Los Angeles-area man pleads guilty to fraudulently seeking millions of dollars in COVID-related tax credits for nonexistent business

 

Date: Jan. 17, 2025

Contact: newsroom@ci.irs.gov

LOS ANGELES — A Los Angeles-area man pleaded guilty today a federal felony charge and admitted to seeking more than $65 million from the IRS by falsely claiming on tax returns that his nonexistent farming business was entitled to COVID-19-related tax credits.

Kevin J. Gregory pleaded guilty to one count of making false claims to the IRS. Gregory has been in federal custody since May 2023.

In response to the COVID-19 pandemic and its economic impact, Congress authorized an employee retention tax credit that a small business could use to reduce the employment tax it owed to the IRS, also known as the “employee retention credit.”

To qualify, the business had to have been in operation in 2020 and to have experienced at least a partial suspension of its operations because of a government order related to COVID-19 (for example, an order limiting commerce, group meetings or travel) or a significant decline in profits. The credit was an amount equal to a set percentage of the wages that the business paid to its employees during the relevant time period, subject to a maximum amount.

Congress also authorized the IRS to give a credit against employment taxes to reimburse businesses for the wages paid to employees who were on sick or family leave and could not work because of COVID-19. This “paid sick and family leave credit” was equal to the wages the business paid the employees during the sick or family leave, also subject to a maximum amount.

According to his plea agreement, from November 2020 to April 2022, Gregory made false claims to the IRS for the payment of nearly $65.4 million in tax refunds for a purported Beverly Hills-based farming-and-transportation company named Elijah USA Farm Holdings.

The IRS issued a portion of the refunds Gregory claimed, and Gregory used that portion – more than $2.7 million – for personal expenses.

Specifically, in January 2022, Gregory made a false claim to the IRS for the payment of a tax refund in the amount of $23,877,620, which he submitted as part of Elijah Farm’s quarterly federal tax return. Gregory claimed Elijah Farm employed 33 people, paid nearly $1.6 million in quarterly wages, had deposited nearly $18 million in federal taxes, and was entitled to nearly $6.5 million in COVID-relief tax credits.

In fact, Gregory knew that Elijah Farm employed nobody and paid wages to no one and had not made federal tax deposits to the IRS in the amounts stated on his tax return.

United States District Judge Josephine L. Staton scheduled a May 16 sentencing hearing, at which time Gregory will face a statutory maximum sentence of five years in federal prison.

IRS Criminal Investigation (IRS-CI) investigated this matter.

Assistant United States Attorney Valerie L. Makarewicz of the Major Frauds Section is prosecuting this case.

IRS-CI is the criminal investigative arm of the IRS, responsible for conducting financial crime investigations, including tax fraud, narcotics trafficking, money-laundering, public corruption, healthcare fraud, identity theft and more. IRS-CI special agents are the only federal law enforcement agents with investigative jurisdiction over violations of the Internal Revenue Code, obtaining a more than a 90 percent federal conviction rate. The agency has 20 field offices located across the U.S. and 12 attaché posts abroad.