IRS Criminal Investigation Releases Top Five Cases of the Year via Twitter

 

For the first time, the Internal Revenue Service's Criminal Investigation Division (IRS-CI) is issuing its Top Five Cases of the year in a multi-day countdown via the agency's Twitter handle @IRS_CI. The five-day countdown will run from December 28, 2020 through January 1, 2021 and highlight some of the agency's most prominent and high-profile investigations conducted in 2020.

This page contains a summary of the Top Five Cases of 2020.

Number Five

Former tax lawyer sentenced to five years in federal prison for evading back taxes he owed to Internal Revenue Service

On February 3, 2020, James Roy McDaniel was sentenced to 60 months in federal prison for evading the payment of over $1.5 million in taxes, which the Judge ordered him to pay as restitution. This is McDaniel’s second criminal tax offense. Previously in 2004, McDaniel, an attorney, pleaded guilty to filing a false income tax return for failing to report income he earned from 1997 – 2001, creating a tax loss of $677,368. In that case, McDaniel was sentenced to 3 years of federal custody and ordered to surrender his law license in California. The IRS assessed McDaniel more than $1.4 million in taxes, interest and penalties. Following this conviction, McDaniel attempted to evade payment of the $1.5 million he owed the IRS by creating two shell companies – Davis Bell Consulting LLC and James Roy Consulting LLC – where he directed payments for tax and estate planning consulting work he performed after he was released from prison. Between May 2008 and late 2018, McDaniel attempted to mislead federal tax authorities and conceal his income by directing other people to sign documents identifying themselves as the sole managing members of the shell companies. McDaniel directed them to open bank accounts where he deposited checks for his tax and estate planning work. 

Number Four

Tax preparer sent to prison after causing more than $3 million in fraudulent tax returns 

On August 28, 2020, Winfred Fields was sentenced to 109 months in prison and three years of supervised release for the preparation of false returns, conspiracy and mail fraud.  Fields prepared and submitted false amended tax returns and false nonresident tax forms (1040NR) to the IRS for tax years 2007 through 2012 for foreign persons working on vessels on the Outer Continental Shelf of the U.S. Fields falsely claimed these workers were exempt from U.S. tax under a tax treaty between the U.S. and the U.K., Spain and New Zealand. Fields required direct receipt of the refunds so he could negotiate the checks and take his fee off the top; $2,500 for the first return and $1,000 for any additional returns.  Eventually, Fields stopped sending the refunds to his foreign clients.  As a result of his tax scheme, Fields fraudulently obtained refunds from the IRS totaling $3,097,974.19 of which approximately $1,302,271.75 he kept for himself. 

Number Three

Mountaintop man sentenced to 169 months’ imprisonment for money laundering conspiracy 

On June 25, 2020, Jonathan Jacome was sentenced on June 23 to 169 months in prison, followed by 36 months of supervised release. Jacome was also ordered to pay restitution in the amount of $7,760,585. His sentence stems from his involvement in a SIRF and money laundering scheme. Jacome also admitted that he committed the underlying crimes of theft of public money, wire fraud, and bank fraud. Jacome was a leader and organizer in a sophisticated scheme that used stolen identities to file fraudulent tax returns. As a result of his scheme, he obtained over $7.7 million in fraudulent federal tax refunds. Jacome opened three check cashing businesses solely to carry out the fraud scheme. He used these businesses to process the fraudulently obtained Treasury checks. 

Number Two

Israel’s largest bank, Bank Hapoalim, admits to conspiring with U.S. taxpayers to hide assets and income in offshore accounts 

On April 30, 2020, Bank Hapoalim pleaded guilty and Bank Hapoalim B.M. entered into a deferred prosecution agreement for conspiring with U.S. taxpayers and others to hide more than $7.6 billion in more than 5,500 secret Swiss and Israeli bank accounts and the income generated in these accounts from the Internal Revenue Service. As part of the resolutions, along with resolutions entered into with state and federal partners, Bank Hapoalim B.M. (BHBM), Israel’s largest bank, and Bank Hapoalim (Switzerland) Ltd. (BHS), its Swiss subsidiary, agreed to pay approximately $874.27 million to the U.S. Treasury, the Federal Reserve, and the New York State Department of Financial Services. The resolution is the second-largest recovery by the Department of Justice in connection with its investigations since 2008 into facilitation of offshore U.S. tax evasion by foreign banks.

Number One

Global disruption of three terror finance cyber-enabled campaigns

On August 13, 2020, three forfeiture complaints and a criminal complaint were unsealed in the District of Columbia detailing a coordinated effort to dismantle three terrorist financing cyber-enabled campaigns. These campaigns involved the (1) al-Qassam Brigades, Hamas’s military wing, (2) al-Qaeda, and (3) Islamic State of Iraq and the Levant (ISIS). These actions represent the government’s largest-ever seizure of cryptocurrency in the terrorism context. These three terror finance campaigns all relied on sophisticated cyber-tools, including the solicitation of cryptocurrency donations from around the world. The action demonstrates how different terrorist groups have similarly adapted their terror finance activities to the cyber age. Each group used cryptocurrency and social media to garner attention and raise funds for their terror campaigns. Pursuant to judicially-authorized warrants, U.S. authorities seized millions of dollars, over 300 cryptocurrency accounts, four websites, and four Facebook pages all related to the criminal enterprise. Treasury Secretary Steven Mnuchin presented the Secretary’s Honor Award to Special Agent Christopher Janczewski of the Washington Field Office for his role in this case.

Honorable Mention

CEO of multibillion-dollar software company indicted for decades-long tax evasion and wire fraud schemes; Private equity CEO enters into non-prosecution agreement on international tax fraud scheme and agrees to pay $139 million, to abandon $182 million in refunds

On October 15, 2020, Robert T. Brockman, a Houston software tycoon, was charged in a 20-year scheme to hide $2 billion in income. This is the largest U.S. tax case ever against an individual. At the same time, a non-prosecution agreement was announced against Robert Smith who agreed to cooperate with the investigation and pay $139 million in penalties and abandon a claim of over $180 million in refunds.

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