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June 10, 2015

New Jersey Attorney/CPA Sentenced in an Extortion Scheme

On April 27, 2015, Thomas G. Frey was sentenced in the District of New Jersey for his role in an extortion conspiracy. [1] Frey was charged with conspiracy to extort under fear of economic harm, attempted extortion, and wire fraud in August 2011. [2]

According to the court documents, Frey was a licensed attorney in the State of New Jersey and a Certified Public Accountant operating in New Jersey at all times relevant to the extortion conspiracy. In 2011, Frey, and coconspirator Robert Cusic, Jr., a mortgage broker, devised a scheme to obtain legal fees and property from victims through extortion with the wrongful threat of economic harm. [3]

The four victims of the conspiracy owned and rented real estate investment properties in New Jersey. Two of them were also police officers. A third (unindicted) conspirator, an attorney, had represented the victims in matters related to the purchase and sale of their investment properties since approximately 2003, and Cusic had served as the victims’ mortgage broker in the past. [4]

In late 2010 or early 2011, one of the victims was informed that a group of investors was interested in the purchase of some of the investment properties. Four properties were subsequently sold to a company named 135 Easton Avenue, LLC. The unindicted attorney represented the seller in this transaction. Cusic acted as an agent of the purchasing company, and Frey held an interest in the purchasing company and also invested a portion of the purchase price. [5]

As part of their scheme to defraud the victims, Frey, Cusic, and the third conspirator falsely represented to the victims that they were the subjects of criminal investigations, principally by the Internal Revenue Service (IRS), related to their investment properties. To facilitate their scheme, Cusic indicated that two IRS special agents had approached him at one of the properties regarding investigations of police officers for mortgage fraud. Cusic said the agents had provided him with their business cards at that time. Frey told the victims he knew one of the special agents and said if the two IRS criminal investigators were involved, then the United States Attorney’s Office must also be involved in the case. Frey offered to call the special agents to inquire about the nature of the IRS’s investigation and advised that to retain him, to bring an initial retainer fee of $10,000. Frey later told the victims that his purported legal and accounting services would cost them up to $20,000 each. [6]

In a meeting with the victims, Frey falsely informed them that he had spoken to one of the special agents and confirmed there was an open criminal investigation on three of the four individuals. Frey showed those present at the meeting the special agents’ business cards and falsely stated that the agents had given him these cards when he was at the investment property. In fact, Frey had represented another individual who was the subject of an IRS criminal investigation several years earlier and had obtained the two special agents’ cards at that time. Frey falsely indicated that the victims’ 2007 and 2008 personal Federal tax returns had prompted the IRS problems and indicated the victims’ “way out” was to amend their returns. Frey said he would forward the amended returns to one of the special agents with whom he had a working relationship, and the agent would convert the IRS inquiry from a criminal investigation to a civil matter. [7]

In subsequent contacts, Frey continued to pressure the victims, telling them that if they engaged him, he would “put the brakes on” the criminal investigation. If they did not, he would not speak to the special agent again on their behalf and the criminal investigation would proceed. Additionally, Frey instructed the victims to distance themselves from the investment property by hiring Cusic’s property management company to collect the rent. Frey then followed with mention of similar situations where one of his clients was sentenced to 6 months in prison and another was serving a year and a day in prison. [8]

One of the victims contacted the IRS and learned that neither of the two special agents mentioned were investigating them. Two of the victims coordinated future meetings and conversations with law enforcement and monitored such meetings. In one such meeting, Frey accepted $10,000 from one of the victims for the initial retainer fee. The others were to provide tax documentation and fees at a later date. When one of the victims delayed subsequent meetings, Frey said that the IRS was “going gangbusters” against the individuals because they had not retained him. He claimed that the delay made the individual look like a non-compliant taxpayer and that the IRS was getting ready to subpoena the victims’ bank records. Frey indicated that the two victims who were police officers were particularly vulnerable. Cusic supported and reiterated the false statements in separate conversations, and the third conspirator also urged the victims to engage Frey, stating that Frey expected they (the victims) would be arrested soon. [9]

Frey, Cusic, and the third individual knowingly and intentionally conspired with each other in their false and fraudulent representations when, in fact, the IRS did not have a criminal investigation on the victims; neither of the special agents had participated in an investigation of the victims; neither of the special agents had ever approached Cusic about the victims; and neither agent had any contact with Frey since the previous investigation and prosecution of his client. [10]

Frey was sentenced to 27 months in prison, followed by three years of supervised release. Frey was also ordered to pay a fine of $25,000, complete 300 hours of community service, [11] and repay legal fees provided by the court. [12]

  • [1] D. N.J. Judgment filed Apr. 29, 2015.
  • [2] D. N.J. Indict. filed Aug. 2, 2011.
  • [3] Id.
  • [4] Id.
  • [5] Id.
  • [6] Id.
  • [7] Id.
  • [8] Id.
  • [9] Id.
  • [10] Id.
  • [11] D. N.J. Judgment filed Apr. 29, 2015.
  • [12] D. N.J. Crim. Docket filed Aug. 2, 2011.
  • IRS Special Agent and Co-conspirator Indicted in Tax Refund Scheme

    On April 30, 2015, in the Northern District of Alabama, Internal Revenue Service (IRS) Special Agent Donald Centreal Smith (aka Donald Sentreal Smith) and Alabama resident Gary Gene Collins were charged in a 30-count indictment for a variety of criminal violations associated with a tax refund scheme, including conspiracy, false claims, theft of Government funds, wire fraud, and aggravated identity theft. [1]

    According to the court documents, Smith was hired as a trainee with IRS Criminal Investigation (IRS-CI) in 2005 and became a special agent with IRS-CI in 2007. From about September 2011 through October 2013, Smith and Collins unlawfully conspired with each other and devised a scheme to obtain money and property through false representations by presenting claims to the IRS to generate income tax refunds, knowing such claims to be fraudulent. [2]

    As part of the conspiracy, in 2011 and 2012, Smith formed SMBG, LLC and Red Alliance, LLC, respectively. Smith and Collins then opened two bank accounts at Regions Bank, one in the name of Red Alliance and another in the name of Red Alliance dba True Tax Enterprise. [3]

    Between June 2012 and October 2012, Smith and Collins electronically filed at least nine fraudulent personal income tax returns with the IRS, knowingly using the identification of others without lawful authority. The personal identification information (i.e., names, dates of birth, and Social Security Numbers) contained in the false tax returns came into Smith’s possession by virtue of his employment as a special agent. Specifically, Smith had obtained the information several years earlier through investigations that he had conducted and prosecuted in his capacity as an IRS special agent. The false returns directed the refunds to be deposited into the two specific bank accounts earlier established by Smith and Collins at Regions Bank, which were opened with Collins’s SSN, date of birth, and home address. [4]

    Smith and Collins requested, through the filing of these nine false claims, Federal tax refunds totaling $31,882. Before the scheme was detected, the IRS paid three of the refunds totaling $5,672.94 by depositing the funds into the Regions Bank accounts. Smith and Collins converted these funds to their own use. [5]

    In early October 2012, after discovering that a Regions Bank security officer was investigating one of the refund payments deposited into the Red Alliance account, Collins made multiple calls to Smith. On the same date as the calls from Collins, Smith withdrew $10,000 from his personal bank account. On two subsequent dates during the month, Smith searched restricted and confidential Treasury databases for records and information relating to himself, Red Alliance, the Employer Identification Number associated with Red Alliance, and one of the identity theft victims. [6]

    Additional legal actions are pending. Smith’s next court appearance is scheduled for May 21, 2015. [7]

    • [1] N.D. Ala. Indict. filed Apr. 30, 2015.
    • [2] Id.
    • [3] Id.
    • [4] Id.
    • [5] Id.
    • [6] Id.
    • [7] N.D. Ala. Notice of Suppl. Arraignment Donald Smith filed May 5, 2015.
    • IRS Employee Indicted in False Tax Return Scheme

      On April 24, 2015, in the Eastern District of New York, Internal Revenue Service (IRS) employee James Brewer was charged in a 28-count indictment with filing false tax returns, aiding in the preparation of false tax returns, wire fraud, mail fraud, aggravated identity theft, and perjury. [1]

      According to the indictment, Brewer was an IRS Revenue Officer assigned to the Edison, New Jersey IRS office. As a Revenue Officer, Brewer was responsible for collecting money owed to the IRS and securing Federal tax returns from taxpayers who failed to file them. In connection with their employment, IRS employees are prohibited from preparing tax returns for profit and are prohibited from operating an outside business without prior written approval from IRS management. In addition to the criminal charges, Brewer violated these regulations by preparing fraudulent Federal tax returns for taxpayers in exchange for a fee, and by operating a personal business selling items through eBay without proper approval. [2]

      Between 2010 and 2014, Brewer prepared six fraudulent tax returns for five different individuals, containing false statements relating to dependents, filing status, itemized deductions, business profits or losses, and residential energy credits. Additionally, Brewer knowingly used the identities (names and Social Security Numbers) of others for dependent claims on the returns without lawful authority or authorization to do so, knowing the identities belonged to actual persons. These false statements on the tax returns either caused the clients to receive a refund when they otherwise would not have or caused inflated refunds. Brewer earned money preparing the returns by diverting a portion of the taxpayers’ refunds to bank accounts within his control. In some cases, the taxpayers believed Brewer had prepared their tax returns as a favor and were unaware Brewer had diverted or attempted to divert a portion of their refund to his bank accounts. [3]

      In furtherance of his scheme, for Tax Years 2011, 2012, and 2013, Brewer made fraudulent claims on his own tax returns, filed jointly with his current wife, claiming fraudulent dependents, underreporting the gross receipts of his eBay business, claiming false deductions, and failing to report money earned preparing tax returns for others. By making these false claims, Brewer fraudulently reduced his taxable income and increased the amount of his tax refunds. Brewer filed seven fraudulent returns, including two of his own, electronically from Staten Island, New York. [4]

      Further, Brewer perjured himself by knowingly making false declarations to the U.S. Tax Court in 2012, while under oath. Brewer had falsely claimed the First-Time Homebuyer Credit on his 2008 Federal return. This credit was established for people who purchased a new home in 2008, 2009, or 2010; however, taxpayers who owned a principal residence during the three years prior to the date of purchase of the new home were not eligible for the $7,500 tax credit. Brewer did not meet the eligibility conditions for the credit because he owned and used his Staten Island property as his principal residence until he, and his wife at the time, purchased a home in Avenel, New Jersey in 2008. After Brewer was notified that the IRS had disallowed the credit, he appealed the decision and a trial was held in U.S. Tax Court. During the trial, Brewer lied, testifying under oath that he did not live in his Staten Island residence for any part of the three years prior to his purchase of the Avenel home. [5]

      In a detention hearing on May 6, 2015, the judge determined there was a serious risk Brewer would not appear at future hearings, indicating a variety of reasons related to the charges, including Brewer’s conduct history and that no credible sureties were presented to assure his appearance. Therefore, Brewer was remanded into custody. [6]

      • [1] E.D. N.Y. Indict. filed Apr. 24, 2015.
      • [2] Id.
      • [3] Id.
      • [4] Id.
      • [5] Id.
      • [6] E.D. N.Y. Detention Order filed May 6, 2015.
      • IRS Employee Indicted for Providing Fraudulent Documents in Connection With Her Tax Returns

        In the Eastern District of Pennsylvania, IRS employee Shirley McElhaugh was indicted on April 14, 2015, for attempting to interfere with the administration of the Internal Revenue laws. [1]

        According to the court documents, McElhaugh was employed by the IRS as a Contact Representative at all times relevant to the indictment. Around 2009, the IRS conducted an examination of McElhaugh’s 2006 and 2007 Federal income tax returns and disallowed charitable contributions she had claimed, resulting in a tax deficiency of approximately $16,920 for the two years. McElhaugh filed a petition in the U.S. Tax Court challenging the results of the IRS examination. McElhaugh subsequently endeavored to obstruct the due administration of the Internal Revenue laws by submitting fraudulent documentation to the IRS Chief Counsel’s Office in support of her claimed charitable contributions, knowing the documents were false, and did not accurately report her contributions for the tax years in question. [2]

        • [1] E.D. Penn. Indict. filed Apr. 14, 2015.
        • [2] Id.
        • Former IRS Employee Charged With Wire Fraud and Identity Theft in Connection With Refund Scheme

          On April 22, 2015, former Internal Revenue Service (IRS) employee Kenneth Goheen was charged with wire fraud and aggravated identity theft in the Western District of Texas. [1]

          According to the court documents, Goheen was employed by the IRS in Austin, Texas, until February 7, 2015. Goheen held a position as a Tax Examining Technician in the department responsible for assisting individuals in obtaining an Individual Tax Identification Number (ITIN). An ITIN is a tax processing number available only to certain non-resident and resident aliens, their spouses, and dependents who cannot obtain a Social Security Number. Some applicants go through an intermediary to assist with the ITIN process, but in some instances applicants provide original documents directly to the IRS for authentication and review. The IRS then establishes an ITIN for the individuals, allowing the filing of Federal tax returns. While working in the ITIN department, Goheen had access to individuals’ identification documents and the IRS computer systems that assigned ITINs. [2]

          Between about March 25, 2013, and January 1, 2015, Goheen devised a scheme to defraud the Government and obtain money by means of fraudulent pretenses. Specifically, in furtherance of his scheme, Goheen used identification documents submitted by legitimate applicants without their authorization and caused the IRS to establish ITINs in their names. He used the fraudulent ITINS to file false tax returns with the IRS which caused the issuance of tax refunds in the names associated with the fraudulent ITINs. [3]

          Goheen prepared and filed at least 51 Federal income tax returns in the names of at least 24 individuals, causing the Department of the Treasury to issue a minimum of $124,852.48 in fraudulent tax refunds. The refund checks were mailed to mailboxes established by Goheen. To facilitate the opening of some of the mailboxes, Goheen supplied copies of passports in the names of other people. [4]

          Goheen established several bank accounts, mostly via the Internet, again using means of identification of individuals without their consent or knowledge, and deposited at least $119,734.02 from the fraudulently obtained tax refunds into the accounts. Goheen further converted the funds to his personal use, including paying for living expenses, personal debts, mortgage loans, and his tuition at Texas State University. [5]

          Additional legal actions are pending. [6]

          • [1] W.D. Tex. Info. filed Apr. 22, 2015.
          • [2] Id.
          • [3] Id.
          • [4] Id.
          • [5] W.D. Tex. Info. filed Apr. 22, 2015.
          • [6] W.D. Tex. Crim. Docket filed.
          • IRS Enrolled Agent Pleads Guilty to Corrupt Interference with the IRS

            On March 27, 2015, in the Central District of California, Richard Schultz pled guilty to obstructing and endeavoring to obstruct the administration of the Internal Revenue Code. [1] Schultz was charged with the offense in February 2015. [2]

            According to the court documents, Schultz was an Enrolled Agent for Optima Tax Relief (Optima) in Santa Ana, California. As an Enrolled Agent, Schultz represented Optima’s clients before the Internal Revenue Service (IRS). The IRS had placed levies on the accounts of a number of Optima’s clients in an effort to collect back taxes from them. [3]

            From approximately December 2012 to June 2013, Schultz corruptly endeavored to obstruct and impede the Internal Revenue Code by creating false levy releases for eight to ten Optima clients. In connection with his fraudulent activities, Schultz used valid levy releases previously issued by the IRS and altered them by whiting out the true taxpayer’s information and adding the new taxpayer’s information. Schultz then sent the falsified levy releases to the Optima clients and advised them that the releases were valid. As a result, the clients forwarded the false levy releases to their financial institutions, who in turn released the IRS levies on the applicable accounts. Schultz’s actions, creating and sending false IRS levy releases, impeded the IRS in the collection of outstanding tax liabilities from the Optima clients. [4]

            Schultz could face up to three years in prison for the offense. [5] Sentencing is scheduled for June 19, 2015. [6]

            • [1] C.D. Cal. Crim. Docket filed Feb. 10, 2015; C.D. Cal. Crim. Minutes Change of Plea filed Mar. 27, 2015.
            • [2] C.D. Cal. Info. filed Feb. 10, 2015.
            • [3] C.D. Cal. Plea Agr. filed Feb. 10, 2015.
            • [4] Id.
            • [5] Id.
            • [6] C.D. Cal. Crim. Docket filed Feb. 10, 2015.
            • May 13, 2015

              IRS Employee Arrested for Filing False Tax Returns

              On March 17, 2015, Internal Revenue Service (IRS) employee Elaina Norris was arrested for charges relating to false tax returns. [1] Norris was indicted on March 12, 2015, in the Eastern District of California for filing fraudulent tax returns and aiding in the preparation of a false tax return. [2]

              According to the court documents, Norris, a resident of Fresno County, California, was employed by the IRS at the Fresno Service Center as a seasonal tax examiner in the Error Resolution System (ERS) unit. As an ERS tax examiner, Norris had access to the names, Social Security Numbers (SSNs), dates of birth, and other personally identifiable information of taxpayers and their claimed dependents. Norris’s duties included verifying the accuracy of claimed dependents on taxpayers’ income tax returns and correcting errors on documents submitted to the IRS, including tax returns. [3]

              While employed in the ERS unit, Norris prepared and caused to be filed the 2008 Federal income tax return of her relative. The return falsely claimed two dependents and claimed, for the purpose of the Earned Income Tax Credit (EITC), that the dependents lived with her relative for eight months in 2008. In fact, neither of the individuals listed were relatives; they did not live with the taxpayer (Norris’s relative) during the tax year; and they were not the taxpayer’s dependents. [4]

              Increasing the number of dependents a taxpayer claims on a Federal income tax return may decrease the taxpayer’s tax liability or increase the taxpayer’s refund.. Norris obtained the legitimate names and SSNs of the claimed individuals through her employment in the ERS unit for the purpose of falsely listing them as dependents on her relative’s tax return. Norris knew that the individuals were not her relative’s dependents and that they did not live with her relative for eight months of the year. Norris’s preparation and submission of the fraudulent tax return caused her relative to claim unauthorized tax deductions and credits. [5]

              Additionally, Norris prepared and filed her own 2008 Federal income tax return, falsely claiming a dependent described as her “nephew” and claiming for the purpose of the EITC that the dependent lived with her for eight months in 2008. Norris declared the accuracy of her return under the penalties of perjury, knowing that these claims were not true, and that the individual was not her dependent and did not reside with her. As a result, Norris claimed and received tax deductions and credits to which she was not entitled. The following year, Norris again falsely claimed the same dependent on her 2009 tax return and claimed that the dependent lived with her for seven months of the year, thereby knowingly claiming and receiving tax deductions and credits to which she was not authorized. [6]

              • [1] E.D. Cal. Executed Arrest Warrant filed Mar. 17, 2015.
              • [2] E.D. Cal. Indict. filed Mar. 12, 2015.
              • [3] Id.
              • [4] Id.
              • [5] Id.
              • [6] Id.
              • Individual Sentenced for Role in Impersonation Scheme

                On March 24, 2015, a judgment was filed in the Southern District of New York against Leyton Ramsay for conspiracy to commit wire fraud. The date of imposition of the sentence was March 19, 2015. [1] Ramsay was charged with conspiracy to commit wire fraud, as well as conspiracy to impersonate a Federal officer and misuse Department of the Treasury names and symbols, in December 2013, [2] and pled guilty to the wire fraud conspiracy in March 2014. [3] Co-defendant Dwayne Campbell [4] was charged with, and pled guilty to, conspiracy to commit wire fraud in December 2014. [5]

                According to the court documents, from at least 2009 to 2013, Ramsay, Campbell, and others known and unknown, knowingly and willingly, with intent to defraud and to obtain money and property by use of false and fraudulent pretenses, transmitted and caused to be transmitted writings, signs, and pictures through wire and radio communication in interstate and foreign commerce. [6]

                In furtherance of the conspiracy, Ramsay agreed, along with the others, to falsely impersonate a Federal officer and employee and to misuse Department of the Treasury names and symbols. While falsely assuming and pretending to be an officer of the United States, and acting under the authority of such, they demanded and obtained money, paper, documents, and things of value. The conspirators used words, symbols, and emblems of a bureau of the Department of the Treasury, namely, the Internal Revenue Service (IRS), in their solicitations in a manner which could convey the false impression that the product or solicitation was associated with the IRS or an employee thereof. [7] Specifically, individuals were contacted via interstate and foreign telephone calls and e-mails and told they had won a lottery, which caused victims to send payments for purported taxes on lottery winnings. [8]

                One of the victims, an Arizona resident, was notified of a $750,000 lottery winning. The victim began receiving telephone calls almost daily from individuals demanding payments in order to receive the lottery winnings. The victim also received two letters purporting to be from “IRS.com.” One of the letters indicated the victim owed $45,090 and stated that it is the duty of the IRS to collect taxes on behalf of the Government, and that non-payment is a Federal offense. The second letter said the IRS had verified and recorded a lottery winning in excess of $3 million to be paid to the victim. Additionally, the victim received a letter purporting to be from the Federal Bureau of Investigation. As a result of the calls and letters, the victim transferred over $400,000 to a variety of individuals. [9] On one occasion, the victim wired funds through Western Union to Ramsay in Bronx, New York. [10]

                Another victim received a telephone call representing that the victim had won $3.5 million in an international lottery and had to pay taxes and other charges before the winnings would be transmitted. [11] The victim received a letter purporting to be from the IRS and bearing the IRS logo [12] and received a number of calls and e-mail messages requesting that the victim make payments and send personally identifiable information to specified individuals. As a result, the victim sent over $100,000 to individuals; most of the wires were sent to Jamaica. [13]

                According to the transcript of his plea hearing, Ramsay, who was granted asylum in the United States in 2009, was contacted by others and asked to collect money for them. Ramsay was provided with the name, address, telephone number, and a reference number for these transactions and would go to a “check cashier place, fill out the form…and collect the money.” Ramsay was paid a portion of the money from each transaction and sent the remainder to Jamaica. Ramsay did not initially understand the money was obtained fraudulently, but admitted to continuing the activity even after discovering it was an illegal scam. Victims sent over $500,000 to Ramsay. [14]

                Ramsay was sentenced to 48 months in prison followed by three years of supervised release, and was further ordered to pay restitution in the amount of $559,307.25. [15]

                • [1] S.D. N.Y. Judgment filed Mar.24, 2015.
                • [2] S.D. N.Y. Info. Leyton Ramsay filed Dec. 12, 2013.
                • [3] S.D. N.Y. Crim. Docket filed Dec.12, 2013; S.D. N.Y. Tr. of Plea Hearing filed Mar. 27, 2014.
                • [4] S.D. N.Y. Crim. Docket filed Dec.12, 2013.
                • [5] S.D. N.Y. Info. Dwayne Campbell filed Dec. 30, 2014; S.D. N.Y. Crim. Docket filed Dec.12, 2013.
                • [6] S.D. N.Y. Info. Leyton Ramsay filed Dec. 12, 2013; S.D. N.Y. Info. Dwayne Campbell filed Dec. 30, 2014.
                • [7] S.D. N.Y. Info. Leyton Ramsay filed Dec. 12, 2013.
                • [8] S.D. N.Y. Crim. Compl. Dwayne Campbell filed Feb. 13, 2014.
                • [9] S.D. N.Y. Crim. Compl. Dwayne Campbell filed Feb. 13, 2014.
                • [10] S.D. N.Y. Info. Leyton Ramsay filed Dec. 12, 2013.
                • [11] S.D. N.Y. Crim. Compl. Dwayne Campbell filed Feb. 13, 2014.
                • [12] S.D. N.Y. Info. Leyton Ramsay filed Dec. 12, 2013.
                • [13] S.D. N.Y. Crim. Compl. Dwayne Campbell filed Feb. 13, 2014.
                • [14] S.D. N.Y. Tr. of Plea Hearing filed Mar. 27, 2014.
                • [15] S.D. N.Y. Judgment filed Mar.24, 2015.
                Florida Man Sentenced for Filing False Claims and Interfering with Administration of the Internal Revenue Laws

                On March 2, 2015, in the Middle District of Florida, Armand Croteau was sentenced for filing false claims against the Government and corruptly impeding the due administration of the Internal Revenue laws. [1] Croteau pled guilty to the offenses in July 2014. [2]

                According to the court documents, Croteau knowingly filed numerous false claims for Tax Years 2005 through 2009, seeking refunds totaling over $1.9 million to which he was not entitled. Croteau used the “1099-OID” (Original Issue Discount) anti-tax scheme, fabricating information on the Forms 1099-OID submitted to the Internal Revenue Service (IRS). [3]

                In a further corrupt effort, Croteau endeavored to impede, obstruct, and interfere with the administration of the IRS by recording numerous fraudulent and fictitious documents with the Charlotte County, Florida Clerk of the Court and by mailing fictitious documents to the Department of the Treasury. Croteau filed liens with the clerk of the court against IRS personnel, including the IRS Commissioner, and recorded other fraudulent documents attempting to discharge his pre-existing, current, and future liabilities. Croteau recorded two Affidavits of Satisfaction of Debt and Private Bills of Exchange with the clerk, totaling $270,810.38, for the purpose of satisfying a debt owed to the IRS in response to Federal tax liens filed for the 2008 and 2009 tax years. Additionally, Croteau filed fictitious instruments with the Department of the Treasury in an attempt to pay his tax obligations with the use of Private Discharging and Indemnity Bonds. [4]

                Croteau was sentenced to 27 months in prison, followed by three years of supervised release. The Court recommended that Croteau attend an intensive 500 hour drug treatment program during his incarceration and also ordered him to cooperate with the IRS regarding all outstanding taxes, interest, and penalties related to his offenses. Croteau is scheduled to surrender on April 16, 2015. [5]

                • [1] M.D. Fla. Judgment filed Mar. 3, 2015.
                • [2] M.D. Fla. Acceptance of Guilty Plea and Adjudication of Guilt filed July 7, 2014; M.D. Fla. Plea Agr. filed June 27, 2014.
                • [3] M.D. Fla. Plea Agr. filed June 27, 2014.
                • [4] Id.
                • [5] M.D. Fla. Judgment filed Mar. 3, 2015.
                Former IRS Employee Charged in False Claims Scheme

                Former Internal Revenue Service (IRS) employee Modestine Gillette, a/k/a “Cookie,” was indicted in the Eastern District of Pennsylvania on February 18, 2015, for filing false claims, theft of Government property, aggravated identity theft, access device fraud, wire fraud, and filing a false Federal income tax return. Gillette’s daughter, Moniquetta Coats, was also charged with wire fraud in the indictment. [1]

                According to the court documents, Gillette was a seasonal Contact Representative working part-time at the IRS from October 2008 until March 2012. As a Contact Representative, Gillette was responsible for providing administrative and technical assistance to individuals and businesses who contacted the IRS with tax - related questions. In her capacity as an employee, Gillette had access to IRS computerized files containing confidential tax return information for taxpayers, including names, Social Security Numbers (SSNs), and income information. IRS employees are prohibited from accessing tax return information in the absence of an official business reason. Agency rules and regulations also prohibit employees from preparing tax returns for compensation. Gillette had received training and instruction in these legal obligations as a condition of her employment. [2]

                In contradiction of agency rules and regulations, Gillette prepared Federal income tax returns for friends, relatives, and acquaintances in exchange for payment. Between February 2010 and February 2012, Gillette knowingly prepared and filed, or caused to be filed, nine Federal income tax returns which contained false, fictitious, or fraudulent information, and diverted Government funds from those returns for her own benefit. Most of the individuals listed on the fraudulent tax returns had provided Gillette with their true income and expense information and had authorized Gillette to prepare and submit their returns for them. Nevertheless, the tax returns Gillette prepared and submitted to the IRS reported false information, including income not earned by the taxpayers, business expenses not incurred, false dependent claims, and inflated refund requests. The total amount claimed was $34,466. One taxpayer did not authorize Gillette to prepare and submit a return on her behalf; however, Gillette used her identification to submit a fraudulent tax return, request an inflated refund, and direct the inflated refund into a bank account in the name of her (Gillette’s) spouse. [3]

                Gillette knowingly stole and converted to her own use about $12,869 of the inflated refunds. Gillette did so by directing the taxpayers’ refunds, or a portion thereof, into either her own bank account or, more often, into an account in the name of her spouse. [4] Further, since at least June 2010, Gillette was an owner or operator, and was employed by A Unique Learning Experience, LLC, (A Unique Experience) a child daycare business in Philadelphia, Pennsylvania. From about June 2010 through June 2013, Gillette devised a scheme to defraud the United States and the Commonwealth of Pennsylvania Department of Labor by obtaining money through false and fraudulent representations. Specifically, Gillette received benefits to which she was not entitled under the Federal Unemployment Program, the Emergency Unemployment Compensation Program, and the American Recovery and Reinvestment Act of 2009. Gillette used the Internet and telephone to submit applications and file claims falsely representing that she was not engaged in self-employment, was not working for any other employer, and had not worked for another employer in Pennsylvania since her separation from the Federal Government. Gillette failed to disclose that she had been receiving income from A Unique Experience. In 2011 alone, she received direct compensation from A Unique Experience in excess of $35,000. Gillette also failed to disclose that she was an owner and operator of A Unique Experience. As a result of these misrepresentations, Gillette received approximately 66 weeks of payments, totaling about $46,322 in unemployment benefits , to which she was not entitled and which had been fraudulently obtained. [5]

                Gillette’s daughter, Coats, was also an owner, operator, and employee of A Unique Experience during the same time period. Coats also made fraudulent representations regarding her unemployment benefits by failing to disclose that she had been an owner and operator of A Unique Experience and by failing to disclose employment with and income from that business. As a result, Coats received about 16 weeks of unemployment payments to which she was not entitled totaling approximately $10,578 in benefits. [6]

                Additionally, in January 2012, Gillette willfully filed her own 2011 joint Federal income tax return, under penalty of perjury, knowing it was not true and correct. Gillette failed to report as income stolen funds of approximately $5,033, her income of about $35,138 from A Unique Experience, and her spouse’s income from A Unique Experience in the amount of $3,929. [7]

                Trial is set for Gillette and Coats on October 5, 2015. [8]

                • [1] E.D. Pa. Indict. filed Feb. 18, 2015.
                • [2] Id.
                • [3] Id.
                • [4] Id.
                • [5] Id.
                • [6] Id.
                • [7] Id.
                • [8] E.D. Pa. Crim. Docket filed Feb. 18, 2015.
                April 14, 2015

                Three Individuals Sentenced in Conspiracy Intended to Corruptly Impede the IRS and to File False Claims for Refund

                Three Colorado Springs residents [1] were sentenced in the District of Colorado for conspiring to corruptly endeavor to obstruct or impede the due administration of the Internal Revenue laws and file false claims for refunds with the Internal Revenue Service (IRS). [2] A jury unanimously found George Thomas Brokaw, John J. Pawelski, and Mimi M. Vigil guilty of the charges in November 2014. [3] Brokaw and Pawelski were sentenced on February 19, 2015, and Vigil was sentenced on February 25, 2015; imposition of all three judgments was February 10, 2015. [4]

                According to the court documents, from March 2008 through April 2012, Brokaw, Pawelski, and Vigil unlawfully conspired with each other, and other individuals, to corruptly endeavor to obstruct and impede the due administration of the Internal Revenue laws by attempting to reduce their tax liability and thwart the legitimate collection of taxes owed by them and others to the IRS. [5]

                As part of their conspiracy, Brokaw, Pawelski, and Vigil filed a variety of false or fraudulent liens and other documents, falsely claiming that IRS employees who were engaged in legitimate tax collection efforts against them owed money to one or more of the individuals. Brokaw, Pawelski, and Vigil hand-delivered to the IRS copies of Notices and Maritime Liens against two IRS employees, with claims for damages, interest, penalties, and fees, in one case for $1.1 billion and in the other for $2.2 billion. Additionally, Brokaw submitted a “Final Notice of Default and Demand for Payment” in the amount of $72 million to an IRS employee for the employee’s alleged libel of him (Brokaw). [6]

                In furtherance of their conspiracy, the coconspirators also submitted a variety of documents to the IRS purporting to constitute payment of their taxes owed or reduce their tax liabilities, or otherwise attempting to thwart legitimate tax collection. Some of the fictitious documents were mailed directly to IRS revenue officers at their offices or personal residences. [7]

                Brokaw, Pawelski, and Vigil were also convicted of a conspiracy to defraud the United States by submitting false claims for tax refunds to the IRS. [8] In 2008 and 2009, the three filed, or caused to be filed, 11 fraudulent Federal income tax returns with false claims for refunds totaling over $23.6 million. In connection with these false tax returns, the coconspirators submitted false IRS Forms 1099-OID, Original Issue Discount, reporting that financial institutions, lenders, or other entities had withheld and paid over to the IRS interest income from accounts which did not generate such interest income and from which no withholdings were made. The tax returns claimed false refunds based on these fictitious withholdings. Brokaw, Pawelski, Vigil, and others were found to have communicated between themselves via e-mail about the use of the Form 1099-OID to avoid their tax responsibilities and obtain fraudulent tax refunds. [9]

                Following their convictions, Brokaw, Pawelski, and Vigil filed a motion for a new trial, claiming a lack of jurisdiction of the Court. [10] The judge denied their motion, stating the motion made the same “tax-protester style arguments” regarding the power of the Government and the Court to hear the case as have been repeatedly rejected as frivolous and legally meritless. [11]

                Brokaw and Pawelski were each sentenced to 78 months in prison, followed by three years of supervised release, and fined $15,000. Vigil was sentenced to 72 months in prison, three years of supervised release, and 200 hours of community service. Included in the special conditions of supervised release were requirements for all three of the defendants to comply with all legal obligations associated with the IRS and the Colorado Department of Revenue, and the requirement to provide the probation officer copies of all correspondence mailed, or caused to be mailed, to the Department of the Treasury, the IRS, and the Colorado Department of Revenue. [12]

                All three are appealing their sentences. [13]

              • [1] D. Colo. First Superseding Indict. filed Oct. 21, 2013.
              • [2] D. Colo. Judgment George Thomas Brokaw filed Feb. 19, 2015; D. Colo. Judgment John Pawelski filed Feb. 19, 2015; D. Colo. Judgment Mimi Vigil filed Feb. 25, 2015.
              • [3] D. Colo. Verdict Form filed Nov. 7, 2014.
              • [4] D. Colo. Judgment George Thomas Brokaw filed Feb. 19, 2015; D. Colo. Judgment John Pawelski filed Feb. 19, 2015; D. Colo. Judgment Mimi Vigil filed Feb. 25, 2015; D. Colo. Criminal Docket filed Sep. 23, 2013.
              • [5] D. Colo. First Superseding Indict. filed Oct. 21, 2013.
              • [6] Id.
              • [7] Id.
              • [8] D. Colo. Judgment George Thomas Brokaw filed Feb. 19, 2015; D. Colo. Judgment John Pawelski filed Feb. 19, 2015; D. Colo. Judgment Mimi Vigil filed Feb. 25, 2015.
              • [9] D. Colo. First Superseding Indict. filed Oct. 21, 2013.
              • [10] D. Colo. Motion for New Trial filed Nov. 18, 2014.
              • [11] D. Colo. Order Denying Def. Motion for New Trial filed Nov. 24, 2014.
              • [12] D. Colo. Judgment George Thomas Brokaw filed Feb. 19, 2015; D. Colo. Judgment John Pawelski filed Feb. 19, 2015; D. Colo. Judgment Mimi Vigil filed Feb. 25, 2015.
              • [13] D. Colo. Criminal Docket filed Sep. 23, 2013.


              • Bodley Found Guilty of Endeavoring to Obstruct and Impede the Due Administration of the Internal Revenue Laws and Other Offenses

                On February 6, 2015, in the Western District of Wisconsin, a jury found Scott Bodley guilty of all charges included in a 26-count indictment. [1] In May 2013, Bodley was indicted for corruptly endeavoring to obstruct and impede the internal revenue laws, filing fictitious instruments, making false statements, fraud in connection with Federal income tax returns, and attempting to evade tax. [2]

                According to the court documents, Bodley corruptly endeavored to obstruct and impede the due administration of the internal revenue laws through a variety of methods. As part of these attempts to interfere, Bodley sent letters to the Internal Revenue Service (IRS) threatening to file criminal charges or liens against IRS employees, a United States (U.S.) District Court Judge, and a U.S. Department of Justice attorney. In some of the correspondence, Bodley used the alias “Hunter Haplo,” a private attorney at the firm of Hunter, Veritas & Haplo. [3]

                Additionally, Bodley knowingly submitted numerous fraudulent documents to the IRS, including fictitious bonded promissory notes and fictitious money orders ranging in amounts from $300 to $70 million as purported payment of debts for himself and others. Such debts related to Federal tax liabilities, frivolous return penalties, credit card bills, home mortgage bills, traffic fines, and State court judgments. Bodley also willfully mailed to the IRS other packages of false documents, which generally included a Form 1040 tax return, Forms 1099-OID reporting payment of Original Issue Discount income, a Form 1040-V payment voucher, a Form 56 fiduciary notice, and a Form 1096 summary of information returns. All were false documents containing fraudulent statements related to the withholding and payment of Federal income taxes for Bodley and others. [4]

                Further, Bodley failed to file any Federal returns or pay Federal income taxes from 1999 through 2009. He filed false forms with his employers claiming he was exempt from withholding for income tax, thereby attempting to evade and defeat his tax due and owing. [5]

                Bodley’s sentencing is scheduled for May 1, 2015. [6]

              • [1] W.D. Wis. Verdict filed Feb. 6, 2015.
              • [2] W.D. Wis. Indictment filed May 16, 2013.
              • [3] Id.
              • [4] Id.
              • [5] Id.
              • [6] W.D. Wis. Criminal Docket filed May 16, 2013.


              • IRS Employee Arrested for Fraudulent Tax Returns

                Internal Revenue Service (IRS) employee Yolanda Castro was arrested on February 27, 2015, [1] for making false Federal tax returns. Castro was indicted in the Eastern District of California the previous day, February 26, 2015, on charges of making a fraudulent tax return by an employee of the United States, aiding and assisting fraud and false statements, and false statements to a Government agency. [2]

                According to court documents, Castro has been employed by the IRS in Fresno, California, for approximately 20 years as a tax examiner and, most recently, as a contact representative responsible for responding to taxpayers’ inquiries and making adjustments to taxpayers’ accounts. [3]

                Between 2007 and 2013, Castro prepared and filed, or caused to be filed, numerous fraudulent Federal income tax returns for herself, her family members, and others, on which she knowingly placed false information for purported child care services, education expenses, business expenses, and casualty losses. As a result of her fraudulent conduct, Castro defrauded the United States of approximately $37,387. [4]

                Specifically, as part of her fraudulent return scheme, Castro claimed education expenses and child care expenses on her own Federal tax returns that she knew she did not incur. Further, in connection with an audit of one of these false returns, Castro knowingly provided the IRS auditor with fabricated receipts for college textbooks and child care services, and made false statements to the auditor about the textbook purchases. She did so to deceive the auditor and conceal the fact that she had fraudulently claimed the education and child care credits. [5]

                Additionally, Castro willfully aided and assisted in the preparation of six Federal returns for others, in which she falsely identified purported child care providers and fraudulently claimed $17,800 in child care services. The fraudulent information Castro included in these tax returns yielded fraudulent tax deductions and credits to which Castro and the taxpayers whose returns she prepared were not eligible." [6] In some cases, Castro had access to the personal identifying information of the purported child care providers because she had prepared those taxpayers’ returns in the past. However, on at least one occasion, Castro illicitly accessed IRS databases to review the purported provider’s personal identifying information. Additional court appearances are pending. [7]

              • [1] E.D. Cal. Executed Arrest Warrant filed Feb. 27, 2015.
              • [2] E.D. Cal. Indict. filed Feb. 26, 2015.
              • [3] Id.
              • [4] Id.
              • [5] Id.
              • [6] Id.
              • [7] E.D. Cal. Crim. Docket filed Feb. 26, 2015.


              • Massachusetts Chiropractor Sentenced for Bribery of a Public Official

                Chiropractor Stephen Jacobs was sentenced for Bribery of a Public Official on January 13, 2015, in the District of Massachusetts. [1] He pled guilty to the offense in October 2014. [2]

                According to court documents, Jacobs unequivocally admitted that he knowingly and intentionally committed the crime, [3] Bribery of a Public Official. In 2013, an Internal Revenue agent was assigned an examination of Jacobs’ U.S. Federal Income Tax Form 1040 for 2011. When the assigned revenue agent met with Jacobs, Jacobs advised the agent that he had made $5,000 payments to two different women because he touched them inappropriately during medical treatment sessions. The revenue agent told Jacobs that these payments were not allowable deductions. Jacobs became agitated and, in essence, asked if there was anything the revenue agent could do for him. [4]

                In a subsequent meeting, Jacobs became upset when the revenue agent requested documentation for personal and vehicle expenses. Jacobs asked if the revenue agent wanted to be paid and offered the revenue agent $5,000 to terminate the examination. Later the same day, Jacobs paid the revenue agent $5,000 in cash for the purpose of terminating the examination. The revenue agent provided Jacobs with a “no change” audit letter and examination reports reflecting no tax due for 2011 and a 13 cent refund for 2012. [5]

                As part of the plea agreement, Jacobs agreed to cooperate with the examination and collection division of the IRS, file accurate and complete tax returns for those years for which returns were not filed or for which inaccurate returns were filed, and make a good faith effort to pay any tax liabilities. [6]

                Jacobs was sentenced to nine months in prison, followed by two years of supervised release. He was further ordered to pay a $10,000 fine and participate in a mental health treatment program. [7]

                The presiding judge stated, in part, “Bribery is one of the most severe crimes that this court confronts. …it cuts to the very heart of our government. Bribery is unacceptable. Bribery is a crime that has an evil component of its very own. And it is necessary…that those who commit bribery go to prison.” [8]

              • [1] D. Mass. Judgment filed Jan. 15, 2015.
              • [2] D. Mass. Plea Agr. filed Oct. 9, 2014.
              • [3] Id.
              • [4] D. Mass. Crim. Compl. filed Feb. 6, 2014.
              • [5] Id.
              • [6] D. Mass. Plea Agr. filed Oct. 9, 2014.
              • [7] D. Mass. Judgment filed Jan. 15, 2015.
              • [8] D. Mass. Judge’s Findings filed Jan. 15, 2015.


              • Two Individuals Sentenced for Role in Telephone Impersonation Scam in Florida

                On February 4, 2015, in the Southern District of Florida, Dorothy John and Sohail Sheikh were sentenced for Use of Unauthorized Access Devices. [1] Both John and Sheikh pled guilty to the offense in November 2014. [2]

                According to court documents, John and Sheikh knowingly, and with intent to defraud, trafficked in and used unauthorized access devices to obtain items of value. [3] Specifically, they were part of a pervasive scam wherein persons working in call centers in India contact American citizens and pretend to be from official United States (U.S.) Government or judicial agencies, including the Internal Revenue Service (IRS) and the U.S. Attorney’s Office. The scammers falsely tell the victims they have a tax lien or have committed a crime and have to pay a sum of money. Victims are instructed to make their respective payments to the purported Government agencies via Moneypak, a pre-paid money card. On occasion, the victims have been provided with a tracking number, a confirmation number, and a legitimate Government address. [4]

                Once the U.S. citizen pays money onto a Moneypak, the scammers transfer the money onto a pre-paid debit card. Scammers employ runners throughout the U.S. to withdraw money from the pre-paid debit cards via money order purchases. The runners subsequently deposit the money orders into various bank accounts for the benefit of the scammers, typically for a 2% fee. [5]

                Records for one of these fraudulent pre-paid debit cards led investigators to information that identified John and Sheikh as individuals who frequently made money order purchases at a Miami, Florida, Walmart using pre-paid debit cards. [6] Continued investigation revealed John and Sheikh were runners connected to the scam. The two would purchase prepaid debit cards from pharmacies, dollar stores, and other locations; the cards would subsequently be loaded with fraudulently obtained funds. John and Sheikh would then use the pre-paid debit cards to purchase money orders at supermarkets and other locations and deposit the money orders into various bank accounts. The investigation revealed John and Sheikh purchased a total of $37,000 in money orders from pre-paid debit cards in June and July 2014. [7]

                When interviewed, John estimated she had used prepaid debit cards to purchase approximately $5,000 in money orders per day, six days a week, or roughly $900,000 in money order purchases between November 2013 and July 2014. [8]

                John and Sheikh were both sentenced to three years of supervised probation and were ordered to pay $150 in restitution. John’s sentence included 60 days of home detention and monitoring, Sheikh’s included six months of home detention and monitoring. [9]

              • [1] S.D. Fla. Judgments: Dorothy John, Sohail Sheikh filed Feb. 4, 2015.
              • [2] S.D. Fla. Plea Agreement Sheikh Sohail filed Nov. 24, 2014; S.D. Fla. Plea Agreement Dorothy John filed Nov. 25, 2014.
              • [3] S.D. Fla. Superseding Info. filed Oct. 9, 2014.
              • [4] S.D. Fla. Crim. Compl. filed Sept. 5, 2014.
              • [5] S.D. Fla. Factual Proffers: Dorothy John, Sohail Sheikh filed Nov. 24, 2014.
              • [6] S.D. Fla. Crim. Compl. filed Sept. 5, 2014.
              • [7] S.D. Fla. Factual Proffers: Dorothy John, Sohail Sheikh filed Nov. 24, 2014.
              • [8] S.D. Fla. Crim. Compl. filed Sept. 5, 2014.
              • [9] S.D. Fla. Judgments: Dorothy John, Sohail Sheikh filed Feb. 4, 2015.


              • March 17, 2015

                Two Missouri Men Arrested for Attempts to Impede the IRS, Conspiracy to Defraud the Government, and False Tax Returns

                On December 12, 2014, in the Western District of Missouri, Wesley Delport and Alton Vaughn, Sr. were arrested for Obstructing and Impeding the Administration of the Internal Revenue Laws, Conspiracy to Defraud the United States (U.S.), and False Income Tax Returns. [1] The men were charged in a six-count Indictment on December 9, 2014. [2]

                According to court documents, Delport, owner of Abundant Health & Wellness, a holistic health clinic in Springfield, Missouri, and Vaughn, a self-employed tax preparer and representative, knowingly conspired with each other to defraud the U.S. by impeding and obstructing the lawful functions of the Internal Revenue Service (IRS).

                To impede a criminal investigation, Delport and Vaughn falsely reported to the Treasury Inspector General for Tax Administration (TIGTA), allegations of wrongdoing by two IRS employees, claiming that an IRS Revenue Officer and an IRS Special Agent had coerced, intimidated, and threatened Delport. They further stated Delport’s original income records, which would prove he owed no taxes, were taken by the IRS Revenue Officer. They knew this to be untrue and knew the specified Revenue Officer was deceased.

                Beginning as early as May 2002, and continuing through September 2014, Delport corruptly endeavored to obstruct and impede the due administration of the Internal Revenue laws through a variety of acts and fraudulent means. Delport received approximately $4.7 million in gross receipts for Abundant Health & Wellness from 2004 through 2013, which he did not report to the IRS as required by law and did not pay taxes on. He transferred business funds to other accounts to pay personal expenses and registered entities in family members’ names, among other things, in his efforts to avoid, delay, and otherwise impede the IRS.

                Delport submitted multiple documents to the IRS with lengthy and frivolous arguments about the legality of taxes and claimed he was a "Sovereign National," and the IRS was "a bogus agency not of government." In additional submissions, Delport made claims that he "is a NON-TAXPAYER," and is part of the Cherokee Republic of North America, not subject to taxation because of Indian treaties entered into by the U.S., along with other claims and frivolous statements.

                Vaughn, also known as "Bishop" Vaughn, advised and colluded with Delport on a number of activities from at least 2009 through September 2014, designed to obstruct the IRS’ efforts, including the preparation of Federal income tax returns which were materially false and contained frivolous statements about an IRS employee.

                Delport and Vaughn refused to comply with IRS requests and summonses, as well as Grand Jury subpoenas for records, making the same statement about the Revenue Officer possessing the records.

                Vaughn provided false testimony to the Grand Jury about a meeting with the Revenue Officer and the Special Agent and stated the Revenue Officer verified he had been to Delport’s business to collect the documents. Vaughn knew the Revenue Officer was not present and the claims were fictitious.

                Delport and Vaughn further attempted to impede the Grand Jury by counseling an employee of Abundant Health & Wellness to refuse to testify and providing her with a written statement to read in lieu of her testimony.

                In a consensually monitored conversation, Vaughn advised another witness to stick to the false story they had concocted regarding the Revenue Officer having the tax records and stated there was no way the IRS could prove their story was false because the Revenue Officer was dead and could not provide testimony to the contrary. [3]

                The investigation was conducted jointly by agents of the Treasury Inspector General for Tax Administration and IRS Criminal Investigation. Additional legal actions are pending for both defendants.

              • [1] W.D. Mo. Criminal Docket filed Dec. 9, 2014.
              • [2] W.D. Mo. Indictment filed Dec. 9, 2014.
              • [3] W.D. Mo. Indictment filed Dec. 9, 2014.


              • California Couple Sentenced for Interference With the IRS and False Claims

                On January 13, 2015, in the Southern District of California, James Francis Murphy and Denine Christine Murphy were sentenced for Corrupt Interference with the Administration of the Internal Revenue Laws and False Claims. [1] James Murphy was also sentenced on four counts of Fictitious Financial Obligations. [2] The two were found guilty of the offenses in a June 2014 jury trial. [3]

                According to court documents, James and Denine Murphy, husband and wife, corruptly endeavored to obstruct and impede the due administration of the internal revenue laws from at least 2000 to 2012. James Murphy was an osteopathic physician licensed in California and Nebraska, operating a for-profit medical practice in Encinitas, California and in Omaha, Nebraska. [4]

                The Murphys attempted to interfere with the due administration of the internal revenue laws by sending false written accusations of criminal conduct to an IRS employee in order to intimidate the employee from performing his official duties, and presenting numerous Notices Concerning Fiduciary Relationship to the IRS that falsely identified the Secretary of the Treasury as their fiduciary and bore the forged signature of the Secretary. [5]

                Additionally, the Murphys filed false tax returns and fictitious Forms 1099-OID, claiming refunds totaling over $1.2 million to which they were not entitled. They attempted to hide income from James Murphy’s medical practice and unlawfully evade Federal income taxes on such. James Murphy presented several fictitious financial instruments to the IRS, totaling over $3.4 million, purporting to be actual securities for payment of their income taxes due. [6]

                James Murphy was sentenced to 48 months in prison, followed by three years of supervised probation, and ordered to pay restitution to the IRS in the amount of $447,528. [7] Denine Murphy was sentenced to three years of probation, including 12 months of home incarceration and monitoring, and was ordered to pay $178,246 in restitution to the IRS. [8] James Murphy is scheduled to surrender for service to the Bureau of Prisons by February 24, 2015. [9] He is appealing the final judgment. [10]

              • [1] S.D. Cal. Judgment for James Francis Murphy filed Jan. 16, 2015; S.D. Cal. Judgment for Denine Christine Murphy filed Jan. 16, 2015.
              • [2] S.D. Cal. Judgment for James Francis Murphy filed Jan. 16, 2015.
              • [3] S.D. Cal. Verdict filed June 20, 2014.
              • [4] S.D. Cal. Indict. filed June 21, 2012.
              • [5] S.D. Cal. Indict. filed June 21, 2012.
              • [6] S.D. Cal. Indict. filed June 21, 2012.
              • [7] S.D. Cal. Judgment for James Francis Murphy filed Jan. 16, 2015.
              • [8] S.D. Cal. Judgment for Denine Christine Murphy filed Jan. 16, 2015.
              • [9] S.D. Cal. Judgment for James Francis Murphy filed Jan. 16, 2015.
              • [10] S.D. Cal. Notice of Appeal filed Jan. 23, 2015.


              • Visalia, California Woman Sentenced for Scheme Using Stolen IRS Documents

                On January 20, 2015, in the Eastern District of California, Rebekah Joy Root was sentenced for aggravated identity theft, making a false claim for a tax refund, and wire fraud. [1] Root was charged with the offenses in a 14-count indictment in October 2013, [2] and entered into a plea agreement with the Government in August 2014. [3]

                According to court documents, Root, a resident of Visalia, California, knowingly devised, participated in, and executed a scheme to defraud the Internal Revenue Service (IRS) and obtain funds from it by means of materially false and fraudulent representations. [4]

                As part of the scheme, Root obtained tax documents from mail packages that she knew had been stolen from an IRS office in Visalia. The packages contained a variety of tax documents, including 15 tax returns, and eight tax remittance payments totaling nearly $11,000. Also included in the stolen mail were 22 Forms W-7, Application for IRS Individual Tax Identification Number (ITIN). [5]

                Root then used the stolen tax documents in order to perpetrate identity theft and a scheme to defraud. Root attempted to file tax returns via the Internet and obtain tax refunds using the assumed identities, including Social Security Numbers, of six individuals. Root sought approximately $50,507 in fraudulent tax refunds from the IRS, regardless of whether the individuals were due a tax refund.

                Root was sentenced to 45-months imprisonment, followed by three years of supervised release. The court also recommended she attend a 500-hour Bureau of Prisons Substance Abuse Treatment Program. [6] A restitution hearing was held on January 30, 2015, and Root was ordered to pay $12,080.64 in restitution to victims. [7] Root is scheduled to surrender for service of her sentence on February 23, 2015. [8]

              • [1] E.D. Cal. Judgment filed Jan. 22, 2015.
              • [2] E.D. Cal. Indict. filed Oct. 10, 2013.
              • [3] E.D. Cal. Plea Agreement filed Aug. 8, 2014.
              • [4] E.D. Cal. Indict. filed Oct. 10, 2013.
              • [5] E.D. Cal. Plea Agreement filed Aug. 8, 2014.
              • [6] E.D. Cal. Judgment filed Jan. 22, 2015.
              • [7] E.D. Cal. Stipulation and Order Regarding Restitution filed Jan. 30, 2015.
              • [8] E.D. Cal. Judgment filed Jan. 22, 2015.


              • 10 Former IRS Employees Sentenced in Kansas City for Theft of Government Property

                Ten former Internal Revenue Service (IRS) employees were sentenced in the Western District of Missouri between January 26, 2015, and January 28, 2015, for the theft of Government property stemming from unemployment benefits fraud. [1]

                The former IRS employees, Michelle Glavin, Priscillia Smith, Christopher Bair, Tiffani Harding, Christopher Castillo, Brenda Jones, Jesse Love, Leisa Hunsel, Shalonda Bradley, and Berneta Weedin, were indicted on December 10, 2013, for theft of Government property and bank fraud related to an unemployment benefits scheme. [2]

                According to the court documents, the Missouri Division of Employment Security (MODES) administered unemployment benefits in Missouri on behalf of the Federal Government, and the approved benefit funds for the individuals were then transferred to Central Bank. Between January 2008 and February 2013, the above-named defendants knowingly and willfully stole money belonging to the United States and executed a scheme to defraud Central Bank by fraudulently obtaining unemployment benefits. [3]

                The individuals were required to certify weekly, via the Internet or telephone, any work and earnings in order for MODES to determine the validity of continued benefits. All 10 of the defendants were employed at the IRS while claiming unemployment benefits through MODES, resulting in the fraudulent payment of benefits in amounts ranging from $6,127 to $21,348, with an aggregate total of $112,609. The false representations in connection with their weekly unemployment claims were further extended to obtain debit cards and/or financial deposits and negotiable instruments with funds transferred from MODES to Central Bank. [4]

                The defendants pled guilty to theft of government property i.e., Extended Unemployment Compensation Account and American Recovery and Reinvestment benefits. [5] Nine of the 10 individuals were sentenced to five years of Federal probation; the tenth received three years of probation. All were ordered to pay restitution, which totaled over $100,000. [6]

              • [1]W.D. Mo. Judgments: Christopher Bair, Michelle Glavin filed Jan. 26, 2015; W.D. Mo. Judgments: Priscillia Smith, Tiffani Harding, Christopher Castillo, Brenda Jones, Jesse Love, Leisa Hunsel, Shalonda Bradley, and Berneta Weedin filed Jan. 28, 2015.
              • [2]W.D. Mo. Indict. filed Dec. 10, 2013.
              • [3]Id.
              • [4]Id.
              • [5]W.D. Mo. Plea Agr. Berneta Weedin filed May 27, 2014; W.D. Mo. Plea Agr.: Shalonda Bradley, Christopher Castillo, Michelle Glavin, Tiffani Harding, Jesse Love filed May 28, 2014; W.D. Mo. Plea Agr.: Brenda Jones, Priscillia Smith filed Jun. 4, 2014; W.D. Mo. Plea Agr. Christopher Bair filed Jun. 24, 2014; W.D. Mo. Plea Agr. Leisa Hunsel filed Aug. 15, 2014.
              • [6]W.D. Mo. Judgments: Christopher Bair, Michelle Glavin filed Jan. 26, 2015; W.D. Mo. Judgments: Priscillia Smith, Tiffani Harding, Christopher Castillo, Brenda Jones, Jesse Love, Leisa Hunsel, Shalonda Bradley, and Berneta Weedin filed Jan. 28, 2015.


              • February 19, 2015

                Ohio Accountant Sentenced for Wire Fraud, Engaging in Monetary Transactions in Property Derived from Specified Unlawful Activity, Mail Fraud, and Attempting to Interfere with Administration of the Internal Revenue Laws

                On December 16, 2014, in the Eastern District of Pennsylvania, accountant Andrew Zelenkofske was sentenced for attempting to interfere with the administration of the Internal Revenue laws, wire fraud, mail fraud, and engaging in monetary transactions in property derived from specified unlawful activity.[1]

                Zelenkofske was charged with the offenses on January 9, 2014, [2] and June 3, 2014, [3] in associated cases. According to court documents, from approximately 2009 through 2013, Zelenkofske engaged in various schemes to defraud individuals to obtain money and property by means of false and fraudulent pretenses and representations, and to obstruct the due administration of the Internal Revenue laws. [4]

                Zelenkofske, a resident of Ohio, provided tax and accounting services to individuals, including the preparation of Federal and State income tax returns. Some of Zelenkofske’s clients were Pennsylvania residents. Zelenkofske had power of attorney to represent a Pennsylvania couple before the Internal Revenue Service (IRS). After the IRS issued a levy to a financial firm in the amount of $91,193.53 to collect taxes owed by the couple, Zelenkofske corruptly endeavored to obstruct and impede the due administration of the internal revenue laws by transmitting, via e-mail, a falsified IRS Form 668-D, Release of Levy, which purported to remove the levy from the couple’s account. Zelenkofske did so knowing the IRS had not authorized the release of the levy from that account. [5]

                Prior to this, around April 2011, Zelenkofske devised a scheme to defraud another Pennsylvania victim, a senior citizen with little experience managing financial matters. Zelenkofske falsely represented to the victim that the victim owed the IRS a substantial amount of taxes, and directed the victim to send him multiple payments for taxes purportedly owed by the victim. Zelenkofske kept all of the money received from the victim and used it for his own personal and business expenses, defrauding the victim of approximately $237,050. [6]

                Zelenkofske also identified start-up businesses as investments for his clients and business associates. In 2003, Zelenkofske recruited four individuals to invest in a start-up retailer in Philadelphia, Pennsylvania called Five Below, Inc. Zelenkofske and the other four individuals each contributed $40,000 towards the investment. In 2010, Five Below issued a dividend check in the amount of $704,556.58 to the holding company. Zelenkofske received and deposited the check as the managing member of the holding company, but concealed the payment from the victims, misrepresenting to the victims that he had not receive it. When confronted about the dividend payment, Zelenkofske admitted its receipt and entered into an agreement to repay the victims approximately $563,520. He repaid a portion of the debt, defrauding the victims defrauded of approximately $137,254. [7]

                In another scheme, Zelenkofske solicited $650,000 from clients, purportedly for the purpose of investing in a start-up biotechnology company. Rather than using the funds as he represented, Zelenkofske used the money to finance his own personal and business expenses and to make a $200,000 investment in the start-up company in his own name. [8]

                Zelenkofske was sentenced to 36 months in prison, followed by three years of supervised release, and was further ordered to pay $987,050.00 in restitution to victims. Zelenkofske is scheduled to surrender to the Bureau of Prisons on February 27, 2015. [9]

              • [1]E.D. Pa. Judg. filed Dec. 16, 2014.
              • [2]E.D. Pa. Indict. filed Jan. 9, 2014.
              • [3]E.D. Pa. Info. filed June 3, 2014.
              • [4]E.D. Pa. Indict. filed Jan. 9, 2014; E.D. Pa. Info. filed June 3, 2014.
              • [5]Id.
              • [6]E.D. Pa. Info. filed June 3, 2014.
              • [7]E.D. Pa. Info. filed June 3, 2014.
              • [8]E.D. Pa. Indict. filed Jan. 9, 2014.
              • [9]E.D. Pa. Judg. filed Dec. 16, 2014.


              • Lora Lewis Sentenced for Filing False Tax Returns

                On December 4, 2014, in the Eastern District of Pennsylvania, Lora Lewis [1] was sentenced for filing false Federal tax returns. [2] Lewis pled guilty to the charge in June 2014. [3]

                According to court documents, Lewis, while employed as an IRS contact representative in Philadelphia, Pennsylvania, made various false claims on her tax returns for Tax Years 2007 through 2011. During Tax Years 2007 through 2011, Lewis received unemployment compensation while employed full time at the IRS, but did not report such compensation on her tax returns. During the same tax years, Lewis filed her returns claiming "Head of Household" status, thereby increasing her standard and other deductions by $16,059 in total. She also claimed Earned Income Tax Credits to which she was not entitled each year in the amount of $11,961. Other facts related to the offense include the following: • In Tax Year 2008, Lewis claimed the $7,500 First Time Homebuyers Credit, even though she did not purchase a home. • In Tax Years 2009 through 2011, Lewis claimed education credits to which she was not entitled, totaling $5,600. • In Tax years 2008, 2010, and 2011, Lewis received distributions from her Thrift Savings Plan in the amount of $8,144, but did not report the distributions as income and repay such funds. • In Tax Years 2008 through 2011, Lewis claimed Individual Retirement Account (IRA) deductions in the amount of $5,000, thereby lowering her taxable income each year, knowing that she did not have an IRA. • In 2009, Lewis claimed on her income tax return that she purchased an automobile and as a result decreased her standard deduction by $4,600, thereby lowering her taxable income, although she did not purchase a vehicle. [4]

                Lewis was sentenced to three years of supervised probation and ordered to pay $59,847.03 in restitution to the IRS. Lewis must fully cooperate with the IRS by filing all delinquent or amended returns, timely filing future returns that come due during the period of supervised release, properly reporting all taxable income and claiming only allowable expenses on those returns, and paying all taxes, interest, and penalties due. She is further prohibited from engaging in any form of gambling.
              • [1]E.D. Pa. Info. filed Apr. 15, 2014.
              • [2]E.D. Pa. Judgment filed Dec. 4, 2014.
              • [3]E.D. Pa. Crim. Docket filed Apr. 15, 2014.
              • [4]E.D. Pa. Info. filed Apr. 15, 2014.


              • January 12, 2015

                Three Individuals Found Guilty of Conspiracy to Corruptly Endeavor to Obstruct or Impede the Due Administration of the Internal Revenue Laws and Conspiracy to File False Claims for Refunds with the IRS and Making False Claims for Refunds

                On November 7, 2014, in the District of Colorado, a jury found three Colorado Springs residents guilty of a conspiracy to corruptly endeavor to obstruct or impede the due administration of the Internal Revenue Laws and file false claims for refunds with the Internal Revenue Service (IRS). The jury unanimously found George Thomas Brokaw, John J. Pawelski, and Mimi M. Vigil guilty of the charges laid out in the October 2013 First Superseding Indictment. [1]

                According to the court documents, from March 2008 through April 2012, Brokaw, Pawelski, and Vigil unlawfully conspired with each other, and other individuals, to corruptly endeavor to obstruct and impede the due administration of the Internal Revenue laws by attempting to reduce their tax liability and thwart the legitimate collection of taxes owed to the IRS. [2]

                As part of their conspiracy to obstruct or impede with the due administration of the Internal Revenue laws, Brokaw, Pawelski, and Vigil filed a variety of false or fraudulent liens and other documents, falsely claiming that IRS employees who were engaged in legitimate tax collection efforts against them owed money to one or more of the individuals. Brokaw, Pawelski, and Vigil hand-delivered to the IRS copies of Notices and Maritime Liens against two IRS employees, with claims for damages, interest, penalties, and fees ranging between $1.1 billion and $2.2 billion, respectively. Additionally, Brokaw submitted a "Final Notice of Default and Demand for Payment" in the amount of $72 million to an IRS employee for the employee’s alleged libel of him (Brokaw). [3]

                In furtherance of their conspiracy, the coconspirators also submitted a variety of documents to the IRS purporting to constitute payment of their taxes owed or reduce their tax liabilities, or otherwise attempting to hinder legitimate tax collection. Some of the fictitious documents were mailed directly to IRS revenue officers at their offices or personal residences. [4]

                Brokaw, Pawelski, and Vigil were also convicted of a conspiracy to defraud the United States by submitting false claims for tax refunds to the IRS. In 2008 and 2009, the three filed, or caused to be filed, 11 fraudulent Federal income tax returns with false claims for refunds totaling over $23.6 million. In connection with these false tax returns, the coconspirators submitted false IRS Forms 1099-OID (Original Issue Discount), reporting that financial institutions, lenders, or other entities had withheld and paid over to the IRS interest income from accounts which did not generate such interest income and from which no withholdings were made. The tax returns claimed false refunds based on these fictitious withholdings. Brokaw, Pawelski, Vigil, and others were found to have communicated between themselves via e-mail about the use of the Form 1099-OID to avoid their tax responsibilities and obtain fraudulent tax refunds. [5]

                Brokaw, Pawelski, and Vigil filed a motion for a new trial, claiming a lack of jurisdiction of the Court. [6] The judge denied their motion on November 24, 2014, stating the motion made the same "tax-protester style arguments" regarding the power of the Government and the Court to hear the case as has been repeatedly rejected as frivolous and legally meritless. [7]

                Sentencing is scheduled for January 28, 2015. [8]

              • [1] D. Colo. Verdict Form filed Nov. 7, 2014; D. Colo. First Superseding Indict. filed Oct. 21, 2013.
              • [2] D. Colo. First Superseding Indict. filed Oct. 21, 2013.
              • [3] Id.
              • [4] Id.
              • [5] D. Colo. First Superseding Indict. filed Oct. 21, 2013.
              • [6] D. Colo. Motion for New Trial filed Nov. 18, 2014.
              • [7] D. Colo. Order Denying Def. Motion for New Trial filed Nov. 24, 2014.
              • [8] D. Colo. Crim. Docket filed Sep. 23, 2013.


              • California Florist Sentenced for Retaliating Against Federal Officers, Corrupt Endeavor to Obstruct or Impede with the Due Administration of the Internal Revenue Laws, and Contempt of Court

                On November 20, 2014, in the Eastern District of California, James O. Molen was sentenced for retaliating against Federal officers, corruptly impeding the due administration of the Internal Revenue laws, and contempt of court. [1] Molen was found guilty of all counts in a May 2014 jury trial, and was remanded to custody at the conclusion of the trial. [2]

                According to court documents, from 2003 to 2010, Molen, a resident of Chico, California, corruptly endeavored to impede the due administration of the Internal Revenue laws by recording false liens against Federal judges and Executive Branch employees, making false and frivolous statements to the Internal Revenue Service (IRS), and offering a fictitious instrument as payment to the IRS, among other things. [3]

                Molen retaliated against two IRS Revenue Officers by filing false liens and encumbrances against their personal property in public records. Molen did so because of the Revenue Officers’ performance of their official duties, knowing the liens and encumbrances were false and contained at least one fictitious statement and representation. Additionally, Molen filed Uniform Commercial Code Financing Statements with the California Secretary of State, purporting to secure debts owed by the same two IRS Revenue Officers. [4]

                The contempt of court charges against Molen stemmed from a 2007 civil judgment, wherein he was permanently forbidden from filing any documents or instruments that purported to create a nonconsensual lien or encumbrance against a Government employee. [5] Molen knowingly and willfully disobeyed this order by filing documents against the IRS revenue officers in February 2010. [6]

                Molen was sentenced to 36-months imprisonment, followed by three years of supervised probation. Molen was also fined $10,000, and further ordered to cooperate with the IRS in the determination and payment of any taxes owed. [7]

                A Notice of Appeal was filed on December 2, 2014. [8] In a handwritten document, signed by Molen on December 7, 2014, he declared, among other things, the Court’s lack of jurisdiction over him as a "California State Citizen, and not a U.S. citizen, or a 14th Amendment citizen." [9]

              • [1] E.D. Cal. Judg. filed Dec. 5, 2014.
              • [2] E.D. Cal. Verdict filed May 27, 2014.
              • [3] E.D. Cal. Indict. filed Jul. 12, 2012.
              • [4] Id.
              • [5] E.D. Cal. Order filed Feb. 26, 2007.
              • [6] E.D. Cal. Indict. filed Jul. 12, 2012.
              • [7] E.D. Cal. Judg. filed Dec. 5, 2014.
              • [8] E.D. Cal. Notice of New Appeal filed Dec. 9, 2014.
              • [9] E.D. Cal. Reply to U.S. Opposition to Defendant’s Frivolous Post-Trial Filings filed Dec. 9, 2014.


              • Woman Sentenced for Impersonating an IRS Employee

                On October 16, 2014, in the Western District of Arkansas, Noel Porter was sentenced for Impersonating an Officer or Employee of the United States. [1] Porter pled guilty to the offense in May 2014. [2]

                According to the court documents, Porter falsely assumed and pretended to be an officer and employee of the Internal Revenue Service (IRS) on numerous occasions. Porter prepared a letter on purported IRS, Department of the Treasury, letterhead addressed to the North Central Arkansas Chamber Foundation in Mountain Home, Arkansas. The letter discussed the chamber’s application for 501(c)(3) status, and stated the IRS had approved the application. The letter added that the chamber was "exempt from Federal income tax under Section 501(c)(3) of the Internal Revenue Code…." and was signed by a "Sally Davenport," who is an actual IRS employee. [3]

                Porter subsequently prepared another letter, also on purported IRS letterhead and addressed to the North Central Arkansas Chamber Foundation. This letter again discussed the chamber’s recent application for section 501(c)(3) status, but was signed by Exempt Organization Specialist "Sally Irby." Irby is a fictitious person. [4]

                Porter admitted in front of numerous witnesses during a meeting at her place of employment that she had prepared and signed the two letters. [5] Porter was sentenced to one year of supervised probation plus restitution in the amount of $5,500. [6]

              • [1] W.D. Ark. Judg. filed Oct. 16, 2014.
              • [2] W.D. Ark. Plea Agr. filed May 29, 2014.
              • [3] Id.
              • [4] Id.
              • [5] Id.
              • [6] W.D. Ark. Judg. filed Oct. 16, 2014.



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