Kansas City man sentenced for $2.5 million tax fraud scheme

 

Date: June 19, 2020

Contact: newsroom@ci.irs.gov

KANSAS CITY, Mo. – A Kansas City, Missouri, man was sentenced in federal court today for a scheme to obtain more than $2.5 million in fraudulent federal income tax refunds, in part by stealing his children's identities.

"Today's sentencing further shows that IRS Criminal Investigation has made investigating refund fraud and identity theft a top priority," stated Acting Special Agent in Charge Adam Steiner. "Individuals who commit refund fraud with this degree of dishonesty and deceit, deserve to be punished to the fullest extent of the law. IRS Criminal Investigation along with the United States Attorney's Office remains vigilant in identifying, investigating, and prosecuting those individuals who seek to willfully defraud the United States Treasury."

"This lifelong criminal has spent his entire adult life committing one fraud after another," said Garrison, "but he reached a new low when he used his own children in a failed tax fraud scheme. Even after being indicted by a federal grand jury, he continued to steal from the public by filing another false tax return and by fraudulently claiming unemployment benefits. Today's substantial prison sentence will deter him from committing more crimes and protect the public from his habitual thievery."

Michael A. Kheop was sentenced by U.S. Chief District Judge Beth Phillips to eight years and six months in federal prison without parole. The court also ordered Kheop to pay $24,322 in restitution.

On Dec. 2, 2019, Kheop was found guilty at the conclusion of a bench trial of three counts of making false claims, two counts of mail fraud and one count of aggravated identity theft.

Kheop created a fraudulent business entity in 2013. He then created fraudulent W-2 forms that contained false income and withholding in order to fraudulently claim refunds in his own name and using his three minor children's names. Kheop filed 12 fraudulent claims for refunds on behalf of his three minor children for tax years 2014 through 2017. He filed four fraudulent claims for refunds in his own name for tax years 2015 through 2017.

By filing the 15 fraudulent claims for refunds, Kheop attempted to defraud the government of $2,591,706. The U.S. Treasury actually paid Kheop $24,322. In August 2017, the IRS sent Kheop a check for $717,910 based on his false 2016 return, but Central Bank refused to deposit the check due to suspected fraud and contacted the IRS. In 2018, the IRS also sent Kheop a check for $1,596,765 based on his false 2017 tax return, which Kheop attempted to deposit at Merrill Lynch/Bank of America. Once again, the bank suspected the check was fraudulent and refused to release the funds to Kheop.

The false claims convictions are specifically related to three tax returns Kheop filed in 2018, one in his own name and two in the names of his minor children. The mail fraud convictions are specifically related to refund checks mailed to Kheop's post office box. The aggravated identity theft conviction is specifically related to the use of his minor child's name and Social Security number on a federal income tax return.

On Oct. 10, 2018, Kheop was released on bond after indictment in this case. While on pre-trial supervision, on Feb. 22, 2019, he filed yet another false tax return for tax year 2018, claiming he worked for "Michael Kheop," that he earned $17,500, and withheld $1,451 in federal income taxes. Kheop also filed false unemployment claims with the state of Missouri in 2017 and 2018, while on pre-trial release, claiming he worked for (and was laid off from) yet another fictional company, Quddus. The state of Missouri paid Kheop a total of $7,680 based on his false unemployment claims. Based on these new law violations, the court revoked Kheop's pre-trial supervision.

Today's sentence includes an enhancement for obstruction of justice because Kheop testified falsely at his trial that he paid income tax withholding.

This case was investigated by IRS-Criminal Investigation. It was prosecuted by Assistant U.S. Attorney Kathleen D. Mahoney and Special Assistant U.S. Attorney Bradley Cooper.