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.
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.