaction. According to court documents, Swank was the president of Altematech, Art & Print, Associated Mechanical, Inc. (AMI) and T.A. Brinkoetter & Sons (TAB), which were corporations located in Illinois. In January 2008, Swank obtained a $1 million loan from Soy Capital Bank & Trust (Soy Capital) to acquire 100 percent of the outstanding stock of TAB. He also obtained a $1.6 million line of credit at Soy Capital. As president of TAB, Swank signed a security agreement which pledged all of TAB's assets, including equipment, to Soy Capital as collateral for the two loans. In September 2008, Swank sold the encumbered equipment to Citizen's State Bank of Cropsey (Cropsey) for $660,000. He then entered into an agreement •to lease the encumbered equipment back from Cropsey. Swank represented to Cropsey in the Bill of Sale that the equipment was not encumbered by any liens while knowing that Soy Capital had a lien on the equipment. In October 2008, Swank knowingly engaged in a prohibited monetary transaction by transferring $100,000 from the AMI account at Morton Community Bank to the AMI account at Associated Bank. These funds were derived from bank fraud. In May 2010, Swank and another filed a bankruptcy petition under Chapter 7. Swank falsely declared that he possessed no more than $5,000 in cash when, in fact, he possessed approximately $92,200 in cash, which he had failed to disclose as part of the bankruptcy proceedings.
Texas Man Sentenced For Filing False Tax Return
On August 1, 2011, in Springfield, Mo., Randall L. Pennington, of Houston, Texas, formerly of Branson West, Missouri, was sentenced to 18 months in prison and ordered to pay $525,125 in restitution to the IRS. According to court documents, Pennington owned Total Balance Orthotics, which sold orthotic shoe inserts. Pennington admitted that he earned more than $4 million from 2000 to 2004, for which he owed nearly $318,000 in income and self-employment taxes, but paid only $1,000 in taxes for 2002. Pennington pleaded guilty on February 16, 2011, to filing a false 2002 income tax return in 2006. According to the plea agreement, Pennington had $962,274 in gross income in 2002, which resulted in $26,388 owed in taxes, though he only paid $1,000. Pennington admitted that, although he used seven bank accounts in 2002, he only gave his return preparer information on two accounts. He also funneled more than $50,000 of business receipts through another person’s account. Pennington also admitted that he used a transposed version of his actual social security number when providing identifying information to casinos for reporting his gambling winnings. As a result, Pennington did not report $23,200 in gambling winnings on his tax return.
Former Florida Hospital Facilities Employees Sentenced for Accepting Bribes
On July 29, 2011, in Miami, Fla., Elliot Gordon and Anthony Merola, both residents of Lake Worth, Florida, were sentenced prison. Gordon was sentenced to 38 months in prison, two years of supervised release and ordered to pay $597,676 in restitution. Merola was sentenced to 33 months in prison, two years of supervised release, and ordered to pay $625,487 in restitution. According to the Information and statements made in court during the plea hearing, Gordon and Merola were team leaders in the Facilities Management Department at a hospital in Hollywood, Florida. As team leaders, the defendants were responsible for, among other things, contracting with vendors to purchase goods and services for the hospital. Gordon and Merola accepted money and in-kind kickbacks in exchange for selecting certain vendors to perform maintenance work at the hospital. The defendants would cause the selected vendors to substantially inflate their invoices to the hospital to facilitate the payment of kickbacks to themselves. In addition, the defendants, with the assistance of their accountant, would conceal the kickback payments through various entities and would improperly deduct personal expenses as business deductions on tax returns filed with the IRS.
California Man Sentenced on Tax Charges
On July 29, 2011, in Sacramento, Calif., Owen Charles, of Pleasant Hill, was sentenced to 51 months in prison. Charles was convicted on January 14, 2011, of tax evasion, fraudulent use of a social security number and false statements to a federal agency. According to testimony presented at trial, Charles claimed to believe that the law only required him to pay income tax on his federal retirement. An IRS audit determined that between 2001 and 2003, he had failed to pay more than $1.2 million in taxes, interest, and penalties on income from, among other things, real estate sales and rental properties. Upon learning that he was being audited, Charles took measures to frustrate IRS collection efforts. He did three “cash out” refinances of his million-dollar Benicia home; he moved money into nominee accounts; and he disguised his control of those accounts by using a false social security number, shell corporate names, and another person’s name. In 2001, Charles wired more than $900,000 to a bank account in the Turks and Caicos Islands. Charles also claimed to have been living under a vow of poverty while driving luxury vehicles and controlling more than $1 million in assets.
California Man Sentenced for Masterminding a $30 Million Ponzi Scheme and Mortgage Fraud
On July 28, 2011, in San Diego, Calif., Matthew “Beau” La Madrid was sentenced to 120 months in prison, three years of supervised release, and ordered to pay $23,484,171 in restitution. In addition, La Madrid was ordered to forfeit $7 million, his interest in five parcels of real property, and other assets. La Madrid pleaded guilty in January 2011 to conspiracy to commit mail fraud, wire fraud, and bank fraud and conspiracy to launder money. According to court documents, Beau La Madrid was the mastermind of the operation of the Plus Money Premium Return Funds (PRF) and related real estate investment and mortgage fraud schemes. Between 2004 and 2008, he and others fraudulently solicited from PRF investors more than $39 million that they promised to invest in “covered calls” stock option trading. Instead, a substantial part of new investor funds was used to make monthly payments to earlier investors, and more than $7 million was secretly funneled to a bank account that La Madrid controlled in the name of Vision Quest Investments. To mislead investors into believing that their PRF investments were profitable and intact, La Madrid sent investors monthly account statements that reported fictitious brokerage account values and trading returns. In addition, La Madrid was a principal in related real estate companies - Real Estate Investment Group (REIG) and E & M Property Management - which were used to fraudulently obtain from investors more than $3 million by falsely promising to secure real estate investments with promissory notes and recorded deeds of trust. In reality, the deeds of trusts were either not recorded or improperly recorded, causing victims to lose their investments when the properties purportedly securing the notes were sold or foreclosed upon. In total, La Madrid cheated more than 300 victims out of more than $26 million through the various schemes.
South Dakota Man Sentenced for Tax Fraud and Failure to Appear
On July 26, 2011, in Sioux Falls, S.D., Thomas R. Kelley, of Salem, South Dakota, was sentenced to a total of 70 months in prison, five years of supervised release and ordered to pay $96,710 in restitution to the IRS for tax fraud, passing fictitious United States Treasury bonds, and failure to appear. Kelley was convicted of tax fraud charges and other financial crimes in May 2010, but failed to appear at his August 23, 2010, sentencing hearing. After a four-month search, he was arrested in December 2010. He was convicted of willful failure to appear in April 2011. Throughout the two trials, Kelley claimed to be a “sovereign citizen,” arguing unsuccessfully that certain federal laws did not apply to him. Kelley was originally indicted in October 2009 for filing a false income tax return, impeding the Internal Revenue Service, tax evasion, willful failure to file tax returns and uttering fictitious obligations (private discharging and indemnity bonds, private offset bonds, and bonded promissory notes).
Oklahoma Man Sentenced for Tax Evasion
On July 25, 2011, in Tulsa, Okla., Thomas Rondot was sentenced to 24 months in prison, three years of supervised release, and ordered to pay $1,718,575 in restitution. Rondot pleaded guilty in March 2011 to one count of tax evasion. According to his plea agreement, Rondot admitted that he intentionally filed a false U.S. Individual Tax Return for calendar year 2008. The return was false because he failed to include certain income on the return. In total, for tax years 2006 through 2008, Rondot failed to report approximately $1,344,850 in additional income resulting in additional tax due of approximately $373,995.
Texas Woman Sentenced to Prison for Tax Evasion
On July 25, 2011, in Fort Worth, Texas, Misti D. Rieger, of Fort Worth, was sentenced to 18 months in federal prison following her guilty plea in April 2011 to one count of tax evasion. The judge also ordered her to pay $355,391 in restitution to Amerisource Bergen Corporation, the parent company of her former employer, Pharmacy Healthcare Solutions, from whom she embezzled. According to court documents, from 2003 until 2007, Rieger was an accounting supervisor at Pharmacy Healthcare Solutions. In that position, she embezzled $355,391 by forging 87 checks and depositing the proceeds into her personal bank accounts. She failed to report any of those embezzled funds as taxable income on her tax returns. In April 2007, Rieger filed a joint return on behalf of herself and her spouse stating that their joint income for 2006 was $38,506 when she knew that their joint income was approximately $143,211 and the correct tax owed was approximately $31,153, not the $5,024 as stated on the fraudulent return. Rieger admitted that she intentionally understated her income.
Federal Judge Sentences Fugitive Fraudster to Prison
On July 22, 2011, in Dallas, Texas, Michael R. Rouse, formerly of Wellington, Florida, was sentenced in absentia to 210 months in federal prison and ordered to pay $1.9 million in restitution to the 62 identified victims of his crime. Rouse was convicted in April 2011 on all nine counts of a superseding indictment charging various felony offenses, including money laundering, related to his operation of the Golden Gate Real Estate Investment Trust (REIT). Rouse is a fugitive. The government presented evidence at trial that, during 2003 and 2004, Rouse and convicted co-conspirator James A. Testa, of Carrollton, Texas, were founders and trustees of the Golden Gate REIT. During that period, Rouse and Testa, acting personally and through brokers, raised more than $2 million from investors by claiming that the REIT was a safe investment in real estate and real estate related assets. In fact, virtually none of the money was ever invested in anything connected with real estate. The only investments Rouse and Testa ever made were in foreign currency trading, and those investments failed completely. The investors lost most or all of their money, while Testa and Rouse paid themselves handsome salaries and spent the investors’ funds on business and personal expenses, including Mercedes Benz automobiles that cost more than $125,000 each. Testa, who testified for the government at trial, pleaded guilty to one count of money laundering in 2009; he is scheduled to be sentenced on August 26, 2011.
Oklahoma Man Sentenced for Tax Evasion
On July 22, 2011, in Tulsa, Okla., Jeffrey Lee Parker was sentenced to 24 months in prison, three years of supervised release, and ordered to pay $166,061 in restitution following his guilty plea in November 2009 to mail fraud and tax evasion. According to information in court documents, Parker was an attorney with offices in Tulsa, Oklahoma, whose practice included handling personal injury and worker's compensation cases.. Although Parker was entitled to retain a portion of the proceeds derived from settlement checks, he was not entitled to keep all the proceeds or retain and use the funds for his own benefit. Parker, however, retained all the proceeds of settlement checks he received on behalf of clients. When clients contacted him to determine the status of their legal proceedings, Parker evaded their questions and did not tell them he had received checks in payment of their claims but had kept all the proceeds for himself instead of just the amounts to which he was entitled. According to his plea agreement, Parker admitted that during 2004, he kept without the permission of his clients $130,105 in settlement checks. Parker intentionally failed to file an income tax return with the Internal Revenue Service for calendar year 2004.
Tennessee Man Sentenced to an Eight Year Prison Term on Tax Charges
On July 21, 2011, in Nashville, Tenn., Luther T. Smith of Crossville, Tennessee, was sentenced to 96 months in prison, followed by three years of supervised release, and ordered to pay nearly $277,000 in restitution to the IRS. Smith was found guilty on two counts of income tax evasion and one count of filing a false income tax return. During the trial, evidence revealed that Smith, an independent life insurance agent, failed to report income received during 2001, 2002, and 2003. During this time, Smith was living a lavish lifestyle, purchasing property on Franklin Road in Franklin, Tennessee, renting two apartments in Nashville, paying in excess of $107,000 for decorations and furnishings and purchasing appliances, electronics, furniture and fine jewelry, including a Rolex watch. Smith also paid for cruises for friends and family members. During the sentencing hearing, evidence presented also revealed that Smith, as a licensed insurance agent, was engaged in an illegal rebating scheme, in which a portion of the agent’s commission was returned back to the insurance policy holder. Smith’s insurance license was revoked by the State of Tennessee Department of Commerce and Insurance in January, 2011. The government also noted that Smith’s conduct had been on-going for almost 10 years and that he had not been paying his fair share of taxes as all U.S. Citizens are required to do. In determining Smith’s sentence, the judge applied enhancements for obstruction of justice, for using sophisticated means to commit the offense and for failing to report to the IRS more than $10,000 of income from criminal activity.
Rhode Island “Career Con Man” Sentenced To 16 Years in Federal Prison; Recovered Assets to Be Used to Compensate Victims
On July 21, 2011, in Providence, R.I., Rocco DeSimone was sentenced to 192 months in prison, followed by three years of supervised release and ordered to pay more than $6 million in restitution. DeSimone was convicted in March 2011 for bilking numerous investors from around the United States out of more than $6 million dollars in cash and property by making false representations regarding the sale and/or marketing of three inventions. DeSimone used the money he bilked from would be investors to fund an exotic, work free lifestyle. In March 2008, DeSimone escaped from a minimum security facility in New Jersey after he learned that federal agents had executed a search warrant at his Johnston, R.I., home in connection with this case. He was about to complete a federal prison term for tax fraud when he escaped from prison.
California Man Sentenced for $18 Million Ponzi Scheme
On July 19, 2011, in Eugene, Ore., Louis J. Borstelmann, of Thousand Oaks, California, was sentenced to 108 months in prison, followed by three years of supervised release, and ordered to pay nearly $19 million in restitution and forfeit $100,000 and a Lexus SUV. Borstelmann pleaded guilty in March 2011 to mail fraud and money laundering in connection with running a Ponzi scheme where he swindled more than 100 people out of more than $18 million. According to court documents, Borstelmann solicited individuals to invest in real estate through his company Sunburst Associates, Inc., a California corporation. Borstelmann falsely claimed to offer hard-money loans through his company that were secured by real estate deeds of trust. To entice potential investors, he falsely promised high rates of return and a security interest in the property allegedly pledged to secure the investment. In addition, Borstelmann admitted that the alleged investments never existed and that it was all a Ponzi scheme wherein he used new investor money to pay existing investor obligations, and spent investor money on personal items, including a car and a home.
Virginia Businessman Sentenced for Role in Investment Scheme Causing Millions in Losses
On July 19, 2011, in Richmond, Va., Julius Everett “Bud” Johnson was sentenced to 97 months in prison for his role in an investment scheme resulting in millions of dollars in losses. On April 11, 2011, Johnson pleaded guilty to one count of conspiracy to commit mail, wire and bank fraud and one count of engaging in unlawful monetary transactions. A future hearing will be held to determine the amount of restitution, which, according to the plea documents, is currently estimated to be approximately $8.9 million. According to court filings, from prior to July 2009 until at least March 2010, Johnson owned and operated several businesses based in Richmond, including Virginia Group Benefits (VGB); Mid-Atlantic Insurance (MAI); F.I.C. Financial Group Inc.; Benefit Contractors Administrators Inc. (BCA); River City Cleaners LLC; Roberts Awning LLC; Norvell Awning LLC; MHC Linen Services LLC; The Everett Group; and Living Well. Johnson and his co-conspirator offered investments in the different businesses, generally including a promise of returns of up to 10 percent within one to four years. Johnson and his co-conspirator represented to potential investors that their investment funds would be funneled directly into specific companies, which would generate the returns on investment. Instead, a significant portion of the invested funds was used to repay other investors and to cover operating costs for unrelated businesses.
Rapper Ja Rule Sentenced for Failing to File Income Tax Returns Resulting in Over $1.1 Million in Tax Losses
On July 18, 2011, in Newark, N.J., Jeffrey Atkins, the rapper popularly known as “Ja Rule,” was sentenced to 28 months in prison, followed by one year supervised release for failing to file tax returns with the IRS, after admitting that he did not pay his taxes for five years. Atkins, of Saddle River, N.J., previously entered his guilty plea to three counts of a five-count Information. According to documents filed in this case and statements made in court, Atkins was the sole shareholder of ASJA Inc. and Rule Tours Inc. Atkins admitted that during the five tax years from 2004 through 2008, he received music royalty income from ASJA Inc. and music tour and live performance-related income from Rule Tours Inc. Although Atkins pleaded guilty to charges specifically related to tax years 2004, 2005 and 2006, his sentence took into account the tax loss for all five years, including 2007 and 2008 – a total loss to the government of approximately $1,137,912. Atkins had also agreed to file true and accurate tax returns and to pay all taxes and penalties owed to the IRS.
Former Alabama Mayor Sentenced for Filing False Tax Returns
On July 15, 2011, in Montgomery, Ala., John Jackson, the former mayor of White Hall, Alabama, was sentenced to 24 months in prison, followed by one year of supervised release, and ordered to pay a $25,000 fine and $11,065 in restitution. According to court documents, Jackson filed false joint 2004, 2005 and 2006 U.S. Individual Income Tax Returns (IRS Forms 1040) that did not report all of the total income earned by Jackson and his spouse. Jackson did not report as income money he took from the city of White Hall and money he diverted from non-profit companies who handled the gaming license for White Hall.
Idaho Businessman Sentenced to 51 Months for Tax Evasion
On July 14, 2011, in Boise, Idaho, Douglas J. Fitzgerald, formerly of Eagle, Idaho, was sentenced to 51 months in prison, followed by three years of supervised release for attempting to evade income tax. Fitzgerald was also ordered to pay $308,912 in restitution to the IRS and perform 100 hours of community service. According to the plea agreement, Fitzgerald filed false tax returns that omitted the income from the sale of his business’ assets and from the sale of real property. Fitzgerald admitted that he failed to report over $1 million in income and evaded payment of taxes totaling $308,912 by using nominee entities. He titled the stock in his business and titled his real estate in two entities formed as Nevada corporations sole, which are state entities designed for use by church officials. Fitzgerald used the corporations as purported religious or charitable institutions, to conceal his income from the sale of his business and from the sale of real property. Fitzgerald also admitted that in one instance, he directed the proceeds of a real estate sale to another company and used the proceeds to purchase a house for his daughter. Fitzgerald also directed several hundred thousand dollars to a bank account in his wife’s name in the Philippines. He eventually moved to the Philippines but was returned to the United States after he was indicted. Fitzgerald was previously convicted of filing false claims for tax refunds and mail fraud in 1998, after which he served 30 months in prison.
Wisconsin Man Sentenced To Federal Prison for Filing False Income Tax Return
On July 13, 2011, in Madison, Wis., Dale Scholl, of Mount Horeb, Wis., was sentenced to 18 months in prison, one year of supervised release, and fined $50,000 for filing a false 2006 federal income tax return. As a special condition of release, Scholl must complete 500 hours of community service. According to the evidence presented at the sentencing hearing, Scholl underreported $748,000 in income from 2001 to 2006. He owed over $201,000 in income taxes to the IRS, which he paid to the Clerk of Court. Scholl failed to report interest income he received from a loan sharking business he operated during those tax years. Scholl also failed to report income he received working as a heating and air conditioning contractor during that same time.
Former Bookkeeper Sentenced To Prison for Embezzlement and Money Laundering
On July 13, 2011, in Oklahoma City, Okla., Amy Joyce Cameron, of Washington, Oklahoma, was sentenced to 30 months in prison, three years of supervised release and was ordered to pay $455,904 in restitution her former employer. Cameron pleaded guilty on February 11, 2011, to mail fraud and money laundering charges. According to court records, Cameron worked as a bookkeeper for Quality Plumbing and Heating, located in Norman, Oklahoma, from 2006 through 2010. Her responsibilities included handling payroll, billing accounts, accounts receivable, and accounts payable. From March 2007 through February 2010, Cameron issued checks payable to herself on company bank accounts and deposited those checks into a personal bank account in Oklahoma City and a personal investment account in Cincinnati, Ohio. Cameron embezzled a total of $455,904.
Idaho Real Estate Developer Sentenced for Tax Fraud
On July 12, 2011, in Boise, Idaho, Glenn E. Mosell, of Eagle, Idaho, was sentenced to 15 months in prison followed by one year of supervised release. In addition, Mosell was ordered to pay $199,887 in restitution to the Internal Revenue Service (IRS). Mosell pleaded guilty to filing a false federal tax return on February 8, 2011. According to court documents, Mosell failed to report approximately $1.8 million of income on tax returns he filed for 2004, 2005 and 2006. The income was generated from sales commissions, the sale of real estate and from a lawsuit.
Former High School Bookkeeper Sentenced for Theft and Filing False Tax Returns
On July 12, 2011, in Rutland, Vt., Deborah Clough, a former high school bookkeeper, was sentenced to 14 months in prison followed by two years of supervised release. In addition, Clough was ordered to repay more than $111,000 in restitution to the school through its insurers, as well as $19,440 to the Internal Revenue Service. Clough pleaded guilty in March 2011 to charges of theft from an organization receiving federal funding and filing false tax returns. According to court documents, from in or about August 2007 until in or about August 2009, Clough repeatedly prepared unauthorized checks to herself from the High School Student Activities Account and fabricated supporting documents to justify the issuance of the checks. Clough obtained a total of approximately $106,000 from her fraud against the school. Because she failed to declare the stolen funds as income, she failed to pay over $19,000 in taxes during the years of the fraud.
Virginia Couple Sentenced for Conspiracy to Defraud the United States
On July 11, 2011, in Norfolk, Va., John Scott Miles was sentenced to 30 months in prison and Kathryn Charles Miles was sentenced to 20 months in prison. Both were sentenced to three years of supervised release and ordered to pay $215,591 in restitution. The Miles, a husband and wife, of Mathews County, Virginia, were sentenced for conspiring to impair and obstruct the IRS in the ascertainment and assessment of federal income taxes from 2001 through 2010. At their plea hearings, Kathryn Miles and John Miles admitted to earning taxable income as the owners and operators of a construction business named “Scotts Construction” and “KCM Construction & Design.” Kathryn Miles also admitted to earning taxable income as a nurse at various Virginia hospitals. The Miles’ joined American Rights Litigators, a business they knew sold and promoted tax avoidance methods, in 2001 and maintained an annual membership. Kathryn Miles admitted that, in 2005 and 2006, she submitted six tax returns to the IRS in which she falsely claimed that she earned no wages and in which she did not disclose the operation of her construction business. She submitted falsified tax documents with each tax return. John Miles admitted that he did not file tax returns during the time of the conspiracy.
Father and Son Sentenced for Concealing Ownership of a Bail Bond Business and Hiding Taxable Income
On July 8, 2011, in Baltimore, Md., Milton Tillman, Jr. (Milton Tillman) was sentenced to 51 months in prison, followed by five years of supervised release for filing a false tax return, unlawfully engaging in the business of insurance, wire fraud in connection with the operation of his bail bond business and a scheme to defraud his employer. Milton Tillman was also ordered to pay $120,000 in restitution to his employer in connection with his employment as a longshoreman. According to his plea agreement, Milton Tillman began serving a federal prison sentence after being convicted of tax related charges. Prior to the start of his sentence and during his imprisonment, Milton Tillman admitted that he made arrangements with his son, Milton Tillman III, aka “Moe,” (Moe Tillman), and others to incorporate and manage several bail bonding businesses. Milton Tillman was not eligible to be licensed as a bail bondsman without written consent from the Maryland Insurance Administration (MIA), however, he never applied for, nor received, consent from the MIA. Upon Milton Tillman’s release from federal prison in 2001, a condition of his supervised release was to obtain employment. Milton Tillman reactivated his union membership and worked as a longshoreman primarily at a port terminal in Baltimore. Wage records indicated that the company paid wages and hourly benefit contributions to Milton Tillman for at least 258 shifts; however, he was not present to unload cargo vessels for 121 of the work shifts. According to Moe Tillman’s plea agreement, he admitted that, as an officer and the only listed shareholder of the company, he was legally obligated to file a corporate tax return for 2003 for 4 Aces, which he failed to do. Investigating agents estimated that the company had a net taxable income in 2003 of at least $80,489, with taxes due of approximately $15,616. Moe Tillman was sentenced to five years probation with the special condition that he serve six months in community confinement and six months on home detention with electronic monitoring. Moe Tillman was also ordered to pay $12,500 in restitution to the IRS.
Ohio Woman Sentenced for Defrauding Employer
On July 7, 2011, in Cincinnati, Ohio, Kimberly Prebles of Monroe, Ohio, was sentenced to 71 months in prison, followed by three years of supervised release. She was also ordered to pay $3,612,634 in restitution to the victims of her crime and $829,307 in restitution to the IRS. Prebles previously pleaded guilty for one count of wire fraud and one count of filing a false federal income tax return arising from her scheme to defraud a former employer of approximately $4,315,755 over a ten-year period. According to court documents, Prebles worked at a Middletown, Ohio company from approximately 1999 until March 2009, most recently as an accounting manager in the accounts payable department. In or about June 1999, Prebles fraudulently opened a bank account in the name of one of the company’s vendors and began writing checks and making wire transfers from the company’s accounts into the fraudulent account she controlled. She falsified company documents to conceal her embezzlement. She used the stolen money to pay personal expenses including the purchase of property, jewelry, travel, vehicles, and home improvements. In addition to the wire fraud, Prebles also pleaded guilty to failing to report the income from the embezzlement scheme on her personal income tax returns from 2005 through 2008.
Missouri Woman Sentenced For Filing False Tax Returns; Embezzled $383,000 from Employer
On July 7, 2011, in Kansas City, Mo., Jacquelyn Dee Lackland, of Peculiar, Mo., was sentenced to three years in prison for filing false tax returns that failed to report income she obtained by embezzling more than $383,000 from her employer. On April 15, 2011, Lackland pleaded guilty to filing a false tax return. According to court documents, Lackland, who was hired to provide personal nursing care, admitted that she embezzled $383,076 from her employer by cashing and depositing forged and stolen checks. Lackland also admitted that she evaded paying taxes on that income, as well as $46,431 in income from her employment, for tax years 2004 through 2007
Arkansas Couple Sentenced for Role in Prostitution and Money Laundering Conspiracy
On July 6, 2011, in Fayetteville, Ark., Jason M. Fedele and Tiffney R. Fedele were sentenced for their involvement in a local prostitution ring. Jason M. Fedele was sentenced to 66 months in prison, three years of supervised release for using an interstate facility to distribute proceeds from prostitution, conspiracy to commit money laundering and possession of firearms. Tiffney R. Fedele, was sentenced to 21 months in prison and three years of supervised release for conspiracy to use an interstate facility to distribute proceeds from prostitution and conspiracy to commit money laundering. Five co-defendants, James B. Mitchell, also of Fayetteville, Sherrie Havens-O’Donnell, Sherry Mae Seals, William Marshall and Conrad Dickson have already been sentenced. Mitchell, the Fedeles, and their co-conspirators admitted that the escort service, which Mitchell owned from approximately July 2003 until he was arrested on August 10, 2010, was actually an interstate and intrastate prostitution enterprise which employed escorts to engage in sexual acts with customers for monetary payment. Mitchell and his co-conspirators advertised numerous escort services in the yellow pages of multiple phone books in Arkansas and Missouri. Mitchell hired individuals to answer the service telephone lines and set up appointments for the prostitutes. Prostitutes were paid by customers for sexual services with cash, checks and credit cards. Mitchell hired other individuals to assist with collecting the prostitution proceeds. Mitchell and his co-conspirators used banks and other financial institutions to conduct financial transactions with the prostitution proceeds, both to conceal and disguise the nature, source and ownership of the proceeds and to promote the prostitution enterprise.
Minnesota Man Sentenced for Stealing Mortgage Title Insurance Proceeds
On July 6, 2011, in Minneapolis, Minn., Trent Christopher Jonas was sentenced to 24 months in prison and to pay more than $5.3 million in restitution on one count of wire fraud and one count of money laundering. Jonas was charged on November 22, 2010, and pleaded guilty on December 30, 2010. In his plea agreement, Jonas admitted that from June of 2005 through August of 2007, he misappropriated more than $5.3 million; money that was intended to pay for title insurance premiums, title search costs and recording fees in connection with thousands of residential real estate mortgage financing transactions. According to court documents, Jonas owned and operated Title Source, Ltd. and Zen Title, two title insurance agencies. Both agencies acted as an insurance agent for Ticor Title Insurance Co., a title insurance underwriting company located in Florida, which is a subsidiary of Fidelity National Financial and United General Title Insurance Co. Fidelity mailed checks to Title Source and Zen Title to pay the title insurance premiums, title search and recording fees on behalf of the closing agent after closings. Instead, Jonas admitted using the funds for other business and personal expenses. By doing so, Jonas defrauded the mortgage lender, the borrower and the title insurance underwriter, Ticor Title.
California Man Sentenced for Tax Evasion
On July 5, 2011, in Fresno, Calif., Walter Watts, III, of Clovis, California was sentenced to 18 months in prison, three years of supervised release, and ordered to pay $98,486 in restitution to the Internal Revenue Service. Watts pleaded guilty to tax evasion on April 4, 2011. According to his plea agreement, Watts admitted that he had under-reported his income for tax year 2007, and that during the same year, he deliberately converted $31,000 in cash into four cashier’s checks and used those checks for a down payment on a $72,000 motorboat. Watts was also ordered to forfeit the motorboat.
Texas Man Sentenced to Prison for Failing to Pay Taxes
On July 1, 2011, in Houston, Texas, Jimmy Mitlo was sentenced to 24 months in prison and was ordered to pay $555,720 in restitution to the IRS. Milto pleaded guilty in November 2010 to one count of willfully conspiring to impede the IRS from collecting his income tax liabilities from 1989, 1990 and 1991. According to his plea agreement, Mitlo signed a decision document in the U.S. Tax Court in 2000 agreeing that he owed taxes, penalties and accruing interest for those tax years of approximately $349,939. Mitlo also admitted that even though he made substantial amounts of money from 2004 through 2008 by repairing machines and selling scrap metal, he conspired with an unnamed co-conspirator to conceal his income and assets from the IRS instead of paying his old income tax liabilities. Some of the steps that Mitlo or his co-conspirator took to conceal income and assets from the IRS included cashing checks at check-cashing companies; using bank accounts opened in the names of others; failing to timely file income tax returns for years 2001 through 2008; depositing large amounts of cash into the nominee bank accounts; and breaking larger deposits of cash into amounts of less than $10,000 to avoid banking requirements to report cash transactions of $10,000 or more to the U.S. Department of Treasury. The court included in the restitution order the $205,781 Mitlo owes for tax years 2004 through 2008.
Leader in $78 Million “Dream Home” Mortgage Fraud Scheme Sentenced
On July 1, 2011, in Greenbelt, Md., Michael Anthony Hickson, of Commack, New York, was sentenced to 120 months in prison, followed by three years of supervised release and ordered to pay restitution in the full amount of the loss, with the exact amount to be determined at a later hearing. Hickson was convicted for his participation in a fraud conspiracy, wire fraud and conspiracy to commit money laundering in connection with a massive mortgage fraud scheme which promised to pay off homeowners’ mortgages on their “Dream Homes,” but left them to fend for themselves. According to evidence presented in court, beginning in 2005, Hickson, the former chief financial officer of Metro Dream Homes (MDH, and his co-conspirators, targeted homeowners and home purchasers to participate in a purported mortgage payment program called the “Dream Homes Program.” In exchange, for a minimum $50,000 initial investment, the conspirators promised to pay off the homeowners’ mortgage within five to seven years. Dream Homes Program representatives explained to investors that the homeowners’ initial investments would be used to fund investments in automated teller machines (ATMs), flat screen televisions that would show paid business advertisements and electronic kiosks that sold goods and services. To give investors the impression that the Dream Homes Program was very successful, MDH spent hundreds of thousands of dollars making presentations at luxury hotels. According to trial testimony, the defendants failed to advise investors that: the ATMs, flat-screen televisions and kiosks never generated any meaningful revenue; and the defendants used the funds from later investors to pay the mortgages of earlier investors. The defendants also failed to advise investors that their investments were being used for the personal enrichment of select MDH employees, including the conspirators. As a result of the scheme, more than 1,000 investors in the Dream Homes Program invested approximately $78 million. When the conspirators stopped making the mortgage payments, the homeowners were left to attempt to make the mortgage payments MDH had promised to make in full.
Michigan Office Manager Goes to Prison for Debit Card Fraud and a Tax Charge
On June 30, 2011, in Grand Rapids, Mich., Rebecca Sue Kellogg, of Eaton Rapids, Michigan, was sentenced to 42 months in prison, three years of supervised release, and ordered to pay $245,468 in restitution to her former employer and $60,663 to the Internal Revenue Service. This sentence was imposed following her guilty plea to identity theft, access device fraud, and making a false statement on a federal tax return. According to court records, from September 2008 to September 2009, Kellogg was employed as an office manager at Capital Communications Systems, Inc., of Lansing, Michigan. During this time, she had unauthorized access to a corporate debit card that had been issued to the former company comptroller. She admitted using the debit card to make frequent withdrawals of $500 in cash from Lansing area ATM machines. The unauthorized ATM withdrawals totaled over $148,000. She also admitted that when she filed her 2009 federal income tax return, she knowingly failed to report the income from her unauthorized debit withdrawals.
North Carolina Couple Sentenced for Health Care Fraud and Tax Offenses
On June 29, 2011, in Greensboro, N.C., Ruben D. McLain and Michelle Judge McLain, both of Winston-Salem, North Carolina, were each sentenced to 24 months in prison, followed by three years of supervised release. They were also ordered to pay restitution of $1,313,671 jointly and severally to the Internal Revenue Service. The McLains did business in Winston-Salem as Universal Services, Inc., Reynolds Home Care, and Triage Behavioral Health Systems. According to their plea agreement, the McLains admitted they established a bank account for Universal Services, Inc. using a false tax identification number. They also admitted to using business bank accounts to purchase personal items for their home, to pay school tuition for their children, and to purchase jewelry. The McLains also admitted that, from 2004 through 2007, they either failed to file tax returns or filed false tax returns that did not declare their true income. The McLain companies provided personal care and mental health services to qualified recipients, paid for by the Medicaid program. The McLains admitted that they submitted a false enrollment application to the North Carolina Division of Medical Assistance that concealed their involvement in the companies through the use of a nominee and a fictitious person. The McLains also admitted to withholding income, social security, and Medicare taxes from their employees’ wages without paying over those withholdings to the Internal Revenue Service.
Connecticut Man Sentenced to Three Years in Federal Prison for Bank Fraud, Money Laundering
On June 29, 2011, Hartford, Conn., Sabir Moghul, of Manchester, was sentenced to 36 months in prison, followed by three years of supervised release, and ordered to pay $1.2 million in restitution. On June 14, 2010, Moghul waived his right to indictment and pleaded guilty to one count of bank fraud and one count of money laundering. According to court documents and statements made in court, in 2005, Moghul applied for two mortgage loans from different banks, each in an amount of more than $1 million, using his former residence as collateral. Each loan was supposed to be secured with a first mortgage on the residence, but at no time did Moghul inform either lender that he had applied for another loan to be secured by the same property. During the application processes, Moghul’s residence was appraised twice. One appraisal valued the residence at approximately $1.6 million and a second appraisal valued the residence at approximately $1.8 million. Moghul received approval for each loan. During the first closing, Moghul and his wife signed mortgage loan documents for a loan in the amount of $1,080,000 from Lehman Brothers Bank. At the second closing, Moghul and his wife signed mortgage loan documents for a loan from Washington Mutual in the amount of $1,200,000. After the closings, Lehman Brothers Bank recorded a first mortgage and Washington Mutual Bank recorded a secondary security interest. Moghul subsequently defaulted on the loans and the home went into foreclosure. Washington Mutual sustained a loss of approximately $1.2 million as a result of Moghul’s fraud. In August 2005, Moghul applied $445,000 of the fraudulently obtained loan proceeds to the purchase of a medical office building, which has since been sold through foreclosure.
New York Man Sentenced for False Claims
On June 29, 2011, in Rochester, N.Y., Michael Israel was sentenced to 24 months in prison, followed by three years supervised release after pleading guilty to three counts of making false claims against the government and one count of false impersonation of a United States employee or officer. Israel was also fined $1,000. In 2009, Israel filed three false tax returns, one in his own name and two returns in the names of other individuals. Israel utilized false wage and withholding amounts from a “shell” company that he owned to request significantly inflated refunds. As a result, Israel claimed a total of $325,250 in tax refunds from the IRS. After one of the tax refunds was frozen by the bank, Israel called the bank posing as a United States Secret Service agent seeking release of the refund.
California Woman Sentenced on Tax Evasion Charges
On June 28, 2011, in San Jose, Calif., Beverly Harville was sentenced to 30 months in prison and ordered to pay $1,034,334 in restitution. Harville pleaded guilty on March 22, 2011, to five counts of tax evasion. According to the plea agreement, Harville worked as a payroll specialist/contract administrator at a company for twenty-one years and had access to the business bank accounts of the company and a sister company. Harville also had access to the personal bank accounts of the owners of the companies. In 2004, Harville began embezzling funds from the business accounts of both companies and the personal accounts of the owners. She used a variety of schemes to facilitate and conceal her embezzlement. Harville entered false vendor payments into the accounts payable system to account for the money she stole; she manipulated the companies’ payroll systems in order to steal fellow employees’ vacation accruals, which she would then convert to cash; and she stole blank personal checks that she would account for as voids in the check registers, filling out the checks to herself and cashing them. Harville used a system of multiple offset register entries to disguise the embezzlement when taking money from the personal accounts of the owners. For the tax years 2004 through 2008, Harville embezzled $783,924, which she did not report as taxable income. This resulted in additional tax due of $250,410. Harville agreed to restitution of $1,034,334 which accounts for $783,924 to the victims and $250,410 to the IRS.
Salesman for Union Trade Newspaper Sentenced for Failing to Report Over $153,000 in Commission Payments
On June 28, 2011, in Newark, N.J., Gerald DePaul was sentenced to seven months in prison, followed by two years supervised release, including five months of home confinement for income tax evasion. On June 16, 2010, DePaul pleaded guilty to one count of a four-count Information charging him with tax evasion for failing to report all of his income for the 2001 tax year. According to court documents, DePaul was employed as a commissioned salesman for Trade Union Media Group, Inc. Trade Union published a labor union newspaper and sold advertisements in that newspaper. In addition, DePaul was the principal owner and operator of Striper Entertainment, Inc., a company that purportedly sold fishing equipment. In an attempt to conceal his income from the Internal Revenue Service, DePaul directed Trade Union to issue checks representing his taxable income to Striper Entertainment. DePaul deposited some of these checks into an account under his control. In doing so, DePaul failed to report approximately $153,547 in additional taxable income for the 2001 tax year. This additional taxable income resulted in a tax loss to the government of approximately $42,504. In his plea agreement, DePaul was also held responsible for an additional tax loss of approximately $35,340 related to unreported income between the years 2002 and 2004.
North Chicago Restaurant Owner Sentenced for Tax Evasion
On June 23, 2011, in Chicago, Ill., John Psihos was sentenced to 24 months in prison, one year of supervised release and was ordered to pay $837,724 in restitution for income tax evasion. Psihos, the owner of the Flanagan's restaurant at 3201 Buckley Road in North Chicago, and previously the Metro Lounge, pleaded guilty on April 8, 2011, to four counts of income tax evasion. According to his plea agreement, from about January 2001 and continuing until at least December 2004, Psihos maintained two sets of financial records for Flanagan's gross receipts or sales. He recorded the correct amount of gross receipts from Flanagan's on one of the set of financial records that he kept for himself, but falsely under-reported the amount of gross receipts on the set of financial records he provided to his accountant. His accountant used the fraudulent set of financial records to prepare Flanagan's financial statements and Form 1120S corporate tax returns for calendar years 2001 through 2004. As a result of preparing and submitting these false financial records to his accountant, Psihos knowingly caused his accountant to prepare Form 1120S corporate tax returns for Flanagan's that falsely under-reported the amount of gross receipt and taxable income for calendar years 2001 through 2004. In addition to filing the false corporate income tax returns, Psihos knowingly and willfully filed false personal income tax returns (Form 1040) with the Internal Revenue Service for the same years. In total, Psihos failed to report approximately $3,210,129 in gross receipts.
Co-Conspirators of Arkansas Prostitution Ring Sentenced
On June 16, 2011, in Fayetteville, Ark., James B. Mitchell was sentenced to 126 months in prison, followed by three years of supervised release and ordered to pay a $15,000 fine. According to court documents, Mitchell and his co-conspirators admitted that the escort service, which Mitchell owned from approximately July 2003 until he was arrested on June 11, 2010, was actually an interstate and intrastate prostitution enterprise which employed escorts to engage in sexual acts with customers for monetary payment. Mitchell and his co-conspirators advertised numerous escort services in the yellow pages of multiple phone books in Arkansas and Missouri. Mitchell and his co-conspirators used bank and other financial institutions to conduct financial transactions with the prostitution proceeds, both to conceal and disguise the nature, source and ownership of the proceeds and to promote the carrying-on of the prostitution enterprise. Several of Mitchell’s co-conspirators have also been sentenced. Sherrie Havens-O’Donnell, of Springfield, Missouri, was sentenced to 46 months in prison, three years of supervised release and ordered to pay a $5,000 fine. Sherry Mae Seals, of Russellville, Arkansas, was sentenced to 24 months in prison, followed by three years of supervised release and ordered to pay a $5,000 fine. William Marshall, of Springfield, Missouri, was sentenced to 41 months in prison, three years of supervised release and ordered to pay a $3,000 fine. Conrad Dickson, of Pea Ridge, Arkansas, was sentenced to 12 months in prison, followed by three years of supervised release and a $2,000 fine.
Utah Businessman Sentenced on Tax Charges
On June 14, 2011, in Salt Lake City, Utah, Thomas J. Hook, owner of Westerner Private Club, Inc. during 2002, was sentenced to 12 months and one day in prison and one year supervised release. In addition, Hook was ordered to cooperate with the Internal Revenue Service (IRS) to file all outstanding tax returns and pay all outstanding taxes, interest, and penalties. Hook pleaded guilty in March 2011 to making and signing a false federal income tax return. According to court documents, Hook admitted that during 2002, the management of the club systematically excluded cash received at the bar from the books and records that were given to the accountant who prepared tax returns for the business. Hook admitted that the difference between the actual cash received and the cash reported on the books was substantial and likely would have impacted the calculation of tax owed to the federal government. Additionally, Hook admitted that on September 15, 2003, he signed a tax return prepared for the club based on books presented to the accountant which did not report all of the gross receipts of the business and that he did it with the intent of reducing the club’s income tax liability.
North Carolina Dermatologist Sentenced on Tax Charges
On June 13, 2011, in Greensboro, N.C., Clyde Nolan was sentenced to 24 months in prison, followed by two years of supervised release and ordered to pay $585,835 in restitution to the Internal Revenue Service. Nolan operated a dermatology practice as a sole proprietorship in Greensboro, North Carolina. Nolan employed a staff in this office and withheld taxes from his employees’ paychecks. According to his plea agreement, Nolan admitted that he failed to account for and pay over $42,596 he withheld in taxes from his employees’ paychecks from 2003 and 2006. Nolan used that money for his own personal use. Nolan also willfully failed to file a personal income tax return for calendar year 2004, a year in which he was required to file a return.
Idaho Bookkeeper Sentenced for Embezzlement
On June 13, 2011, in Boise, Idaho, Connie A. Stills, of Middleton, Idaho, was sentenced to 41 months in prison, followed by three years of supervised release, for filing false tax returns and mail fraud. The judge also ordered Stills to pay $1.7 million in restitution. Stills pleaded guilty to the charges on September 21, 2010. According to court documents, Stills was employed as a bookkeeper for Port of Hope Centers, Inc., in Nampa, Idaho, a non-profit entity which operates drug and alcohol treatment centers throughout Idaho. Between 2004 and 2008, Stills embezzled approximately $1.3 million from Port of Hope. Stills substantially under-reported the amount of her taxable income by failing to include the embezzled income on her personal federal income tax returns. Stills' daughter, Bobbi George, was sentenced on April 19, 2011, to five years of probation and was ordered to pay $233,024 in restitution as a result of her involvement in the misappropriation of $177,000 from the Port of Hope. She pleaded guilty to wire fraud in October 2010.
Minnesota Man Sentenced For Filing False Claims for More Than $2 Million in Tax Refunds
On June 8, 2011, in St. Paul, Minn., Robert Mohan Tiwari was sentenced to 20 months in prison on one count of filing a false claim for a tax refund. Tiwari also was ordered to pay approximately $602,000 in restitution. Tiwari was charged on December 27, 2010, and pleaded guilty on January 18, 2011. According to his plea agreement, Tiwari admitted that on June 14, 2010, he filed a U.S. Individual Income Tax Return in his name that claimed a tax refund of $906,419 even though he knew he was not entitled to that money. Moreover, he filed six additional tax returns for tax years 2008 and 2009 under the names of other individuals. Those returns requested a combined refund of over $2 million. The actual loss to the government was approximately $602,000.
North Carolina Settlement Company Owners Sentenced
On June 8, 2011, in Charlotte, N.C., Jerry Holmes, of Matthews, North Carolina, was sentenced to 33 months in prison, followed by two years of supervised release and ordered to pay $1.9 million in restitution. Holmes was an owner and former chief executive of Settlement Source, LLC. Another Settlement Source owner, R. Scott Pace, of Charlotte, North Carolina, was sentenced to 33 months in prison, followed by two years of supervised release and ordered to pay $1.9 million in restitution. Holmes and Pace were each sentenced for their roles in embezzling money from the escrow account at the Settlement Source and for tax evasion. According to the bill of information, in or about November 2005, Holmes and Pace discovered they could embezzle client funds from the escrow account, at least initially, without any customer discovering the embezzlement and without any noticeable effect on operations. Over time, Holmes and Pace, with the assistance of another, embezzled substantial amounts of money for, among other things, real estate investments, a box suite for Carolina Panthers football games, personal loans, and a loan for Holmes’ daughter and son-in-law to purchase a house. When the scheme collapsed in or about July 2008, it caused losses to clients and insurers of approximately $2.4 million.
Missouri Business Owner Sentenced For False Tax Returns
On June 8, 2011, in Kansas City, Mo., Inocente Ramirez, of Grandview, Missouri, was sentenced to 14 months in prison and was ordered to pay $467,050 in restitution after pleading guilty to making false statements to the IRS on his 2005 income tax return. According to court documents, Ramirez owned and operated Ramirez Roofing, which subcontracted with larger roofing companies and other contractors. Ramirez admitted that he filed tax returns for 2003, 2004 and 2005 that significantly understated the gross receipts for his roofing business. Ramirez grossed almost $6 million dollars during the period, but he filed tax returns which included only income reported on Forms 1099, and omitted everything else, thereby significantly under-reporting his income. According to the plea agreement, Ramirez’s unreported income was $195,946 for 2003, $507,128 for 2004, and $541,841 for 2005, resulting in a tax loss of $467,050 for the three years. In addition, Ramirez has not filed any income tax returns for the years 2008-2010.
Utah Man Who Embezzled $1.3 Million Sentenced To Federal Prison
On June 7, 2011, in Salt Lake City, Utah, Nathan Lee Kapp, of Syracuse, was sentenced to 30 months in prison and 36 months of supervised release for embezzling $1.3 million from his former employer. Kapp, who pleaded guilty in March to money laundering, admitted embezzling the money from early 2007 to November 2010. According to documents filed by federal prosecutors in the case, Kapp converted the money to his own personal use, including purchasing a $630,000 home; three luxury vehicles; property; basketball tickets; and other personal items.
Oklahoma Man Sentenced for Defrauding Investors in Foreign Currency Trading Scheme
On June 7, 2011, in Tulsa, Okla., Timothy Broadous was sentenced to 51 months in prison, ordered to pay $1,562,897 in restitution, and to forfeit $1,205,489 in criminal proceeds of his crime. On March 4, 2011, Broadous pleaded guilty to two counts of wire fraud. In his plea agreement, Broadous admitted that between 2005 and 2007, he devised a scheme to defraud investors in his two companies, Embassy Investments & Securities, Inc., and Embassy Ventures, Ltd. The investors believed that Broadous was investing their funds in the FOREX Spot Market (foreign currency trading) through certain holding company accounts that he controlled. From the total amount of investor funds received, Broadous only invested $197,000, which was lost. The balance of investor funds was either returned to investors who requested refunds or used for his personal benefit and gain. Broadous diverted $1,398,803 in investor funds for other than their intended purpose. The total loss to investors as a result of the scheme was $1,689,788.
CEO of Capitol Investments USA, Inc. Sentenced in $930 Million Ponzi Scheme
On June 7, 2011, in Newark, N.J., Nevin Shapiro, the former owner and Chief Executive Officer of Capitol Investments USA, Inc. (Capitol) was sentenced to 240 months in prison, followed by three years of supervised release and ordered to pay $82,657,362 in restitution. Shapiro, of Miami Beach, Fla., pleaded guilty to one count of securities fraud and one count of money laundering for overseeing a $930 million Ponzi scheme linked to his purported wholesale grocery distribution business. According to court documents, Shapiro used Capitol to solicit approximately $930 million between January 2005 and November 2009 from individuals who believed they were investing in Shapiro’s grocery distribution business. Shapiro admitted that Capitol had virtually no income-generating business during that time, and that he used new investor funds to make principal and interest payments to existing investors, as well as to fund his own lavish lifestyle. More than $35 million in investor funds were misappropriated for Shapiro’s personal use. To induce investors, Shapiro directed others to create and show to the investor’s documents fraudulently touting Capitol’s profitability. Shapiro admitted that more than 50 victim investors lost a total of between $50-100 million as a result of the scheme.
Two Men Sentenced to Prison in Multimillion Dollar Heating Oil Embezzlement and Money Laundering Conspiracy
On June 3 and June 7, 2011, in Central Islip, N.Y., Tonino Solimine and Eston Clare were sentenced for their role in a multimillion dollar heating oil embezzlement and money laundering conspiracy. Solimine was sentenced to 60 months in prison, followed by three years supervised release and a $550,000 fine. He will be deported upon release. Clare was sentenced to 12 months and one day in prison and 3 years supervised release. They were also ordered to pay a joint and several money judgment forfeiture of $7,000,000. These are the latest sentencing’s resulting from investigations into the skimming of home heating oil deliveries in the NY metropolitan area.
Tennessee Resident Sentenced on Wire Fraud and Tax Evasion Charges
On June 3, 2011, in Knoxville, Tenn., Jessica Potter Stafford, of Kingston, Tennessee, was sentenced to 27 months in prison, followed by three years of supervised release. Stafford was also ordered to pay $119,310 in restitution to the Internal Revenue Service (IRS), $111,794 in restitution to her former employer, and a special assessment of $1,300 to the court. Stafford pleaded guilty in February 2011, to 10 counts of wire fraud and three counts of failure to pay income tax. According to court documents, Stafford was employed as Director of Administration for several businesses located in Knoxville, Tennessee. In the course of her employment, she was issued credit cards to be used for the sole purpose of paying expenses relating to her employment duties. Stafford admitted that from January 1, 2005, through August 31, 2008, she devised a scheme in which she used the company credit cards to charge more than $200,000 in personal charges at various stores. In the plea agreement, Stafford admitted that she paid for the unauthorized charges with funds from her former employer. Stafford also admitted to failing to report over $405,000 in income during 2006, 2007, and 2008, resulting in additional tax due to the United States of over $119,000.
Arkansas Physician Sentenced for Sheltering Assets in an Abusive Tax Shelter
On June 3, 2011, in Fayetteville, Ark., Todd Richard Simpson was sentenced to 30 months in prison, followed by three years of supervised release. Simpson was also ordered to pay $812,221 in restitution to the Internal Revenue Service and a $10,000 fine. Simpson pleaded guilty in March 2011. According to the factual basis included in the plea agreement, Simpson, a medical physician since 1994, was selected for an audit after he was identified as a taxpayer who had participated in an abusive tax shelter. The audit determined that Simpson owed a substantial amount of tax for tax years 1998 through 2001. Simpson admitted that during the audit process he began moving personal assets into the name of a Subchapter S corporation named Richlynn Enterprises for the purpose of sheltering his assets from collection by the IRS. Simpson also admitted that he provided false information to the IRS on a collection information statement in an effort to thwart collection efforts.
Former District Attorney Sentenced for Tax Evasion
On June 1, 2011, in Lafayette, La., Joseph Floyd Johnson was sentenced to 18 months in prison, followed by three years of supervised release and ordered to pay $179,661 in restitution. Johnson was employed as an assistant district attorney with the Lafayette Parish District Attorney’s Office from 1995 until at least July 2010 and he was also engaged in the private practice of law beginning around 1989 until at least July 2010. Based on the taxable income Johnson earned, he owed federal income tax. According to his plea agreement, in November 2010, Johnson admitted that he willfully attempted to evade federal income tax by failing to prepare and submit a tax return for the tax year 2003 on or before April 15, 2004, as required by law. He also admitted to committing other acts such as concealing the nature, extent and location of his assets to the IRS, making false statements to IRS agents, placing funds and property in the names of nominees to attempt to hide the true ownership of the assets, making checks payable to others to conceal assets from the IRS, paying creditors instead of the government and depositing checks into a client trust account to conceal the nature of the funds and give the appearance that the funds were neither income nor assets. According to the bill of information, as of July 2010, Johnson failed to file federal income tax returns for 2003, 2004, 2005, 2006, 2007 and 2008 despite the fact that he was required to do so by law.
Minnesota Attorney Sentenced For Tax Evasion
On May 26, 2011, in Minneapolis, Minn., Samuel Alfred McCloud was sentenced to 18 months in prison and two years of supervised release on one count of tax evasion. McCloud was also ordered to cooperate with the Internal Revenue Service and the Minneapolis Department of Revenue in the assessment and collection of taxes, interest, and penalties owed by him. McCloud pleaded guilty on December 9, 2010. In his plea agreement, he admitted concealing $595,000 from both the IRS and the Minnesota Department of Revenue. Between 2004 and 2006, McCloud worked at two law firms, but he instructed clients to write checks to him directly rather than making them payable to the law firms. McCloud admitted depositing or instructing others to deposit those checks in bank accounts held in the name of another person as well as in the name of several sham corporations. In addition to failing to report the income, McCloud failed to pay state or federal taxes on it.
Former Missouri Goodwill Executive Sentenced for Million Dollar Embezzlement
On May 25, 2011, in St. Louis, Mo., Ronald Partee, of St. Louis, was sentenced to 70 months in prison and ordered to pay more than $1 million in restitution. He pleaded guilty in January to one count of embezzlement and one count of money laundering. According to court documents, Partee worked for several years at MERS/Goodwill Industries of Missouri in a variety of capacities, including as benefits coordinator. He eventually became an assistant vice president for human resources. He was routinely involved in matters requiring the payment of expenses, including benefits and unemployment insurance premiums. Between January 2007 and June 30, 2010, Partee embezzled more than $1 million from Goodwill by presenting fraudulent bills, invoices, and letters to Goodwill to dupe employees in the accounts payable department to draft checks which the he took and converted to his own use. Typically, he deposited the checks into one of several bank accounts he controlled. He also set up and registered fictitious business entities, set up a P.O. Box, and obtained a toll-free telephone line to make his scheme less likely to be detected. Partee established fictitious businesses and business banking accounts for use in converting Goodwill checks into funds he could spend. In his plea agreement, Partee admitted that he used the embezzled funds to purchase numerous vehicles, tickets to sporting and concert events, and to travel and pay the expenses of others. Partee used a variety of methods to accomplish his embezzlement scheme and adapted those methods as circumstances at the nonprofit organization changed.
Former Oklahoma Postmaster Sentenced for Embezzlement from Postal Service and Tax Fraud
On May 25, 2011, in Oklahoma City, Okla., James E. Draheim, of Elgin, Oklahoma, was sentenced to 37 months in prison, followed by two years of supervised release, and ordered to pay $643,604 in restitution. According to information presented in court, Draheim was employed as the Postmaster in Elgin, Oklahoma. From October 2005 through September 2009, he used his position of trust to embezzle from the United States Postal Service. Specifically, Draheim took money paid by postal customers for bulk mailings, failed to credit the customer’s account for the full amount of the check, and then embezzled the difference by purchasing money orders in his own name which he then used for his own personal benefit. Draheim pleaded guilty on September 28, 2010, to theft of public funds and filing a false tax return for the 2008 tax year.
Seattle Businessman Sentenced in $65 Million Ponzi Scheme
On May 23, 2011, in Seattle, Wash., Robert Miracle, of Bellevue, was sentenced to 156 months in prison and three years of supervised release for his role in a $65 million “ponzi” scheme. The amount of restitution Miracle owes will be determined at a later date. Miracle and two Malaysian Nationals, Mukhtar Kechik, and Fahimi Fisal, were charged in February 2009, in a 23-count indictment charging conspiracy, mail fraud, wire fraud, money laundering and tax evasion. Kechik and Fisal remain fugitives. According to court documents, Miracle and his co-defendants represented to investors that various companies were making money from oil field development and services on oil and gas fields in Indonesia. Between September 2004 and October 2007, Miracle took in more than $65.3 million and paid out $36.7 million as dividends to investors. The bulk of the remaining funds were used to develop oil and gas fields in Indonesia, as well as to pay for a lavish lifestyle for Miracle. Some of the proceeds of later investors were used to pay off the investments of earlier investors in the form of a “ponzi” scheme. In his plea agreement, Miracle admitted he owes the U.S. Treasury $326,650 in back taxes from 2003-2005. He also admitted that in 2005, he transferred more than $500,000 from the company accounts to his personal bank accounts for his own use. These transfers were claimed as “loans,” and Miracle under reported his income by almost $530,000, avoiding taxes of nearly $150,000, for 2005. As part of his plea agreement, Miracle agreed to pay restitution to the investors, as well as to the United States for back taxes. In addition, Miracle agreed to forfeit a 2 carat diamond ring Miracle purchased for more than $38,000 and a painting purchased in Italy for $27,000.
Former Governor’s Assistant Receives Federal Prison Term
On May 17, 2011, in Raleigh, N.C., Charles Ruffin Poole was sentenced to 12 months and a day in prison, followed by two years of supervised release, and ordered to pay $16,629 in restitution for underpaid taxes. In April 2010, Poole pleaded guilty to income tax evasion. According to the plea agreement, Poole attempted to evade a portion of his 2005 federal income tax liability by concealing his receipt of $30,000 of income he received in connection with his involvement in the financing of a high-end community in Carteret County. At his sentencing, Poole was held accountable for an additional $25,000 he received from the same source, which was also not reported on his tax returns. As part of the plea agreement, Poole agreed that he failed to report and correctly identify the source of income from criminal activity.
Operator of Multi-Million Dollar Ponzi Scheme Sentenced
On May 16, 2011, in San Diego, Calif., Thanh-Viet “Jeremy” Cao, the leader of a massive Ponzi scheme, was sentenced to 360 months in prison, followed by three years of supervised release, and ordered to pay $12,408,172 in restitution. Cao was convicted by a trial jury on December 9, 2010, of conspiracy and three counts of wire fraud. According to evidence presented in court, Cao was a career criminal who both defrauded and threatened his victims with extreme violence. Cao operated a long term Ponzi scheme that claimed to invest in real estate, mortgages, and certain financial transactions. Cao told his victims that he had a long history of financial success and experience. In fact, Cao had a history of cheating clients. He used the victims’ funds to pay for a $200,000 Bentley, numerous trips to Las Vegas, the remodeling of his parents’ home, and other luxury items. In total, Cao cheated approximately 190 victims out of more than $10 million. According to court documents, during the investigation, law enforcement officials seized Cao’s Bentley pursuant to a court order. Shortly after the Bentley was forfeited in 2008, Cao lashed out against federal and state judges, agents, prosecutors, and others by filing a series of false liens. A federal judge in Orange County, California, declared these false liens null and void, and a grand jury in Las Vegas returned a separate indictment against Cao for filing these false liens and for engaging in yet another tax scam. That case is scheduled for trial later this year. Cao remains in contempt of court in Orange County, and has been permanently enjoined in Los Angeles from filing false tax returns.
Arkansas Man Sentenced in Wire Fraud and Money Laundering Scheme
On May 13, 2011, in Little Rock, Ark., Glenn A. Railsback III, of Pine Bluff, Arkansas, was sentenced to 84 months in prison, followed by three years of supervised release, and ordered to pay $2.9 million in restitution. According to court documents, Railsback defrauded the beneficiaries of a trust for which he prepared tax returns. Railsback came into possession of stock shares that originally funded the trust and used the shares to open a brokerage account. Between September 2002 and December 2008, Railsback wrote checks on the account totaling approximately $2,850,980, deposited the checks into bank accounts under his control, and used the funds for his own benefit.
Illinois Contractor Sentenced to Prison on Federal Fraud and Tax Charges
On May 9, 2011, in Rockford, Ill., John M. Volpentesta, formerly of Marengo, Illinois, was sentenced to 133 months in prison, five years of supervised release, and was ordered to pay $1,378,127 in restitution to the victims of his fraud scheme. Volpentesta was convicted in July 2010 of various federal charges, including failure to pay over to the IRS taxes he withheld from the wages of his employees, failure to file unemployment tax returns, and failure to file personal income tax returns. According to the indictment, Volpentesta operated a residential construction business in Marengo, known as Volpentesta Construction, Inc. (VCI). He defrauded his construction company customers and investors out of more than $1 million. In addition, from the second quarter of 2003 through the fourth quarter of 2005, Volpentesta collected federal income tax, Medicare, and Social Security taxes from the wages of VCI's employees but failed to pay those monies to the IRS. He also failed to file Form 940, Federal Unemployment Tax returns, on behalf of VCI for the years 2003, 2004, and 2005; and, he failed to file personal income tax returns on behalf of himself and his wife for the same years.
Former Massachusetts Direct Mail Printing Executive Sentenced to Prison for His Role in Fraud Conspiracies and Tax Evasion
On May 12, 2011, in Boston, Mass., Reed A. Richard, of Carlisle, Mass., was sentenced to 30 months in prison, ordered to pay a $250,000 criminal fine and to pay $35,500 in restitution. On December 14, 2010, Richard pleaded guilty to conspiring with others to defraud his employers by accepting kickbacks from two direct mail advertising printing brokers in exchange for awarding printing work to the companies that the brokers represented. Richard also pleaded guilty to tax evasion for tax years 2004 and 2005 for falsely claiming substantial personal expenses as business expenses. According to court documents, as a vice president of direct marketing production services and later as a senior production manager, Richard was responsible for procuring direct mail printing services by obtaining competitive bids from printing companies, awarding contracts, reviewing invoices and authorizing payment. As part of the conspiracies, Richard approved invoices, issued by or through the printing brokers, while knowing that they were fraudulently inflated to include the kickbacks he was to receive. A portion of these overcharges were passed from the brokers to Richard as kickback payments. In order to conceal his role in the scheme, Richard used a shell company which purportedly provided consulting services to the printing brokers but was in fact a vehicle for Richard to receive the kickbacks. In addition to the conspiracies, Richard claimed substantial illegitimate business deductions on his company’s federal income tax returns. As a result, he under-reported his corporate and personal taxable income, resulting in a total tax loss of approximately $170,000.
Kansas Man Sentenced in University Ticket Fraud Case
On May 12, 2011, in Wichita, Kan., Ben Kirtland, of Lawrence, Kansas, was sentenced to 57 months in prison for conspiring to steal and sell tickets to sporting events. Kirtland is the former associate athletic director in charge of the fund-raising arm of the athletics program at the University of Kansas. He pleaded guilty to one count of conspiracy to defraud the United States. In his plea, Kirtland admitted he and a co-defendant sold tickets to university athletic events which they were not legally authorized to sell. . He admitted he received cash and checks for tickets, converting the checks to money orders to avoid detection. He did not claim the proceeds on his income tax returns or reports he filed annually with Kansas Athletics, Inc. Six other co-defendants in the case have been previously sentenced.
Oklahoma Woman Sentenced for Embezzlement and Filing a False Tax Return
On May 10, 2011, in Oklahoma City, Okla., Lora L. Renshaw, of Jones, Oklahoma, was sentenced to 30 months in prison and ordered to pay $1,982,777 in restitution for mail fraud and filing a false tax return. According to court documents, from 2005 through 2009, Renshaw worked as the office manager for a firm in Oklahoma City. In December 2010, Renshaw pleaded guilty to a two-count Information charging her with writing over 500 checks on the company’s account to pay her own personal expenses, forging the signature of an authorized signer on the checks, altering copies of the checks to reflect that payments had been made to legitimate company vendors, and submitting the altered check register and bank statements to the company’s CPA through the mail. Renshaw also pleaded guilty to submitting a false tax return for 2009 by failing to disclose the income she received from her embezzlement.
Uzbekistan Man Sentenced for Role in Multi-National Racketeering and Forced Labor Enterprise
On May 9, 2011, in Kansas City, Mo., Abrorkhodja Askarkhodjaev, an Uzbekistan national, was sentenced to 144 months in prison, three years of supervised release, and ordered to pay $172,000 in restitution to the victims and for the harm caused by his criminal enterprise. Askarkhodjaev pleaded guilty in October 2010 to racketeering conspiracy, fraud in foreign labor contracting, evasion of corporate employment tax and identity theft. As leader of this multi-national criminal enterprise, whose members included nationals of Uzbekistan, Moldova and the United States, Askarkhodjaev arranged for the recruitment and exploitation of dozens of workers from Jamaica, the Dominican Republic, the Philippines and elsewhere. Many workers were recruited with false promises concerning the terms, conditions and nature of their employment. Once in the United States, the workers were held in overcrowded apartments and compelled into service and hospitality jobs in as many as 14 states. Members of the criminal enterprise withheld much of the victims’ earnings and threatened them with deportation and financial penalties if they refused to comply with the defendants’ demands.
Oklahoma Doctor Sentenced for Tax Evasion
On May 6, 2011, in Tulsa, Okla., William Edward Clymer, a doctor located in Pawnee, Oklahoma, was sentenced to 24 months in prison, three years of supervised release, and ordered to pay $350,793 in restitution to the Internal Revenue Service (IRS). He was also ordered to cooperate with the IRS in filing his 2003-2005 taxes. On January 3, 2011, Clymer pleaded guilty to tax evasion for calendar year 2003. Clymer admitted he committed tax evasion by filing a false tax return for 2003, which falsely understated his taxable income and tax due. The government alleged that Clymer had failed to comply with his tax obligations from 2000 to the present.
North Carolina Closing Attorney Sentenced for Mortgage Fraud Scheme
On May 5, 2011, in Charlotte, N.C., Demetrius G. Rainer was sentenced to 36 months in prison followed by three years of supervised release. Rainer was a licensed attorney in the state of North Carolina and served as a closing attorney. According to court documents, Rainer and others participated in a mortgage fraud scheme that falsely inflated the price of real estate properties to obtain mortgage loan proceeds from lenders in excess of the property’s true value. The excess proceeds were then distributed among the participants at closing. Participants in the scheme prepared false loan packages and settlement statements. Rainer and other attorneys received proceeds of the fraud in their trust accounts and then distributed the proceeds to other participants in the fraud. The funds were then typically used to finance similar schemes.
New York Restaurateur Sentenced for Tax Evasion
On May 5, 2011, in Buffalo, N.Y., Steve Carlson, a prominent restaurateur, was sentenced to 46 months in prison and ordered to pay $391,972 in restitution to the Internal Revenue Service (IRS) and $599,086 to the EverBank of Florida. Carlson was also ordered to forfeit over $2,000,000. According to court documents, Carlson evaded the payment of his federal taxes from 2001 to 2008 by putting businesses and properties in names other than his own, thereby hiding his assets from the government. Included in this scheme are properties in Florida, one of which involved a multi-million dollar loan. Carlson was a guarantor of the loan, and was required to provide proof of income to the bank. He provided supporting documents that included falsified tax returns, false financial statements and a false social security number. The loan has since failed and the loss is at least $600,000.
Co-Defendants in Mail Fraud and Money Laundering Scheme Sentenced
On May 4, 2011, in Raleigh, N.C., Rebecca Plummer was sentenced to 12 months and one day for conspiring to commit mail fraud, the sale of unregistered securities, and money laundering. She was also ordered to pay over $400,000 in restitution. On May 5, 2011, Darryl Lynn Laws, of La Jolla, California, was sentenced to five years’ probation on one count of false statements to a federal officer and one count of filing a materially false tax return. Laws was ordered to pay $150,000 in restitution. Plummer and Laws were two co-defendants in the mail fraud and money laundering scheme involving Gregory Bartko. A jury convicted Gregory Bartko, a securities attorney, of one count of conspiring to commit mail fraud, the sale of unregistered securities and money laundering, four counts of mail fraud, and one count of the sale of unregistered securities in November 2010; he is awaiting sentencing. According to evidence presented at Bartko’s trial, January 2004, Bartko and Laws had a newly formed fund called the Caledonian Private Equity Bridge and Mezzanine Fund which accepted more than $701,000 in fraudulently raised funds. Of that amount $250,000 was paid to Bartko and Laws as “draws” or compensation for their work as partners in the Caledonian Fund. Laws failed to report or pay taxes on the $125,000 he received. In January 2005, Bartko met with potential investors in the offices of Legacy Resource Management, a business run by Rebecca Plummer and another individual. Bartko asked Legacy Resource Management to allow him to filter money through their bank accounts. This money had also been fraudulently raised and did not comply with registration requirements for securities. Plummer, through Legacy Resource Management, assisted Bartko in the laundering of these fraudulent proceeds.
Illinois Man Sentenced for Tax Fraud
On May 3, 2011, in Chicago, Ill., Jason Hyatt, of St. Charles, Illinois, was sentenced to 120 months in prison, three years of supervised release, and ordered to pay $2,194,476 in restitution. He must also forfeit $1,570,000 to the United States. In November 2009, Hyatt pleaded guilty to various federal charges, including four counts of tax evasion. According to the indictment, Hyatt was an owner and manager of Hyatt Johnson Capital, LLC and affiliated with other various companies that collectively invested over $20 million in companies affiliated with BCI Aircraft Leasing, Inc. (BCI), a commercial aircraft leasing company. From approximately spring 2006 until at least February 2007, Hyatt engaged in a scheme to defraud investors by diverting investor funds into bank accounts under his control and using the funds his personal benefit. For tax year 2003, Hyatt filed an income tax return that he knew to be materially false in that he failed to disclose gross receipts and income from commission payments he received from BCI. For tax years 2004 and 2005, Hyatt willfully failed to file required income tax returns for gross income of approximately $1.4 million. For tax year 2006, Hyatt willfully attempted to evade income tax due by diverting approximately $1,465,000 of investor funds into bank accounts under his control, which he diverted for his personal benefit, but failed to file a personal income tax return.
North Carolina Trucking Company Manager Sentenced for Fraud
On May 3, 2011, in Charlotte, N.C., John David Bennett, Jr. was sentenced to 41 months in prison, followed by three years of supervised release and ordered to pay $799,715 in restitution. Bennett was the logistics or transportation manager for a bathroom fixture manufacturer and also the owner of several trucking companies. In his management position, Bennett had broad authority to hire and use local freight haulers as well as review and approve freight bills and invoices. According to court documents, Bennett sent, or directed the sending of, false shipping invoices to a third-party billing company to obtain payment from his employer for freight hauling services that were not rendered. With the assistance of a long-time acquaintance, he also directed the issuance of checks to himself and others that were not disclosed to or authorized by his employer. From October 2004 through November 2005, Bennett caused his employer to pay more than $1.2 million based on false invoices.
Virginia Man Sentenced for Orchestrating Multi-Million Dollar Rehabilitation Tax Credit Scheme
On May 3, 2011, in Richmond, Va., Justin Glynn French was sentenced to 192 months in prison, followed by three years of supervised release, for stealing millions from federal and state tax credit programs intended to rehabilitate historic buildings. In January 2011, French pleaded guilty to wire fraud and engaging in unlawful monetary transactions for his role in orchestrating a multi-million dollar rehabilitation tax credit scheme and defrauding more than 110 investors who purchased tax credits from French for their own use. Through court documents, French admitted that since 2005, he initiated the historic rehabilitation tax credit application process on at least 36 properties in Richmond; 14 were approved by state authorities and 20 were approved by federal authorities. French agreed that the intended and actual tax credit losses connected to the rehabilitation projects was between $7 and $20 million. French agreed to pay full restitution for the losses he caused in connection with the ongoing rehabilitation tax credit scheme, which will be determined as the victims and loss amounts are identified in the ongoing investigation. The final restitution amount will be determined at a restitution hearing to be scheduled at a later date, following the completion of the investigation.
Former Alaskan Restaurant Owner Sentenced for Filing a False Tax Return
On April 29, 2011, in Anchorage, Alaska, Kisun Hamilton was sentenced to five years of probation, 14 months of home confinement, and ordered to pay a $25,000 fine and $160,000 in restitution to the Internal Revenue Service (IRS) for filing a false federal income tax return. According to court documents, from 2000 to 2007, Hamilton skimmed approximately $1.5 million in currency received by her restaurant, Tempura Inn. She maintained a double set of books. One set reflected the actual income of the business, while the amounts entered in the second set omitted significant amounts of cash. The second set was the one she provided to her tax return preparer. The unreported cash ranged from $500 to $2,000 a day. Some of the skimmed cash was used to partially pay employees under the table. By paying employees half of their wages in cash under the table, she not only defrauded the government out of income taxes, social security, Medicare, and unemployment insurance payments, she also cheated the employees out of benefits to which they might eventually be entitled. Some of the remaining cash was spent on jewelry, expensive vehicles, home remodeling, investment properties, and international travel. Hamilton also defrauded the Dimond Center mall, where her rent was partially determined by her gross receipts. By under-reporting receipts to the mall, she defrauded her landlord. Hamilton has made $320,000 in restitution to the U.S. Treasury, and was ordered by the Court to make complete restitution, pay interest and penalties, and perform 100 hours of community service consisting of outreach to the Korean and restaurant communities regarding the consequences of tax evasion.
Minnesota man sentenced for operating $80 million Ponzi scheme
On April 28, 2011, in Minneapolis, Minn., Corey N. Johnston, of Lakeville, Minn., was sentenced to 72 months in prison for operating a Ponzi scheme that defrauded 18 lenders in Minnesota and several other states. He will also be ordered to pay restitution. Johnson pleaded guilty in September 2010 to one count of bank fraud and one count of filing a false income tax return. In his plea agreement, Johnston admitted that from 2005 through March of 2009, he oversold participation in large commercial and personal loans arranged by him through his company, First United Funding (“FUF”). Loan participation is a common banking practice through which a bank pays the original lender all or a portion of the subject loan and then assumes that loan, along with its associated risk. Johnston’s scheme involved selling more than 100 percent participation in at least ten different loans arranged through FUF. In each instance, Johnston failed to disclose that the total participation exceeded 100 percent of the original loan, making it impossible for the participating banks to receive the money expected. In one instance, Johnston solicited and received $23.65 million from six banks for one $7 million loan. Johnston used some of the proceeds of the fraud to repay other loans and perpetuate the scheme. He also diverted fraud proceeds for his personal use as well as for use by family members. Furthermore, Johnston failed to report the fraudulent income on his 2005 federal income tax return. That failure resulted in an underpayment of taxes to the U.S. in 2005 of approximately $508,905.
Louisiana Man Sentenced for Investment Fraud Scheme
On April 27, 2011, in Baton Rouge, La., William J. Coury, of Plaquemine, Louisiana, was sentenced to 51 months in prison, followed by two years of supervised release, and ordered to pay restitution in the amount of $1,375,122. Coury pleaded guilty in January 2011, to mail fraud and engaging in an illegal monetary transaction. Coury, who was an insurance agent, admitted that, from at least 1996 through 2006, he engaged in a scheme to defraud clients. He solicited funds from clients for investment in annuities and other insurance products. Rather than investing the funds as promised, Coury converted the funds to his own use and benefit. In total, Coury stole more than $1,399,000 from unsuspecting clients.
Florida Woman Sentenced for Check Fraud and Filing False Tax Returns
On April 26, 2011, in Pensacola, Fla., Barbara A. Abraham was sentenced to 60 months in prison, followed by three years of supervised released, and was ordered to pay $1,200,389 in restitution. Abraham pleaded guilty in January 2011 to 196 counts including charges for wire fraud, fraud and false statement on tax returns, and aggravated identity theft. According to court documents, in her position as a part-time bookkeeper, Abraham took funds from her employer without permission by writing herself checks and paying personal credit card bills with company checks upon which she forged the owner’s signature, by transacting debits and credits on personal credit card accounts through the company’s merchant account, and by obtaining a credit card in the company name which she used to make personal purchases/pay personal bills. Further, Abraham never declared any of this money on her federal income tax returns .
Texas Woman Sentenced for Tax Fraud
On April 26, 2011, in Plano, Texas, Dulcinea Annette Hansard was sentenced to 36 months in prison and ordered to pay $312,578 in restitution for income tax violations. Hansard was found guilty on June 30, 2010, of making and subscribing to a false tax return for tax year 2006. According to information presented in court, Hansard under-reported her income for tax years 2003, 2004, 2005, 2006 and 2007 by not reporting income she illegally derived through embezzlement.
Texas Woman Sentenced for Tax Fraud
On April 26, 2011, in Plano, Texas, Susan Gill Ruston, of Carrolton, Texas, was sentenced to 30 months in federal prison and ordered to pay $218,196 in restitution for income tax violations. Ruston pleaded guilty on August 17, 2010, to making a false statement on a tax return. According to information presented in court, Ruston willfully and intentionally filed federal income tax returns for tax years 2005 through 2008 in which she understated her income and the tax due. The total tax loss to the government as a result of Ruston's fraudulent activities is $218,196.
Former Home Builder Division Manager Sentenced for Fraud and Prohibited Monetary Transactions
On April 25, 2011, in Fort Myers, Fla., Lawrence L. Ripley of Bonita Springs, Florida, was sentenced to 36 months in prison, followed by three years of supervised release and was ordered to pay restitution in the amount of $220,412. Ripley pleaded guilty in December 2010 to three counts of mail fraud, two counts of wire fraud and five counts of prohibited monetary transactions. Ripley devised a scheme to defraud his former employer of money and honest services in excess of $270,000. As part of the scheme he caused fraudulent invoices, from vendors he solicited, to be sent to his former employer for payment. At Ripley’s direction, the vendors wrote checks back to Ripley for approximately ninety percent of the monies they received through the scheme. Ripley converted the monies he received from vendors to cashier’s checks, made payable to himself. Ripley personally received in excess of $220,000 as a result of his scheme.
Oregon Man Sentenced for Filing a False Tax Return
On April 25, 2011, in Portland, Ore., Bobbie Ephrem was sentenced to 12 months and a day in prison, followed by one year of supervised release, and ordered to pay a $10,000 fine and a $100 special assessment. In addition, Ephrem must cooperate with the Internal Revenue Service (IRS) in filing amended tax returns and paying $109,000 which is the estimated taxes due for tax years 2004 and 2005. Ephrem pleaded guilty in January 2011 to filing a false income tax return. According to court documents, Ephrem understated gross receipts in 2004 and 2005 by $14,474,221. Additional business expenses were computed at $13,098,196 for a total of $1,016,025 in additional net income not reported for tax years 2004 and 2005.
Mt. Lebanon Man Sentenced to Prison for Mortgage Fraud Scheme
On April 21, 2011, in Pittsburgh, Pa., Daniel Gillen, of Mt. Lebanon, Pa., was sentenced to 51 months in prison on his conviction of wire fraud conspiracy, money laundering conspiracy, and tax evasion in connection with a mortgage fraud scheme. According to information presented to the court, Gillen was a loan officer for several different mortgage broker companies who submitted fraudulent loan applications and supporting documents that misrepresented borrowers' income and assets. He also conspired with Kenneth Cowden, who, as part of the conspiracy, prepared fraudulent appraisals for Gillen and others that overstated the true values of the properties serving as collateral for the loans. Gillen, even though he was not a licensed appraiser, also prepared fraudulent appraisals as part of the conspiracy that overstated the true values of the properties serving as collateral for the loans. Gillen also laundering money by re-investing profits from the scheme back into the scheme. Gillen also filed false tax returns that understated his income and engaged in other activities designed to evade his tax obligations.
Former Chairman of the Soboba Band of Luiseno Indians Sentenced on Bribery and Tax Charges
On April 18, 2011, in Los Angeles, Calif., Robert Salgado, Sr., former chairman of the Soboba Band of Luiseno Indians, was sentenced to 41 months in prison for taking approximately $875,000 in bribes from tribal vendors and concealing that income from the Internal Revenue Service (IRS). In addition to the prison term, Salgado was ordered to pay $226,187 in back taxes to the IRS. Salgado, who lives on the Soboba Reservation near San Jacinto, pleaded guilty in October 2010 to bribery and subscribing to a false tax return. According to court documents, Salgado admitted that he accepted a total of $874,995 in bribe payments from five vendors who did business with the Soboba Band. The payments to Salgado, which were made by vendors hoping to obtain or keep contracts with the tribe, were given to Salgado in the form of cash, payments made to his creditors and checks payable to an entity controlled by Salgado. Additionally, Salgado admitted that he filed a 2001 tax return that claimed he and his wife earned $146,114, but in reality earned substantially more. In the plea agreement, Salgado admitted he also did not accurately report his income for tax years 2002 through 2006, failing to pay a total of $226,187 in taxes.
Husband and Wife Sentenced for Conspiring to Steal and Sell University of Kansas Sports Tickets
On April 14, 2011, in Wichita, Kan., Charlette Faye Blubaugh was sentenced to 57 months in prison and ordered to pay more than $2.2 million in restitution to the University of Kansas (KU) and more than $268,000 to the Internal Revenue Service. Blubaugh was the former associate athletic director in charge of the ticket office at the University of Kansas. Her husband, Thomas Ray Blubaugh was on the ticket office’s payroll from August 2007 to January 2010 as a consultant. On April 11, 2011, Thomas Blubaugh was sentenced to 46 months in prison and ordered or pay $841,111 in restitution to the University of Kansas and $268,292 to the Internal Revenue Service. According to her plea agreement, Charlette Blubaugh admitted that she and co-conspirators diverted $2 million worth of tickets to KU athletic events. Beginning in 2005, Charlette Blubaugh began to steal individual and season tickets for Kansas athletic events and provide them to others, including her husband, to sell to third parties in violation of university policies. The tickets were moved in interstate commerce and marketed through individuals and ticket brokers. Conspirators paid kickbacks to individuals who marketed the stolen tickets and they used various means to cover up their crimes. Thomas Blubaugh attempted to conceal the theft of tickets by using third parties not connected to the ticket office to sell tickets to individuals. He paid travel expenses for an intermediary who marketed tickets through brokers in Oklahoma. He also concealed on annual tax returns the income he received from the ticket sales.
Operator of Ponzi Scheme Sentenced for Bilking Victims out of Millions of Dollars in Fraudulent Investments
On April 11, 2011, in Los Angeles, Calif., Peter Jerald Frommer was sentenced 108 months in prison and ordered to pay $8.1 million in restitution. Frommer pleaded guilty in November 2010 to wire fraud, money laundering and failing to file federal income tax returns for the tax years 2004 through 2006. According to court documents, Frommer operated a bogus investment scheme under the names “Cap Exchange” and “Cap X,” companies that he falsely claimed traded in the surplus property of defunct companies. Frommer told numerous victims throughout the United States that he used commercial auction websites to purchase large lots of equipment for resale at higher prices. From early 2004 through August 2006, Frommer solicited more than $13 million from more than five dozen victims by promising “guaranteed” returns of up to 15 percent in as little as six weeks. Frommer claimed that he would use victims’ money to buy the distressed assets for Cap X, and then would share profits from the subsequent sales. Instead, he used the victims’ money to make Ponzi payments and to maintain a lavish personal lifestyle. Additionally, Frommer convinced many investors to put money into other bogus ventures that he pitched, including a wireless Internet company, a high-end automobile parts venture, real estate deals, and other investments beyond Cap-X.
Construction Company President Sentenced For Tax Crimes and Structuring
On April 12, 2011, Pensacola, Fla., Mauricio Soto, of Navarre, Florida, was sentenced to 41 months in prison and was ordered to pay $626,689 in restitution to the IRS. In January, Soto pleaded guilty to a 69 count superseding indictment that charged him with failing to file federal corporate income tax returns, structuring U.S. currency transactions, and fraudulently using a social security number. According to his plea agreement, Soto, the president of Mauricio Soto Concrete Construction, Inc., of Navarre, Florida, admitted to knowingly structuring cash withdrawals to avoid federal currency reporting requirements from January 2006 through October of 2007. During this period, 62 checks in the amount of $9,500 each were negotiated for cash in an attempt to evade the requirement that financial institutions report currency transactions greater than $10,000. Soto also admitted to failing to file federal corporate income tax returns for his business for the years 2005 through 2009. Soto’s concrete and framing business generated over $9 million in gross receipts during this time from new housing construction. Additionally, Soto faces deportation following his prison sentence because he is not a citizen of the United States and is in the country unlawfully.
New Jersey Wastewater Treatment and Chemical Supply Company and Owner Sentenced for Their Role in Fraud Conspiracy
On April 6, 2011, in Newark, N.J. John Drimak Jr. was sentenced 18 months in prison, ordered to pay a $30,000 criminal fine and $283,241 in restitution to the EPA. Drimak owned J.M.J. Environmental Inc., which was also sentenced to pay $283,241 in restitution. The company and Drimak pleaded guilty on July 23, 2008, to rigging bids and allocating certain sub-contracts at Federal Creosote from approximately the Spring of 2002 to May 2007. Drimak also pleaded guilty to one count of conspiracy to defraud the EPA at Federal Creosote and to defraud Tierra Solutions Inc. at Diamond Alkali. As part of the conspiracy, Drimak participated in a false invoicing and kickback scheme from January 2002 until May 2007. He also pleaded guilty to filing false income tax returns for 2002 through 2005. According to court documents, Drimak paid approximately $411,000 in kickbacks to co-conspirators, in exchange for their assistance in allocating certain sub-contracts to J.M.J. Environmental.
Birmingham Man Sentenced for Trafficking Counterfeit Nike Shoes, Filing False Tax Return and Mail Fraud
On April 6, 2011, in Birmingham, Ala., Corey Bishop was sentenced to 18 months in prison for a scheme involving trafficking of counterfeit Nike shoes, tax fraud and mail fraud. Bishop pleaded guilty to one count of trafficking counterfeit goods, one count of filing a false tax return, and one count of mail fraud on September 13, 2010. According to court documents, in 2007, 2008 and 2009, Bishop ordered multiple shipments of Nike footwear, which he knew to be counterfeit, from a business in China to sell in two of his retail stores, Fresh2Def Urbanwear, located in Birmingham and Montevallo. Bishop’s sale of counterfeit goods generated a large taxable income, which he failed to report on his 2007 and 2008 individual income tax returns. Bishop was sentenced for filing a false tax return for calendar year 2008, on which he reported his business gross receipts to be $22,262. The true amount of his gross receipts was $293,549. The tax loss was determined to be $75,961.
Oklahoma Woman Sentenced on Tax Charge and Wire Fraud
On April 5, 2011, in Oklahoma City, Okla., Deanne Rae Meshew was sentenced to 36 months in prison and ordered to pay $436,106 in restitution to the Cooperative Council of Oklahoma School Administrators (CCOSA). Meshew pleaded guilty on September 23, 2010, to wire and tax fraud charges. According to court documents, Meshew was employed as a financial officer for the CCOSA and was responsible for the mail, accounts payable and receivable, payroll and paying bills. From March 2007 through October 2009, Meshew repeatedly accessed the CCOSA bank account via computer and made electronic payments to her personal credit card account. Meshew also filed a false tax return for the 2008 tax year which stemmed from her failure to report income embezzled from CCOSA.
Former Assistant Athletic Director and Systems Analyst Sentenced for Conspiring to Sell Stolen Kansas University Sports Tickets
On March 31, 2011, in Wichita, Kan., Rodney Dale Jones was sentenced to 46 months in prison and ordered to pay almost $1.2 million in restitution to the University of Kansas (KU) and more than $113,800 restitution to the Internal Revenue Service. Jones pleaded guilty in January 2011 to one count of conspiracy to defraud the United States. In his plea, he admitted that he and other employees of Kansas Athletics, Inc., made more than $2 million diverting tickets to KU athletic events and selling them to third parties. On March 30, 2011, Kassie Liebsch was sentenced to 37 months in prison and ordered to pay more than $1.2 million in restitution to the University of Kansas and $79,000 to the Internal Revenue Service. She also forfeited a 2008 Toyota Camry. Liebsch pleaded guilty in January 2011 to one count of conspiracy to defraud the United States. In her plea, she admitted she personally received about $100,000 from the sale of approximately $2 million worth of tickets diverted by her and other employees of Kansas Athletics, Inc. According to court documents, Liebsch worked as a systems analyst in the ticket office. She provided Jones with tickets, even though she knew the tickets were being sold illegally, and she accepted cash kickbacks from Jones for providing him with tickets. Jones was an Assistant Athletic Director in charge of the Williams Education Fund, the fund-raising arm of KU Athletics. He and other conspirators diverted tickets from their intended purpose and sold them in violation of university policies. They attempted to conceal the crimes through various means, including using third parties not connected with the ticket officer to sell tickets, having checks written to third parties, purchasing money orders in amounts meant to avoid currency reporting requirements and concealing their illicit income.
New York Man Sentenced to Prison for Role in Excise Tax Scheme
On March 30, 2011, in Brooklyn, N.Y., Joseph Reisch, was sentenced to 97 months in prison and ordered to pay $34,000,000 in restitution to the IRS for evading federal excise taxes. From 1987 to 1993, Reisch participated in a gasoline excise tax scheme by soliciting businesses to participate in the scheme, directing companies to provide false documentation concerning the purchase and sale of gasoline, and collecting the federal excise tax. Reisch and other participants pocketed a substantial amount of the 14.1 cents per gallon in federal excise tax included in the retail price of gasoline. Over a three-year period, Reisch and his co-conspirators evaded more than $34 million in Federal Excise Tax. Reisch fled to Israel and Germany and before being brought back to the U.S.
Hawaii Insurance Agent Sentenced on Tax Charges
On March 30, 2011, in Honolulu, Hawaii, Herbert Y. Ushiroda, Jr., was sentenced to 30 months in prison and ordered to pay a $20,000 fine. Ushiroda pleaded guilty on December 15, 2010, to an information that charged him with evading the payment of income taxes for the 2006 calendar year. According to court documents, Ushiroda, a licensed insurance agent residing in Honolulu and doing business on Maui, falsely stated the cost of doing business on his Schedule C for 2006. Ushiroda admitted in court that he had filed false tax returns for the calendar years 2003 through 2007, for a total tax loss of $911,878 to the United States and a loss to the State of Hawaii in the amount of $205,715. At his guilty plea, Ushiroda agreed to pay full restitution to both the state and federal governments for all those years. According to information produced to the court, Ushiroda admitted that starting in 2003, he began to overstate his Schedule C expenses by over twofold because he needed more money to support his lifestyle.
Florida Man Sentenced in Tax Fraud Case
On March 28, 2011, in Miami, Fla., Morris Sherman was sentenced to six months in prison, followed by one year of supervised release, including six months of home detention, after having previously pleaded guilty to one count of filing a false individual income tax return for calendar year 2006. According to court documents, Sherman diverted funds from his company, Miami Travel, Inc., to a personal bank account and failed to report this income on his personal tax returns, while falsely treating the diverted funds as costs of doing business on his company’s corporate returns. For calendar year 2006, Morris reported total individual income of $202,946, with an amount of tax due of $29,774. Morris knew that his total income for that year was substantially greater than $202,946. As part of his plea agreement, Sherman paid $2,028,405 to the IRS, which represented tax, penalties and interest owed for individual and corporate returns for tax years 2002 through 2006.
Illinois Man Sentenced for Mail Fraud and Filing False Income Tax Returns
On March 25, 2011, in Chicago, Ill. Frank J. Gabriele was sentenced to 48 months in prison, followed by two years supervised release and ordered to pay $4,306,050 in restitution. Gabriele plead guilty in December 2010 to mail fraud and subscribing to a false U.S. Income Tax Return. According to court documents, Gabriele was involved in a false billing scheme that involved him and his co-conspirators, Frank Butera and his son Frank Gabriele, III to bilk money from Zim-American Israeli Shipping Co, Inc. (Zim). Zim is a national trucking company based out of Israel with offices located in Chicago and New York. Gabriele III worked for Zim and was in charge of paying invoices. Butera who had a fictitious trucking company and Gabrielle who owned and operated a legitimate trucking company would submit false invoices to Zim. Gabriele III, with the sole authority to authorize and pay invoices, would pay them. Gabriele and Butera would then kick money back to the son. The total unreported income was $3,840,102 with a total tax loss of $1,075,228.
Pennsylvania Man Sentenced on Drug, Gambling, and Tax Charges
On March 24, 2011, in Scranton, Pa., Michael Stockunas was sentenced to 41 months in prison, followed by three years of supervised release, and ordered to pay a $300 special assessment and $116,000 in restitution to the Internal Revenue Service (IRS). In addition, Stockunas was ordered to forfeit real estate in Hazleton, Pennsylvania, and more than $32,000 in cash. Stockunas was indicted by a federal grand jury, along with three other defendants, in October 2008, for his participation in a drug conspiracy, conducting an illegal gambling business, and making false statements on tax forms. According to court documents, Stockunas pleaded guilty in February 2010 to conspiracy in running a Las Vegas-to-Pennsylvania methamphetamine trafficking operation in 2005 and 2006, to operating a gambling business during 2003 through 2007, and to filing false tax forms in 2006.
California Woman Sentenced for Tax Evasion
On March 24, 2011, in Sacramento, Calif., Deborah Murillo, of Valley Springs, was sentenced to nine months in prison to be followed by nine months of home detention with electronic monitoring. According to court documents, Murillo pleaded guilty on October 15, 2010, to a single count of tax evasion covering 11 years. Murillo failed to file tax returns for the tax years 1994 through 2004 although she had taxable income over $1.2 million for those tax years. Prior to her sentencing, Murillo paid $228,231 towards restitution to the Internal Revenue Service (IRS).
Indiana Business Owner Sentenced
On March 23, 2011, in Hammond, Ind., Husein Kanakrieh, was sentenced 21 months in prison, followed by two years of supervised release and ordered to pay $289,170 in restitution. In October 2010, Kanakrieh plead guilty to one count of food stamp fraud and three counts of filing false corporate income tax returns. According to the plea agreement, Kanakrieh, owner of Jordon Foods, willfully filed false corporate income tax returns for tax years 2005-2007 by overstating the "Cost of Goods Sold Purchases" on the Form 1120 U.S. Corporation tax returns. Kanakrieh knowingly supplied to his accountant information and documentation that did not accurately reflect the amount of purchases incurred by his business. Kanakrieh also admitted to redeeming electronic food stamp coupons for full face value in violation of the USDA food stamp program and received benefits in excess of $5,000.
Tennessee Resident Sentenced in Embezzlement Scheme
On March 21, 2011, in Chattanooga, Tenn., Glenna R. Campbell, of McMinnville, Tenn., was sentenced to 41 months in prison, three years of supervised release, and ordered to pay $119,835 in addition to $100,000 in forfeiture already paid in cash to the victim, Stewart's Pharmacy, McMinnville, Tenn. Campbell was convicted by a federal jury in November 2010 on six counts of mail fraud, one count of wire fraud, and one count of money laundering. Evidence during the trail proved that from 2002 until about July 6, 2009, she devised a scheme to defraud her employer, Stewart Pharmacy, Inc., of approximately $407,000. She embezzled cash and money orders from her employer which she then converted into her own personal use. Campbell used the funds to purchase services, goods, and merchandise, including an Allegro motor home, jewelry, a Tracker Pontoon boat, jet skis, vehicles, Tennessee Titan football tickets, and other luxury items.
Government Attorney Sentenced to Nearly 18 Years for Taking Over $400,000 in Bribes from Immigrants, Tax Evasion, and Other Charges
On March 21, 2011, in Los Angeles, Calif., Constantine Peter Kallas, a senior attorney with U.S. Immigration and Customs Enforcement (ICE), was sentenced to 212 months in prison and ordered to pay $296,865 in restitution. Kallas was convicted by a jury in April 2010 of three dozen felony counts including, conspiracy, bribery, obstruction of justice, aggravated identity theft, making false statements to the Department of Labor, making false statements to obtain federal employee compensation, and tax evasion. According to court documents, Kallas took bribes from immigrants who were promised immigration benefits that would allow them to remain in the United States. Kallas and his wife, Maria, told illegal aliens that Kallas was an immigration official and that Kallas could obtain immigration benefits for the aliens in exchange for bribes. They accepted payments from aliens that totaled at least $425,854. Kallas took bribes from some illegal aliens who were offered “jobs” at companies Kallas and his wife had set up. As part of the scheme, Kallas filed fraudulent labor condition applications with the Department of Labor that falsely claimed the companies had offered employment to the aliens. Kallas misused the identities of several real persons by, among things, putting their names on fraudulent documents or on nominee bank accounts used to hide money from the Internal Revenue Service. Kallas also illegally obtained more money through workers compensation fraud and tax evasion, claiming total disability and zero income, even as he was conducting the elaborate bribery and fraud scheme. According to court documents, the bank records for the Kallases showed that, beyond his salary, approximately $950,000 had been deposited into the couple’s bank accounts since 2000. Maria Kallas pleaded guilty in November 2009 and is awaiting sentencing.
Former Community Association Officer Sentenced
On March 21, 2011, in Charlottesville, Va., Michael Douglas Comer, of Charlottesville, was sentenced to 36 months in prison following his guilty plea to one count of mail fraud and one count of tax evasion. Comer is the former treasurer of the Glenmore Community Association and officer with Glenmore Associates, PBK Real Estate and Kessler Enterprises. According to court documents, Comer admitted that between 2004 and 2009 he devised a scheme to defraud Glenmore Associates, PBK Real Estate and Kessler Enterprises by embezzling funds from these entities and using these funds to pay himself unauthorized compensation and to pay unauthorized personal expenses. Those personal expenses included car payments and mortgage payments. In addition, Comer admitted to affirmatively evading his individual income taxes for the years 2003 through 2009 by annually submitting false income tax returns. Comer admitted he received unreported taxable income of at least $2,548,212 and based on that taxable income, he owed additional income tax of at least $933,028. Comer agreed to make full restitution to the United States for all taxes owed.
Colorado Woman Sentenced for Failing to Report $1.6 Million in Income
On March 17, 2011, in Denver, Colo. Linda Abramson-Schmeiler, of Monument, Colorado, was sentenced to 36 months in prison, followed by one year of supervised release, and ordered to pay a $7,500 fine and $709,672 in restitution to the Internal Revenue Service (IRS). Abramson-Schmeiler was convicted by a trial jury in October 2010 of filing false income tax returns in connection with failing to report $1.6 million in gross business receipts to the IRS for the years 2002 through 2005. According to evidence presented at trial, Abramson-Schmeiler had been employed primarily as a hair stylist who owned and operated a hair salon called Hair Drama in Colorado Springs which stocked brand name professional hair care products for sale to customers. Beginning no later than 2000, Abramson-Schmeiler began buying these brand name professional hair care products from various distributors in large volumes and reselling them to others besides her salon customers which was outside the authorized distribution channels. She essentially functioned as a “collector” or product diverter in unauthorized parallel distribution markets, commonly known as “gray markets.” Beginning in or about late July 2000, Abramson-Schmeiler became a regular supplier of these brand name professional hair care products for a large gray market wholesale business operating out of New York. Although Abramson-Schmeiler received product payments from the New York business that alone totaled more than $7.7 million, she reported on her income tax returns sales receipts from all customers that totaled no more than $6.1 million.
Ohio Man Gets 33 Months for Defrauding Investors
On March 16, 2011, Ronald Olear was sentenced to 33 months in prison, two years of supervised release, and ordered to pay $339,102 in restitution for defrauding approximately 30 investors by purporting to sell either shares of stock or warrants for shares of stock. In addition, Olear filed false income tax returns for the 2005 – 2007 income tax years understating the amount of his total income by approximately $276,500. According to the information Olear promoted and sold securities to family, friends and acquaintances by falsely representing to them that he owned or controlled shares of company stock. Olear’s scheme originally involved “selling” shares of company stock, then changed the scheme by removing stock certificates from a shredding receptacle that was stored in a secure area of the company’s facility and altering the stock certificates to represent his purported ownership of approximately 80,000 shares of company stock. Olear presented the fraudulent certificates to investors and falsely represented that they demonstrated his ownership of company stock. He also falsely represented that he was permitted to sell warrants for these shares of company stock. Olear converted investor money for his own purposes, including making Ponzi-type payments to previous investors, paying the expenses necessary to continue his scheme, and financing a house valued at approximately $600,000.
Illinois Man Sentenced for Money Laundering and Filing a False Tax Return
On March 15, 2011, in Peoria, Ill. Christopher A. Quisenberry was sentenced to 41 months in prison for filing a false federal income tax return and money laundering. Quisenberry was also ordered to pay restitution in the amount of $1,526,205 to his former employer. On November 29, 2010, Quisenberry entered a plea of guilty to a two-count information charging him with one count each of filing a false tax return with the IRS and money laundering. According to court documents, Quisenberry admitted that he transferred $17,180 to purchase a vehicle, knowing that the money was derived from wire fraud. Quisenberry also admitted that he filed an individual income tax return with the IRS falsely stating that his gross income for calendar year 2007 was $83,172, when he knew his income was actually $309,814. Quisenberry agreed to cooperate with the IRS in the assessment and collection of any taxes due. Quisenberry further admitted that he began manipulating fund transfers from his employer’s account to his checking and savings accounts raising the dollar amounts by hundreds or thousands of dollars per paycheck above his actual salary. Quisenberry also used his employer’s account to wire funds to pay his personal credit card balances for personal and family expenses, and to deposit funds into a friend’s account. As a result of the fraud, he received approximately $1.5 million more than he was due in authorized salary and dealership bonuses.
Illinois Man Sentenced for Embezzlement, Filing False Tax Returns and Money Laundering
On March 15, 2011, in Urbana, Ill. Kenneth M. Best, Jr., was sentenced to 30 months in prison, ordered to pay a fine of $250,000 and $81,129 in restitution to the Internal Revenue Service. Best, who operated not-for-profit organizations that served the developmentally disabled, pleaded guilty in April 2010 to embezzling approximately $667,000, filing false income tax returns and money laundering. According to court documents, Best admitted that from 2002 to 2006, he embezzled $667,000 from the organization and that he transferred the funds to non-organization bank accounts which he controlled, and used the funds for his personal benefit. Best further admitted that he filed false income tax returns for the federal tax years 2002 through 2006, resulting in failure to pay more than $80,000 in federal income tax.
Oklahoma Woman Sentenced for Embezzlement
On March 2, 2011, in Tulsa, Okla., Deena Carrier was sentenced to 41 months in prison, three years of supervised release and ordered to pay more than $752,000 in restitution for forged security bank checks and filing a false tax return. According to court documents, Carrier embezzled money from her employer from 2001 to 2009. Carrier worked as an accountant and would use pre-signed checks to pay her personal expenses and also make them out to herself and deposit them in her bank account. Her total embezzled amount was nearly $690,000. Carrier also failed to report this embezzled income on her tax returns causing a tax loss to the government of nearly $141,000.
Financial Advisor Kenneth Starr Sentenced to 90 Months in Prison
On March 2, 2011, in Manhattan, N.Y., Kenneth Starr was sentenced to 90 months in prison in connection with a multi-million dollar scheme to defraud his clients. Starr pleaded guilty in September 2010 to one count of wire fraud, one count of money laundering, and one count of fraud by an investment adviser. According to documents filed in federal court and statements Starr made at his guilty plea proceeding, Starr served for decades as a financial planner and investment adviser to numerous clients including high net-worth businessmen and well-known celebrities. Through his two companies, Starr & Company, LLC and Starr Investment Advisers, LLC (collectively, "Starr & Co."), Starr managed his clients' finances, paid their bills, advised them about their taxes, and made investments on their behalf and for their benefit. In some cases, he assumed total control over his clients’ finances by collecting their earnings, investing their savings, and paying their bills. Between 2005 and 2010, Starr participated in fraudulent schemes that involved more than $33 million in actual or intended losses. First, between March 2009 and April 2010, Starr stole millions of dollars from his clients by directing unauthorized transfers of funds from his clients' accounts to one of two attorney escrow accounts, and by causing funds to be transferred from the attorney escrow account for his benefit. Second, between 2005 and 2010, while serving as an investment adviser in Manhattan, Starr made material misstatements and/or material omissions in an effort to fraudulently induce his clients to make certain investments. Under the terms of his plea agreement, Starr admitted that he was responsible for $33,312,782 in actual or intended loss. He further agreed to pay restitution in the amount of $29,112,782. To satisfy his restitution obligation, Starr has already forfeited his interest in a Luxury Apartment. A final restitution amount will be determined at a later date.
Indiana Man Sentenced for False Returns
On February 24, 2011, in Fort Wayne Ind., Tobby Steele was sentenced to 15 months in prison to be followed by one year of supervised release after pleading guilty to filing a false tax return. According to court documents, Steele admitted to filing a false tax return, not reporting more than $95,000 in income on his 2006 return.
Former U.S. Mortgage President Sentenced to 14 Years in Prison for Orchestrating $136 Million Fraud Scheme
On February 24, 2011, in Newark, N.J., Michael J. McGrath, Jr. was sentenced to 168 months in prison, followed by three years supervised release for his role in orchestrating a $136 million fraud scheme that bankrupted U.S. Mortgage Corp. and its subsidiary, CU National Mortgage, LLC. McGrath, Jr., the former president and controlling shareholder of U.S. Mortgage, previously plead to one count of mail and wire fraud conspiracy and one count of money laundering. According to court documents, beginning as early as 2002 to January 2009, McGrath conspired to fraudulently sell Fannie Mae hundreds of loans belonging to various credit unions. Other members of the conspiracy included U.S. Mortgage’s chief financial officer and its servicing manager, Leroy Hayden. McGrath directed Leroy Hayden, who provided numerous reports to credit unions falsely stating that loans that had been sold were still in the credit unions’ portfolios, to falsify records to conceal the fraudulent sales. McGrath admitted that he devised the scheme to prop up U.S. Mortgage, and that he used the proceeds to fund U.S. Mortgage’s operations, his personal investments, and investments he made on U.S. Mortgage’s behalf. McGrath also consented to forfeiture of the proceeds of his crimes and $14 million of his assets that the government has seized or frozen. The Court postponed entry of a restitution order so that the victims’ losses could be properly allocated.
Former Credit Union CEO Sentenced to 9 Years Imprisonment
On February 23, 2011, in Wheeling, W. Va., Bernie D. Metz, who served as the Chief Executive Officer and Manager of the Center Valley Federal Credit Union, was sentenced to 108 months in prison, followed by five years supervised release and ordered to pay restitution in the amount of $4,657,869 to the National Credit Union Administration and $200,000 to The Benevolent and Protective Order of Elks Lodge 2029 from North Canton, Ohio. Also as part of the sentence handed down by the Court, Metz must forfeit all remaining property seized from her at the time of her arrest and acquired by her during the time of her scheme, including: the Roadworthy Tavern and Resort in West Liberty; $14,036.75 in funds seized from bank accounts; and several vehicles. Metz previously plead guilty to two counts of an Information charging her with embezzlement and money laundering. At the time Metz pleaded guilty, the Government presented evidence that an audit conducted by the National Credit Union Administration revealed that millions of dollars in funds were missing from the credit union in January of 2009. As a result of the discrepancy, the credit union was liquidated in February of 2009, and a criminal investigation was commenced into Metz’s activities by the Internal Revenue Service and the Federal Bureau of Investigation.
Owner of North Attleboro Seafood Dealer Sentencing in $7 Million Bank Fraud
On February 23, 2011, in Boston, Mass., Robert Coutu, the owner of Ocean Fresh Seafood, Inc. was sentenced to 60 months in prison to be followed by three years supervised release. Coutu was also ordered to pay $6,582,165 to Wells Fargo and its successors as a result of his scheme to defraud Wells Fargo Business Credit, Inc., a division of Wells Fargo Bank NA. Beginning before August 1, 2005, Coutu orchestrated a complex scheme to defraud Wells Fargo, which, since 2002, extended a line of credit to Ocean Fresh. The Wells Fargo line of credit was secured by Ocean Fresh’s accounts receivable and inventory. Coutu, with the assistance of various Ocean Fresh employees, falsely inflated Ocean Fresh’s receivables and inventory balances in order to borrow millions of dollars more than the company’s actual business activity would have permitted. To accomplish their scheme, Coutu and others created false invoices and wired funds from Ocean Fresh’s bank account to accounts managed by affiliates and friends to create the appearance that Ocean Fresh was buying and selling much more product than it actually was. When Wells Fargo’s auditors conducted their quarterly reviews at Ocean Fresh, Coutu and his employees showed them the fabricated paperwork. Coutu also "prepared" for these quarterly reviews by stuffing the freezers with "borrowed" low value seafood from Coutu’s friends in the fish business and then directed his employees to mislabel it as high value seafood, such as lobster tails. Ocean Fresh’s former Controllers, Christopher Day and Cynthia LaRose have both pleaded guilty to conspiring with Coutu and others to defraud Wells Fargo. LaRose was sentenced to three months probation for her role in the fraud and Day is awaiting sentencing.
Romeo, Michigan Home Builder Gets Jail Time in Mortgage Fraud Scheme
On February 22, 2011, in Detroit, Mich., Giuseppe Cracchiolo was sentenced to six months in prison, six months home confinement, three years of supervised release and ordered to pay nearly $1.7 million in restitution for mortgage fraud. According to court documents, from 2002 through 2005, Atiim Collins, owner of Edgewood Property Management recruited and paid individuals to act as straw buyers in fraudulent mortgage loan transactions. The scheme involved homes built by Cracchiolo, through his company, Mark Christian, Inc (MCI). The straw buyers generally had good credit ratings, but not enough income, and lacked the qualifications necessary to purchase the properties. Ted Carter participated in the conspiracy by creating false documents, including fictitious W-2 forms and pay stubs. These false documents were used by the straw buyers to support the fraudulently inflated asset and income information submitted on their mortgage loan applications. After the loans were approved by the lending companies, Cracchiolo used MCI to receive and disburse the illegally gained proceeds. This scheme resulted in the approval and disbursement of over $4.1 million in fraudulent mortgage loans. Cracchiolo admitted that, during the conspiracy, he arranged to have the illegally obtained loan proceeds transferred back to borrowers and others without the knowledge and approval of the lending companies. All of the properties involved in the fraud went into foreclosure resulting in approximately $2.5 million in losses to the lenders. On December 3, 2010, Carter was sentenced to one year and a day imprisonment, followed by two years supervised release. On December 6, 2010, Collins was sentenced to five years probation, with one year to be served at a residential reentry center and six months home confinement. They must also pay restitution.
Ex-Controller of Carpenter & Company Sentenced On Fraud and Tax Charges
On February 18, 2011, Boston, Mass., Matthew J. Abusheery was sentenced to 37 months in prison, followed by two years of supervised release and ordered to pay a $469,403 fine. Abusheery pleaded guilty to five counts of wire fraud and two counts of subscribing to a false tax return. Had the case proceeded to trial the Government’s evidence would have proven that from October 2006 through September 2008, utilizing two separate schemes, Abusheery embezzled more than $450,000 from Carpenter and Company, a Cambridge-based real estate development and management company. At the time he stole the money, Abusheery was Carpenter’s controller and a member of the company’s management team. As controller, Abusheery was responsible for various accounting operations, to include payroll and the day-to-day management of the accounting department, including the accounts payable operation and overseeing Carpenter’s petty cash account. The evidence at trial would have shown that Abusheery embezzled the money from his employer using two schemes. First, in the payroll fraud scheme, Abusheery fraudulently inflated his bi-weekly salary, causing himself to be paid an amount in excess of his authorized salary. In the years 2006 - 2008, Abusheery’s legitimate compensation from Carpenter, including his salary and annual bonus ranged between $160,000 and $230,000. In a second scheme, involving Carpenter’s petty cash account, Abusheery routinely caused unauthorized checks to be written and negotiated for “petty cash” and then pocketed the cash for himself. Specifically, Abusheery directed Carpenter’s accounts payable clerks to (1) prepare checks drawn on the company’s bank account for his signature; (2) cash the checks after he signed them, and (3) turn over the cash, generally in $100 bills, to him upon their return from the bank. Abusheery then pocketed the money and used it for his own personal expenses. This procedure was followed for 68 ‘extra’ checks and thereby Abusheery stole an additional $264,100 during 2006 to 2008. During the calendar years 2006 and 2007, Abusheery willfully made and subscribed U.S. individual tax returns, Forms 1040, knowing that the tax returns did not report the significant amounts of money stolen from Carpenter via the petty cash fraud and certain annual bonuses paid by Carpenter by wire transfer directly to Abusheery’s personal bank account. Abusheery used the money that he stole from Carpenter to build an addition on his home, install a pool, pool house and putting green, as well as on vacations and a boat.
Brothers Sentenced for Conspiring to Defraud the IRS
On February 17, 2011, in Minneapolis, Minn., brothers Joseph and John Riley were each sentenced to 42 months in prison and each received a $250,000 fine and were ordered to pay all taxes and penalties owed to the IRS for a tax evasion scheme that involved concealing income they and many of their employees received from their road construction business. According to court documents, the brothers own Riley Bros. Companies, Inc., a holding company that owns 100 percent of Riley Bros. Construction as well as a number of other companies in whole or in part. Between 1984 and 2003, the Riley’s conspired to defraud the U.S. by concealing income earned by Riley Bros. Companies, Inc. and evaded paying income taxes, social security taxes, Medicare taxes, and unemployment taxes. The Riley’s also used unreported company income to pay for their personal expenses.
Embezzlement by Former Billing Service Employee Results in 27 month Sentence
On February 15, 2011, in Oklahoma City, Okla., Melissa Dover was sentenced to 27 months in prison, three years of supervised release and ordered to pay nearly $374,000 in restitution for tax fraud and wire fraud. According to court documents, Dover was employed as an Accounts Receivable Manager by Comprehensive Medical Billing Solutions, Inc. (CMBS) and had authority to refund overpayments using a credit card terminal. From October 2005 through January 2007, Dover illegally diverted money from CMBS’ bank account to her personal credit and debit card accounts. In addition, Dover pled guilty to filing a false tax return for the 2006 tax year.
British National Sentenced to 13 Years in Multi-Million Dollar Investment Fraud Scheme
On February 15, 2011, in Los Angeles, Calif., Robert Tringham, a British national, was sentenced to 156 months in prison, followed by three years of supervised release, and ordered to pay $8,076,034 in restitution and a $1,000 special assessment. Tringham was convicted by a trial jury in February 2010 of mail and wire fraud, tax evasion, obstruction of justice, and making false statements to federal investigators. According to court documents, Tringham set up the Rancho Cucamonga-based First National Bancorp to solicit funds that would purportedly be leveraged to trade in discounted Grade A bonds, which would provide investors with guaranteed profits at high rates of return when the bonds were sold. Trial evidence showed that Tringham did not maintain separate accounts with a registered broker-dealer and did not complete the bond trades he promised. Instead, Tringham transferred millions of dollars of investor funds to himself to finance purchases such as a house in Diamond Bar, California, and a Land Rover. Tringham also did not disclose to investors that he had previously been convicted of deception, forgery and theft in the United Kingdom. Tringham took more than $7 million from investors in 2005 and 2006. For the 2005 tax year, Tringham failed to pay nearly $480,000 in income tax he owed to the Internal Revenue Service (IRS). The jury found that, during the investigation of his fraud, Tringham fabricated evidence and willfully made false statements to federal investigators. The jury also found true criminal forfeiture allegations against Tringham's $1.5 million residence in an exclusive, private development in Diamond Bar.
California Man Sentenced for Failing to Report Over $1.7 Million in Business Receipts
On February 14, 2011, in Los Angeles, Calif., Emmanuel Chukwueke, of Yorba Linda, California, was sentenced to 18 months in prison, followed by one year of supervised release, and ordered to pay $394,000 in restitution, a $5,000 fine, and a $100 special assessment. Chukwueke, the owner of AMNAT Environmental & Geotechnical in Anaheim, California, pleaded guilty in June 2010 to one count of subscribing to a false United States Income Tax Return, Form 1040, which he filed with the Internal Revenue Service (IRS) for the 2005 tax year. According to his plea agreement, Chukwueke admitted that during the years 2004, 2005, and 2006, he knowingly under-reported business receipts of approximately $1,712,800, which resulted in defendant failing to pay taxes due to the IRS of at least $390,000. As a part of his plea agreement, Chukwueke entered into closing agreements for the tax years 2003 through 2006, correctly reporting the unreported income and receipts, which resulted in defendant owing approximately $1,216,000 in additional taxes, penalties, and interest for the tax years 2003 through 2006. Chukwueke also paid $400,000 to the IRS as a credit towards all additional taxes, penalties and interest assessed by IRS.
California Man Sentenced to 22 Years for Multi-Million Dollar Ponzi Scheme and Mortgage Fraud Scheme; Defendant Targeted Spanish-Speaking Victims
On February 14, 2011, in Los Angeles, Calif., Juan Rangel was sentenced to 264 months in prison for running two fraud schemes - a Ponzi scheme that took in at least $30 million from more than 500 victims, and a mortgage fraud scheme that preyed on working-class homeowners by stealing the equity from their homes and secretly taking title to their properties. According to court documents, Rangel and his company, the Commerce-based Financial Plus Investments, recruited investors through advertisements in Spanish-language newspapers, as well as in infomercials broadcast on television. Rangel and Financial Plus promised to pay investors annual returns as high as 60 percent, claiming Financial Plus’ real estate investments and lending business generated substantial profits. However, Rangel admitted in his plea agreement that Financial Plus did not realize any profits from real estate or lending. Rangel instead used victims’ money to make Ponzi payments to prior investors and for his own personal use. Rangel also admitted that he and others operated a mortgage fraud scheme targeting Latino homeowners facing foreclosure. Rather than assisting the distressed homeowners, Rangel took titles to their homes and drained the equity out of the properties. As part of this scheme, Rangel arranged to sell the homeowners’ properties, usually without their knowledge, to straw buyers. He then applied for loans in the straw buyers’ names, and used a variety of falsified documents to ensure that the fraudulent loans were approved. Rangel admitted that the mortgage fraud scheme caused lenders to fund more than $10 million in fraudulent loans.
Woman Sentenced For Real Estate Fraud Scheme
On February 11, 2011, in New Bern, N.C., Lynda S. Steele was sentenced to 41 months in prison, to be followed by three years’ supervised release, and was ordered to pay $1,020,404 in restitution. On September 14, 2010, Steele pleaded guilty to wire fraud. According to the investigation, Steele, doing business as JP & Associates Investment Firm, represented herself as someone who purchased properties for investment, fixed them up, and “flipped” them for a profit. In portraying even basic facts about herself to investors, Steele often made misrepresentations, claiming that she was a licensed CPA when she had not graduated from college, that she was widowed because her husband died in the Army when she was actually divorced, and that she had previously worked with the IRS. Steele represented to her investors that she would use their funds to purchase real estate in their names that could be held and then later resold at a profit. In reality, Steele did not purchase the real estate; rather she frequently spent the money on other purchases such as renovation of her office space, payroll for a company owned by her boyfriend, and payment to past investors.
North Brookfield Man Sentenced for Tax Evasion
On February 10, 2011, in Boston, Mass., Thomas Rickaby was sentenced to 36 months probation with 30 days of intermittent confinement for two counts of Income Tax Evasion. Rickaby pled guilty on August 4, 2010. At the hearing the prosecutor outlined the evidence that Rickaby had failed to file federal tax returns for calendar years 1996 through 2005 even after the Internal Revenue Service served him with notices of delinquencies. Beginning in May of 2002 Rickaby subscribed to services offered by entities called Business Management Systems and Contract America, Ltd. to unlawfully conceal his income and assets from the Internal Revenue Service. Rickaby evaded payments for delinquent taxes from the earlier years and evaded assessment of taxes for the calendar year 2005.
Massachusetts Man Sentenced to Prison for Tax Evasion Related to Organized Crime Investigation
On February 10, 2011, in Providence, R.I., Gerald Diodati was sentenced to 12 months and one day in prison, followed by three years of supervised release, and ordered to pay $194,031 in restitution. Diodati pleaded guilty in November 2010 to tax evasion related to his 2003 income tax filings. According to court documents, from approximately 2003 through 2006, Diodati concealed from the IRS at least $586,000 he earned through his construction business by converting the proceeds of his businesses to cash and using check cashing services to evade assessment of income tax. For each year of the scheme, false income tax returns were prepared and filed, concealing additional taxes Diodati rightfully owed. In all, from 2003 through 2006, Diodati attempted to evade the assessment of more than $194,000 in federal income taxes.
Oak Brook, Illinois Man Sentenced to 71 Months for Tax Fraud
On February 9, 2011, in Chicago, Ill., Chris Kokenis was sentenced 71 months in prison; one year supervised release, 400 hours of community service and ordered to pay a $165,000 fine for failing to report $7.8 million in income. According to court documents, Kokenis, president of Delta Energy and Delta Oil Company, filed false corporate and personal income tax returns for the calendar years 1997, 1998, 1999 and 2000, failing to report over $7.8 million in sales of oil well interests, and he treated personal expenses, including home improvement expenses, real estate taxes paid and other personal expenditures, as business expenses, thus fraudulently reducing the amount of income attributable to the corporations. The evidence at trial established that during the course of a civil audit of Delta Energy, the IRS requested Kokenis to produce records to support large and questionable expenditures by the business. In response to this request, Kokenis produced false, altered and counterfeited documents to conceal the fact that he had paid personal expenditures with business funds and to conceal his fraudulent reversal of sales in the corporate books. Kokenis remains civilly liable to the government for any and all back taxes, as well as a civil fraud penalty of 75% of the underpayment plus interest.
Man Sentenced for Conversion of Government Money and False Statements on Tax Returns
On February 9, 2011, in Bangor, Maine, David G. Young was sentenced to 33 months in prison, three years supervised release, a special assessment of $400, and a $7,500 fine. Young was convicted after trial on April 15, 2010, of one count of Conversion of Government Money and three counts of making False Statements in Connection with Income Tax Returns. Evidence at trial established that from 1997 to 2005, Young received pension benefits from the United States Office of Personnel Management totaling $138,968 which were intended for his mother-in-law, Mary Jerram. Those benefits were directly deposited into a joint checking account which Young maintained with Mrs. Jerram. Mrs. Jerram passed away in February 1997, but Young failed to notify the Office of Personnel Management that Mrs. Jerram had died. Young spent all of the money that was deposited into the account. During the period that Young was receiving his deceased mother–in-law’s benefits, he failed to claim the money on his income tax returns. Young was also ordered to pay the maximum restitution allowed, $30,931 to the Office of Personnel Management and $13,308 to the Internal Revenue Service.
Marine Corps Captain Who Skimmed Almost $1.7 Million from Contracts while in Iraq Sentenced to Six Years in Prison
On February 7, 2011, in Riverside, Calif., Eric Schmidt, a captain in the United States Marine Corps, was sentenced to 72 months in prison for his role in skimming about $1.69 million from government contracts awarded under the Iraqi First Program while he was in Iraq. Schmidt pleaded guilty in May 2010 to conspiracy to commit wire fraud and filing a false tax return that concealed the illicit income from the Internal Revenue Service (IRS). Schmidt’s wife, Janet Schmidt, who now lives in Nebraska, who pleaded guilty to a tax offense for failing to report income received as part of the scheme, is scheduled to be sentenced later this year. According to court documents, Eric Schmidt was deployed to Iraq for one year in 2008, when he used his position in the contracting process to steer contracts to an Iraqi contractor, the Al-Methwad Company. The contracts were often awarded under the Iraqi First Program, which was designed to award certain contracts to Iraqi vendors to assist with Iraqi economic expansion and entrepreneurship. Once Al-Methwad had been awarded the contract, Janet Schmidt found United States-based vendors to provide the goods purportedly to be furnished by Al-Methwad under the terms of the contract. Janet Schmidt purchased the goods using money provided by Al-Methwad, often purchasing far fewer or inferior products than those required by the contract. She then arranged for the goods to be delivered to the United States Marines in Iraq. Once the shipment arrived in Iraq, Eric Schmidt falsely certified both the number and type of goods required by the contract. Armed with the false certification, representatives from Al-Methwad sought and received payment from the United States. As a result of the scheme, the Schmidts caused the United States Department of Defense to suffer losses of $1,692,472 and the Internal Revenue Service to suffer losses of $458,141. Eric Schmidt was ordered to pay full restitution to the two agencies.
Washington Man Defrauded Used Car Dealers through ‘Advance Fee’ Scam of More Than $122,000
On February 7, 2011, in Tacoma, Wash., Steven P. Drury, of Vancouver, Washington, was sentenced to 24 months in prison, followed by three years of supervised release, and ordered to pay $219,000 in restitution to various car dealers. According to court documents, Drury established Auto Credit Solutions in 2005. For three months during 2005 and 2006, the company marketed itself to used car dealers claiming that for a fee it would bundle a dealership’s car loans and market them to investors, essentially selling the car dealers’ collectable debt. For this service, Auto Credit Solutions required the auto dealers to pay Auto Credit Solutions the car buyers’ first two to three months’ payments. The company collected the fees, but never marketed the loans. In his plea agreement, Drury admitted that Auto Credit Solutions had fraudulently charged more than 50 auto dealers $122,000. On November 22, 2010, co-defendant Shannon Huggins was sentenced to four months in prison and six months of home detention, with three years of supervised release. Ben King, another co-defendant, is scheduled to be sentenced at a later date.
Noblesville Man Sentenced for Wire Fraud and False Tax Returns
On February 4, 2011, in Indianapolis, Ind., Jimmy W. Burleson, was sentenced to 36 months in prison, three years supervised release, and ordered to pay restitution in the amount of $760,405, of which he has paid $125,000. Burleson pleaded guilty to wire fraud and making a false tax return. Serving as Controller/Secretary of an Indianapolis business, Burleson embezzled over $760,000 from his employer between June 15, 2005, and December 15, 2009. Burleson used his position within the company to conduct hundreds of telephone/electronic wire transfers from business checking accounts to pay his credit card accounts in the names of Jimmy Burleson, Dr. Jimmy W. Burleson and his wife, Sandra J. Burleson. Burleson further used his position of trust to conceal the embezzlement of the money by falsifying the “Daily Cash Reports.” As Controller/Secretary, Burleson was required to submit the “Daily Cash Report” to the owner/president every business day. The document reported the daily cash position of the business’s checking account to include balance, deposits, and any disbursements made from the account via cash withdrawals, check payments, electronic payments (ACH Debits), and payments to business equity credit lines. The investigation revealed that Burleson would take large credit advances on the credit card accounts to deposit into his personal checking accounts to pay for his home and vehicles, and fund the everyday living expenses of his family, children, and grandchildren. Burleson reported none of the money he embezzled as income on his federal tax returns for the years 2005 through 2008. Accordingly, the returns he filed for each of those years fraudulently understated his income. The tax loss to the government resulting from the false tax returns totaled $111,907.
Easton Man Sentenced to Federal Prison for Tax Fraud
On February 4, 2011, in New Haven, Conn., James L. McCarthy was sentenced to 12 months and one day of in prison, followed by one year of supervised release, and ordered to pay taxes due of $1,202,049. On August 3, 2010, McCarthy pleaded guilty to one count of aiding and assisting in the preparation of a fraudulent corporate federal tax return for 2000, and to one count of making and subscribing a false tax return for failing to report income on his 2000 personal tax return. According to court documents and statements made in court, McCarthy controlled two companies located in Stratford, American Boiler, Inc. (“AB”) and Industrial Property Management (“IPM”). AB maintained, repaired and occasionally installed industrial boilers, and IPM maintained the Stratford Army Engine Plane under a contract with the U.S. Army. Between 1999 and 2002, checks AB received for work it performed for its customers were deposited to the IPM checking account, either by McCarthy or at his direction. The income represented by those payments was never recorded in the books of AB, nor was it reported on AB’s federal corporate tax returns for those years, and McCarthy used checks drawn from the IPM account for his benefit and for the benefit of his family.
Former Telkite Technologies President and CEO Sentenced to Prison for Failing to Pay IRS Money Withheld from Employees
On February 4, 2011, in Trenton, N.J., Subrat Patnaik, former Telkite Technologies president and CEO, was sentenced to 12 months and one day in prison, two years of supervised release and was also ordered to file any outstanding tax returns and pay any taxes, penalties, and interest due. Patnaik previously pleaded guilty to a count of willful failure to truthfully account for and pay over taxes withheld by his former company. According to court records Telkite treated the IT personnel as employees of Telkite, withholding federal income and FICA taxes from their wages and providing them with IRS Forms W-2 at the end of the year. Patnaik controlled the finances, including writing payroll checks to Telkite’s employees. Patnaik admitted that though the taxes were withheld, from early 2004 through the end of the third quarter of 2006, Telkite did not file any payroll tax returns or pay any of the withheld taxes over to the IRS. According to the Information, Telkite withheld and failed to pay over $238,447 in payroll taxes. Patnaik admitted that he used money from Telkite to pay personal expenses – including mortgage payments and payments for his and his spouse’s BMW vehicles – and advanced money to other businesses that he controlled.
Tennessee Couple Sentenced on Tax Charges
On February 3, 2011, in Memphis, Tenn., Jerry Wayne Esch and his wife, Marcia Kay Esch, both of Gleason, Tennessee, were sentenced for filing false tax returns. Marcia Esch was sentenced to serve 12 months and one day in prison, followed by one year of supervised release. She was also ordered to pay restitution to the Internal Revenue Service (IRS) of $521,598. Jerry Esch was sentenced to two years probation, with the first six months to be served in home detention. Mr. Esch was also ordered to pay restitution to the IRS of $164,344. The Esches pleaded guilty on July 19, 2010, to one count of filing a false income tax return related to the 2003 corporate return for Esch and Poole, Inc. According to the plea agreements, Jerry Esch agreed to a tax loss of $164,344 to the United States based upon his actions relating to corporate and personal tax returns for 2003. Marcia Esch agreed to a tax loss of $521,598 based upon her relevant conduct pertaining to her 2003 personal and corporate tax returns for Esch and Poole, Inc., for 2003 through 2006, and employment taxes for tax years 2005 through 2007.
Owner of Suburban Adult Entertainment Clubs Sentenced to 12 Months in Jail and Six Months Home Confinement for Federal Tax Offenses
On February 3, 2011, in Chicago, Ill., Michael G. Wellek, who diverted more than $12 million in cash from three adult entertainment clubs he owned and operated in the Chicago suburbs, was sentenced to 12 months in prison, followed by six months home confinement in combination with one year of supervised release. Wellek was also ordered to pay a fine of $75,000 and perform 200 hours of community service. Wellek, pleaded guilty last fall to one count of obstructing the IRS in the collection of taxes and one count of filing a false federal income tax return for 2000. Wellek was the owner and operator of three “gentleman’s” clubs. In May 2003, IRS agents seized approximately $12 million in cash from a warehouse where Wellek conducted business. The cash was stored in bags marked with a date and location indicating from which adult club the cash was earned. Operating the businesses as sole proprietorships, Wellek was required to report their gross income and expenses on self-employment schedules attached to his federal income tax returns, and include their net income in calculating his annual individual gross income, taxable income and income tax. According to the charges, from 1989 through 1999, Wellek did not file any personal income tax returns despite operating profitable businesses that generated substantial taxable income. Between February 2000 and May 2003, Wellek endeavored to obstruct and impede the IRS in collecting taxes on his business income. Specifically, between February 2000 and October 2002, Wellek engaged in a pattern of false and misleading conduct, including making false representations about his assets and income, to obstruct and impede an IRS audit for the tax years 1989 through 1999.
Kentucky Businessman Sentenced to Prison for Filing False Income Tax Returns
On February 3, 2011, in Lexington, Ky., John Lee VanArsdale, a Lexington businessman, was sentenced to 27 months in prison for wrongfully deducting thousands of dollars in personal expenses on his federal tax returns. In October 2010, a jury convicted VanArsdale of filing false income tax returns. Evidence presented at trial proved that VanArsdale wrongfully deducted over $270,000 of personal expenses on his 2002, 2003, 2004, and 2005 tax returns. He treated these personal expenses as legitimate expenses of his company, Savage Technical Services, Inc., which serviced machinery at the Toyota automobile assembly plant in Georgetown, Ky., and at other automobile assembly plants. As a result, VanArsdale avoided paying nearly $90,000 that he owed in federal income taxes. Some of the personal expenses that VanArsdale deducted from his taxes included vacations, cosmetic dentistry, designer clothing, massages, groceries, liquor, meals at restaurants, renovations to his Lexington residence and his ex-wife’s house, rent for his girlfriend’s Lexington residence, and payments to attorneys for his divorce and to set up his children’s trust. The evidence also proved that VanArsdale engaged in a cash kickback scheme to lower his taxes. VanArsdale rented a small office in his friend’s Lexington residence for $200 per month. Each month, he gave his friend a $1,000 check and directed him to cash the check and return $800. VanArsdale then wrongfully deducted each $1,000 check as business rent on his taxes.
Chicago Contractor Sentenced
On January 26, 2011, in Chicago, Ill., Robert Blum was sentenced to 24 months in prison followed by two years supervised release and ordered to pay $2,131,838 in restitution. In August 2010, Blum pleaded guilty to filing false individual income tax returns and filing false corporate income tax returns. Blum was President, Chief Executive Officer and sole shareholder of Castle Construction Corporation, a general contractor. Blum caused Castle to pay certain personal expenses, including for the construction of his home and fraudulently recorded those payments as business expenses. He also diverted additional Castle funds to himself, which he failed to report as income. Blum concealed his use of corporate money for personal expenses funds from Castle’s tax preparer and the IRS by directing that certain personal expenses be recorded in Castle’s books as business expenses when, in fact, they were solely for his personal benefit. Blum under-reported Castle Construction’s net income for fiscal years 2003 through 2006 by approximately $1,956,604. As a result, Blum failed to pay approximately $665,245 in federal taxes owed by Castle. Blum also failed to report the business funds that he used to pay personal expenses as gross income on his individual tax returns. From 2003 through 2006, Blum failed to report a total of approximately $2,483,486 in gross income. As a result, Blum failed to pay approximately $875,367 in federal income taxes owed on this under-reported income.
San Francisco Restaurant Operator Sentenced for Tax Fraud
On February 3, 2011, in San Francisco, Calif., Suriya Srithong was sentenced to six months in federal prison, followed by six months of home confinement, for filing false federal income tax returns. Srithong pleaded guilty on October 6, 2010, to filing false federal income tax returns, admitting that he knowingly failed to report earnings from that restaurant on his 2005 and 2006 federal income tax returns. According to court documents, Srithong filed U.S. Individual Income Tax Returns that reported no gross receipts, expenses, net income or taxes related to the restaurant for 2005 and 2006.
Owner of Armenian-Language Publications Sentenced to 30 Months in Prison
On January 31, 2011, in Los Angeles, Calif., Navasard Petrosyan was sentenced to 30 months in prison, followed by three years of supervised release after pleading guilty to conspiracy and false statement charges. According to court documents, Petrosyan was the owner of several Armenian-language publications based in Glendale. While the Petrosyan businesses produced and sold Armenian-language publications, advertising, and other graphic design products and services, they served as front companies in connection with illicit financial transactions. Court documents state that unidentified co-conspirators operating medical “management” or “consulting” businesses in California and elsewhere in the southwestern United States required a source of cash to pay unlawful kickback expenses to obtain patient referrals to their medical businesses. Petrosyan negotiated checks from various medical provider clients, disguised the checks as advertising expenditures, and gave back to the clients in cash the face value of the checks minus a fee of several percent. According to his plea agreement, Petrosyan would arrange for advertisements for the medical businesses to appear in his publications, distributed in Los Angeles County, and elsewhere, to provide a further cover for the cash-back payments of co-conspirators’ medical businesses. Petrosyan conducted over $3 million of cash-back transactions fraudulently concealed as “advertising” expenditures.
Connecticut Man Sentenced to More Than Five Years in Prison for Running $2 Million Investment Scheme
On January 25, 2011, in Hartford, Conn., Carlos Garcia was sentenced to 63 months in prison, followed by three years of supervised release, and ordered to pay restitution of $2,061,604 to the victims of his $2 million investment scheme. On November 4, 2010, Garcia pleaded guilty to one count of mail fraud, one count of wire fraud and four counts of tax evasion. According to court documents and statements made in court, from at least as early as 2002 until 2009, Garcia purported to be an investment advisor/hedge fund manager; selling shares in “Paramount Equity Partners, LLC,” an investment vehicle that he represented would be used to invest client funds. Garcia directed certain clients to cash out their stock holdings or other investments, obtain surrender checks by mail, and endorse the checks over to “Garcia Capital Management, LLC,” an entity that Garcia controlled. Garcia then deposited the surrender checks into the Garcia Capital Management, LLC bank account. Garcia directed other clients to wire transfer money directly into the bank account for Paramount Equity Partners, LLC, and he then transferred those funds into the Garcia Capital Management, LLC bank account. Instead of investing the funds as promised, Garcia used clients’ money to pay for personal expenses for himself and his family, and to make “lulling” payments to clients. Through this scheme, Garcia victimized at least 10 people and caused a net loss to his victims of more than $2 million. As part of the scheme, Garcia created and mailed bogus account statements and correspondence to his client victims that discussed the returns they were earning on their investments. In some cases, Garcia also created false federal Internal Revenue Service Form 1065 Schedule K-1s so that victims filed false tax returns and paid taxes on returns they never earned. Garcia also willfully evaded the payment of income taxes for the tax years 2005, 2006, 2007 and 2008, resulting in a tax loss to the government of $38,145.
Former Virginia Attorney Sentenced
On January 24, 2011, in Abingdon, Va., David Eugene Cecil, of Grundy, Virginia, was sentenced to 36 months in prison and was ordered to pay $291,451 in restitution after pleading guilty to one count of mail fraud, one count of money laundering and one count of tax evasion. According to court documents, Cecil admitted stealing money from several trust accounts that he had been hired to administer for the late Robert and Nancy Baxter. The defendant also admitted depositing the funds he improperly took from the various trust accounts in a manner that would disguise the origin of the funds. He also admitted to evading payment of over $200,000 in income taxes from 1998 to 2006. Cecil admitted that as the co-trustee of several trust accounts set-up for the estate of Robert F. Baxter, he was to distribute the money in those trusts to the Baxter’s families upon the deaths of Robert Baxter and Nancy Baxter. However, upon the death of Mrs. Baxter, Cecil established bank accounts for the trust funds for which he was the sole signatory. Instead of liquidating the trusts and distributing the proceeds to the family, Cecil fraudulently withdrew over $260,000 from the trusts for his personal use.
Montana Man Sentenced in Investment Fraud Scam
On January 27, 2011, in Missoula, Mont., Carl Lawrence Estep, of Belgrade, was sentenced to 48 months in prison, followed by three years of supervised release, and ordered to pay a $200 special assessment and $1,379,700 in restitution. According to court documents, Estep engaged in an investment fraud scheme by promising investors large returns on their money from overseas investments that were allegedly realized by leveraging “gold ore” as collateral for overseas trading. He would solicit potential investors, often over singles dating web sites, by claiming that he used to work for the Howard Hughes Corporation and operated their mining division. In 2003, Estep stored 200 barrels of rock and sand in a Belgrade barn and obtained a forged “assay” that purported to show that the rock and sand in the barrels contained large amounts of gold and/or platinum. An assay is a detailed report of findings of metals in ore. He further solicited investors by stating that he owned a gold refinery in Montana and was trying to build others in the area that could refine the gold and investors stood to make large profits by investing in the gold barrels and refinery operations. In reality, Estep did not own any refineries nor did he make any expenditures to develop refineries, and he did not invest money overseas. He simply used the money for numerous personal expenditures, including cars, overseas travel, and daily expenses.
Alabama Woman Sentenced to Prison for Tax Evasion
On January 27, 2011, in Birmingham, Ala., Ina Susan Standberry, of McCalla, was sentenced to six months in prison and six months home detention for filing false tax returns with the Internal Revenue Service. She was also ordered to pay $137,018 in back taxes. Standberry pleaded guilty in September to two counts of filing false tax returns, which under-reported her income for 2003 and 2004 by $441,183. According to her plea agreement, Standberry owned Standberry & Associates, a Birmingham income tax and accounting business, and was a branch manager at a Birmingham mortgage company in 2003 and 2004 when she filed false returns for those two years. She acknowledged that she filed a return for 2003 claiming $209,180 in income, but omitting $82,782 she received that year. She also acknowledged filing a return for 2004 claiming $339,035 in income, but omitting $331,401 she received.
Kansas Man Sentenced to Federal Prison in $3 Million Mortgage Fraud
On January 25, 2011, in Kansas City, Kan., Eric Rabicoff was sentenced to 51 months in prison and ordered to forfeit $50,000 for money laundering. According to court documents, Rabicoff admitted he was the leader of a scheme to defraud mortgage lenders that resulted in more than $3 million in loans to straw buyers who were not qualified to receive them. Rabicoff and his co- conspirators arranged for straw buyers to purchase homes in Olathe, Kan., Kansas City, Mo., and Lee’s Summit, Mo. that were for sale by owners. They obtained financing for the deals by submitting false loan applications to lenders. They provided false information including employment, income and rent history in order for the straw buyers to obtain loans. The scheme also called for contract prices to be increased and for conspirators to receive money by submitting false invoices to title companies for improvements on the houses that never were made. Rabicoff directed conspirators in recruiting straw buyers and assembling fraudulent loan files. He and the conspirators, under his direction, submitted false invoices to title companies for purported improvements made to the properties. The invoices were submitted in the name of MSM Enterprises, a company Rabicoff controlled. The title companies paid MSM Enterprises from the loan proceeds at closing, not knowing that the company made no actual improvements to the properties. On April 5, 2006, Rabicoff committed the crime of money laundering by transferring $50,000 in money criminally derived from the conspiracy from his MSM account to another conspirator’s account held in the name of Cappo Investment Agency.
Two Women Sentenced for Multi-Million Dollar Embezzlement Scheme and Tax Fraud
On January 21, 2011, in Des Moines, Iowa, Phyllis and Marla Stevens were sentenced for multiple felony offenses. Phyllis was sentenced to 72 months in prison followed by three years of supervised release for conspiracy to commit money laundering, conspiracy to file false income tax returns, wire fraud, computer fraud, and filing a false income tax return. Marla was sentenced to 40 months in prison followed by three years of supervised release for conspiracy to commit money laundering and conspiracy to file false income tax returns. Both were ordered to pay restitution of nearly $6.76 million to Aviva USA, their employer. According to court documents, Phyllis Stevens admitted to a long-time pattern of embezzlement by making false and fraudulent entries into the computer system of her employer. She admitted to using large sums of this money to purchase real estate and for making large payments to American Express. She further admitted to filing false income tax returns which failed to report the embezzled income, and which sometimes falsely reported the income in the names of other individuals as part of an effort to conceal the fraud. Marla Stevens admitted that she knew that Phyllis Stevens was receiving income from unlawful activity, that she participated in financial transactions with the proceeds of Phyllis Steven's unlawful activity, and that she participated in the filing of false income tax returns.
MetroHealth System Executive Sentenced to 9 Years in Prison
On January 19, 2011, in Cleveland, Ohio, John J. Carroll, former MetroHealth System executive, was sentenced to 108 months in prison and ordered to pay $728,000 in restitution and perform 100 hours of community service upon his release from prison. Carroll, the former Vice President of Facilities and Institutional Services at MetroHealth, pleaded guilty in September 2009 to six charges, including conspiracy to commit bribery, obstruction of justice and filing false tax returns. According to court documents, Carroll admitted to participating in several bribery schemes in which he and another MetroHealth executive, Thomas J. Greco, solicited bribes from Nilesh Patel, former vice president of East West Construction Company. The bribes were valued at approximately $678,000 and came in the form of travel, gift cards, home improvements and home furnishings, according to court documents. In exchange, Carroll and Greco exercised their discretion at East West’s advantage on MetroHealth contracts. Court documents showed that Carroll, Greco and Patel funded the bribes by causing MetroHealth to pay inflated costs to East West.
Tennessee Man Sentenced to 25 Years in Prison for Role in Investment Fraud Scheme
On January 18, 2011, in Raleigh, N.C., John Kent Colvin, of Nashville, Tennessee, was sentenced to 300 months in prison, followed by three years of supervised release, and ordered to pay over $5 million in restitution. According to evidence presented at trial and at his sentencing hearing, Colvin, a former insurance agent, conspired with Scott Hollenbeck while both were working for Merchant Capital, LLC, in Brentwood, Tennessee, in an investment fraud scheme. The two men began soliciting investments in various “funds” and “programs” called Webb Group, Franklin Asset Exchange, and Disciples Trust. Colvin and Hollenbeck falsely told investors that their money would be invested in name-brand companies and was insured by a surety bond program. In fact, Colvin arranged for approximately $17 million to be sent to BMP Investments, Inc., an entity involved in developing a coal mine in Montana. BMP failed to repay the money. Other investors' money was used to make “interest” payments back to victims; lulling them into thinking the investment was legitimate. Hollenbeck and Colvin collected a total of more than $20 million from victims during a two-year period starting in 2003. Colvin retained approximately $1.5 million in commissions over a two-year period which came in large part from commissions based on the money provided to BMP.
California Woman Sentenced to Prison for Defrauding New Mexico Company
On January 18, 2011, in Albuquerque, N.M., Flavia Bolourchi, of Sacramento, California, was sentenced to 37 months in prison, three years of supervised release, and ordered to pay restitution of $856,000. Bolourchi pleaded guilty on March 10, 2010, to mail fraud, interstate transportation of stolen property, money laundering and tax evasion. According to court documents, between January 3, 1997, and August 20, 1999, Bolourchi was employed as the financial officer of Spartan Health Sciences School of Medicine (“Spartan”). In March 1998, Spartan moved its corporate headquarters to El Paso, Texas and Santa Teresa, New Mexico. As part of her duties, Bolourchi received student loan checks and disbursed them to students to cover tuition and other expenses. Instead of depositing funds from these checks into Spartan’s bank account, Bolourchi deposited the funds into her own bank account in Santa Teresa, New Mexico. To conceal her fraud, Bolourchi made false entries in Spartan’s financial records. Bolourchi also failed to pay $320,483 in federal income taxes on the income she obtained by defrauding Spartan.
General Manager of California Medical Practice Sentenced To 24 Months in Prison for Tax Evasion
On January 13, 2011, in San Francisco, Calif., Maria Virginia Reyes, of Los Altos, Calif., was sentenced to 24 months in prison, three years of supervised release, including 6 months of home detention, and ordered to pay restitution in the amount of $141,815. According to the plea agreement, Reyes admitted that from July 2000 until August 2007 she was employed by a medical practice located in Palo Alto and San Mateo, Calif. Reyes first worked as a front desk manager and later as a general manager of that medical practice. For the tax years 2003 through 2007, she received a total income from the medical practice of approximately $502,796 that she did not report on her tax returns. To facilitate her income tax evasion, Reyes used her position as general manager to under-report her taxable income to the medical practice’s payroll processing company. Specifically, during 2006, in addition to her wages, Reyes received approximately $250,699 from the medical practice. She used that money to pay her personal credit card debts. On April 16, 2007, she filed an income tax return reporting taxable income of $16,638 when her true and correct taxable income was $267,337.
Officials of Non Profit Organization Sentenced For Tax Evasion
On January 11, 2011, in Detroit, Mich., Jon Rutherford and Judith Bugaiski were sentenced on charges of tax evasion. According to court documents, Rutherford, former President and Chief Executive Officer of Metro Emergency Services Inc. (MES), received a sentence of 21 months, followed by three years supervised release and Bugaiski, the former Controller of MES, was sentenced to three years probation, with the first 90 days to be served in a residential re-entry program. As president and CEO of MES, Rutherford diverted more than $1.3 million of grant money to himself, and channeled more than $1 million into his property management company, DPR Management LLC, so that he could use the money for political payments and campaign expenses. These political and campaign payments were improperly claimed as expenses of the property management company’s records. Bugaiski, at the direction of Rutherford, maintained the books and records, knowing that the information was false. Through this scheme Rutherford evaded personal taxes of over $890,000 from the 2000 through 2004 tax years.
Pennsylvania Man Sentenced to Prison for Tax Evasion
On January 6, 2011, in Pittsburgh, Pa., Timothy Lucas was sentenced to 12 months and one day imprisonment and two years of supervised release on his conviction of tax evasion. According to information presented to the court, Lucas evaded payment of his income tax due for the calendar years 1996 through 2006. Lucas filed accurate tax returns for each year. However, since 2001 he has made almost no payments to the IRS of tax due. However, he paid $398,000 on credit cards and $78,000 for vehicles. In 2004 he purchased a Porsche; in 2005 he purchased a Land Rover. From 2003 to 2007, he spent over $100,000 on trips to St. Barts. During the same period, he spent $65,000 on pleasure trips to New York City.
Montana Man Sentenced for Filing False Tax Returns Claiming Fictitious Gambling Winnings
On January 5, 2011, in Billings, Mont., Tyson L. McBride, of Miles City, was sentenced to 54 months in prison, three years of supervised release, and ordered to pay restitution of $485,708. McBride was sentenced after pleading guilty to making a false claim, wire fraud and aggravated identity theft. In an Offer of Proof, the government stated that between February 13, 2006, and February 26, 2009, McBride electronically filed multiple false tax returns with the IRS claiming refunds based on fictitious gambling winnings. McBride admitted that he did not have any gambling winnings during the tax years covered by the false tax returns. McBride purchased two identical 2007 Yamaha motorcycles with tax refund proceeds he received based on the false federal income tax returns he filed with the IRS.
Former Louisiana State Senator Sentenced on Tax Charges
On January 5, 2011, in Shreveport, La., Charles D. Jones, an attorney and former Louisiana State Senator, was sentenced to 27 months in prison, followed by three years of supervised release, and ordered to pay $305,174 in restitution. Jones was convicted of two counts of filing false tax returns and one count of tax evasion. Court testimony showed that beginning in July 1995 and continuing to December 2003, Jones took various actions to evade paying income taxes, including converting legal fees received into cashier’s checks and cash and using a nominee to purchase two lots in Ouachita Parish, which he paid for in cashier’s checks. In addition, in August 2001 and in October 2003, Jones filed individual income tax returns which he knew under-reported his gross receipts and adjusted gross income for tax years 1999 and 2000 by well over $500,000 and $50,000, respectively.
Two Sentenced in Ohio in Tax and Money Laundering Conspiracy
On January 5, 2011, in Columbus, Ohio, Marsha Parenteau, wife of convicted felon Thomas Parenteau, was sentenced to 33 months in prison to be followed by three years of supervised release on money laundering charges. In addition, Parenteau was ordered to forfeit a vacant lot in the Wedgewood golf community in Dublin. The court ordered the government to seize Parenteau’s personal belongings maintained at two storage garages and the home of a friend, and sell the belongings at auction to pay towards the restitution judgment. Pamela McCarty, a real estate agent, was sentenced to 24 months on charges of conspiring to commit tax fraud, money laundering and bank fraud. According to court documents, Marsha Parenteau conspired with her husband, Thomas Parenteau, his accountant Dennis Sartain, Pamela McCarty and others to launder unlawful proceeds generated from nearly $19 million in fraudulently obtained loans against a personal residence. According to court documents, McCarty conspired with other individuals at Your Home Source, real estate brokerage company, to defraud the United States by impairing and impeding the IRS by falsely understating amounts paid to workers. McCarty also admitted conspiring with Thomas and Marsha Parenteau, Sartain and others to launder unlawful proceeds generated from more than $6 million in fraudulently obtained loans against a personal residence. McCarty further admitted to conspiring with Sartain and others to commit bank fraud by helping a Your Home Source employee fraudulently obtain a mortgage to buy a home from McCarty, which she held in trust for Thomas Parenteau, at an inflated price with an undisclosed kickback. Thomas Parenteau has yet been sentenced.
Irons Michigan Man Sentenced on Tax Evasion Charges
On January 4, 2011, in Grand Rapids, Mich., Gary Oetman was sentenced to 12 months and a day in prison, two years of supervised release and ordered to pay nearly $222,000 in restitution for tax evasion. According to court documents, Oetman pleaded guilty to four counts of tax evasion. During the tax years 2004 through 2007, Oetman caused to be prepared and filed false and fraudulent income tax returns, under-reporting gross receipts for his scrap iron business by more than $720,000, resulting in more than $8,000 in fraudulent tax refunds. Oetman had substantially underreported gross receipts over the four year period and owed taxes to the Internal Revenue Service of $221,915.00.
Businessman Sentenced on Tax Charges
On January 4, 2011, in Boston, Mass., James T. Espinola, a New Hampshire businessman, was sentenced to 15 months in prison to be followed by three years of supervised release. According to court documents, from 2001 to 2005, Espinola engaged in a scheme to hid income along with Darrell Maclean and Charles Smith, owners of Suburban Middlesex Insulation (SMI), a Norwood-based asbestos removal business. SMI used teams of trained laborers that were supplied by temporary employment agencies to perform asbestos abatement. Espinola supplied temporary laborers to SMI and in exchange for this service, SMI paid Espinola by check each week. In addition, either Maclean or Smith would hand Espinola a second check, made payable either to Espinola or his company, ranging in amounts from $5,000 to $15,000, purportedly for payment for temporary employment services. Espinola deposited the checks into his bank account, and later withdrew the funds in cash. He then delivered the cash, minus a cut for himself, to Maclean and Smith. On SMI’s tax returns, Maclean and Smith characterized these checks to Espinola as business expenses and failed to report the cash from Espinola as taxable income on their personal tax returns. Espinola hid approximately $372,410 of additional tax revenue by falsely understating his income for the tax years 2001 to 2005.
Oklahoma Woman Sentenced for Writing Company Checks to Pay for Her Personal Debts
On December 29, 2010, in Oklahoma City, Okla., Tina West was sentenced to 33 months in prison and three years of supervised release for making false and fraudulent statements to the Internal Revenue Service and mail fraud. According to court documents, from January 2005 through September 2006 West, an office manager for Triple S Systems, a plumbing and electrical company, wrote checks from her employer’s bank account to pay for her personal debts with various creditors. West represented that the checks were written to company vendors and noted the payees in the ledger to conceal her fraud. West also filed a false tax return for the calendar year 2007; reporting her income of $38,342, when she well knew that she received additional income in excess of $171,000 that she did not report as income on her tax return.
Connecticut Attorney Sentenced for Failing to Pay Taxes
On December 22, 2010, in Bridgeport, Conn., Michael Sherman, aka Mickey, of Greenwich, was sentenced to 12 months and one day in prison, followed by one year of supervised release, for willfully failing to pay his federal income taxes. In addition, Sherman was ordered to cooperate with the Internal Revenue Service (IRS) to resolve his outstanding tax liabilities, which total more than $1.2 million. According to court documents and statements made in court, Sherman, an attorney, filed his federal income returns in 2001 and 2002, but failed to pay taxes due. In October 2002, after receiving an extension from the IRS, Sherman filed an individual income tax return for the 2001 tax year indicating that he had received $667,256 in taxable income and owed $278,304 in income taxes. However, even though he had the ability to do so, Sherman willfully failed to pay the taxes he owed. In October 2003, Sherman filed an individual income tax return for the 2002 tax year indicating that he had received $347,757 in taxable income and owed $142,406 in income taxes. Again, he failed to pay his taxes even though he had the ability to do so. As a result of the prosecution of this case, Sherman paid approximately $400,000 in taxes for the years 2001 and 2002. However, he still owes penalties and interest of more than $320,000 for those years. In addition, he owes more than $962,000 in taxes, penalties, and interest for tax years 2004 to 2009.
Connecticut Man Sentenced for Filing a False Tax Return
On December 21, 2010, in Hartford, Conn., Michael Harrison, of Torrington, was sentenced to 12 months and one day in prison, followed by one year of supervised release, and ordered to pay more than $385,000 to the Internal Revenue Service (IRS) for back taxes and interest. On May 6, 2010, Harrison pleaded guilty to one count of making and subscribing to a false tax return. According to court documents and statements made in court, Harrison was formerly employed as Vice President and General Counsel of Danone Waters of North America. In July 2004, Harrison filed a false federal tax return by failing to report $514,727 in income that he received in 2002 from Danone through “Retained Attorney Partners, LLC,” an entity Harrison controlled.
Prolific Identity Thief Sentenced For Stealing $1.15 Million
On December 15, 2010, in Portland, Ore., Eduard Anatolyevich Kholstinin (aka Edward Belozor) was sentenced to 22 months in prison to run concurrently with his sentence in a New York State case. In addition, Kholstinin will serve three years of supervised release and pay $1,151,382 in restitution. On September 9, 2010, Kholstinin pleaded guilty to one count each of interstate transportation of stolen property, structuring of monetary transactions, and fraud and misuse of visas, permits, and other documents. Kholstinin, a Russian citizen, also agreed to forfeit $80,000 from the sale of gold coins, along with two automobiles, an ATV and computers. According to court documents, between May 2006 and May 2007, Kholstinin used fraudulent credit cards to gain unauthorized access, via hundreds of ATM machines in California and elsewhere, to bank accounts held by victims in Oregon, Washington, California and elsewhere. This scheme resulted in a loss of over $463,000 to Wells Fargo Bank and over $687,000 to Citibank. In late May 2007, Kholstinin took stolen bank funds from Anderson, California to Oregon where he used phony driver’s licenses, which he created, to wire transfer at least $124,000 to various individuals in Russia. The wire transfers were all made at non-bank locations such as grocery stores, pharmacies, and retail stores. Receipts for 47 of the wire transfers, purchased with currency for between $1,920 and $2,870, show that he structured the transfers and made the transactions at multiple locations on the same date, to not trigger the filing of Suspicious Activity Reports or Currency Transaction Reports with the Internal Revenue Service (IRS).
Chicago Man Sentenced for Tax Evasion
On December 10, 2010, in Chicago, Ill., Isaac Bridges was sentenced to 12 months in prison, one year of supervised release and ordered to pay $54,000 in restitution for failing to file a tax return. According to court documents, Bridges was employed by Euromarket Designs, Inc., and Uline, Inc. and made nearly $136,000 in 2004 but failed to file a tax return for 2004. He also filed a false form W-4 claiming he was exempt from all federal taxes.
Florida Man Sentenced to Over 15 Years for $37 Million Ponzi Scheme
On December 22, 2010, in Tampa, Fla., Beau Diamond was sentenced to 186 months in prison and ordered to pay $23,065,090 in restitution to victims. In addition, the court entered a money judgment in the amount in excess of 37 million dollars, representing the proceeds of Diamond's fraudulent conduct. According to testimony and evidence presented at trial, Diamond operated a fraudulent Ponzi scheme from April 2006 to January 2009 through his Sarasota company called Diamond Ventures LLC. He defrauded approximately 200 investors located in Sarasota and throughout the country out of approximately $37 million.
Virginia Man Sentenced To 15 Years In Prison In $17 Million Online Ponzi Scheme
On December 21, 2010, in Baltimore, Md., Byron Keith Brown, of Vienna, Virginia, formerly of Ellicott City, Maryland, was sentenced to 180 months in prison followed by three years of supervised release for wire fraud and money laundering charges related to a five year scheme to fraudulently obtain over $17 million from online investors. The court also ordered Brown to pay restitution of $9,830,111. According to testimony at his trial, Brown was the chief executive officer for companies called In God We Trust (IGT) Financial Services, IGT Investment Company, IGT Wealth Management Group and WM Private Equity Fund, Inc. Brown was not a licensed broker, dealer or investment advisor in Maryland, Virginia or the District of Columbia. The evidence presented at trial showed that from 2003 to 2009, Brown operated websites in which he falsely held himself out as having 10 years experience in financial services and securities industries when in fact he had filed personal bankruptcy in 1999. He also claimed to have offices in Washington, D.C., Wilmington, Delaware, New York, NY, and London, England when in fact he had rented a mailbox or services at a virtual office that provided telephone answering services and mail forwarding services to clients. Brown advertised on his websites that the basic investment required was a minimum of $1 million. He used computer software to create an illusion that the investor was logging into a banking website and viewing account information when in fact, the account numbers were made up. Brown found investors through his websites and referrals. Witnesses testified that Brown opened some bank accounts in the names of investors, but he retained a power of attorney over the accounts, managed all the money that was invested, controlled investment decisions and deprived investors of information about their accounts. According to trial evidence, Brown used funds from new investors to make payments to old investors and to conceal his diversion of investors’ monies. Brown used the investors’ money to purchase a 2004 Bentley, a 2005 Rolls Royce Phantom, a 1936 Auburn Speedster, a 2007 BMW, a 1997 Jaguar and a 2006 Aston Martin. To date, the government has seized 16 vehicles, including some of the vehicles described above, as well as a 2007 Lamborghini, a 2008 Maserati, two Mercedes and a 2002 Ferrari.
California Man Sentenced To 20 Years in Prison for Central Illinois ‘Ponzi’ Fraud Scheme
On December 10, 2010, in Peoria, Ill., William Huber, of LaJolla, Calif., was ordered to serve 240 months in federal prison. Huber pleaded guilty in August to operating a multi-million dollar “Ponzi” fraud scheme for more than a decade in the Decatur area. The court also ordered Huber to pay restitution of $23.6 million to the approximately 160 investors he defrauded from 1998 through 2009. According to court documents, Huber was responsible for all aspects of Hubadex, Inc., an Illinois corporation with its main office in Forsyth, Illinois. Hubadex represented that it served as the general partner for two pooled investment funds, The Quarter Funds, L.P. and The Symmetry Fund, L.P., and for an investment club known as The Trimester Fund. During the plea hearing on August 10, 2010, Huber admitted that he did not invest clients’ funds as represented; rather, he engaged in a Ponzi-type scheme whereby clients who requested redemption, based on the falsely-inflated position of their investments, were paid with funds invested by other clients. Huber admitted that he diverted client funds to support a lavish lifestyle, paying personal expenses for himself and others. These expenses included mortgage payments and remodeling expenses for residences in La Jolla, California, and Naples, Florida. Huber also admitted that he provided false and fraudulent information to the Securities and Exchange Commission.
Man Sentenced in Connection with Stealing $8 Million from Investors
On December 9, 2010, in Minneapolis, Minn., David McCaffrey was sentenced to 30 months in prison for conspiracy to commit wire fraud and tax evasion. According to court documents, McCaffrey admitted that between October 2004 and February 2007, he conspired with others to defraud the Carlton Financial Corporation and others out of money by making false representations. McCaffrey was the Chief Executive Officer for ConServe Corporation, which provided electricity sub-metering services to apartment complexes. ConServe financed its operations, in part, by attracting investors to finance the installation of the sub-metering equipment. The Carlton Financial Corporation was one of ConServe’s primary investors, providing the company with millions in operating dollars. McCaffrey admitted that ConServe defrauded the investors by stating that installation projects were in place or going to be put in place. Based on those fraudulent representations, investors would provide financing for phony installation projects. McCaffrey admitted that false invoices were created that reflected expenses connected to installations that were never done. Those invoices were then submitted to investors, including Carlton, as purported documentation of legitimate projects that needed to be financed. To support the scheme, phony acceptance certificates were also created to “certify” those false installations. McCaffrey admitted that on December 5, 2005, more than $700,000 was transmitted via wire from a Carlton-related bank account to a ConServe bank account. The total amount of loss to investors from the scheme to defraud was approximately $8 million. In addition, McCaffrey filed a false 2007 tax return that listed nearly $35,000 in taxable income for McCaffrey and his wife. In truth, their taxable income for that year was in excess of $100,000.
New Hampshire Bookkeeper Sentenced for False Check and Tax Fraud Scheme
On December 9, 2010, in Burlington, Vt., Julie Ann Garrow, of New Hampshire, was sentenced to 24 months in prison, followed by three years of supervised release, and ordered to pay restitution of $612,455 to Vermont Graphics and its insurer and $82,133 to the Internal Revenue Service (IRS). According to court documents, Garrow was a former part-time bookkeeper for Bellows Falls printing company Vermont Graphics between 1994 and October 2008. As part of her duties, Garrow had access to the company’s checks, but did not have authority to sign them or write checks to herself. From approximately March 1994 until October 2008, Garrow forged authorized signatures and altered payment amounts on corporate checks for her own benefits. Garrow further failed to pay taxes on the fraudulently obtained funds, resulting in an understatement of her income on her 2003 to 2008 tax returns.
Husband and Wife Who Were Pastor and Co-Pastor at Greater Salem Church Sentenced on Tax Charges
On December 8, 2010, in Charlotte, N.C., Anthony L. Jinwright, former Bishop at Charlotte’s Greater Salem Church, and his wife, Harriett P. Jinwright, co-pastor at the church, were sentenced for conspiracy to defraud the United States and tax evasion. Anthony Jinwright was sentenced to 105 months in prison; Harriett Jinwright was sentenced to 80 months in prison. In addition, the Jinwrights will serve three years of supervised release and were ordered to pay more than $1 million. In May 2010, a jury convicted Anthony Jinwright on one count of conspiracy to defraud, six counts of tax evasion (calendar years 2002-2007), and six counts of filing a false tax return (calendar years 2002-2007); Harriett Jinwright was convicted on one count of conspiracy to defraud and three counts of tax evasion (calendar years 2005, 2006 and 2007). According to court documents, the Jinwrights failed to report their taxable income from their ministry at the Greater Salem Church of Charlotte; AL Jinwright Funeral Services in Charlotte; AL Jinwright Ministries; and from speaking engagements at other churches. Trial testimony and evidence revealed a history of the Jinwrights filing false returns that understated taxable income and of ever-growing and exorbitant salaries accompanied by unrestrained spending, all while they controlled and were intimately involved in the operations of Greater Salem Church. According to the evidence presented at trial, despite receiving more than $5.3 million in payments and disbursements between 2002 and 2007, the Jinwrights reported to the IRS an adjusted gross income of less than half that amount. Witness testimony and trial evidence established that when the funds of the Greater Salem Church, credit card spending, and income from other sources still did not cover their lifestyle, the Jinwrights cheated on their taxes to provide additional spending money.
Men Sentenced to Prison for 2003 Investment Fraud Scheme
On December 7, 2010, in Las Vegas, Nev., Gary Colombo, of Las Vegas, and Michael Jenkins, of Memphis, were sentenced to 57 and 48 months in prison, respectively. In addition, both men were sentenced to three years of supervised release and ordered to pay $10 million in restitution. According to court document, in 2003, Colombo and Jenkins promised victims "no risk" and "high gain" investments on sums of $10 million or more. The defendants also promised that the investors’ funds would be securely held in a major bank and returned to them within a specified time. The defendants used corporate entities, including Arquest, Inc,” “ZAG, LLC”, and FRETUS FIDUCIA PRIVATE BANK, through which the investment program was offered. At least three persons invested for over $30 million. The monies were never invested and were instead used for personal gain, including for the purchase of luxury automobiles and multiple homes in Grand Junction, Colorado.
Minneapolis Man Sentenced to 11 Years in $2.3 Million Refund Fraud Scheme
On December 6, 2010, in Minneapolis, Minn., William Morris was sentenced to 132 months in prison for conspiracy, mail fraud, wire fraud and filing a false tax return. Morris and his mother, Carolyn Louper-Morris, were convicted on February 2, 2010. Louper-Morris was sentenced to 144 months in prison in September 2010. In addition, the defendants were ordered to pay restitution. According to the evidence presented at trial, Carolyn Louper-Morris and her son owned CyberStudy 101, a privately held Minnesota corporation. In 2000, she and her son conspired to market CyberStudy 101 as an Internet-based tutorial for students in Grades K-12 to take advantage of the Minnesota education tax credit for low income families. The defendants had customers assign their education tax credits to CyberStudy and give the company authority to file tax returns on their behalf. To get people to sign up for CyberStudy, the defendants promised customers “free computers,” among other things. They misrepresented to customers and the MDR the content and features of CyberStudy and violated the law by not having customers pay for the tutorial in advance of receiving the education credit. The defendants received payment for the tutorial only by diverting the tax refunds of CyberStudy customers. The defendants distributed more than 2,000 “free computers” but never paid Kmart, which supplied most of them. In all, the defendants obtained more than $2.1 million from the Minnesota Department of Revenue. In addition, on October 18, 2002, William Morris, Jr., willfully filed a false federal Individual Income Tax Return that failed to report more than $400,000 in funds he received from CyberStudy in 2001.
Two District of Columbia Men Sentenced for Filing False Tax Returns
On December 6, 2010, in Washington, D.C., Andrew Novak and Daniel Feller were sentenced to 18 months and 8 months in prison, respectively. In addition, they were both ordered to perform 100 hours of community service and to serve one year of supervised release following their prison terms. According to court documents, Novak was formerly employed by a District of Columbia based company that provided advertising and media outreach services, identified in court documents as “Company K." Feller owned Strategic Plus, Inc. (SPI) which did business with Company K. In their plea agreements, Novak and Feller admitted that from 2002 through 2007, they engaged in a scheme to steal and misapply over $2.3 million in funds from Company K. The men caused false SPI documents and fictitious SPI invoices to be submitted to Company K, resulting in checks being issued from Company K to SPI. Feller caused approximately 90 percent of the check proceeds to be sent to Novak and kept approximately 10 percent for himself. To assist Novak in preparing false Federal Form 1040 income tax returns, Feller falsified SPI check registers to ensure that Forms 1099 (relating to payments from corporations to individuals) were not issued for the payments being made from SPI to Novak. Novak prepared and filed false tax returns for the years 2002 through 2007, not reporting $2,321,764 in income which resulted in a tax loss of $814,744.
Owners of Parking Systems Sentenced on Tax Evasion Charges
On December 3, 2010, in St. Louis, Mo., William Bialczak was sentenced to 12 months and a day in prison and ordered to pay more than $370,000 in restitution and a $100,000 fine. Kenneth Bialczak was sentenced to 12 months and a day and ordered to pay more than $347,000 in restitution and a $75,000 fine. The Bialczak brothers owned and operated St. Louis Metropolitan Towing, L.P., Parks Auto Sales, and S & H Parking Systems, LLC, all located in St. Louis. According to court documents, these businesses generated large amounts of cash from parking lots operated in downtown St. Louis, towing operations stemming largely from a contract with the St. Louis Metropolitan Police Department, and vehicle auction sales. The brothers skimmed substantial sums of cash receipts from their businesses, which were never deposited into their business bank accounts. As part of their plea agreements, they admitted that between 2005 and 2006, gross receipts for their businesses were under-reported by approximately $1 million dollars.
Illinois Couple Sentenced in Lenders Fraud Scheme
On December 2, 2010, in Bloomington, Ill., Gary and Toni Jo Wilder were sentenced to 184 and 84 months in prison, respectively. The couple was also ordered to pay $172 million in restitution to victims of their fraud scheme. The Wilders were the owners of Wildwood Industries Inc. a company that manufactured lawn, leaf and vacuum bags. Starting in 2000 and continuing to about April 2009, the Wilders and others defrauded financial institutions and private lenders by providing false information to obtain lease funding for manufacturing equipment which did not exist.
Montana Woman Sentenced on Tax Charges
On December 2, 2010, Missoula, Mont., Melissa Lynn Sever, of Butte, was sentenced to 24 months in prison, three years of supervised release, and ordered to pay $342,441 in restitution. According to court documents, Sever worked full time as a bookkeeper for H & R Block from February 2008 until March 2009. Sever used her position at H & R Block to embezzle from the company in four ways. First, she improperly gained access to management’s user ids and passwords and used that information to send unauthorized Automated Clearing House (ACH) payments to herself. Second, she increased her working hours on several of her paychecks to receive larger paychecks than she was entitled to receive. Third, Sever wrote checks from the company bank account for her personal benefit. Finally, she took and pocketed cash payments made to H & R Block by clients before making the company deposits. Sever admitted creating false accounting entries in the books and records of the business to hide her embezzlement. During 2008, Sever embezzled approximately $133,000 and failed to report much of that income on her 2008 federal income tax return. She only included the increased wages she was not entitled to receive. The resulting tax loss from the unreported income is $41,947 for the 2008 tax year.
Mortgage Insiders Sentenced to Prison
On December 1, 2010, in Houston, Texas, four employees of the Central Capital Financial Group were sentenced to prison for running a mortgage fraud scheme. Anthony Hawkins, a loan officer and real estate agent, who oversaw a real estate office, Team Work Realty, and a mortgage brokerage office, Central Capital Financial Group, was the leader of the scheme and received 151 months for conspiracy to commit mail and wire fraud and money laundering. Loan officers Brandon Crenshaw and Nehemiah Douglas were sentenced on the same charges to 36 months and 24 months respectively. Loan processor Shirley Adger, and local business owner David Vasser were convicted several counts of wire fraud and conspiracy to commit mail and wire fraud and were sentenced to 60 months and 87 months respectively. The scheme involved numerous misrepresentations on mortgage loan applications which the defendants supported with other fraudulent documents. Vasser was accused of not only applying for and receiving mortgage loans under false pretenses, but allowing his business, Rising Star Enterprises, to be used in the scheme as an employer of straw borrowers on loan applications in exchange for money. The scheme was alleged to have taken place between 2002 and 2006 and involved approximately 129 fraudulent property transactions.
Former Tile Company Executive Sentenced to Five Years for Bank Fraud and Tax Evasion
On November 29, 2010, in Newport News, Va., Iraj “Roger” Ahmadian, of Collierville, Tenn., was sentenced to 60 months in prison, followed by three years of supervised release, and ordered to pay $508,998 in restitution. According to court documents, from October 2003 to January 2007, Ahmadian was an executive at Dillon Stone, a Virginia Beach-based retail marble and granite tile company. Dillon Stone paid its subcontractors through weekly draws and reported these payments to the Internal Revenue Service (IRS) on Forms 1099. To initiate payment, a project manager and/or Ahmadian would submit a subcontractor pay request to the accounting department. Ahmadian had the authority to approve these subcontractor pay requests. At the time Ahmadian worked for Dillon Stone, he owned and operated National Marble Tile & Terrazzo, Inc. (NMTT), a corporation registered in Georgia, but operated out of Memphis, Tenn. NMTT was also engaged in the commercial tile business. NMTT was assigned an Employer Identification Number (EIN) by the IRS, and this number was used to open two bank accounts at First Tennessee Bank in Memphis. On or about September 10, 2004, Ahmadian opened a nominee bank account in the name of Phoenix Tile and Marble Company, Inc. On the account, Ahmadian listed himself as the secretary/CEO of Phoenix Tile and provided the same EIN for Phoenix Tile that the IRS assigned to NMTT. From October 2004 to January 2005, Ahmadian caused Dillon Stone to issue approximately $53,026 in payments to the non-existent entity Phoenix Tile. From February 2004 to January 2007, Ahmadian caused Dillon Stone to issue approximately 200 paychecks to subcontractors totaling over $500,000; however, the money was deposited into the NMTT and Phoenix Tile bank accounts for his own use. In addition, Ahmadian filed no individual or corporate federal income tax returns, declaring income from Dillon Stone or any other source, for the years 2004 through 2006, until February 2009, when he became aware of a criminal investigation being conducted by the FBI and IRS. Although he filed tax returns for the years 2004, 2005 and 2006 in February 2009, Ahmadian made no payments toward this admitted tax due and owing.
Florida Man Sentenced for Failing to Report All Income on Tax Returns
On November 29, 2010, in Miami, Fla., William Chris Blane, Jr., of Vero Beach, was sentenced to 16 months in prison, to be followed by one year of supervised release, and ordered to pay more than $1 million in restitution to the Internal Revenue Service (IRS). On August 4, 2010, Blane pleaded guilty to filing a false individual income tax return for tax year 2006. According to court documents, from 2004 to 2007, Blane owned stock and engaged in various transactions in three separate companies, Eyewonder, Inc., Eyevest LLC, and Poly-Triplex, Inc. During that time, approximately 41 individuals bought stock directly from Blane who deposited money earned from the sales of this stock into his personal bank account, but failed to report the income on his tax returns for tax years 2004-2007.
California Dentist Sentenced for Filing False Tax Returns
On November 18, 2010, in San Diego, Calif., Lewis Donald Guess was sentenced to serve 18 months in federal prison for filing false income tax returns. According to court documents, Guess, a dentist, owned and controlled the xélan Family of Companies, which specialized in financial planning and aggressive tax management for medical professionals. Guess also controlled the xélan Foundation, which purported to be a public charity. In June 2010, Guess was found guilty of filing false and fraudulent U.S. Individual Income Tax Returns for calendar years 2001 and 2002 by falsely claiming that he donated $800,000 worth of stock to the xélan Foundation, a charity that he controlled. In finding the defendant guilty the Court found that Guess manipulated his employees and tax professionals to “slice and dice” the preparation of his tax returns for the years 2001 and 2002. Guess backdated documents and engaged in an illusory “shell game” to support the false charitable deduction on his tax returns.
Pennsylvania Man Sentenced for Failing to File Tax Return
On November 23, 2010, in Pittsburgh, Pa., Edward Siceloff was sentenced to 12 months in prison to be followed by 12 months of supervised release on his conviction of failing to file a tax return. According to information presented to the court, during 2004, Siceloff received income in the amount of approximately $763,926 from his sales of corporate stock, but he failed to file his income tax return for that year.
Chief Financial Officer of Pizzeria Sentenced on Embezzlement and Tax Charges
On November 19, 2010, in Cleveland, Ohio, Vince Romito was sentenced to 27 months in prison and ordered to pay more than $350,000 in restitution. Romito, of Brunswick, Ohio, pleaded guilty on November 1, 2010, to making, uttering or possession of forged securities and five counts of filing false income tax returns. According to court documents, Romito worked as controller and chief financial officer for Zeppe’s Pizzeria, a pizza chain headquartered in Bedford Heights. He admitted that in that capacity, he embezzled $291,034 from July 2004 through April 2009. Romito caused Zeppe’s to issue 166 checks, purportedly for business expenses, that were actually for his own personal expenditures, according to court documents. Romito also failed to report this income on his personal income tax returns filed between 2004 and 2008, resulting in $68,023 additional taxes due and owing.
Owner of Residential Roofing Company Sentenced for Illegally Structuring Cash Deposits
On November 15, 2010, in Hartford, Conn., Karl Gagnon, of Winsted, was sentenced to 12 months and one day in prison to be followed by two years of supervised release. Gagnon pleaded guilty on July 22, 2010 to charges of structuring cash transactions for the purpose of evading federal reporting requirements. Federal law requires all financial institutions to file a Currency Transaction Report (CTR) for transactions that exceed $10,000. To evade the filing of a CTR, individuals will often structure their currency transactions so that no single transaction exceeds $10,000. According to court documents and statements made in court, Gagnon was a self-employed general contractor, doing business as Karl Gagnon Construction, specializing in residential roofing. Between September 6 and October 6, 2006, Gagnon deposited approximately $277,306 at various branches of Northwest Community Bank and Webster Bank by making 29 separate cash deposits in amounts equal to or less than $10,000. In addition, Gagnon had not filed federal income tax returns from 1999 to 2006.
Ohio Accountant Sentenced to 11 Years in Prison for Fraud and Obstruction of Justice
On November 12, 2010, in Columbus, Ohio, Dennis G. Sartain, an accountant, was sentenced to 132 months in prison and ordered to forfeit $120,000 to the U.S. government. In addition, Sartain was ordered to pay restitution to the Internal Revenue Service (IRS) and the defrauded banks in an amount to be determined. According to court testimony and documents, Sartain was the accountant for convicted Columbus-area home builder, Thomas Parenteau. Sartain conspired with Parenteau to commit tax fraud and money laundering schemes through which the pair defrauded the IRS of more than $1 million and defrauded banks into lending more than $18 million to Parenteau and his nominees. As part of the tax fraud conspiracy, Parenteau and Sartain prepared and filed with the IRS four false income tax returns for Parenteau’s mistress, Pamela A. McCarty. The false returns generated more than $850,000 in refunds from the IRS and state of Ohio that all went to Parenteau. In addition, Parenteau and Sartain, along with McCarty and Parenteau’s wife, Marsha K. Parenteau, obtained nearly $19 million in loans against a 27,000-square-foot home, by falsely representing income and submitting other false documents. They used the money to make more than $6 million in premium payments at $85,000 a month on four life insurance policies on the life of Thomas Parenteau’s father, who passed away on April 4, 2009. The government has moved for the forfeiture of the life insurance premiums and death benefits. Finally, after learning of the IRS investigation into the tax, bank fraud and money laundering schemes, Thomas Parenteau, McCarty and Sartain engaged in a scheme to obstruct justice by concealing computers, creating false documents, destroying or altering evidence, tampering with a witness, and lying to federal and local investigators. Thomas and Marsha Parenteau, and Pamela A. McCarty are awaiting sentencing.
Former Deputy Liquor Commissioner Sentenced
On November 12, 2010, in Fairview Heights, Illinois, Walter Hill was sentenced to 60 months in prison, three years of supervised release and ordered to pay more than $1,000 in restitution for fraud involving extortion and making false statements to federal agents. According to court documents, Hill used his official position as Deputy Liquor Commission in East St. Louis, Illinois, to solicit and obtain money and property not due to him or his office from the liquor license holders of East St. Louis that included cash, liquor and requests for sexual favors. Hill also made false statements during the investigation to agents of the FBI and to the IRS pertaining to whether he ever took money from businesses in East St. Louis and whether he ever used another individual to pick up money from businesses in East St. Louis.
Illinois Woman Sentenced for Financial Crimes
On November 12, 2010, in Fairview Heights, Illinois, Chevette Curry, now known as Chevette D. Gill, was sentenced to 12 months in prison, three years supervised release, and ordered to pay more than $227,000 in restitution. According to court documents, in December 2009, Gill pleaded guilty to a three-count Information alleging that she participated in an investment scheme that defrauded three investors out of more than $183,000. Gill failed to disclose the existence of fraudulently obtained income on her income tax return for 2007 and she also admitted that from 2005 to 2007 she underpaid her federal income taxes by nearly $29,000. Gill also pleaded guilty to receiving federal food stamp benefits and federal student loan benefits for which she was ineligible because of the undisclosed income. By underreporting her income, Gill received $12, 571 in federal food stamp benefits and $2,938 in federal Pell grants for which she was ineligible.
California Pastor Sentenced for Wire Fraud and Tax Evasion
On November 8, 2010, in San Diego, Calif., Pastor Brian Keith Tomlinson was sentenced to 78 months in prison, three years of supervised release, and ordered to pay $12,883,100 in restitution to Albert Adelmann. Tomlinson admitted in a plea agreement that from 1999 to 2003, he defrauded Adelmann through a scheme involving false promises of security interests on two properties for the purpose of inducing Adelmann to provide funds. According to court documents, Adelmann provided more than $12 million to the Tomlinson during the course of the scheme. Tomlinson spent Adelmann’s money on expensive cars, a house, renovations on the house, and withdrew over $1.3 million of Adelmann’s money in cash. Tomlinson also admitted that he evaded paying income taxes in the years 2001, 2002, and 2003. Furthermore, according to court documents, Tomlinson has a history of involvement in fraudulent activities going back to the 1990s.
Dallas Realtor Sentenced for Failing to Pay Federal Income Taxes
On November 5, 2010, in Dallas, Texas, Eleanor Sheets was sentenced to 12 months in prison which will be served in strict home confinement to include electronic monitoring. In addition, Eleanor Sheets was sentenced to three years of supervised release and ordered to pay more than $1.37 million in back taxes. She pleaded guilty in July 2010 to four counts of failure to pay income taxes. According to the plea documents, Eleanor Sheets admitted that she willfully failed to pay both individual income and corporate taxes during tax years 2003 through 2007. Since 1996, Eleanor and her husband, John Nicholas “Nicky” Sheets successfully worked as real estate agents and established multiple closely-held corporations, including, EMS, Inc., E-Residential, LLC and Dallas EMS, LLC. In court hearings, Sheets stipulated that they failed to pay personal and/or employments taxes for tax years 1997 through 1999 and 2003 through 2007 which totaled approximately $1.3 million. John Nicholas “Nicky” Sheets, was sentenced to 40 months for tax evasion in August 2010.
Army Space and Missile Defense Command Engineer Sentenced for Accepting Bribes
On November 3, 2010, in Birmingham, Ala., Steven Earl Bryant, of Scottsboro, was sentenced to 20 months in prison and ordered to pay $200,000 in restitution to the government and a $5,000 fine. Bryant worked as an engineer with the U.S. Army Space and Missile Defense Command in Huntsville, Alabama, from 2002 to 2010. He pleaded guilty in July 2010 to accepting bribes in relation to Space and Missile Defense Command contracts with private companies that were supposed to provide material for missile defense research. He also pleaded guilty to evading $33,370 in taxes on $110,694 of unreported income for the 2006 calendar year. According to court documents, Bryant acted as the Technical Representative for Contracting Officers on Space and Missile Defense Command contracts for items and material for missile defense research supplied by private businesses. Between 2002 and November 2006, he received about $200,000 in return for and with the intent of being influenced in his job involving contracts between the missile defense command and companies that were paying him bribes. Three co-conspirators have been sentenced in this investigation. Dennis Darling was sentenced in July 2010 to 24 months in prison and ordered to pay $100,000 in restitution and a $6,000 fine. Douglas Ennis was sentenced in June 2010 to 24 months in prison and ordered to pay $75,000 in restitution. Michael Cantrell was sentenced in December 2009 to 60 months in prison and ordered to pay $2.5 million in restitution and $352,145 in back taxes.
Securities Attorney and Former Stock Broker Each Sentenced to More Than 12 Years in $43 Million Pump-and-Dump Stock Manipulation Scheme
On October, 29, 2010, in Tulsa, Okla., G. David Gordon, a securities attorney, and Richard Clark, a businessman and former stock broker, were sentenced to 188 months and 151 months, respectively and ordered to forfeit more than $43 million for wire fraud, securities fraud and money laundering. According to court documents, between April 2004 and December 2006, Gordon, Clark and other conspirators devised a scheme to defraud investors known as a "pump and dump," in which they manipulated three publicly traded stocks. The evidence at trial established that the conspirators obtained approximately $43 million in proceeds from the manipulation of the three penny stocks. Two companies based in Tulsa at the time of the scheme were among those whose stock was manipulated: Deep Rock Oil & Gas Inc., and Global Beverage Solutions Inc., formerly known as Pacific Peak Investments. Clark is the former chief executive officer of Global Beverage. The third company, National Storm Management Group Inc., is based in Glen Ellyn, Ill. Gordon and Clark executed the scheme by obtaining a majority of the free-trading shares of stock they intended to manipulate, using fraudulent and deceptive means to acquire the stock and/or remove the trading restrictions on the shares they obtained. They hid and "parked" their shares with various nominees, such as friends, relatives or other entities that they owned and controlled. Then they coordinated trading to create the appearance of an emerging market for these stocks, after which they conducted massive promotional campaigns in which unsolicited fax and e-mail "blasts" were sent to millions of recipients. These blasts touted the respective stocks without accurately disclosing who was paying for the promotions, omitted that the defendants intended to sell their shares, and induced unsuspecting investors to purchase stock in the companies. E-mail and fax blasts promoting two companies, National Storm and Deep Rock Oil & Gas, touted investment opportunities purportedly created by Hurricane Katrina. The defendants and their nominees obtained significant profits by selling large amounts of shares after they had artificially inflated the stock price. For each of the three manipulated stocks, the defendants’ sell-off caused declines of the stock price and left legitimate investors holding stock of significantly reduced value.
Pennsylvania Man Sentenced on Tax Charges
On October 28, 2010, in Johnstown, Pa., James L. Vautar was sentenced to 30 months in prison, to be followed by three years of supervised release, and ordered to pay a $25,000 fine. According to court documents, Vautar falsely stated his income on his Individual Income Tax Returns for calendar years 2004 through 2008. Vautar stated his total income for those five years was $183,348 and paid a total of $14,849 in taxes. His true total income for those five years was $864,383 resulting in a total tax due and owing of $131,170.
Former Bass Executive Director Sentenced for False Tax Return
On October 22, 2010, in Sioux City, Iowa, Margaret Waltz was sentenced to 15 months in prison, one year of supervised release and ordered to pay restitution of nearly $53,000 for filing a false income tax return. According to court documents, BASS was a nonprofit organization that provided before and after school care to children enrolled in Head Start, Department of Education at-risk programs, or early childhood special education programs. BASS was funded primarily through grants from the Iowa Department of Human Services, private grants and fees charged to parents whose children participated in the program. Waltz set up a BASS operating account, which she had sole signature authority and used this account for her own benefit and the benefit of her family. Waltz repeatedly wrote checks directly to herself from the operating account. These checks totaled almost $108,000 during the period of 2002 through 2004. Waltz made additional payments to herself in 2000 and 2001 for more than $58,000. Some of these funds were used for family vacations to Mexico and the Virgin Islands in 2003, using nearly $20,000 of BASS funds. In 2004, Waltz purchased a Chevy Avalanche with funds from the BASS operating account that amounted to $19,000.
Iowa Man Sentenced to Prison for Wildlife, Fraud and Tax Violations
On October 21, 2010 in Des Moines, Iowa, James Juergens was sentenced to 21 months in prison, three year term of supervised release on the wildlife and mail fraud violations and a one year term of supervised release on the tax violations following his incarceration. He was also ordered to pay $14,080 in restitution to the Internal Revenue Service and a special assessment to the crime victims fund in association with his operation of a hunting guide business known as Lott’s Creek Inn located in Ringgold County, Iowa. Juergens pleaded guilty on June 4, 2010, to one count of mail fraud, one count of violating the Lacey Act for unlawful taking of wildlife and four counts of failing to file tax returns.
Former Financial Adviser Sentenced to Over 8 Years in Prison; Ordered to Pay $4.5 Million in Restitution
On October 26, 2010, in Boston, Mass., Stephen Clifford, a former financial adviser from Plymouth, was sentenced to 97 months in prison and ordered to pay $4,559,667 in restitution to his victims. Clifford pleaded guilty on May 4, 2010, to mail and wire fraud charges, violating the Investment Advisers Act, and subscribing to false tax returns. According to evidence presented at his plea hearing, from about March 2003 through June 2008, Clifford induced clients to give him and his company, Clifford Financial Associates, money to invest on their behalf, assuring them that he would select appropriate securities for their financial needs and tolerance for risk. Instead of investing the money, Clifford used the funds to pay personal expenses, including his mortgage, alimony, credit card bills, payments on his home equity line of credit, and his daughter’s college tuition. In addition, Clifford funded a personal trading account which he used to speculate in oil futures. Clifford’s scheme resulted in a loss to about 24 investors of $4.5 million. Clifford also filed tax returns which failed to report $2.1 million in investor funds which he had converted to his own use for tax years 2004 through 2006.
San Francisco Woman Sentenced to 30 Months in Federal Prison for Million Dollar Embezzlement Scam, Tax Evasion
On October 26, 2010, in San Francisco, Calif., Lily C. Aspillera was sentenced to 30 months in federal prison for embezzling approximately $1.77 million from a client of a major professional services firm and for not paying taxes on that stolen money. According to Court documents, Ms. Aspillera, of San Francisco, was employed as an executive assistant at a major professional services firm. In that capacity, Ms. Aspillera engaged in a scheme through which she embezzled approximately $1.77 million from the accounts of one of the client’s of her employer. Ms. Aspillera used the stolen money to fund a $180,000 down payment on a $1.1 million home and to pay the mortgage on that home. She also used stolen funds to purchase two BMWs, more than $200,000 worth of jewelry, and to pay her personal credit cards bills, which included charges for international and domestic travel and stays at luxury resorts. Ms. Aspillera admitted to making several false statements to her supervisors and taking several steps to conceal her scheme during its course. Ms. Aspillera also admitted that she willfully evaded a large part of the federal income tax due and owing by understating the joint taxable income on her federal income tax returns for calendar years 2005—2008. The income she failed to report consisted of the monies she embezzled. In addition to being ordered to repay the $1.77 million she stole, Ms. Aspillera also was ordered to pay back taxes of $644,843.
Virginia Man Sentenced for Filing False Tax Return
On October 26, 2010, in Newport News, Va., Terry A. Miller, of Hampton, was sentenced to 18 months in prison, followed by one year of supervised release, and ordered to pay $344,000 in restitution. According to court documents, from approximately 2002 through 2008, Miller was employed as an accountant and comptroller for Virginia Home Medical. In his position, Miller was responsible for making expense entries into the company's accounting records, handling payroll, and preparing payment checks for company bills from the company's business bank account. The president of the company was the only individual with the authority to endorse company checks, and sometimes used a signature stamp for endorsement. In 2002, Miller began to embezzle funds. Without authorization he increased his salary, prepared company checks made payable to himself and deposited the checks into his own bank account, and made company checks payable to petty cash cashed the checks, and used the funds for personal expenditures. He also used company checks to pay personal debt and expenses often by the unauthorized use of the president's signature stamp. The loss to Virginia Home Medical was more than $480,000. During tax years 2002-2008, Miller prepared and filed his individual tax returns which documented his increased salary, but failed to disclose the embezzled funds. The tax owed as a result of the false tax returns from 2002 through 2008 totals approximately $138,000.
Third Defendant in $20 Million Scam That Sold Fake Art Nationwide Via TV Auctions Sentenced To Federal Prison
On October 25, 2010, in Los Angeles, Calif., James Mobley, a Woodland Hills man who sold fake art through a rigged televised art auction, was sentenced to 60 months in federal prison. Mobley, who was an on-air auctioneer for sales conducted through Fine Art Treasures Gallery, previously pleaded guilty to two felony counts – conspiracy (to commit wire fraud, mail fraud, and interstate transportation of stolen property) and willful failure to file a tax return. According to documents presented in court, Fine Art Treasures Gallery operated an art auction television show. The company sold art to more than 10,000 customers around the United States, bringing in more than $20 million. Earlier this year, the husband-and-wife team at the center of the Fine Art Treasures Gallery scam was sentenced to prison. Gerald Sullivan was sentenced to 48 months in prison. Sullivan’s wife, Kristine Eubanks, was sentenced to 84 months in prison. Eubanks and Sullivan ran the scheme from 2002 through 2006. Mobley participated in the scheme from 2002 through 2005. Fine Art Treasures Gallery and its representatives, including Mobley, claimed to be selling art that had been found at “estate liquidations all over the world.” In reality, Fine Art Treasures Gallery sold fake and forged art that had been purchased from suppliers, as well as forgeries Eubanks and others themselves had printed and signed on behalf of the artists.
New Yorker Sentenced to 20 Years in Prison for Perpetrating Multi-million Dollar Advance-Fee Scheme and Bankruptcy Fraud
On October 22, 2010, in Manhattan, N.Y., Clyde "Peter" Hall was sentenced to 240 months in prison, followed by three years of supervised release, and ordered to forfeit $4.275 million and to pay over $1.9 million in restitution. Hall, who decades ago played football for the New York Giants, was also sentenced on separate charges of bankruptcy fraud. According to court documents, Hall held himself out as the "representative" or "attorney-in-fact" of two purported business trusts and told his victims that in exchange for upfront or advance fees he could obtain various bank instruments worth hundreds of millions of dollars which could be used as collateral for loans or to fund trading in high yield investment programs. Despite Hall’s promises to victims that the advance fees were completely refundable, and that he had over a decade of success promoting these investments, Hall used the advance fees to pay personal and family expenses and for the benefit of his co-conspirators. In addition to the advance-fee scheme, Hall also committed bankruptcy fraud. In 2004, Clyde Hall filed or caused to be filed a series of bankruptcy petitions in U.S. Bankruptcy Court for the Southern District of New York, which contained false representations. These actions were for the purpose of halting the eviction of Hall and his wife from an apartment and allowing them to remain in the apartment without paying rent. The Halls eventually moved out of the apartment but never paid approximately $81,200 in rent.
New York Woman Sentenced on Charges Connected with Massive Ponzi Scheme
On October 22, 2010, in Buffalo, N.Y., Kathleen Fuoco, of West Seneca, was sentenced to 18 months in prison and agreed to a restitution order of the full amount of the investors' losses. In June 2010, Fuoco pleaded guilty to misprision of a felony and willful failure to file tax returns. According to court documents, Fuoco, who was known as Kitty, was the only employee in the offices of Gen See Capital, a business run by Richard Piccoli. In early 2009, federal agents disrupted a massive Ponzi scheme being run by Piccoli through the business. Losses to investors due to the Ponzi scheme totaled $25,000,000. Fuoco admitted that she came to realize that the business was a scam but kept working at Gen See and failed to notify authorities about the criminal activity. She also admitted failing to file tax returns while she worked for at Gen See. Piccoli pleaded guilty in June 2009 and is currently serving a 20 year sentence.
Department of Defense Official Sentenced in Contractor Fraud Case
On October 21, 2010, in Boston, Mass., Allen Thrower, a Department of Defense civilian employee at Fort Benning, Georgia, was sentenced to 27 months in prison, to be followed by two years of supervised release, and ordered to pay a $20,000 fine. Thrower was convicted by a trial jury in July 2010 on charges related to a scheme involving $4.1 million in contracts with the U.S. Army. According to evidence presented at trial, Thrower served as Chief of Quality Support Division in the Human Resources Directorate at Fort Benning and was responsible for preparing purchase requests and sole source justifications for the services of commercial contractors. Thrower used his official position to arrange for and influence the awarding of both sole source and competitive contracts to Military Service Support, LLC (MSS) for personnel-related services. Thrower's sister, Marie Cimino, was President and Chief Executive Officer of MSS. Thrower was involved in steering eight contracts to MSS and supervising them. In return, Thrower received at least $20,000 from MSS in the form of checks, airline tickets and lodging at Foxwoods Resort and Casino in Connecticut. In one instance, Thrower recommended the selection of MSS to a contracting official, citing its past performance, even though its bid was substantially higher than the other bids. MSS was then awarded the contract valued at $683,990, with options that reached $2,234,806.
Owners of Dry Cleaner and Laundromat Businesses Sentenced for Tax Evasion
On October 12, 2010, in Camden, N.J., Edward Choi, a resident of East Windsor and Robbinsville, New Jersey, was sentenced to 12 months and one day in prison, two years of supervised release, and ordered to pay a $3,000 fine. Paul Choi, a resident of Toms River and Cherry Hill, New Jersey, was sentenced to five years probation and ordered to pay a $2,000 fine. According to court documents, Edward and Paul Choi were the owners and operators of several dry cleaners and laundromats in New Jersey, including Sunway Cleaners, Liberty Laundromat, Betty Brite Cleaners, and Clinton Laundromat. On March 15, 2010, Edward and Paul Choi pleaded guilty to tax evasion for failing to report additional income on their individual 2006 tax returns. At his plea hearing, Edward Choi admitted he took cash from both the Liberty and Clinton Laundromats and deposited the cash into his personal bank account to pay for personal expenses. In total, during the years 2004 through 2006, Edward Choi diverted approximately $864,859 in cash from his businesses resulting in approximately $266,469 in taxes. At his plea hearing, Paul Choi admitted he took cash from Betty Brite Cleaners and deposited the cash into his personal bank account for personal use. In total, Paul Choi diverted approximately $292,172 in cash from his business during the years 2004 through 2006. This additional unreported income resulted in a total tax due and owing of approximately $69,111 for the tax years 2004 through 2006.
Man Who Promoted Asset Protection Strategy to Avoid Taxes Sentenced
On October 20, 2010, in Los Angeles, Calif., Dana Ray Reynolds, who promoted schemes to avoid the payment of federal income taxes, was sentenced to 18 months in prison for filing false tax returns with the Internal Revenue Service (IRS). Reynolds was also ordered to pay $193,812 in restitution to the IRS. Reynolds pleaded guilty in May to two counts of subscribing to false tax returns. According to court documents, Reynolds operated Repackaging America, Inc. and Incorporating You, Inc. He developed strategies to conceal assets and income through the creation of corporations. Reynolds used videotapes, seminars and written materials to market his strategies, which he promoted by highlighting his own elaborate lifestyle that he claimed was made possible by following the plans he developed. Following his own strategies, Reynolds paid personal expenses with money he had funneled through his corporations. Reynolds also placed assets – such as automobiles, recreational vehicles and at least one vacation home – in the names of the corporations. IRS investigators found evidence that Reynolds used corporate checks to pay workers, including a person hired to completely redesign his Yorba Linda home, for which he ordered a custom $80,000 bathroom. For the tax years 2002 and 2003, Reynolds used more than $400,000 from corporate accounts for his own personal benefit, and none of that income was reported to the IRS.
Missouri Business Owner Sentenced for Possessing Stolen Firearms, Structuring Financial Transactions
On October 18, 2010, in Springfield, Mo., Daniel Rook was sentenced to 24 months in prison and ordered to pay a $25,000 fine for processing stolen firearms and structuring financial transactions to evade federal reporting requirements. According to court documents, Rook, the owner of Rook’s Auto Service in Springfield pleaded guilty to one count of possessing stolen firearms and to nine counts of structuring financial transactions. Rook admitted that he was in possession of two stolen shotguns and four stolen rifles on April 11, 2008. In the course of the investigation into stolen property, law enforcement agents also reviewed Rook’s bank records and discovered a series of bank deposits, most in the amount of $9,000. Under federal law, transactions of $10,000 or more must be reported to the IRS. Rook admitted that he deliberately structured financial transactions totaling more than $210,000 between July 11, 2005, and November 30, 2007, in order to evade those federal reporting requirements. In addition to the fine, the court also ordered Rook to forfeit to the government a sum of money equal to $210,195, including a Lexus LS460L, $80,904 that was seized from two bank accounts, and $91,590 in cash that was seized from his home.
Missouri Woman Sentenced for Stealing $760,000 from Employer, False Tax Return
On Oct 15, 2010, in Springfield, Mo., Mary Hurtt was sentenced to 46 months in prison and ordered to pay more than $760,000 in restitution for embezzling from her employer. According to court documents, Hurtt pleaded guilty to uttering a forged security and filing a false tax return. Hurtt was employed as a bookkeeper at White Electrical Services, Inc., from 1999 to June 5, 2007. White Electrical Services installed commercial security systems around the United States. Between January 2000 and May 2007, Hurtt embezzled more than $760,500 from White Electrical Services’ bank accounts. As part of the fraud scheme, Hurtt fraudulently endorsed and received payment on checks that were drawn on White Electrical Services. Hurtt forged the signatures of authorized persons and made withdrawals from the business bank account to purchase money orders for her personal use. Many of the checks she embezzled were intended to make the company’s quarterly tax payment to the Internal Revenue Service. Hurtt thus caused false Employer’s Quarterly Federal Tax Returns to be filed, resulting in an underpayment of nearly $306,000. As a result of Hurtt’s crimes, White Electrical Services was closed on January 1, 2008, and its assets were sold to another business. Hurtt did not tell her CPA about the additional income she embezzled, and therefore the embezzled income was not reported on her tax returns, causing them to be false. Hurtt admitted that the additional tax she owed as a result of more than $181,000.
Former South Carolina City Councilman Sentenced on Tax and Structuring Charges
On October 15, 2010, in Columbia, S.C., Ernest W. Cromartie, II, former City Councilman, was sentenced to 12 months and one day in prison, to be followed by three years of supervised release, and ordered to pay a mandatory $300 special assessment. In addition, Cromartie was ordered to pay all amounts due and owing to the Internal Revenue Service (IRS) from the tax years 2002-2007. Cromartie pleaded guilty on April 26, 2010 to one count of income tax evasion and to two counts of structuring financial transactions to evade reporting requirements. Evidence presented at his plea hearing established that Cromartie, a lawyer, owned and operated a liquor store. Beginning in 2003, Cromartie failed to make appropriate employment tax payments to the IRS based on his operation of the liquor store. Cromartie began to engage in more aggressive tax evasion beginning in 2005 when he filed an income tax return disclosing an income tax liability for the tax year 2004 of $25,316 which he subsequently failed to pay. Cromartie began a pattern of failing to pay employment taxes for his law firm as well. Cromartie’s actions have caused a total tax loss to the IRS of approximately $58,075. He failed to pay $32,760 in employment taxes from his law firm and liquor store business, in addition to the $25,316 in personal income taxes still due and owing from 2004. Additionally, Cromartie began structuring the deposit and withdrawal of attorney’s fees in and out of his law firm’s escrow account and maintained only minimal amounts of money in his law firm’s operating account in an effort to prevent the IRS from determining his ability to pay the taxes. Cromartie structured transactions totaling approximately $287,146 in 2005 and 2006.
Tennessee Couple Sentenced on Conspiracy, Tax Evasion and Structuring Charges
On October 12, 2010, in Greeneville, Tenn., Edward Kenneth Eastwood and Elina Gromova Eastwood, both of Greeneville, were sentenced for their convictions on conspiracy, tax evasion, perjury, and financial structuring charges. Edward Eastwood was sentenced to 97 months in prison; Elina Gromova Eastwood was sentenced to 60 months in prison. In addition, both were ordered to pay $403,000 in restitution to the Internal Revenue Service (IRS); $9,610 in court costs incurred by the United States in prosecution of the case; and serve three years supervised release. Elina Gromova Eastwood was also convicted of four aggravated felonies and is likely to be deported to the Republic of Kyrgystan, her country of origin. According to court documents and statements made in court, the Eastwoods drove to a remote location in the Cherokee National Forest on March 7, 2010, where they buried 128 one-ounce gold coins and 543 one-ounce silver coins in four poly-vinyl-chloride pipes in an attempt to conceal the fruits of their offenses. Edward Eastwood also hid $9,900 in $100 bills in his travel-trailer. At the beginning of the investigation, federal agents found 76 one-ounce gold coins stored in a poly-vinyl-chloride pipe located at a storage unit which was rented in the name of the couple’s daughter.
President of Telemarketing Fraud Business Sentenced to 23 Years in Prison
On October 8, 2010, in Philadelphia, Pa., Neal D. Saferstein, of Mount Laurel, N.J., was sentenced to 276 months in prison and ordered to pay the Federal Trade Commission a civil judgment of $58 million and to pay a $100,000 fine. According to court documents, Saferstein ran a multi-million dollar telemarketing scam that defrauded as many as 400,000 small businesses out of as much as $75 million. Saferstein was the President and Chief Executive Officer of GoInternet.net, Inc. Tyrone L. Barr, Vice President of Customer Service and Regulatory Affairs, was sentenced to 12 months and a day in prison. Billy D. Light, Chief Information Officer, was sentenced to three years probation, with the first six months in home confinement, 100 hours of community service, and a $5,000 fine. Court documents showed that the entire GoInternet business model was designed to defraud customers and potential customers into making monthly $29 payments for Internet-related services without their knowledge or authorization. GoInternet’s telemarketers duped customers into receiving a welcome packet without disclosing that the mailing would trigger monthly bills unless the customer called to cancel. GoInternet would place monthly charges on its customers’ local telephone bills, without authorization, which customers routinely paid without noticing. By 2003, GoInternet employed over 1,000 telemarketers and was signing on approximately 7,500 new customers every week. By the end of 2003, GoInternet’s customer base included more than 350,000 businesses. Saferstein prevented customers from receiving notices disclosing the cost of services, and delayed and prevented refunds from going to customers that had been defrauded and were promised refunds. Barr created fake sales-verification tapes which were purported to contain the telemarketer’s call to the customer and the customer’s consent. Saferstein used GoInternet corporate funds for significant personal expenses and he failed to report more than $1.7 million in income from the years 2000 to 2003.
Missouri Man Sentenced for Filing a False Tax Return
On October 8, 2010, in St. Louis, Mo., Rodney Shrum was sentenced to 24 months in prison and ordered to pay nearly $104,000 in restitution for filing a false tax return. According to court documents, Shrum falsely overstated his business expenses to reduce his taxable income. By doing so, Shrum avoided paying $103,919 in federal taxes. Instead of purchasing inventory for his small business, evidence at trial showed that most of the income Shrum received during 2007 was spent on personal expenditures, including casino gambling, gifts to family, and cash withdrawals, not on legitimate business expenses that could be properly deducted in Shrum’s 2007 tax return. This is the third conviction arising out of this investigation. Rodney Shrum was married during 2007 to Teressa Shrum. Teressa Shrum and a former Department of Defense employee Steven Brown were previously prosecuted regarding the same business, and both were sentenced during January of 2009 to two year prison terms after being convicted of stealing federal government property.
Colorado Businessman Sentenced to Prison for Filing False Tax Returns
On October 7, 2010, in Denver, Colo., Phillip Allen Worack, of Aurora, Colorado, was sentenced to 12 months and one day in federal prison for subscribing to two false tax returns. Worack was also ordered to pay a $5,000 fine. According to the indictment as well as evidence presented at trial, Worack was the president of L.K.S. Corporation which provided consulting and financial public relations services for and on behalf of other companies. On or about April 12, 2001, Worack willfully filed a false Form 1040 U.S. Individual Income Tax Return for the year 2000 that stated his total income was $107,623. In fact, he had additional income that year of approximately $132,997. For the subsequent tax year, on or about April 11, 2002, Worack willfully filed a false Form 1040 U.S. Individual Income Tax Return for the year 2001 that said his total income was $43,032. In fact, he had additional income that year of approximately $16,134.
California Man Sentenced to Prison for Tax Fraud in Connection with UCLA Willed Body Program
On October 5, 2010, in Los Angeles, Calif., Ernest Nelson, of Rancho Cucamonga, was sentenced to 30 months in prison consisting of 28 months to be served concurrently with a state prison sentence, and the remaining two months at the end of that sentence. Nelson was also ordered to pay restitution of approximately $433,000 to the Internal Revenue Service. Nelson pleaded guilty to filing a false tax return for tax year 2002. According to information presented in court, Nelson owned and operated Anatomical Services, LLC, working as an Anatomical Prosector. During the years 1999 through 2003, Nelson purchased or took anatomical specimens from the Willed Body Program at the University of California Los Angeles in order to sell such specimens to companies conducting research, research and development, and training. For tax year 2002, Nelson admitted that he failed to report to the IRS at least $478,196 in gross receipts he received from his company, which resulted in a tax loss to the IRS of more than $176,000. Nelson also admitted that for tax years 1999, 2000, and 2001, he failed to report to the IRS gross receipts from his business of at least nearly $175,000, $247,000, and $392,000, respectively, in an attempt to decrease his tax liabilities. Nelson also admitted that for the 2003 tax year, he failed to report to the IRS approximately $127,000 in gross receipts. For tax years 1999 through 2003, Nelson’s total tax liability was approximately $433,000.