The following examples of General Tax Fraud Investigations are written from public record documents on file in the courts within the judicial district where the cases were prosecuted.
Restaurant Chain Accountant Sentenced For Tax Fraud Scheme
On Aug. 6, 2015, in Philadelphia, Pennsylvania, William J. Frio, of Springfield Township, was sentenced to 60 months in prison, four years of supervised release and ordered to pay $1.7 million in restitution. Frio pleaded guilty on Jan. 26, 2015, to conspiracy to commit tax evasion, four counts of filing false tax returns, loan fraud and aggravated structuring of financial transactions. According to court documents, Frio was an accountant and income tax preparer who provided services to the Nifty Fifty’s organization dating back to 1986. Frio and five others, including the restaurant chain’s owners and managers, participated in a long-running scheme to avoid paying millions of dollars in personal and employment taxes. The scheme defrauded the IRS by failing to properly account for more than $15 million in gross receipts. Frio and the owners and principals of Nifty Fifty’s conspired in a scheme to use skimmed cash to pay themselves and people and businesses who supplied goods and services to the Nifty Fifty’s restaurants. In 2008, Frio submitted a false loan application and other documents to a bank, for a $417,000 mortgage for his personal residence. Between January 2009 and November 2009, Frio knowingly structured transactions with the bank, totaling more than $2.6 million, as part of a pattern of illegal activity involving transactions of more than $100,000 in a 12-month period. Frio used his position as the Nifty Fifty’s accountant to embezzle millions of dollars that belonged to the organization.
Former Construction Boss Sentenced for Role In $58 Million HOA Scheme, Tax Evasion
On Aug. 6, 2015 in Las Vegas, Nevada, Leon Benzer, a former construction boss from Las Vegas, was sentenced to 188 months in prison and ordered to pay restitution of $13,294,100. Benzer pleaded guilty on Jan. 23, 2015, to one count of conspiracy to commit mail and wire fraud, 14 counts of wire fraud, two counts of mail fraud and two counts of tax evasion for his role in a scheme to fraudulently gain control of condominium homeowners’ associations (HOAs) in the Las Vegas area in order to secure construction and other contracts for himself and others. According to court documents, Benzer admitted that, from approximately August 2003 through February 2009, he and an attorney developed a scheme to control the boards of directors of HOAs in the Las Vegas area. As part of the scheme, Benzer and his co-conspirators recruited straw buyers to purchase condominiums and secure positions on HOAs’ boards of directors. Benzer paid the board members to take actions favorable to his interests, including hiring his co-conspirator’s law firm to handle construction-related litigation and awarding remedial construction contracts to Benzer’s company, Silver Lining Construction. Forty-two individuals have been convicted of crimes in connection with the scheme. In addition, beginning around Sept. 25, 2007, Benzer owed the IRS at least $459,204 for his individual income taxes for tax years 2001 through 2005. However, Benzer willfully attempted to evade the payment of these taxes by preparing and causing to be prepared false financial forms with the IRS in order to conceal income and assets. Also, about Sept. 25, 2007, Benzer owed at least $705,982 for employment taxes for tax periods Sept. 30, 2003, Dec. 31, 2003 and March 31, 2004 and for unemployment taxes for tax year 2003. Instead of paying these taxes, Benzer willfully attempted to evade payment by opening a bank account in his name to conceal money and assets and preparing and filing false financial forms with the IRS.
Owner of Investment Firm Sentenced for Orchestrating $4.7 Million Ponzi Scheme
On Aug. 3, 2015, in Charlotte, North Carolina, James H. Mason, of Graham, North Carolina, was sentenced to 96 months in prison, three years of supervised release and ordered to pay $4,325,820 in restitution to the victims of his fraud. Mason pleaded guilty in June 2014 to securities fraud conspiracy and filing a false federal income tax return. According to court documents, beginning in 2010 and continuing through March 2013, Mason solicited at least 500 victims to invest over $4.7 million with his investment companies and other related entities, for the supposed purpose of investing in Over-the-Counter foreign currency exchange. Mason falsely projected substantial returns on investments, as much as $100 million, depending on the amount of their initial investment. Mason put only a portion of investors’ money into the foreign currency exchange and lost essentially all the money he did invest while conducting FOREX trading. Mason failed to disclose his actual trading results to his victims, and instead made false oral representations and provided bogus statements to clients that fraudulently reported profits. In order to induce individuals to continue to invest in his scheme, he established a website for investors to access their accounts online. The website fraudulently depicted that investors were making money, when in fact, the profits depicted were false, and in many cases, there was no actual money in the victims’ accounts. Instead of investing the funds, Mason simply deposited victims’ money into various bank accounts he controlled and used a substantial portion of it to pay for personal and business expenses, real estate, cars and other expenses. In addition, Mason did not claim the additional income on his federal income tax returns filed with the IRS. Mason also used the rest of investors’ money to make “Ponzi” payments to other victims, fraudulently claiming they were “profits” from successful FOREX trading.
Married Lawyer and Doctor Sentenced for Obstructing IRS Audit
On July 31, 2015, in Manhattan, New York, Jeffrey S. Stein and Marla Stein, who are husband and wife, were sentenced to 18 months and 12 months and one day in prison, respectively and ordered to pay restitution of $344,989 to the IRS for obstructing the IRS. According to court documents, Jeffrey S. Stein, a vascular surgeon, and Marla Stein, a New York personal injury lawyer, reported the profits from their medical and law practices, respectively, on separate Schedules C (Profit or Loss From Business) attached to the joint U.S. Individual Income Tax Returns, Forms 1040, that they filed for the tax years 2009-2012. The Steins provided false and fictitious information to their accountant in order to fraudulently reduce the amount of taxes they would have to pay to the IRS. In February 2013, the IRS notified the Steins that their tax returns for the 2010 and 2011 tax years had been selected for audit. In response to requests by an IRS auditor for documents, the Steins created and provided various fabricated and fictitious documents and information as part of a corrupt effort to convince the IRS auditor that the expenses claimed on their respective Schedules C were legitimate. Additionally, for the tax years 2007-2013, the Steins failed to inform their accountant that they employed and paid approximately $15,000 annually in cash wages to a household employee. As a result, the Steins failed to pay to the IRS various employment taxes due and owing to the IRS, and also aided the employee in avoiding detection by the IRS of the employee’s failure to report her cash wages to the IRS for the tax years 2007-2013.
Pennsylvania Insurance Firm Operator Sentenced for Fraud and Tax Evasion
On July 30, 2015, in Wilkes-Barre, Pennsylvania, Joseph S. Hyduk, of Hazleton, was sentenced to 63 months in prison and three years of supervised release. Restitution will be determined at a later date. In November 2014, Hyduk pleaded guilty to wire fraud and income tax evasion. According court documents, Hyduk did business as BNA Financial Services, an insurance company which he operated from his home. During 2010 through 2012, Hyduk fraudulently diverted approximately $1 million from his clients’ accounts to himself for his own personal use.
Texas Man Sentenced for Pump and Dump Securities and Tax Fraud
On July 24, 2015, in Buffalo, New York, Eric C. Cusimano, of Lakeway, Texas, was sentenced to 46 months in prison and ordered to pay $657,005 in restitution to the IRS and pay $1,218,783 as a money judgment to the United States. Cusimano was previously convicted of conspiracy to commit securities fraud and tax evasion. According to court documents, between September 2009 and Jan. 9, 2012, Cusimano and others participated in a stock fraud scheme that used several websites and web hosting company to fraudulently inflate the prices of publically traded stocks of companies, generally stocks of companies with low stock prices (“penny stocks”). Investors were deceived into believing that prices at which they bought and sold the stocks were determined by supply and demand, not rigged by manipulators, a scheme frequently referred to as a “pump-and-dump.” During the course of the scheme, Cusimano and others were compensated by third-parties to tout certain penny stocks. In total, Cusimano was compensated $1,218,783 during the course of the scheme which involved at least 250 victims. Furthermore, during the tax years 2008 to 2011, Cusimano owned and operated Premire Consulting, Inc., which was used to promote penny stocks. During these years, Premire received from the defendant’s penny stock promotion business, unreported gross receipts totaling $7,921,706, and corrected taxable income totaling $1,218,783. As a result of the unreported income, the total tax due and owing is $657,005.
Virginia Man Sentenced for Employment Tax Fraud, Filing a False Tax Return
On July 16, 2015, in Richmond, Virginia, David Hoare was sentenced to 18 months in prison, three years of supervised release and ordered to pay $$396,824 in restitution to his victim and $42,011 to the IRS. Hoare pleaded guilty on April 15, 2015 to failure to pay over employment taxes and filing a false tax return. According to court documents, Hoare was a certified public accountant. Starting in 2002, he entered an agreement with a doctor’s practice in Newport News, Virginia to provide bookkeeping, accounting and tax services for the business. On a monthly basis he collected funds from the business for the payment of estimated payroll and other taxes. However, instead of placing these funds in an escrow account for payment to the IRS, Hoare cashed the checks and failed to file IRS Forms 941 and failed to remit the taxes to the IRS. For the years 2008 through 2011, Hoare collected $124,308 for the payment of estimated payroll and other taxes. Rather than placing these funds in an escrow account for payment to the IRS, Hoare endorsed and negotiated these funds for cash. In or about late 2010, the victim received notification from the IRS that there were tax delinquencies of over $100,000 on his personal tax returns for the years 2003, 2007 and 2008. When the victim spoke to Hoare about this notice, and he falsely assured the victim that taxes had been paid and that the IRS had miscredited the payments. In addition, Hoare omitted from his federal 2010 tax return approximately $66,078 in income received from various clients, resulting in tax due and owing of $23,131.
Defendant Sentenced for Conspiracy to File False Tax Returns in Connection to a Fraud Against a College Bookstore
On July 16, 2015, in Cedar Rapids, Iowa, Thomas DeFelice was sentenced to 12 months in prison, three years of supervised release, and ordered to pay all taxes and penalties owed. DeFelice previously pleaded guilty to filing false tax returns. This case was connected to that of James Spaulding, from Longmont, Colorado, who was the director of the Clarke University Bookstore between 2011 and 2012. Spaulding was previously sentenced to 57 months in prison. According to plea agreements, Spaulding and DeFelice created a fictitious corporation called RVP Wholesale Books (RVP). They then caused RVP to issue false invoices to Clarke University purporting to show that RVP supplied the Clarke University bookstore with books. In truth, RVP never supplied the Clarke University bookstore with any books. Spaulding and DeFelice split the proceeds of the fraud, totaling more than $302,000. Spaulding and DeFelice filed false tax returns for 2011 and 2012 in which they failed to disclose the illegal proceeds obtained from the fraud.
Virginia Man Sentenced for Investment Fraud Scheme
On July 13, 2015, in Richmond, Virginia, James Ashby Moncure Jr., of Fredericksburg, Virginia, was sentenced to 65 months in prison, three years of supervised release and ordered to pay approximately $8.3 million in restitution to his victims. On Feb. 6, 2015, Moncure pleaded guilty to wire fraud and engaging in unlawful monetary transactions. According to court documents, as a partial owner of Moncure Brothers LLC, Moncure had partnered with The Silver Companies to develop property known as the Quantico Corporate Center at Stafford (QCCS), a business park located in Stafford County, Virginia, adjacent to Marine Corps Base Quantico. Beginning prior to January 2010 and continuing through March 2014, Moncure solicited individuals for investment opportunities in exchange for short term promissory notes offering returns ranging from 10 percent up to 25 percent. In connection with those investments, Moncure claimed that the investment funds would be used for acquiring and developing land for the QCCS or another specified property. He also made misrepresentations about how the promised returns would be generated and the security of investment funds. Instead, Moncure misappropriated a significant amount of investor funds for payment of returns to earlier investors and transfers to investment trading accounts from which he day-traded stocks and options.
Happy's Pizza Founder and Co-Conspirators Sentenced for Multi-Million Dollar Tax Fraud Scheme
On July 10, 2015, in Detroit, Michigan, Happy Asker, of West Bloomfield, was sentenced to 50 months in prison, three years of supervised release and ordered to pay $2.5 million in restitution to the IRS. Asker was convicted of three counts of filing false income tax returns for the years 2006 through 2008, 28 counts of aiding and assisting in the filing of false income and payroll tax returns for the years 2006 through 2009, and corruptly endeavoring to obstruct and impede the administration of the Internal Revenue Code. According to court documents, Asker was the president and founder of Happy’s Pizza, a chain of restaurants in Michigan, Ohio and Illinois. From 2004 through 2011, Asker, along with certain franchise owners and employees, executed a systematic and pervasive tax fraud scheme to defraud the IRS. Gross sales and payroll amounts were substantially underreported on numerous corporate income tax returns and payroll tax returns filed for nearly all 60 Happy’s Pizza franchise locations. From 2008 to 2010, Asker and his co-conspirators diverted for personal use more than $6.1 million in cash gross receipts from approximately 35 different Happy’s Pizza stores. In total, Asker and certain employees and franchise owners failed to report approximately $3.84 million of gross income and approximately $2.39 million in payroll taxes from the various Happy’s Pizza franchises to the IRS. Maher Bashi, Happy’s Pizza corporate chief operating officer; Tom Yaldo, an owner of numerous franchises; Arkan Summa, an owner of numerous franchises; and Tagrid Bashi, a nominee franchise owner; have been sentenced for their roles in the scheme to terms ranging from three years of supervised release to 24 months of prison and ordered to pay total restitution of $1,134,222.
Former County Prosecutor Sentenced for Stealing from Elderly Client
On July 6, 2015, in Kansas City, Missouri, Richard F. Turner, of Bethany, Missouri, was sentenced to 45 months in prison and ordered to pay restitution to his former client, followed by restitution payments to the IRS and the Missouri Department of Revenue. Turner has already made two restitution payments to his former client totaling $193,753. Turner, an attorney, is the former elected county prosecutor of Harrison County. On Nov. 26, 2014, Turner pleaded guilty to one count of wire fraud and one count of false statements on his tax return. According to court documents, from Oct. 12, 2004 to May 29, 2014, Turner fraudulently attempted to obtain at least $728,147, and he did obtain at least $540,803, from an elderly client. He spent the money on personal expenses not authorized by his client, the client’s trust agreements, or his power of attorney. Turner also failed to pay taxes on the embezzled income, causing additional loss to the state and federal government of at least approximately $154,453.
New York Man Sentenced on Tax Fraud Charges
On July 1, 2015, in Buffalo, New York, Carlo J. Marinello, Jr., of Williamsville, was sentenced to 36 months in prison and ordered to pay $351,763 in unpaid taxes. Marinello was convicted after a jury trial of one count of obstructing and impeding the due administration of the Internal Revenue Code, four counts of failing to file personal income tax returns and four counts of failing to file corporate tax returns with the IRS. According to court documents, Marinello was the manager and owner of Express Courier Group/Buffalo Inc. (AExpress Courier@), a corporation formed to commercially transport letters and documentation between businesses in New York and Canada. The business earned hundreds of thousands of dollars in revenues but Marinello failed to file tax returns for the company or personal tax returns for earned income. Marinello hid the income and obstructed and impeded the due administration of the IRS by various methods including failing to maintain corporate books and records; failing to provide his accountant with complete and accurate information; and destroying, shredding and discarding business records. Additionally, Marinello hid income earned by Express Courier in personal and other non-business bank accounts, transferred assets to a nominee, paid employees of Express Courier with cash and used business receipts and money from business accounts to pay personal expenses. Although required to do so, Marinello failed to file personal income tax and corporate tax returns for tax years 2005, 2006, 2007 and 2008.
Missouri Woman Sentenced for Stealing from Her Employer and Filing False Returns
On June 29, 2015, in Springfield, Missouri, Patricia Culbertson, of Nevada, Missouri, was sentenced to 24 months in prison and ordered to pay $412,022 in restitution to the business and the government. On Dec. 4, 2014, Culbertson pleaded guilty to bank fraud and filing a false tax return. According to court documents, Culbertson worked for Barrington Manufacturing Corporation as a bookkeeper from June 2009 until she was suspended on June 24, 2014. Culbertson forged the company owner’s signature on checks from the company’s bank account without authorization in order to cover her gambling debts and for other personal expenses. On hundreds of occasions, Culbertson stole the identity of various company officials, forged their signatures, and wrote unauthorized checks on the company's operating account and a separate account created to provide financial assistance to her fellow employees. The checks were either deposited into her personal bank account, the bank accounts of her mother and son, or the bank account of her company, PC Tech. In July 2014, agents spoke with Culbertson at her home and observed Barrington's financial records that had been removed from the business office. Agents immediately seized and preserved those financial records. After completing their investigation, agents determined that Culbertson destroyed and stole financial documents in an effort to conceal the true scope of her crimes. Culbertson failed to report this embezzled income on her federal income tax returns for the years 2010 through 2013. Culbertson’s actions resulted in a total tax loss to the federal government of $60,431. The total tax loss to the state of Missouri was $14,754.
Minnesota Man Sentenced for Defrauding Investors
On June 26, 2015, in Minneapolis, Minnesota, Sean Meadows, of Eden Prairie, was sentenced to 300 months in prison and three years of supervised release for using his financial planning and asset management firm, Meadows Financial Group (MFG), to operate a long-term Ponzi scheme. Meadows pleaded guilty on Dec. 11, 2014 to wire fraud, mail fraud, and transaction involving fraud proceeds. According to the plea and documents filed in court, Meadows operated MFG, through which he sold insurance and investment products to clients in Minnesota, Indiana, Arizona, and elsewhere. From 2007 until April 2014, Meadows successfully solicited a total of at least $13 million from more than 100 clients for a purported investment managed by MFG. The defendant falsely told victims that he would use their funds to purchase bonds, real estate, or other legitimate third-party investments. Meadows lured victims into removing funds from their retirement and other savings accounts by promising high rates of returns – up to 10 percent annually – when, in fact, he did not invest their funds and did not have a legitimate means by which to make interest payments. Instead, Meadows used funds from new investors to make interest and/or principal repayments to existing investors and to pay personal expenses. Among the victims Meadows defrauded are senior citizens and the disabled, poor or terminally ill. Victims were left in financial ruin because they lost their financial security, retirement funds, their ability to support their families, and in some cases, their ability to pay for cancer treatments.
Former Senior Executive of Qualcomm Sentenced for Insider Trading and Money Laundering
On June 26, 2015, in San Diego, California, Jing Wang, of Del Mar, California, was sentenced to 18 months in prison and fined $500,000 for his role in a three-year insider trading scheme. Wang, former Executive Vice President and President of Global Business Operations for Qualcomm Inc., pleaded guilty in July 2014 to insider trading, money laundering and obstruction of justice. In connection with his plea, Wang made three, separate insider trades using a brokerage account in the name of his British Virgin Island (BVI) shell company, Unicorn Global Enterprises. First, in early 2010, prior to Qualcomm’s announcement of a dividend increase and stock repurchase, Wang bought company stock valued at approximately $277,000. Then in December 2010, while attending Qualcomm’s Board of Directors meeting in Hong Kong, and hours after the Board approved a non-public offer to purchase Atheros, Wang purchased stock in Atheros. A few weeks later, he directed his stockbroker, Gary Yin, to sell the Atheros stock, for approximately $481,000, and purchase Qualcomm stock one day before the company announced record earnings. Wang transferred the illegal proceeds from Unicorn’s account to an account of a new BVI shell company he controlled. He obstructed justice by creating a false cover story in which he and Yin would blame Wang’s brother Bing Wang, who resides in rural China, for the insider trading and ownership of the Unicorn Account. Yin pleaded guilty to conspiring to obstruct justice and launder money, and is scheduled to be sentenced at a later date. Bing Wang has been charged in connection with the scheme, and is wanted on an international arrest warrant.
Massachusetts Dentist Sentenced for Tax Evasion
On June 26, 2015, in Worcester, Massachusetts, George Fenzell, of Douglas, was sentenced to 16 months in prison, one year of supervised release and ordered to pay $157,407 in restitution to the IRS. In November 2014, Fenzell pleaded guilty to tax evasion. According to court documents, Fenzell operated a dental office located in Shrewsbury, Massachusetts. From 1999 through 2012, Fenzell engaged in conduct intended to obstruct the IRS. For the years 1999 through 2007, he failed to file timely federal income tax returns and concealed income that he earned from his dental practice from the IRS. Additionally, Fenzell failed to file his tax returns for 2008 through 2011. He concealed his dental business receipts by diverting the funds through nominee entities, including River Valley Dental. He used multiple nominee bank accounts to conceal his ownership of his income and assets. Fenzell also titled and registered a Lincoln Navigator and Ducati motorcycle with another nominee entity, Smiling Trust, and made extensive use of cash in order to conceal his fraud from the IRS.
Florida Resident Sentenced for Investment Fraud
On June 25, 2015, in Ocala, Florida, John C. Boschert, of Apopka, was sentenced to 108 months in prison for conspiracy to commit wire fraud. He pleaded guilty on Oct. 29, 2014. According to court documents, Boschert and his two conspirators, Jenifer E. Hoffman, of Clermont, and Bryan T. Zuzga, of Coldwater, Michigan, defrauded over 100 victims out of more than $11 million through investments offered in connection with a company called Assured Capital Consultants. As part of their solicitations, the conspirators represented to investors that money would be placed in a Performing Private Placement Investment, and that Boschert had connections to the trading program being used. Investors were told that their investments would be safe and that none of their money would leave the attorney escrow account that belonged to Zuzga, who was represented as being an attorney licensed in Florida. Investors were further advised that their funds would be used as collateral for a line of credit, which would then be used in trading. None of those representations were true. Zuzga was not an attorney licensed in Florida or any other state, and the funds were not deposited into any escrow account controlled by him. Instead, the three operated a scheme in which money from later investors was paid to earlier investors. They also used some of the money from the scheme for themselves, including purchasing residences for Hoffman and Zuzga. In a prior civil proceeding, the United States forfeited two residences belonging to Hoffman and Zuzga, which had been purchased with proceeds from the scheme. The US obtained more than $850,000 from the sale of the properties. The proceeds from those sales were distributed to the victims of the scheme. On June 18, 2015, Zuzga pleaded guilty to conspiracy to commit wire fraud. His sentencing date has not been set. Hoffman was charged with one count of conspiracy, 11 counts of wire fraud, and one count of making a false tax return. Her trial is set for July 2015.
Ohio Man Sentenced for Running $8.7 Million Ponzi Scheme
On June 22, 2015, in Cincinnati, Ohio, John R. Bullar was sentenced to 100 months in prison and three years of supervised release. Bullar was also ordered to forfeit $535,408 and pay approximately $6.2 million in restitution to the victims. On Sept. 23, 2014, Bullar pleaded guilty to committing wire fraud and money laundering. According to court documents, Bullar marketed himself as someone experienced in the financial services industry and who was successful in investing in commodity futures. In an effort to persuade individuals to invest with him, Bullar frequently made numerous false representations. Although Bullar collected over $8.7 million from investors between mid-2006 and September 2013, only $580,500 was sent to brokers for trading. The remaining $8.1 million was never invested, but used instead to pay other investors and Bullar’s own personal expenses. Bullar provided investors with quarterly statements purporting to show their account balances and often substantial gains over a short period of time. In addition, Bullar caused Forms 1099 to be issued to investors for tax purposes, which reported the fictitious gains. Investors relied on these documents to file their tax returns and investors paid taxes on the fictitious gains reported to them.
Pennsylvania Woman Sentenced for Embezzling from Her Employer
On June 18, 2015, in Philadelphia, Pennsylvania, Joan Baranek, of Yardley, was sentenced to 24 months in prison, three years of supervised release and ordered to pay $567,504 in restitution to Airgas, Inc. and $304,003 in restitution to the IRS. Baranek pleaded guilty on Oct. 8, 2014 to mail fraud and filing a false income tax return. According to court documents, Baranek was a vice president for sales at Airgas Safety, Inc., a subsidiary of Airgas, Inc., based in Levittown, Pennsylvania. Baranek was responsible for designing and managing a sales incentive program for telesales centers (call centers). She purchased gift cards and other award prizes with her personal American Express card, and then submitted expense reports to Airgas for reimbursement. In support of her expense reports, she attached invoices for the gift cards and award prizes to the expense reports. Between May 2006 and December 2012, Baranek altered invoices or even created fictitious invoices, which she attached to her expense reports so as to obtain reimbursement for alleged promotional expenses that she never incurred. Baranek submitted approximately 200 expense reports claiming a total of $1.8 million in promotional expenses; of these, approximately 121 of the reports contained altered, fictitious, or duplicate invoices in support of the expensed promotional items, for a total of approximately $830,504 of fraudulent expenses. Baranek filed a United States income tax return for calendar year 2008, that reported her taxable income as $155,419, when her actual taxable income approximately $360,944.
Texas Man Sentenced for Stealing Nearly $1 Million from Employer
On June 17, 2015, in Kansas City, Missouri, Daniel Reif, of Weatherford, Texas, was sentenced 36 months in prison and ordered to pay $1,318,042 in restitution and to forfeit $105,000 seized from his TD Ameritrade account and a 2010 Tige boat and trailer. On Jan. 22, 2015, Reif pleaded guilty to one count of mail fraud and one count of filing a false income tax return. According to court documents, in August 2005, Reif began working for Herzog, a company which constructs railroads, highways, bridges, and airports. As the manager of signals for Herzog, Reif was responsible for procuring materials and services from vendors in order to fulfill the needs of existing jobs; he was also responsible for oversight of the installation and performance of those services and materials and was authorized to approve payments to vendors under his supervision and responsibility. Reif defrauded Herzog from January 2006 through Aug. 26, 2011. To execute the scheme, Reif founded his own company, Railway Signal Solutions, LLC (RSS), in February 2005. Reif began ordering project materials and services from supply vendors through RSS, then re-selling those products and services to Herzog at inflated prices. The RSS invoices made it appear as though the materials and services were being provided directly by RSS, an ostensibly independent supply vendor. The difference between the true price and Reif’s inflated price varied from 10 percent to over 100 percent. After RSS invoiced Herzog, Reif actually authorized payment of the inflated invoices. Reif embezzled nearly $1 million from Herzog during the course of his scheme. In addition, Reif filed a false federal income tax return for the year 2008. Reif claimed $990,159 in business expenses, although $498,301 of his business expenses had already been reimbursed by Herzog, his employer. The return understated his taxable income, resulting in a tax loss to the government of $192,230. Reif also claimed substantially inflated and fraudulent expenses on federal income tax forms for travel and entertainment, depreciation, shipping and supplies. The total tax loss for tax years 2008 to 2011 is $337,434.
Media Firm Owner Sentenced In Scheme to Defraud Louisiana Car Dealerships
On June 17, 2014, in Baton Rouge, Louisiana, Raymond C. Reggie, of Mandeville, Louisiana, was sentenced to 135 months in prison and ordered to pay $1,217,657 in restitution and to forfeit the same amount. Reggie pleaded guilty on Oct. 27, 2014, to five counts of wire fraud for orchestrating an elaborate $1.2 million scheme to bill car dealerships in the Baton Rouge and New Orleans areas for fictitious advertising services. Some of the conduct to which Reggie pleaded guilty he committed while on supervised release from a prior fraud conviction. According to court documents, Reggie owned and operated Nexlevel Group, a firm that purchased and managed advertising for car dealerships in Southeast Louisiana. Reggie billed the dealerships for fictitious advertising expenses, falsely representing that such expenses were actually incurred. Reggie admitted that once the dealerships issued the checks for the bogus expenses, he diverted the funds for his personal use. In total, the car dealerships issued 138 checks for more than $1.2 million for fictitious advertising services.
New York Investment Advisor Sentenced for Ponzi Scheme
On June 17, 2015, in Central Islip, New York, Paul Sullivan, of Franklin Square, was sentenced to 55 months in prison, three years of supervised release and ordered to pay $1.9 million in restitution to the victims of his fraud. In November 2013, Sullivan pleaded guilty to wire fraud for engaging in a Ponzi scheme. According to court documents, Sullivan, a licensed financial advisor, made investments without his clients’ authorization that resulted in significant losses. When these losses were discovered, Sullivan admitted his misconduct to some clients and attempted to prevent them from alerting the authorities by promising to reimburse the clients for their losses. However, in order to obtain the money to reimburse these clients, Sullivan stole funds belonging to other clients. Sullivan falsely told the clients from whom he stole funds that he was investing their money in special private investments with high rates of return.
California Man Sentenced for Defrauding Investors Out of Almost $1 Million
On June 16, 2015, in Portland, Oregon, Bryan Scott Gunn, of Victorville, California, was sentenced to 20 months in prison, three years of supervised release and ordered to pay $939,308 in restitution. According to court documents, Gunn executed schemes conning investors out of almost $1 million. For the first scam, Gunn convinced his victims to invest more than $500,000 in an alleged heavy equipment leasing company, Republic Funding LLC, promising a high rate-of-return. During the scheme, Gunn showed the investors documentation that falsely showed the alleged company was profitable. Gunn diverted the investors’ money for his personal use. When the investors began to seek a return on their investment and began to challenge Gunn’s claims about the alleged business, he started his second swindle. Gunn created two fictitious companies, a few fictitious employees, and a fictitious attorney, including corresponding email accounts, to conceal his fraud. Gunn told the investors that he had sold the equipment leasing business’ portfolio to one of his fictitious companies, CMC Funding. When the investors sought payment from the sale of the portfolio, Gunn explained that CMC Funding had filed for bankruptcy and that its assets, including the portfolio, were being purchased by Fidelity LLC, Gunn’s other fictitious entity. Gunn, using letters and emails, posed as employees of Fidelity and as an attorney, and falsely claimed that costs associated with the bankruptcy needed to be paid before the investors could receive any payment for the alleged purchase of the portfolio. The investors paid more than $411,000 in an attempt to recover some of their investment. Gunn continued to use their money to live lavishly. At one point, in an attempt to appease the investors, Gunn created and gave two bogus checks to the investors as a payout. The checks, one for $314,113 and the other for $1,169,887, appeared to be issued from CMC Funding and to be drawn on an account at a Federal Credit Union. After depositing the checks, the investors quickly learned that the checks were fraudulent and that the account at the Federal Credit Union did not exist.
Day Trader Sentenced for Investment Fraud Scheme
On June 16, 2015, in Pocatello, Idaho, Michael Justin Hoopes, of Rexburg, Idaho, was sentenced to 24 months in prison, three years of supervised release, and ordered to pay $620,000 in restitution. Hoopes pleaded guilty on Feb. 24, 2015 to wire fraud and monetary transactions in property derived from specified unlawful activity. According to the plea agreement, from 2007 through February 2011, Hoopes engaged in a scheme to defraud investors in various investment opportunities he offered. Specifically, Hoopes solicited investors to provide him with capital he represented would be use in his commodities futures day trading activities and to invest in Connected Lyfe, a publicly traded company. Hoopes misrepresented to investors that he earned returns in excess of 20 to 25 percent, that he would invest all of the capital they provided in day trading and pay them from the profits generated by their investments, and he would receive personal compensation only from profits he made above the 20 to 25 percent return. Hoopes provided false monthly account statements to investors documenting the purported positive returns. In reality, he used much of the capital he received for personal expenses and paying “positive” returns to existing investors primarily from the capital raised from new investors. Hoopes received in excess of $9 million from investors and misappropriated approximately $620,000 for his own personal use. Contrary to monthly account statements showing positive returns, he lost most of the remainder day trading and in other failed investments. Hoopes was also ordered to forfeit shares of Connected Lyfe in his possession.
Former State Public Health Administrator Sentenced for Bribery, Kickback Scheme and Filing False Returns
On June 12, 2015, in Springfield, Illinois, Roxanne Jackson, of Olympia Fields, was sentenced to 25 months in prison, three years of supervised release and ordered to pay $1,000,000 in restitution to the Illinois Department of Public Health (IDPH) and an additional $172,825 to the IRS. Jackson, a former director of human resources for the Illinois Department of Public Health, pleaded guilty on Sept. 23, 2014, to participating in a bribery and kickback scheme with IDPH Chief of Staff Quinshanta Golden. According to court documents, Jackson, at Golden’s direction, was a paid consultant to three not-for-profit entities that received state grant funds and a security business that conducted background checks and interviews of Illinois nursing home residents. As part of the scheme, Jackson was required to pay Golden one-half of whatever she received in grant funds, less any funds to be withheld for payment of taxes, which were never paid, and to pay Golden kickbacks for each background investigation performed by the security firm. As a result of the scheme, from 2006 to 2009, Jackson received more than $1,000,000 in grant and contract funds, and paid Golden approximately $433,000 in kickback payments. For tax years 2006, 2007, 2008, and 2009, Jackson failed to report approximately $908,266 in income, resulting in failure to pay $172,825 in taxes due. Golden is scheduled to be sentenced for her role in the bribery and kickback scheme and for obstruction of justice.
Kentucky Businessman Sentenced for Bribery, Tax Fraud and Wire Fraud
On June 4, 2015, in New York, New York, Wilbur Anthony Huff, of Caneyville and Louisville, Kentucky, was sentenced to 144 months in prison, three years of supervised release, ordered to forfeit $10.8 million to the United States and pay a total of more than $108 million in restitution to victims of his crimes, including the Federal Deposit Insurance Corporation and the IRS. Huff pleaded guilty on Dec. 23, 2014 to corrupt interference with Internal Revenue code, aiding in the preparation of false tax returns, willful failure to file taxes and conspiracy to commit bank bribery and wire fraud. According to court documents, Huff was a businessman who controlled numerous entities located throughout the United States (Huff-Controlled Entities). Huff concealed his control of the Huff-Controlled Entities by installing other individuals to oversee the companies’ day-to-day functions and to serve as the companies’ titular owners, directors, or officers. Huff also maintained a corrupt relationship with Park Avenue Bank and Charles J. Antonucci Sr., the bank’s president and chief executive officer, and Matthew L. Morris, the bank’s senior vice president. From 2007 through 2010, Huff used Huff-Controlled Entities to avoid paying employment taxes for clients, even though the client companies had given his company the funds for such purposes; he bribed executives of Park Avenue Bank, defrauded bank regulators, as well as the board and shareholders of a publicly-traded company. In addition, Huff, Morris, Antonucci, and Allen Reichman, an executive at an investment bank and financial services company headquartered in New York, New York, conspired to defraud Oklahoma insurance regulators into allowing Antonucci to fraudulently purchase an Oklahoma insurance company. Through these schemes, Huff diverted millions of dollars from one of the Huff-Controlled Entities to fund his investments in unrelated business ventures and pay his family members’ personal expenses. Huff also paid bribes totaling hundreds of thousands of dollars in cash and other items to Morris and Antonucci in exchange for their providing him with false letters of credit at Park Avenue Bank. Antonucci, Morris, and Reichman pleaded guilty for their roles in the above-described offenses and will be sentenced at a later date.
Wisconsin Woman Sentenced for Failure to Declare Embezzled Money on Income Tax Returns
On June 4, 2015, in Madison, Wisconsin, Cornelia J. Mutter, of St. Germain, was sentenced to 12 months and one day in prison and ordered to cooperate with the IRS in paying past due taxes. Mutter pleaded guilty to filing false information in a 2008 tax return on March 13, 2015. According to court documents, Mutter worked as Vice President of Information Technology for T.A Solberg Company, Inc. in Minocqua, Wisconsin, during the years 2004 through 2010. In that capacity, Mutter had access to company checks. Without authorization, she used the company checks to make payments to multiple personal credit cards from January 2004 to December 2010. In addition, Mutter used checks to pay for groceries, and medical and dental expenses. The embezzlement was discovered when an investigation and audit of the accounts payable was conducted after a credit card company called and inquired about company checks being used to pay off personal credit card accounts. Although T.A. Solberg did not pursue charges for the embezzlement, Mutter never declared the money she embezzled as income on her federal tax returns, including the return for 2008. According to IRS calculations, Mutter embezzled more than $500,000 over the seven years, resulting in a tax liability of $146,047.
Kansas City Woman Sentenced for Embezzling From Client
On June 2, 2015, in Kansas City, Missouri, Julie A. Hughes, of Kansas City, Missouri, was sentenced to 30 months in prison without parole and ordered to pay $425,250 in restitution. On Feb. 12, 2015, Hughes pleaded guilty to receiving stolen money that had crossed state lines and to making a false statement on a tax return. According to court records, Hughes worked as an accountant for Professional Accounting Systems. As part of her job, Hughes was assigned to prepare and distribute payroll for Pathfinder Systems, a client of the firm. Hughes embezzled $366,453 from Pathfinder Systems by directing payroll to a fictional employee she created on a bank account she controlled. Hughes conducted 167 fraudulent transactions from October 2011 to November 2013 and transferred most of the funds to other bank accounts she controlled for her personal use. A bookkeeper found discrepancies in bookkeeping records in November 2013 and brought them to the attention of the company’s president. They showed the discrepancies to the company’s owner and Hughes, who could not answer questions as to where the money had gone. Hughes was confronted by the owner about the missing money again on a later date, and admitted to stealing from the company’s client, Pathfinder Systems. Hughes also admitted that she did not report the embezzled money as income on her federal income tax returns, resulting in a tax loss to the government of $58,797.
New Jersey Man Sentenced for Filing False Return and Illegal Immigration Scheme
On June 2, 2015, in Newark, New Jersey, Sandipkumar Patel, of Edison, was sentenced to 30 months in prison and ordered to pay $423,452 in restitution to the IRS and a fine of $50,000. On Sept. 4, 2014, Patel pleaded guilty to conspiring to defraud the United States and subscribing to a false federal income tax return. According to court documents, from 2001 until 2009, Patel sponsored the visa applications of Indian nationals by falsely claiming that he would provide employment for them in the United States. Patel falsely certified on the visa applications that he would employ the migrants in various technical fields at several New Jersey companies, thereby facilitating their illegal entry into the United States. Over the course of the scheme, migrants paid Patel tens of thousands of dollars for the false certifications. To disguise the scheme, Patel issued payroll checks and other payroll forms. Patel required the migrants to return the proceeds of the payroll checks to him and to further reimburse him for the payroll tax expenses he incurred. Patel used the fraudulent pay stubs and payroll checks to support false applications to extend the visas, and charged the migrants fees for the visa extensions. As a result of falsely carrying the migrant employees on his payrolls, Patel overstated his payroll expenses on his federal income tax returns by more than $1.4 million over four years, and thereby underreported his tax obligation by over $400,000 for those years.
Former Executive Director of Choctaw Nation Sentenced for Theft, Money Laundering and Tax Fraud
On June 1, 2015, in Muskogee, Oklahoma, Jason Brent Merida, of Fort Towson, Oklahoma, was sentenced to 144 months in prison, two years of supervised release and ordered to pay $545,000 in restitution to the Choctaw Nation of Oklahoma and $32,149 in restitution to the IRS. Merida was convicted by jury trial on Nov. 20, 2014 for conspiracy to commit theft or bribery of programs receiving federal funds, theft by an employee or officer of a tribal government receiving federal funds, conspiracy to commit money laundering and tax fraud. According to court documents, Merida, the former Executive Director of Construction for the Choctaw Nation of Oklahoma, conspired to corruptly demand, solicit and receive cash, trips, a Cadillac Escalade, cattle guards, and other things of value in excess of the $5,000 from subcontractors performing work on Choctaw Nation construction projects. Merida, in concert with others, submitted and approved false invoices from subcontractors allowing him to steal, embezzle and fraudulently convert in excess of $500,000 in funds from the Choctaw Nation of Oklahoma which were used to purchase items for Merida and others. Merida also willfully failed to report the proceeds of the fraud on his federal income taxes in 2009 and 2010. Merida was the eighth person to date to be convicted as part of this investigation and prosecution. Seven additional defendants have been sentenced to terms ranging from 60 months in prison to 3 years' probation.
Former Town Finance Director Sentenced for Embezzling More Than $800K
On May 22, 2015, in Bridgeport, Connecticut, David J. Bertnagel, of Thomaston, was sentenced to 30 months in prison and three years of supervised release. Bertnagel was also ordered to pay $808,029 in restitution to the Town of Plymouth and cooperate with the IRS to pay all outstanding taxes, penalties and interest. On Feb. 20, 2015, Bertnagel pleaded guilty to theft from a local government receiving federal funds and making and subscribing a false tax return. According to court documents, from October 2011 through October 2014, Bertnagel was employed as the Finance Director for the Town of Plymouth. During that time period, Bertnagel issued 207 checks totaling approximately $808,030 from the Town’s payroll account to himself. Bertnagel used the embezzled funds to make mortgage payments, pay credit card bills, fund home improvement projects and purchase more than $100,000 in coins, stamps and other collectibles. He also converted more than $182,000 of the stolen funds by way of cashed checks, ATM withdrawals and money orders. In addition, Bertnagel’s federal tax returns for the 2012 and 2013 tax years failed to report any of his embezzled income, resulting in a tax loss to the government of $145,564 for those two years. Bertnagel also did not file a tax return with the IRS for the 2011 tax year.
Man Sentenced for $10.2 Million Securities Fraud Conspiracy
On May 21, 2015, in Kansas City, Missouri, Brian Langenbach, of Globe, was sentenced to 46 months in prison and ordered to pay $696,660 in restitution. Langenbach was sentenced for his role in a $10.2 million securities fraud conspiracy that victimized more than 12,000 investors across the United States and Canada who bought shares in Petro America Corporation. Langenbach pleaded guilty on June 22, 2012. According to court documents, Langenbach participated in a conspiracy to commit securities fraud and wire fraud. Petro America Corporation was purported to be a profitable company with $284 billion in assets. Contrary to the fraudulent representations Langenbach and others made to victim-investors, Petro America had no oil, no realistic prospects for obtaining, transporting or storing large amounts of oil, no significant assets, no revenue and no employees other than the CEO. Langenbach was not licensed to sell securities but admitted he sold Petro America stock to at least 180 investors, receiving at least $400,000 in proceeds, from Aug. 20, 2009, to March 2, 2010. When he sold shares, he relayed inflated expectations, and he did not disclose material negative information to investors, including the existence of the cease and desist orders in Missouri and Kansas. Langenbach personally spoke on behalf of Petro during business dealings, and he personally attended at least one investor meeting and one update meeting in Arizona. Langenbach spoke on behalf of the company in negotiating business deals, and on multiple occasions entered into purported deals on behalf of his own company in partnership with Petro. Langenbach frequently spoke for Petro and sought out deals in order to bring purported assets into Petro so as to inflate the value of the stock.
Vermont Business Man Sentenced for a Series of Fraud
On May 21, 2015, in Brattleboro, Vermont, Paul Hendler, of Taftsville, was sentenced to 27 months in prison, three years of supervised release and ordered to pay $550,000 in restitution. According to the indictment, in the early 2000s, Hendler founded JavaPop, Inc., a company that manufactured carbonated coffee-based drinks. Hendler defrauded JavaPop of more than $150,000 by misappropriating for his own benefit, in 2007. Hendler also made off with $56,000 in JavaPop funds that he received in 2008 after selling four company vehicles. In addition, Hendler defrauded a New York City doctor by inducing him to make a $140,000 investment in JavaPop under false pretenses in 2005. Hendler never turned the money over to JavaPop but instead used it for himself. Hendler also defrauded Green Mountain Digital, another business Hendler helped found in 2007-2008, by submitting fraudulent documentation to Green Mountain Digital which caused the company to reimburse him for expenses he did not actually incur. Finally, Hendler made off with $25,000 paid over to him by another business partner, and embezzled $33,000 from the Blueberry Hill Inn by forging the signature of the Inn's owner on a series of checks Hendler issued to himself.
New Jersey Man Sentenced for Operating Supposed Charity as Illegal Bank, Falsifying Taxes
On May 19, 2015, in Newark, New Jersey, Moshe Schwartz, aka David Schwartz or aka Gedalya David Schwartz, of Union City, was sentenced to 27 months in prison, two years of supervised release and ordered to pay $74,889 in restitution and a $60,000 fine. Schwartz previously pleaded guilty to operating an unchartered bank and aiding and assisting in the filing of a false 2007 tax return. According to court documents, Schwartz operated Gemach Shefa Chaim (GSC), purportedly to provide interest-free loans to needy members of the Sanz community in Union City. Schwartz operated GSC as a bank, with millions of dollars in deposits and more than 350 client accounts by July 2009. Schwartz also opened and maintained various bank accounts at financial institutions in the name of GSC. Because client funds were deposited into and commingled within GSC’s bank accounts at the financial institutions, the funds could only be traced back to GSC, thereby concealing the true ownership, nature and source of the funds. Many clients were thus able to use their GSC accounts to engage in suspicious and, at times, illegal activities, including evading federal taxes and money laundering. Schwartz also provided false and fraudulent information to his tax preparer in Union City concerning his income for tax year 2007, falsely representing that his income was $24,475 when it was approximately $208,845. Schwartz used his own GSC account and a false identity to conceal his income and assets from the IRS, causing a $74,889 tax loss. GSC bank accounts were seized in July 2009 and approximately $500,000 was ultimately forfeited. The accounts had been used by Moshe Altman, Itzak Friedlander, and Shimon Haber, to launder proceeds that cooperating witness Solomon Dwek, had purported to be the proceeds of illegal activities. Altman, Friedlander and Haber were each sentenced to terms of 41 months, 24 months and five months in prison respectively.
Former Company Vice President Sentenced for Tax Evasion
On May 19, 2015, in Newark, New Jersey, Anthony R. Pecoraro, of Colts Neck, was sentenced to 33 months in prison, three years of supervised release and ordered to pay $1,241,604 in restitution to the IRS. Pecoraro previously pleaded guilty to tax evasion. According to court documents, in 2008 and 2009, Pecoraro worked at Traffic Safety Service LLC, which provided traffic safety equipment and other traffic related services to local and state municipalities and private businesses. In connection with his position as a vice president, he had access to the company’s business account. Pecoraro admitted he wrote checks for unauthorized cash withdrawals for a total of approximately $2,126,200 between June 2008 and December 2009, which he took for personal use. Pecoraro acknowledged he failed to report this money as taxable income for calendar years 2008 and 2009 in the amounts of $563,800 and $1,562,400, respectively, and that if he had reported the additional cash on his income tax returns he would have owed the government approximately $733,970.
Iowa Man Sentenced for Wire Fraud and Filing False Tax Returns
On May 11, 2015, in Cedar Rapids, Iowa, Michael Schute, of Dubuque, Iowa, was sentenced to 33 months in prison, three years supervised release, and ordered to pay $306,848 in restitution to the company and its insurance company. Schute has previously paid back more than $56,000 in restitution to the victim company. Schute pleaded guilty on Feb. 6, 2015, to one count of wire fraud and one count of filing false tax returns. In a plea agreement and at the sentencing hearing, Schute admitted he embezzled more than $365,000 from a privately-owned company between 2008 until he was fired in April 2013. Schute embezzled the money by writing checks on the company bank account to pay personal credit cards and other bills. Schute then concealed this conduct by falsifying the company books to make it appear the funds were expended on company debts. When filing his tax returns for the tax years 2008 through 2013, Schute falsely concealed the funds he received from the embezzlement for his own personal use. Schute owes more than $86,000 in taxes on the illegal income.
Former Illinois Business Owner Sentenced for Filing False Income Tax Returns
On May 11, 2015, in Urbana, Illinois, Michael Fogerson was sentenced to 27 months in prison, one year of supervised release and ordered to pay restitution of $465,211 to the IRS. On March 17, 2015, Fogerson, pleaded guilty to two counts of filing false income tax returns. According to court records, Fogerson was the owner, sole proprietor, and operator of The Smoke Shack in Champaign, Illinois, and The Smoker’s Den in Decatur, Illinois. During 2009, 2010, and 2011, The Smoke Shack sold tobacco-related products, as well as synthetic marijuana prior to its regulation by state and federal authorities. For tax years 2009 and 2010, Fogerson sold bulk quantities of synthetic marijuana to tobacco product stores similar to The Smoke Shack that operated outside of the Champaign and Decatur area. Fogerson admitted that he failed to report to the IRS the profits generated from these bulk sales.
Former Army Officer Sentenced in Absentia for Role in Fraudulent U.S. Army Contracts Scheme
On May 8, 2015, in San Antonio, Texas, Heidi Webster of Manhattan, Kansas, a former U.S. Army officer, was sentenced in absentia to 72 months in prison, three years of supervised release and ordered to pay $613,828 in restitution. On Jan. 9, 2014, Webster and her co-defendant, Lawrence Fenti, a former non-commissioned officer in charge of Base Realignment and Closure issues for Brooks Army Medical Center (BAMC) radiology, pleaded guilty to one count of conspiracy and one count of bribery. According to court documents, the defendants conspired since 2007 to fraudulently secure multiple Army contracts and sub-contracts for radiology equipment and services by using Fenti’s position of influence, taking advantage of a prime contractor’s non-competitive bidding status, making false statements and fraudulent claims, as well as bribing Army personnel and Army contractors. Webster also admitted to paying Fenti thousands of dollars for his role in the overall scheme. In September 2014, Fenti was sentenced to 48 months in prison and three years of supervised release. A third defendant, John Walter Hoffman, owner/operator of Hoffman Surgical Devices, Inc. in San Antonio, is awaiting trial.
Ex-Controller of Court Services Firm Sentenced for Embezzlement
On May 4, 2015, in Santa Ana, California, Steven A. Hagstrom, of Anaheim, was sentenced to 37 months in prison and ordered to pay $2,127,932 in restitution. Hagstrom, an accountant and then controller of the Irvine-based Sentinel Offender Services, LLC, pleaded guilty in June 2014 to one count of embezzlement. Sentinel provides supervision services, including electronic monitoring programs, to courts and probation departments. According to court documents, as controller of Sentinel, Hagstrom had access to Sentinel’s bank accounts where fines, court fees and restitution payments from criminal defendants were held in trust. The accounts also held money paid to Sentinel for services provided to state and federal court systems. Beginning in early 2012 and continuing until April 2013, Hagstrom transferred approximately $3,338,197 from Sentinel’s bank accounts to bank accounts he controlled, where they could be used for his own benefit.
Rhode Island Real Estate Businessman Sentenced for Tax Fraud
On April 28, 2015, in Providence, Rhode Island, John Fall, of Cranston, was sentenced to 30 months in prison and three years of supervised release. On Jan. 26, 2015, Fall was convicted of one count of corruptly endeavoring to obstruct and impede the IRS, one count of tax evasion and two counts of aiding and assisting in the preparation and filing of false corporate tax returns. According to the court documents, Fall was a real estate consultant who also participated in handling the financial affairs of his wife and her businesses, including her dental practice, Comfort Dental Inc., and Broad Street Investments. Between 1999 and 2010, Fall used numerous nominee entities and business names, multiple bank accounts and aliases to conceal his business and financial transactions. Fall filed false federal income tax returns for 1998 and 1999, and failed to file tax returns for the tax years 2000 through 2010. The IRS audited Fall for tax years 1998 through 2000, and assessed taxes due and owing totaling approximately $72,000. Fall also caused the filing of false tax returns on behalf of Comfort Dental for the years 2005 through 2007.
Florida Doctor Sentenced for Role in Income Tax Fraud Scheme
On April 27, 2015, in Miami, Florida, Dr. Krishna Tripuraneni, of Palm Beach County, Florida, was sentenced to 24 months in prison, one year of supervised release and ordered to pay a $50,000 fine. Tripuraneni previously pleaded guilty to one count of filing false tax returns. According to court documents, Tripuraneni, a physician licensed in the State of Florida, was the owner and operator of three businesses in Wellington, Florida. For the tax years 2004 to 2008, Tripuraneni received income in the form of direct compensation, distributions, and corporate funds and used these payments to cover personal expenditures. Tripuraneni utilized funds from the companies to pay for expenses on a new home, payments on condominiums, interior design improvements to his residences and tuition payments for his children. Some of these payments were fraudulently classified as professional consulting, building repairs, and miscellaneous expenses by his companies and used as profit and loss statements on his corporate and personal income tax returns. Tripuraneni caused the preparation and filing of a false 2006 U.S. Income Tax Return for an S Corporation; a U.S. Return of Partnership Income, and a U.S. Individual Income Tax Return. In total, Tripuraneni underreported his income for tax years 2004-2008 by $18,128,066 for a total of $6,383,977 in outstanding taxes.
Indiana Man Sentenced for Tax Evasion and Structuring Financial Transactions
On April 23, 2015, in South Bend, Indiana, Michael Smith, of Mishawaka, was sentenced to 27 months in prison. Smith was also ordered to pay restitution of $429,795 to the Internal Revenue Service and forfeit $656,019 in cash to the United States. On Dec. 11, 2014, Smith pleaded guilty to tax evasion and structuring financial transactions. According to court documents, from 2008-2012, Smith, the owner of a heating/cooling business in Mishawaka, evaded over $400,000 in taxes during the five-year period by failing to report business income on his tax returns. He also structured multiple cash transactions to avoid bank reporting requirements.
Ohio Man Sentenced on Bank Embezzlement and IRS Charges
On April 17, 2015, in Columbus, Ohio, Joseph P. Molnar, of Chillicothe, was sentenced to 72 months in prison, five years of supervised release and ordered to pay $4,076,189 in restitution to Huntington National Bank and $987,011 in restitution to the IRS. On Oct. 24, 2014, Molnar pleaded guilty to embezzling approximately $4,076,189 from Huntington National Bank and willfully filing a false federal income tax return with the IRS. According to court documents, between July 2005 and July 2012, Molnar was a Managing Director for a Huntington subsidiary, Huntington Community Development Corporation. Molnar misapplied and embezzled approximately $4,076,189 of Huntington National Bank’s funds by falsely representing that he was paying “placement fees” or “advisory fees” for property management companies as part of several affordable housing property deals that had closed with Huntington National Bank. Instead, Molnar withdrew the funds under false pretenses and placed that money into his own accounts for his own personal use. In addition, Molnar omitted these funds as income on his own income tax returns. Molnar filed a false income tax return with the IRS for the 2009 income tax year by falsely stating that he had an adjusted gross income of $94,358, when in actuality his income was approximately $1,226,103. For 2008 through 2012 income tax years, Molnar underreported his income by a combined total of $3,054,064, which has resulted in total tax due and owing in the amount of approximately $987,011 to the IRS.
New Hampshire Woman Sentenced for Transportation of Stolen Property and Tax Evasion
On April 17, 2015, in Portland, Maine, Janis F. Woods, of Conway, New Hampshire, was sentenced to 26 months in prison, three years of supervised release and ordered to pay $1,135,371 in restitution. On Oct. 29, 2014, Woods pleaded guilty to interstate transportation of stolen checks and tax evasion. According to court documents, Woods used her position as a bookkeeper for two businesses, Grover Gundrilling, Inc. of Norway, Maine and VM Foods of Conway, New Hampshire, to issue herself unauthorized checks. Between about January 2009 and January 2012, Woods wrote approximately 169 unauthorized checks totaling approximately $742,081 on Grover Gundrilling’s business account. Between about 2007 and about 2009, Woods wrote unauthorized checks drawn on the VM Foods account, payable to herself, totaling approximately $220,456. The total tax due and owed as a result of Woods’ unreported income from both Grover Gundrilling and VM Foods is $283,977.
Five Sentenced for Elaborate Advance-Fee Scam
On March 30 and 31, 2015, in Phoenix, Arizona, five defendants were sentenced to prison for stealing more than $11 million through an elaborate advance-fee scam. Steven Thomas Brewer of Dallas, Texas, was sentenced to 188 months in prison; Joel Stephen Cutulle of Middleton, Massachusetts, to 108 months in prison; Kenny Ray Kirby of Corinth, Texas, to 60 months in prison; Debra Ann Nickolas of Stanbury Park, Utah, and formerly of Scottsdale, Arizona, to 60 months in prison; and David P. Rachel of Mableton, Georgia, to 36 months in prison. Brewer, Cutulle, Kirby and Rachel were found guilty by a federal jury on Oct. 8, 2014, of charges including criminal conspiracy, wire fraud, and money laundering. Nickolas pleaded guilty on Aug. 11, 2014, to conspiracy and tax evasion. Evidence at trial showed that the defendants stole more than $11 million by using fake companies, including Platinum Diversified Holdings (PDH) and HS&H Holdings, through which the defendants claimed they could secure loans for the victims’ business projects. In exchange for purportedly securing the loans, the defendants demanded refundable deposits, which were supposed to be held in an attorney’s escrow account until the loans funded. In reality, the attorneys, Kirby and Rachel, transferred the victims’ money to themselves and their co-conspirators. The victims’ money was spent on luxury items, vacations and other personal items. The scheme continued for years, with the defendants concealing the fraud by providing the victims false bank documents and other assurances to convince them that funding was imminent. The defendants never funded any business loans and the victims never received any of their money back.
Colorado Man Sentenced in Connection with Defrauding College Bookstore
On March 30, 2015, in Cedar Rapids, Iowa, James Spaulding, from Longmont, Colorado, was sentenced to 57 months in prison, three years of supervised release, and ordered to pay $318,900 in restitution to Clarke University. Spaulding was convicted of one count of mail fraud and two counts of filing false tax returns. On March 31, 2015, Spaulding’s friend and co-conspirator from Concord, New Hampshire, Thomas DeFelice, pleaded guilty to conspiracy to falsify corporate and personal tax returns in relation to falsely reporting the income from the fraud. According to court documents, Spaulding was the former director of the Clarke University bookstore in Dubuque, Iowa. Spaulding and DeFelice created a fictitious corporation called RVP Wholesale Books (RVP), and then caused RVP to issue false invoices to Clarke University purporting to show that RVP supplied the Clarke University bookstore with books. In truth, RVP never supplied any books. Spaulding and DeFelice split the proceeds of the fraud, totaling more than $302,000. DeFelice and Spaulding falsely inflated the purported cost of goods sold so as to fraudulently decrease RVP’s and their personal tax liabilities. Spaulding and DeFelice therefore filed false tax returns for 2011 and 2012 in which they failed to disclose the illegal proceeds obtained from the fraud. Spaulding later lied to a federal grand jury by falsely claiming RVP supplied books to the Clarke University bookstore.
Former Las Vegas Casino Company Employee Sentenced to Prison
On March 27, 2015, in Las Vegas, Nevada, Anthony M. Cirulli was sentenced to 12 months and one day in prison, three years of supervised release and ordered to pay $351,039 in restitution to the United States. On Sept. 9, 2014, Cirulli pleaded guilty to one count of tax evasion for concealing the payments that he received from printing companies and willfully filing a false federal income tax return for 2007 that omitted the funds. According to court documents, from about 2005 to 2008, Anthony M. Cirulli was employed as a production manager in the corporate advertising department of Station Casinos, a company that owns several casinos in the Las Vegas area. Part of his job involved reviewing bids for printing contracts and determining which printing companies would be awarded the contracts. During the course of his job, Cirulli began soliciting side payments from printing companies. He instructed the companies to pay him a percentage of the printing contract to guarantee that the companies would continue to be awarded work. Over the course of four years, Cirulli received side payments of more than $2.1 million from these arrangements. Cirulli concealed the payments in two different nominee bank accounts in the names of sham business entities.
Former Office Manager Sentenced for Embezzlement and Tax Fraud
On March 26, 2015, in Oklahoma City, Oklahoma, Julie Ann Smith, aka Julie A. Judkins and Julie A. Judkins Smith, of Jones, Oklahoma, was sentenced to 94 months in prison, five years of supervised release and ordered to pay $1,237,939 in restitution. On Oct. 30, 2014, Smith was found guilty by jury trial of bank fraud, mail fraud, aggravated identity theft, forged securities, and tax fraud. According to court documents, Smith worked from 2000 until late June 2012 at Power Equipment & Engineering, Inc. (PE&E), in Oklahoma City. At PE&E, Smith was the accounts-payable clerk and office manager, where she prepared checks and paid invoices for the company. From June 2002 through June 2012, Smith forged approximately 195 PE&E checks by using the company owner’s signature stamp without PE&E’s permission or knowledge. The forged checks totaled more than $1 million. Smith disguised the forged checks through false entries on PE&E’s accounting system, wrote many of the forged checks to a fake company under her control, and directed other forged checks to credit card companies, financial institutions, and vendors for her personal benefit. In addition, Smith filed materially false federal income tax returns for years 2008 through 2012.
Former Developer Sentenced for Tax Evasion
On March 19, 2015, in Seattle, Washington, Thomas R. Hazelrigg, III, was sentenced to 54 months in prison, three years of supervised release and ordered to pay $1,082,249 in restitution to the IRS. In December 2014, a jury found Hazelrigg guilty of tax evasion following a nine-day trial. Evidence presented at trial described how Hazelrigg first agreed to pay $533,454 in taxes owed for tax years 1989, 1990 and 1991 and then failed to pay the tax debt while living a lavish lifestyle. Hazelrigg also evaded payment of his taxes owed for 1994, for which he had filed a return showing tax owed, but for which he made no payments. Between 1997 and 2007, Hazelrigg illegally funneled income from his businesses into accounts that he controlled but that he kept secret from the IRS. Hazelrigg used these accounts to pay for the multi-million dollar purchase and remodel of a Bellevue penthouse, two Chihuly glass chandeliers worth more than $460,000, and two luxury homes in Palm Springs, California. He also used these secret accounts to pay various household expenses including the services of a butler. Hazelrigg hid his assets for 10 years, until the IRS collection statutes expired. After one of the IRS liens were removed, Hazelrigg sent an email saying he was “legit again.” Following that email, Hazelrigg once again took out loans in his own name and purchased property in his own name.
Former Corporate Officers Sentenced for Ponzi Scheme
On March 17, 2015 in Atlanta, Georgia, Ephren Taylor II and Wendy Connor were sentenced in connection with the fraud scheme they perpetrated while officers at City Capital Corporation. Taylor, of Overland Park, Kansas, was sentenced to 235 months in prison, three years of supervised release and ordered to pay restitution in the amount of $15,590,752. Taylor pleaded guilty to conspiracy to commit wire fraud on Oct. 8, 2014. Connor, of Raleigh, North Carolina, was sentenced to 60 months in prison, three years of supervised release, the first 18 months of which will be home confinement, and ordered to pay restitution in the amount of $5,818,299. Connor pleaded guilty to the interstate transportation of money taken by fraud on Oct. 8, 2014. According to court documents, Taylor, the CEO of City Capital Corporation, traveled around the country on a “Building Wealth Tour,” giving wealth management seminars to church congregations and targeting the African American and Christian communities. As part of the scheme, Taylor claimed to be a socially conscious investor and falsely claimed that 20% of profits were donated to charity. From at least April 2009, when Wendy Connor joined City Capital, through October 2010, 278 victims were defrauded of over $5.8 million. During this time, Taylor and Connor pushed investments that included purchasing promissory notes, where the funds invested would be used to support small businesses, as well as investing in sweepstakes machines. Taylor and Connor knew that the investments he was touting were not profitable and that investors were not receiving actual returns from their investments. In addition, Taylor and Connor encouraged investors to use self-directed IRAs to make their investments. Many victims transferred their retirement savings to trust companies that act as custodians for self-directed IRAs, expecting these funds to be used to fund the investments pushed by Taylor. After victims funded their self-directed IRAs, Taylor and Connor directed the use of those funds to pay ongoing business expenses of City Capital, pay personal expenses for Taylor and Connor, and in some limited instances, to pay supposed returns to earlier investors. In late 2010, the scheme collapsed and Taylor's victims lost virtually all of their investments. The scheme victimized more than 400 people who invested over $16 million.
Audiologist Sentenced for Tax Fraud
On March 12, 2015, in San Francisco, California, Michael Ryan Trythall, of Los Angeles, California, was sentenced to 24 months in prison, one year of supervised release, and ordered to pay $1,006,035 in restitution. Trythall agreed he owed $173,496 in civil fraud penalties to the IRS. Trythall pleaded guilty in November 2014 to tax evasion. According to the plea agreement, Trythall, a professional audiologist, embezzled more than $750,000 between 2009 and 2012. During that period, Trythall performed bookkeeping services for his employer and had access to the business’s financial records. He was authorized to print business checks for others to sign, but he was not authorized to issue or sign checks on his own. Nevertheless, Trythall issued business checks payable to himself, forged the signature of authorized signers, and deposited the checks into his personal bank accounts. Trythall used the money he embezzled for personal use. Trythall concealed his embezzlement by omitting payments to himself from the business’s books, making false entries into the business’s books, and failing to disclose his embezzlement, even when confronted by others. Also, Trythall did not pay income taxes on any of the money he embezzled resulting in tax due and owing of over $230,000 for calendar years 2009 through 2011.
Travel Agent Sentenced for Fraud Scheme, Stole From High School Band
On March 11, 2015, in Springfield, Missouri, Calliope R. Saaga, of Saratoga Springs, Utah, was sentenced to 60 months in prison and ordered to pay $782,480 in restitution. On Oct. 15, 2014, Saaga pleaded guilty to wire fraud. According to court documents, Saaga, doing business as Present America Tours, LLC, contracted with the Willard High School Band Boosters in January 2011 to provide travel arrangements for a June 2012 band trip to Hawaii. Saaga was responsible for booking airfare, lodging, transportation, meals, tours, and travel insurance for more than 300 students and chaperones. The Willard High School Band Boosters wired 12 payments of $30,000 each to Saaga between February 2011 and January 2012. Saaga booked no reservations as required in the contract. Instead, as he received wire transfers from the band boosters, he used the funds to finance his personal lifestyle, including at least 47 days spent gambling in Las Vegas, Nevada. As a result of Saaga’s diversion of funds, the Willard High School band trip was cancelled and the Willard High School Band Boosters suffered a loss of $360,000. Saaga has also pleaded guilty to two similar fraud schemes involving school districts in Fort Smith, Arkansas and West Memphis, Arkansas, for which he will be sentenced for at a later date. The total loss for the victims in all three fraud schemes was $782,480.
Utah Resident Sentenced For Tax Evasion and Filing a False Return
On March 9, 2015, in Salt Lake City, Utah, Jon T. McBride, of Kaysville, Utah, was sentenced to 27 months in prison, three years of supervised release, and ordered to pay $174,684 in restitution. On Sept. 19, 2014, Jon T. McBride was convicted following a jury trial of three counts of tax evasion and one count of filing a false federal income tax return. The evidence at trial established that McBride prepared and filed a false individual federal income tax return for the year 2005. He failed to report approximately $109,785 in gross income that he received during the 2005 tax year. McBride also willfully attempted to evade his federal income taxes for the 2006, 2007 and 2009 tax years by failing to file an individual federal income tax return, filing a false tax return where he underreported his income by more than $300,000, and filing a false tax return that reported zero income. McBride also used several nominees to hide and conceal his ownership in property and partnerships to keep those assets out of the reach of the Internal Revenue Service (IRS).
Former Employee Sentenced for Embezzlement
On March 3, 2015, in Atlanta, Georgia, DeMarco Doxie, of South Bend, Indiana, was sentenced to 53 months in prison, three years of supervised release and ordered to pay $1,008,417 in restitution to Ennis Paint and $299,750 in restitution to the IRS. According to court documents, Doxie was the former Corporate Environmental Health & Safety Manager for Ennis Paint. Ennis, headquartered in Dallas, Texas, manufactures and sells a variety of road marking and pavement surface treatments. Ennis maintains a facility in Atlanta, Georgia, where Doxie worked. From June 2007 through August 2011 Doxie used a sham business that he created and owned, Outlook Environmental & Safety Solutions, LLC (Outlook), as his main vehicle to systematically embezzle large sums of money from Ennis. Beginning in June 2007, Doxie began creating fictitious invoices for environmental work that Outlook had supposedly performed for Ennis Paint, when Doxie knew that Outlook had not performed any such work. Ennis Paint was never informed by Doxie that he was the actual owner of Outlook while Doxie was submitting fraudulent invoices to Ennis Paint for payment to Outlook. Doxie also defrauded Ennis by using a corporate card issued by Ennis Paint to make payments to Outlook even though Outlook had not performed any work for Ennis. Doxie also paid for some of his personal expenses using his Ennis-issued credit cards in 2011. In total, Doxie stole more than $1 million from Ennis Paint. Additionally, Doxie under-reported his actual income to the IRS for tax years 2008 through 2011 by failing to include the income that he had received from the fraud. As a result, Doxie underpaid his taxes by nearly $300,000.
Connecticut Man Sentenced for Operating $1.8 Million Investment Scheme
On Feb. 24, 2015, in Hartford, Connecticut, Stephen Goodrich, of Rocky Hill, was sentenced to 60 months in prison, three years of supervised release and ordered to pay full restitution to his victims. On Oct. 7, 2014, Goodrich pleaded guilty to one count of mail fraud and one count of subscribing to a false tax return. According to court documents, Goodrich formerly resided in Bristol where he conducted an investment business using the name Goodrich Financial. Although Goodrich was not a licensed or registered investment adviser, he falsely represented that he was licensed to conduct an investment business. From approximately 2006 to November 2012, Goodrich defrauded individuals who had provided him with investment funds by failing to invest the funds as represented, and by using some of the investment funds for his personal use. At times, Goodrich also used new investor funds to return the principal investment to older investors as is often done in Ponzi schemes. In order to prevent his investors from becoming aware of the scheme, Goodrich provided written performance summaries to his investors that falsely represented the value of their investments. More than 10 investors collectively lost more than $1.8 million as a result of this scheme. During the years 2007 to 2011, Goodrich used more than $600,000 of the investors’ funds for his personal use without disclosing this income on his federal tax returns. As a result, Goodrich owes $239,443 in additional federal taxes, plus interest and penalties.
Alabama Man Sentenced for Role in Securities Fraud Conspiracy
On Feb. 20, 2015, in Kansas City, Missouri, Russell Hopkins, of Northport, Alabama, was sentenced to 51 months in prison and ordered to pay $673,465 in restitution. Hopkins pleaded guilty on July 13, 2011, and admitted his role in a conspiracy to commit securities fraud and wire fraud that began Sept. 1, 2008. According to court documents, Hopkins promoted Petro America and sold shares to investors, although he was never licensed to sell securities and despite cease and desist orders from both Missouri and Kansas. Hopkins and other conspirators used religious language in their pitches and often recruited through churches. More than 12,000 victims invested in excess of $10.2 million in Petro America. Contrary to the fraudulent representations the conspirators made to victim-investors, Petro America had no oil, no realistic prospects for obtaining, transporting or storing large amounts of oil, no significant assets, no revenue and no employees other than the CEO. Hopkins is among nine co-defendants who pleaded guilty to their roles in the scheme. Five additional co-defendants were convicted at trial, including CEO Isreal Owen Hawkins who was sentenced on Oct. 8, 2013, to 30 years in prison.
Psychic Swindler Sentenced in $15.5 Million Scam
On Feb. 19, 2015, in Portland, Oregon, Rachel Lee, of Canby, Oregon, was sentenced to 100 months in prison, three years of supervised release and ordered to pay $15,490,978 in restitution to the victim. According to court documents, the victim met Lee in 2004 when he visited her Psychic Shop in Bend, Oregon. Between 2004 and 2006, Lee fostered a friendship with the victim for the purpose of extracting money from him. As a result of lies and the trust she established with the victim, Lee assumed the role as a paid caregiver to the victim’s elderly father by 2007. Trusting her to act in his best interests, the victim turned over all personal and business account control to Lee. While controlling the victim’s finances, Lee and her family lived in a million-dollar home in the Portland West Hills purchased with the victim’s money. Between 2007 and 2011, Rachel Lee directed the victim to incrementally liquidate investment accounts totaling approximately $3.8 million. After depleting the victim’s investment accounts, Rachel Lee convinced the victim he owed substantial taxes and needed to sell his family’s tree farm. At Lee’s direction, the tree farm properties were sold for approximately $12.3 million. Lee also recruited members of her family to play key roles in carrying out the deception. As a result of the investigation, the 10 properties purchased with the victim’s money will be sold for the victim’s benefit. IRS special agents seized approximately $1.9 million in cash from bank accounts in the name of Rachel Lee, as well as a Ferrari, Bentley, and other items. All federally seized assets will be returned to the victim after all defendants are sentenced.
Doctor Sentenced for Defrauding University of Rochester and Filing a False Tax Return
On Feb. 18, 2015, in Rochester, New York, Doron Feldman, of Williamsville, New York, was sentenced to 24 months in prison and ordered to pay $1,460,000 in restitution to the University of Rochester and to pay $157,000 in restitution to the IRS. According to court documents, Feldman practiced as an anesthesiologist in Buffalo, New York, and provided anesthesia services to patients undergoing surgery at hospitals and other medical facilities in the Rochester area. Between September 2007 and December 2009, Feldman, along with co-defendant Debra Bulter and others, devised a scheme to defraud and obtain money from the Department of Anesthesiology at the University of Rochester. In September 2007, fraudulent invoices were submitted to the Department of Anesthesiology for services that were never provided by Feldman. In her position as Program Administrator for the department, Debra Bulter approved payment of the fraudulent invoices. From 2008 through 2010, the Department of Anesthesiology paid fraudulent fees totaling approximately $1,460,000 with Feldman receiving approximately $630,000 of that amount. Debra Bulter will be sentenced at a later date.
Former CFO Sentenced for Embezzling from Non-Profit Employer
On Feb. 9, 2015, in San Francisco, California, Robert Bradley Strahan, aka Robin Bradley, aka Kaola Bradley, was sentenced to 57 months in prison, three years of supervised release and ordered to pay $1,105,481 in restitution. Strahan pleaded guilty on Nov. 3, 2014, to wire fraud, mail fraud, and tax evasion. According to the plea agreement, Strahan admitted to embezzling more than $920,000 from a non-profit trade association where he worked as the chief financial officer. Strahan’s responsibilities included bookkeeping, payroll, and accounting. As the CFO, he had complete control over and access to the association’s books, records, and bank accounts. Without the knowledge or authorization of the non-profit trade association, Strahan wrote and cashed checks payable to himself and to “Cash” totaling over $550,000; he used the association’s credit cards to make unauthorized purchases totaling over $250,000; and he put an acquaintance on the payroll who received over $120,000 but did almost no work. To conceal the money that he embezzled, Strahan made false entries in the association’s accounting systems. Strahan also emailed false financial statements to the board of directors that omitted the funds he was taking for his personal use. Finally, Strahan did not pay income taxes on any of the money he embezzled for calendar years 2009 through 2013, resulting in tax due and owing to the Internal Revenue Service of over $175,000.
California Man Who Fraudulently Obtained and Sold Computers Destined For Schools and Non-Profits Sentenced
On Feb. 5, 2015, in Seattle, Washington, Steven Alexander Bolden, of Palmdale, California, was sentenced to 120 months in prison and ordered to pay $7.2 million in restitution. Bolden pleaded guilty in January 2014 to wire fraud, aggravated identity theft, and filing a false income tax return. According to court records, between 2007 and 2013, Bolden defrauded a Government Services Administration (GSA) program called “Computers for Learning,” that transfers excess government computers and related peripheral equipment directly to qualified schools and educational non-profit organizations. Bolden posed as 14 different non-profits to obtain the computers for free, and then sold them for his personal profit. Over the course of the scheme, Bolden obtained 19,442 items through the program with an original purchase price of $30.3 million. Based on its “fair market value,” the computer equipment that Bolden fraudulently acquired was worth about $7.2 million. Bolden became acquainted with a person operating a legitimate non-profit in Southern California and convinced the head of the non-profit to let him review the paperwork for the organization. Using the non-profit organization’s information, Bolden created an account in the Computers for Learning program, and in July 2010, obtained 41 Dell and HP computers that were made available by the Border Patrol at Blaine, Washington. Bolden claimed the computers and later sold them for his own benefit. Bolden failed to report any income from the sale of the computers on his tax return.
Florida Men Sentenced for Operating $18 Million Fraud Scheme
On Jan. 30, 2015, in Orlando, Florida, Donald Ray Babb, of Merritt Island, and Ralph Victor Ruth, of Melbourne, were each sentenced to 121 months in prison and ordered to pay $9,728,968 in restitution. In addition, they were ordered to forfeit their interest in several properties and to pay a $18,731,125 money judgment. Both men pleaded guilty on Nov. 12, 2014 to conspiracy to commit wire fraud. According to court documents, between June 2006 and December 2013, Babb and Ruth orchestrated a scheme that ultimately defrauded approximately 181 investors out of $18.7 million. Doing business as Southeast Mutual Insurance and Investment, LLC, Capstar Industries, LLC, and First Merchant Capital, LLC, Babb and Ruth falsely represented their businesses as licensed financial institutions whose deposits were insured by the FDIC. Using these entities, they advertised risk-free Certificates of Deposit (CD) investment opportunities that yielded high rates of return. However, neither Babb nor Ruth ever purchased a CD for an investor. Instead, they used the money to make payments to earlier investors in the scheme, and to purchase real estate and other luxury items for themselves.
Real Estate Development Schemers Sentenced for Defrauding Investors of Millions of Dollars
On Jan. 23, 2015, in Baltimore, Maryland, Mervyn A. Phelan Sr., of Newport Beach, California, was sentenced to 60 months in prison, three years of supervised release and ordered to forfeit and pay restitution of $17,414,000 for wire fraud conspiracy, wire fraud and obstruction of justice from a $17.4 million investment fraud scheme. According to court documents, Phelan and others were part of a fraudulent scheme carried out by Brian McCloskey and Patrick Belzner. Phelan operated IAG Underwriters (IAGU) which was in the business of underwriting loan applications submitted by real estate developers and then locating project financing from banks and other financial entities. Phelan employed Gregory Grantham, an attorney who held the position of IAGU’s general counsel. IAGU began working with the McCloskey Group to locate sources of financing for its projects in about 2009. From 2009 through June 2011, Belzner and McCloskey persuaded private lenders to loan funds to the McCloskey Group to establish that it had cash reserves in connection with its efforts to secure funding for real estate development projects through IAGU. In return, Belzner and McCloskey promised to pay substantial rates of interest. The funds were falsely represented as being maintained in an escrow account under the control of Kevin Sniffen who was a licensed attorney and escrow agent. However, once the lenders transferred their funds into the escrow accounts, Belzner or McCloskey used the funds to repay earlier loans and for personal expenses. The total losses resulting from the scheme were approximately $20 million.
• Patrick J. Belzner, aka “Patrick McCloskey,” was sentenced Oct. 21, 2014, to 180 months in prison and ordered to pay $19.805million in restitution;
• Gregory E. Grantham was sentenced Nov. 14, 2014, to 60 months in prison and ordered to forfeit and pay restitution of $17.4 million;
• Kevin Sniffen was sentenced Dec. 19, 2014, to 36 months in prison and ordered to pay restitution of $15.85 million; and
• Brian McCloskey was sentenced on Dec. 23, 2014, to 41 months in prison for conspiring to commit wire and ordered to pay $15.85 million in restitution.
Michigan Company President Sentenced for Fraud and Tax Evasion
On Jan. 23, 2015, in Detroit, Michigan, Michael Stover, of Plymouth, was sentenced to 42 months in prison and one year of supervised release for committing wire fraud and tax evasion. According to court documents, Michael Stover was the president of Omni Facility Services (Omni), a janitorial company located in Southfield, Michigan. As part of his responsibilities as president, Stover approved and paid subcontractors of Omni. Stover incorporated a fictitious subcontractor called Envirovac Inc., and from 2004 through 2010, he created fictitious invoices from Envirovac that billed Omni for work that was never performed. Stover then approved payment of those invoices on Omni’s behalf. The payments to Envirovac actually went to Stover. Over the course of this scheme, Stover embezzled approximately $2.178 million from Omni. On his federal income tax return for 2007, Stover failed to report the income that he had embezzled from Omni.
Bookkeeper of Charter Bus Company Sentenced for Tax Fraud and Other Charges
On Jan. 21, 2015, in San Jose, California, Elena Moreno was sentenced to 22 months in prison, three years of supervised release and ordered to pay $422,962 in restitution and to forfeit $3.328 million, as well as her interest in two pieces of real property. Prior to pleading guilty in this case, Moreno and her co-defendants paid more than $200,000 in restitution to the IRS for losses associated with their fraud. According to court documents, beginning in 2005 and continuing through at least 2010, Elena Moreno and members of the Moreno family failed to report all of the gross receipts from their charter bus company, Quality Assurance Travel (QAT), on the corporate tax returns for QAT and on their personal income tax returns that they filed with the IRS. The total amount of unreported gross receipts during those years exceeded $966,908. The unreported income consisted primarily of cash receipts that were paid by passengers as they boarded the bus, but were not deposited into the business bank accounts or disclosed to the Moreno’s tax return preparer. In addition, between 2005 and July 2013, Elena Moreno and her co-defendants submitted false and fraudulent loan applications that overstated the applicants’ income and assets in order to acquire and refinance homes in San Jose. In total, the defendants fraudulently obtained more than $3.3 million in loans through their conspiracy. After the defendants fell behind with the loan payments, they attempted to avoid foreclosure by submitting false and fraudulent applications to modify these loans. One of the four properties was ultimately sold through a short sale in 2013, while another was foreclosed upon in 2014. The total losses to the financial institutions resulting from the foreclosure exceeded $200,000.
Attorney Sentenced for Role in Investment and Real Estate Frauds
On Jan. 21, 2015, in Trenton, New Jersey, Fred Todd, of Lakewood, was sentenced to 46 months in prison, three years of supervised release and ordered to pay $6.53 million in restitution. Todd previously pleaded guilty to conspiracy to commit wire fraud and transacting in criminal proceeds. According to court documents, Todd was an attorney with offices in Seaside Heights, New Jersey, and Los Angeles, California. In February 2012, Todd and his conspirators offered a pair of investors (referred to in the information as the “Facebook victims”) the opportunity to purchase large blocks of Facebook shares prior to the company’s initial public offering, or IPO, in May 2012. The conspirators did not use any of the Facebook victims’ money to purchase Facebook shares, instead misappropriating it for their own use. Around the same time, Todd and his conspirators also persuaded victims to invest in the purported purchase of an apartment complex in Florida. The victims wired money to complete the purchase, but Todd and his conspirators instead used the money for their own purposes. His two co-defendants, Eliyahu Weinstein and Aaron Glucksman, have already been sentenced for their roles in the scheme. On Dec. 15, 2014, Weinstein, who was already sentenced to 22 years in prison in a separate Ponzi scheme, was sentenced, to an additional two years in prison for his role in this scheme. Glucksman was sentenced on May 5, 2014, to 52 months in prison and ordered to forfeit $1.2 million.
Woman Sentenced for Tax Evasion
On Jan. 14, 2015, in Tampa, Florida, Nova A. Montgomery was sentenced to 36 months in prison, three years supervised release, and ordered to pay a $10,000 fine, and $338,308 in restitution to the Internal Revenue Service. Montgomery was found guilty on Oct. 10, 2014 to charges of tax evasion and failure to file a tax return. According to testimony and evidence presented at trial, Montgomery was self-employed as a distributor for a multi-level marketing company that sold nutritional and other products. Between 2002 and 2012, she received commissions and other income exceeding $2.7 million. Montgomery set up a complex corporate structure that made it appear that virtually none of the income she received from the commissions and sales went to her personally. Further, on Feb. 12, 2009, in the midst of an IRS audit, Montgomery filed false and fraudulent federal income tax returns claiming that she had no income for 2002 through 2006. In addition, she failed to file personal income tax returns for 2008 through 2012.
Texas Corporation Owner/CEO Sentenced for Tax Fraud
On Jan. 13, 2015, in Houston, Texas, Robert Earl Carter, of Fresno, Texas, and the former owner/CEO of Enterprise Advisory Services Inc. (EASI), was sentenced to 36 months in prison, one year of supervised release and ordered to pay a $75,000 fine. Carter pleaded guilty Sept. 9, 2014 to making false statements in a federal income tax return. At the hearing, evidence was also presented regarding a half-million-dollar African art donation to Texas Southern University that Carter reported in his 2005 federal income tax return, but never donated. Carter also claimed the art, via carryover charitable donation deductions, in his 2007 to 2010 tax returns. At the time of his plea, Carter admitted he willfully made a materially false statement in his 2009 personal federal income tax return by reporting a total income of $276,270, but failing to disclose an additional $309,821 in bonus income he received that year. Carter had those bonus monies converted into a check payable directly to another company controlled by a family member. Approximately one month later, $286,821 was returned directly to Carter via a cashier's check. EASI issued Carter another bonus check for $195,000 on Dec. 22, 2009, which he deposited into his personal savings account. EASI reported this $195,000 payment as executive variable pay. Carter did not, as required, report this $195,000 personal income on his 2009 individual federal income tax return. In total, Carter willfully and intentionally failed to report personal income totaling $504,821 on his 2009 tax return.
Oklahoma Pastor Sentenced For Wire, Tax Fraud
On Jan. 12, 2015, in Tulsa, Oklahoma, Willard Lenord Jones, of Tulsa, church pastor and former Executive Director of the Greater Cornerstone Community Development Project, was sentenced to 37 months in prison and three years of supervised release for wire fraud and subscribing to a false tax return. An order has been entered forfeiting his residence, a Rolex watch and fur coat. A criminal forfeiture money judgment has also been entered against him in the amount of $933,507 as well as restitution to the IRS for $155,112. At a change of plea hearing on Oct. 9, 2014, Jones admitted that, from September 2007 to June 2013, he misappropriated approximately $933,000 from the Greater Cornerstone Community Development Project, a non-profit organization formed to raise money for the building and operation of a community center in South Haven, a neighborhood in West Tulsa. As the Executive Director of the community center, Jones solicited monetary contributions from donors, including foundations, corporations, churches and individuals, to fund the development project. As part of the scheme, Jones fraudulently transferred funds from community center bank accounts to church bank accounts and then transferred those funds into personal bank accounts. Jones admitted using the money on personal expenses and luxury items, including hotels, gambling, liquor, automobiles, and jewelry. He also admitted that he failed to report $390,061 of income in 2011 on his federal tax return for 2011.
Former Investment Advisor Sentenced on Wire Fraud and Tax Evasion Charges
On Dec. 22, 2014 in Roanoke, Virginia, Donna J. Tucker was sentenced to 60 months in prison and ordered to pay $976,485 in restitution to victims. Tucker pleaded guilty to wire fraud and tax evasion charges. In evidence presented at sentencing, Tucker was an investment advisor in Roanoke from 2007 through April 2013. She stole directly from, and caused loss to, the accounts of two sets of victims. In August 2010, Tucker forged the signature of one of her clients, an elderly couple who held a joint account, in order to obtain a line of credit, supposedly for the clients, through her firm’s banking arm. Tucker took these actions without the knowledge or consent of the victim. Approximately one year later, on Aug. 4, 2011, Tucker caused to be transmitted a wire transfer of $295,000 from the victim’s account to her own account at a local credit union. These funds were used to benefit Tucker and her family. In addition, Tucker took steps to ensure the victims did not learn of the unauthorized transfer by instructing others at her firm to place the victims in an all-electronic delivery system that would send the victim’s account statements by email. Tucker also made false statements to the victims, other employees at the firm and created false documents in order to carry out the scheme. Additionally, in calendar year 2011, Tucker reported to the IRS a taxable income of $125,333. She failed to report additional taxable income of at least $340,000, which resulted in an additional tax of at least $115,000 being owed to the United States.
Oregon Man Sentenced for $5 Million Securities Fraud
On Dec. 19, 2014, in Eugene, Oregon, Joseph Anthony LaCoste, of Albany, Oregon, was sentenced to 60 months in prison and ordered to pay $1.6 million in restitution for securities fraud violations. LaCoste, the former chief executive officer of Willamette Development Services (WDS), a real estate development company, previously pleaded guilty to conspiracy to commit securities fraud for his conduct associated with WDS. According to court documents, LaCoste lured individuals to invest with him and WDS by telling a series of lies. Based on his misrepresentations, between 2006 and 2008, LaCoste duped more than 50 people to invest more than $5.2 million with him and WDS. In reality, WDS and its alleged real estate projects were undercapitalized, and the projects were not progressing. To avoid detection and to further the scheme, LaCoste and others commingled investor money and transferred investor money between various projects and businesses to make it appear as if the projects were on schedule and the company was profitable. In 2008, LaCoste’s scheme collapsed. At that time, he had failed to complete a single project, and the investors lost their money. After his WDS scheme collapsed, LaCoste engaged in a new scheme to induce four property owners in Washington to transfer ownership of their property to his control by falsely representing that he had the experience and skills to develop their property into a profitable real estate venture. Similar to his WDS investors, LaCoste falsely promised these property owners a huge return and failed to tell them that he had been fired from U.S. Bank for dishonest and unethical conduct and that he had previously filed for bankruptcy. In the end, this scheme also collapsed, and the property owners lost more than $150,000.
Illinois Man Sentenced for Tax Evasion and Unlawful Firearms Possession
On Dec. 19, 2014, in Benton, Illinois, David Ray, of Fieldon, was sentenced to 37 months in prison, three years of supervised release and ordered to pay a $7,500 fine and $1,272,904 in restitution. Ray also forfeited a gun collection valued between $75,000-$100,000. On July 23, 2013, Ray pleaded guilty to tax evasion and possession of a firearm by a user of controlled substances. According to court documents, Ray used his various businesses to pay personal expenses, vested ownership of personal assets in the name of his businesses and by filed false tax returns with the IRS or refused to file a U.S. Individual Tax Return. In tax years 2005 through 2010, Ray concealed income from the IRS resulting in him avoiding $1,272,904 in federal income taxes that he otherwise would have been required to pay.
Two Men Sentenced for Fraudulent Billing Scheme
On Dec. 19, 2014, in San Antonio, Texas, Jason Boyd and Darrell Doyle were sentenced to 33 months and 60 months in prison, respectively, for their roles in a fraudulent billing scheme that corruptly charged Sprint Corporation for equipment not delivered. Both men will also serve three years of supervised release and will pay restitution, jointly, of $6,442,679. Doyle and Boyd were convicted of wire fraud and conspiracy to commit wire fraud. According to court documents, Doyle was the owner of Waccamaw Wireless and Boyd was the owner of AAA Communications. From on or about Aug. 30, 2007, to about Sept. 10, 2013, the defendants worked together to submit materially false and fraudulent purchase orders to Sprint Communications to show purchases of certain equipment from Waccamaw Wireless and AAA Communications (none of which were ever delivered), and caused payments to be wired from a Sprint bank account to a Waccamaw Wireless bank account and a payment to an AAA Communications Branch bank account.
California Business Owner Sentenced for Filing False Tax Returns
On Dec. 18, 2014, in Sacramento, California, Thomas W. Stringfellow, of Placerville, was sentenced to 18 months in prison and ordered to pay $687,182 in restitution for willfully making false tax returns. According to court documents, from 2006 through 2010, Stringfellow underreported his business income on tax returns by more than $1.1 million, and underreported his personal income on tax returns by more than $1 million. Stringfellow owned New Horizon Painting, and rather than depositing all of the business checks into the appropriate accounts, he cashed some of the checks and did not report those amounts as income. In total, Stringfellow’s underreporting of his business income and his personal income led to a tax loss of more than $687,000.
Virginia Attorney Sentenced for Mail Fraud and Unlawful Monetary Transactions
On Dec. 16, 2014, in Norfolk, Virginia, David R. Flynn was sentenced to 71 months in prison, three years of supervised release and ordered to pay $2,296,657 in restitution. Flynn pleaded guilty on April 23, 2014 to mail fraud and unlawful monetary transactions. According to the plea agreement, Flynn, an attorney licensed to practice law in Virginia and owner of Assured Title of Virginia, LLC in Virginia Beach, stole over $2 million from real estate trust accounts in order to cover up problems with his escrow account that dated back to 2008. Flynn also used the stolen funds to pay a personal credit card, to travel to tropical destinations, sometimes paying for friends to join him, and on at least one occasion, to charter a private plane.
Accountant Sentenced For Million Dollar Fraud Scheme
On Dec. 16, 2014, in Philadelphia, Pennsylvania, Andrew B. Zelenkofske, of Chagrin Falls, was sentenced to 36 months in prison, three years of supervised release and ordered to pay $987,050 in restitution. Zelenkofske, an accountant, previously pleaded guilty to various charges in connection with defrauding former clients of over $1 million. According to court documents, between January 2009 and May 2012, he defrauded three of his victims by soliciting funds from them to invest in a start-up biotechnology company. Instead of investing the victims’ money, Zelenkofske used the funds to pay his own business expenses in connection with a failing restaurant he owned. Between April 2011 and July 2012, Zelenkofske defrauded another victim, also a former client, of $237,000 by falsely representing that she owed income taxes when she did not and soliciting a loan from her which he knew he could not repay. He also spent this victim’s money to pay expenses related to his restaurant. In 2010 and 2011, Zelenkofske defrauded a group of business associates of at least $137,254 by concealing the payment of a dividend and using the funds belonging to these investors to pay his own business expenditures. Finally, in November 2013, Zelenkofske attempted to obstruct the administration of the internal revenue laws by falsifying a Release of Levy form which he transmitted to the IRS in connection with the representation of a client.
Massachusetts Woman Sentenced for Loan Scam
On Dec. 16, 2014, in Boston, Massachusetts, Diane Glatfelter, of Billerica, was sentenced to 30 months in prison, three years of supervised release, and ordered to pay $1,575,000 in restitution. In September 2014, Glatfelter was found guilty of four counts of wire fraud in connection with a bogus bank guaranty program. According to court documents, in 2007 and 2008, Glatfelter engaged in a scheme to defraud a young real estate businessman from California who was seeking funding for a development project. Glatfelter promised to secure a $20 million loan for him, but required him to pay $125,000 in up-front fees. The loan never materialized. Glatfelter used the money for various purposes other than to secure any funding. As part of her scam, Glatfelter set up two bogus front companies and used her unsuspecting sister to make these fronts appear legitimate. At sentencing, Glatfelter was also held accountable for an additional $1,450,000 in fraud against four other victims in connection with three transactions during the same time period. Glatfelter promised all of the victims that she could procure huge sums of money for their projects (up to $100 million), but they would need to pay a percentage of the amount sought up-front. The victims wired their payments to Glatfelter but she never procured the funding.
Idaho Restaurant Owner Sentenced for Tax Evasion
On Dec. 15, 2014, in Boise, Idaho, Rogelio Contreras Villasenor, of Caldwell, was sentenced to 41 months in prison, three years of supervised release and ordered to pay a $20,000 fine. Additionally, Villasenor agreed to a tax assessment of at least $329,421 to the IRS. Villasenor pleaded guilty on July 10, 2014 to conspiracy to attempt to evade and defeat tax. According to court documents, Villasenor owned and operated Tacos Michoacan for almost two decades. Beginning in 2005 and continuing to 2011, Villasenor conspired to fail to report $1,176,506 in income. Some of his unreported income was derived from illegal outdoor marijuana grows on public lands, methamphetamine, marijuana, and cocaine trafficking. As part of his plea agreement, Villasenor agreed to civilly forfeit real property, bank accounts and a vehicle.
California Attorney Sentenced for Tax Evasion
On Dec. 15, 2014, in Sacramento, California, Orion Douglas Memmott was sentenced to 18 months in prison for attempted tax evasion and subscribing to a false tax document. According to trial evidence, Memmott, a Stanford Law School graduate and tax attorney, stole hundreds of thousands of dollars from investors and law firm clients to spend on his own expenses. Some of this money was removed from a client’s medical trust, leaving her destitute and homeless. Memmott concealed the embezzled money through the use of nominee accounts and false statements to investors, clients, and the IRS. Memmott also concealed his real estate holdings and rental income from IRS collection agents who were seeking to collect more than $650,000 in unpaid taxes for tax years 1993 through 1999.
Convicted Ponzi Schemer Sentenced on New Fraud and Money Laundering Charges
On Dec. 15, 2014, in Trenton, New Jersey, Eliyahu Weinstein, of Lakewood, was sentenced to 135 months in prison, 111 months of which will be served concurrently with a previous sentence and 24 months to be served consecutively. His total sentence for the two schemes is 24 years in prison. In addition, Weinstein was ordered to pay $6.2 million restitution and forfeiture. Weinstein previously pleaded guilty to conspiracy to commit wire fraud, committing wire fraud while on pretrial release and money laundering. According to court documents, in February 2012, Weinstein and his fellow conspirators offered a pair of investors (the “Facebook victims”) the opportunity to purchase large blocks of Facebook shares prior to the company’s initial public offering, or IPO, in May 2012. The Facebook victims wired millions of dollars that the conspirators then misappropriated. Weinstein and his conspirators also persuaded the Facebook victims to invest $2.83 million in the purported purchase of an apartment complex, “Belle Glade Gardens,” in Florida. However, Weinstein and his conspirators redirected the money to accounts that they controlled, returned $1.8 million to the Facebook victims as a purported return on investment and used the remaining money for their own purposes. In July 2012, Weinstein approached another group of investor victims (the “Florida condominium victims”) and told them he had the opportunity to purchase the notes on seven condominiums in Florida. Weinstein did not use this money to purchase the notes on the Florida condominiums; instead, Weinstein and his conspirators converted the money to their own use. Throughout the scheme, Weinstein was already under indictment and on pretrial release. Weinstein pleaded guilty on Jan. 3, 2013, admitting he ran a Ponzi-style real estate investment fraud scheme that caused $200 million in losses and then laundered the proceeds of the scheme. Weinstein was previously sentenced on Feb. 25, 2014, to 264 months in prison and ordered to pay more than $200 million in restitution and forfeiture to the victims of his scheme.
Former Company Employee Sentenced for Forging Checks, Filing False Tax Return
On Dec. 11, 2014, in Oklahoma City, Oklahoma, Carla Jo Mires was sentenced to 24 months in prison and three years of supervised release for embezzlement by forging company checks and for filing a false tax return. Mires was also ordered to pay $168,386 in restitution to the IRS and the victims of her embezzlement scheme. Mires pleaded guilty on Sept. 3, 2014. According to court documents, Mires worked for Union Mutual Insurance Company in the accounting office. She was charged with forging a check from Union Mutual that went to her personal account. Mires also filed a false tax return for 2008 by failing to report as income the money she had embezzled from her employer.
Kansas Man Sentenced for Filing a False Tax Return
On Dec. 10, 2014, in Kansas City, Kansas, Bradley Stoneking, of Lawrence, was sentenced to 30 months in prison for filing a false tax return. Stoneking pleaded guilty to making false statements in his income tax return for 2010. According to court documents, Stoneking falsely claimed federal tax withholdings on gambling winnings in the amount of approximately $330,000. In fact, the federal tax withholding on his gambling winnings was $300.
Pennsylvania Man Sentenced for Filing False Income Tax Return
On Dec. 8, 2014, in Johnstown, Pennsylvania, Keith D. Nash, was sentenced to 24 months in prison and ordered to pay $132,868 in restitution to the IRS. Nash was previously convicted of filing a false tax return. According to court documents, Nash filed an individual income tax return for the calendar year 2009, whereby he failed to report $161,267 in taxable income, resulting in an underpayment of $52,466 in income tax owed to the United States.
Maryland Business Owner Sentenced for Tax Evasion
On Dec. 5, 2014, in Baltimore, Maryland, Ramon Anthony Jadra, of Westminster, Maryland, was sentenced 24 months in prison, two years of supervised release and ordered to pay $283,481 in restitution. According to court documents, Jadra was the president and majority shareholder of a family-owned business that manufactures parts for the defense and aerospace industries. Between 2008 and 2011, Jadra fraudulently diverted $495,950 of company funds to himself by causing checks to be written on the company’s bank account in the names of actual businesses with which Jadra or his company had dealings in the past, but which were not owed the amounts shown on the checks. As part of this scheme, Jadra established a check cashing account at a liquor store, where he cashed fraudulently obtained checks totaling $368,350. Jadra then deposited $316,585 of these funds, in amounts less than $10,000, in a checking account he had established in the name of DIA Solutions, a sham company. In the spring of 2010, Jadra implemented a new aspect of his scheme by falsely advising his father and his company’s controller that DIA Solutions was entitled to receive 5 percent of the payments the company received on a contract worth over $6 million, claiming that DIA Solutions helped obtain the contract. Jadra received checks, totaling $313,218, which he deposited into the DIA Solutions bank account. DIA Solutions had not in fact provided any goods or services, nor played any role in obtaining the contract in question. To further the scheme, Jadra intercepted checks totaling $91,249, from the two businesses that were tendered to Jadra’s company to pay for scrap metal it had sold. As a result of the schemes, Jadra fraudulently converted $900,418 from the company, and failed to pay $283,481 in taxes on this fraudulently obtained money. Jadra’s reported income during that same time period was more than $4 million. Jadra used the majority of the embezzled funds for largely unsuccessful on-line stock trading. Other embezzled funds were used for personal items such as cars, home renovations and other luxury items.
Former Business Owner Sentenced For Tax Fraud
On Dec. 4, 2014, in Pensacola, Florida, Patrick Alfred Anderson, of Laughlin, Nevada, was sentenced to 24 months in prison and ordered to pay $173,549 in restitution to the IRS. In related civil and administrative forfeiture actions, Anderson was required to forfeit approximately $900,000 in property as proceeds from his sale of the synthetic drugs, including cash, two pieces of real property, and eight vehicles. Anderson pleaded guilty earlier this year to three counts of filing fraudulent tax returns. Between 2010 and 2011, Anderson sold synthetic drugs, commonly known as “spice” and “bath salts,” from retail stores he operated in northwest Florida. Anderson derived more than $700,000 in income from the sale of these drugs. He failed to report this income on his tax returns, resulting in a net tax loss of $173,549.
Vehicle Dealer and Accountant Sentenced for Multi-Million Dollar Financing Fraud Scheme
On Dec. 3, 2014, in Chicago, Illinois, Russell S. Ott, of Oswego, was sentenced to 162 months in prison and ordered to pay approximately $61.16 million in restitution. Ott, a former motorcycle and recreational vehicle dealer, previously pleaded guilty to bank fraud and tax evasion. On Dec. 10, 2014, in Chicago, Illinois, Ott’s accountant, Brian McMahon, of Naperville, was sentenced to 30 months in prison and ordered to pay $396,829 in restitution. McMahon previously pleaded guilty to two counts of aiding and assisting the filing of Ott’s false tax returns. According to court documents, Ott was the owner of several dealerships including Emily, Inc., dba Pro Source Motorsports. Ott’s bank fraud scheme involved two prongs: in one, Pro Source Motorsports fraudulently obtained more than $31.3 million in direct financing through five lines of credit from a bank, which lost more than $27.1 million; and, in the second, individual straw borrowers obtained just under 200 fraudulent loans totaling more than $44.58 million, which resulted in 18 financial institutions losing more than $31.66 million. Ott and McMahon took multiple steps to continue the fraud, such as fabricating false personal and business tax documents and financial statements and providing them to the bank. Ott and the straw buyers fraudulently obtained money for their personal use and benefit, enabling them to maintain lavish lifestyles, operate various businesses, and/or make investments.
Restaurant Owner Sentenced for Filing False Tax Returns
On Dec. 3, 2014, in Madison, Wisconsin, Rennell D. West, of Adams, Wisconsin, was sentenced to 12 months and one day in prison. West pleaded guilty on Sept. 4, 2014 to filing false tax returns. According to court documents, from 2005 to 2009, West had an ownership interest in a restaurant called Family Affair. Family Affair took in 50 percent of its revenue in cash. During an IRS audit, agents discovered large cash deposits into the personal bank account of West. The cash deposits reflected income West earned from the restaurant. However, these deposits were not provided by West to Family Affair’s accountant, and were not included in the income figures for the restaurant on the Schedule C's filed by West. The income also was not accounted for on West’s personal income tax returns. West’s tax loss was $117,171.
Michigan Man Sentenced for Role in Ponzi Scheme
On Dec. 3, 2014, in Grand Rapids, Michigan, David W. McQueen, of Byron Center, Michigan, was sentenced to 360 months in prison and ordered to pay $32,036,997 in restitution to his victims and $926,787 to the IRS. McQueen was convicted on May 9, 2014 of mail fraud, money laundering and tax evasion stemming from a massive Ponzi scheme that spanned three years. The scheme affected more than 800 families, and preyed upon unsophisticated, often elderly investors. According to evidence presented at trial, in 2006, McQueen borrowed funds to invest in a company called Multiple Return Transactions (MRT) which promised 10 percent return on investments. McQueen later created a company called Accelerated Income Group (AIG), through which he promised returns as high as 5-6 percent to investors. McQueen used MRT’s promised returns of 10 percent, to make AIG’s promised returns of 5 percent. McQueen could meet his 5 percent obligations to his investors and then keep 5 percent for himself. However, MRT was merely a Ponzi scheme. Instead of notifying AIG investors that MRT had failed, McQueen continued to tell investors that their money was safe and growing. Without MRT making its monthly payments, McQueen and AIG could not meet their 5 percent monthly obligations to investors based on investment earnings. Instead, McQueen used money from new investors to make promised interest payments. In addition to AIG, McQueen created three other funds that were nothing more than sham corporations designed to raise millions of dollars from investors. McQueen commingled the investor money between his various and purportedly distinct funds and used it to make bogus interest payments and redemption requests to investors, pay commissions to agents or simply spend the money. Despite knowing that he had absolutely no revenue coming in, McQueen took $100,000 of investor money per month tax free for his own personal use and enjoyment.
Former Illinois Home Builder Sentenced for Failing to Pay $1.27 Million in Federal Income Taxes
On Nov. 24, 2014, in Chicago, Illinois, Dennis Weiss, of South Elgin and formerly of St. Charles, was sentenced to 30 months in prison and ordered to pay $296,643 in restitution to the IRS. Weiss previously pleaded guilty to filing a false federal income tax return and making false statements in a bankruptcy petition. According to court documents, Weiss owned Custom Homes by D. R. Weiss, Inc., and Reliable Home Solutions, Inc. Weiss filed false individual federal income tax returns for 2005 through 2009, and he failed to file corporate tax returns for both of his companies. Between 2005 and 2009, Weiss paid personal expenses from Custom’s business bank account, accepted cash payments from Custom and Reliable customers, and failed to record the receipt of these funds on the books and records of the corporations, resulting in a total federal tax loss of $1,271,280. In Weiss’ personal bankruptcy petition, he intentionally concealed the existence of a company he owned and interests in three family held entities. In addition to criminal penalties, Weiss remains responsible for all taxes and interest due, as well as civil penalties of up to 75 percent of the tax owed.
Ohio Man Sentenced for Criminal Schemes Centered Around IHOP Restaurants
On Nov. 21, 2014, in Toledo, Ohio, Mazen Khdeer, of Sylvania, was sentenced to 57 months in prison and two years of supervised release. Khdeer was also ordered to pay $1.3 million in restitution and forfeit two properties. Khdeer previously pleaded guilty to 13 counts, including money laundering, malicious use of fire, conspiracy to harbor aliens, identity theft, conspiracy to commit health care fraud and filing false claims. According to court documents, Khdeer was the last of 18 people to be sentenced for their roles in a series of criminal schemes that centered around seven IHOP restaurants owned by Tarek “Terry” Elkafrawi in northwest Ohio and Indiana. The schemes resulted in losses of more than $3 million. In 2008, the Findlay IHOP burned as the result of arson started by a co-conspirator at the direction of Elkafrawi and Khdeer to facilitate an insurance fraud scheme. Additionally, Khdeer used two identities to split his salary from the restaurants between two paychecks, creating lower reportable income for both identities. Using those identities, he claimed approximately $140,000 in Medicaid payments and $35,000 in food stamps and welfare benefits from the state of Ohio. Khdeer and Elkafrawi created a false property company to which Khdeer paid “rent” to Elkafrawi to show a lower income. Elkafrawi was sentenced to eight years in prison.
Attorney Sentenced for Defrauding Investors
On Nov. 14, 2014, in Baltimore, Maryland, Gregory E. Grantham, of Oceanside, California, was sentenced to 60 months in prison, three years of supervised release, and ordered to forfeit/pay restitution of $17.4 million. Grantham pleaded guilty to wire fraud conspiracy, wire fraud and obstruction of justice. According to court documents, between September 2009 and September 2011, Grantham, a licensed attorney, was employed as General Counsel for IAGU Underwriters, LLC which was operated by Mervyn Phelan. Between mid-2010 and August 2011, Grantham and Phelan became involved in a fraudulent scheme carried out by Patrick Belzner and Brian McCloskey. McCloskey owned a real estate development business known as the McCloskey Group, LLC. Belzner, a home builder, worked with McCloskey. Phelan and IAGU began working with the McCloskey Group trying to locate sources of financing for its projects. Beginning in 2009 and continuing through June 2011, Belzner and McCloskey persuaded a series of private lenders to fund loans to establish that the McCloskey Group had reserves of cash that would supposedly help it obtain loans it was seeking in connection with real estate development projects through IAGU. In return for this temporary use of the lender’s funds, Belzner and McCloskey promised to pay substantial fees or interest. However, once the lenders transferred their funds into the escrow accounts, Belzner directed McCloskey to remove those funds from the escrow accounts without the knowledge or permission of the lenders. Belzner and McCloskey then used the majority of the stolen funds to pay for their personal and business expenses. The total losses resulting from the scheme were approximately $20 million. Grantham and Phelan obstructed grand jury investigation of the fraud scheme. Patrick J. Belzner, aka Patrick McCloskey, was previously sentenced to 15 years in prison for wire fraud conspiracy, wire fraud and tax evasion, and ordered to pay $19.805 million in restitution. Brian McCloskey, Kevin Sniffen, and Mervyn A. Phelan, Sr., are scheduled to be sentenced at a later date.
California Man Sentenced for Fraud Scheme Exceeding $100 Million in Losses
On Nov. 13, 2014, in Sacramento, California, Deepal Wannakuwatte was sentenced to 240 months in prison and ordered to forfeit multiple properties, vehicles, business interests, and bank accounts estimated to be at least $3.5 million to be used to repay victims. According to court documents, from 2002 to 2014, Wannakuwatte convinced nearly 200 victims, including individuals, corporate entities, and financial institutions, to invest in a number of business opportunities by misrepresenting the financial worth of himself and his companies. He falsely claimed that his companies did tens of millions of dollars in business with federal agencies every year, most notably the Department of Veterans Affairs. In 2013, Wannakuwatte claimed to have more than $125 million in VA contracts alone. In fact, while he did have a contract with the VA, it was only worth up to $25,000 a year. Ultimately, Wannakuwatte obtained well over $230 million from his victims. Contrary to his representations, Wannakuwatte used much of the money he obtained to pay himself and his family, make lulling payments to participants in his fraudulent investment schemes, and pay outstanding debts unrelated to his false representations. A former owner of the Sacramento Capitals professional tennis team, Wannakuwatte purchased properties in Hawaii, Oregon and California. In order to establish his financial credibility, Wannakuwatte showed investors his personal and corporate tax returns where he actually reported and paid taxes that falsely overstated his annual personal income and the annual gross receipts and sales for his companies. He used investors’ money to pay the overstated tax returns.
Tavern Owner Sentenced for Filing False Tax Returns
On Nov. 12, 2014, in Madison, Wisconsin, Jared Jerome Hart, of Eau Claire, was sentenced to 18 months in prison and ordered to pay a $100,000 fine. Hart pleaded guilty on Aug. 12, 2014, to filing false tax returns. Hart will have to work with the civil collection division of the IRS for repayment of taxes. Hart was also required to pay restitution to the Wisconsin Department of Revenue for non-payment of Wisconsin sales taxes. According to court documents, between 2008 and 2011, Hart owned a tavern in Eau Claire called The Pickle Bar. The Pickle Bar accepted payment only in the form of cash and at the end of each day, tavern employees would place daily sales in a safe for Hart to pick up. Hart would bring the cash home, count it using his cash-counting machine, and then record a number for the day in his own daily calendar. Hart would then deposit only some of the cash from the business into the business bank account. At the end of each month, Hart would give his accountants incomplete payroll information, the business bank statements, the business check register, and vendor invoices. Hart never told his accountants about the cash he was “skimming” from the tavern, or the second set of books he was keeping at home. Between 2008 and 2011, there was more than a $1 million discrepancy between the gross receipts of The Pickle Bar reflected in the books the accountants maintained and the second set of books Hart maintained at his home. Hart’s accountants used the incomplete information provided to them by Hart to generate the false Corporate Income Tax Forms for the tavern that were filed with his individual tax return for tax years 2008 through 2011. The artificially low business income was used on his personal income tax return. The total tax loss was $367,278.
Couple Sentenced for Tax Fraud
On Nov. 12, 2014, in Minneapolis, Minnesota, Mark Allen Garcia was sentenced to 30 months in prison and Patricia Ann McQuarry was sentenced to 40 months in prison. In addition, both defendants were ordered to serve three years of supervised release and to pay $226,000 in restitution. On May 20, 2014, a federal jury found the two defendants guilty of conspiracy to defraud the United States and false claims against the United States. According to trial evidence, beginning in 2007, Garcia and McQuarry engaged in a scheme to obstruct foreclosure proceedings on their house, avoid responsibility for repaying loans, and steal money from the United States Treasury by filing false individual income tax returns. Garcia and McQuarry attempted to obstruct foreclosure proceedings by sending a host of frivolous documents to their bank, including a “Bonded Promissory Note” for $10,000,000. For tax years 2007 and 2008, both defendants filed self-prepared tax returns falsely claiming to have received hundreds of thousands of dollars in 1099-OID income and that the entire amount had been withheld and paid over to the IRS on their behalf. Both defendants created fake forms 1099 showing false interest income and withholding from various financial institutions. In total, the defendants sought more than $500,000 in false refunds. They attempted to hide the proceeds of their fraud scheme by purchasing real estate near Pine City, Minn., and then transferring the property to a private trust. The defendants also used the stolen money to purchase gold coins and a motorhome.
Fifth Ohio Businessman Associated With Cadillac Ranch Restaurants Sentenced for Tax Evasion
On Nov.7, 2014, in Cincinnati, Ohio, Joel Field, of Marion, was sentenced to 12 months and a day in prison, four months in a halfway house, four months home confinement, three years supervised release and ordered to pay $353,778 in restitution and fines. In May 2014, Field pleaded guilty to evading payment of his federal income taxes for the years 1997 through 2001. According to court documents, when the IRS attempted to collect the outstanding amount of taxes owed by Field, which was in excess of $140,000, Field misled the IRS by failing to report assets and income and by submitting false information regarding foreclosure proceedings. Furthermore, Field transferred assets in an effort to conceal those assets from the IRS. Field also filed false federal income tax returns for the years 2006 through 2009 where he failed to report over $620,000 in income that he earned through his companies.
Michigan Man Sentenced for Tax Evasion
On Oct. 30, 2014, in Detroit, Michigan, Bradley T. McKouen, of Clarkston, was sentenced to 18 months in prison, two years supervised release and ordered to pay $319,000 in restitution. McKouen pleaded guilty to tax evasion in April 2014. According to court documents, during the 2008 tax year, McKouen was the president and sole member of Delta Staffing, LLC, an employee leasing company located in Clarkston, Michigan. Delta was a Schedule C company, meaning its profits were to be reported on Schedule C as a part of McKouen’s personal federal income tax return. In 2008, Delta’s gross receipts were approximately $5.7 million. However, McKouen reported $0 gross receipts on his return. He also reported $0 business income, $0 taxable income, and $0 income tax. In 2008, McKouen’s actual taxable income was approximately $299,000 and his tax due was approximately $110,000. Under the terms of his plea agreement, McKouen is also being held responsible for filing similar zero-income returns for the years 2004-2007. In all, he failed to report $15 million in gross income and evaded $319,000 in federal income taxes for the years 2004-2008.
Illinois Man Sentenced for Failing to Pay Taxes
On Nov. 5, 2014, in Chicago, Illinois, Paul West was sentenced to 37 months in prison and ordered to pay $582,934 in restitution. West pleaded guilty to two counts of filing false tax returns. According to court documents, West, aka Thomas Wilson and Tom Wilson, sold materials for recycling, including scrap cardboard. In 2007 and 2011, West under-reported his income from his recycling services and gambling, reporting that he owed little or no taxes. For six other years between 2004 and 2011, he failed to file any individual income tax returns, despite gross receipts and gambling income over all eight years totaling $3,190,741.
Washington Woman Sentenced in Investment Fraud Scheme
On Nov. 4, 2014, in Spokane, Washington, Doris E. Nelson, of Colbert, Washington, was sentenced to 108 months in prison and three years of supervised release. Restitution will be determined at a later date. Nelson pleaded guilty in April 2014 to 110 charges related to wire fraud, mail fraud, and international money laundering. According to court documents, Nelson ran a fraud scheme for over eight years and took in approximately $137 million from at least 650 investors worldwide. Nelson operated an unprofitable payday and short-term lending business, known as the Little Loan Shoppe. She solicited hundreds of investors, throughout the United States and in international locations, by leading them to believe, falsely, that her business profits allowed her to pay investors a 40% to 60% (and up to as much as 75%) annual return. Nelson also made numerous false and fraudulent statements about the Little Loan Shoppe in order to induce investors. Rather than paying her investors returns from a profitable business, investors were paid “interest” with their own money or the money of other investors. Investor funds rarely, if ever, were used to fund new customer loans. The scheme collapsed in 2008, when the flow of new funds could no longer support the payments required on the earlier investments and Nelson abruptly announced that all investments would be changed to a 10% interest rate. Nelson ended most payments to investors around this time, and by February 2009 she suspended all payments. Nelson’s scheme resulted in personal withdraws of investor money of approximately $4.3 million. With these proceeds, she funded a lavish lifestyle for herself and her family.
Kansas Man Sentenced for Collecting Millions in False Tax Refunds
On Nov. 3, 2014, in Topeka, Kansas, Jerold D. Fisher, of Arma, Kansas, was sentenced to 41 months in prison and ordered to pay more than $4 million in restitution. Fisher pleaded guilty to one count of filing a false federal tax return. According to his plea agreement, from 2006 to 2009, while Fisher was a registered agent for Fisher Alfalfa Farms, he prepared false federal tax returns both for himself and for his mother in order to receive tax refunds that were not owed to them. In 2006, he started to test the tax system by filing false income tax returns claiming Fisher Alfalfa Farms had withheld taxes from his wages and paid them to the federal treasury. As he continued to fraudulently receive tax refunds without being detected, Fisher increased the amount of his claims.
Costa Rican Based Telemarketing Fraud Results in Prison Terms for Two
On Oct. 30, 2014, in Charlotte, North Carolina, Glen Adkins Jr., of San Diego, California, was sentenced to 300 months in prison and Warren F. Tonsing Jr., of St. Paul, Minnesota, was sentenced to 144 months in prison. Both were ordered to pay $2.4 million in restitution, joint with their co-defendants. Adkins and Tonsing were convicted in August 2013 of wire fraud and money laundering. According to court documents, the defendants defrauded United States residents, most over the age of 55, out of millions of dollars by deceiving them into believing that each had won a large monetary prize in a “sweepstakes contest.” Both defendants worked in a Costa Rica-based call center that used computers to make telephone calls over the Internet to victims in the United States. This process allowed the defendants and their co-conspirators to disguise the originating location of the calls. Victims were informed that the callers were from a federal agency and that to receive their “prize” they had to wire thousands of dollars to Costa Rica for a purported “refundable insurance fee.” As long as the victims continued to pay, the co-conspirators continued to solicit more money from them in the form of purported fees. To date, 46 defendants have been convicted for their participation in similar Costa Rican telemarketing schemes.
Defendant Sentenced on Tax Fraud Charges
On Oct. 30, 2014, in Denver, Colorado, Libia Hernandez-Garcia, of Miami, Florida, formerly of Denver, Colorado, was sentenced to 12 months in prison, three years of supervised release and ordered to pay over $70,000 in restitution. Hernandez-Garcia pleaded guilty on May 22, 2014, to tax fraud, visa fraud and social security fraud. According to court documents, from 2009 through 2011, Hernandez-Garcia made false claims against the IRS by preparing and filing federal income tax returns for several individuals where the claims for income tax refunds were fraudulent. Particularly, Hernandez-Garcia provided false information to a tax preparer, so refunds not belonging to her would be deposited into her own bank account. Also, from 2009 through 2012, Hernandez-Garcia misused the social security number (SSN) of several individuals by causing the filing of individual income tax returns which falsely included the name and SSN, as a dependent, for the person identified as the filer of the tax return. In addition, from 2008 through 2011, Hernandez-Garcia assisted in the preparation and filing with the IRS the U.S. Individual Income Tax Return of her husband for tax years 2007 through 2010 which were materially false and fraudulent. Dependents were claimed on her husband’s tax returns who could not lawfully be claimed as dependents of his. On her own personal tax returns for tax years 2006 through 2011, Hernandez-Garcia followed a similar pattern claiming dependents that could not be claimed as her dependents all in an effort to receive higher refunds.
California Man Sentenced for Nationwide $15 Million Foreclosure Rescue Scam
On Oct. 29, 2014, in Sacramento, California, Jeremy Michael “Mike” Head, of Huntington Beach, was sentenced to 120 months in prison for a nationwide foreclosure rescue scam. In September 2014, Mike Head’s brother and co-defendant Charles Head was sentenced to 35 years in prison. According to evidence presented at trial, Mike Head played an important leadership role in a fraud scheme that promised to help homeowners avoid foreclosure and repair their credit. Through misrepresentations, fraud and forgery, the Head brothers and their associates substituted straw buyers for the victim homeowners on the titles of properties without the homeowners’ knowledge. These straw buyers were often friends and family members of the defendants. Once the straw buyers were on title to the homes, the defendants applied for mortgages to extract the maximum available equity from the homes. The defendants then shared the proceeds of the ill-gotten equity and the “rent” that the victim homeowners paid them. Ultimately, the victim homeowners were left with no home, no equity, and with damaged credit ratings. Between January 2004 and March 2006, the scam netted more than $15 million in fraudulently obtained funds from scores of homeowners.
Maine Woman Sentenced for Federal Program and Tax Fraud
On Oct. 28, 2014, in Portland, Maine, Stacey A. Backman, of Brunswick, Maine, was sentenced to 20 months in prison and ordered to pay $365,168 in restitution. On June 9, 2014, Backman pleaded guilty to federal program and tax fraud. According to court documents, Backman was a fund accountant at Coastal Enterprises, Inc. (CEI). CEI is a private, nonprofit, charitable community development corporation and community development financial institution based in Wiscasset, Maine that received more than $10,000 in federal funds each year. From 2010 to January 2014, Backman embezzled $365,168 from CEI and failed to report the embezzled income on her federal income tax returns. CEI learned of the embezzlement in January 2014 and terminated Backman’s employment.
Owner of Accounting Business Sentenced for Tax Fraud
On Oct. 27, 2014 in Statesville, North Carolina, Denise Swanson, of Lenoir, North Carolina, was sentenced to 24 months in prison, three years of supervised release and ordered to pay restitution of $839,830 to client victims and $249,912 to IRS. Swanson previously pleaded guilty to tax evasion for tax year 2010. According to court documents, Swanson was the owner and operator of “Bottom-line Accounting,” a tax preparation and bookkeeping business. From 2006 to 2012, Swanson performed tax preparation services for her clients and their business, which included making related tax payments on their behalf. According to court records, Swanson received funds from her clients that were supposed to be used to pay their various tax obligations to IRS and other state agencies. But instead of making the payments, Swanson embezzled the money and used it to pay for personal expenses. Swanson failed to report the embezzled income on her own individual tax returns for tax years 2006 through 2011.
North Carolina Businessman Sentenced for Failing to Report More Than $1 Million in Income
On Oct. 27, 2014, in Raleigh, North Carolina, Jeffrey Wayne Scott was sentenced to 12 months and one day in prison for tax evasion. Scott previously pleaded guilty to one count of willfully attempting to evade his personal income tax for tax year 2007. According to court documents, Scott owned and operated Greenville Loop Seafood (GLS). For tax years 2006 through 2010, Scott and his wife filed joint individual income tax returns. Scott reported that his taxable income for these five years ranged between $23,934 and $92,999, and paid only $91,800 in federal income taxes for this time period. However, during these five years, the Scotts spent far in excess of this reported taxable income on personal expenditures. Between 2006 and 2010, the Scotts paid for nearly all of their living expenses with checks from GLS. Scott also made a monthly transfer of $10,000 from the GLS business account into a personal brokerage account. After the purchase of their home in June 2009, Scott stopped transferring funds to the brokerage account, but instead used funds from the GLS business account to pay the mortgage and related expenses. Scott failed to report in excess of $1,270,000 in taxable income for these five years and owed at least $412,844 in additional federal income taxes. Furthermore, despite being aware that he was under criminal investigation, in November 2012, Scott filed a false 2011 corporate income tax return claiming work on his personal residence, including painting and repair work by a plumber, and health bills related to his family dog as business expenses.
California Woman Sentenced for Filing False Tax Return
On Oct. 27, 2014, in San Francisco, California, Sandra Lynn Vitorelo, aka Sandra Mathewson, was sentenced to 24 months in prison, three years of supervised release and ordered to pay $91,442 in restitution. Vitorelo pleaded guilty to filing false tax returns. According to court documents, Vitorelo had her own tax return preparation and accounting business called M-V Services. In 2000, Vitorelo became the bookkeeper for her cousin. Vitorelo managed her cousin’s assets including stocks, currency, and real property. In 2006, the daughter of Vitorelo’s cousin opened a clothing store in Novato, California. Vitorelo subsequently began managing the finances for that store. Vitorelo made unauthorized transfers from the bank accounts of her cousin and cousin’s daughter to her own bank accounts. Vitorelo misappropriated at least $248,583 which she kept for her own use. Vitorelo further underreported her income on her federal income tax returns beginning in 2006 and continuing through 2009 as a result of her intentional failure to report these funds as income.
Former CFO Sentenced for Mail Fraud and Tax Evasion
On Oct. 27, 2014, in Fort Myers, Florida, Shawn Fuentes was sentenced to 60 months in prison. Fuentes was also ordered to pay restitution to Naples Concrete and Masonry of $1,951,459, restitution to the IRS of $624,728 and a money judgment of $106,979. Fuentes pleaded guilty on July 17, 2014 to mail fraud and tax evasion. According to court documents, Fuentes was the Chief Financial Officer of N.C.M. of Collier County, Inc., doing business as Naples Concrete and Masonry, which was headquartered in Naples, Florida. On numerous occasions, between October 2008 and February 2010, Fuentes fraudulently wrote checks payable to American Express and to Bank of America drawn on the bank accounts of N.C.M. and then sent them to satisfy her own credit card debt. As part of the scheme, the fraudulent checks appeared to be written for legitimate business expenses in the accounting system utilized by the company. As a result of the scheme, she obtained in excess of $500,000. Fuentes also filed a 2009 tax return reporting a taxable income of approximately $35,148, omitting the amount of money misappropriated or stolen from Naples Concrete and Masonry. The actual taxable income that she had received was $822,060; therefore, she failed to report taxable income in the amount of approximately $786,912. For the calendar year 2009, Fuentes paid $2,671 in taxes rather than $262,081.
Former Army Contracting Official Sentenced in Bribery and Kickback Scheme
On Oct. 24, 2014, in Alexandria, Virginia, In Seon Lim, of Fairfax Station, Va., a former contracting official for the U.S. Department of the Army, was sentenced to 48 months in prison, three years of supervised release, and ordered to pay restitution of $250,000 to the Department of Defense and nearly $125,000 to the IRS. In addition, he must pay a forfeiture money judgment of $490,262. Lim pleaded guilty in July 2014 to conspiracy to commit bribery and honest services wire fraud; bribery; and attempting to interfere with and impede tax laws. Lim is among 18 individuals and one corporation, Nova Datacom, LLC, to plead guilty to federal charges in an investigation that uncovered this bribery and bid-rigging scheme. Overall, participants in the scheme stole over $30 million in government money through inflated and fictitious invoices. Lim was an assistant project manager and product director with the Program Executive Office Enterprise Information Systems, a part of the Army that provides infrastructure and informational management systems. As part of his work responsibilities, Lim coordinated work on a major contract, which, in turn, had numerous subcontracts. Lim secretly used his official position to enrich himself by soliciting and accepting gifts, payments and other things of value from government contractors - totaling more than $490,000 - in return for favorable official action. He also disclosed confidential bid information to the favored government contractors. Lim also admitted that he failed to report the bribes he received on tax returns for the years 2007 through 2011. He also failed to keep records that would allow him to file accurate records for 2012 and 2013.
South Dakota Woman Sentenced on Tax Charges
On Oct. 22, 2014, in Sioux Falls, South Dakota, Veronica Fairchild was sentenced to 33 months in prison and ordered to pay over $214,000 in restitution to the IRS for unpaid taxes. Fairchild was convicted in June 2014 of four counts of tax fraud. According to court documents, Fairchild failed to claim over $850,000 in income on her 2005 through 2008 income tax returns which she filed in 2010. Fairchild claimed the unreported income she received from performing private shows as an exotic dancer was a gift.
Idaho Nightclub Owner Sentenced for Tax Evasion
On Oct. 22, 2014, in Boise, Idaho, Herminio Harro Sandoval, of Caldwell, Idaho, was sentenced to 46 months in prison and three years of supervised release. In addition, Sandoval agreed to civilly forfeit real property, bank accounts, a vehicle, and U.S. currency and coins, totaling approximately $315,335. Sandoval also agreed to a tax assessment of at least $210,000. Sandoval pleaded guilty on Aug. 12, 2014 to conspiracy to attempt to evade and defeat tax. According to court documents, over the past two decades Sandoval owned and operated various nightclubs in Canyon County. Beginning in 1998 and continuing to 2012, Sandoval conspired to fail to report $750,000 in income. Sandoval derived much of his unreported income from illegal outdoor marijuana grows on public lands, methamphetamine and cocaine trafficking, prostitution, and an illegal check cashing business.
Former Oklahoma State University Professor Sentenced on Federal Charges
On Oct. 22, 2014, in Great Falls, Montana, Gary Joseph Conti, of Three Forks, was sentenced to 60 months in prison, three years of supervised release and ordered to pay $1.7 million in restitution. Conti, a former Oklahoma State University professor, was convicted in March 2014 by a federal jury of bankruptcy fraud and convicted in May 2014 of 26 other felony crimes. According to court documents, Conti was part of a multi-million dollar tribal corruption and fraud case on the Blackfeet Indian Reservation. He assisted Blackfeet Tribal officials Frances Onstad and Delyle “Shanny” Augare, and others, obtain millions of dollars in federal monies for a program for troubled and at risk Blackfeet youth called the Po’Ka Project. The federal money was provided based on fraudulent claims as to matching or “in-kind” contributions of third parties which made it appear that the project was becoming self-sufficient. Once the federal money was provided to the Po’Ka program, Onstad and Augare paid Conti $475,000 from August 2008 to August 2011. Conti then kicked-back $225,000 through a children’s charity bank account over which Augare and Onstad had control. An audit by the Department of Health and Human Services’ Office of Inspector General found the projected loss due to fraud and mismanagement at $4.6 million out of the $9 million provided to the Po’Ka Project from 2005 to 2011.
Doctor Sentenced for Tax Evasion
On Oct. 22, 2014, in Milwaukee, Wisconsin, Dr. Michael N. Mangold was sentenced to 18 months in prison. Mangold pleaded guilty on May 22, 2014, to one count of tax evasion and one count of making false statements. According to court documents, Mangold was a medical doctor specializing in emergency medicine and urgent care who, since about 1993, had worked as a physician for various hospitals, emergency rooms and urgent care facilities. At times, he also worked as a physician in state and county correctional facilities. Mangold primarily earned income through a combination of employee wages and independent contractor payments. From 1997 through 2007, Mangold willfully concealed his income from the IRS and made false statements to the IRS. In total, Mangold owed approximately $191,577 in taxes based on his income and wages during the relevant calendar years plus interest. In addition, Mangold made materially false statements during the course of a civil lawsuit concerning his failure to repay federal student loan obligations. He submitted a false financial affidavit to government officials which contained false statements about the amount of income he earned as a doctor.
Homebuilder Sentenced for Defrauding Investors and Tax Evasion
On Oct. 21, 2014, in Baltimore, Maryland, Patrick J. Belzner, aka Patrick McCloskey, of Selbyville, Delaware, was sentenced to 180 months in prison and three years of supervised release on charges of wire fraud conspiracy, wire fraud and tax evasion. Belzner was also ordered to pay $19.805 million in restitution. According to court documents, from the fall of 2009 through August 2011, Belzner, a home builder, worked for a real estate development business known as the McCloskey Group, which was owned by another home builder. During that time, Belzner conspired with others to defraud investors through a fraudulent real estate investment scheme. Belzner also pleaded guilty to evasion of assessed tax payments for funds he stole from his employer in the years 1995, 1996 and 1998. Belzner admitted that between January 2006 and June 2011, he concealed income and assets from the IRS and made no payments on his tax debt through such schemes as placing his residences, other real estate and automobiles in the names of corporations that he formed. In February 2006 and again in January 2009, Belzner submitted forms to the IRS falsely claiming that he did not have sufficient income to make any payments on the assessed back taxes, penalties and interest. The total amount of assessed tax, interest and penalties owed by Belzner as of August 2013 was $2,619,870.
Owner of Investment Company Sentenced on Tax and Money Laundering Charges
On Oct. 16, 2014, in Salt Lake City, Utah, James Ronald Donahoo, II, of Pleasant Grove, was sentenced to 48 months in prison, three years of supervised release and ordered to pay $2,739,501 in restitution to victims of the fraud. A forfeiture money judgment has been entered in the same amount. Donahoo pleaded guilty in June 2014 to wire fraud, money laundering and failure to file a tax return. According to his plea agreement, Donahoo misrepresented to investors that if they would invest in Paradigm Investing, Inc., they would make a 1 to 3 percent return on their investment, which would be paid out monthly. Paradigm never earned any revenues on any of its purported investments from which interest payments could have been made. Donahoo created false bank statements for Paradigm that he showed to investors to convince them that the investment was safe, low risk, and a good investment. He also told investors that the risk was mitigated by the fact that for every dollar invested, he had a dollar in the bank. Donahoo made payments to investors totaling more than $267,000 out of investor funds in furtherance of what was a Ponzi scheme. In addition, Donahoo did not file a tax return for 2008, even though he transferred funds from the Paradigm bank account to his personal bank account totaling $335,000. He used those funds for personal purposes.
New Jersey Woman Sentenced to Prison for Defrauding Non-Profit
On Oct. 14, 2014, in Philadelphia, Pennsylvania, Rochelle Biesenthal, of Brigantine, New Jersey, was sentenced to 12 months and a day in prison, three years of supervised release and ordered to pay restitution of $171,187 to the victim organization and $61,637 to the IRS. On May 28, 2014, Biesenthal pleaded guilty to one count of wire fraud and three counts of tax evasion. According to court documents, Biesenthal engaged in a scheme to defraud a non-profit organization in Philadelphia that provides opportunities for Jewish individuals to engage with their Jewish heritage and reaffirm their Jewish identity. Biesenthal carried out the scheme between 2002 and April 2009, while she was employed as a bookkeeper at the organization. She fraudulently prepared and issued checks and authorized electronic debits from the organization’s bank accounts to herself and to pay her personal and family’s personal credit cards. As part of the scheme, she defrauded the organization of a total of well over $400,000. In addition, she never reported her unauthorized income in her tax returns in tax years 2007 through 2009 and concealed the true sources of her income.
Attorney Sentenced for Stealing Clients Funds and Filing False Tax Returns
On Oct. 9, 2014, in Springfield, Missouri, Daniel D. Whitworth, of Joplin, was sentenced to 24 months in prison and ordered to pay $404,957 in restitution to his former clients and $72,810 to the government. In addition, Whitworth surrendered his license to practice law. On March 31, 2014, Whitworth pleaded guilty to wire fraud, money laundering and false statements on tax returns. According to court documents, Whitworth embezzled approximately $576,739 from 22 of his legal clients between 2004 and Oct. 18, 2013. Whitworth spent these embezzled funds on personal loans and items unrelated to the legal matters of his clients. Whitworth failed to report the embezzled funds on his personal income tax returns for the years 2009 through 2011, which totaled $448,835. For 2012, Whitworth did not file an income tax return and therefore did not report the embezzled funds during this year as well.
Texas Woman Sentenced for Tax Violations
On Oct. 8, 2014, in Sherman, Texas, Shirley Jean Emert, of Spring Branch, was sentenced to 24 months in prison and ordered to pay $697,187 in restitution. Emert pleaded guilty in February 2014 to making and subscribing to a false tax return for the calendar year 2010. According to court documents, Emert embezzled funds from her employer in the amounts of $53,859 in 2008; $126,202 in 2009; $172,965 in 2010; and $166,254 in 2011. Emert failed to report the income on the corresponding tax year returns. Emert’s willful act of falsely reporting income on her tax returns for the years 2008 through 2011 resulted in income tax due and owing in the amount of $159,907.
Former Financial Advisor Sentenced for Money Laundering and Tax Fraud
On Oct. 2, 2014, in New Orleans, Louisiana, Jabari Ragas, of New Orleans, was sentenced to 42 months in prison and three years of supervised release for money laundering and tax fraud. Ragas was also ordered to pay nearly $1,700,000 in restitution for the money laundering count, and $259,210 for the tax fraud count. According to court documents, Ragas was employed by as a registered broker and investment adviser from 2005 through 2009. Ragas previously pleaded guilty to embezzling nearly $1,400,000 from clients, and failing to pay nearly $260,000 in tax due and owing to the IRS. In early 2006, a client of Ragas indicated that he wished to open a Simplified Employee Pension (SEP) account to allow him to contribute towards retirement. Without authorization, Ragas began moving money from the SEP account into an account controlled by Ragas. Ragas supplied the client with a fraudulent account statement along with a fraudulent balance. After using the interstate wire to embezzle funds from the client’s account, Ragas then committed money laundering by further transferring $20,000 into a different account that he controlled. Additionally, on Oct. 12, 2008, Ragas signed and filed an income tax return for 2007 that did not report approximately $288,000 in income.
“Real Housewives of New Jersey” Stars Sentenced for Conspiracy, Bankruptcy Fraud and Tax Offenses
On Oct. 2, 2014, in Newark, New Jersey, Teresa Giudice and her husband, Giuseppe “Joe” Giudice, both of Towaco, were sentenced to 15 months and 41 months in prison, respectively. Both also were sentenced to two years of supervised release and ordered to forfeit $414,588. Both previously pleaded guilty to conspiracy to commit mail and wire fraud, bankruptcy fraud by concealment of assets, bankruptcy fraud by false oaths, and bankruptcy fraud by false declarations. Giuseppe also pleaded guilty to failure to file a tax return. According to court documents, from September 2001 through September 2008, both engaged in a mail and wire fraud conspiracy in which they submitted fraudulent applications and supporting documents to lenders in order to obtain mortgages and other loans. In relation to a petition for individual bankruptcy protection, the Giudices intentionally concealed businesses they owned and income they received and provided false testimony under oath. Giuseppe admitted that during tax years 2004 through 2008, he received income totaling $996,459 but did not file tax returns for those years.
Connecticut Man Sentenced for Investment Fraud and Tax Evasion
On Oct. 1, 2014, in Hartford, Connecticut, Frank Mete, of Berlin, was sentenced to 41 months in prison and three years of supervised release. Mete was also ordered to make full restitution to his victim investors and pay $666,851 to the IRS. On Dec. 4, 2013, Mete pleaded guilty to wire fraud and tax evasion. According to court documents, from approximately 2009 to November 2012, Mete operated an investment fraud scheme in which he held himself out as a broker of hard money loans between investors and purported individual borrowers who were willing to borrow money at interest rates of 15 to 18 percent. In fact, there were no such borrowers. In order to induce the investors to extend loans to the purported borrowers through him as the broker, Mete created false documents using the names of the fictitious borrowers. Mete forged signatures on the checks he received from the victim investors and deposited the funds into several bank accounts he opened in the borrowers’ names. Mete defrauded investors of approximately $1,191,610 and used the funds to pay for various personal expenses. Mete also failed to file federal income tax returns from 2009 to 2012, causing a tax loss of approximately $357,324.