Examples of General Fraud Investigations - Fiscal Year 2014
The following examples of general fraud investigations are written from public record documents on file in the courts within the judicial district where the cases were prosecuted.
Leader of Massive Real Estate Fraud Scheme Sentenced for Fraud and Money Laundering
On Feb. 19, 2014, in Trenton, N.J., Eliyahu Weinstein, aka Eli Weinstein, aka Edward Weinstein, aka Eddie Weinstein, of Lakewood, N.J., was sentenced to 264 months in prison, three years of supervised release and ordered to pay $215.4 million in restitution and forfeiture of $215.4 million. Weinstein previously pleaded guilty to two counts of an indictment charging him with conspiracy to commit wire fraud and money laundering. According to court documents, from June 2004 through August 2011, Weinstein orchestrated, with the help of others, a real estate investment fraud scheme that resulted in multimillion-dollar losses to victim investors. To induce victims to invest, Weinstein and others made various types of materially false and misleading statements and omissions. Weinstein and others told victims that Weinstein’s inside access to certain real estate opportunities allowed him to buy a particular piece of property at a below-market price. Weinstein and others told victims that their money would be used to purchase a specific property, and the property would be quickly resold – or “flipped” – to a third-party purchaser that Weinstein had lined up. Victims were also told that the their money would be held in escrow until the closing of a purported real estate transaction. Weinstein bolstered his lies by creating, and causing to be created, various types of fraudulent documents. Weinstein used millions of dollars fraudulently obtained from his victims to fund his own lavish spending including millions of dollars’ worth of antiques, artwork, a multimillion-dollar collection of jewelry and watches, gambling and personal expenses.
Business Owner Sentenced for Tax and Structuring Violations
On Feb. 18, 2014, in Los Angeles, Calif., Jeremy Scott Levine, of Newport Beach, was sentenced to 18 months in prison and ordered to pay $300,000 in restitution to the IRS. Levine pleaded guilty in June 2013 to one count of subscribing to a false tax return for the 2010 tax year and one count of structuring a cash transaction. Levine was the owner and president of JSL Construction and Landscaping (JSL), a general contracting business in Newport Beach. According to the plea agreement, for the 2006 through 2010 tax years, Levine failed to report all of the business receipts of JSL on the individual and corporate income tax returns. Beginning in 2006, Levine directed numerous JSL customers to pay for some of the services provided by JSL by writing checks payable to Levine, individually, rather than writing a check payable to JSL. During the years 2006 through 2010, Levine cashed JSL customer checks, totaling approximately $2 million. For the years 2006 through 2009, Levine failed to report $1,498,907 in income resulting in a tax due and owing to the government of approximately $300,000. In addition to subscribing to a false income tax return, Levine pleaded guilty to cashing checks of less than $10,000 to evade federal reporting requirements.
New York Man Sentenced for Tax Crimes
On Feb. 14, 2014, in Rochester, N.Y., John P. Gizzi was sentenced to 12 months of home confinement, 5 years of probation and ordered to pay a $15,000 fine. Previously, a business that Gizzi owned, Rochester Business Machines Supplier, Inc., was sentenced to pay a fine of $500,000. On July 30, 2013, Gizzi pleaded guilty to filing false tax returns in 2008 and 2009. According to court documents, Gizzi criminally cheated the United States out of $1,901,633 in federal income taxes by using entities he owned to conceal income and artificially inflate expenses in several complex schemes. Gizzi and his business have now paid the United States approximately $11.5 million in back taxes, fraud penalties, interest, fines and forfeitures, in this and related tax proceedings.
New York Woman Sentenced for Fraud
On Feb. 14, 2014, in Syracuse, N.Y., Patricia Harrington, of Liverpool, N.Y., was sentenced to 55 months in prison, three years of supervised release and ordered to pay $19,424 in restitution to the New York State Department of Labor and $28,031 to the IRS, along with interest and penalties. On Sept. 11, 2013, Harrington pleaded guilty to 11 wire fraud, tax fraud and aggravated identity theft charges. According to court documents, Harrington submitted six false federal tax refund claims in the name of family members, without their knowledge, during 2011 and 2012. She also fraudulently obtained monies from the New York State Department of Labor in 2011 and 2012 by submitting false claims for unemployment benefits in the name of various family members, again, without their knowledge. Harrington used the identity of another person to commit her crimes. At the time she committed these offenses she was serving a term of federal supervised release in connection with a conviction for a similar fraud scheme in Pennsylvania in 2009.
Florida Man Sentenced for Tax Evasion and False Statements
On Feb. 14, 2014, in Tallahassee, Fla., William “Geri” Eaton was sentenced to 27 months in prison and ordered to pay $99,126 in restitution. In November 2013, Eaton pleaded guilty to charges of tax evasion and making false statements in a matter involving a health care benefit program. According to court documents, between 2004 and 2008, Eaton earned more than $1.18 million in taxable income. He failed to file his federal income tax returns as they became due and instead, in the fall of 2009, Eaton filed late returns for all four prior tax years. His total tax due, not counting interest and penalties, was more than $472,000. In early 2010, Eaton entered an agreement to pay his back taxes in monthly installments of $1,000. He made six payments, and then stopped paying altogether. On April 29, 2011, Eaton opened an account under a false social security number at a Tallahassee credit union. One week later, he sold his beach house for more than $1.3 million. To conceal the money from the IRS, Eaton deposited $727,437 in proceeds he received from the sale into his fraudulently opened credit union account. He later transferred a portion of this money to a Pensacola credit union account, which he had also opened under a false social security number. Over the course of the next seven months, Eaton spent more than $125,000 of the sales proceeds. He made no payments on his taxes during this period. In November 2011, the IRS levied Eaton’s fraudulently opened credit union accounts and obtained approximately $610,000 as payments toward his tax liabilities.
California Man Sentenced for Role in Ponzi Scheme
On Feb. 14, 2014, in Sacramento, Calif., Kenneth Kenitzer, of Pleasanton, was sentenced to 72 months in prison and three years of supervised release. According to court records, beginning in 2006, Kenneth Kenitzer and Anthony Vassallo ran Equity Investments Management & Trading (EIMT). Vassallo claimed that he had developed computer software that enabled him to make profits of approximately 3 percent per month or 36 percent per year. Investors were told that this strategy had worked successfully for years with one loss situation that had been corrected. In fact, Vassallo’s strategy had been historically unsuccessful, losing money overall. Investors generally funneled money into EIMT through a number of sub-funds. Kenitzer was an officer of EIMT and the primary administrator of several of the sub-funds that invested with EIMT. He also was the primary point of contact for investors and sub-fund managers to actually transfer money to and from EIMT. More than 300 individuals invested in the EIMT scheme, contributing at least $83 million. Of that amount, more than $55 million was returned to investors, although nearly $17 million of that constituted amounts paid to some investors above the amount of their original investments. Thus, actual loss to the investors totaled more than $40 million. Vassallo was sentenced in June 2013 to 192 months in prison.
Former Laboratory Executive Sentenced for Tax-Related Crimes
On Feb. 13, 2014, in Boston, Mass., Patrick Cavanaugh, of Gloucester, was sentenced to 18 months in prison and one year of supervised release. In 2013, Cavanaugh pleaded guilty to four counts of subscribing to false tax returns for tax years 2005 through 2008. According to court documents, Cavanaugh, the former chief operating officer of Calloway Laboratories, Inc., a urine drug testing company in Woburn, Mass., filed false federal income tax returns for tax years 2005 through 2008, by substantially underreporting his income during those tax years. During that period, while employed at Calloway, Cavanaugh received payments, in the form of checks and cash, from JAC Resources, Inc., a straw company that Cavanaugh owned and controlled, but failed to report the income on his federal income tax returns.
Former Coroner Sentenced for Conspiracy to Steal Government Funds
On Feb. 12, 2014, in New Orleans, La., Peter Galvan, the former St. Tammany Parish Coroner, was sentenced to 24 months in prison, one year of supervised release and ordered to pay $193,388 in restitution. Galvan pleaded guilty on Oct. 23, 2013 to conspiring to steal government funds from the St. Tammany Parish Coroner’s Office. According to court records, Galvan earned annual or sick leave to which he was not entitled. However, with the assistance of another coroner’s office employee, Galvan received yearly payments for unused annual and sick leave, totaling $111,376 over a five year period. Galvan, as a physician, individually contracted with the City of Slidell, La. to provide medical services for inmates of the Slidell City Jail. The contract was not with the St. Tammany Parish Coroner’s Office, but with Galvan personally. However, Galvan conspired with another individual employed with the St. Tammany Parish Coroner’s Office to service this contract while the other individual was supposed to be working for and was being paid by the St. Tammany Parish Coroner’s Office. The Coroner’s Office employee was paid at least $50,000 in public funds to fulfill Galvan’s personal contract. Additionally, Galvan conspired with an employee of the coroner’s office to purchase personal item valued at over $16,000 for his personal use, all with St. Tammany Parish Coroner’s Office funds. Finally, Galvan used his St. Tammany Parish Coroner’s Office credit card to make purchases of meals and other personal items totaling $15,606 which were unrelated to the office’s business.
Former Nightclub Owners Sentenced for Tax Violations
On Feb. 12, 2014, in Buffalo, N.Y., Vincent Giamo, of Orchard Park, N.Y., was sentenced to 12 months in prison after a previous conviction for tax evasion. His wife Mary Giamo was sentenced to three years’ probation after a previous conviction for aiding or assisting in the preparation of a false tax return. The couple was also ordered to pay $671,840 in restitution and have already paid $550,000 to the IRS. According to court documents, the couple owned and operated a bar business, known as "Utopia." Between 2002 and 2005, Vincent Giamo maintained two sets of books for "Utopia." One set of books was used for preparing and filing of the corporate tax returns and the other set of books reflected the true receipts and expenses for the business. The total amount of tax loss associated with the evasion is approximately $1,225,651. Mary Giamo, as an officer of the corporation, aided her husband in filing false returns for the taxable years 2004 and 2005 resulting in a tax loss of approximately $123,454 for those years.
Owner of Construction Company Sentenced for Tax Fraud
On Feb. 11, 2014, in San Francisco, Calif., Brian Kenny was sentenced to six months in prison and six months of home confinement and ordered to pay $199,493 in restitution. Kenny pleaded guilty on Nov. 5, 2013 to aiding and assisting in the preparation and presentation of a false tax return. According to court records, on or about Feb. 17, 2005, Kenny incorporated his business, SF Bay Construction, Inc. (SFBC). SFBC filed tax returns reporting business gross receipts but paid no corporate income tax. Rather, Kenny reported SFBC’s income on his personal income tax return and paid the tax as SFBC’s sole shareholder. Kenny, however, evaded the full payment of his individual income taxes by underreporting SFBC’s business gross receipts. Kenny failed to report $470,225 in business gross receipts during the 2006 tax year. He knew the amount of business gross receipts reported on SFBC’s tax return was material to the calculation of income tax owed on his personal income tax return.
Financial Advisory Sentenced for Investment Fraud Scheme
On Feb. 10, 2014, in Reno, Nev., Gary H. Lane, a former bank financial advisor, was sentenced to 120 months in prison, five years of supervised release and ordered to pay restitution to the victims. Lane pleaded guilty in September 2013 to 12 counts of mail fraud and five counts of attempt to evade or defeat tax. According to court documents, Lane was employed until March 2011 as a financial advisor with Bank of America Investment Services. During the course of Lane’s employment, he developed a scheme to entice persons to invest monies with him through the use of an E-Trade account rather than through normal bank procedures. Lane allegedly looked for investors who were elderly or lacked investing experience and who had a desire for high returns and aversion to risk. Lane told the investors that their funds would be invested in United States Treasury Bonds which would pay better than six percent interest and would mature in two years. Lane corroborated the trades by creating false confirmations and distributing them to the victims by mail. After receiving the monies from the victims, Lane gave them to his spouse who mailed them to her E-Trade account. The monies were then withdrawn at Lane’s direction for his own use or to pay other investors. In actuality, Lane never purchased any United States Treasury Bonds with the victims’ monies. In fact, there were never any United States Treasury Bonds that existed with a rate of return of greater than six percent and a maturity period of less than two years. Using this scheme, Lane defrauded approximately six persons of over $2 million between January 2010 and March 2011. Lane also filed false and fraudulent individual tax returns for the years 2006 through 2010, substantially understating his income and tax due and owing to the IRS.
California Man Sentenced in Investment Fraud Scheme
On Feb. 10, 2014, in Los Angeles, Calif., Nicholaus Skultety was sentenced to 41 months in prison and ordered to pay $10.9 million in restitution to victims of his scheme. In October 2013, Skultety pleaded guilty to conspiracy to commit wire fraud and willful failure to file a tax return. According to court documents, Skultety was the President of Operations of American Paramount Financial, a private funding group located in Westlake Village. Between at least January 2009 through May 2010, Skultety and other unidentified co-conspirators solicited at least 42 investors seeking loans either in person or by phone. Investors were told that their loans would be provided through American Paramount and secured by a Stand-by-Letter of Credit (SBLC) issued by a bank. Investors were further told that they had to pay American Paramount an upfront lender fee of typically two percent of their requested loan amount prior to the issuance of the loan. Investors were further told that their lender fees would be held in a secure “attorney-trust account” or in an American Paramount corporate holding account, and that the fees would be returned to the investors if the loans did not fund within 30 days of receipt of the fees. In truth, no loans were funded. Nonetheless, Skultety and other co-conspirators transferred and withdrew the investors’ fees before the expiration of the 30-day periods, and without the investors’ permission. As a result, Skultety received $14,251,939 from 42 investors between January 2009 and May 2010. Skultety paid back $3,937,950, thus causing a loss of $10,313,989. During calendar year 2009, Skultety received at least $1,349,595 in gross income. However, Skultety failed to timely file a personal federal income tax return for the 2009 tax year claiming this income.
Mississippi Office Manager Sentenced for Tax Evasion, Bank Fraud
On Feb. 4, 2014, in Jackson, Miss., Barbara Cummings, of Clinton, Miss., was sentenced to 23 months in prison and five years of supervised release. Cummings pleaded guilty in October 2013 to tax evasion and bank fraud. According to court documents, from March 2007 through March 2009, Cummings was employed as the office manager at Mid-South Machinery in Jackson. During her employment, she systematically forged the signatures of the owners of Mid-South Machinery on numerous checks drawn on Mid-South Machinery’s bank accounts, making such forged checks payable to herself and her husband and cashing and depositing funds into her personal bank account. Cummings also altered the dollar amounts written on transaction tickets from a Mid-South bank account that were made payable to “Petty Cash” or she would fraudulently create a transaction ticket, making it payable to “Barbara Cummings,” and keeping some or all of the money. During 2008, she prepared her own income tax return, where she intentionally failed to report over $120,000 in income she had received that year through her fraudulent scheme.
Louisiana Lawyer Sentenced for False Tax Claims
On Feb. 4, 2014, in Monroe, La., Francis C. Broussard, of West Monroe, La., was sentenced to 28 months in prison and three years of supervised release for making false, fictitious, and fraudulent claims to the IRS. He pleaded guilty on April 19, 2013. According to evidence presented at court, Broussard, who has been licensed to practice law in Louisiana since 1986, filed personal tax returns in 2009 for years 2005 to 2008 using documents containing false information in an attempt to receive a total of $9.7 million in refunds to which he was not entitled. Broussard did not receive the requested refunds.
Former County Sheriff Deputy Sentenced for Role in Ponzi Scheme
On Feb. 4, 2014, in Denver, Colo., David N. Hawkins, of Colorado Springs, Colo., was sentenced to 30 months in prison, three years of supervised release and ordered to pay $204,348 in restitution and to forfeit $17,000. Hawkins pleaded guilty on March 15, 2013 to one count of wire fraud and one count of money laundering. According to court documents, Hawkins was employed as a deputy sheriff for the El Paso County, Colorado Sheriff's Office. In 2006, Hawkins attended training courses on how to trade profitably in foreign currencies and the exchanges of foreign currencies (FOREX). From in or about November 2009, and continuing through early December 2011, Hawkins obtained in excess of $1.2 million from his colleagues, other law enforcement officers, and their respective friends and relatives for the purpose of trading these funds in the FOREX markets on their behalf. He had approximately 73 investors, most investors using personal savings or retirement funds accumulated over the years as their source of the investment funds. Estimated losses to investors collectively total approximately $204,349. Hawkins made several false representations to investors, including investors would be guaranteed a return of 10% per month. Over time Hawkins removed investor funds from FOREX trading accounts into bank accounts he controlled. He would then use these funds either for his own personal expenses, for personal investments unrelated to FOREX investments or to fund payments to those of his investors who requested to withdraw their principal investments. In addition to making Ponzi scheme payments to investors, Hawkins diverted approximately $175,587 for his own uses and purposes.
Attorney Sentenced for Unlawfully Intercepting Telephone Conversations and Tax Evasion
On Feb. 3, 2014, in San Francisco, Calif., Mary Nolan, a divorce and family law attorney in San Ramon, Calif., was sentenced to 24 months in prison, three years of supervised release and ordered to pay $468,918 in restitution. In addition, the court ordered the resignation of her bar license. Nolan pleaded guilty on September 27, 2013, to one count of unlawful interception of communications and four counts of tax evasion. According to court documents, Nolan caused her staff to illegally intercept telephone conversations by accessing a listening device that a private investigator had installed in a victim’s vehicle. She also willfully evading more than $400,000 in federal taxes between 2005 and 2009, and obstructed justice by submitting false contracts to the IRS during an audit.
Illinois Businessman Sentenced for Tax Evasion and Unemployment Benefits Fraud
On January 31, 2014, in Chicago, Ill., James L. Quirin, of Sauget, Ill., was sentenced to 27 months in prison, three years of supervised release and ordered to pay $384,780 in restitution to the IRS and $44,670 to the Illinois Unemployment Compensation Fund. Quirin previously pleaded guilty to one count of theft of government funds, three counts of tax evasion and one count of filing a false tax return. According to court documents, Quirin applied for unemployment insurance benefits in February 2009, even though he was a gainfully employed businessman receiving significant income. Most of the payments he received were made out to the names of other business entities with which he was associated. In March 2009, in order to conceal his true income, he began converting these checks to cash at a money services business (over $900,000 through January 2013). On July 22, 2008, the IRS issued Quirin a Notice of Federal Tax Lien Filing in the amount of $93,844 for the 2006 tax year. On September 30, 2009, Quirin made a formal offer in compromise in the amount of $5,500 for his 2006 tax debt in which he claimed that his only income was unemployment compensation. Quirin also evaded payment of substantial income tax for 2008 and 2010. On July 13, 2010, Quirin made and filed an income tax return for 2009 in which he understated the gross receipts of his business by over $100,000.
Former Developer of Condo-Hotels Sentenced for Tax Evasion
On January 31, 2014, in Chicago, Ill., Robert D. Falor was sentenced to 74 months in prison and ordered to pay $1,752,948 in restitution to the IRS. Falor pleaded guilty in May 2013 to two counts of income tax evasion. According to court documents, Falor was the chief operator and manager of The Falor Companies, Inc. (TFC), which ceased operating in 2006. TFC acquired and managed hotel properties through a complex network of limited liability corporations. Through various ventures, before and after 2006, Falor attempted to convert hotels to condo-hotels by selling individual guest rooms to investors as separately titled condominium units. He then rented the units through a related hotel management company to other guests when the owner was not in residence. The owner received a percentage of the rental fee. From 2006 through June 2008, one of the hotels generated hundreds of thousands of dollars per month in revenues. But instead of paying debts to the hotel’s creditors, Falor plundered approximately $5.7 million from the hotel and diverted the cash to himself. Falor’s father, David R. Falor, who was a principal in TFC and extradited last year from Italy, pleaded guilty to tax evasion and was sentenced in December 2013 to 24 months in prison. David Falor converted $779,000 in payments that were recorded as loans from TFC, but which became taxable income when the companies went out of business. David Falor used the funds for personal expenses. Robert Falor’s brother, Christopher Falor, a consultant to the condo-hotel projects, pleaded guilty to mail fraud and tax counts and is awaiting sentencing.
Russian National Sentenced for Role in Securities Fraud Scheme
On January 31, 2014, in Newark, N.J., Petr Murmylyuk, of Brooklyn, N.Y., was sentenced to 30 months in prison, three years of supervised release and ordered to pay $505,357 in restitution. Murmylyuk, a Russian national, previously pleaded guilty to conspiracy to commit securities fraud. According to court documents, Murmylyuk participated in a conspiracy to steal from online trading accounts. The conspiracy first gained unauthorized access to the online accounts of brokerage firm customers. The conspirators then used stolen identities to open additional accounts referred to as “Profit Accounts” at other brokerage houses. They then caused the victims’ accounts to make unprofitable and illogical securities trades with the Profit Accounts, leading to losses in the victims’ accounts and gains in the Profit Accounts. One version of the fraud involved causing the victims’ accounts to sell options contracts to the Profit Accounts, then to purchase the same contracts back minutes later for many times the price. The members of the conspiracy recruited foreign nationals visiting, studying, and living in the United States to open bank accounts into which illegal proceeds could be deposited. The conspirators then caused the proceeds of the sham trades to be transferred from the Profit Accounts into those accounts, where the stolen money could be withdrawn. The scheme caused combined losses of approximately $1 million.
Ohio Financial Planner Sentenced for Filing False Tax Returns, Wire Fraud and Money Laundering
On January 29, 2014, in Dayton, Ohio, Joshua E. Knisley, of Wilmington, Ohio was sentenced to 15 months in prison, five years of supervised release and ordered to forfeit a 2006 Jeep Commander. Knisley pleaded guilty on June 7, 2013 to willfully filing a false federal income tax return with the IRS, wire fraud, and money laundering. According to court documents, between January 2007 and June 2011, Knisley was a business partner with an individual in a retail boat business known as 77 Marine located in Centerville, Ohio. Knisley was also a financial advisor for several individuals. Knisley engaged in an extensive scheme to defraud his financial advising clients, various employees and customers of Marine 77, various financial institutions, and the IRS. Knisley created false documents, including business checks, personal financial statements, purchase agreements, business sales reports, and other financial documents. Also, Knisley concealed from his financial advising clients the fact that he continued to divert investment funds, sales proceeds and loan proceeds entrusted to him for unauthorized personal and business purposes. The total tax loss to the IRS caused by Knisley filing false federal income tax returns was approximately $66,908 for the 2007 through 2009 tax years. Knisley also caused federal employment tax losses to the IRS in the amount of approximately $68,239 for 2008 through 2011 tax years.
Illinois Farmer and Former Elevator Manager Sentenced for Money Laundering and Wire Fraud
On January 29, 2014, in Peoria, Ill., Robert James Printz, of Fairbury, Ill., and Timothy Boerma, of Lincoln, Ill., were sentenced to 121 months and 72 months in prison, respectively, and five years of supervised release. Printz, who pleaded guilty to money laundering and wire fraud charges, was also ordered pay $7,038,537 in restitution. Boerma, who pleaded guilty to wire fraud, was also ordered to pay restitution of $6,730,594. According to court documents, Printz farmed in central Illinois as Printz Farms. Boerma was employed at Towanda Grain and became manager of the elevator in April 2009 until he was discharged on May 10, 2010. From October 2009 to about January 2010, Printz admitted that he continued to obtain advances from Boerma, at more than twice the value of the grain Printz delivered. From October 2009 to April 2010, Printz received a total of approximately $13.1 million from Towanda Grain. Printz subsequently made repayments to Towanda Grain of approximately $6.1 million. To conceal funds, Printz misrepresented to his accountants the nature of the transactions and the amount of funds received. Boerma admitted that he acted contrary to the terms of the loan agreement between Towanda Grain and a secured lender of Towanda Grain, in making loans and advances to Printz. To conceal the payments to Printz, Boerma made false entries in the records of Towanda Grain and provided false statements to the bank.
CEO of Free Truth Enterprises Sentenced for Tax Fraud and Mortgage Loan Fraud
On January 29, 2014, in Cincinnati, Ohio, Regina Shields was sentenced to 12 months and one day in prison and ordered to pay $202,806 in restitution for filing a false tax return and wire fraud. According to court documents, Shields formed a non-profit corporation called Free Truth Enterprises and has served as the President and CEO since 2000. From 2007 through 2010, Shields filed federal income tax returns with the IRS claiming $61,315 in false claims for income tax refunds. Shields also bid for and won an auction for a property in foreclosure. She then paid for the property using a check that had insufficient funds. Using this temporary appearance of title she applied for a sizable loan, in excess of $140,000, and used the proceeds to purchase a luxury car.
Virginia Businessman Sentenced for Role in Contracting Scheme Involving United States Army
On January 27, 2014, in Washington, D.C., Oh Sung Kwon, of Vienna, Va., was sentenced to 46 months in prison, three years of supervised release and ordered to pay $1,188,500 in restitution and the same amount in a forfeiture money judgment. Kwon, aka Thomas Kwon, pleaded guilty in September 2012 to one count each of bribery, conspiracy to commit bank fraud and willful failure to file a tax return. According to court documents, Kwon was the co-founder and chief executive officer of Avenciatech, Inc., a government contractor. Kwon is among 17 people and one corporation that pleaded guilty to federal charges for their roles in the largest domestic bribery and bid-rigging scheme in the history of federal contracting. Kwon learned of a contract-steering scheme from two business contacts. These schemes involved contracts and subcontracts awarded through the United States Army Corps of Engineers in return for hundreds of thousands of dollars in payments to a program manager at the Army Corps of Engineers. Kwon also pleaded guilty in a separate scheme involving bank fraud. In addition to running Avenciatech, Kwon was the operations manager for Onyx Financial Services, a mortgage broker. He admitted involvement in at least six fraudulent real estate sales and refinances in northern Virginia, with loan amounts of about $1.8 million. Finally, Kwon pleaded guilty and was sentenced for the willful failure to file a tax return.
Former Executive Director of Halfway House Sentenced on Embezzlement and Tax Charges
On January 22, 2014, in Albuquerque, N.M., Robin Cash was sentenced to 24 months in prison, three years of supervised release and ordered to pay $202,775 in restitution to the victim of her criminal conduct and $66,575 to the IRS. On May 15, 2013, Cash pleaded guilty to four counts of theft concerning programs receiving federal funds and three counts of willful failure to file a tax return. According to her plea agreement, Cash was employed as the Executive Director of a halfway house. Court filings reflect that the Pretrial Services Office (PTS) of the U.S. District Court for the District of New Mexico contracted with the not-for-profit corporation that operates the halfway house to cover the costs of providing a custodial residential environment for federal defendants. PTS made monthly payments of approximately $60,000 to $80,000 to the halfway house to cover these costs, and the halfway house deposited the funds in its business bank account. After Cash became Executive Director of the halfway house in April 2008, she was added as a signatory on the halfway house’s business bank account and received a debit card for the account. Between September 2008 and January 2011, Cash made unauthorized debits to the business bank account and used the proceeds for her own benefit. In April 2010, Cash opened a checking account and corresponding bank account in the name of halfway house without authorization. Thereafter and until February 2011, Cash regularly took funds that the halfway house residents were required to pay to defray their housing costs and deposited the funds into the unauthorized account. She then used the funds to pay for personal expenses. In addition, Cash failed to file federal income returns for calendar years 2008, 2009 and 2010.
North Carolina Woman Sentenced for Wire Fraud
On January 22, 2014, in Greensboro, N.C., Angela Womack, of Jamestown, N.C., was sentenced to 70 months in prison, three years of supervised release and ordered to pay $2,857,201 in restitution. Womack pleaded guilty on August 30, 2013 to wire fraud and money laundering. Womack worked as the Accounts Payable Manager of Carolina Steel Group, LLC. As Accounts Payable Manager, Womack prepared the company’s reports to provide that vendors would be paid. While working at Carolina Steel Group, Womack opened non-profit accounts in the name of “IBOCF.” Unbeknownst to her employer, Womack created vendor checks payable to “International BOCF” even though this company was not a vendor to Carolina Steel Group. She also caused additional checks payable to “International BOCF” to be included on the company’s vendor reports. Womack then ensured that banks would honor the company’s checks (including the fraudulent ones) by uploading additional fraudulent reports to a financial clearinghouse website. In an attempt to hide her scheme, Womack changed internal accounting entries so that the checks to “International BOCF” appeared to be written to legitimate vendors of Carolina Steel Group and altered internal accounting data using another employee’s access codes. Womack deposited fraudulently obtained checks into the “IBOCF” account she controlled, and used the funds from that account for her own benefit.
Pennsylvania Couple Sentenced on Tax Evasion and Bribery Charges
On January 21, 2014, in Harrisburg, Pa., Ivan Garces, of Etters, Pa., was sentenced to 18 months in prison, one year of supervised release and ordered to pay a $7,700 fine. Mayra Garces was sentenced to 12 months and one day in prison, one year of supervised release and ordered to pay a $7,700 fine. The Garces pleaded guilty to tax evasion and bribery of a public official in May 2013. According to court documents, on September 27, 2011, the Garces offered to pay a Revenue Agent, who was conducting an audit, $50,000 if the agent would reduce their tax liability and not expand the audit to include the years before and after the current audit. On November 10, 2011, during an undercover operation, the couple paid the Revenue Agent $50,000 in cash. A review of the couples’ business records established that the couple intentionally failed to report $1,091,267 in income for the years 2008, 2009 and 2010. The couple has paid the IRS a total of $843,866 in penalties, back taxes and interest. The $50,000 used for the bribe was relinquished to the United States Treasury.
Missouri Man Sentenced for Investment Fraud Scheme
On January 21, 2014, in Kansas City, Mo., Richard J. Gumerman, of Independence, Mo., was sentenced to 46 months in prison and ordered to pay $722,326 in restitution. On July 26, 2013, Gumerman pleaded guilty to one count of mail fraud and one count of filing a false income tax return. According to court documents, Gumerman stole at least $724,000 from investors from 2007 through December 2011. Gumerman used investor funds for personal living expenses, to pay other investors and in other businesses he owned. According to court documents, Gumerman did business as Gumerman Trading Company (GTC). Gumerman is not registered as a broker-dealer agent, investment adviser representative, or issuer agent in the state of Missouri, nor has he ever been. Despite not being registered to sell securities, Gumerman sold investments with the GTC Trading Fund. Between January 1992 and December 2010, individuals and groups invested more than $948,000 in the GTC Trading Fund. Gumerman told investors that the GTC Trading Fund pooled investor funds to trade in the commodities futures market. Gumerman mailed statements to investors listing a fictional ending balance, fictional “interest” earned and a fictional rate of return on investment. Gumerman sent to investors IRS Forms 1099 which reflected that they had earned interest from their investment accounts, when in fact they had not earned interest. Investors used these forms to pay taxes on interest they had not earned. Gumerman also admitted that, when he filed his tax return in April 2011, Gumerman failed to declare income he had obtained by fraud. He stated that his taxable income was $42,534 in 2010; however, his taxable income was actually $248,350. The total tax loss from Gumerman’s false tax returns was $96,635.
Former Loan Officer Sentenced for Investment Fraud Scheme
On January 17, 2014, in Las Vegas, Nev., Kamalu Gonzales was sentenced to 78 months in prison, five years of supervised release and ordered to pay over $830,000 in restitution. Gonzales pleaded guilty in August 2013 to two counts of mail fraud, six counts of wire fraud and two counts of money laundering. According to court documents, Gonzales worked as a loan officer in Henderson. Gonzales helped persons refinance their homes by placing false information in the loan applications so the individuals could obtain refinancing and cash to which they would not have otherwise been entitled. In addition, Gonzales told individuals that he was a successful investor and trader in the foreign currency exchange market. Gonzales recruited individuals to invest with him in the market, telling them that they could earn high rates of return on their investments in a short period of time. Some of the victims wired money to Gonzales, and others borrowed money from their retirement funds or lines of credit. Gonzales also convinced some of the persons who refinanced their houses to give him some of the cash they received from refinancing for his investment fraud scheme. None of the victims agreed to pay Gonzales any commissions or fees, or agreed that he could use their investments for personal or business expenses or to pay other investors. In order to continue the scheme and to keep victims from discovering the crime, Gonzales lied to the victims repeatedly and told them their investments were doing well. As a result of the lies, some victims gave Gonzales more money to invest. Gonzales also made payments to some of the victims using monies he received from other victims. Gonzales received approximately $1 million total from at least 16 victims in 2007 and 2008. Gonzales did not invest the victims’ funds as promised and diverted approximately $410,000 for his own personal purposes.
Former Social Security Administrator Sentenced on Federal Charges
On January 10, 2014, in Providence, R.I., Randolph Hurst, of West Warwick, R.I., was sentenced to 39 months in prison, three years of supervised release and ordered to pay $245,299. Hurst, a former Assistant District Manager for the Social Security Administration in Rhode Island, pleaded guilty on October 9, 2013, to one count each of aggravated identity theft, transportation of stolen securities and tax evasion; two counts of mail fraud; and three counts of filing a false tax return. According to court documents, Hurst admitted to stealing the identity of a Coventry, R.I., man and using his identity to fraudulently sell more than $160,000 worth of stock certificates belonging to the victim, and for failing to pay $61,999 in taxes owed the IRS. Hurst stole personal identifying information of the victim and used it to open a joint account at a brokerage firm in his name and in the name of the victim without the victim’s permission. Hurst then provided documentation purportedly authored and signed by the victim, requesting the deposit of stock certificates owned by the victim. The victim never authorized the deposit of the stock certificates. Further, without the victim’s knowledge, Hurst requested that the stocks be sold. He deposited two checks totaling $161,727 which represented the proceeds of the stock sales into a bank account owned jointly by Hurst and his wife. Hurst admitted to the court that he and his wife spent the proceeds of the stock sales on personal items and personal expenses.
Former Florida Police Officer and Wife Sentenced for Selling Firearms without a License and Filing False Tax Returns
On January 9, 2014, in Miami, Fla., Rafael Oscar Valdes and Tammy Lynn Valdes were sentenced for dealing in firearms without a federal license and filing false tax returns. Rafael Valdes was sentenced to 60 months in prison and three years of supervised release. Tammy Valdes was sentenced to 42 months in prison and three years of supervised release. Both defendants were ordered to pay $6,613 in restitution. According to the court record and evidence presented at trial, neither defendant ever possessed a federal firearms license. Starting as early as July 2005, and continuing through June 2012, the defendants began buying and selling firearms. In November 2008, the defendants began buying and selling firearms under the fictitious name of Custom Weapons Systems. The defendants advertised and sold more than 100 firearms via the Internet to persons across the nation, as well as attending more than 100 gun shows in Florida, during which they purchased and sold firearms. During trial, evidence was presented that the Valdeses failed to report over $350,000 in gross receipts during 2008 through 2011.
Naval Pharmacy Technicians Sentenced for Fraud
On January 9, 2014, in Albany, Ga., Anthony David Olson, of Mauk, Ga., was sentenced to 55 months in prison for conspiracy to commit wire fraud and filing a false tax return. Olson's co-defendant, Patrick Edward Keefe, of Dayville, Conn., was sentenced to 33 months in prison for conspiracy to commit wire fraud. Both defendants pleaded guilty on September 27, 2013. In their plea agreements, Olson and Keefe admitted that from approximately 1999 to 2009, they were active duty sailors or otherwise employed by the United States Navy. Olson was assigned to work as a pharmacy technician at the Naval Branch Medical Clinic located on the Marine Corps Logistics Base in Albany, Ga. Keefe was a pharmacy technician at the Naval Hospital located in Groton, Conn. The pair stole insulin and diabetic test strips and sold them to an unlicensed drug wholesaler in Florida. Payments for the products were delivered by electronic funds transfers or credit card payments. These actions were a continuation of a scheme begun by Olson in approximately 2001 while assigned to another naval hospital. Olson recruited Keefe into the scheme in approximately 2002. PayPal records show that from January 2005 through October 2009, Olson received approximately $1,037,458 for insulin and diabetic test strips which he and Keefe stole from their respective pharmacies. From that amount, he paid Keefe approximately $241,849. In addition, Keefe admitted that he filed false tax returns for tax years 2005 through 2009, resulting in $191,808 in taxes due and owing.
Florida Woman Sentenced for Tax and Student Loan Fraud
On January 9, 2014, in Tampa, Fla., Katherine Rumph-Smith, of Largo, Fla., was sentenced to 48 months in prison and ordered to pay $110,971 in restitution to the IRS and to pay $22,350 to the Federal Stafford Loan Program. Rumph-Smith pleaded guilty on October 10, 2013 to defrauding student financial aid and filing false claims with the IRS. According to court documents, Rumph-Smith had procured several student loans with outstanding balances, then had the balances discharged due to a disability. In order to obtain further student loans, she submitted physician forms, with the physician’s signature forged by her, saying that her condition had improved, and agreeing to repay her prior loan balances. Rumph-Smith then applied for additional student loans to attend a University, which she did not attend, and obtained over $27,000 in loans, from which a total of $22,350 was disbursed to her. In addition, Rumph-Smith created four fictitious Florida corporations and then filed corporate tax returns claiming over $500,000 in refundable tax credits on behalf of the corporations. Also, she opened bank accounts in the names of the corporations, where refunds from the fraudulent corporate tax returns were directly deposited. She used these funds for personal expenses and admitted that these corporations were created solely for the purpose of filing false corporate tax returns and were not operational in any manner.
Illinois Woman Sentenced for Tax Fraud
On January 9, 2014, in Chicago, Ill., Sharon Anzaldi, of Elmwood Park, was sentenced to 63 months in prison and ordered to pay $851,142 in restitution for filing false income tax returns. According to court documents, Anzaldi filed 13 federal tax returns for herself, friends, and family that fraudulently claimed refunds totaling more than $8 million. Also convicted and sentenced as part of the scheme with Anzaldi, were her son, Phillip DeSalvo who received 30 months in prison and Steven Latin who received 18 months in prison.
Virgin Islands Man Sentenced for Tax Fraud
On January 7, 2014, in St. Thomas, U.S. Virgin Islands, Rodney E. Miller, Sr., former Chief Executive Officer (CEO) of Schneider Regional Medical Center, was sentenced to 21 months in prison, one year of supervised release and ordered to pay $86,798 in restitution to the Virgin Islands Bureau of Internal Revenue, for income tax fraud. According to the evidence presented at trial, in 2006, Miller received $510,947 in taxable income and compensation from his position as CEO of Schneider Regional Medical Center. When he filed his 2006 income tax return, Miller only reported income in the amount of $265,198, and a tax owing of $39,810. However, based on his true income for 2006 which was $510,947, Miller’s tax liability was actually $126,608.
Former County Commissioner Sentenced for Ponzi Schemes
On December 19, 2013, in Nashville, Tenn., Edward Shannon Polen, of Greenbrier, Tenn., was sentenced to 71 months in prison and five years of supervised release. Polen, a former Robertson County Commissioner, pleaded guilty in December 2012. According to court documents, between January 2007 and about March 2011, Polen operated three investment Ponzi schemes in which he solicited and received approximately $16,000,000 from more than fifty investors. The three investment schemes were totally fraudulent and Polen never intended to invest any of the funds he received from investor-victims. At the time of investment, Polen provided investors with a minimum of two post-dated checks, one for the principal amount of their investment and the other for the profit that their investment was expected to produce. Polen used the post-dated checks as a ruse to create the illusion for investors that their investments were safe and secure. Polen assured the investors that the post-dated checks could be cashed at any time. However, at the time he tendered the checks to the investors, Polen knew that the accounts upon which the checks were drawn had either been closed or did not, and would never, contain funds sufficient to cover the amounts of the checks.
Rhode Island Convenience Store Owner Sentenced for Defrauding the Food Stamp Program
On December 19, 2013, in Providence, R.I., Cristina Ramirez was sentenced to 12 months and one day in prison and three years of supervised release, the first eight months to be served in home confinement. Ramirez was also ordered to pay $399,000 in restitution to the Food Stamp Program. Ramirez, the owner of Cristina’s Market, pleaded guilty on October 4, 2013, to conspiracy to commit food stamp fraud and money laundering. According to court documents, beginning in at least October 2010, Ramirez stole nearly $400,000 from the Food Stamp Program. Ramirez allowed Supplemental Nutrition Assistance Program (SNAP) benefit recipients to use their Electronic Benefit Transfer (EBT) cards to exchange their SNAP benefits for cash, a violation of the program’s laws and regulations. Ramirez then added a surcharge to the recipients’ withdrawal of SNAP benefits, usually an amount equal to half that of the amount of cash benefit received by the recipient. Ramirez and her two employees, her ex-husband and another person, conducted the illicit business transactions. Ramirez repeatedly withdrew the proceeds of her fraud in a manner that was designed to disguise its source, avoiding reporting requirements for transactions in excess of $10,000. Ramirez conducted $362,000 worth of transactions in this manner. The funds were used for personal and other non-business related expenses.
Zimbabwe Native Sentenced for Filing False Income Tax Returns
On December 19, 2013, in Baltimore, Md., Makushamari Gozo, a native of Zimbabwe, was sentenced to 132 months in prison, five years of supervised release and ordered to pay $202,667 in restitution. According to evidence presented at trial, beginning in 2010, Gozo used several entities he controlled to file fraudulent claims for tax refunds. Gozo filed individual income tax returns falsely claiming that from 2007 to 2011, he earned wages from two of his companies and was entitled to tax refunds totaling more the $417,000. In addition, Gozo filed tax returns falsely claiming that a third company had sustained losses in 2007 through 2009 which entitled Gozo to more than $76,000 in tax refunds. From October 31, 2011 to February 17, 2012, Gozo also filed false excise tax returns claiming that a fourth company was entitled to approximately $22,657,137 in alternative fuel tax refunds and credits based on having purchased or used over 39 million gallons of alternative fuel. In fact, the entities were all sham businesses that existed in name only. Also, between July and September 2010, Gozo defrauded several credit unions to obtain fraudulent automobile and business loans. Gozo submitted four loan applications to the credit unions in which he misrepresented his income and employment in order to buy luxury automobiles that Gozo never actually purchased. Gozo also submitted a fraudulent loan application for a $3 million business loan in the name of another one of his sham companies. On the business loan application, Gozo made fraudulent statements about the financial and business affairs of the company in order to make it appear financially successful, and submitted several false corporate tax returns claiming that the company controlled millions of dollars in assets.
Former Vice President of Construction Company and Subcontractor Sentenced on Fraud Charges
On December 19, 2013, in St. Louis, Mo., Clone Jefferson Oliver, of Apollo Beach, Fla., was sentenced to 60 months in prison. Oliver, former vice-president of construction at Alberici, pleaded guilty in September 2013 to mail fraud, wire fraud and money laundering. Oliver will be liable to pay Alberici the full $6.8 million in restitution. He also agreed that property and assets he acquired with the stolen money would be forfeited. According to court documents, Oliver was the project manager for Alberici on a project to build a water treatment plant in Arlington County, Virginia. Oliver and Kenneth Marc Simmons, a subcontractor on the project, participated in a scheme to defraud Alberici through the preparation and submission of inflated invoices and false change orders for materials provided to the project by Simmons' business, Industrial and Municipal Supply (IMS). When IMS received payment on the inflated invoices, Simmons kept a share and then forwarded money in the nature of kickbacks to Oliver. Simmons made many of the payments to a corporation formed by Oliver called Advanced Construction Solutions. Alberici was over-billed in the amount of $4.8 million from 2006 through 2011. Simmons, of La Grange, Ga., was sentenced on December 18, 2013, to 24 months prison and ordered to pay restitution of $4.8 million.
Venture Capitalist Sentenced on Tax Charges
On December 19, 2013, in St. Louis, Mo., Burton Douglas Morriss, of Creve Coeur, Mo., was sentenced to 60 months in prison. Morriss pleaded guilty in August 2013 to one count of tax evasion. According to his plea agreement, the tax liability Morriss attempted to evade in 2007 was $2,888,483. The total tax due and owing by Morriss for all tax years is $5,559,386. According to court documents, Morriss was a venture capitalist and was versed in tax laws. As a venture capitalist, he would discuss tax consequences of buying and selling investments to sophisticated investors. For the tax year 2007, Morriss earned substantial income from his venture capital activities. In order to reduce his tax liability for that year, he claimed $18,160,613 in losses associated with a number of entities, including Morriss Holdings, MIC Aircraft, Tech Aircraft and MIC Real Estate. These entities were established as single member limited liability companies for Morriss's mother. Additionally, Mrs. Morriss had already claimed these passive losses for her own benefit in previous years. In addition to these 2007 tax losses, Morriss admitted to evading millions more in taxes on income from his venture capital companies in subsequent tax years. Morriss did not timely file tax returns for 2006 through 2009.
Florida Man Sentenced for Operating Investment Fraud Schemes
On December 18, 2013, in Hartford, Conn., Robert Rivernider, of Wellington, Fla., was sentenced to 144 months in prison and five years of supervised release. On February 25, 2013, Rivernider pleaded guilty to two counts of conspiracy and 16 counts of wire fraud for operating two investment schemes that caused a loss of more than $25 million to individuals and lending institutions. A restitution order will be issued at a later date requiring Rivernider to pay full restitution to the victims of both schemes. According to court documents and statements made in court, between approximately June 2005 and April 2008, Rivernider and another individual conspired to defraud several victim investors by misrepresenting that the investors’ monies would be invested in legitimate, high-return investments. Instead of investing the funds as promised, they used the funds to pay their and their extended families’ living expenses, as well as the pre-existing debts of other investors. Through this first scheme, investors lost approximately $2.2 million. In a second scheme, between approximately November 2006 and December 2007, Rivernider and others engaged in a real estate investment conspiracy that defrauded both lenders and individuals they recruited. As part of the scheme, Rivernider and others recruited victim borrowers to take out financing to purchase various investment properties with financing from victim lenders. Rivernider and others victimized lenders by making multiple false representations in loan applications and other documents provided to the victim lenders. This scheme involved at least 100 properties. The investigation revealed that the victim lending institutions suffered more than $23 million in losses.
Defendant Sentenced for Multi-Million Dollar Fraud Scheme
On December 18, 2013, in Houston, Texas, Charles Craig Jordan, of Los Angeles, Calif., was sentenced to 156 months in prison, three years of supervised release and ordered to pay $9,661,660 in restitution to 503 victims in the case. Jordan pleaded guilty on July 23, 2013 to conspiracy to commit wire and mail fraud. According to court documents, Jordan and his co-defendant, Kelly Taylor Gipson, of Rockwall, Texas, devised a scheme to defraud investors from around the United States and Canada. The scheme required people to invest in the life settlement offerings of Secure Investment Services and American Settlement Associates of Houston. Jordan and Gipson misappropriated the investor funds by using them for personal purchases and not paying the policy premiums. This ultimately resulted in insurance policies lapsing and the investors losing their money. Gipson pleaded guilty on July 18, 2013 to conspiring to launder the proceeds from the fraud scheme and will be sentenced at a later date.
Florida Resident Sentenced for Filing False Tax Returns, Access Device Fraud and Identity Theft
On December 16, 2013, in Ft. Lauderdale, Fla., Harvey Zitron, of Boca Raton, Fla., was sentenced to 81 months in prison and three years of supervised release. Restitution will be determined at a later date. Zitron was convicted by a jury trial on July 16, 2013 for filing fraudulent tax returns, access device fraud and aggravated identity theft. According to the indictment, Zitron used companies to write checks to friends or acquaintances who cashed the checks and returned the cash to Zitron. Zitron then failed to declare this income on his tax returns. He also opened credit card accounts in the names of his son and ex-wife, and charged more than $1,000 in a single year on those accounts without their authorization or knowledge.
Three Sentenced in Multi-Million Dollar Fraud Scheme
On December 16, 2013, in Portland, Ore., three defendants were sentenced for lying to and misleading clients about how they held and used millions in client funds while operating Summit Accommodators, Inc. Mark Neuman was sentenced to 78 months in prison, Tim Larkin was sentenced to 54 months in prison, and Lane Lyons was sentenced to 54 months in prison. In addition, the defendants must each serve three years of supervised release. On July 3, 2013, a jury convicted the three former owner/operators of Summit Accommodators, Inc. of conspiracy to commit mail fraud and conspiracy to commit money laundering in connection with a 10-year fraud scheme. About 10,000 clients entrusted them with almost $1 billion from 1999 to 2008. The defendants used $75 million of client funds for undisclosed personal investments in real estate, investments in businesses and loans to business associates and family members. Neuman and his business partner Brian Stevens, both Certified Public Accountants, created Summit in 1991 to help customers take advantage of lawful federal income tax deferral transactions. In a typical transaction, a customer would sell income producing property, allow Summit to hold the proceeds of the sale, and then buy another income producing property within 180 days. Federal income tax laws then allowed the customer to defer paying taxes on the profits from sale of the first property. In 2002, Neuman and Stevens hired Larkin as Summit’s Chief Operating Officer. In 2005, Neuman and Stevens hired Lyons as Summit’s in-house counsel. The trial evidence showed that although Neuman and Stevens began using their clients’ exchange funds for personal investments before 1999, they promised their clients their exchange funds would remain in Summit bank accounts and would only be used to complete their tax deferral exchanges. From 2004 through October 2008, Summit held between $49 million and $109 million of its customers’ money in a typical month. The defendants routinely transferred large amounts of client money to Inland Capital Corp., another company they owned and controlled. Through Inland, the conspirators used client funds for over 100 real estate projects in Central Oregon in which one or more of them had direct personal interests. Brian Stevens was sentenced in May 2012 to 48 months in prison.
Estate Planning CEO and Employee Sentenced for Obtaining Millions in Death Benefits in Names of Terminally-Ill Individuals
On December 16, 2013, in Providence, R.I., Joseph A. Caramadre was sentenced to 72 months in prison and three years of supervised release. Caramadre, the president, CEO and majority owner of Estate Planning Resources in Cranston, R.I., was sentenced for conspiring to steal and use the identities of terminally-ill patients to obtain millions of dollars in illicit profits from insurance companies and bond issuers. Raymour Radhakrishnan, a former employee of Caramadre, was sentenced to 12 months and one day in prison and three years of supervised release. Restitution for both will be determined at a later date. Caramadre and Radhakrishnan pleaded guilty on November 19, 2012 to conspiracy to commit identity theft and wire fraud. According to court documents, Caramadre and Radhakrishnan made misrepresentations to terminally-ill and elderly patients and their family members in order to obtain their personal identifying information. They used the information to obtain more than 200 variable annuities and to open more than 75 brokerage accounts in order to purchase “death-put" bonds in the victims’ names without their knowledge and consent. When the terminally-ill person died, Caramadre and others reaped substantial profits by exercising death benefits associated with the investments.
New York Man Sentenced for Filing False Tax Returns
On December 12, 2013, in Rochester, N.Y., Patrick Dandrea, of Rochester, N.Y., was sentenced to 24 months in prison and ordered to pay $466,007 in restitution. Dandrea was previously convicted of filing false tax returns. According to court documents, Dandrea was awarded a contract from Erie County in 2006 to remove damaged trees and branches following a storm. Dandrea received over $5,000,000 in payments which he failed to report on his 2006 and 2007 federal income tax returns resulting in a tax loss of over $460,000. In addition to being responsible for the tax loss, the defendant is also liable for interest payments and penalties of over $265,000 going back to 2006.
Louisiana Motel Owner Sentenced For Tax Fraud
On December 11, 2013, in New Orleans, La., Anil Patel, of Metairie, La., was sentenced to 13 months in prison. Patel pleaded guilty on September 4, 2013 to filing a false income tax return. According to court documents, on August 6, 2009, Patel filed a 2008 federal income tax return but did not report approximately $426,744 in income, which resulted in a $111,378 loss to the IRS. Patel was the former owner of the Trade Winds and La Village motels that were located in Metairie, La. As part of his plea agreement, Patel agreed to accept responsibility for failing to report $1,373,076 in total unreported income for the tax years 2006 through 2009. As a result, the tax due and owing to the IRS for those years is $393,048. Patel also agreed to pay both the parish and state taxes due and owing.
Owner of Gourmet Food Markets Sentenced for Participating in Massive Tax Fraud Scheme
On December 9, 2013, in New York, N.Y., Adem Arici, of Easton, Conn., was sentenced to 60 months in prison, three years of supervised release and ordered to forfeit $7 million. Arici pleaded guilty on June 4, 2013, to one count of conspiracy to commit tax and fraud offenses, four counts of subscribing to false and fraudulent federal personal income tax returns, nine counts of aiding and assisting in the preparation of false and fraudulent federal corporate, partnership, and payroll tax returns, and one count of witness tampering in connection with a federal investigation of individuals engaging in prohibited transactions in which a Cuban national had an interest. According to court documents, Arici was one of the leaders in a long-running tax fraud conspiracy in which more than $50 million in gross receipts from six gourmet food markets in New York, New Jersey, and Connecticut was hidden from federal, state, and local tax authorities. Arici had an ownership interest in all six markets (The Markets) involved in the conspiracy and played an active management role. Most of the cash payments received from customers were diverted from the books and records of the Markets. The owners of the Markets used this cash to pay business expenses, including cash payroll, as well as to line their own pockets. They paid numerous employees, including undocumented foreign citizens, in cash. The owners of the Markets failed to withhold and pay to the IRS the withheld payroll taxes, and caused the preparation and filing of false returns with the IRS. Arici also avoided paying over $1 million in personal income taxes. On September 12, 2013, co-defendant Jody Vitale was sentenced to time served followed by two years of supervised release, and ordered to forfeit $354,166. On October10, 2013, Josefina Caraballo was sentenced to one year of probation, and ordered to forfeit $41,331.
Owner of New York Sportswear Distribution Business Sentenced for Tax Fraud
On December 6, 2013, in Brooklyn, N.Y., Harry Neuhoff was sentenced to 12 months and one day in prison and three years of supervised release for tax evasion. According to court documents, Neuhoff was the president and an owner of Eva Tees Inc., a wholesale distributor of sportswear. From approximately 2006 to 2008, Neuhoff manipulated Eva Tees accounts through his accounting software program to delete cash sales from the general ledger accounts maintained on the computer accounting system. As a result, Neuhoff caused false corporate tax returns to be filed with the IRS that under-reported the company’s gross receipts. During those years, Neuhoff’s behavior also resulted in his filing false personal income tax returns with the IRS. According to documents filed with the court, Neuhoff under-reported the gross receipts of Eva Tees by at least $1.5 million using computer manipulation.
Virginia Man Sentenced for Wire Fraud and Filing False Income Tax Returns
On December 6, 2013, in Alexandria, Va., Douglas G. “Bo” Taylor, of Remington, Va., the former chief of the Remington Volunteer Fire & Rescue Department (RVFD), was sentenced to 24 months in prison and three years of supervised release. Taylor was also ordered to pay restitution of $70,833 to the Remington Fire Department, $59,419 to the Prince William County Schools and $79,576 to the IRS. According to court records, Taylor served as the Chief of the RVFD from 1994 through 2011, during a time when the RVFD fire station underwent major renovations and reconstruction with funding, in significant part, from the U.S. Department of Agriculture. Taylor, a licensed master electrician, offered to do some of the renovations at the fire station and only seek reimbursement for his out of pocket expenses. Taylor then submitted false invoices which contained charges for materials Taylor did not purchase and charges for labor that, at times, was never performed or was inflated from the hours that were actually performed. Taylor also used a Prince William County Public Schools System credit card to purchase some of the materials used at the fire station project and elsewhere. Finally, Taylor did not disclose the money he fraudulently obtained from the RVFD and winnings from the Virginia lottery on two individual income tax returns filed with the IRS.
Missouri Apartment Manager Sentenced for Fraud Scheme
On December 5, 2013, in Springfield, Mo., Barbara J. Evans, of Carthage, was sentenced to 41 months in prison and ordered to pay approximately $206,000 in restitution. Evans pleaded guilty on October 3, 2012 to wire fraud, money laundering and filing a false tax return. According to court documents, Evans was employed as a property manager for Preservation Housing Management (PHM), which owned the Deerfield Village, Highland Acres, and Highland Meadows. From 2003 through 2011, when a low-income tenant rented an apartment and qualified for Section 8 rental assistance/subsidies, Evans generally calculated the move-in rent amounts correctly. However, when tenants reported an increase in income, instead of reflecting the increased rent in the computer system, she delayed reporting the increased rent to PHM. As a result, tenants would pay the higher rent amount to Evans, but she continued to provide the lower rent payments to PHM. Evans pocketed the difference. In addition, Evans filed false federal income tax returns for the years 2006 through 2010 by failing to report $171,790 on her individual income tax returns, resulting in a total tax loss of $28,737.
Ohio Woman Sentenced for Tax Conviction
On December 3, 2013, in Cleveland, Ohio, Margaret Monroe Greenaway, of Willowick, Ohio, was sentenced to 54 months in prison and three years of supervised release for filing false tax returns. According to court documents, Greenaway filed income tax returns under her name during a prior marriage, Margaret M. Demaria-Susevich, using a “single” filing status, on which she claimed $1,326,671 for 2010 and $3,945,123 for 2011. Greenaway fabricated W-2 forms by using the employer information on her husband’s W-2 forms and inserted phony amounts of wages and withholding paid to her. Greenaway never worked for that employer.
Montana Man Sentenced for Concealing Assets and Making False Statements
On December 3, 2013, in Helena, Mont., Brad Charles Fisher, of Kenmore, Wash., was sentenced to 45 months in prison, three years of supervised release and ordered to pay $729,794 in restitution. Fisher was convicted of attempting to evade or defeat income tax. According to trial evidence, from April 2006 until January 2008, Fisher attempted to evade and defeat the payment of an income tax due and owing by him to the United States for the calendar years 2001 to 2006 by concealing and attempting to conceal from the IRS the nature and extent of his assets and by making false statements to IRS agents. From 2001 through 2006, Fisher earned substantial amounts of income by selling insurance products. However, he did not file any tax returns for these years until mid-2006. After IRS began a civil audit of the 2001 through 2003 tax years, and later sent him a notice of tax deficiency for this period, Fisher eventually filed his 2001 through 2006 tax returns. In these tax returns, Fisher reported that he earned income and owed tax. However, he only paid a small portion of his tax due. In May 2006, Fisher provided an IRS agent with a partially completed Collection Information Statement where he failed to disclose all his assets. As IRS Collections proceeded toward seizure of Fisher’s assets, he filed for bankruptcy on November 14, 2007. During a subsequent bankruptcy hearing the IRS learned about all the assets that Fisher had previously concealed.
Colorado Man Sentenced for Income Tax Evasion
On December 2, 2013, in Denver, Colo., James G. Kreutzer, of Grand Junction, Colo., was sentenced to 38 months in prison, three years of supervised release and ordered to pay $186,473 in restitution. According to court documents, Kreutzer, through his company, Village Nursery, Inc., and various related entities he owned and/or controlled, engaged in real estate development and construction activities in Southwest Colorado. During 2001 through 2008, Kreutzer devised a scheme to defraud lenders, which included financial institutions, companies, and other persons. Personally and through his companies, Kreutzer repeatedly obtained new loans to service his prior loans, to pay his personal obligations and expenses, and to pay for his real estate purchases and construction activities. To obtain these loans, he routinely made materially false and fraudulent pretenses, representations and promises to financial institutions. By mid-2008, Kreutzer was no longer able to obtain money through new loans to pay previous lenders and others. In 2007 and 2008, Kreutzer’s personal expenses were reflected by the accountant he hired in the company's general ledger as accounts receivable which showed he took $1,132,917 from his company in 2007, none of which was reported as income on his 2007 tax return. In 2008 he took an additional $248,627, none of which was reported as income on his 2008 tax return. The personal expenses paid by the company in 2007 and 2008 included Kreutzer’s home mortgage payments for his two homes, his utility payments, his Mercedes Benz payments, his gambling expenses in Las Vegas, and jewelry purchases. Kreutzer paid no income tax to the IRS in 2007 and 2008.
Former Attorney Sentenced for Receiving Stolen Money and Filing False Tax Return
On November 25, 2013, in Buffalo, N.Y., Timothy Toohey, of Lewiston, N.Y., was sentenced to 33 months in prison and ordered to pay $540,000 in restitution to the Seneca Nation of Indians and $62,821 to the IRS. Toohey previously pleaded guilty to receiving money stolen from an Indian Tribal Organization and filing a false tax return. According to court documents, Toohey’s role was to bring together a land seller and the Seneca Nation of Indians (SNI) as the purchaser of a golf course site. During the course of negotiations leading up to the sale of property, Toohey and another individual entered into an unlawful agreement whereby each would receive a portion of the sale proceeds. They undertook affirmative measures to conceal their interest in the transaction, including the fact that they were each personally going to receive a portion the sale proceeds. During 2006, Toohey received approximately $202,000 of the sales proceeds. He failed to report the $202,000 as income on his 2006 tax return.
Pennsylvania Woman Sentenced for Role in Fraud Scheme
On November 25, 2013, in Philadelphia, Pa., Lorraine Dispaldo was sentenced to 18 months in prison, three years of supervised release and ordered to pay $120,865 in restitution for her role in a fraud conspiracy with then-Philadelphia Traffic Court Judge Robert Mulgrew. Dispaldo pleaded guilty to 36 counts including conspiracy to commit mail and wire fraud, mail fraud, wire fraud, filing false personal income tax returns, and bankruptcy fraud. Dispaldo and Mulgrew, who is awaiting sentencing, carried out a scheme to defraud the Pennsylvania Department of Community and Economic Development (DCED). According to court records, Dispaldo helped orchestrate the scheme to fraudulently receive and misuse Pennsylvania state grant funds awarded to non-profit groups. Between 1996 and 2008, the DCED awarded hundreds of thousands of dollars in grants to two community groups with which Mulgrew and Dispaldo were associated. DCED awarded approximately $397,000 in grants to the Community to Police Communications (CPC) to be used to purchase communications equipment for the police and to purchase materials to secure vacant lots and buildings for the protection of the police. Between 1997 and 2007, DCED also awarded approximately $460,000 in grants to the Friends of Dickinson Square (FDS) to be used for the maintenance of Dickinson Square, and the surrounding neighborhood. Instead of using grant funds exclusively for materials and equipment, Dispaldo paid tens of thousands of dollars in CPC and FDS grant funds to Mulgrew’s relatives and associates, and to the State Representative’s life-long friends. To mask the fact that grant funds were being used improperly, Dispaldo falsified her five CPC “close out” reports sent to DCED by concealing most of the $104,000 in payments she made to persons from CPC funds and FDS funds during 2005 through September 2010. At times, Dispaldo submitted to DCED inaccurate IRS Forms 1099, which document payments to persons, and at other times failed to prepare the forms, as required by law. Dispaldo also improperly paid almost $13,000 in CPC funds to the Representative’s office cleaner and improperly used $4,600 in CPC grant funds over the years to pay for her personal cell phone. In addition, Dispaldo filed false personal income tax returns for tax years 2006 through 2009, and concealed her true income for 2008 and 2009 in a 2010 bankruptcy filing.
Restaurant Chain Owners Sentenced for Cheating the IRS Out of Millions of Dollars
On November 21, 2013, in Philadelphia, Pa., Brian F. Welsh, of Springfield, Pa., and Elena V. Ruiz, of Drexel Hill, Pa., two of the owners and managers of the restaurant chain “Nifty Fifty’s” were sentenced. Welsh was sentenced to 20 months in prison and two years of supervised release. Ruiz was sentenced to 12 months and one day in prison, three years of supervised release and fined $7,500. According to court documents, Welsh and Ruiz along with three others conspired to commit tax evasion by constructing a long-running scheme to avoid paying millions of dollars in personal and employment taxes related to their restaurant chain. Their co-conspirators have been sentenced as follows:
• Joseph B. Donnelly was sentenced on November 20, 2013, to 28 months in prison, three years of supervised release and fined $25,000.
• Leo T. McGlynn was sentenced on November 19, 2013, to 36 months in prison, three years of supervised release and fined $35,000.
• Robert D. Mattei, of Del Ray Beach, Fla., was sentenced on November 18, 2013, to 15 months in prison, three years of supervised release and fined $35,000.
According to court documents, the conspirators not only evaded paying the taxes they owed, they filed income tax returns claiming they were due refunds based on the erroneous reporting of their incomes. The conspirators evaded paying taxes since the restaurant was established in 1986 by, among other things, paying employees a portion of their wages with unreported cash in order to evade payroll taxes; paying suppliers with cash; and having false tax returns prepared that under-reported income and falsely inflated expenses and deductions. Just between the years 2006 and 2010, the conspirators deliberately failed to properly account for $15.6 million in gross receipts, thereby evading $2.2 million in federal employment and personal taxes.
Utah Man Sentenced for Fraud, Money Laundering, and Tax Charges
On November 20, 2013, in Salt Lake City, Utah, Jeffrey Charles Zander was sentenced to 68 months in prison and ordered to pay $202,543 in restitution. Zander was convicted of mail and wire fraud, money laundering, and willful failure to file tax returns. According to court documents, Zander began working for the Paiute Tribe around October 1998 as its tribal planner. Around September 2007, Zander convinced the Tribe to hire him as general counsel when, in truth, he did not possess a license to practice law. Beginning in 2005, Zander developed a scheme to divert more than $175,000 for his personal use that had been awarded to the Paiute Tribe through grant proposals the defendant had authored and assisted the tribe in applying for. The grants were awarded for Integrated Resource Management Plans (IRMP), which are long-term plans to balance the use of tribal resources between interests of residents of the reservation and revenue-generating uses of tribal lands. Zander told tribal leaders that he had hired companies in Salt Lake City, Las Vegas, and Provo to act as consultants or facilitators to assist with the creation of the IRMPs. Zander told the tribe that since he would be traveling to work with the consultants or facilitators, he could hand-deliver progress payment checks to the companies. Evidence at trial showed the companies were bogus and created by the Zander to facilitate the fraud. Zander created fictitious invoices from the companies, submitted them for payment from the Tribe, and then drove to different points between Provo, Utah, and Mesquite, Nevada to deposit the checks into his personal bank accounts. He also drafted quarterly reports for the Bureau of Indian Affairs to show that the money was being spent for facilitators and consultants when, in truth, he had converted grant funds for his own use.
Former Law Enforcement Officer Sentenced for Extortion
On November 19, 2013, in Chicago, Ill., Lawrence A. Draus, aka Larry Draus, was sentenced to 30 months in prison, one year of supervised release and ordered to forfeit $50,000. Draus previously pleaded guilty to conspiracy to commit extortion. According to his plea agreement, Draus conspired to commit extortion by obtaining money and contraband cigarettes. Draus was a law enforcement officer for the Cook County Sheriff’s Office and assigned to the Special Operations Division. He used the powers of the office to provide protection for a warehouse that was selling contraband cigarettes, which were cigarette cartons without the required tax stamps form the state and county and were manufactured outside of Illinois. Unbeknownst to Draus, the warehouse was operated by ATF agents conducting an undercover investigation. Draus received payments totaling $50,000 as well as cartons of contraband cigarettes from the warehouse as payments for the protection services he offered.
Ohio Man Sentenced for Filing False Income Tax Returns
On November 18, 2013, in Columbus, Ohio, William David Taylor, Sr. of Canal Winchester, Ohio, was sentenced to 30 months in prison, one year of supervised release and ordered to pay $46,227 in restitution to the IRS. On July 12, 2013, Taylor was convicted of two counts of willfully filing false federal income tax returns with the IRS. According to court documents, during 2006 and 2007, Taylor operated a construction consulting business. Part of his business involved convincing landowners to engage him in development projects that would involve both investors, as well as individuals, who would purchase plots and receive construction loans to build houses. Taylor served as the general contractor and, established business bank accounts that he controlled in order to develop the properties and build the houses. Taylor had failed to report on his federal income tax returns approximately $110,000 in income for 2006 and $189,000 for 2007.
Florida Resident Sentenced for Tax Evasion
On November 18, 2013, in Miami, Fla., Annabel Cooper was sentenced to 12 months and one day in prison, three years of supervised release and ordered to pay $687,475 in restitution. Cooper previously pleaded guilty to an Information charging her with attempting to evade tax. According to court documents, between 2006 and 2009, Cooper evaded the payment of income taxes to the IRS by failing to accurately report her true income on her Form 1040. The total amount of income Cooper failed to report during the tax years in question was approximately $2,320,000, resulting in a tax loss of approximately $687,475.
Repeat Offender Sentenced for Tax Obstruction
On November 15, 2013, in Pittsburgh, Pa., Michael Carlow was sentenced to 35 months in prison. On January 4, 2013, Carlow pleaded guilty to tax obstruction. In 1996, Carlow pleaded guilty to bank fraud and tax fraud in federal court and was sentenced to eight years in prison. After his release in 2002, Carlow resided with his girlfriend, Elizabeth Jones, in Pittsburgh. According to court documents, the IRS assessed more than $6 million in overdue taxes, interest and penalties against Carlow for the years 1992 through 1996. However, from 2000 through 2011, in order to thwart efforts by the IRS to collect what he owed, Carlow concealed his assets and income through Jones and numerous nominee corporations. Carlow maintained a secret interest in various corporations and had fees and royalties paid to Jones rather than to himself. He also failed to report his ownership and control of corporate assets to the United States Probation Office and the IRS. Carlow filed false individual income tax returns for 2003 through 2006 and failed to file individual income tax returns from 2008 through 2011. In August 2011, Jones pleaded guilty to her conduct related to acting as a nominee for Carlow and is awaiting sentencing.
Michigan Couple Sentenced for Theft and Tax Offenses
On November 14, 2013, in Detroit, Mich., John McCarter and his wife, Katherine McCarter, were sentenced for their roles in a theft and tax scheme. John McCarter was sentenced to 57 months in prison. Katherine McCarter was sentenced to three years of probation. According to court documents, from August 2006 to October 2007, John McCarter’s stole six semi-trailers full of new tires and wheels. After breaking the locks and hitching the semi-trailers to their own cabs, McCarter and his accomplices transported the semi-trailers to Knox, Pennsylvania, where they sold them to a wholesale tire dealer. John McCarter failed to declare and pay taxes on approximately $759,000 from the sale of those stolen tires. Katherine lied to investigators about the source and purpose of the monies John had her deposit into her personal bank accounts to help hide the money.
Six Defendants Sentenced for Prepaid Funeral Scheme
On November 14, 2013, in St. Louis, Mo., six defendants were sentenced on more than 40 counts of fraud, money laundering, and related crimes.
• James Douglas Cassity was sentenced to 115 months in prison.
• David Wulf was sentenced to 120 months in prison.
• Randall K. Sutton was sentenced to 84 months in prison
• Brent Douglas Cassity was sentenced to 60 months in prison
• Howard A. Wittner was sentenced to 36 months in prison
• Sharon Nekol Province was sentenced to 18 months in prison
According to court documents, these defendants, acting through National Prearranged Services, Inc. and Lincoln Memorial Life Insurance Company, had defrauded more than 97,000 customers in more than 16 states, hundreds of funeral homes, and multiple financial institutions, causing more than $450 million in losses. Beginning as early as 1992 and continuing until 2008, NPS sold prearranged funeral contracts in several states, including Missouri, Illinois, and Ohio. During that time, insurance companies affiliated with NPS issued life insurance policies related to those prearranged funeral contacts. As part of the contracts, the total price for funeral services and merchandise for an individual was agreed upon, and that price would remain constant regardless of when the funeral services and merchandise would be needed. Customers entering into prearranged funeral contracts would usually pay a single sum of money up-front to NPS either directly or through a funeral home that was also a party to the contract. NPS represented to individual customers, funeral homes, and state regulators that funds paid by customers under the prearranged funeral contracts would be kept in a secure trust or insurance policy as required under state law. Court documents disclose, however, that NPS made use of funds paid by customers in ways that were inconsistent both with its prior and continuing representations and with the applicable state laws and regulations. Instead, NPS operated as a fraudulent Ponzi-like scheme, where customer funds were neither kept safe in bank trusts or insurance policies but instead were utilized for unauthorized purposes and the personal enrichment of NPS’s officers and others. In turn, new business became the source of funding for funerals that prior customers had previously paid for in advance. Victims of the scheme include individual customers, funeral homes and state insurance guarantee associations across the country.
Utah Man Sentenced for Investment Fraud Scheme
On November 13, 2013, in Salt Lake City, Utah, John S. Dudley, of Sandy, was sentenced to 60 months in prison and ordered to pay $6.8 million in restitution to victims of the fraud scheme. Dudley pleaded guilty in February 2013 to wire fraud in connection with a fraudulent investment scheme. According to court documents, Dudley induced individuals to invest money with him for use in various investment programs. He made a variety of misrepresentations to potential investors, including telling them they could expect monthly returns of 5-10 percent and he had not suffered a trading loss since 1978. In addition, he told investors that their funds would be used exclusively for investment purposes; that he had personally done very well in his investments and had never made less than 5 percent per month over the last 30 years; that investors’ money was backed by a “senior life settlement policy” that reduced or eliminated investors’ risk of loss; and that investing with him was an exclusive opportunity with only a limited number of investors allowed to invest with him at one time.
Indiana Woman Sentenced for Fraud and Tax Evasion
On November 13, 2013, in Indianapolis, Ind., Michele Spurgeon was sentenced to 60 months in prison, three years of supervised release and ordered to pay more than $1.7 million in restitution for fraud and tax evasion. According to court documents, Spurgeon admitted that from 1996 until 2011, she used her position at a Hamilton County business to orchestrate a sophisticated fraud scheme. The defendant would process all checks made payable to the company, but would withhold some of these checks, not depositing them into the company’s bank accounts. Instead, she would deposit these checks into a business account for a fraudulent company that Spurgeon created as a vehicle for her fraud. Over the course of the scheme, Spurgeon spent this money on a number of personal items. In addition, Spurgeon failed to report this additional money to the Internal Revenue Service.
Banker Sentenced for Failing to Report Embezzled Money on Tax Return
On November 12, 2013, in San Diego, Calif., Ricardo Adolfo Benavente III, a banker, was sentenced to 27 months in prison, three years of supervised release and ordered to pay $88,952 in restitution to the IRS and to pay $293,023 in restitution to the bank. Benavente pleaded guilty on June 20, 2013 to one count of conspiracy to embezzle and one count of filing a false tax return. According to court documents, in 2009, using his bank privileges, Benavente stole approximately $293,000 from the accounts of four bank customers. In 2010, Benavente filed a personal income tax return for the tax year 2009 which failed to include the money he stole from bank customers. As a result, Benavente was able to avoid approximately $88,952 in personal income taxes.
Business Owner Sentenced for Tax Evasion and Structuring
On November 12, 2013, in Honolulu, Hawaii, Roger Santos, of Kahului, Maui, was sentenced to 12 months and one day in prison, six months home confinement, three years of supervised release and ordered to pay $317,599 in restitution to the IRS. Santos pleaded guilty on May 22, 2013 to one count of income tax evasion and one count of structuring. According to court documents, in 2008, Santos diverted approximately $959,883 from the checking account of the business he operated, Paradise Asian Foods, Inc., into multiple personal checking accounts. He then reported as income only the money that was deposited into the business account. These actions fraudulently lowered his taxable income by approximately $365,267 for the 2008 tax year. In addition, Santos deposited $30,000 in currency into multiple bank accounts on the same day in order to evade certain regulations relating to currency transactions.
Arkansas Man Sentenced for Filing False Tax Returns
On November 7, 2013, in Little Rock, Ark., Richard Mathews, of Conway, Ark., was sentenced to 27 months in prison and ordered to pay $56,904 in restitution to the IRS. Mathews was convicted by a jury on July 30, 2013, of five counts of filing false income tax returns and one count of obstructing the IRS laws. According to court documents, Mathews was self-employed and operated a business soliciting members for a $99 joining fee into his system of making money by encouraging more members to join his online multi-level marketing network known as MMS and Wealth Team International (WTIA). Mathews only claimed $22,201on his federal tax for the five year period from 2004 to 2008, when in fact his bank records showed business deposits of $245,300. During the investigation, Mathews made false statements to and regarding actions taken by IRS agents, created a trust to avoid payment of taxes, and filed false returns.
Former Investment Adviser Sentenced for Fraud and Tax Evasion
On November 7, 2013, in Boston, Mass., John A. Picini, of North Attleboro, was sentenced to 121 months in prison and three years of supervised release. Picini was also order to pay $3.5 million in restitution to his investment clients and $490,000 in unpaid taxes to the IRS. On April 1, 2013, Picini pleaded guilty to fraud and tax evasion charges arising from his operation of a financial planning service called The Center for Senior Financial Planning. According to court documents, Picini targeted senior citizen investors as his clients and persuaded them to cash out annuities for the supposed purpose of investing with Picini. Picini failed to roll these sums over into annuities, as promised, and instead spent a total of $3.5 million of 70 victims’ retirement savings. Picini lulled his victims into believing that their funds were safely invested by producing bogus account statements and also by making periodic payments to his victims with money that supposedly represented investment earnings, but which were actually funds stolen from other victims. Furthermore, Picini filed false individual income tax returns with the IRS which substantially understated his true income.
Ohio Man Sentenced for Filing False Income Tax Returns
On November 7, 2013, in Dayton, Ohio, Gregory A. Johnson was sentenced to three years of supervised release, with the first twelve months to be served in home confinement, and ordered to pay $26,369 in restitution to the IRS. Johnson pleaded guilty on June 11, 2013 to willfully filing false federal income tax returns for the 2005, 2006, and 2007 tax years. According to court documents, in October 2009, Johnson filed his 2005, 2006, and 2007 federal income tax returns with the IRS. Johnson falsely claimed that $75,000 of his income for the 2005 income tax year, $140,000 of his income for the 2006 income tax year, and $120,000 of his income for the 2007 income tax year were earnings from his G. Allan Johnson Ministries which was not subject to self-employment taxes. However, the income was from a settlement of his employment as a chief financial officer with another company. By falsely including that income as income earned from G. Allan Johnson Ministries, Johnson under-reported his tax liability.
Mastermind of Multi-Million Dollar Naval Fraud Scheme Sentenced
On November 1, 2013, in Providence, R.I., Ralph M. Mariano, of Warwick, R.I., and South Arlington, VA., was sentenced to 120 months in prison, three years of supervised release and ordered to pay $17,957,000 in restitution to the United States Navy. Mariano pleaded guilty in May 2013 to conspiracy and theft of government funds. According to court documents, Mariano, a former senior systems engineer with the United States Navy’s Naval Sea Systems Command (NAVSEA) in Newport, R.I., and Washington, D.C., was the mastermind behind a kickback scheme which defrauded the United States Navy of nearly $18 million dollars. From 1999 to 2011, Mariano used his position at NAVSEA to direct a computer software specialist in Rhode Island, to submit millions of dollars in fraudulent invoices to Navy contractors and subcontractors. The invoices totaled approximately $17,957,000. In addition to pleading guilty to conspiracy and theft of government funds, Mariano also pleaded guilty to one count of tax evasion. Mariano admitted that from 2006 to 2009, he failed to report $1,864,910 in income he received from the scheme.
Woman Sentenced for Role in Scheme to Defraud Philadelphia Sheriff’s Office
On October 30, 2013, in Philadelphia, Pa., Aarti Gupte, of Houston, Texas, was sentenced to 36 months in prison, three years of supervised release and ordered to pay $242,186 in restitution. In June 2013, Gupte was found guilty of conspiracy to commit wire fraud and wire fraud. According to court documents, Gupte was involved in a scheme to steal funds from the Philadelphia Sheriff’s Office (PSO) bank accounts which consists of funds from Sheriff’s sales of real estate. The sales require the PSO to write checks to different entities with regard to the properties sold. One of Gupte’s co-conspirators was a PSO employee in the Accounting Department. The co-conspirator wrote checks drawn on the PSO’s bank accounts made payable to individuals and companies. Gupte, who had two companies, was recruited to participate in the scheme. During the period from 2009 to 2010, the co-conspirator wrote four checks, totaling $242,186, which Gupte deposited into her company bank accounts. She then withdrew the proceeds and shared them with co-conspirators.
Virginia Bookkeeper Sentenced for Fraud
On October 29, 2013, in Newport News, Va., Julie Ann Stratton, of Poquoson, Va., was sentenced to 24 months in prison, one year of supervised release and ordered to pay $284,695 in restitution. Stratton pleaded guilty in June 2013 to two counts of making false statements on tax returns. According to court documents, Stratton was employed as a bookkeeper by several local businesses. In her capacity as a bookkeeper for these companies, Stratton was responsible for making bank deposits and for writing checks to pay vendors and expenses. Through a combination of removing cash from bank deposits, writing checks to herself, altering checks, making direct deposits into her bank account, and writing checks to fictitious vendors and fabricated expenses, Stratton defrauded the companies for approximately $358,000 from the years 2000 through 2011. In addition, Stratton signed and filed federal tax returns by failing to report the income derived from her embezzlement.
Illinois Businessman Sentenced for Filing False Tax Returns
On October 18, 2013, in Springfield, Ill., Lakhvir Nijher, aka Tony Nijher, was sentenced to 45 months in prison, three years of supervised release and ordered to pay $739,184 in restitution. Nijher previously pleaded guilty to mail fraud and filing false tax returns. According to court documents, Nijher falsely claimed he worked as a cashier at a gas station when, in truth, he owned the gas station and other businesses. Nijher filed a false federal corporate tax return for the gas station for the tax year 2010. Nijher reported the gas station had gross receipts of $3,980,618 whereas, Nijher knew the gas stations actual gross receipts for that year were approximately $4,729,798. Nijher also filed false monthly sales tax returns to the Illinois Department of Revenue understating business sales by approximately $6.3 million.
CEO of Produce Company Sentenced to Prison
On October 29, 2013, in Birmingham, Ala., Scott David Grinstead, chief executive officer of the now-defunct Adams Produce company, was sentenced to 16 months in prison and three years of supervised release. Grinstead pleaded guilty in April 2013 to misprision of a felony, wire fraud and failure to file federal income tax returns. As part of his plea agreement, Grinstead agreed to pay $450,000 in restitution to the bankruptcy estate of Adams Produce to benefit the company’s employees who lost pay when Adams closed abruptly and filed for bankruptcy in 2012. Three other officials of Adams Produce, David Andrew Kirkland, Christopher Alan Pfahl and Stanley Joel Butler II, have also pleaded guilty. They were indicted in August in connection with fraud at the Birmingham-based company that had been a leading distributor of fresh fruits and vegetables across the Southeast for decades. According to court documents, the federal government, through the Defense Supply Center Philadelphia, was one of Adams’ customers. Adams Produce entered into contracts with the government worth millions of dollars. Kirkland, Butler, Pfahl, and another employee conspired to create false records that reflected a higher purchasing cost for fruits and vegetables from a national distributor than Adams Produce actually paid. The inflated costs were presented to the government, which had agreed to pay a certain amount over Adams cost for produce. Between August 4, 2011, and December 7, 2011, the Adams' employees and officers conspired to conduct at least 82 transactions with the national distributor that were designed to create false invoices and purchase orders. Through those false invoices, Adams Produce fraudulently received about $481,000 from the government. In addition, Grinstead failed to file income tax returns with the IRS for the calendar years 2009 and 2010 when he had gross income of about $2,627,501.
Ohio Man Sentenced for Fraud and Tax Evasion
On October 23, 2013, in Cleveland, Ohio, Andrew J. Franz, of Aurora, Ohio, was sentenced to 57 months in prison and ordered to pay $602,420 in restitution. According to court documents, Franz pleaded guilty to three counts of mail fraud, one count of securities fraud, one count of investment adviser fraud and five counts of income tax evasion. According to court documents, Franz worked for an investment company and defrauded at least 10 clients by misappropriating customer funds for his own personal use. Franz submitted quarterly fee requests to mutual fund and annuity companies for payment of investment advisory fees for clients’ investment accounts. Franz then had these companies issue checks to his company, which he deposited into bank accounts he maintained and controlled. Franz also contacted a mutual fund company by telephone and, misrepresenting himself as the owner of a trust, caused the mutual fund company to mail payments to Franz’s personal residence. Franz then deposited these checks into bank accounts he maintained and controlled. Franz filed false tax returns for calendar years 2007, 2008, and 2009. He also failed to file an income tax return for 2010 and 2011.
California Man Sentenced for Tax Evasion
On October 23, 2013, in San Jose, Calif., Jonathan Jianguo Jiang was sentenced to 16 months in prison, three years of supervised release and ordered to pay $467,336 in restitution. Jiang also paid his civil tax liability, which includes penalties and interest, of over $3,000,000. On March 3, 2013, Jiang pleaded guilty to one count of income tax evasion for the 2004 tax year. According to court documents, Jiang, of Saratoga, Calif., incorporated SecureM in the Cayman Islands on January 28, 2004. He was the director, president, and sole shareholder of SecureM. On April 17, 2004, SecureM was sold to a United Kingdom company for at least $8,600,000. Jiang willfully omitted the capital gains from his 2004, 2005 and 2006 federal income tax returns, notwithstanding the fact that he received capital gains of at least $2.9 million between 2004 and 2006 from the sale of SecureM.
Two Men Sentenced for Their Roles in International High-Yield Investment Scheme
On October 18, 2013, in Boston, Mass., Alan Gilner, of New Smyrna Beach, Fla., and Randi A. Bochinski, of British Columbia, Canada, were sentenced for their roles in a scheme to defraud investors out of millions of dollars. Gilner was sentenced to 84 months in prison, three years of supervised release and ordered to pay $5.2 million in restitution. Bochinski was sentenced to 72 months in prison, three years of supervised release and ordered to pay $5.2 million in restitution. In June 2012, Gilner was convicted of conspiracy, mail fraud, wire fraud and money laundering following a seven-day jury trial. In May 2013, Bochinski pleaded guilty to wire fraud, mail fraud, and money laundering for his role in the scheme. According to court documents, Gilner and Bochinski promoted a series of purported high-yield investment programs to investors throughout the United States. The men promised extraordinary rates of return on the investments within a short period of time, and also pledged that investors’ principal would be insured or maintained in an escrow account. Once investors sent their money to either Gilner or Bochinski, the defendants diverted the funds for other uses, including their own personal use. In order to lull investors into believing that their funds had been invested as promised, Bochinski and Gilner typically made at least some purported “return” payments using money from other investors. In some instances, Bochinski and Gilner attempted to return principal to frustrated investors by using counterfeit checks.
New Jersey Man Sentenced for Fraud Schemes and Tax Evasion
On October 18, 2013, in Camden, N.J., George Sepero, of Glen Rock, N.J., was sentenced to 100 months in prison, three years of supervised release and ordered to pay $4,985,361 in restitution. Sepero pleaded guilty to wire fraud conspiracy, wire fraud and tax evasion. According to court documents, beginning in 2009, Sepero, along with two conspirators, claimed to run a series of hedge funds in New Jersey, luring investors with the prospect of extraordinary profits in foreign currency trading. The trio made numerous other misrepresentations and omissions to investors. However, Sepero and the conspirators invested little or no money in foreign currency or any other investment vehicle. They diverted the vast majority of victims’ investments to pay prior victims in Ponzi-scheme style and to finance extravagant personal expenditures. In a separate fraud scheme, after being fired from a financial institution as a financial planner, Sepero lied to a former client, an elderly, paraplegic woman with dementia, and her family, telling them he was still authorized to manage the annuity account. When his victim had money to add to the account, Sepero directed her to give him checks made payable to his company Casa Nostra Enterprises. Instead of transferring the money to the annuity account, Sepero spent it on his own expenses. To hide the fraud, Sepero fabricated a bogus account statement showing that the annuity account was worth more than $700,000, when, for the period covered by the statement, it actually contained $16. Sepero also pleaded guilty to tax evasion for the tax year 2010, as he derived income from his fraudulent activities, but did not file a tax return and deposited his victims’ money into his companies’ accounts.
Georgia Grocery Store Owner Sentenced for Food Stamp Fraud and Money Laundering
On October 18, 2013, in Macon, Ga., Elbert Eugene Shinholster, of Wilkinson County, Ga., was sentenced to 40 months in prison and ordered to pay $4,680,557 in restitution to the food stamp program, Department of Health and Services. Shinholster pleaded guilty on January 30, 2012 to federal charges of one count each of food stamp fraud and money laundering. As part of his plea, Shinholster admitted that, as the owner and operator of Shinholster’s Grocery and Meat Market located in Irwinton, Georgia, he illegally conspired with almost 2,000 food stamp recipients to defraud the food stamp program. As part of the scheme each food stamp recipient would provide Shinholster with an electronic benefits transfer (EBT) card and personal identification number. Shinholster would then run the EBT card through the point of sale machine administered by the Food Stamp Program as though the cardholder had purchased food when, in fact, the cardholder got cash instead. Shinholster admitted that he knew that an EBT card was to be used to purchase food only and not to be sold for cash. The illegal EBT debit would include an additional 30 percent of the cash amount as profit for Shinholster.
Arizona Man Sentenced for Role in Investment Fraud Scheme
On October 11, 2013, in Tucson, Ariz., Dino Sisneros was sentenced to 60 months in prison, three years of supervised release and ordered to pay $963,200 in restitution and to forfeit $861,000. Sisneros was convicted on June 25, 2013 of wire fraud and money laundering. According to evidence presented at trial, Sisneros orchestrated a real estate investment fraud scheme between 2006 and 2008. Sisneros misled investors by promising them high rates of return in exchange for their money which he said would be used to invest in real estate. However, instead of investing in real estate, he used large portions of his victims’ money for his own personal use. Sisneros received more than $900,000 from his victims but failed to pay his victims in return for their investments as he had promised.
Virginia Man Sentenced for Tax Evasion
On October 3, 2013, in Richmond, Va., Jeffrey Price Elliott, of Chesterfield, Va., was sentenced to 18 months in prison, three years of supervised release and ordered to pay $181,192 in restitution. Elliott pleaded guilty to a single count criminal information charging him with tax evasion. In a statement of facts filed with his plea agreement, Elliott agreed that he had regularly and systematically evaded the payment of income taxes by under-reporting income from two contracting businesses he owned, Empire Masonry and Concrete, LLC, and J.P. Elliott, LLC. As part of the scheme, Elliott dealt mostly in cash, failed to keep adequate records, failed to report sums paid out to his workers and filed tax returns for the years 2006 and 2007 that under-reported Empire's income. Elliott also failed to file tax returns for the years 2008 or 2009.
Trustee Sentenced for Tax Evasion
On October 3, 2013, in Lubbock, Texas, Randy Lynn White was sentenced to 33 months in prison, three years of supervised release and ordered to pay $211,165 in restitution. White pleaded guilty in June 2013 to an Information charging one count of tax evasion. According to the factual resume filed in the case, White admitted that he intentionally and willfully did not file required tax returns for 2007, 2008 and 2009 in order to evade the payment of taxes due and owing to the United States. White was the sole trustee of the Frank F. McMordie Jr Family Trust and derived substantial benefits and income from the Trust, both in administration fees paid to him and in monies he took from the Trust for his personal use. White had absolute control over the Trust’s assets, which consisted primarily of a large ranch in the Texas Panhandle that produced mineral interests. White paid himself excessive administrative fees and spent most of the Trust’s remaining money on extravagant personal expenditures. White attempted to conceal his extravagant expenditures by paying a relatively small amount of the Trust’s income to the Trust’s beneficiary, Frank F. McMordie III, who resided in Mexico. White also admitted that as part of his scheme to evade taxes, he disguised many of the funds that he diverted from the Trust’s bank account to his personal use by placing false business notations on the checks, falsely claiming that the expenditures were for business purposes. He falsely indicated that he was using the money for ranch operating expenses, when, in fact, the Trust did not operate any ranch.