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Examples of General Fraud Investigations - Fiscal Year 2013

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.

Three Sentenced for Running a Ponzi Scheme
On September 30, 2013, in Phoenix, Ariz., three individuals were sentenced for their roles in an investment fraud scheme. Guy Andrew Williams was sentenced to 150 months in prison and three years of supervised release. Brent F. Williams was sentenced to 90 months in prison and three years of supervised release. Duane Hamblin Slade was sentenced to 180 months in prison and three years of supervised release. Restitution for all three defendants will be determined at a later date. Guy Williams and his father, Brent Williams, were convicted by a jury on June 28, 2013, of 38 counts of conspiracy, wire fraud, mail fraud, and money laundering. Slade pleaded guilty on June 5, 2013, to wire fraud. According to the evidence at trial, Guy and Brent Williams, served as the managing director and chief financial officer, respectively, of a group of Mesa, Ariz.-based investment funds known as the “Mathon” entities. The evidence at trial showed that the Mathon entities collected more than $100 million in funds from investors from February 2002 until April 2005. Mathon’s investors were generally told that their money would be used to make short-term loans to third-party borrowers at a high interest rate and that Mathon had an extensive track record of making such loans. In fact, the business partners ran Mathon as a Ponzi scheme by using the overwhelming majority of incoming money from new investors to pay back initial investors. In addition, the defendants paid themselves extravagant salaries and bonuses exceeding $10 million and also used investors’ money to make millions of dollars of “loans” to companies they secretly controlled.

Owner of Electronics Company Sentenced for Defrauding Computer Systems Company
On September 30, 2013, in Oklahoma City, Okla., Mehran Koranki, formerly of Yukon, Okla., was sentenced to 156 months in prison and ordered to pay $6,010,157 in restitution to Nortel Networks. The court also entered a forfeiture money judgment against Koranki in the amount of $6,299,182. In November 2010, a jury found Koranki guilty on 48 counts of mail fraud and two counts of money laundering. According to court documents, Koranki owned and controlled two Oklahoma City companies, SMC Electronics and Allied Solutions Technical Center (ASTC), which were in the business of maintaining, repairing, and selling computer networking components. Both companies had extended warranty agreements with Nortel Networks that allowed businesses with Nortel computer systems to receive replacements for broken or defective parts. These agreements required these businesses to use replacement parts in their own Nortel systems and not to sell replacement parts to third parties. From February 2005 until March 2006, SMC used its extended warranty agreement with Nortel to obtain hundreds of thousands of dollars’ worth of computer networking equipment. During 2005 and the first three months of 2006, SMC fraudulently claimed that it needed replacements for over 850 computer parts under its warranty agreement, mostly line cards for Passport 8600 computer networks. The evidence also showed that SMC did not even use a Nortel computer network. With Koranki’s knowledge and encouragement, SMC then sold these parts for a profit.  After Nortel refused to send more parts to SMC, Koranki used his other company, ASTC, to ask for even more replacement parts under a separate extended warranty agreement registered under an employee’s home address and a fake name. After trial, Koranki left the United States and is currently an international fugitive.

Former Michigan Resident Sentenced for Fraud and Tax Evasion
On September 18, 2013, in Detroit, Mich., Scott Atkins, of Scottsdale, Ariz., and a former resident of Troy, Mich., was sentenced to 72 months in prison and three years of supervised release for operating an advanced fee fraud scheme and tax evasion.  Atkins was also ordered to pay over $1,730,000 in restitution to the victims of his fraud and to pay $270,094 in restitution to the IRS. According to court documents, from February 2005 through August 2010, Atkins falsely portrayed himself as a hedge fund manager and/or an attorney and solicited large advanced fees by falsely promising to arrange large commercial loans for over 50 individual and commercial clients throughout the nation. Atkins had no means to secure such funding and Atkins' clients lost over $1,400,000. In addition, Atkins never reported as income or paid any income taxes on any of the funds he received during that period. He evaded his income tax liability, totaling over $270,000, by opening bank accounts in the names of fictitious entities, sometimes using the social security number of his minor daughter, and depositing funds into those accounts, or transferring or directing his income into accounts controlled by his mother.

Utah Woman Sentenced for Money Laundering
On September 17, 2013, in Salt Lake City, Utah, Monica Paris, of South Jordan, was sentenced to 30 months in prison, three years of supervised release and ordered to pay $462,455 in restitution. In February 2013, Paris pleaded guilty to one count of money laundering. According to court documents, Paris worked at Ultradent, a privately-owned Utah corporation involved in the production and distribution of dental products. Beginning around August 2010 and continuing through February 2012, Paris fraudulently submitted expense reports for personal reimbursement payments for items she never actually purchased. She then fraudulently approved the expense reports on behalf of Ultradent and directed that the reimbursement payments be sent to her personal bank account. She also fraudulently claimed that personal items she purchased at a wholesale store, including large amounts of pre-paid credit cards, were company expenses for which she sought reimbursement payments. She bought personal items using the credit cards of two other company employees. She then submitted the purchases for reimbursement and created false invoices to show that the purchases were for company expenses.

Restaurant Owner Sentenced for Filing a False Return
On September 16, 2013, in Tucson, Ariz., Mary Brooke Martino was sentenced to 12 months in prison and one year of supervised release. Martino pleaded guilty on July 14, 2011, to willfully subscribing and filing a false 2004 tax return. According to court documents, Martino and her husband owned and operated Anthony's in the Catalinas, a restaurant incorporated under the name A.M. Restaurant. From 2002 through 2006, the Martinos diverted at least $100,000 from the financial accounts maintained by the restaurant for their personal use during each year. On the books and records of the corporation, the diverted monies were classified as either business expenses or loans to shareholders. The couple had federal corporate income tax returns, Forms 1120, prepared for 2002 through 2005, but did not file the 2003 return. The other returns were filed late. Martino and her spouse did not timely file federal individual income tax returns for 2002 through 2006 until after being contacted by the IRS in February 2008. On March 3, 2008, Martino and her spouse then filed hand-written Forms 1040EZ which only reported gambling winnings, and no other income for either the defendant or her spouse for any of the five tax years.

North Carolina Man Sentenced for Filing False Tax Returns
On September 13, 2013, in Greensboro, N.C., Jeffrey Lee Johnson, of Mount Airy, N.C., was sentenced to 30 months in prison, one year of supervised release and ordered to pay $2,495,721 in restitution to the IRS. Johnson pleaded guilty to two counts of filing false tax returns. According to court documents, from January 2005 through February 2010, Johnson owned and operated Mayberry Auto Parts and Recycling, Inc. (MAPR). MAPR was in the business of purchasing scrap metal from individuals and reselling it to larger scrap metal companies. Johnson filed tax returns for 2006 and 2007 with gross receipts of $799,228 and $820,000, respectively. Johnson knew at the time he filed those returns he had received hundreds of thousands of dollars in excess of those amounts in both years. In fact, MAPR earned gross receipts of $4 million in 2006 and $5 million in 2007, resulting in a tax loss of approximately $2.5 million.

Texan Sentenced to Additional Prison Time for Tax Fraud Scheme
On September 13, 2013, in Austin, Texas, Hussein Ali “Mike” Yassine was sentenced to 36 months in prison and ordered to pay over $2.5 million restitution to the IRS for a tax fraud. On February 6, 2013, Yassine pleaded guilty to one count of procuring the preparation of a false income tax return. According to court documents, in October 2010, Yassine provided a professional tax preparer with false information to be included in Yassine’s 2009 tax return. Yassine understated by hundreds of thousands of dollars the actual gross receipts generated by his downtown Austin night clubs for 2009. In January 2013, Yassine was sentenced to 151 months in prison after a jury convicted him on money laundering charges. The jury found that in 2008 and 2009, Yassine used several business establishments to launder over $200,000 in cash, which was believed to be the proceeds of narcotics trafficking.

Defendant Sentenced for $7 Million Investment Fraud Scheme
On September 12, 2013, in Tulsa, Okla., Jimmy E. Morrisett, of Burnet, Texas, chief executive officer of now-defunct Red Earth Resources, Inc., and Alpine Petroleum, LLC, was sentenced to 108 months in prison and ordered to pay $6,874,135 in restitution to the victims of his scheme. Morrisett pleaded guilty to an unlawful monetary transaction with the funds he obtained from a massive four-year investor fraud scheme victimizing 238 investors in Oklahoma and 37 other states and Canada. Morrisett promoted a Ponzi scheme in which investors supposedly received returns from oil and gas properties. However, most of the returns came from monies provided by investors themselves. Many of the investors were elderly and lost their life savings.  

New Mexico Man Sentenced for Theft of Federal Funds and Tax Evasion
On September 11, 2013, in Albuquerque, N.M., Joseph C. Kupfer, of Rio Rancho, N.M., was sentenced to 120 months in prison, three years of supervised release and ordered to forfeit $746,375. In addition, Kupfer was ordered to pay $288,339 in restitution to the IRS jointly with his wife, Elizabeth D. Kupfer, and to pay $746,375 in restitution to the State of New Mexico, jointly with a co-defendant Armando C. Gutierrez.  In December 2010, Kupfer and his wife, Elizabeth Kupfer were charged with failing to report $768,333 in taxable income during tax years 2004 through 2006. In July 2011, a superseding indictment was filed which added Gutierrez as a defendant and five counts charging Kupfer and Gutierrez with conspiracy and theft of government property relating to federal "Help America Vote Act" (HAVA) funds administered by former New Mexico Secretary of State (NMSOS). On August 17, 2012, a jury convicted the Kupfers on all three tax evasion charges. The evidence established that, during the years 2004 through 2006, Kupfer received income including federal funds, from Kupfer Consulting (KC), a business owned and operated by Joseph Kupfer. During those years, the Kupfers concealed approximately $768,333 in income. Then on January 31, 2013, Joseph Kupfer and Gutierrez were convicted on the conspiracy and theft of government property charges.  The evidence established that, between April 2003 and December 2006, the NMSOS administered almost $20 million in federal  HAVA funds, which were designated for voter education, increasing voter registration, and meeting new standards for election administration and voting systems, through a number of contracts issued to companies owned by Kupfer and Gutierrez. According to the evidence, Gutierrez and Kupfer conspired to defraud the United States by stealing federal HAVA funds and converting the funds to their own use. On August 19, 2013, Gutierrez was sentenced to 120 months in prison. On May 14, 2013, Elizabeth Kupfer was sentenced to 36 months in prison.

Virginia Transportation Services Manager Sentenced on Tax Charges
On September 6, 2013, in Alexandria, Va., John Fitzgerald Coston was sentenced to 45 months in prison, three years of supervised release and ordered to pay $536,126 in restitution. Coston pleaded guilty in April 2013 to wire fraud and making and subscribing a false tax return.  According to the Information, Coston was the operations manager for a transportation services company. He was responsible for managing the administrative staff, hiring and firing of employees, and payroll.  In or around November 2009, Coston devised a fraudulent payroll scheme in which he knowingly, and without authority, authorized and facilitated the direct deposit of former employees paychecks into personal accounts owned and controlled by Coston.  A review of Coston's personal bank accounts, throughout 2011, disclosed net electronic direct deposits of $325,209 in excess of his salary of $67,294.  Coston failed to report the additional income on his 2011 tax return.

Man Sentenced for Fraud Against Children's Charity
On September 5, 2013, in Grand Rapids, Mich., Nehemiah Muzamhindo, a resident of Grand Rapids, Mich., and citizen of Zimbabwe, was sentenced to 72 months in prison and ordered to pay over $629,000 in restitution and over $79,000 in back taxes. Muzamhindo was previously convicted on charges of money laundering and filing a false tax return. According to court documents, while Muzamhindo was being investigated for his role in a scheme to obtain fraudulent United States passports, agents discovered evidence that Muzamhindo had received large wire transfers from bank accounts held by a children’s foundation in the Republic of South Africa. The children’s foundation has its headquarters in Michigan and is one of the world’s largest children’s charities. The investigation revealed that Muzamhindo was part of a scheme to submit bogus invoices for payment to the charity. The charity paid members of the scheme a total of nearly $800,000 between 2006 and 2008 before learning that it was being swindled.  Muzamhindo did not report to the IRS any of the money he received from the charity during those years.

Colorado Man Sentenced on Tax Evasion Charges
On September 4, 2013, in Denver, Colo., James S. Golob was sentenced to 18 months in prison, three years of supervised release and ordered to pay $375,074 in restitution to the IRS. Golob pleaded guilty on June 26, 2013 to one count of tax evasion. According to court documents, Golob owned and operated A-1 Roofing and Gutters, Inc.  In addition, Golob generated income through a Schedule C business called Total Property Maintenance (TPM) and a Schedule E business called Pigeon Investments. Golob took a variety of measures to avoid the assessment and payment of income tax on income generated during 2007 through rental properties and through his businesses. Golob had no bank accounts in his own name. Instead, he used the A-1 bank accounts to pay for all of his personal expenses, including his mortgage and utilities.

Former University Bookstore Manager Sentenced for Wire Fraud, Money Laundering and Tax Fraud
On August 29, 2013, in Springfield, Mo., Mark Brixey, of Ozark, Mo., was sentenced to 63 months in prison and ordered to pay $1,329,484 in restitution. Brixey pleaded guilty on March 26, 2013 to wire fraud, money laundering and filing a false tax return. According to court documents, Brixey, who managed a university bookstore from 1998 to August 2012, admitted that he embezzled $1,163,237 from the student textbook buy-back program. He concealed his fraud scheme by disguising the proceeds through multiple financial transactions using electronic transmissions related to the processing of sight drafts. Between January 11, 2008, and July 16, 2012, Brixey made, or caused to be made, 55 transfers totaling $121,000 from a credit union deposit accounts to credit union certificates of deposit. Between 2009 and 2011, Brixey failed to report $553,077 of income from his fraud scheme, resulting in a tax loss of approximately $166,247 for those three years.

Ohio Jewelry Store Owner Sentenced for Tax Evasion
On August 28, 2013, in Columbus, Ohio, Elie J. Hannoush, of Westerville, Ohio was sentenced to 12 months and one day in prison,  followed by eight months of home confinement, and ordered to pay $91,140 in restitution to the IRS. Hannoush pleaded guilty in November 2012 to one count of tax evasion and one count of failure to report cash payments greater than $10,000 received in a business.  According to court documents, Hannoush failed to report almost $300,000 in cash he received from the jewelry stores he owns, Farah Jewelers, from 2005 through 2008. Hannoush often accepted large cash payments from his customers, but failed to report the cash he received as income. He also kept a separate accounting system for the cash receivables. In addition, Hannoush structured cash receipts by breaking receipts greater than $10,000 into small receipts in order to evade federal cash reporting requirements. When he filed his federal income tax return for 2006, he reported an income of $27,054 and claimed he was due a $30 refund. His real taxable income for 2006 was $194,817 and he owed $35,188 in taxes for that year.

Accountant Sentenced for Tax Fraud
On August 27, 2013, in Chicago, Ill., Robert Rome was sentenced to 63 months in prison, three years of supervised release and ordered to pay $1,786,053 in restitution to the IRS. Rome pleaded guilty in September 2012 to wire fraud and tax fraud. According to court documents, Rome was the managing partner of the former Rome Associates LLP accounting firm in Chicago. One of his largest clients was a family who owned a group of plumbing wholesale supply companies. He provided accounting and tax services to the family members and their businesses. Rome had sole authority to sign checks, transfer funds and sign tax returns for the trusts he managed. He used his unlimited access to embezzle more than $4.3 million in trust funds between 2003 and 2007 by writing checks payable to himself or his firm. In addition to the trust funds, he stole money from a family investment partnership account and an account of the estate of a deceased family member. Rome spent the money he stole to pay extravagant personal expenses, including cars, a boat, vacation homes in Florida, and jewelry for himself and his family. In addition, Rome filed false federal income tax returns between 2004 and 2006 and failed to file a return for 2007, resulting in a tax loss of more than $1.7 million.

Two Men Sentenced for Fraud Conspiracy
On August 21, 2013, in Rutland, Vt., Malcolm “Mac” Parker, of Addison, Vt., was sentenced to 55 months in prison. On August 19, 2013, Louis J. Soteriou, of Middlebury, Conn., was sentenced for 84 months in prison. Parker and Soteriou were convicted of conspiring to commit fraud in connection with a movie project. According to court documents, from 2000 through 2009, Parker raised more than $28 million from hundreds of people by leading them to believe they were investing in Parker’s production of a movie entitled “Birth of Innocence.” Less than $1 million of that money was spent toward the creation of a movie, which remains unfinished. In contrast, approximately $4 million was sent to Soteriou who spent large sums of money on various luxuries, including more than $100,000 on hotel stays in Telluride, Colorado. Parker supplied Soteriou with this money despite telling investors it would be used toward the movie production.

Business Owner Sentenced for Fraud Scheme
On August 19, 2013, in Nashville, Tenn., Richard Olive, of Vero Beach, Fla., was sentenced to 372 months in prison and ordered to pay $5,992,181 in restitution. Olive was convicted by a jury on March 7, 2013 on charges of mail fraud, wire fraud and money laundering. According to court documents, from January 2006 through May 2007, Olive represented that his business, National Foundation of America (NFOA), headquartered in Franklin, Tenn., was a charitable organization recognized by the IRS. During the scheme, Olive solicited over $30 million in assets, including annuities and real estate from elderly individuals and promised they would receive an “installment bargain contract” issued by NFOA that would give them a guaranteed payout over a guaranteed period of time, as well as a generous tax deduction. However, NFOA never had sufficient assets to meet these obligations.  The majority of assets, which Olive solicited, were annuities, which incurred high penalties on their surrender. When Olive received these annuities, he surrendered them, incurring penalties, so that he could access the cash. He then used the cash to fund his lavish lifestyle. Olive donated to charity only approximately $108,000 – less than ½ of 1% of the $23.6 million NFOA received.

Consultant to Former New Mexico Secretary of State Sentenced on Federal Charges
On August 19, 2013, in Albuquerque, N.M., Armando C. Gutierrez, of Corpus Christi, Texas, was sentenced to 120 months in prison, three years of supervised release and ordered to forfeit $2,500,483, including his interest in his Corpus Christi residence. In addition, Gutierrez was ordered to pay $2,500,483 in restitution to the State of New Mexico, including $746,375 which is to be paid jointly with co-defendant Joseph C. Kupfer. Gutierrez was convicted in January 2013 of conspiracy, theft of government property, obstruction of justice and money laundering. According to trial evidence, between April 2003 and December 2006, the New Mexico Secretary of State (NMSOS) administered almost $20 million in federal "Help America Vote Act" (HAVA) funds, which were designated for voter education, increasing voter registration, and meeting new standards for election administration and voting systems, through a number of contracts. The contracts included a multi-million dollar contract for voting-related advertising awarded to A. Gutierrez and Associates, Inc. (AGA), which was owned and operated by Gutierrez, and three small contracts for increasing voting accessibility for the disabled that were awarded to KC, Kupfer’s business. Gutierrez and Kupfer conspired together to defraud the United States by stealing federal HAVA funds and converting the funds to their own use. Between September 2004 and October 2006, AGA received a total of $6,271,810 in federal HAVA funds but Gutierrez submitted documentation supporting only $3,385,151 in services and costs.  In addition to the three small contracts totaling $70,000 which were awarded to KC by the NMSOS, AGA made nine payments totaling $746,375 in federal HAVA funds to Kupfer between October 2004 and November 2006, which far exceeded the value of any work that Kupfer actually performed for AGA under the HAVA contract. In an audit of the use of federal HAVA funds, AGA provided 187 fraudulent invoices totaling $1,137,000 that purported to represent payment to media vendors when in fact AGA never paid any vendors based on these invoices. Also, AGA and KC submitted fraudulent invoices that purported to support the nine payments totaling $746,375 that KC received from AGA between October 2004 and November 2006. Three of these invoices sought payments in the aggregate amount of $236,605 for production of a poll worker training video that was actually produced by another subcontractor at the cost of $75,000. In a separate case, Kupfer and his wife, Elizabeth D. Kupfer were charged with failing to report at least $768,333 in taxable income during tax years 2004 through 2006, and evading $286,175 in federal taxes. On May 14, 2013, Elizabeth Kupfer was sentenced to 36 months in prison, three years of supervised release and ordered to pay $288,339 in restitution to the IRS. Joseph Kupfer is awaiting sentencing.

Founder and Former Chief Executive Officer of Body Armor Company Sentenced on Federal Charges
On August 15, 2013, in Central Islip, N.Y., David H. Brooks, the former Chief Executive Officer of DHB Industries, Inc., was sentenced to 204 months in prison and five years of supervised release. In addition, he was ordered to pay a $8.7 million fine and to forfeit approximately $65 million. Restitution to the victims of his fraud scheme will be determined at a later date. Brooks was convicted in September 2010 on 14 counts of conspiracy, mail and wire fraud, securities fraud, obstruction of justice, and lying to auditors and subsequently pleaded guilty to conspiracy to defraud the IRS and filing false income tax returns. DHB Industries, Inc. is a supplier of body armor to the U.S. military and law enforcement agencies. According to trial evidence, Brooks and others conspired to loot DHB for personal gain. Brooks concealed his control of a related company in order to funnel more than ten million dollars from DHB to support a thoroughbred horse-racing business and to finance a lavish lifestyle. To cover up his theft, Brooks created, and directed others to create, fictitious documents and misclassified these personal expenses as business expenses on DHB’s books and records. Brooks also falsely inflated inventory at a DHB subsidiary to artificially boost reported profits, and then lied to auditors in an effort to cover up the schemes. Brooks also engaged in accounting fraud schemes designed to increase the net income and profits that DHB reported in its press releases and filings with the Securities and Exchange Commission (SEC) by falsely inflating the value of DHB’s existing inventory, adding non-existent inventory to the company’s books and records, and fraudulently reclassifying expenses. Although Brooks was initially released on bail conditions requiring that he account for and repatriate all foreign assets, he was re-arrested and bail was revoked in January 2010 after the government discovered that Brooks had concealed millions of dollars in accounts in the tax haven principality of San Marino as well as in London, England.

Two Connecticut Women Sentenced for Overseeing Pyramid Scheme
On August 13, 2013, in Hartford, Conn., Donna Bello, of Guilford, Conn., was sentenced to 72 months in prison, three years of supervised release and ordered to pay a $15,000 fine. Jill Platt, also of Guilford, was sentenced to 54 months in prison and three years of supervised release. Bello and Platt were ordered to pay restitution in the amount of $32,000 to several victims of the scheme. On February 20, 2013, Bello and Platt were convicted of conspiracy to commit wire fraud and conspiracy to defraud the IRS, multiple counts of wire fraud and filing false tax returns.  According to court documents, from approximately 2008 to 2011, Bello and Platt, oversaw and profited from a pyramid scheme known as “Gifting Tables”.  The defendants recruited individuals to join the scheme, prepared and distributed materials to recruits that contained false representations, and affirmatively misrepresented to recruits and participants that Gifting Tables was not a pyramid scheme. Bello and Platt also conspired to defraud the IRS by telling recruits and participants that monies given and received during the scheme were tax-free “gifts” under the IRS Code and that lawyers and accountants had approved Gifting Tables as legal ventures that generated tax-free proceeds. In addition, Bello and Platt filed false tax returns that failed to report income generated from the scheme.

Accountant Sentenced for Mail Fraud and Filing a False Income Tax
On August 12, 2013, in Topeka, Kan., Larry D. Lord, of Manhattan, Kan., was sentenced to 33 months in prison and ordered to pay more than $640,000 in restitution. Lord pleaded guilty on March 29, 2013 to charges of mail fraud and filing a false income tax return. In his plea agreement, from 2005 to 2012, while he worked as an accountant for Cheney Construction Inc. (CCI), he embezzled funds from CCI’s bank account to pay his personal expenses. Lord wrote checks on CCI’s bank account and mailed the checks to a credit card company. To conceal the crimes, he falsified the company’s check register log to make it appear the check was written to a legitimate payee. He wrote checks totaling $535,179. In addition, he failed to report the embezzled funds on his federal income tax, resulting in taxes owed for 2006 through 2011 of $103,962.

Founders of Investment Firm Sentenced on Federal Charges
On August 7, 2013, in Utica, N.Y., Timothy M. McGinn was sentenced to 180 months in prison, three years of supervised release and ordered to pay a $100,000 fine. David L. Smith was sentenced to 120 months in prison, three years of supervised release and ordered to pay a $50,000 fine. In addition, McGinn and Smith were ordered to forfeit $6,336,440 and pay a total of $5,992,800 in restitution. McGinn and Smith, former owners of the Albany broker-dealer McGinn, Smith & Co., Inc., were convicted  in February 2013, following a five-week jury trial, of conspiracy to commit mail and wire fraud, mail fraud, wire fraud, securities fraud, and filing false tax returns. According to the superseding indictment, the purpose of the conspiracy was to mislead investors and the Financial Industry Regulatory Authority, Inc. (FINRA) regarding the safekeeping and use of investor money raised by 17 trusts, one corporation, and other entities; the risks of the trust offerings; the performance of the underlying income streams; the source of investor payments; and the improper diversion of investor money in order to obtain money from investors and enrich themselves. As a result of the defendant's conduct, the investors were not aware that the defendants had diverted approximately $4.1 million in connection with transactions related to the trusts for their own benefit and the benefit of another person. In addition, McGinn and Smith failed to declare the improperly diverted money on their personal tax returns for tax years 2006 through 2008. McGinn and Smith later described the money as "loans," but did not list them as such on personal financial statements.

Former Illinois Business Owners Sentenced for Filing False Tax Returns
On August 6, 2013, in Chicago, Ill., Michael H. Martorano, of Ft. Atkinson, Wis., and William S. Sefton, of Scottsdale, Ariz., were sentence to 42 months and 48 months in prison, respectively. Both defendants were also fined $12,500 and ordered to pay the mandatory court costs. In addition, Martorano paid approximately $1.494 million in restitution and Sefton paid approximately $1.441 million in restitution for individual income taxes they owed the IRS, and together they paid approximately $7.308 million in corporate taxes owed by their business. Each defendant pleaded guilty in March 2013 to three counts of filing false income tax returns. According to court documents, Martorano was president and Sefton was vice president/secretary of the former Consumer Benefit Service, Inc., or Cbsi, a Naperville business that provided membership and consumer discount programs to businesses and associations worldwide. Martorano and Sefton admitted that on a number of occasions between December 2005 and December 2009, they caused Cbsi to transfer more than $21.656 million into bank accounts in the name of a consulting firm they controlled. Both defendants used some of this money to pay personal expenses and moved other amounts in approximately equal portions into other accounts they controlled individually. As a result, they each obtained approximately $10.828 million. Neither defendant disclosed the receipt of any of this money to their individual tax return preparer.

Tax Preparer Sentenced for Tax Evasion and Structuring Currency Transactions
On August 5, 2013, in Fresno, Calif., Nohemi Villarreal Noriega, of Patterson, was sentenced to 46 months in prison and ordered to pay $188,900 to the IRS. According to court documents, Noriega prepared tax returns through her business in Livingston, Villarreal’s Business Services. In 2006, 2007 and 2008, she evaded payment of her own taxes, totaling more than $167,000. In addition, Noriega structured more than $1 million of withdrawals from her bank accounts in amounts designed to avoid filing currency transactions reports, which might have disclosed her unreported income.

California Man Sentenced for Filing a Fraudulent Tax Return
On August 5, 2013, in Los Angeles, Calif., Jose Antonio Sanchez, formerly of Pacoima, was sentenced to 30 months in prison, three years of supervised release and ordered to pay $1,678,300 in restitution to Federal Insurance Company. Sanchez, a former mail clerk for ACCO Engineered Systems (AES) headquarters, pleaded guilty on March 26, 2013, to mail fraud and filing a false federal income tax return. According to the court documents, between at least 2004 and 2008, Sanchez used his position to order copier supplies, using an AES “open” purchase order, in the name of AES from companies and directed the companies to deliver the copier supplies to other non-AES locations. The companies then mailed invoices to AES to obtain payment for the supplies. As a result of his scheme, AES spent at least $1,678,300 for supplies that it never received and for which it had no use. The loss incurred by AES was eventually reimbursed by its insurer, Federal Insurance Company. In addition, Sanchez filed false federal individual income tax returns for the 2005, 2006, 2007 and 2008 calendar years by failing to report the proceeds of his scheme.   

Former Director of Navajo Economic Development Project Sentenced for Tax Evasion
On August 1, 2013, in Albuquerque, N.M., Hak Ghun, of Durango, Colo., was sentenced to 12 months and a day in prison, two years of supervised release and ordered to pay $249,567 in restitution to the IRS. Ghun was charged in April 2012 with evading an aggregate of $367,809 in federal taxes during tax years 2005, 2006 and 2007.  On February 21, 2013, Ghun pleaded guilty to one count of evading federal income taxes in 2006. According to court documents, Ghun was the chief executive officer of BCDS Manufacturing, Inc. located in Shiprock, N.M.  In 2003 and 2004, the Navajo Nation invested economic development funds in BCDS and became the majority owner of the company, and in 2006, obtained a $2.2 million loan for the purpose of expanding the BCDS facility in Shiprock.  Between 2005 and 2007, Ghun used BCDS funds to pay his personal expenses and evaded his personal tax obligations on those funds by concealing his conduct from BCDS’s corporate accountant and by filing false corporate tax returns on behalf of BCDS.

Maryland Tax Preparer Sentenced for Making a False Statement on a Tax Return
On July 31, 2013, in Greenbelt, Md., Alejandro A. Salas, of Silver Spring, Md., was sentenced to 18 months in prison, one year of supervised release and ordered to pay $393,018 in restitution. According to court documents, from 2004 to 2008, Salas ran a tax return preparation business that also offered translation services, travel agency services, accounting and bookkeeping services for local companies; facilitated international money transfers; and brokered mortgage loans. In 2009, after learning that he was the target of a criminal investigation, Salas moved the location of his business and began preparing tax returns for clients under the corporate name TAX USA, which he incorporated under the name of another individual. Between 2004 and 2009, Salas’ business prepared over 15,700 tax returns for clients. For tax years 2003 through 2005, Salas underreported the income from his tax preparation business on his individual income tax returns and he underreported the income from the business on the corporate tax return he filed for the 2006 tax year. For tax years 2007 through 2009, Salas failed to file either corporate or individual tax returns.

Iowa Resident Sentenced on Fraud Charges
On July 30, 2013, in Council Bluffs, Iowa, Robert W. Duncan, formally a resident of Thurmond, Iowa, was sentenced to 48 months in prison and five years of supervised release. In addition, Duncan was ordered to pay $218,755 in restitution to the Social Security Administration (SSA) and $42,254 in restitution to the IRS. Duncan, former owner and auctioneer for Bob Duncan and Assoc., pleaded guilty on March 12, 2013 to defrauding the SSA, filing a false income tax return and making a false statement to a financial institution. During the plea proceeding, Duncan admitted that he had defrauded the SSA by receiving benefits he was not entitled to between 1993 and 2011. In addition, he caused a false Form 1040 to be filed for the tax year 2008 by underreporting his income. Duncan also provided false financial documents to a bank to obtain a $225,000 loan in 2005.

New Jersey Woman Sentenced for Bank Fraud, Money Laundering and Tax Evasion
On July 30, 2013, in Newark, N.J., Karen Febles, of Wallington, N.J., was sentenced to 54 months in prison, three years of supervised release and ordered to pay $1,154,911 in restitution. Febles was also ordered to surrender $38,000 in cash she had put toward her bail. Febles was convicted by a jury of bank fraud, wire fraud, money laundering and tax evasion.  According to court documents and evidence presented at trial, from at least 2000 through September 2011, Febles worked as an executive assistant for Citibank and she assisted an individual with his finances. As part of her employment, Febles had exclusive control over the individual’s bank accounts and routinely prepared and negotiated checks on his behalf. Between 2007 and September 2011, at least $1.3 million of the individual’s funds went from his bank accounts directly into Febles’ 21 bank accounts, including two accounts that she maintained for her minor son. A review of hundreds of checks written by Febles revealed that she altered the checks, after they had been signed by the individual, to add additional sums of money. Once issued, Febles negotiated many of these checks, in cash, for the altered amount. At the same time that more than $900,000 in checks and almost $400,000 cash went from the individual's bank accounts into Febles’ accounts, Febles spent hundreds of thousands of dollars on luxury purchases. In the tax years 2009 and 2010, Febles failed to disclose to the IRS any of the money that she stole from the individual.

Massachusetts Man Sentenced for Tax Evasion
On July 25, 2013, in Boston, Mass., Gary Boyar, of Boston, was sentenced to 12 months and one day in prison and ordered to pay $43,149 in restitution to the IRS. In February 2013, Boyar pleaded guilty to corruptly endeavoring to impede the IRS and tax evasion.  According to court documents, Boyar was a “10-percenter,” a phrase referring to the 10-percent fee charged by those who cash winning tickets for gamblers so that the gamblers’ identities are not reported to the IRS.  This scheme allowed gamblers to avoid paying taxes on their winnings, which were taxable income.  When Boyar cashed tickets and submitted forms to the IRS associated with those tickets, he used his deceased father’s social security number to obstruct the IRS.  During the tax years 2004 through 2006, Boyar cashed more than $2 million in tickets at Suffolk Downs that belonged to winning gamblers, and submitted approximately 1,713 false IRS forms using his deceased father’s social security number. This conduct obstructed the IRS from determining the identities of the actual winners.   

North Carolina Man Sentenced for Operating Ponzi Scheme
On July 25, 2013, in Charlotte, N.C., John Knox Bridges, of Salisbury, was sentenced to 121 months in prison, three years of supervised release and ordered to pay $1,534,536 in restitution to victims for operating a Ponzi scheme that defrauded his victims of more than $2 million and for failing to appear in court for his previously scheduled sentencing hearing on that case. In February 2012, Bridges pleaded guilty to one count of securities fraud and one count of money laundering. According to filed court documents, from 2004 to 2010 Bridges engaged in a series of schemes to defraud individual investors and charitable organizations by soliciting his victims to invest in fictitious companies. In fact, Bridges deposited the money in his own personal bank account and used the money to fund personal trips abroad and to pay for his personal living expenses. Bridges made payments to some existing investors using funds contributed by new investors, typical of a “Ponzi” scheme. To cover his fraud and to induce individuals to further invest in his fictitious company, Bridges regularly sent investors bogus profit and loss statements, which falsely showed positive returns. Also, in an effort to further induce additional investment funds, Bridges lied to current and additional investors by fraudulently telling them that his computer had been hacked and $600,000 was emptied out of his personal bank account.

Three Former UBS Executives Sentenced for Frauds Involving Contracts Related to the Investment of Municipal Bond Proceeds
On July 24, 2013, in New York, N.Y., three former UBS AG executives were sentenced for their participation in frauds related to bidding for contracts for the investment of municipal bond proceeds and other municipal finance contracts. Peter Ghavami was sentenced to 18 months in prison and ordered to pay a $1 million criminal fine; Gary Heinz was sentenced to 27 months in prison and ordered to pay a $400,000 criminal fine; and Michael Welty was sentenced to 16 months in prison and ordered to pay a $300,000 criminal fine. Ghavami, Heinz and Welty were convicted on August 31, 2012 on various counts of conspiracy to commit wire fraud and wire fraud. According to trial evidence, Ghavami, Heinz and Welty conspired with others to corrupt the bidding process for more than a dozen investment agreements in order to increase the number and profitability of the agreements awarded to UBS. At other times, while acting as brokers, Ghavami, Heinz, Welty and their co-conspirators arranged for UBS to receive kickbacks in exchange for manipulating the bidding process and steering investment agreements to certain providers. Ghavami, Heinz and Welty deprived the municipalities of competitive interest rates for the investment of tax-exempt bond proceeds that were to be used by municipalities to refinance outstanding debt and for various public works projects, such as for building or repairing schools, hospitals and roads. Evidence at trial established that they cost municipalities around the country and the U.S. Treasury millions of dollars.

Arizona Man Sentenced on Money Laundering and Tax Charges
On July 23, 2013, in Tucson, Ariz., Anthony Mark Boscarino was sentenced to 135 months in prison and ordered to pay $6.5 million in restitution to the 1,685 victims of his fraudulent activity and to pay $1.3 million in unpaid taxes for 2009. In addition, Boscarino was ordered to pay a $4.8 million money judgment and to forfeit several cars and bank accounts. Boscarino pleaded guilty on January 23 and on February 27, 2013 to 43 crimes including fraud, money laundering and tax evasion. According to court documents, Boscarino was involved in multiple frauds using his internet sports handicapping site which operated under several names including Mike’s Lock Club. He solicited victims to invest in gambling junkets to Las Vegas, in an oil well project in Louisiana, in Collateralized Mortgage Obligations and several other scams.

Ohio Man Sentenced for Mail Fraud and Tax Evasion
On July 23, 2013, in Cleveland, Ohio, Frederick C. Bryant, of Bay Village, Ohio, was sentenced to 46 months in prison and ordered to pay $505,832 in restitution to the victim and more than $115,000 in interest and penalties to the IRS. Bryant pleaded guilty in March 2013 to mail fraud and tax evasion. According to court documents, on or about September 16, 2008, Bryant incorporated the Global Venture Fund (GVF) in Ohio. The stated goal of GVF was to save endangered tigers from extinction and to seek funding to save tigers from extinction worldwide. In 2008, Bryant approached the victim asking for funds for GVF and guaranteed a five percent rate of return for seven years. According to court documents, the victim signed an investment contract and, between September 2008 and January 2010, invested $533,916 in GVF. Bryant paid the victim a total of $28,084 in annuity payments until October 2010, when all payments stopped. In actuality, Bryant converted the money for his own personal use and business expenses. During the calendar year 2009, Bryant received taxable income of approximately $388,525. However, he failed to file an income tax return.

Couple Sentenced for Dispensing Controlled Substances and Tax Evasion
On July 18, 2013, in Hammond, Ind., Rakesh Anand was sentenced to 24 months in prison for dispensing controlled substances to patients and federal income tax evasion. His wife, Meena Anand, was sentenced to 30 days in prison for income tax evasion. The couple was also ordered to pay $745,872 in restitution to the IRS and to forfeit more than $4.45 million. In addition, Rakesh Anand was fined $750,000 and Meena Anand was fined $100,000. According to court records, the defendants owned and managed Doctors Weight Loss Clinics in Indiana and Illinois. Between 2002 and February 2010, Rakesh Anand hired Dr. Dinesh Saraiya, who agreed with Anand to illegally dispense the controlled substances as weight loss medications to patients without performing physical examinations or any medical tests, and without reviewing patients’ records, obtaining a complete medical history, or providing any subsequent monitoring. In return, Rakesh Anand paid Saraiya based on how many patients he saw and how many pills he dispensed on a daily basis. The Anands grossed more than $5 million from their operation of the three weight loss clinics. According to the plea agreement, the Anands deposited the funds in amounts under $10,000 in separate transactions at different branches of their financial institution in order to evade Currency Transaction Reporting. In addition, during tax years 2005 through 2008, the Anands failed to report gross income from their weight loss clinics, which resulted in a total tax loss of approximately $745,872. Saraiya pleaded guilty to conspiracy to distribute controlled substances and is awaiting sentencing.

Minnesota Man Sentenced for Role in Investment Scheme
On July 15, 2013, in Minneapolis, Minn., Patrick Kiley, of Burnsville, Minn., was sentenced to 240 months in prison and ordered to pay $155,359,411 in restitution jointly with his co-defendants to the victims of their fraud scheme. Kiley was convicted by jury trial on June 12, 2012 of wire and mail fraud, conspiracy to commit mail and wire fraud and money laundering. According to evidence presented at trial, Kiley and others defrauded investors by soliciting them to invest money in a foreign currency trading program that they alleged would earn a double-digit rate of return with little or no risk. They also claimed investor assets would be held in a segregated account and could be withdrawn at any time. Those representations were false. Between 2005 and July 2009, Kiley and others secured approximately $194 million in investments for the currency program. Of that amount, only about $109 million was actually sent to currency trading firms. About $52 million was paid to investors in the form of lulling payments, and approximately $30 million was diverted to fund the business and personal expenses of Kiley and others.

Conspirators Sentenced for Fraudulent Investment Scheme
On July 11, 2013, in St. Thomas, U.S.V.I., Janice D. Rey was sentenced to 125 months in prison and ordered to pay $3,006,260 in restitution to individual victims of her investment scheme. Rey also was ordered to pay restitution of $550,681 to the Virgin Islands Bureau of Internal Revenue. Rey’s co-conspirator, Devon McLean was sentenced to 70 months in prison and ordered to pay $3,006,260 in restitution. The court also entered a forfeiture money judgment of $5.5 million against both Rey and McLean. On April 4, 2013, a federal jury convicted Rey of one count of conspiracy, eight counts of wire fraud, 43 counts of money laundering, and four counts of tax evasion. Rey was sentenced to 60 months in prison for her conviction on the territorial tax charges, to be served concurrently with her sentence on the federal charges. On March 5, 2013, McLean pleaded guilty to wire fraud conspiracy. According to the court documents, Rey and McLean organized Paramount Group, LLC, and opened a bank account for the partnership in Nevada. Rey opened a store front location in St. Thomas called Rey Financial, which she used to meet with potential investors. Rey made false material representations and material factual omissions to potential investors in order to induce them to invest with Paramount Group.

Indiana Man Sentenced for Tax Fraud
On July 10, 2013, In Hammond, Ind., Charles Standifer, of Gary, Ind., was sentenced to 18 months in prison and one year of supervised release. Standifer pleaded guilty in July 2011 to aiding and assisting in the preparation of a false tax return. According to court documents, Standifer prepared an income tax return for the calendar year of 2009 where he included a false Schedule C net profit of $11,930 and an Earned Income Credit of $4,430, despite knowing the taxpayer was not entitled to the net profit or the Earned Income Credit.

Indiana Woman Sentenced for Mail Fraud and Tax Evasion
On July 2, 2013, in Hammond, Ind., Linda Lyrla, of Demotte, Ind., was sentenced to 46 months in prison, three years of supervised release and ordered to pay $1,426,057 in restitution and forfeit $1,384,600. Lyrla pleaded guilty in June 2012 to mail fraud and tax evasion.  According to court documents, Lyrla embezzled funds from her employer. In 2001, Lyrla began her scheme to siphon money by creating an internal fund for a credit card. During the next nine years, she used the credit card for personal purchases and paid the balances with company funds. She used the money to fund an extravagant lifestyle and did not pay income taxes to the IRS on that money.

Former Bishop Sentenced for Investment Fraud Scheme
On June 27, 2013, in New Haven, Conn., Julius C. Blackwelder, bishop of a church located in Trumbull, was sentenced to 46 months in prison and three years of supervised release. On February 20, 2013, Blackwelder pleaded guilty to one count of wire fraud and one count of money laundering.  According to court documents, beginning in 2005, Blackwelder persuaded individuals to invest their money with him as part of an investment pool known as the “Friend’s Investment Group.” He solicited investments from, among others, members of his congregation. Blackwelder misrepresented to investors that he would invest their money in safe, long-term commodities futures contracts, and that he was an experienced and successful commodities investor.  In some instances, Blackwelder guaranteed investors’ principal and a specific return on their investment.  He documented his misrepresentations to investors in promissory notes, offering memoranda and account updates that he prepared. In fact, Blackwelder used investors’ money to fund his construction of a 7,000 square-foot home, to pay other personal expenses and to repay personal bank loans. Blackwelder also used some invested funds to pay earlier investors. Through this scheme, Blackwelder defrauded investors of nearly $500,000.

Texas Pharmacist Sentenced on Income Tax Evasion Conviction
On June 26, 2013, in Fort Worth, Texas, Joseph Moss was sentenced to 12 months and one day in prison and ordered to pay a $3,000 fine and $51,150 in restitution. Moss pleaded guilty in January 2013 to one count of tax evasion. According to court documents, Moss is a licensed pharmacist at a local pharmacy in Grapevine, Texas. He received quarterly and weekly payments of income drawn on the pharmacy’s business bank accounts. The quarterly payments varied in amounts ranging from $20,000 to $100,000. Each of the quarterly payments were made payable to Moss' business account of Moss Enterprises. The weekly payments were much smaller in amount and were made payable directly to Moss via check. In October 2009, Moss filed his federal income tax return, but failed to report approximately $159,450 that he had received from the pharmacy for the 2008 tax year. As a result, Moss had an additional tax due and owing of $58,554 for the 2008 tax year.

California Woman Sentenced in Foreclosure Assistance Scam
On June 25, 2013, in San Jose, Calif., Tara Denise Bonelli was sentenced to 37 months in prison for defrauding investors of over $3,000,000. Restitution will  be determined at a later date. On February 12, 2013, Bonelli pleaded guilty to wire fraud.  According to her plea agreement, beginning no later than May 2006 and continuing to at least until October 2008, Bonelli promoted false and fraudulent real estate investments by making false promises about how investor funds were to be invested and repaid. In May 2004, Bonelli founded Vista Holding Company, a company that owned and operated eight entities. Although Bonelli established all of these entities under Vista Holding Company, she primarily conducted business under Vista Funding Inc., and controlled all of its business transactions. Bonelli told investors that their money would be used to purchase properties for resale or conversion to condominiums, and to engage in the business of foreclosure assistance. In some instances, to lure their investments, Bonelli promised a return of up to 1000%.  Rather than use investor money for the stated purpose, Bonelli used some of the investor funds to pay for her personal expenses.

Man Sentenced for Retirement Investment Scheme
On June 24, 2013, in Springfield, Mo., Steven Edward Gwin was sentenced to 108 months in prison and ordered to pay $1,173,267 in restitution. On August 20, 2012, Gwin pleaded guilty to mail fraud and money laundering.  According to court documents, Gwin engaged in a scheme to defraud investors from August 2005 to March 2007. Gwin solicited and obtained funds from individuals for investment in various retirement ventures. Gwin conducted seminars for senior citizens in both Missouri and Arkansas to promote these investment programs. Gwin represented to the individual investors that he would invest their retirement funds in secure, interest-earning investments. Gwin directed investors to establish Individual Retirement Accounts (IRAs) at a bank in Waco, Texas, which provides custodial services on self-directed IRAs. After investors funded their IRA accounts, Gwin transferred the funds to purchase unsecured notes issued by First Nevada Marketing, Inc., a Missouri corporation operated by Gwin. Gwin spent a portion of the funds on personal items and left investors with losses on their investments.

Man Sentenced for Running Day-Trading Ponzi Scheme
On June 24, 2013, in Los Angeles, Calif., Syed Qaisar Madad, the CEO and co-owner of Technology for Telecommunication and Multimedia, Inc. (TTM) investment company, was sentenced to 151 months in prison and ordered to pay approximately $5 million in unpaid taxes for tax years 2006 through 2010. Madad pleaded guilty in February 2013 to wire fraud and tax fraud, admitting that he enticed investors to put $49 million into his bogus day-trading venture as part of a Ponzi scheme that caused more than $30 million in losses. Madad under-reported his income for tax year 2009 by approximately $4.9 million. The government established that Madad had under-reported his income for tax years 2007, 2008 and 2010 by an additional $9.4 million.  According to court documents, Madad promised to use a day-trading strategy that would generate consistent, substantial profits. However, over the course of a 5 1/2 year scheme, Madad’s investments resulted in losses of more than $9 million. Notwithstanding these losses, Madad sent victims monthly account statements that always showed gains in their TTM accounts. These detailed account statements falsely reassured victims that their investments were safe and increasing in value. Some victims gave Madad additional funds based solely on these fictitious account statements. Madad admitted in court that he spent well over $15 million of investors’ money on personal expenses, used $1.3 million of investor money to pay for improvements to his personal residence, and an additional $1 million of victim money to purchase an empty lot. Although Madad returned approximately $17.7 million to investors, much of this was through Ponzi payments, meaning that the money came from funds entrusted to him by other investors, rather than from profits or interest he had earned. As part of his plea agreement, Madad will forfeit his mansion, a Mercedes-Benz, 68 pieces of jewelry, and other luxury items.

California Man Sentenced for $80 Million Ponzi Scheme
On June 21, 2013, in Sacramento, Calif., Anthony Vassallo, of Folsom, was sentenced to 192 months in prison and three years of supervised release. for wire fraud in connection with a Ponzi scheme that took in more than $80 million between April 2006 and December 2008. Restitution will be determined at a later time.  According to court records, beginning in 2006, Vassallo and a co-conspirator ran Equity Investments Management & Trading (EIMT). Vassallo claimed that he had developed computer software that enabled him to make profits of approximately 3 percent per month, or 36 percent per year. Investors were told that this strategy had worked successfully for years when in fact, Vassallo’s strategy had been historically unsuccessful, losing money overall. Vassallo also told investors that he traded online on the Russell 2000 index through TradeStation, a licensed securities broker-dealer. In fact, by September 2007, EIMT had been barred from trading at the brokerage. Vassallo continued to tell investors and sub-fund managers that he was investing in reputable stocks through that brokerage. Instead, he was using the money for his own benefit, to pay interest to other investors, and investing in a number of shady schemes, all of which failed. The scheme began to unravel in late 2008, and investors began demanding their money back. Vassallo and his intermediaries engaged in stalling tactics, claiming that Vassallo was “restructuring” the funds, TradeStation was conducting an audit, or the SEC had frozen the TradeStation account due to a baseless complaint. Vassallo continued to recruit new investments. One investor transferred $250,000 to Vassallo’s account less than two weeks before Vassallo admitted to a group of investors that he had ceased trading and their money had been lost. More than 300 individuals invested in Vassallo’s scheme, contributing at least $83 million. The loss to the investors totaled more than $44.8 million.  

Defendant Sentenced on Securities Fraud Charges
On June 21, 2013, in Manhattan, N.Y., John A. Mattera, of Boca Raton, Fla., was sentenced to 132 months in prison, three years of supervised release and ordered to forfeit $11.8 million. Mattera pleaded guilty in October 2012 to securities fraud and wire fraud charges and has agreed to pay restitution to the victims of his offense and consented to the entry of a $13 million forfeiture order. According to court documents and statements made during court proceedings, in 2010 and 2011, Mattera served as Chairman of the Advisory Board of Praetorian Global Fund Ltd., a professional mutual fund, where he was responsible for the day-to-day management decisions. Beginning in the late summer of 2010, Mattera and others offered investors the opportunity to invest in special purpose entities related to Praetorian (the “G Power Entities”). Mattera falsely represented that the G Power Entities owned shares in companies such as Facebook and Groupon when they were still private. Ownership of stock in these private companies was particularly attractive to certain investors because there was an expectation that initial public offerings would soon occur, thereby potentially increasing the value of the shares. In reality, neither Mattera, Praetorian, nor the G Power Entities held these shares of stock. Based on the misrepresentations, investors sent more than $11 million into “escrow accounts” maintained at a Florida bank. Mattera reassured investors that their money would be held in the escrow accounts until either the offering was completed or another triggering event took place. Investors were told they would then receive their ownership interest in the particular special purpose entity. However, instead of maintaining the investor money in the escrow accounts, Mattera caused the vast majority of the funds to be transferred to other entities with which he was associated. Ultimately, Mattera misappropriated approximately $13 million of investor money, spending nearly $4 million on personal items for himself and his family.

Michigan Man Sentenced for Mail Fraud and Failure to File Income Tax Returns
On June 20, 2013, in Detroit, Mich., John H. Wilson Sr., of Yale, Mich., was sentenced to 240 months in prison and ordered to pay over $2 million in a money judgment for mail fraud and failure to file income tax returns. According to court document, Wilson devised and executed a scheme to defraud and to obtain more than $2.6 million from the family members and friends of defendants incarcerated across the United States. Wilson operated three businesses in Southeastern Michigan: University Legal Services LLC (ULS), University Research Services LLC (URS), and Appellant Research Services LLC (ARS). These businesses sent direct mailings to inmates across the country offering to conduct legal and appellate work on the inmate’s behalf. When a family member or friend telephoned Wilson or his co-conspirator, Lari Zeka, they explained that payment was required for two phases: legal research and attorney retainer. They promised that legal research would be provided during the first phase which would help win the inmate’s appeal. During the “attorney retainer” phase, an attorney would be provided to assist in the case. These representations by Wilson and Zeka induced people across the United States to mail large amounts of money to URS and ARS, purportedly for appellate research and appellate representation. However, any research provided did not assist the inmate and no attorney was ever provided to work on the inmate’s appeal. According to the indictment, Wilson and/or Zeka frequently used fictitious names in correspondence with the victims and both repeatedly represented themselves as attorneys or represented that attorneys were on the staff. Neither Wilson nor Zeka is licensed to practice law and no attorneys were on staff at any of the companies.

Massachusetts Man Sentenced for Tax Evasion
On June 18, 2013, in Boston, Mass., David L. Toppin, of Holden, was sentenced to 36 months in prison, two years of supervised release and ordered to pay $716,497 in restitution to the IRS.  In January 2013, Toppin pleaded guilty to tax evasion.  According to court document, Toppin, the sole owner and operator of Pelletizer Group, Inc., did not file federal income tax returns for 1997 through1999 until 2006. In the returns, Toppin reported owing $227,199 in federal income taxes for 1997 thorugh 1999. The evidence at trial showed that Toppin evaded payment of his taxes and tried to impede the IRS’s collection of his income tax by, among other things, placing real estate and checking accounts in his wife’s name and by misleading the IRS about the extent of his assets and income.

Woman Sentenced in Connection with a $2 Million Advance Fee Scheme
On June 17, 2013, in Portland, Ore., Hui “Judy” Wang, of Laguna Niguel, Calif., was sentenced to 41 months in prison and ordered to pay $2 million in restitution to the victims of the advance payment scheme. Wang pleaded guilty to one count of wire fraud. In 2007 a Vancouver business owner sought venture capital for his technology-based start-up company. He found Wang and her business, Grand Capital Financial, through her internet website, advertising the business as a real estate investment trust and financial lender. He approached Wang for her assistance in finding venture capital for his company. Wang promised him that she could secure up to $200 million for his business, but told the victim that he first had to deposit $2 million into her account for a period of 30 days in order to prove to the potential financiers that the business was operational and solvent. If the funding was secured, the deposit would be considered as an advance on her fee. Wang’s contract provided that she would return the $2 million deposit if she could not secure the promised funding within 30 days. As soon as the money was deposited into Wang’s account, she began to spend it. When the 30-day window ended and no venture capital was secured, the victim asked for his money back consistent with the contract. Wang repeatedly lied, stating that funding was still being worked out, that she still had all the money, and would return it if she couldn’t secure the funding in the short term. No venture funding ever materialized. All subsequent efforts to recover the money have failed, and the victim lost the entire advance fee given to Wang.

Massachusetts Man Sentenced for Filing a False Tax Return
On June 17, 2013, in Boston, Mass., William Burr, of Cataumet, Mass., was sentenced to 12 months and one day in prison, one year of supervised release and ordered to pay $101,327 in restitution to the IRS. In January 2013, Burr pleaded guilty to filing a false tax return.  According to court documents, Burr was a 50% owner of a debt collection business. Between January 1 and December 31, 2003, the gross receipts earned by the business totaled $726,226, but Burr did not provide his tax preparer with information necessary to determine a correct gross receipts figure for the business. Consequently, in April 2008, Burr filed a federal partnership tax return for the year 2003, falsely reporting that the gross receipts or sales of the business in 2003 were $246,731. By filing the false return, Burr evaded the payment of approximately $101,327 in taxes.

Accountant Sentenced for Filing a False Tax Return
On June 17, 2013, in Los Angeles, Calif., Michael Lyadda, of Valencia, was sentenced to 18 months in prison, one year of supervised release and ordered to pay $272,983 in restitution. On March 4, 2013, Lyadda, formerly of Uganda, pleaded guilty to one count of filing a false federal income tax return with the IRS.  According to the plea agreement, Lyadda filed a false tax return for the year 2004 and 2005 which listed a false amount for adjusted gross receipts. Lyadda, who holds a degree in accounting, received over $300,000 in income for tax years 2004 and 2005 which he did not report. As part of his plea agreement, Lyadda entered into a closing agreement with the IRS to assess and collect the total tax for the years 2004 and 2005. He will pay additional taxes, penalties, and interest owed the IRS prior to sentencing and that he is liable for the fraud penalty (75% of the tax due to the IRS) on the understatements of tax liability.

CEO Sentenced for Conspiracy to Pay Bribes in Stock Sales
On June 14, 2013, in New York, N.Y., Roland Kaufmann, CEO of Axius Inc., was sentenced to 16 months in prison, three years of supervised release, fined $450,000 and ordered to forfeit $298,740. Kaufmann, a Swiss citizen, pleaded guilty in January 2013 to one count of conspiracy to violate the Travel Act in connection with a scheme to bribe stock brokers to purchase the common stock of a company he controlled and to manipulate its stock price. According to court documents, Kaufmann controlled Axius, Inc., a purported holding company.  As part of the scheme, Kaufmann and a co-conspirator enlisted the assistance of an individual who they believed had access to a group of corrupt stock brokers, but who was, in fact, an undercover law enforcement agent. Kaufmann and the co-conspirator instructed the undercover agent to direct brokers to purchase Axius shares in return for a secret kickback of approximately 26 to 28 percent of the share price. They also instructed the undercover agent as to the price the brokers should pay for the stock and that the brokers were to refrain from selling the Axius shares they purchased on behalf of their clients for a one-year period. By preventing sales of Axius stock, Kaufmann intended to maintain the fraudulently inflated share price for Axius stock.

California Real Estate Agent Sentenced for Obstructing the IRS
On June 10, 2013, in Los Angeles, Calif., Robert Charles Le Moine, of Beverly Hills, was sentenced to 12 months and one day in prison, one year of supervised release and ordered to pay $2,199,302 in restitution. Le Moine, a Beverly Hills commercial real estate agent, pleaded guilty in January 2013 to endeavoring to obstruct the administration of the Internal Revenue Code by preventing the IRS from collecting over $1.7 million in back taxes. According to the plea agreement, from about 1990 through 2009, Le Moine was a real estate agent engaged in representing buyers in the purchase of commercial properties. During that time period, Le Moine filed personal income tax returns reporting substantial amounts of income, averaging approximately $250,000 in adjusted gross income each year.  Le Moine made estimated tax payments and voluntary payments totaling $166,905 over two decades. However, Le Moine did not pay the overwhelming portion of taxes due and owing to the IRS. As a result, Le Moine’s tax obligation to the IRS is approximately $1,704,728, plus penalties and interest. The IRS began collection efforts in 1999 and made numerous attempts to collect Le Moine’s tax liability and levy his income and assets.  However, Le Moine actively impeded the collection efforts. He received as income commission checks in substantial amounts from his real estate business. However, as soon as the checks were deposited to his personal bank account, or shortly thereafter, Le Moine withdrew the money by cash or a check payable to cash, himself, his children or his friends. Le Moine also dealt extensively in cash and did not purchase or acquire property or large attachable assets that the IRS could seize, and instead rented an apartment or house and leased cars.

Businesswoman Sentenced for Filing False Income Tax Returns
On June 10, 2013, in Toledo, Ohio, Doris A. Porterfield was sentenced to 12 months and one day in prison and one year of supervised release. Porterfield pleaded guilty on February 19, 2013 to filing false income tax returns. According to court documents, Porterfield owned the business Elite Seamless Gutters (ESG) in Toledo and offered to help her employees prepare and file their income tax returns. As part of the scheme, Porterfield provided individuals with W-2s that showed greater compensation than the employee received. She also provided individuals with W-2s showing they received compensation from ESG, when in fact, they did not work for ESG nor did they receive any compensation from ESG. As a result of these false W-2s, individuals received Earn Income Credit and tax refunds they were not entitled to receive. Porterfield split the fraudulently obtained tax refund with the individual as a fee for filing the false income tax return.

Couple Sentenced in Ponzi Scheme
On June 10, 2013, in Kansas City, Kan., Richard Dalton, and his wife, Marie Dalton, of Golden, Colo., were  sentenced to 120 months and 60 months in prison, respectively. Richard Dalton pleaded guilty to one count of money laundering. Marie Dalton pleaded guilty to one count of conspiracy to commit mail fraud. Restitution will be determined at a later date. According to the plea agreements, the Daltons admitted that from 2007 through 2010 they operated a company called Universal Consulting Resources, soliciting investors to purchase interests in investment contracts. The Daltons falsely told investors they were guaranteed annual returns ranging from 48 to 120 percent on profits generated from trading in diamonds and international notes. The Daltons falsely claimed that the investments were low risk, that investors’ money could be returned at any time and that the company’s accounts were evaluated by top professionals and licensed third parties. The Daltons falsely claimed the invested funds would be held safely in an escrow account at a bank in the United States. In fact, Universal Consulting Resources was operated as a classic Ponzi scheme, wherein investor funds were commingled and used to pay out purported profits to early investors to create the false appearance that the investments were performing as promised. The Daltons used investor funds to pay personal expenses in addition to providing family members with substantial payments from the company. In 2010 when the Daltons learned they were under investigation by the Securities and Exchange Commission, they discontinued making payments to investors. They attempted to deceive investors by claiming payments would be coming soon and inventing reasons for the delays. In November 2010 they left the United States for South Africa, where they remained until they were forced to return to the United States and arrested in Atlanta on September 30, 2011.

Woman Sentenced for Not Paying Income Taxes on Embezzled Funds
On June 10, 2013 in Kansas City, Kan., Teresa Joyce Moore was sentenced to 33 months in prison for filing false income tax returns. According to court documents, Moore worked for Big W as the bookkeeper and office manager. Her duties included invoicing, tracking payroll and general bookkeeping. In late 2007, the owners of Big W realized that Moore had defrauded the company. She created false invoices from legitimate vendors and prepared checks payable to the vendors. Then she created checks for the same amount payable to herself or her credit card company. When the checks with the forged signature cleared the bank and were returned to Big W., Moore hid them and put the checks payable to the legitimate vendor in Big W’s records. Moore used embezzled funds to purchase homes, furniture, appliances and other items. On her 2006 federal tax return she reported income of $31,990. In fact, she had received income of more than $451,000 through her embezzlement scheme. On her 2007 federal tax return, she reported an income of $30,881. She did not report more than $507,000 she received from her embezzlement in 2007.

Virginia Accountant Sentenced for Wire Fraud and Tax Evasion
On June 7, 2013, in Alexandria, Va., Melvin Mooring, of Gainesville, Va., was sentenced to 72 months in prison, three years of supervised release and ordered to pay $3,541,003 in restitution to his victims. Mooring pleaded guilty on March 8, 2013 to wire fraud and tax evasion charges.  According to court documents, from 2000 to 2011, Mooring served as the chief financial officer of a private company in Chantilly, Va. From 2004 to 2011, Mooring stole approximately $3.3 million from the company via company checks and wire transfers, which he routed through the bank account of a company he controlled in order to conceal their fraudulent nature. Mooring also altered company financial statements to conceal the fraud.  Mooring used the funds for a luxurious home, travel, jewelry, and a BMW automobile. Mooring also failed to report the stolen funds as income on his individual income tax returns for the years 2005 through 2010, resulting in approximately $865,426 in losses to the United States Treasury.

Utah Man Sentenced for Money Laundering in Connection with Diversion of Funds from Business
On June 6, 2013, in Salt Lake City, Utah, David Merrill was sentenced to 21 months in prison, three years of supervised release and ordered to pay $986,073 in restitution.  Merrill pleaded guilty to money laundering in connection with a scheme to divert money from the business where he worked from 2006 through 2011, to his personal accounts. According to court documents, the business is a privately-owned equipment leasing company in Utah.  The company enters into equipment leasing agreements with client businesses, leasing equipment based on monthly payments. Merrill admitted that during the course of performing his job duties at the leasing business, he directed approximately $1 million in client payments to his accounts at various banks in Utah. He admitted the activity was unknown to his employer and done without the employer’s authorization.

Former New Jersey Law Firm Employees Sentenced for Embezzlement
On June 6, 2013, in Trenton, N.J., two former employees of a law firm based in Edison, N.J., were sentenced for conspiring to defraud their former employer by improperly diverting more than $788,000 from the law firm. Marla Deptula, of Sayreville, N.J., was sentenced to 20 months in prison and ordered to pay $705,093 in restitution. Rose L. Crabbe, of Plainfield, N.J., was sentenced to 15 months in prison and ordered to pay $74,206 in restitution. In addition, Deptula and Crabbe were both sentenced to three years of supervised release. Deptula pleaded guilty to one count of conspiracy to commit mail fraud and one count of subscribing to a false tax return. Rose pleaded guilty to one count of conspiracy to commit mail fraud. According to court documents and statements made in court, between February 2005 and September 2007, Deptula and Crabbe conspired to embezzle from their former employer by wrongfully writing checks from the law firm’s trust and business accounts to themselves and their personal creditors to pay for their personal expenses. They attempted to hide their theft by altering the payee information in the law firm’s accounting records. Deptula, who had access to the law firm’s bank accounts in order to perform her duties as a secretary in the law firm’s real estate section, used that access to divert more than $788,000 from the attorney trust and business accounts for her and Crabbe’s personal benefit. Deptula received the vast majority of the stolen funds and failed to report any of the income on her federal tax returns.

Wisconsin Woman Sentenced on Tax Charges
On June 5, 2013, in Milwaukee, Wis., Leah Kuchta, of Mequon, Wis., was sentenced to 33 months in prison, three years of supervised release and ordered to pay over $778,000 to the IRS. On December 13, 2012, she pleaded guilty to two counts of tax-related offenses. According to court documents, Kuchta embezzled approximately $900,000 from a trust established for the benefit of her grandmother, and had pocketed $30,000 from a fraudulent loan on her sister’s home. Kuchta evaded $234,836 of federal income tax due and owing on $728,276 of unreported income for tax year 2005. In addition, she filed a false claim for a $76,165 refund, also for the tax year 2005. The case stemmed from an IRS investigation seeking a wage verification related to the refund claim.

New Jersey Man Sentenced for Securities Fraud and Money Laundering
On June 4, 2013, in Newark, N.J., David Connolly, of Watchung, N.J., was sentenced to 108 months in prison, three years of supervised release, ordered to pay $18,732,775 in restitution and forfeit $9,920,000. Connolly pleaded guilty to two counts of a superseding indictment charging him with securities fraud and money laundering. According to court documents and statements made in court, from at least 2006 through October 2009, Connolly orchestrated a real estate investment fraud scheme in which he took in more than $50 million from more than 200 victims, causing losses of at least $18 million. To induce victims to invest, Connolly made numerous materially false and misleading statements and omissions. He told victims their money would be used to purchase a specific property, and the property would generate rental income that would be used to pay investors monthly distributions. Connolly also told victims their money would be held in escrow until the closing of a purported real estate transaction and each property would be financially independent from all the others. Connolly misrepresented the amount of equity victims had in the properties, the condition of the properties, and the financial performance of the properties. Although the investment properties experienced significant negative cash flow, Connolly told investors they were performing well. Connolly took significant portions of his victims’ money, which had been provided for specific real estate transactions, and used it for other purposes without victims’ knowledge. He funded unrelated real estate transactions in which he was engaged, paid prior victims, and paid himself. The scheme collapsed in the summer of 2009, after Connolly began defaulting on the mortgage payments for the investment properties.

Florida Accountant Sentenced for Two Fraud Schemes
On May 30, 2013, in Miami, Fla., Joseph Rizzuti, of Stuart, was sentenced to 80 months in prison, three years of supervised release and ordered to pay almost $300,000 in restitution to the victims, including the IRS. Additional restitution will be determined within 90 days.  Rizzuti was convicted of conspiracy to commit wire fraud and of corruptly endeavoring to obstruct the IRS. According to court documents, Rizzuti, an accountant and the owner of Beacon Accounting Services in Palm City, Fla., interfered with the IRS’s ability to collect taxes owed by two clients by stealing payments from those clients intended for the IRS and making misrepresentations to the clients, as well as the IRS. Rizzuti also admitted to engaging in a criminal conspiracy to commit wire fraud by making material misrepresentations to individuals throughout the United States who believed the money they were investing with Rizzuti and his co-conspirators was funding Nigerian-related oil and Bahamian construction projects. Instead, Rizzuti and his co-conspirators used the investors’ money for their own personal expenses.

Insurance Agent Sentenced for Defrauding Seniors Out of Annuity Funds
On May 29, 2013, in Grand Rapids, Mich., William Edward Lowder, of Williamsburg, Mich., was sentenced to 60 months in prison and ordered to pay $1,567,908 in restitution for wire fraud and filing a false tax return. According to court documents, Lowder was a licensed insurance agent and annuities producer. Beginning in 2001, Lowder began defrauding several of his elderly clients by convincing them to liquidate existing annuity investments under the promise that the proceeds would be reinvested in annuities earning higher rates of return. After the clients liquidated their annuities, Lowder convinced them to provide the proceeds directly to him for reinvestment. Instead of reinvesting the proceeds, Lowder deposited the proceeds into his own bank account. To conceal his fraud, Lowder provided these clients with false statements of account. Between 2001 and 2009, Lowder stole in excess of one million dollars from his clients, which he used to fund his own comfortable lifestyle. Lowder admitted that he did not claim the amounts stolen from his clients as income on his U.S. individual income tax returns from 2006 to 2009.

Former Town Clerk Sentenced for Income Tax Evasion
On May 22, 2013, in Cheyenne, Wyo., Leslie Diane Zynda, of Marion, Iowa, was sentenced to 24 months in prison, three years of supervised release and ordered to pay $276,706 in restitution to the Town of Guernsey and $75,089 to the IRS. At her plea hearing on March 12, 2013, Zynda admitted to improperly taking money from the Town of Guernsey. According to information contained in the charging document, between April 15, 2006 through April 15, 2012, while Zynda was a resident of Guernsey, Wyoming, she attempted to evade and defeat a large part of income taxes due and owing by her and her spouse for the calendar years 2005 through 2011. For those tax years, she failed to report taxable income on their tax returns totaling $276,706.

Iowa Woman Sentenced for Tax Offenses
On May 17, 2013, in Davenport, Iowa, Regina Jimenez, of Clinton, Iowa, was sentenced to 21 months in prison, one year of supervised release and ordered to pay $332,465 in restitution for filing false tax returns. According to court documents, Jimenez operated AA Accounting & Tax Services, Inc. in Clinton, Iowa from 2007 through 2011. Jimenez used the business to facilitate the theft of over $300,000 from a client who believed that Jimenez would use the money to pay the client’s taxes. Jimenez instead used the money for gambling expenditures, and did not report the stolen funds on her tax returns.

Pennsylvania Lottery Winner Sentenced for Evading Taxes
On May 16, 2013, in Pittsburgh, Pa., Sherman W. Friend, of McClellandtown, Pa., was sentenced to 12 months and one day in prison and ordered to pay a $3,000 fine and $132,445 in restitution on his conviction of tax evasion. According to court documents, in December 2009, Fried purchased 208 lottery tickets and won $520,000. Instead of simply claiming his winnings, Friend used about 40 people, most of whom were unemployed and destitute, to present the winning tickets for payment. He accompanied them to the lottery stations and then paid most of them a fee of $250 per ticket. In 2009, Friend failed to claim $101,818 in income and owed $22,229 in taxes. In 2010, he failed to claim $378,779 in income and owed $110,216 in taxes.

Two California Men Sentenced for Orchestrating International Plot that Smuggled Rhinoceros Horns
On May 15, 2013, in Los Angeles, Calif., Vinh Chuong “Jimmy” Kha, of Garden Grove, was sentenced to 42 months in prison. Kha's son, Felix Kha, was sentenced to 46 months in prison. In addition, the Khas were ordered to pay more than $185,000 in tax fraud penalties to the IRS and $800,000 in restitution to the Multinational Species Conservation Fund, a fund managed by the U.S. Fish and Wildlife. The Khas each pleaded guilty in September 2012 to conspiracy, smuggling, wildlife trafficking in violation of the Lacey Act, money laundering and tax evasion. According to court documents, from January 2010 through February 2012, the Khas conspired with individuals throughout the United States to purchase white and black rhinoceros horns with the full knowledge that the animals were protected by federal law as endangered and threatened species. The horns acquired by the Khas during the course of their conspiracy had a market value of up to $2.5 million. In their plea agreements, both defendants admitted that they purchased the horns in order to export them overseas to be sold and made into libation cups or used for traditional medicine. They made at least one illegal payment to Vietnamese customs officials to ensure clearance of horn shipments to that country. In addition, they evaded income taxes owed in 2009 and 2010.

New Mexico Woman Sentenced for Evading Taxes
On May 14, 2013, in Albuquerque, N.M., Elizabeth D. Kupfer, of Rio Rancho, N.M., was sentenced to 36 months in prison, three years of supervised release and ordered to pay $288,339 in restitution to the IRS, jointly with her husband, Joseph C. Kupfer. On August 17, 2012, a jury convicted Elizabeth and Joseph Kupfer on three tax evasion charges. According to trial evidence, from 2004 through 2006, Joseph Kupfer made $1,304,421 in revenue from his business, Kupfer Consulting. The Kupfers reported only $502,541 on their federal tax returns and attempted to conceal the additional income by providing incomplete information to their tax preparer. Joseph Kupfer is awaiting sentencing.

California Man Sentenced for Swindling Investors
On May 14, 2013, in Trenton, N.J., Robert Schroy, of Placentia, Calif., was sentenced to 46 months in prison, three years of supervised release and ordered to pay $1,540,044 in restitution. Schroy pleaded guilty to one count each of wire fraud and tax evasion. According to documents, from 2004 through 2009, Schroy solicited people to invest in an alleged “international bank trade.”  Schroy and others falsely promised prospective investors extraordinary gains, ranging between 10 and 100 percent per week for a minimum period of 25 weeks, plus the return of their principal investment. Based on Schroy’s misrepresentations, numerous investors wired investment monies to accounts controlled by Schroy and others. Although the money was wired to the designated accounts, Schroy did not invest in any bank trade. Instead, he and other conspirators used it for personal expenditures. In total, Schroy admitted they misappropriated at least $1 million in investor money. In addition, Schroy failed to file a 2007 income tax return and failed to report $479,566 of taxable income.

Florida Woman Sentenced for Tax Fraud
On May 13, 2013, in Pensacola, Fla., Kandi Kay Holden, of Cantonment, was sentenced to 54 months in prison for wire fraud, filing a false tax return, and failing to file a federal income tax return. In addition, Holden was ordered to pay $370,026 in restitution to the victim company and $90,145 to the IRS. Holden pleaded guilty in November 2012 to charges that she embezzled funds from her employer and failed to report this money as income on her federal income tax returns.  Between November 2004 and January 2011, Holden was employed in the bookkeeping and accounting department of a Pensacola, Florida company. Holden used her position there to make unauthorized wire transfers of approximately $282,000 from the company’s bank account to various bank accounts that she controlled.

California Realtor Sentenced for Tax Evasion
On May 13, 2013, in San Jose, Calif., Cheryl Savage, of Monterey, Calif., was sentenced to 14 months in prison and ordered to pay $123,463 in restitution and a $10,000 fine. Savage pleaded guilty on September 12, 2012 to one count of tax evasion.  According to court documents, Savage was a realtor since 1981. She became a broker in 1988 when she opened Steinbeck ERA Realty, a real estate brokerage in Salinas, California. Savage describes herself as knowledgeable in 1031 Tax Deferred Exchanges. A 1031 Tax Deferred Exchange occurs when a taxpayer sells rental property and reinvests the sales proceeds in replacement rental property. In this way, a taxpayer can defer the recognition of capital gains tax until the replacement rental property is sold. In 2004, Savage sold two rental properties realizing $777,014 taxable gain. Savage used those sales proceeds to purchase her primary residence. In October 2005, she filed her 2004 federal income tax return falsely reporting that the proceeds from the sale of her rental properties were used to purchase a replacement rental property. Savage also falsely reported that she had received rental income from her primary residence. The rental payments Savage reported on Schedule E of her 2004 federal income tax return were actually from a tenant who leased another property owned by Savage.

Pennsylvania Woman Sentenced for Mail Fraud and Tax Evasion
On May 10, 2013, in Erie, Pa., Sandra Ann Prechtel, of St. Marys, Pa., was sentenced to 51 months in prison and ordered to pay $1,106,403 in restitution to Abbott Furnace Company and $428,595 to the IRS. Prechtel, an employee of the Abbott Furnace Company, pleaded guilty to mail fraud and tax evasion. According to court documents, Prechtel from the period between 2002 and April 2007, Prechtel engaged in a scheme to defraud the company and embezzled and spent more than $1,106,403 of company money. Prechtel prepared bi-weekly payroll reports reflecting the deductions and pay of employees of the company, but direct deposited or wrote thousands of dollars in additional payroll checks to herself that were not reflected on the company payroll reports. She managed the payroll deductions that would be credited to employee credit union savings accounts and inflated the amount of company funds to be deposited into her own credit union account without regularly deducting those amounts from her pay. She also utilized company funds to pay off more than $570,000 in personal credit card balances for her personal expenditures. She prepared false W-2 wage forms for herself, understating her income from the company and manipulated the company's bank and checking account records. Prechtel concealed these transactions by not properly documenting, or by altering, the company's books, records and accounting system. In addition, Prechtel willfully evaded the payment of income taxes by failing to report as income the money she stole for calendar years 2004, 2005 and 2006.

Former Pilot Sentenced in Tax Fraud Scheme   
On May 8, 2013, in Atlanta, Ga., Charlie Shivers, III, a former pilot, was sentenced to 84 months in prison, three years of supervised release and ordered to pay $5,630,681 in restitution to the United States Treasury. Shivers pleaded guilty on August 9, 2012 to two counts of filing false claims against the United States.  According to court documents, from 2009 through 2012, Shivers filed, or caused to be filed, over 100 fraudulent corporate tax returns, claiming $35 million in refunds for fuel taxes falsely claimed to have been paid on fuel purchased for off-road company vehicles. The false claims were made in the names of corporations and shell companies, none of which used off-road vehicles or paid the fuel tax claimed for refund.   

Texas Man Sentenced for Mail Fraud, Money Laundering and Tax Evasion
On May 3, 2013, in Minneapolis, Minn., Clayton Craig Hogeland, of Aurora, Texas, was sentenced 200 months in prison. Hogeland was convicted on December 6, 2011 on mail fraud, conspiracy to commit mail fraud, conspiracy to commit money laundering and tax evasion. According to trial evidence, from January 2003 through April 2005, Hogeland conspired with Jeffrey Cole Bennett and others to defraud a freight transportation logistics provider where Hogeland served as general manager. Bennett submitted fraudulent invoices which Hogeland approved for payment to shell companies formed by Bennett. Bennett paid about $140,000 in kickbacks to Hogeland. In addition, Hogeland orchestrated a second scheme to run false “commission” payments through fictitious companies formed by Carl Frey and William Gregory Braswell. As a result, between 2003 and 2005, Hogeland received $22,000 in the form of kickbacks from Frey. Between 2005 and 2006, Hogeland received $30,000 in the form of kickbacks from Braswell. Hogeland and his wife failed to report to the IRS the money obtained through the two fraud schemes. On November 13, 2012, Bennett was sentenced to 95 months in prison. In February 2012, Braswell and Frey were each sentenced to three years of probation. On January 10, 2013, Jennifer Hogeland was sentenced to 15 months in prison on three counts of conspiracy to commit tax evasion.

Principals of California Bay Area Internet Services Company Sentenced
On May 2, 2013, in San Francisco, Calif., Roy Lin and John Lin were sentenced to 30 months and 20 months in prison, respectively, and three years supervised release for their roles in operating a fraudulent billing scheme to place charges on customers’ telephone bills. Roy Lin pleaded guilty on December 11, 2012, to one count of mail fraud and one count of money laundering. His brother, John Lin, pleaded guilty on December 11, 2012, to one count of mail fraud. According to the plea agreements, the Lins admitted to running INC21.com Corporation (INC21), including its affiliates GlobalYP, JumPage Solutions, and GoFaxer. INC21 provided Internet-based services and charged consumers for the services on the consumers’ local telephone bills, among other methods. The Lin brothers fraudulently obtained access to bill for services on the consumers’ telephone bills by making false representations on applications.  These applications were submitted to telephone companies in order to be approved to bill consumers. INC21 and its affiliates collected revenues of between $2,500,000 and $7,000,000 from more than 250 victims.

Former Real Estate Broker and Former Police Captain Sentenced in Multi-Million Dollar Fraud
On April 30, 2013, in Eugene, Ore., Tamara (Tami) Sawyer and Kevin Sawyer, of Bend, Ore., were sentenced for their roles in an investment fraud scheme that cost investors almost $6 million. Tami Sawyer, a former real estate broker, was sentenced to 108 months in prison for conspiracy, wire fraud, bank fraud, making false statements to financial institutions, and money laundering. Kevin Sawyer, a former Bend Police Captain, was sentenced to 27 months for making false statements to financial institutions. In addition, the Sawyers were ordered to pay $5,820,307 in restitution to the victims of the fraud and serve five years of supervised release. According to court records, the defendants ran a fraudulent real estate investment scheme through their company Starboard LLC. They enticed investors by falsely promising high rates of return, typically 12 percent, and secured the investments with promissory notes. Rather than investing the money as promised, the defendants used it to pay other investors, to fund their other companies and ventures, and to pay personal expenses, including cars, credit cards, and the construction of their $2 million vacation home in Mexico.

North Carolina Attorney Sentenced for False Tax Return
On April 24, 2013, in Asheville, N.C., Don Samuel Neill was sentenced to 36 months in prison, one year of supervised release and ordered to pay $492,665 in restitution to the IRS.  Neill previously pleaded guilty to one count of filing a false tax return.  According to court documents, Neill engaged in a scheme to embezzle funds from his law firm’s trust account. During the course of his law practice, Neill served as attorney for various trusts established by his clients. In this capacity, Neill had a duty to receive funds from the clients individually and from the various trusts and pay those funds as directed. However, Neill diverted funds from the trust accounts to his own personal accounts ignoring his clients’ directives. Neill did not report the majority of the embezzled income on his tax return. As a result, Neill understated the taxable income on his joint tax return for calendar year 2008 by approximately $857,632.  

Former Ohio Man Sentenced for Filing False Tax Returns
On April 22, 2013, in Cleveland, Ohio, John C. Hartman, formerly of Kirtland, Ohio, was sentenced to 27 months in prison and one year of supervised release. Hartman pleaded guilty on December 3, 2012, to two counts of filing false tax returns for the years 2005 and 2006. According to court documents, Hartman’s tax returns omitted more than $360,000 in income obtained from relatives that he defrauded. Hartman solicited the money from family members under the guise that he was going to invest their money in various investments such as stock, raw materials and real property. He never invested these funds. Instead, Hartman used these funds to pay for personal expenses. Hartman also obtained money, under the guise of loans, by telling his friends and family members that he needed funds to pay for outstanding tax obligations, a bad stock investment and medical expenses for his sick wife. Hartman had no such delinquent tax obligations or bad stock investments and his wife did not have the serious medical condition that Hartman described. Hartman had no intention to repay any of the funds. The unreported income from fraud for 2005 and 2006 was $230,000 and $136,500, respectively. The tax loss for 2005 and 2006 was $65,797 and $17,963, respectively.

Man Sentenced for False Claim Conspiracy and Lying in Federal Investigation
On April 18, 2013, in Orlando, Fla., Jonathan Paul Jimenez was sentenced to 120 months in prison, three years of supervised release and ordered to pay $5,587 in restitution to the IRS. Jimenez pleaded guilty on August 28, 2012 to making a false statement to a federal agency in a matter involving international terrorism and conspiring to defraud the IRS. According to court documents, in November 2010, Jimenez relocated from New York to Central Florida, where he began training with Marcus Dwayne Robertson in the skills necessary to participate in violent jihad overseas.  In order to have funds available for him when he was overseas, Jimenez and others conspired to submit a false 2010 tax return for Jimenez, in which Jimenez falsely claimed three children as his dependents and falsely represented that he lived with each of the three children for all of the year 2010.  As a result of those false representations, Jimenez obtained a refund from the IRS in the amount of $5,587. On March 14, 2012, Robertson was indicted for conspiracy to defraud the IRS and is awaiting a trial.   

Louisiana Woman Sentenced for Tax Evasion and Wire Fraud
On April 17, 2013, in New Orleans, La., Melody Huie, of Mandeville, La., was sentenced to 18 months in prison and three years of supervised release, the first six months of which will be served in home confinement. Huie was also ordered to pay full restitution plus an additional $446,983 to the IRS. Huie previously pleaded guilty to wire fraud and tax evasion. According to court documents, Huie was employed by a transportation company in New Orleans where she served as a general manager for accounting. Huie was responsible for overseeing the company’s finances and accounts and was one of three individuals at the company who was authorized to conduct wire transfers from the company’s bank accounts.  As part of its security protocol, after one of the three authorized individuals initiated a transfer, the bank called one of the other employees to verify the legitimacy of the transfer. When Huie wanted to steal money from her employer, she would call the bank’s customer service department and direct them to transfer money to a separate bank account under her control.  When initiating a wire transfer by phone, Huie had to identify herself, specify the account from which to withdraw the money and provide a password created by the bank. When the bank called to verify Huie’s transfers, Huie would answer the other phone and fraudulently identify herself as the second individual authorized to conduct wire transfers. Huie knew where this individual stored his/her password and security information, which Huie provided to the bank to verify the unauthorized wire transfer. To further disguise her actions, Huie added fictitious reference notes such as “Fund Redemption,” “401K Distribution” or “Consulting Fee” to the transfer or used variations of the name holder on the account where she sent the money to make the transfers appear legitimate. Huie stole money in this manner at least 114 times between November 2006 and September 2011, totaling $1,370,814. Huie then failed to report the money she stole as taxable income on her tax returns. As a result, between the 2006 and 2011 tax years, Huie failed to pay approximately $446,983 in income tax.

Executive of West Virginia Non-Profit Organization Sentenced for Tax Fraud
On April 16, 2013, in Charleston, W.Va., Deborah S. Starks, of Cross Lanes, W.Va., was sentenced to 21 months and ordered to pay $306,872 in restitution to the non-profit organization and $128,626 to the IRS. According to court documents, Starks, a former executive director of a Charleston-based non-profit organization, filed a false tax return in connection with an embezzlement scheme that drained more than $300,000 from the organization. Starks was the treasurer of the organization at the time of the scheme. As treasurer, Starks was in charge of revenue and expenses for the organization and maintained the organization’s bank accounts. Beginning in or about 2005 and continuing until 2010, Starks embezzled approximately $306,000 from the organization. She also admitted additional unreported taxable income of approximately $200,000. The embezzled funds were used primarily to support Starks’ personal gambling activities. In addition to the embezzlement scheme, Starks prepared, signed and filed a joint U.S. Individual Income Tax Return for each of the calendar years 2005 through 2010 and did not report the embezzled funds as income.


New York Man Sentenced in Bid Rigging Conspiracy
On April 11, 2013, in New York, N.Y., Zevi Wolmark, aka Stewart Wolmark, was sentenced to 18 months in prison and ordered to pay a $500,000 fine. In January 2012, Wolmark pleaded guilty to conspiring to defraud municipal issuers, the United States and the Internal Revenue Service; conspiring to allocate and rig bids for investment agreements or other municipal finance contracts; and wire fraud. According to court document, Wolmark was the chief financial officer and a managing director of Rubin/Chambers, Dunhill Insurance Services, Inc. (CDR), which marketed financial products and services, including services as a broker or advisor to various municipalities throughout the United States. Municipal bond issuers often hire third party brokers, such as CDR, to act as their agents in conducting a bona fide competitive bidding process and complying with the relevant Treasury regulations. Wolmark and his co-conspirators, however, engaged in a number of activities that helped to rig bids. As an example, CDR received kickbacks in the form of fees that were inflated or unearned, in exchange for CDR’s assistance in controlling the bidding process and for ensuing that certain co-conspirator providers won the bids they were allocated. These fees were not disclosed to the municipalities that hired CDC or to the IRS.

South Carolina Husband and Wife Sentenced for Filing False Tax Returns
On April 11, 2013, in Spartanburg, S.C., Julie Greene Tucker, of Greer, was sentenced to 33 months in prison and three years of supervised release. Tucker’s husband, James Dean Tucker, was sentenced to eight months of house arrest and five years of probation. The Tuckers were ordered to pay $191,049 restitution to IRS. Julie Tucker was ordered to pay an additional $590,128 as restitution to her former employer. In November 2012, James and Julie Tucker pleaded guilty to a criminal bill of information charging them with two counts of filing false tax returns. In addition, Julie Tucker pleaded guilty to one count of wire fraud. According to court documents, from about 1996 through about July 2011, Julie Tucker was employed at a freight audit business, located in Greenville, S.C. Julie Tucker had access to her employer’s bank accounts and had the authority to write checks and initiate wire transfers from these accounts. Beginning in or about 2010 and continuing until her resignation in July 2011, Julie Tucker embezzled money from her employer’s bank accounts. Additionally, the couple failed to include taxable income derived from Julie Tucker’s embezzlement scheme in their joint tax 2010 and 2011 tax returns.

Kansas Man Sentenced for Tax Evasion
On April 8, 2013, in Kansas City, Kansas, Gregory S. Light, of Louisburg, Kansas, was sentenced to 12 months house arrest and five years of probation. Light pleaded guilty on December 17, 2012 to tax evasion. According to court documents, Light was a lieutenant colonel in the Kansas Army National Guard and deployed to Iraq. After his deployment ended, Light returned to Iraq to work as a subcontractor with his own company, Lighthouse Consulting. One contractor wired him a monthly salary and another paid him in cash. Light reported on his tax returns only the salary that was wired to him. With the cash compensation, he bought postal money orders to bring back to the United States when he returned approximately once every three months. He stored the money orders in a safe deposit box and cashed them a little at a time so the bank would not file a report on the financial transaction. In total, Light failed to report $313,781 in income and failed to pay $81,886 he owed in income taxes.

Former Social Security Administration Executive Sentenced for Embezzlement and Tax Evasion  
On April 3, 2013, in Baltimore, Md., Salvatore Petti, of Ellicott City, Md., was sentenced to 15 months in prison and three years of supervised release. Petti was also ordered to forfeit approximately $83,000 and pay $570,493 in restitution. In November 2012, Petti pleaded guilty to evading payment of taxes on income earned from a Social Security Administration (SSA) employee association and embezzling funds from the association. According to court documents, Petti worked for the SSA for more than 40 years, retiring in 1995 as a District Director. He also served as the treasurer for the Employees Activities Association (EAA) of the SSA. Between 2005 and 2008, Petti earned an annual salary from the EAA of approximately $60,000. By February 2009, Petti had not reported to the IRS any EAA income from at least 1998 through 2009. In February 2010 auditors told Petti that his EAA income would be reported to the IRS.  The next month, Petti filed amended tax returns for the years 2006 through 2009 to report his EAA salary however, he also included false expenses to offset the income. Additionally, Petti had embezzled substantial funds from the EAA. Petti did not report $416,134 of additional, unauthorized income on either his original tax returns for years 2005 through 2009, nor on his amended tax returns in 2006 through 2009.

Virginia Nurse Sentenced for Tax Fraud
On April 1, 2013, in Norfolk, Va., Jeffrey Charles, of Grimstead, Va., was sentenced to 46 months in prison and ordered to pay over $300,000 in restitution to the IRS. On November 6, 2012, Charles was convicted of one count of conspiracy, three counts of aiding and assisting in the preparation of false tax returns, and one count of filing a false tax return. According to the evidence presented at trial, Charles, a registered nurse and the administrator of a rehabilitation center, conspired with his daughter and son-in-law to impair and impede the IRS in ascertaining, computing, assessing and collecting federal income taxes. The evidence also proved that Charles aided and assisted in the preparation of three false tax returns in his daughter’s name for tax years 2000, 2001 and 2005, and attached false documents to each tax return. Finally, the evidence at trial established that Charles filed a false tax return in his own name for tax year 2006 in which he allegedly falsely reported earning no income. Charles joined American Rights Litigators (ARL), a Florida-based organization, and paid ARL to send fraudulent documents to the IRS on his behalf and on behalf of his daughter. In a separate but related case, Charles’s daughter and son-in-law, Kathryn Miles and John Miles, each pleaded guilty to conspiracy. In July 2011, Kathryn was sentenced to 20 months in prison and John was sentenced to 30 months in prison.

Idaho Home Builder Sentenced for Tax Evasion
On March 28, 2013, in Boise, Idaho, Justin D. Schoenauer, aka Corey J. Schoenauer, a resident of Twin Falls County, Idaho, was sentenced to 27 months in prison, three years of supervised release and ordered to pay $429,436 in restitution. Schoenauer was indicted in February 2012 and pleaded guilty on October 30, 2012 to income tax evasion. According to court documents, Schoenauer was a general contractor who, operated a sole proprietorship called Patagonia Construction, a business engaged primarily in building homes. Schoenauer admitted that during tax years 2005 through 2008, he concealed Patagonia’s business receipts. Schoenauer directed some customers to make checks payable to him personally, rather than to Patagonia, then ensured that those checks were not deposited into Patagonia’s main bank account. Schoenauer falsely told his return preparer that all of his business receipts were deposited into the main Patagonia bank account, thereby concealing Patagonia’s gross receipts and causing the preparation and filing of false tax returns.

Alaska Couple Sentenced for Defrauding Trust Account of Adopted Child and Filing a False Tax Return  
On March 27, 2013, in Anchorage, Alaska, Lori Wiley-Drones and Edward Drones were each sentenced to 46 months in prison, three years of supervised release and ordered to pay $829,417 in restitution to the victim. Both were sentenced on five counts of wire fraud and one count of filing a false income tax return. According to court records, in 1996 the Drones became foster parents to a child who had experienced abuse. The Drones later adopted this child and then filed a lawsuit on his behalf charging the State of Alaska with failure to protect. The lawsuit resulted in establishment of a trust fund of over $830,000 for the child. In March 2009, the Drones began arranging the removal of the professional conservator in favor of Edward Drones. When Edward Drones assumed control of the child’s trust fund in December 2009, he assured the state court that he understood his obligation to keep the child’s property separate from his own and never to use the child’s property for his own benefit. However, upon gaining control of the trust account, Edward Drones immediately shared this control with his wife. The defendants admitted that over the next ten months, they spent virtually all of the trust money. In one instance, Lori Wiley-Drones bought and renovated a house in Washington with the child’s trust money. The Drones used over $125,000 to pay credit card bills, $67,088 to purchase cars, and $38,000 to purchase jewelry. By December 2010, only $15.05 remained in the child’s trust account. The Drones filed a false income tax return by failing to report as income any of the more than $700,000 in misappropriated funds.

Federal Inmate Sentenced for Filing False Tax Returns
On March 27, 2013, in Montgomery, Ala., David Marrero was sentenced to 46 months in prison for committing tax fraud while serving time in a federal prison. Marrero pleaded guilty in December 2012 to filing false claims. According to court documents, while serving a federal sentence in Montgomery County, Ala., Marrero began sending various false documents to the IRS and to the federal judge who had presided over his case in Florida. Marrero sent fake money orders and false tax returns making claims for refunds, including one tax return claiming a $2,719,438 refund. Marrero used false IRS Forms 1099-OID to fraudulently claim that various companies withheld a substantial amount of federal taxes from him when, in fact, the companies had withheld nothing. Marrero also used financial documents he had obtained from other people, without their knowledge or consent, as supporting documentation for his fraudulent claims.

Michigan Cinemas Owner Sentenced for Tax Evasion
On March 26, 2013, in Grand Rapids, Mich., Elaine Dawson, of Bellaire, Mich., was sentenced to 12 months in prison, one year of supervised release and ordered to pay $988,366 in restitution to the IRS. Dawson pleaded guilty on October 10, 2012 to an Information charging her with tax evasion. According to court records, Dawson willfully evaded nearly a million dollars in corporate and personal income taxes between 2004 and 2010. Dawson owned five cinemas in Michigan. She routinely under-reported the number of patrons who bought movie tickets and under-reported her receipts from sales of concessions, gift certificates and other items. Dawson skimmed the cash from the unreported sales for personal use. She disclosed only the remaining sales as income when preparing her tax returns.

Alaska Man Sentenced for Investment Fraud Scheme
On March 22, 2013, Anchorage, Alaska, Donald Lee Smith was sentenced to 37 months in prison, three years of supervised release and ordered to pay $316,150 in restitution. Smith pleaded guilty on August 6, 2012 to one count of wire fraud and one count of money laundering in connection with an investment fraud scheme. According to court documents, Smith obtained over $300,000 from victims by making intentionally false representations about investment opportunities. Smith obtained the funds from his investors and lenders without telling them that he was using a substantial portion of their money to gamble in casinos rather than invest in properties.

North Carolina Tobacco Broker Sentenced
On March 21, 2013, in Raleigh, N.C., Jesse Ray “Tommy” Faulkner, II, was sentenced to 66 months in prison, three years of supervised release and ordered to pay $13,261,662 in restitution. On December 10, 2012, Faulkner pleaded guilty to conspiring to make false statements, making material false statements, committing mail and wire fraud, structuring financial transactions and conspiracy to commit money laundering.  According to court documents, Faulkner was an agent for a cigarette manufacturer, and operated as an independent tobacco broker. Faulkner also operated independent tobacco receiving stations in Wilson, N.C. Through his tobacco receiving stations, Faulkner bought and sold tobacco from farmers with cash or in nominee names to facilitate the farmers in hiding their production. The conspiring farmers would not report the sales of the “hidden” tobacco in connection with their federal crop insurance claims, thereby being paid for losses they did not suffer. Faulkner then resold the “hidden” tobacco to the cigarette manufacturer. During the course of the conspiracy, Faulkner sold or caused to be sold $5,181,816 worth of “hidden” flue-cured tobacco and $8,097,429 worth of “hidden” burley tobacco.

Connecticut Man Sentenced for Filing a False Tax Return
On March 21, 2013, in Bridgeport, Conn., Philip Ney, of Northfold, was sentenced to 18 months in prison and one year of supervised release. In addition, Ney has agreed to pay $192,671 in back taxes, plus penalties and interest, for the 2004 through 2008 tax years. On November 26, 2012, Ney pleaded guilty to one count of filing a false federal income tax return. According to court documents, Ney owns and operates Empire Restoration Company in Northford, which provides residential and commercial roofing services, as well as snow plowing services. For the 2004 through 2008 tax years, Ney failed to report on his tax returns a total of $640,581 in income that had been deposited into his savings accounts.

Indiana Man Sentenced for Role in Ponzi Scheme
On March 20, 2013, in Cincinnati, Ohio, Jerry A. Smith, of Brookville, Ind., was sentenced to 65 months in prison and ordered to pay $5,406,950 in restitution to victims and $72,412 to the IRS. In addition, Smith was ordered to forfeit $5,000,000. On June 12, 2012, Smith pleaded guilty to three counts of a four-count Bill of Information charging him and his co-conspirator, Jason Snelling, with running a multi-million dollar Ponzi scheme. According to court documents, Smith admitted that he engaged in a mail and wire fraud conspiracy in connection with a scheme to defraud investors in CityFund and Dunhill, two bogus “day trading” entities that were nothing more than bank accounts where investors’ funds were deposited and then spent by Snelling and Smith. The men used funds solicited from later investors to make payments to earlier investors. Smith also admitted that he engaged in obstruction by creating fictitious trading statements and providing them to federal agents to impede the investigation and cover up the fraud. Finally, Smith admitted that he committed tax evasion by failing to report the embezzled investor funds as income on his tax returns for the tax year 2008 and additional tax years. During the course of this fraudulent scheme, Smith used investors’ money to pay for his expensive rural Indiana home, to buy a boat and jet skis, and to operate his insurance business. Snelling was sentenced on October 23, 2012 to 131 months in prison.

Three Family Members Sentenced for Stealing $3 Million from Armored Truck
On March 20, 2013, in Portland, Ore., Archie Cabello was sentenced to 240 months in prison for his role in stealing $3 million from an Oregon Armored Services armored truck he was driving on December 6, 2005. Cabello pleaded guilty to conspiracy to commit bank larceny, possession of stolen bank funds, making false statements on credit applications, making and subscribing to a false income tax return and money laundering. Also sentenced were Cabello’s wife, Marian Cabello and his son Vincent Cabello, each to 15 months in prison for their roles in the armored truck theft scheme. Marian and Vincent Cabello both pleaded guilty to conspiracy to commit bank fraud and conspiracy to commit money laundering. The three were ordered to pay $3,755,000 in restitution to the victims of the theft. In early 2005, Archie Cabello took a position with Oregon Armored Services as a driver of an armored truck. On December 6, 2005, over seven million dollars in currency was on the armored truck, including two shrink-wrapped bricks containing $1.5 million each in hundred dollar bills. Archie Cabello drove the armored truck to a prearranged location and provided Vincent Cabello with access to the back of the truck. Vincent Cabello took the two shrink-wrapped bricks containing a total of $3 million. Archie Cabello then drove the armored truck several blocks away, handcuffed himself to the door, and flagged down a citizen to call the police. Meanwhile, Vincent Cabello drove the stolen money to a privately-owned safe deposit box company in Bellevue, Washington that Archie Cabello had rented. Since December 2005, the Cabellos spent about $1,000,000 of the stolen funds. Archie Cabello failed to report his $1.5 million share of the stolen funds on his 2005 income tax return resulting in additional taxes of over $500,000 owed to the IRS.

Former Bookkeeper of Real Estate Investment Company Sentenced
On March 20, 2013, in Oakland, Calif., Kristie Gale Meyer was sentenced to 41 months in prison, three years of supervised release and ordered to forfeit $2,013,149. In addition, Meyer was ordered to pay $1,332,329 in restitution to victims and $584,092 to the IRS. Meyer pleaded guilty on November 21, 2012, to mail fraud and tax evasion. According to the plea agreement, Meyer admitted to engaging in a multi-year scheme to defraud her employer, Ansil Realty & Investment Co. and its partner, KLP Properties, Inc. Meyer worked as Ansil’s secretary, office manager, and bookkeeper. She stole money by several means, including paying her credit card bills with checks drawn on the companies’ bank accounts and using those funds for her personal benefit. She also took cash advances and made payments to online gambling web sites. Meyer wrote checks drawn on the companies’ bank accounts and made deposits directly into her personal bank account. Meyer took steps to conceal her fraud by making false accounting entries in the companies’ accounting system to make her fraudulent transactions appear to be legitimate business expenditures, and by destroying copies of the fraudulent checks. For the tax years 2006, 2007 and 2008, Meyer willfully attempted to evade a large part of the income tax due and owing by filing false returns.

Disbarred New Jersey Attorney Sentenced for Tax Evasion
On March 20, 2013, in Camden, N.J., Joseph Gallagher, of Rutherford, N.J., was sentenced to 36 months in prison, two years of supervised release and ordered to pay a $60,000 fine. He was ordered to pay his more than $1 million in outstanding taxes to the IRS, plus interest and penalties. Gallagher, a tax preparer and disbarred New Jersey lawyer, pleaded guilty to one count of tax evasion. According to court documents and statements made in court, for at least five years, Gallagher used a consulting company, purportedly operated by another person, to evade income taxes by having his income from working as a tax preparer deposited into the company’s bank account.  For calendar years 2004 through 2008, Gallagher failed to report $3,359,182 in taxable income to the IRS.

New Jersey Man Sentenced for Conspiring to Defraud Investors
On March 20, 2013, in Newark, N.J., Joseph Suarez, of Woodcliff Lake, N.J., was sentenced to 54 months in prison and two years of supervised release. Restitution will be determined at a later date. Suarez, the former operator of Suarez Investment and Development LLC, pleaded guilty to one count of conspiracy to commit wire fraud. According to court documents and statements made in court, Suarez conspired with others, including Katherine Ferro, a disbarred attorney, to induce their victims to invest a total of $1 million into various fraudulent schemes. Suarez convinced an individual to invest more than $300,000 in connection with certain business ventures, including a credit card factoring scheme. Credit card factoring is a form of accounts receivable where businesses can receive cash in advance of future credit card receipts. Suarez and Ferro convinced an individual to invest approximately $222,000 in a plan to purchase D2 diesel fuel from foreign sources and resell the fuel at a profit. Contrary to the representations Suarez and Ferro made regarding how the funds would be used, nearly all of the $222,000 wired into Ferro’s attorney trust account was depleted by transferring large amounts into other accounts for their personal use. In addition, Suarez and Ferro used false representations to convince additional victims to invest approximately $500,000 in the D2 diesel fuel purchase and sale plan. Ferro executed a written escrow agreement with several of these additional victims, which stated, among other things, that the investment would remain in Ferro’s attorney trust account for the duration of the investment period. Days after the victims wired the $500,000 investment into accounts controlled by Suarez and Ferro, Ferro transferred substantially all of the funds into other accounts. Ferro pleaded guilty in March 2012 to wire fraud and awaits sentencing.

Former Fugitive Sentenced on Conspiracy to Defraud the IRS
On March 19, 2013, in Miami, Fla., Domingos Trofino was sentenced to 14 months in prison and ordered to pay $625,326 in restitution.  Trofino was charged with conspiracy to defraud the IRS in a superseding indictment filed on October 13, 2000.  He was extradited from Italy on August 10, 2012, and was detained pending trial since that time. According to court documents, during 1989, Trofino formed Compubras Export and Import Corporation (Compubras) in Miami, Fla. Compubras manufactured and sold electronics and computer hardware to customers in South Florida, Paraguay and Uruguay. As part of its business operations, Compubras maintained a dual set of records.  One set of records accurately reflected its business activities.  The second set of records was created to understate its actual income in an attempt to support a multi-year scheme to evade the payment of federal income taxes.  

Illinois Man Sentenced for Filing False Tax Returns
On March 19, 2013, in Chicago, Ill., Zalfiqar Alvi, of Justice, Ill., was sentenced to 12 months and one day in prison, one year of supervised release and ordered to pay $164,503 in restitution to the IRS and $3,966,303 to the Illinois Department of Revenue. According to court documents, between March 2010 and December 2011, Alvi and a co-defendant purchased approximately 158,409 cartons of cigarettes that did not have the applicable state or local tax stamps, making them contraband. The men paid approximately $3,966,303 for the cigarettes. Alvi did not pay the applicable state or local taxes on these cigarettes, instead, he placed counterfeit tax stamps on them and resold them for a profit. About February 15, 2011, Alvi filed a federal income tax return that stated his income for 2010 was $34,467, when, in fact, his income substantially exceeded that amount because of his contraband cigarette transactions. It was believed his net income from selling contraband cigarettes was about $269,358 and he would have owed the IRS an additional $97,188 in taxes. Alvi’s income tax for tax year 2011 also failed to show the net income for selling contraband cigarettes for that year, which was estimated to be about $200,829 and would require Alvi to pay an additional $67,325 in taxes.

Arizona Man Sentenced on Tax Charge
On March 18, 2013, in Phoenix, Ariz., Richard Paul Belles was sentenced to 12 months and one day in prison, one year of supervised release and ordered to pay $141,115 in restitution to the IRS. Belles pleaded guilty on October 15, 2012 to an Information charging him with fraud and false statements. According to the plea agreement, in April 2009 Belles submitted a 2008 tax return falsely reporting that the federal government had already withheld $513,000 in federal income tax. This resulted in a requested tax refund of $363,831. Belles used a Form 1099-OID falsely claiming to have earned income on an investment that in realty was a mortgage that he owed. Belles admitted he electronically signed the IRS Form subject to penalties and perjury, and knew it was unlawful to request a refund he was not entitled to receive.  

Connecticut Man Sentenced for Tax Evasion Scheme
On March 18, 2013, in Hartford, Conn., Douglas Cartelli, aka Douglas Martin, of Killingworth, Conn., was sentenced to 40 months in prison and three years of supervised release. In addition, Cartelli was ordered to cooperate with IRS to resolve his outstanding tax liability. On March 21, 2011, Cartelli pleaded guilty to three counts of tax evasion. According to court documents, since 1992, Cartelli owned and operated several Connecticut-based concrete companies. As part of a scheme to avoid withholding and paying employee taxes, Cartelli routinely characterized his employees as “independent contractors.” Cartelli used a convenience store that provided him with cash so he, in turn, could pay his employees in cash. The store owner was reimbursed by checks from Cartelli’s business checking accounts. Over the course of several years, Cartelli attempted to thwart investigators and evade paying taxes and penalties by twice changing the name of his business and falsely representing to the IRS that he no longer owned the businesses, by writing business checks to his wife or to cash, and by using business checks to pay for numerous personal expenses, including credit card bills, personal real estate taxes and high-end renovations of his home. Cartelli also failed to file personal income tax returns for the 2004 through 2007 tax years, during which he had total taxable income of approximately $959,936.

Pennsylvania Man Sentenced for Tax Evasion
On March 18, 2013, in Pittsburgh, Pa., Terrance L. Szymanski was sentenced to 70 months in prison, three years of supervised release and ordered to pay a $6,000 fine.  Szymanski pleaded guilty to five counts of tax evasion.  According to court documents, Szymanski operated a number of businesses in the names of others in order to evade both the payment and assessment of federal income tax.  

New Jersey Man Sentenced in Investment Fraud Scheme
On March 15, 2013, in Trenton, N.J., Brian McCahery, of Bradley Beach, N.J., was sentenced to 71 months in prison, three years of supervised release and ordered to pay $1.19 million in restitution to 16 victims, as well as forfeit $63,000.  McCahery pleaded guilty to an Information charging him with engaging in a monetary transaction in excess of $10,000, using proceeds from wire fraud. According to court documents and statements made in court, McCahery was an employee of a “day trading” company which provided computer terminals, capital and other business services to day traders. From January 9, 2009 through March 14, 2011, McCahery used the name of the day-trading company to promise a high rate of return on initial investments. He promised the investments would be used to purchase short-term equity funds and, in some instances, Initial Public Offerings. The investors provided him funds directly by wire, check, or cash, which were deposited in bank accounts in the name of McCahery or his spouse. McCahery used most of these funds for personal expenditures or to pay “lulling” payments to the victims to extend the life of the scheme. McCahery modified a software program he obtained at the company to allow investors to log on and check the balance of their purported investment accounts. There, they would see false figures indicating their money had been invested in a particular account and was increasing in value.

Former Project Engineer Sentenced for Multi-Million Dollar Bribery, Kickback Scheme
On March 12, 2013, in Newark, N.J., John Alfy Salama Markus, of Nazareth, Pa., was sentenced to 156 months in prison, three years of supervised release and fined $75,000.  Markus, an Egyptian-born U.S. citizen, previously pleaded guilty to three counts of a 54-count indictment charging him with wire fraud, conspiracy to commit bribery and defraud the U.S. government, money laundering and tax offenses.  According to court documents, Markus, a former U.S. Army Corps of Engineers (USACE) Project Engineer, was deployed to Tikrit, Iraq, during Operation Iraqi Freedom. From July 2007 to June 2008, Markus accepted at least $3.7 million in bribes and kickbacks in connection with more than $50 million in USACE contracts awarded to foreign companies in the Gulf Region North Iraq. Markus was also ordered to cooperate with the IRS concerning the payment of taxes and penalties. Markus agreed to the entry of a forfeiture money judgment of at least $3.7 million, a portion of which will be satisfied by his forfeiture of his residence, five vehicles and two motorcycles.  

Former Financial Advisor Sentenced for Embezzlement
On March 8, 2013, in Tallahassee, Fla., James Ryan Lanier was sentenced to 106 months in prison and ordered to pay $887,931 in restitution.  In November 2012, Lanier pleaded guilty to 13 counts of wire fraud, three counts of mail fraud, four counts of money laundering and two counts of aggravated identity theft. According to court documents, between 2008 and 2010, Lanier used his position as a financial advisor to funnel approximately $887,931 in client funds to his own personal bank accounts. Lanier was able to wire transfer client funds to bank accounts he controlled by using forged client authorization letters and falsely claiming that his clients had verbally approved the transfers. Lanier used the embezzled client funds to make loan payments, and to purchase vehicles, an interest in a cellular telecommunications business and a condominium.

Washington Man Sentenced for Money Laundering Conspiracy, Tax Fraud and Other Charges
On March 8, 2013, in Seattle, Wash., Chang Young Kim, of Milton, Wash., was sentenced to 72 months in prison, five years of supervised release, and ordered to pay $112,050 in restitution and over $1.6 million in back taxes and penalties to the IRS.  Kim pleaded guilty in November 2012 to conspiracy to transport individuals for prostitution, conspiracy to engage in money laundering, bribery of a public official and tax evasion. According to court documents, during 2010 and 2011, Kim owned the Blue Moon and used ‘madam’ Miyoung Roberts to recruit and manage more than two dozen “bar girls" and arranged their transportation from Korea to the United States. Kim and his co-defendants arranged apartments for the women to live in and supervised some of the women’s prostitution activities. In addition, Kim convinced two clients of his real estate company, Royal Realty, to invest $400,000 in the purchase of a motel. However, there was no deal to purchase the property. Kim and two co-conspirators used the money for their own expenses.  Finally, Kim attempted to evade more than $1.6 million in income taxes by failing to report income and by putting assets in other people’s names.

Ohio CPA Sentenced for Filing a False Income Tax Return
On March 7, 2013, in Columbus, Ohio, Harry H. Jones, formerly of Reynoldsburg, Ohio, was sentenced to 12 months and one day in prison and one year of supervised release. Jones pleaded guilty on August 9, 2012 to filing a false federal income tax return. According to court documents, Jones, a certified public accountant, filed a false federal income tax return for 1997 with the IRS, listing his income for that year as $14,153, when the actual amount was higher. Jones performed bookkeeping services for a firm and retained $268,252 in gross profit for his services. In addition, Jones received the amount of $282,671 for factoring gross receipts for another company. Therefore, the total amount of income Jones failed to report on his 1997 federal income tax return was $550,923.

California Accountant Sentenced in Tax Fraud Case Involving Sham Non-Profit Organization
On March 5, 2013, in Los Angeles, Calif., Steven Mark Pybrum, of Montecito, Calif., was sentenced to 36 months in prison for failing to report more than $1 million on federal tax returns. Pybrum was convicted in October 2012 on four counts of subscribing to false income tax returns. The evidence presented during the trial showed that Pybrum subscribed to false individual income tax returns for the tax years 1999 through 2002, and that he underreported his income on tax returns that were filed up to three years late. In 1999, Pybrum began depositing receipts from his accounting practice into a bank account held in the name of the Foundation for Harmony and Happiness (FFHH). Documents filed with the IRS stated that FFHH was established to provide financial assistance and conflict resolution to help couples avoid financial disputes. The evidence also showed that between 1999 and 2002, Pybrum brought in as much as $380,000 per year from accounting work. Instead of reporting that income on his own tax return, he claimed that money had been earned by FFHH for providing marital counseling. Prosecutors stated at trial that there was no evidence that FFHH actually did any charitable work or earned any money for charitable activities during these four years, and that FFHH was simply a name on bank accounts that Pybrum set up to avoid paying taxes. Pybrum fraudulently used money from his non-profit organization to pay personal expenses, including renting a Montecito mansion and buying a plane, a fishing boat and an SUV.

Former Bookkeeper for Cultural and Freedom Foundation Sentenced for Tax Crimes
On March 1, 2013, in Alexandria, Va., Sookyeong Kim Sebold, aka Sophia Kim, formerly of McLean, Va., was sentenced to 24 months in prison and three years of supervised release and ordered to pay $133,548 in restitution to the IRS. Sebold was convicted on December 14, 2012 of filing a false 2005 tax return and tax evasion for the year 2005. Sebold worked for a nonprofit organization dedicated to promoting foreign cultural exchange through the sponsorship of a ballet company and other performing art events. According to court documents, Sebold embezzled more than $400,000 from the foundation’s bank accounts for her own benefit and used these funds for day trading, gambling and other personal expenses.  She did not report these funds on her 2005 individual income tax return, resulting in her failure to pay more than $130,000 in taxes.  In addition, the evidence at trial established that Sebold had also embezzled funds from the foundation in 2002, 2003, and 2004, for a total of more than $800,000 in unreported income.

California Bookkeeper Sentenced for Fraud and Tax Evasion
On March 1, 2013, in Sacramento, Calif., Kathe Rascher, of Citrus Heights, Calif., was sentenced to 57 months in prison and ordered to pay $1.5 million in restitution. Rascher was convicted on one count of mail fraud and one count of tax evasion. According to court documents, Rascher, a bookkeeper, embezzled more than $1.7 million from her employer. Rascher wrote checks to herself and her family members from the company's bank account. In order to make it look like the checks were issued for legitimate expenses, she changed the name of the payees on the unauthorized checks in the accounting records, altered carbon copies of the checks, and created fictitious invoices. She also reviewed the monthly bank statements and cancelled checks sent to company and deliberately removed and destroyed any returned unauthorized checks that had been issued to her and her family. Rascher further failed to disclose the embezzled income in May 2006 when she filed her federal tax returns for tax years 2004 and 2005.

North Carolina Man Sentenced in Investment Scheme
On February 28, 2013, in Ashville, N.C., James W. Bailey, Jr., was sentenced to 384 months in prison and three years of supervised release on securities fraud, mail fraud and filing a false tax returns. Restitution is to be determined later. According to court documents, from January 2000 through in or about December 2010, Bailey engaged in a scheme to defraud investors in his businesses of more than $13 million. The scheme paid returns to investors, not from any actual profit earned by Bailey’s businesses, but from money paid by subsequent investors.  As part of the scheme, Bailey founded and operated Southern Financial Services Inc., 1031 Exchange Services, LLC and AVL Properties, LLC in Asheville, North Carolina.  Bailey told clients that he would invest their monies in a variety of different securities and other kinds of assets.  Bailey had no license to trade securities and did not invest his clients’ monies as promised.

Massachusetts Attorney Sentenced for Tax Evasion
On February 27, 2013, in Springfield, Mass., Gregory Olchowski was sentenced to six months in prison, one year of supervised release of which six months will be served in home confinement, and ordered to pay a $8,000 fine.  In September 2012, Olchowski pleaded guilty to four counts of tax evasion. According to court documents, between January 1, 2003 and December 9, 2011, Olchowski evaded the proper assessment of his federal income taxes for four separate tax years. Olchowski received income in the form of cash and checks to third-parties and did not report this income to the IRS. In addition, he concealed documents concerning this unreported income that were responsive to a subpoena in a criminal investigation and provided materially false information to IRS criminal agents.

Oklahoma Man Sentenced on Conspiracy Charges
On February 22, 2013, in Tulsa, Okla., Rickey Enos was sentenced to 15 months in prison, three years of supervised release and ordered to pay $338,999 in restitution for conspiracy to defraud the United States. According to court documents, Enos and co-defendant Gary Johnson conspired to over-charge schools for supplies and then not report that income on their taxes. Johnson ordered and approved supplies thru Enos, who would over-inflate the prices. Enos provided Johnson with gifts and money for approving the invoices and causing the school district to pay the inflated prices. Enos prepared Johnson’s taxes and omitted the cash and gifts he provided Johnson for his part in the scheme. Johnson was sentenced February 7, 2013 to 12 months and one day in prison.

Pair Sentenced for Foreign Currency Exchange Related Ponzi Scheme
On February 13, 2013, in Austin, Texas, Christopher Brown Cornett, of Buda, Texas, was sentenced to 480 months in prison and three years of supervised release for conspiracy to commit wire fraud and conspiracy to commit money laundering.  Heidi Beryl Beyer, of Scottsdale, Ariz., was sentenced to 72 months in prison and three years of supervised release for wire fraud. The defendants were also ordered to jointly pay $9,525,031 in restitution. Cornett was also ordered to pay an additional $795,701 in restitution. According to court documents, from April 2008 to October 2011, Cornett devised a scheme to obtain money from investors under false pretenses. Beyer joined in the scheme in September 2009. The defendants represented to investors that their money would be placed into a common pool of funds that would be invested in foreign currency exchange trades, and that investors would receive the profits of the trades, less a fixed share of the profits for the defendants. These representations were made both orally and in writing, in the form of emails and, eventually, in the form of a subscription agreement each investor had to sign. The defendants solicited from pool participants a total of approximately $14.6 million during their scheme. The defendants lost approximately $7.3 million of the pool’s funds in foreign currency exchange trading. They used the remaining pool funds for personal enrichment or to make payments to other investors to lull those investors into the mistaken belief that their investment was profitable and sound. The scheme resulted in an estimated $10.6 million loss to over 150 investors.

Owner of “Clean Green Fuel” Sentenced for Scheme to Violate EPA Regulations and Sell Fraudulent Renewable Fuel Credits  
On February 22, 2013, in Baltimore, Md., Rodney R. Hailey, of Perry Hall, Md., was sentenced to 151 months in prison and three years of supervised release in connection with a scheme in which he sold $9 million in renewable fuel credits which he falsely claimed were produced by his company, Clean Green Fuel, LLC.  Hailey was ordered to pay restitution of $42,196,089 to over 20 companies. Hailey was also ordered to forfeit $9.1 million in proceeds of the fraud including cars, jewelry, his home and bank accounts already seized by the government. According to court documents, Hailey owned Clean Green Fuel, LLC, located in the Baltimore area. Hailey registered Clean Green Fuel with the EPA as a producer of bio-diesel fuel, a motor vehicle fuel derived from renewable resources.  Between March 2009 and December 2010, Hailey engaged in a massive fraud scheme, selling over 35 million renewable identification numbers (RINs) representing 23 million gallons of bio-diesel fuel to brokers and oil companies, when in fact Clean Green Fuel had produced no fuel at all and Hailey did not have a facility capable of producing bio-diesel fuel.

Ohio Business Man Sentenced for Tax Evasion
On February 21, 2013, in Cleveland, Ohio, John W. Hufgard, of Bath Township, Ohio, was sentenced to 18 months in prison, two years of supervised release and ordered to pay $397,659 in restitution. On November 26, 2012, Hufgard pleaded guilty to income tax evasion for tax years 2007, 2008 and 2009. According to court documents, Hufgard was the sole proprietor of Universal Service and Repair, Ltd., and sold manufacture racks to metal scrap dealers. He failed to report the proceeds on his federal income tax returns. Hufgard concealed his scheme by selling racks for cash, depositing business income into his personal account and falsely recording business income as short term loans from himself. He also tried to conceal his scheme by moving large amounts of scrapped metal racks long distances to scrap dealers who were willing to pay him in cash, rather than using unknown dealers who might pay by check. Through this scheme, Hufgard evaded approximately $397,659 in federal taxes.

Defendant Sentenced in $1.8 Million Scheme to Defraud Kaiser Permanente
On February 20, 2013, in Oakland, Calif., Asim Waqar, a former employee of Kaiser Permanente, was sentenced to 33 months in prison and ordered to pay $1,803,667 in restitution to Kaiser and $142,530 to the United States Treasury. Waqar pleaded guilty to the conspiracy to commit wire fraud and tax evasion. According to court documents, Waqar was employed by Kaiser in 2005 as a manager.  Waqar, co-defendant Farid Rahman, and his wife, co-defendant Mina Kuhl, living in the Detroit, Michigan area, joined Waqar in a scheme to defraud Kaiser by encouraging Kaiser to hire Kuhl who would purportedly work from Michigan under Waqar’s supervision. In fact, once Kuhl was hired by Kaiser, Waqar would arrange for Kuhl to be paid without having to perform any work. Between 2005 and 2008, Waqar had authorized payment of $1,803,667 to third party vendors for the employment of Kuhl.  From the money paid to Kuhl, Kuhl and Rahman kicked back $428,300 to Waqar, who failed to pay federal taxes in the amount of $142,300 due on this income. Rahman was sentenced to 18 months in prison and Kuhl was sentenced to 12 months and one day in prison.

Maryland Business Owner Sentenced for Evading Over $522,000 in Federal and State Taxes
On February 14, 2013, in Baltimore, Md., Bae Soo “Chris” Chon, of Beltsville, Md., was sentenced to 12 months and a day in prison and one year of supervised release for income tax evasion. Chon was also ordered to pay a fine of $15,000 and restitution of $412,404 to the IRS and $172,884 to the Maryland Office of the Comptroller. Chon was also required to pay a civil penalty of $441,482 for failing to disclose his foreign bank accounts. According to court documents, Chon owned and operated Mirage Cosmetics, Inc., which manufactured cosmetics products. Mirage marketed its products domestically and internationally.  As a subchapter S corporation, the net profits Mirage earned were required to be reported as taxable income by Chon. In the fall of 2008, Chon started a tax evasion scheme whereby he caused the proceeds from Mirage’s transactions with many of its foreign distributors to be diverted into foreign bank accounts in Hong Kong and Seoul, South Korea. The funds deposited into these foreign accounts were not reflected on Mirage’s official records. Accordingly, Chon substantially understated Mirage’s income on his 2008 and 2009 personal income tax returns. As a result of the scheme, approximately $1,818,895 in revenues from Mirage’s foreign clients that were diverted into the overseas bank accounts resulted in understating Chon’s federal and state tax liability by $522,649 for the tax years 2008 and 2009.

Three Georgia Store Operators Sentenced for Food Stamp Fraud
On February 8, 2013, in Savannah, Ga., three store operators were sentenced for their participation in food stamp fraud.  Litricia Allen was sentenced to 57 months in prison and three years of supervised release for theft of government funds.  Petrina Barge was sentenced to 51 months in prison and three years of supervised release for conspiracy.  Jewell Allen was sentenced to 37 months in prison and three years of supervised release for theft of government funds.  The defendants were also ordered to pay $5,886,091 in restitution. According to court documents, the defendants and their co-conspirators owned and operated a number of stores authorized to participate in the Supplemental Nutrition Assistance Program (SNAP) and Georgia's Women, Infant and Children Program (WIC). From around February 2009 through June 2011, these stores redeemed a combined total of approximately $2,235,259 in SNAP benefits and $4,456,879 in WIC vouchers.  Collectively, the defendants and co-conspirators used the stores for the illegal purchase of over $5,000,000 worth of SNAP and WIC benefits for cash.

Florida Man Sentenced for Tax Evasion
On February 11, 2013, in Fort Myers, Fla., Peter Jensen was sentenced to 31 months in prison and ordered to pay $2,155,133 in restitution to the IRS. Jensen pleaded guilty on October 23, 2012 to one count of tax evasion. According to court documents, for the years 2003 through 2009, Jensen attempted to evade paying approximately $1.8 million in federal income tax. Jensen attempted to evade paying the taxes by placing real properties in the names of others, and utilizing the bank account of another individual, rather than depositing money he earned in a bank account from which the money could have been seized by the IRS.

Michigan Man Sentenced for Mail Fraud and Tax Offense
On February 6, 2013, in Grand Rapids, Mich., Kenneth Hoesch, formerly of Zeeland, Mich., was sentenced to 78 months in prison, three years of supervised release and ordered to pay $1,295,518 in restitution to his victims and to pay $211,654 in restitution to the IRS. In July 2012, Hoesch pleaded guilty to one count of mail fraud and one count of filing a false tax return. According to court records, during 2006 through 2010 tax years, Hoesch worked as an attorney specializing in trusts and estate law. During this time period, he stole over $800,000 from his clients and trust beneficiaries and falsified his federal income tax return when reporting his income. Of the $800,000 Hoesch stole, over $300,000 was embezzled and the remaining amount was stolen through an Interest on Lawyers Trust Account (IOLTA) controlled by Hoesch. IOLTAs are a standard type of account where monies are held pending disbursement.

Pennsylvania Man Sentenced for Income Tax Evasion
On February 4, 2013, in Johnstown, Pa., Leonardus A. Otto, of Fort Hill, Pa., was sentenced to six months in prison, followed by six months home detention and three years of supervised release for income tax evasion. According to information presented to the court, for the calendar years 2005, 2006 and 2007, Otto filed income tax returns showing a total taxable income of $70,844 with total tax due of $26,467, when in actuality his total taxable income was $488,165 with total tax due of $147,259.

Florida Man Sentenced on Tax Charges  
On January 31, 2013, in Rochester, N.Y. Gary Shapoff, of Boynton Beach, Florida, was sentenced to 60 months in prison and ordered to pay $2,228,605 in restitution. According to court document, between January 2004 and July 2008, Shapoff participated in a scheme to defraud investors who had invested approximately $2.5 million in international currency trading investments through the company Atwood & James S.A. Shapoff offered the opportunity for “huge profits” in foreign currency, trades that were never made in investors names. In addition, Shapoff did not report the gains that he made from the fraud on his individual tax returns.

Illinois Man Sentenced for Mail Fraud and Money Laundering
On January 31, 2013, in Peoria, Ill., Timothy J. Roth, of Stonington, Ill., was sentenced to 151 months, three years of supervised release and ordered pay $16,151,964 in restitution to victims of his fraud scheme. Roth pleaded guilty on October 25, 2011, to one count each of mail fraud and money laundering.  According to court documents, Roth fraudulently transferred, liquidated and removed mutual fund shares from clients’ accounts for his own personal and business use. Since June 2002, Roth had worked as a federally registered investment advisor for a capital management company in Champaign, Ill., and had also formed and operated several personal consulting companies. These companies provided software and tracking and management programs to various outside third party administrators for mutual fund option plans.  

Rhode Island Businessman Sentenced on Tax Charges
On January 30, 2013, in Providence, R.I., William L'Europa, of Scituate, R.I. was sentenced to 27 months in prison and three years of supervised release for conspiring to defraud the United States government and filing false tax returns. On December 21, 2012, former state legislator John J. McCauley Jr. was sentenced to 27 months in prison and three years of supervised release. According to court documents, L’Europa and McCauley under-reported business receipts from 2007 to 2010 by nearly $1.8 million, resulting in an underpayment of federal taxes to the IRS of more than $500,000. Together, they ran McCauley and L'Europa Public Insurance Adjusters LLC and PIA Restoration LLC in Providence.

Bookkeeper Sentenced for Stealing Employer and Evading Taxes
On January 29, 2013, in Greenbelt, Md., Diane Michelle Pimble, of Washington, D.C., was sentenced to 14 months in prison and three years of supervised release for interstate transportation of stolen money and tax evasion.  Pimble was also ordered to pay restitution of $152,918 to her employer and $26,697 to the IRS. According to court documents, from early 2008 through late 2011, Pimble worked as a bookkeeper for an individual residing in Maryland. Pimble managed her employer’s accounts, paid bills, organized financial information using an accounting software program, and prepared reconciliation reports of her employer’s bank accounts. In order to help fulfill these duties, at Pimble’s request, her employer gave her a stamp bearing her employer’s signature that Pimble would use to sign her employer’s checks.  Pimble, however, wrote over 100 unauthorized checks to herself from her employer’s bank accounts.  Pimble concealed her fraud by falsifying entries in her employer’s accounting program and creating falsified balance reports. Pimble transported across state lines a minimum of $152,918 of her employer’s money that was taken by fraud. Finally, for the tax years 2008, 2009 and 2010, Pimble filed false federal individual income tax returns with the IRS by not reporting the income she received through her embezzlement, resulting in additional tax owed totaling $26,697.

Oregon Man Sentenced for Tax Fraud
On January 29, 2013, in Eugene, Ore., William Meyers, of Cottage Grove, Oregon, was sentenced to 12 months and one day in prison, three years of supervised release, including 100 hours of community service each of the three years, and ordered to pay $873,186 in restitution. Meyers pleaded guilty to failing to pay $879,000 in federal excise taxes and filing more than 70 false federal excise tax returns on behalf of his company, the Side Pocket Food Company. According to court records, the Side Pocket Food Company is a distilled spirits plant, primarily in the business of blending and bottling distilled spirits, in Cottage Grove, Oregon. Despite collecting federal excise taxes from the company’s clients, Meyers failed to pay the federal excises taxes.  Additionally, Meyers engaged in a repeated pattern of evasion, intentionally avoiding efforts to audit his company and to rectify his federal excise tax situation.  

Members of Crime Ring Sentenced for Multi-Million Dollar Stolen Goods and Tax Evasion Conspiracy
On January 24, 2013, in Charlotte, N.C., four members of an organized retail crime ring that sold and distributed over $16 million in stolen over-the-counter products were sentenced as follows:
• Kimberley Bridges Morris, of Bessemer City, N.C., - 18 months in prison and three years of supervised release.  
• Darlene Bridges Schoener, of Kings Mountain, N.C., - 18 months in prison and three years of supervised release.
• Michael David Morris, of Charlotte, N.C., - 84 months in prison and two years of supervised release.
• William Christopher Schoener, of Kings Mountain, N.C., - 86 months in prison and two years of supervised release.
The defendants also were ordered to pay $4,035,636 in restitution. On October 19, 2012, Bonnie Knight Bridges, of Bessemer City, N.C., was sentenced to 70 months in prison, two years of supervised release and ordered to pay $4,035,636 in restitution. On October 30, 2012, Darryl Keith Brock was sentenced to 20 months in prison, two years of supervised release and ordered to pay $2,128,059 in restitution. According to court documents, the defendants participated in what is known as Organized Retail Crime and Organized Retail Theft, an annual multi-billion crime affecting retail merchants. From 2006 to March 2011, the defendants engaged in a scheme whereby they bought and then sold stolen over-the-counter products, including medications, dietary supplements, and health and beauty aid products. From 2006 to 2011, the amount of stolen property involved in this case exceeded $16 million.

Massachusetts Man Sentenced for Filing False Tax Returns
On January 23, 2013, in Boston, Mass, David Altavilla, of Mendon, Mass., was sentenced to six months community confinement, six months of home confinement and ordered to pay $141,710 in restitution to the IRS and pay a $10,000 fine. In October 2012, Altavilla pleaded guilty to filing a false income tax return. According to court documents, Altavilla operated a blog called “HOTHARDWARE.COM,” which contained contributor articles reviewing computers, computer components, and other related items. Altavilla sold advertising space on the site. For the calendar years 2006, 2007, and 2008, he under-reported the total amount of gross receipts he took in from advertisers, resulting in an under-reporting of his tax liability.

Pennsylvania Woman Sentenced on Embezzlement and Tax Evasion Charges
On January 18, 2013, in Pittsburgh, Pa., Holly Cowan, a resident of Lawrence County, Pa., was sentenced to 15 months in prison, three years of supervised release and ordered to pay $285,641 in restitution. Cowan was charged by Information in February 2012 with embezzlement from an institution insured by the National Credit Union Administration and tax evasion. According to court documents, from about January 1, 2004, through about October 2009, Cowan was employed by a federal credit union. She misappropriated approximately $222,888. In addition, Cowan file a false tax return for calendar year 2009 by under-reporting her taxable income by over $80,000.

Defendant Sentenced for Investment and Tax Fraud
On January 18, 2013 in Chicago, Ill., Randy M. Cho, of Seattle, Wash., was sentenced to 144 months in prison and three years of supervised release. Cho, formerly of Chicago, Ill. and Newton, Mass., was also ordered to pay $7,995,707 in restitution to investors and $1,496,339 to the IRS. Cho pleaded guilty in August 2012 to wire fraud and tax fraud. According to court documents, Cho, who represented himself as a self-employed securities trader, raised about $9.6 million from investors. He falsely stated the funds would be used to buy discounted shares of stock in well-known companies. He then used a significant portion of the $9.6 million for his own benefit. He used approximately $1.68 million he fraudulently obtained from new investors to make Ponzi-type payments to previous investors. During the investment fraud scheme, Cho failed to report approximately $4.8 million of additional income between 2004 and 2007, resulting in an underpayment of just under $1.5 million in federal income taxes.

Illinois Man Sentenced on Tax Charges
On January 17, 2013, in East St. Louis, Ill., Stephen Keith Sweet, of South Roxana, was sentenced to 18 months in prison, three years of supervised release, and ordered to pay $226,988 in restitution to the IRS and a $52,400 fine. According to court documents, Sweet owned Lake Environmental, Inc. (LEI), Abatement Management, Inc. (AMI), and AMI O LLC, which are located in Madison County, Illinois. He willfully attempted to evade and defeat a large part of the income tax due and owing by filing a false and fraudulent Individual Income Tax Return with the IRS. Sweet, who falsely reported his total income, had diverted business funds to his own personal use without declaring those amounts as income.

Iowa Man Sentenced for Fraudulent Investment Scheme
On January 17, 2013, in Des Moines, Iowa, John Francis Holtsinger, of Ottumwa, Iowa, was sentenced to 87 months in prison and five years of supervised release on wire fraud and tax evasion charges. Holtsinger also was ordered to pay $948,239 in restitution to his victims. According to court documents, Holtsinger admitted to soliciting and receiving more than $1.1 million from investors between 2005 and 2012. He told the investors he would put their money into investment accounts; however, he used most of it for personal expenses or to pay back investors whose money he had misappropriated earlier. Holtsinger also tried to convince investors to lie to law enforcement officers regarding the purpose of the funds they gave him by stating the funds were “interest free loans,” when they were investments. Holtsinger also threatened that anyone who cooperated with law enforcement officers would not be repaid.

Missouri Man Sentenced for Securities Fraud and False Tax Returns
On January 15, 2013, in Kansas City, Mo., Daniel Meredith, of Excelsior Springs, Mo., was sentenced to 132 months in prison and ordered to pay $3,572,526 in restitution to his victims. Meredith pleaded guilty to one count of securities fraud and two counts of filing false tax returns. According to court documents, Meredith obtained more than $3.5 million by defrauding at least 12 victims in Missouri and Kansas through various schemes through the end of March 2012. Meredith also cheated one victim out of an additional $28,000 several months after confessing his crimes to federal authorities, while he was negotiating his guilty plea. Meredith’s fraud schemes included a Bolivian land scheme and fake Scooter’s Coffeehouse franchise agreements. Instead of investing the money as promised, he lost it gambling. In 2006 and 2007, Meredith received $510,900 from others under false pretenses. He did not use the money for the purposes intended and he did not report this income on his tax returns. Meredith has an additional tax due and owing for 2006 and 2007 of $139,679.

Kansas Couple Sentenced for Tax Fraud
On January 14, 2013, in Wichita, Kan., Charles W. Kriel was sentenced to 12 months and one day in prison for tax fraud and his wife, Pamela A. Kriel was sentenced to time served. The Kriels, who were co-owners of a computer consulting company, both pleaded guilty to making a fraudulent claim for a 2008 tax return. In addition, Charles Kriel pleaded guilty to submitting a fraudulent promissory note to his mortgage lender. In their pleas, they admitted the false claims would have caused a loss of about $961,569 to the IRS.

Ohio Man Sentenced for Food Stamp Fraud, Conspiracy and Tax Crimes
On January 11, 2013, in Dayton, Ohio, Edward “Ed” Claude Jones, of West Carrollton, was sentenced to 24 months in prison and three years of supervised release. Jones also agreed to a $300,000 money judgment relative to committing conspiracy, food stamp fraud and tax crimes in connection with two businesses. According to court documents, Jones and others conspired between February 2009 and February 2011 to hide money received from the sale of counterfeit goods. In addition, they illegally purchased Electronic Benefit Transfer “food stamp” cards by cashing 12 checks of more than $10,000 each and failed to file reports required by the Bank Secrecy Act involving large cash transactions. Jones also filed an income tax return with the IRS using the name “Randy Banker”, a deceased individual, and a Social Security number belonging to another individual in an effort to conceal his income.

Pennsylvania Woman Sentenced for Embezzlement and Tax Fraud
On January 10, 2013, in Philadelphia, Pa., Sheila Kaye Jameson, of Blandon, Pa., was sentenced to 48 months in prison, three years of supervised release and ordered to pay $1,864,024 in restitution to EnerSys and its insurer and to pay $256,447 to the IRS. Jameson pleaded guilty to mail fraud and filing false tax returns. According to court documents, Jameson was a Logistics Analyst for EnerSys Corporation. She embezzled approximately $1.8 million dollars from EnerSys by using a shell corporation, Aries Consulting Group. Jameson created Aries Consulting for the purpose of sending bogus invoices to EnerSys, requesting payment which Aries Consulting Group was not entitled to receive. Jameson also failed to include any of the embezzled income on federal income tax returns that she filed with the IRS.

West Virginia Attorney Sentenced for Tax Evasion
On January 10, 2013, in Beckley, W.Va., Charles B. Mullins II, of Daniels, Raleigh County, W.Va., was sentenced to 18 months in prison and ordered to pay $780,146 in restitution. Mullins pleaded guilty in August 2012 to charges of tax evasion.  According to court documents, Mullins practiced law in Pineville, Wyoming County, W.Va. He deposited money into his client trust account, which included legal fees, reimbursements from settlements for private clients, as well as his personal income. Mullins then wrote checks for his personal use directly from his law office’s client trust account. Mullins admitted that on his federal income tax returns, he did not report as income the money that he used personally from his law office’s trust account. In an effort to conceal the personal expenditures from his trust account, Mullins had employees falsely assign personal expenses to a random client in his trust account computer software program. In the operating account, which he provided to his accountant, Mullins classified personal expenses as business expenses, which were deducted from his income. Mullins admitted that for years 2006 through 2009, he failed to pay more than $389,000 in taxes.

Missouri Woman Sentenced for Tax Evasion
On January 9, 2012, in Kansas City, Mo., Christine Diane Todd, of Columbia, Mo., was sentenced to 15 months in prison and ordered to pay $318,938 in restitution. Todd, the branch credit manager for Major Brands, Inc., pleaded guilty to falsifying her 2005 income tax return. According to court documents, Todd engaged in a scheme from January 2003 to October 2006 to defraud Major Brands and its customers. Todd’s duties included processing payments from customers, including both cash and checks. She stole a portion of the cash received, totaling $257,688 over the four-year period. Todd’s 2006 income tax return did not report $100,832 that she embezzled from Major Brand Foods in 2005.

New Jersey Father and Daughter Sentenced for Tax Evasion
On January 7, 2013, in Trenton, N.J., William H. Bogan Sr. and his daughter, Sharon Bogan, were sentenced for failing to report or pay income taxes. William Bogan was sentenced to six months in prison and six months home confinement with electronic monitoring, two years of supervised release, and ordered to pay a $5,000 fine. Sharon Bogan was sentenced to two years of probation. According to court documents, William and Sharon Bogan owned and operated charter fishing and river cruising boats in New Jersey. From 2004 through 2009, they kept a large portion of the business receipts and failed to report these receipts on their respective personal income tax returns. William Bogan failed to report more than $300,000 in income and maintained a “second set of books,” which was recovered by the IRS during a search of his personal residence and which he used to record the amount of income he received but did not report to the IRS.

Connecticut Woman Sentenced for Making False Statements
On January 4, 2013, in Hartford, Conn., Amy Kuhner, formerly of Madison, Conn., was sentenced to 15 months in prison, three years of supervised released and ordered to pay a $5,000 fine. On July 25, 2012, Kuhner pleaded guilty to one count of making false statements about her use of federal funds. According to court documents, Kuhner was the Executive Director of Sunshine House, an organization formed for the purpose of constructing a facility to care for seriously ill children. In September 2001, Sunshine House received a $836,190 federal grant from the Health Resources Services Administration (HRSA) to pay part of the construction costs of the center. As Executive Director, Kuhner exercised exclusive control over the use of the grant funds. In July 2007, Kuhner admitted sending to HRSA documents that falsely stated that Sunshine House had incurred architectural and engineering costs in the amount of $594,225. The documents omitted the fact that, from September 2001 through September 2006, Kuhner had received a gross salary of $417,932 and health insurance benefits totaling $22,294, and that most of this salary and benefits had been paid using grant funds. In addition, Kuhner used grant funds to pay her salary in 2007 and 2008, after the grant had closed.

Minnesota Men Sentenced in Ponzi Fraud Scheme
On January 3, 2013 in Minneapolis, Minn., Jason Bo-Alan Beckman, of Plymouth, was sentenced to 360 months in prison on wire and mail fraud, conspiracy to commit mail and wire fraud, money laundering, filing a false tax return and tax evasion. Gerald Joseph Durand, of Faribault, was sentenced to 240 months on wire and mail fraud, conspiracy to commit mail and wire fraud, money laundering, concealing a material fact from the United States and filing a false tax return. Christopher Pettengill, of Plymouth, was sentenced to 90 months in prison on securities fraud, conspiracy to commit wire fraud and money laundering. All three men were also ordered to pay $155,359,411 in restitution to the victims of their Ponzi-fraud scheme. The evidence presented at trial proved that between 2005 and November 2009, the defendants, along with Trevor Cook, defrauded investors by soliciting them to invest money in a foreign currency trading program that they alleged would earn a double-digit rate of return with little or no risk. They also claimed investor assets would be held in a segregated account and could be withdrawn at any time. Those representations were false. Moreover, Beckman filed false individual income tax returns for tax years 2007 and 2009 and failed to file a tax return for 2008. For that year, Beckman and his wife owed more than $1.3 million in federal income taxes. Durand filed false individual income tax returns for tax years 2006 through 2008.

Missouri Bank Employee Sentenced for Embezzlement and Tax Fraud
On January 3, 2013, in Jefferson City, Mo., Kelley Lee Steiner, of Jefferson City, was sentenced to 12 months and one day in prison and ordered to pay $664,495 in restitution. Steiner, who pleaded guilty on February 27, 2012, was employed by a bank from June 14, 1999 to November 12, 2008. Steiner also served as personal executive assistant to former bank president. According to court documents, Steiner embezzled a total of $487,199 from both the bank and from the president's personal checking account. Steiner also embezzled $54,000 while employed at Modern Business Systems. By failing to report the embezzled funds as income on her federal tax returns from 2005 to 2008, Steiner caused tax harm to the United States in the amount of $143,623. Steiner had diverted approximately $19,070 in valid reimbursement funds from the bank president, and used them to pay on her personal credit cards. She submitted false documentation to the bank for work-related expenses purportedly incurred by the president, which were then reimbursed by the bank, including the re-submission of credit card statements which had already been previously reimbursed by the bank. It was discovered that an additional $29,947 had been diverted by Steiner to pay on her personal credit card accounts. Steiner was responsible for paying the board of directors for participating in board meetings, audit meetings, and other special bank meetings. During a review of board fees paid by the bank in 2008, a bank officer identified approximately $60,400 in cash embezzled by Steiner that had purportedly been paid as board fees.

Former Financial Services Broker Sentenced for Role in Conspiracies Involving Investment Contracts for the Proceeds of Municipal Bonds
On January 3, 2013, in New York, N.Y., Adrian Scott-Jones, of Morriston, Fla., was sentenced to 18 months in prison and ordered to pay a $12,500 criminal fine. Scott-Jones, a former broker for Tradition N.A., pleaded guilty on September 8, 2010, to participating in multiple conspiracies with executives of General Electric Co. (GE) affiliates, from as early as 1999 until 2006. The public entities hired brokers like Scott-Jones and Tradition to conduct bidding for contracts to invest money from a variety of sources, primarily the proceeds of municipal bonds issued to raise money for, among other things, public projects. According to court documents, Scott-Jones gave co-conspirators information about the prices, price levels or conditions in competitors' bids, a practice known as a “last look,” which is explicitly prohibited by U.S. Treasury regulations. Scott-Jones also solicited and received intentionally losing bids for certain investment agreements and other municipal finance contracts. As a result of Scott-Jones’ role in corrupting the bidding process for investment agreements, he and his co-conspirators deprived the municipalities of competitive interest rates for the investment of tax-exempt bond proceeds used by municipalities for various public works projects. The department said that the conspiracies cost municipalities around the country millions of dollars.

Missouri Attorney and Clergyman Sentenced for Role in Million Dollar Ponzi Scheme  
On December 28, 2012, in Kansas City, Mo., Martin T. Sigillito, of Webster Groves, was sentenced to 40 years in prison and ordered to pay $30,670,714 in restitution. Sigillito, an attorney and an ordained priest and bishop, was also ordered to forfeit hundreds of antiques, six Persian rugs, dozens of bottles of cognac champagne, whiskey and wine, a 2006 Volvo S40, $19,500 in cash, $19,237 from bank accounts and residential property. On April 13, 2012, Sigillito was found guilty of conspiracy to commit wire and mail fraud, wire fraud, mail fraud and money laundering. According to court documents, from 2000 to 2010, more than 140 investors in the United States loaned a total of $52.5 million through a Ponzi scheme that was known as the British Lending Program (BLP). Victims believed they were loaning money for legitimate real estate development projects in England, but in reality, most of their money was kept by Sigillito and co-defendant James Scott Brown or used to pay interest and principal to other lenders. Brown was sentenced to 36 months in prison.

Former Stockbroker Sentenced for Wire Fraud and Filing a False Tax Return
On December 27, 2012, in Tacoma, Wash., Michael D. Montgomery, formerly from Lakewood, Washington, now residing in Aspen, Colorado, was sentenced to 60 months in prison and three years of supervised release. Restitution is to be determined later. Montgomery was also ordered to file all necessary tax returns with the IRS. Montgomery pleaded guilty in June 2012 to wire fraud and filing a false tax return. Montgomery was a licensed stockbroker and investment advisor in the Tacoma, Washington area until 2009, when the Washington State Department of Financial Institutions revoked his registration as a securities dealer for unethical conduct. According to the plea agreement, Montgomery was first an investment advisor for an elderly man and later became the trustee of the man’s revocable living trust. Montgomery also had power of attorney for the victim. Over the years 2003 through 2007, Montgomery misappropriated a substantial amount of money from the elderly man’s bank and investment accounts. From 2005 through 2007, Montgomery caused $654,600 to be sent by wire from his client’s investment account to his client’s Key Bank account. Then Montgomery took the money and used it for his own benefit. From January 2004 to July 16, 2006, Montgomery wrote $598,916 in checks to himself from his client’s accounts, purportedly for services to his client. Following the client’s death on July 18, 2006, Montgomery wrote an additional $243,745 in checks to himself from the client’s estate, purportedly for “estate services.” However, Montgomery never provided the victim’s family with any accounting of what these services entailed. Montgomery also failed to report any of the income on his federal income tax returns.

Alabama Woman Sentenced for Bank Fraud and Tax Evasion
On December 21, 2012, in Birmingham, Ala., Donna Taylor, aka Donna J. Rodgers, was sentenced to 27 months in prison and two years of supervised release. Taylor was also ordered to pay restitution of $176,456 to the IRS and $645,217 to her former employer. According to court documents, from approximately May 2007 until April 2010, Taylor was employed as an office secretary. As part of her duties, Taylor was responsible for preparing various checks, printing them for the signature of a company co-owner and depositing checks into the proper bank accounts.  Instead, Taylor deposited checks into the incorrect bank account then, through the company’s computer, wrote herself checks on the company account, forged the company co-owner’s name on the checks and deleted the computerized record of the checks. Taylor then cashed the checks in her personal bank accounts. Over the life of her scheme, Taylor fraudulently appropriated $645,217 for the benefit of herself and others. Additionally, Taylor filed a false tax return with the IRS for 2009. In that false return, Taylor reported that her wages for 2009 were $29,508 and claimed she was entitled to a $1,069 refund.  In fact, Taylor’s taxable income for 2009 was $319,181 on which she owed income tax of approximately $85,579.

Rhode Island Businessman and State Legislator Sentenced for Tax Evasion
On December 21, 2012, in Providence, R.I., John J. McCauley, Jr., the owner and co-operator of McCauley and L’Europa Public Adjusters, LLC, and PIA Restoration, LLC, and longtime Rhode Island state legislator, was sentenced to 27 months in prison and three years of supervised release. McCauley pleaded guilty in September 2012 to conspiracy to defraud the United States and filing false tax returns. According to court documents, McCauley and his business partner, William L’Europa, under-reported business receipts for tax years 2007 through 2010 by nearly $1.8 million dollars, resulting in the underpayment of federal taxes of more than $500,000. L’Europa is awaiting sentencing.

Former Chief Compliance Officer and Senior Managing Director at Bernard L. Madoff Investment Securities Sentenced on Tax, Securities, and Other Charges
On December 20, 2012, in Manhattan, N.Y., Peter Madoff, the former Chief Compliance Officer and Senior Managing Director of Bernard L. Madoff Investment Securities LLC (BLMIS), was sentenced to 120 months in prison, one year of supervised release and ordered to forfeit $143.1 billion, including all of his real and personal property. Madoff pleaded guilty in June 2012, to among other things, conspiracy to commit securities fraud, tax fraud, mail fraud, ERISA fraud and falsifying records of an investment adviser. According to court documents, Madoff was employed at BLMIS from 1965 through December 2008. Beginning in 1969, he became the Chief Compliance Officer (CCO) and Senior Managing Director of BLMIS. In his role as CCO, Madoff created false and misleading BLMIS compliance documents, as well as false reports that were filed with the U.S. Securities and Exchange Commission (SEC) that materially misstated the nature and scope of BLMIS’s Investment Advisory (IA) business. In addition, from 1998 through 2008, Madoff engaged in a tax fraud scheme involving the transfer of wealth within the Madoff family in ways that allowed him to avoid paying millions of dollars in required taxes to the IRS. Specifically, Madoff received approximately $15,700,000 from Bernard L. Madoff and his wife, and executed sham promissory notes to make it appear that the transfers were loans, in order to avoid paying taxes. Also, Madoff did not pay taxes on approximately $7,750,000 that he received from BLMIS. He also received approximately $16,800,000 from Bernard L. Madoff from two sham trades, and disguised the proceeds of the trades as long-term stock transactions in order to take advantage of the lower tax rate for long-term capital gains. Additionally, Madoff charged approximately $175,000 in personal expenses to a corporate American Express card and did not report those expenses as income. Madoff also arranged for his wife to have a “no-show” job at BLMIS from which she received between approximately $100,000 to $160,000 per year in salary, a 401(k), and health benefits to which she was not entitled. On December 10, 2008, one day prior to BLMIS’s collapse, Madoff also withdrew $200,000 from BLMIS for his personal use.

Defendant Sentenced for Role in Internet Fraud Scheme
On December 20, 2012, in Manhattan, N.Y., Razvan Marcu, of Las Vegas, Nevada, was sentenced to 60 months in prison, three years of supervised release, and ordered to pay $1 million in restitution and forfeit more than $1 million. Marcu pleaded guilty in July 2012 to one count of conspiracy to commit wire fraud for his role in an Internet fraud scheme in which at least 80 victims were defrauded of more than $1 million. According to court documents and statements made in court, from at least 2009 through about 2011, Marcu and his international co-conspirators engaged in a scheme to defraud individuals seeking to buy items, including cars, which were listed for sale on various Internet websites, including eBay.com, Autotrader.com, and Craigslist.com. As part of the scheme, Marcu recruited Timothy Harron and instructed him to recruit individuals to open bank accounts into which money from victims could be sent, or to agree to receive money sent by victims through money transmission services. Once a victim contacted the purported seller over the Internet and the parties agreed to the terms of sale, the victim received an e-mail message that appeared to be from the website on which the item was listed, or some other legitimate website designed for online transactions. The e-mail asked the buyer to wire money to one of the people Harron had recruited or to one of the bank accounts that was opened to facilitate the scheme. The victims never received the items for which they paid. After victims wired money, Harron arranged for the money to be withdrawn in cash and then deposited into accounts of others or transmitted to co-conspirators, including those located in Romania, where leaders of the scheme were also based. Some of the victims’ money was also deposited into Marcu’s bank accounts. He used the money to purchase and lease numerous luxury automobiles and for other personal expenses.

Texas Attorney and Former Department of Veteran Affairs Fiduciary Sentenced on Conspiracy and Tax Charges
On December 19, 2012, in Houston, Texas, Joe Phillips was sentenced to 46 months in prison and ordered to pay $2,352,107 to the Department of Veterans Affairs (VA) and $282,112 to the IRS. He pleaded guilty on September 4, 2012 to conspiracy to make false statements, misappropriation by a fiduciary and signing a false income tax return. According to court documents, Phillips was an attorney who owned and operated a small law office in Houston. Dorothy Phillips, his wife and co-defendant, served as his legal assistant and office administrator. Phillips and his wife submitted false accounting statements to the VA in Houston, which included fraudulent verification forms for bank information for a number of his veteran clients. He and his wife also transferred money from bank accounts Phillips maintained for his veteran clients to accounts in his and his wife’s name. He did not file a proper accounting with the court or the VA for the transfer of these funds. Both Joe and Dorothy Phillips signed a tax return for the year 2007 filed with the IRS that contained a false Schedule C, concealing unreported receipts. Dorothy Phillips pleaded guilty on April 18, 2012, to conspiracy and making a false statement on an income tax return. She was sentenced on December 11, 2012, to 46 months in prison and was ordered to pay the same amounts of restitution to the VA and the IRS.

New York Man Sentenced for Filing a False Tax Return
On December 14, 2012, in Syracuse, N.Y., Timothy M. Schmidt, of Potsdam, N.Y., was sentenced to 18 months in prison and ordered to pay $270,802 in restitution to the IRS. In August 2012, Schmidt pleaded guilty to signing and filing a false income tax return. According to court documents, from 2003 through 2010, Schmidt served as a handy man and occasional contractor for an elderly woman from whom he obtained over $1 million, none of which he acknowledged as income on his tax returns. Schmidt persuaded the woman to write checks in amount less than $10,000 in order to avoid alerting the IRS.

New York Physician Sentenced for Tax Evasion
On December 14, 2012, in Syracuse, N.Y., Faddi J. Bejjani was sentenced to six months in prison, one year of supervised release to include six months of home detention and ordered to pay a $20,000 fine. Bejjani pleaded guilty on May 7, 2012, to subscribing a false income tax return for the year 2007. According to court documents, from 2005 through 2008, Bejjani served as the president of his medical practice, C.O.P.P.S. Medical, P.C. (Cedars Occupational Pain Physical and Spine) located in Utica and later in New Hartfordm, N.Y. During those years, he failed to report approximately $538,000 in income on his personal income tax returns. Bejjani has repaid his tax delinquency of $164,409.

Former Postal Employee Sentenced for Stealing Government Property and Tax Evasion
On December 12, 2012, in Central Islip, N.Y., Gregory Giordani was sentenced to 37 months in prison, three years of supervised release and ordered to pay $488,589 in restitution. In addition, Giordani was ordered to cooperate with the IRS to satisfy his tax liability. On March 13, 2012, Giordani pleaded guilty to one count of tax evasion and one count of theft of government property. According to court documents and statement made in court, while employed as a technician at a United States Postal Service’s mail handling facility, Giordani ordered computer parts, including ink, using the Postal Service’s procurement system. He subsequently sold them on an Internet auction site and kept the proceeds without reporting them on his tax returns.

Georgia Man Sentenced for Filing False Tax Returns
On December 11, 2012, in Atlanta, Ga., Jorge A. Castellanos, of Cumming, Georgia, was sentenced to 57 months in prison and one year of supervised release. On September 19, 2012, Castellanos was convicted of filing false federal Individual Income Tax Returns with the IRS.  According to court documents, in 2004, Castellanos and his partners formed an investment business, which touted itself as pre-selling overstock golf equipment and providing a return of the profits to its investors.  Instead of purchasing golf equipment from vendors with investors’ funds, Castellanos used the money to pay his own business and personal expenses. Castellanos then tried to hide this stolen income from the IRS by telling his accountants that the stolen income was from loans.  One accountant relied on this false information and unknowingly prepared and filed false income tax returns for tax years 2006 and 2007 on Castellanos’ behalf.  The false returns resulted in a tax loss of approximately $1,357,562.

Former U.S. Congressman Sentenced in Tax Case
On December 11, 2012, in Los Angeles, Calif., Wester Shadric Cooley, a former U.S. Congressman, was sentenced to 12 months and one day in prison and ordered to pay $3.5 million in restitution to the victim-investors and another $138,470 in back taxes to the IRS. Cooley, who represented Oregon’s second congressional district during a two-year term that began in January 1995, pleaded guilty in November 2011 to subscribing to a false tax return. According to court records, Cooley was the vice president of Bidbay.com and an executive of AskGT.com and Rose Laboratories. Former IRS Revenue Agent George Tannous and De Elroy Beeler Jr. solicited hundreds of victims across the country to purchase unregistered stock in Bidbay.com (a company that was later known as Auctiondiner.com, Inc.) and related companies AskGT.com and Rose Laboratories.  Victim-investors were enticed to put money into the companies by several false statements, including that the companies would conduct initial public offerings, and that Bidbay.com and/or the shell companies would soon be acquired by Ebay, Inc. for $20 per share. Ebay never had any intention of acquiring Bidbay.com. Cooley admitted that he received approximately $1.1 million during the scheme and that he failed to report approximately $494,000 on his 2002 tax return. The fraud scheme defrauded more than 400 victim-investors out of over $10 million. Tannous was sentenced to 33 months in prison and Beeler is awaiting sentencing.

Michigan Chiropractor Sentenced for Tax Evasion
On December 3, 2012, in Grand Rapids, Mich., Paul Douglas Kelly, a chiropractor from Cadillac, Michigan, was sentenced to 24 months in prison, two years of supervised release and ordered to pay $279,145 in restitution to the IRS. Kelly pleaded guilty in August 2012 to one count of tax evasion related to a scheme that spanned from 1999 to 2006. According to court documents, during this time period, Kelly earned approximately $2.2 million in gross income from his chiropractic business yet he paid only approximately $23,601 in taxes. He understated his true tax liability by over $250,000. Kelly owned and operated Kelly Chiropractic Center, and later, Advanced Chiropractic Center. From 1999 to 2006, Kelly willfully evaded assessment of income taxes by under-reporting the amount of his business income and inflating his business expenses. Kelly’s scheme to evade the assessment of taxes included maintaining two sets of books and records and only providing his tax preparers with records that did not accurately reflect his total business receipts. He also regularly claimed personal expenses as an off-set to his business receipts on his federal income tax returns. Kelly also utilized a business bank account in the name of KF Asset Management Trust, as opposed to his true business name, in an attempt to further conceal his true financial affairs from the IRS.

Massachusetts Landscaper Sentenced for Tax Fraud
On November 29, 2012, in Boston, Mass., William A. Reinertson, of Hopkinton, Mass., was sentenced to 15 months in prison, one year of supervised release, and ordered to pay $101,588 in restitution. In August 2012, Reinertson pleaded guilty to four counts of filing false tax returns for tax years 2005 through 2008. According to court documents, Reinertson and his wife filed joint returns and submitted false W-2s claiming that the landscaping and construction businesses Reinertson operated withheld more than $200,000 in federal income taxes from wages paid to each of them and claimed they were entitled to tax refunds. In fact, no withholdings had been made or were paid over to the IRS.

Oregon Man Sentenced for Theft of Government Property
On November 28, 2012, in Eugene, Ore., Zachary Stanley Rice, aka Brian Scot Rice, of Josephine County, Oregon, was sentenced to 30 months in prison, three years of supervised, and ordered to pay $284,865 in restitution. Rice was sentenced on charges of theft of government property and making false statements in a passport application. According to court documents and statements made in court, Rice mailed the IRS a fictitious money order for $364,315 that was allegedly drawn on an account at the Federal Reserve Bank of Cleveland. When he filed his federal tax return, the IRS issued him a $284,865 refund which he was not entitled to receive. Additionally, Rice obtained two passports in the names of Zachary Stanley Rice and Brian Scot Rice. Rice used the two identities to facilitate and avoid detection of a variety of fraud schemes related to debt elimination. Rice swindled several individuals out of thousands of dollars who sought his help to obtain debt relief.

Maine Man Sentenced on Mail Fraud and Income Tax Evasion Charges
On November 27, 2012, in Portland, Maine, Matthew J. LaForge, of Brunswick, Maine, was sentenced to 24 months in prison, three years of supervised release and ordered to pay $530,129 in restitution. LaForge pleaded guilty on August 7, 2012 to two counts of mail fraud and one count of income tax evasion.  According to court documents, LaForge defrauded two former employers. During 2006 through 2008, while employed at the first employer as a business analyst, LaForge prepared and submitted invoices to his employer for marketing services totaling around $230,000. LaForge used the name of a fictitious company and directed payments to a mailbox address that he had opened in New Hampshire. Then in 2009, while working as a financial analyst for the second employer, LaForge billed that company for around $220,000 in the same fashion. LaForge also failed to report any of the illicit income on his federal income tax returns for the years 2006 through 2010, resulting in over $89,000 in unpaid income taxes.

Owner of Food Company Sentenced for Fraud
On November 27, 2012, in Atlanta, Ga., Mushtaq “Mike” Mistry, of Lawrenceville, Ga., was sentenced to 12 months and one day in prison, three years of supervised release, six months of home confinement and ordered to pay $342,500 in restitution. Mistry pleaded guilty in September 2012 to submitting over $300,000 in false claims to the U.S. Department of Agriculture (USDA). According to court documents, Mistry was the owner of Salwa Foods, a halal frozen food company located in Lawrenceville, Ga. From April 2007 through August 2009, Mistry submitted false claims under the USDA’s Market Access Program (MAP) to be reimbursed for the cost of television advertising in Dubai for Salwa Foods products.  MAP uses federal funding to help domestic companies finance promotional activities abroad for United States agricultural products. However, the claims submitted did not correspond to any actual payments made to air television commercials in the United Arab Emirates. Over the course of his scheme to defraud the USDA, Mistry obtained $342,500 in payments.  

Former Owner of Private Equity Firm Sentenced for Wire Fraud and Tax Charges
On November 26, 2012, in Charlotte, N.C., Jerry Demario Guess, of Charlotte, was sentenced to 51 months in prison and three years of supervised release in connection with a fraudulent advanced fee loan scheme which cheated victims out of approximately $1.76 million. Guess was also ordered to pay $2,371,401 in restitution of to four victims of the scheme and to the IRS. Guess pleaded guilty to wire fraud and tax charges in October 2011. According to court documents, Guess operated an Internet website for Ligna Acquisition Group, LLP, that advertised Ligna as a sophisticated private equity firm and direct lender routinely making loans of between $25 million and $1 billion to companies. Guess provided information to his victims regarding the loan and the amount of Ligna’s fee. Victims were directed to remit the initial fee to Ligna’s “designated escrow agents.” According to court documents, Guess controlled the funds in these purported “escrow” accounts and used the funds for his personal benefit. Guess falsely advised the victims that, for a variety of reasons, their loans did not close. The victims requested refunds of their advanced fees, but the funds were never paid back.

President of Torco Racing Fuels Sentenced for Making False Claims Against the United States and Bank Fraud
On November 21, 2012, in Grand Rapids, Mich., Evan Ward Knoll, the founder, owner and former president of Torco Racing Fuels, Knoll Gas Motor Sports and General Sales and Service, was sentenced to 168 months in prison, five years of supervised release and ordered to pay $82,933,652 in restitution to the IRS. Knoll pleaded guilty in July 2012 to eight charges of making false claims against the United States and to one count of bank fraud. According to court documents, Knoll exploited a refund program applicable to the federal “excise tax” of 18.3 cents per gallon on all automotive gasoline sold in the United States. The excise tax primarily funds highway construction, but where the gasoline is used for an “off road” purpose, such as drag-racing, the “off road” user who paid the tax can apply for a federal tax refund. Knoll filed false IRS forms over many years in which he falsely claimed to have purchased massive quantities of racing fuel, all of which resulted in refund payments of over $80,000,000. In addition, Knoll also used his refund scheme to commit bank fraud. He obtained a series of bank loans primarily based on his fraudulently obtained refund checks. When the IRS stopped the scheme, Knoll was unable to make the payments on his bank loans. The banks suffered losses of over $10,000,000.

Attorney Sentenced on Tax and Obstruction of Justice Charges
On November 20, 2012, in Philadelphia, Pa., Charles Naselsky was sentenced to 70 months in prison, three years of supervised release and ordered to pay 423,345 in restitution. Naselsky, of Philadelphia, was convicted in September 2012 of two counts of tax evasion, two counts of filing false tax returns, three counts of wire fraud, and two counts of obstruction of justice. According to court documents, Naselsky was an attorney specializing in real estate transactional law. Naselsky instructed some of his clients to pay him directly for professional services, despite knowing that the payments belonged entirely to the law firm where he worked. He then hid that income from the IRS in order to avoid paying taxes on it and filed false income tax returns. When he became aware that he was being investigated by the IRS for tax offenses, he obstructed the investigation by fabricating evidence, including emails, that claimed the monies were loans from a company. In total, Naselsky failed to report $365,000 in income for the years 2005 and 2006.

Foreign Exchange Trader Sentenced for Defrauding Customers Out of Millions of Dollars
On November 20, 2012, in Boston, Mass., Lyndon Lydell Parrilla, of Los Angeles, was sentenced to 97 months in prison, three years of supervised release and ordered to pay approximately $4.6 million to his victims. Parrilla pleaded guilty to seven counts of wire fraud and three counts of money laundering. Parrilla, through his company Green Tree, solicited more than $5 million from customers, purportedly for trading in the foreign currency exchange (Forex) market. Parrilla traded only a small portion of the customer funds in Forex and instead spent most of it on personal expenses for himself and his employees. To hide this fraud, Green Tree e-mailed account statements to customers, showing fabricated trading results. Many of the account statements falsely showed that customers were making money through successful Forex trading.  Ultimately, Parrilla defrauded the Green Tree customers out of almost all of the more than $5 million. Parrilla’s partner in Green Tree, Ryan Manzanilla has also pleaded guilty to wire fraud for his role in defrauding Green Tree customers and is awaiting sentencing.

Business Owner Sentenced for Filing False Tax Return
On November 19, 2012, in Philadelphia, Pa., Mark J. Larocque, of Quarryville, Pa., was sentenced to 12 months and one day in prison and one year of supervised release. Larocque pleaded guilty in August 2012 to willfully filing a materially false federal income tax return, arising from his under-reporting of income and overstating of business expenses for the 2008 tax year. Larocque is the owner of Practical Environmental Solutions, LLC (PES), an environmental service business. According to court documents, for the tax year 2008, Larocque under-reported his income by $248,052 and overstated his business expenses in the amount of $483,339.

California Used Car Wholesaler Sentenced for Tax Evasion
On November 19, 2012, in San Diego, Calif., Mohammad Jafar Nikbakht, aka Freydoon Nikbakht, was sentenced to 15 months in prison and ordered to pay $124,454 in restitution to the IRS. Nikbakht pleaded guilty to tax evasion on March 30, 2011. According to court documents, Nikbakht ran a series of lucrative auto dealerships in the greater San Diego area and significantly under-reported income earned through these businesses. At his plea hearing, he admitted that during 2007 he earned income through auto dealership operations, but willfully failed to file his personal tax return and pay his taxes.

Former Forex Trader Sentenced for Operating Ponzi Scheme
On November 15, 2012, in Chicago, Ill., Jeffery Lowrance was sentenced to 170 months in prison and ordered to pay $17.64 million in restitution. Lowrance pleaded guilty in July 2012 to one count each of wire fraud and money laundering. According to court documents, Lowrance owned Mentor Investing Group, Inc., initially located in San Diego and later in Panama City, Panama. He later owned and was chairman and chief executive officer of First Capital Savings & Loan, Ltd., which he incorporated in 2007 in New Zealand, and which took over Mentor’s purported business and investor accounts. Both businesses claimed to buy and sell foreign currencies (Forex trading) and offered and sold investments through a network of salesmen and investor referrals. Between August 2004 and June 2009, Lowrance and others at his direction fraudulently solicited investments by making material misrepresentations, about, among other things, the profitability of First Capital’s Forex trading, the expected return on and risk involved with the investments, and the use of funds raised from investors. To conceal the fraud, he made Ponzi-type payments to investors and provided investors with fraudulent account statements. Among the specific misrepresentations was that investors would be paid as much as four to seven percent interest per month on their investments. Lowrance used only a small portion of investors’ funds to do Forex trading. In addition to making Ponzi-type payments to investors, he misused investors’ funds to pay First Capital’s expenses, expenses of unrelated business ventures including a newspaper, and to make payments for his own benefit and the benefit of his family and associates. Lowrance fraudulently obtained approximately $31 million from 452 investors. After deducting Ponzi-type payments that he made to some investors, the scheme resulted in losses totaling approximately $17.6 million to 343 investors nationwide.

Tennessee Man Sentenced for Operating Phony Invoice Scheme
On November 13, 2012, in Minneapolis, Minn., Jeffrey Cole Bennett, of Lakeland, Tennessee, was sentenced to 95 months in prison and ordered to pay $393,183 in restitution. Bennett was convicted by a jury on December 6, 2011, on one count of mail fraud, one count of conspiracy to commit mail fraud, one count of conspiracy to commit money laundering, and two counts of tax evasion. According to trial evidence, from January 2003 through April 2005, Bennett conspired with co-defendant Clayton Hogeland, of Aurora, Texas, to defraud Advantage Transportation, a freight transportation logistics provider headquartered in Eagan. Hogeland was Advantage’s general manager, and in May 2003, he hired Bennett to be the sales manager for the company’s Tennessee office. Bennett submitted false invoices to Advantage for nonexistent goods and services from four shell companies he formed. Bennett formed three of those companies for the sole purpose of conducting the fraud scheme. Payment of the invoices was then approved by Hogeland, who, in addition, caused checks to be issued to the shell companies, knowing the invoices were fraudulent. Between January 2003 and April 2005, those payments totaled more than $390,000. Bennett kept approximately $250,000 of that money for himself, while paying out about $140,000 in kickbacks to Hogeland. Bennett also failed to report to the IRS or pay taxes for the money he obtained through the fraud scheme during tax years 2004 and 2005.

Texas Church Leaders Sentenced for Defrauding IRS
On November 13, 2012, in Houston, Texas, David A. and Bridget M. Montgomery, a husband and wife, were each sentenced to 41 months in prison, three years of supervised release and ordered to pay $550,000 in restitution to the IRS. According to court documents, the Montgomerys founded their own church, Restoration Temple Church of God in Christ, in Humble. The Montgomerys were convicted in August 2012 for conspiring to impair and impede the IRS in its computation and collection of income taxes between January 2003 and April 2006. They were also convicted for making false statements in relation to their 2004 and 2005 income tax returns by under-reporting approximately $2.1 million in gross income from their construction business, Montgomery’s Contracting.

Maryland Liquor Store Owner Sentenced for Evading Income Taxes
On November 6, 2012, in Baltimore, Md., Kwang Sik Kim, of Clarksville, Maryland, was sentenced to 12 months in prison, six months home detention and three years of supervised release for evading his 2009 income taxes. Kim was also ordered to forfeit $104,680 from $260,900 previously seized on October 18, 2011. The balance of the seized funds are to be remitted to the IRS and applied to Kim’s 2008 and 2009 taxes due. According to his plea agreement, Kim is the owner of KSJB, Inc., dba Limetree Liquors, a liquor store operating in Baltimore. Between March 27, 2009 and May 5, 2011, Kim made regular deposits of cash by “structuring” his bank deposits in order to keep the deposits less than $10,000 so as to avoid bank reporting requirements, dividing his deposits between several bank accounts and depositing funds on successive days. In all, Kim deposited $1,046,800, in amounts at or below $10,000, in just over two years. A review by the IRS of Kim’s tax returns indicates that he also under-reported his gross receipts for 2008, 2009 and 2010 by a total of $839,061 resulting in a federal tax loss totaling $235,526.

Owner of Ohio Painting Company Sentenced for Paying Bribes to Inspectors and Tax Charges
On November 2, 2012, in Cleveland, Ohio, George Kafas, of Seven Hills, Ohio, was sentenced to 27 months in prison, three years of supervised release and ordered to pay $60,687 in restitution to the IRS and $60,000 in restitution to the Ohio Department of Transportation (ODOT). Kafas pleaded guilty in June 2012 to conspiracy to commit bribery and make false statements in connection with a highway project, bribery, tax evasion and filing false returns. According to court documents, Kafas owned and operated Skyway Industrial Painting and Contracting. Between December 2000 and January 2001, Skyway was subcontracted to paint bridges in Ashtabula County for $200,000. Between January and June 2002, ODOT hired Skyway to perform bridge painting in Carroll County for approximately $218,960. All the bridge painting work required inspections for quality assurance. Kafas and his brother, John Kafas, made improper payments to on-site bridge painting inspectors and cause the inspectors to falsify documents and inspection results presented to ODOT. In addition, Kafas falsely under-reported his income and/or his companies’ receipts on five tax returns between 2000 and 2002, resulting in under-reporting income or receipts by $280,456 over that period.

New York Man Sentenced for Mail Fraud and Tax Evasion
On October 31, 2012, in Buffalo, N.Y., Bernard Lane was sentenced to 41 months in prison and ordered to pay $58,524 in restitution to the IRS after being convicted of mail fraud and tax evasion. According to court documents, between April 2003 and November 2006, Lane was employed as a Director of the Information Technology Department. During that time, Lane directed the purchase of 251 laptop computers and then directed that invoices be submitted for payment. After receiving the computers, Lane sold them to someone else for approximately $175,000. For the tax years 2005 through 2007, Lane failed to file federal income tax returns which would have included the money he received for the sale of the laptop computers.

Alabama Businessman Sentenced for $450,000 Federal Tax Violation
On October 31, 2012, in Birmingham, Ala., Ahmad “Mike” Rahiminejad, of Helena, Ala., was sentenced to 21 months in prison, one year of supervised release, and ordered to pay $446,693 in restitution to the IRS. Rahiminejad pleaded guilty in July 2012 to filing a false tax return. According to court documents, Rahiminejad owned or operated several businesses in the Birmingham Metro Area. While Rahiminejad disclosed those businesses on his federal income tax returns for tax years 2006 through 2009, he “greatly understated” his gross receipts and business income for those four years resulting in a tax loss of nearly $450,000 to the IRS.  

Michigan Man Sentenced on Tax Charge
On October 31, 2012, in Detroit, Mich., Andrew Park was sentenced to 12 months in prison, two years of supervised release and ordered to pay $301,000 plus penalties and interest to the IRS. Park pleaded guilty on December 17, 2012, to tax evasion. According to court documents, Park is an owner and executive of Asian Village Detroit, Inc. (Asian Village), Pangborn Technovations, Inc. (PTI), and the Security Communication Alert Network (SCAN). During the years 2005 through 2007, Parks failed to pay taxes on $898,000 in income that he earned in connection with Asian Village, PTI, and SCAN.

Arizona Man Sentenced for Role in Ponzi Scheme
On October 31, 2012, in Phoenix, Ariz., Gerald Lee Kelly was sentenced to 27 months in prison, three years of supervised release and ordered to pay $915,028 in restitution. Kelly pleaded guilty on May 14, 2012 to wire fraud, transactional money laundering and structuring financial transactions through a domestic financial institution. According to the plea agreement, Kelly, dba Cornerstone Financial Holdings, LLC, solicited funds from investors to purportedly make loans to individual homeowners in need of financing secured by second deeds of trust or some variation of a security instrument. Beginning in 2006 through December 2007, Kelly devised a scheme to obtain money by making false promises and misrepresentations to investors. Kelly falsely represented a high return on investors principal. He provided some lender/investor victims with second deeds of trust, open-ended mortgages, home equity loans or other contracts purportedly securing the victims' investment knowing some of them were worthless and a sham. Kelly also issued promissory notes to several investors and made sporadic payments to mute their concerns and demands for payments knowing there was not sufficient money to satisfy the obligation. Additionally, on March 1, 2007, Kelly avoided reporting requirements by depositing two $9,500 checks into separate bank accounts.

Montana Woman Sentenced in Wire Fraud and Identity Theft Scheme
On October 29, 2012, in Billing, Mont., Krista Lynn Martinez was sentenced to 30 months in prison, three years of supervised release and ordered to pay a $600 special assessment and $9,116 in restitution. Martinez pleaded guilty to wire fraud and aggravated identity theft charges. According to court documents, Martinez worked for Ashley Lamere at a telemarketing company. From approximately January 18, 2011 through at least February 20, 2012, Lamere, Martinez and others participated in a scheme to create fake payroll checks and cash the checks at Wal-Marts around the United States. As part of the scheme, Martinez and others obtained Social Security account numbers from individuals by posting fraudulent "Help Wanted" advertisements on Craig's List. Individuals would call about the job posting and were asked to provide their Social Security numbers for background checks and prehiring paperwork. They were also asked whether they had ever used the check cashing services offered by Wal-Mart. Once an individual uses the Wal-Mart check cashing system, all that is needed is the Social Security number to cash future checks. If an individual had previously used the check cashing services their Social Security number was written down and used by Lamere, Martinez and others to cash the fraudulent checks. Lamere, Martinez and others cashed at least 180 counterfeit checks around the United States with the total loss to Wal-Mart exceeding $200,000. Lamere is awaiting sentencing.

Former Colorado Resident Sentenced for Income Tax Evasion
On October 24, 2012, in Denver, Colo., William Ballantine, of Kirkland, Wash., formerly of Durango, Colo., was sentenced to 13 months in prison, three years of supervised release, and ordered to pay $480,000 in restitution and a $20,000 fine. Ballantine pleaded guilty on April 3, 2012 to one count of income tax evasion. According to the plea agreement, Ballantine established the William Ballantine Fund through an agreement with the National Philanthropic' Trust (NPT), a Pennsylvania nonprofit corporation. The Fund was established to provide donations to charitable entities, and was managed and owned by the NPT.  In August 2008, and continuing through about September 2009, Ballantine knowingly executed a scheme to defraud the Fund, the NPT, and a church. In July 2008, Ballantine contacted the pastor of the church and advised him that he was in the process of forming a charity to provide computers to poor children in Antigua. Members of Ballantine’s family were long time members of the church and the pastor knew him. Ballantine advised the pastor that he needed the assistance of the church to move contributions for his charity through the church until his charity was established. Ballantine made requests via email or facsimile of NPT to send money to the church. NPT mailed several checks to the church totaling $395,000 between August, 2008, and September, 2009. According the Ballantine’s instructions, the pastor deposited $35,000 into the church's bank account, and $360,000 into the Ballantine’s bank account. Ballantine admitted to law enforcement officers the $360,000 he received from the church was not used for charitable causes. For the tax years 2008 and 2009, Ballantine owed in excess of $143,000.

Ohio Man Sentenced for Operating Ponzi Scheme
On October 23, 2012, in Cincinnati, Ohio, Jasen Snelling was sentenced to 131 months in prison and ordered to pay $5,336,177 in restitution to victims and $596,928 in restitution to the IRS. On June 28, 2012, Snelling pleaded guilty to three counts of a four-count Bill of Information charging him and his co-conspirator, Jerry Smith, with crimes arising out of their operation of a multi-million dollar Ponzi scheme. According to court documents, Snelling engaged in a mail and wire fraud conspiracy in connection with a scheme to defraud investors in CityFund and Dunhill, two bogus “day trading” entities. These entities were nothing more than bank accounts where investors’ funds were deposited and then spent by Snelling and Smith. Snelling created fictitious trading statements and provided them to federal agents to impede the investigation and cover up the fraud. In addition, for the 2005 through 2010 tax years, Snelling omitted a total of $2,091,770 in income derived from the stolen investment funds on his personal income tax returns, resulting in a total tax loss to the IRS of $596,928. Smith is awaiting sentencing.

South Carolina Woman Sentenced on Embezzlement and Tax Fraud Charges
On October 16, 2012, in Columbia, S.C., Tina Lewis Clinton, of Newberry, was sentenced to 30 months in prison on one count of embezzlement and five counts of filing false tax returns. According to evidence presented at the sentencing hearing, from 2005 to 2009, Clinton embezzled $440,958 from a nursing home where she worked as a bookkeeper. In her position, rather than depositing checks for residents receiving social security and veteran’s benefits, Clinton cashed the checks and diverted the funds to her personal use. Clinton was able to cover her theft by making accounting adjustments to the residents’ accounts. Clinton also failed to report the stolen income on her tax returns, and owes over $65,000 in additional taxes. No resident of the nursing home lost money as a result of the embezzlement because the loss was covered by a bonding company. Clinton was ordered to make full restitution of the loss to the bonding company and to the IRS.  

Massachusetts Man Sentenced for Defrauding Investors
On October 12, 2012, in Boston, Mass., James S. Sakkos, of Holliston, was sentenced to 53 months in prison, five years of supervised release and ordered to forfeit various automobiles and other assets that Sakkos obtained through his fraud. On July 18, 2012, Sakkos pleaded guilty to 6 counts of wire fraud, 12 counts of monetary transactions with proceeds of illegal activity, 25 counts of obtaining controlled substances by fraud and of lying to a federal investigator. According to court documents, Sakkos persuaded a physician to invest in a software company that Sakkos claimed to operate. Between 2003 and 2011, Sakkos told the physician and the physician’s sister about the purported success of the company making substantial sales to major U.S. corporations. To support these fraudulent representations, Sakkos provided his victims with a forged letter from a prominent investment banking firm, expressing interest in a public offering of the software company’s stock. The software company, however, was nothing more than a trade name Sakkos used to open a bank account into which he funneled the investors’ money. Instead of using the investors’ money for business purposes, Sakkos diverted virtually all of the investors’ funds to his own personal use, including living expenses, purchases of a home in Florida and luxury automobiles.

Former Insurance Salesman Sentenced for Aiding the Filing of False Income Tax Return
On October 11, 2012, in Albuquerque, N.M, Michael Craig Celenze, currently residing in Odessa, Texas, was sentenced to 12 months and one day in prison, one year of supervised release, and ordered to pay $380,863 to the Crime Victim’s Fund of the United States Treasury. Celenz pleaded guilty to aiding and abetting in the filing of a false income tax return. In his plea agreement, Celenze initiated a business venture in 2004 that sought to make a profit through the purchase of property in Puerto Peñasco, Mexico, and he solicited investors in a limited liability corporation, Puerto Peñasco Getaway LCC (PPG), from 2004 through 2006. Celenze admitted that he falsely represented to investors that PPG was a qualified rollover vehicle, which permitted the investors to withdraw funds from their 401K and other retirement accounts without having to pay taxes on those funds. At the time, Celenze knew that PPG was not a qualified rollover vehicle and that funds withdrawn from retirement accounts would give rise to tax liability. Celenze also assisted investors in making similar misrepresentations regarding the status of PPG as a qualified rollover vehicle to the financial institutions that served as custodians of the investors’ retirement accounts. He did so knowing that the investors would file false returns, which failed to declare as taxable income the funds withdrawn from the retirement accounts, with the Internal Revenue Service.  

Iowa Man Sentenced for Filing False Claims for Refunds
On October 11, 2012, in Cedar Rapids, Iowa, Gene Jirak, of Ft. Atkinson, was sentenced to 45 months in prison and three years of supervised release. Jirak was convicted in June 2012 of two counts of submitting false claims for tax refunds, one count of uttering a fraudulent treasury check, one count of mail fraud, and one count of aggravated identity theft. According to the evidence at trial, Jirak filed two fraudulent tax returns claiming tax refunds. In support of these fraudulent claims for refunds, Jirak claimed that financial institutions withheld taxes and he submitted fabricated tax documents purportedly issued by the financial institutions. In addition, Jirak filed the first fraudulent tax returns as an amended joint tax return. He used his ex-wife's name and social security number, and forged her signature on the tax return without her knowledge or permission.

Two Contractor Employees Sentenced for Kickback Conspiracy and Tax Crimes Related to Iraq Reconstruction Efforts
On October 10, 2012, in Huntsville, Ala., Billy Joe Hunt was sentenced to 15 months in prison, three years of supervised release and ordered to pay $66,212 in restitution to the IRS and to forfeit $236,472. On October 9, 2012, in Birmingham, Ala., Gaines R. Newell Jr. was sentenced to 27 months in prison, three years of supervised release and ordered to pay $1,102,115 in restitution and to forfeit $861,027. Both men, former employees of The Parsons Company, an international engineering and construction firm, were sentenced for participating in a kickback conspiracy in Iraq and related tax crimes. On May 8, 2012, Hunt pleaded guilty to one count of conspiracy to commit mail and wire fraud and pay kickbacks, and one count of filing a false tax return. On April 10, 2012, Newell pleaded guilty to one count of conspiracy to commit mail and wire fraud and pay kickbacks, and one count of filing a false tax return. According to court documents, Newell and Hunt were employed by Parsons in Iraq as program manager and deputy program manager, respectively. They were under a contract that Parsons held to support the Coalition Munitions Clearance Program operated by the U.S. Army Corps of Engineers in Huntsville. In their plea proceedings, Newell and Hunt admitted taking over $1 million in kickbacks from subcontractors, from 2005 to 2007, in return for arranging to award contracts on the munitions clearance program to those subcontractors. Newell and Hunt also admitted filing false federal income tax returns by not disclosing the kickback income.

Texas Man Sentenced for Running Investment Scheme
On October 9, 2012, in Dallas, Texas, Bradley Stark, formerly of Riverside, Calif., was sentenced to 276 months in prison and ordered to pay approximately $13 million in restitution. Stark was convicted in January 2012 on seven counts of wire fraud and one count of securities fraud related to his fraudulent securities offerings. According to court documents, Stark incorporated Sardaukar Holdings as an international business corporation in the British Virgin Islands, to engage in the business of investing and managing clients’ financial assets. From October 2004 through July 2005, Stark operated Sardaukar from his residence in Riverside. Stark lied to investors that he had previous institutional trading experience and was a registered broker. He also falsely told investors that Sardaukar had yielded high rates of return, often more than 20 to 30 percent per month. He told investors that for $50,000 they could purchase an insurance contract through him that would insure invested principal against any loss.

Connecticut Man Sentenced for Embezzling Over $400,000 from Boys and Girls Club
On October 5, 2012, in Hartford, Conn., Robert Generali, of Waterbury, was sentenced to 57 months in prison and three years of supervised release for embezzling $423,908 from the Boys and Girls Club of Greater Waterbury. The court also ordered Generali to pay full restitution to the Boys and Girls Club, $168,285 in back taxes, penalties and interest, and a $7,500 fine. On February 27, 2012, Generali pleaded guilty to one count of theft from a program receiving federal funds, one count of wire fraud and one count of filing a false tax return. According to court documents and statements made in court, Generali was the Executive Director of the Boys and Girls Club of Greater Waterbury and had sole responsibility for managing the Club’s day-to-day finances. From January 2007 through May 2011, Generali embezzled from the Club by using the Club’s funds to pay for personal expenses he charged to a credit card he established in the Club’s name. Generali also established an unauthorized “off-the-books” bank account, funded with approximately $30,000 in Club funds, which he used to pay personal expenses. In addition, Generali authorized issuing checks to “phantom” employees and then negotiated the checks for his own unauthorized use. Generali filed federal tax returns that did not include the embezzled income for tax years 2007 through 2010. He also did not report on his tax returns a $40,000 raffle prize that he won in 2007 and a $100,000 gambling prize that he won in 2008.

Missouri Woman Sentenced for Forging Checks and Filing a False Tax Return
On October 3, 2012, in Springfield, Mo., Carla Jean Wilson, of Ash Grove, was sentenced to 37 months in prison and ordered to pay $611,000 in restitution. Wilson pleaded guilty on April 12, 2012, to forging checks from her employer and to filing a false tax return. According to court documents, Wilson, an accountant, was employed at Kitchenland USA, Inc., as an office manager beginning in August 2004 until she was terminated on September 20, 2010. Wilson admitted that she was involved in a scheme to embezzle funds from Kitchenland between January 19, 2007, and September 20, 2010. During that time period, Wilson obtained signed bank checks drawn on Kitchenland’s bank account, which she made payable to herself. Wilson received a total of $479,803 in unauthorized payments from checks drawn on Kitchenland’s account. Wilson failed to report the embezzled funds as income when she filed federal tax returns for the years 2007 through 2010.

Pizza Restaurant Owner in Texas Sentenced on Tax Conviction
On October 2, 2012, in Amarillo, Texas, Paul Khoury was sentenced to 12 months in prison, ordered to pay a $10,000 fine and $98,729 in restitution to the IRS. Khoury pleaded guilty in July 2012 to one count of making a false statement. According to court documents, Khoury owned and operated two pizza restaurants in Amarillo. Khoury would not deposit all the cash sales into his business account, instead he would use the money to pay employees, cash employees paychecks, purchase goods and services and pay for personal expenses. Khoury did not claim this cash income on his tax returns for the years 2006 through 2008.

 

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