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December 15, 2015

Canadian Man Extradited from Hungary for His Role in U.S. Fraud Scheme

On October 23, 2015, after being extradited from Hungary, [1] David Chityal, a/k/a David Solomon was arrested at Dulles International Airport in connection with a mail fraud, wire fraud, and money laundering conspiracy. [2] Chityal was indicted for these offenses and others in the Eastern District of Virginia in March 2012, [3] and an arrest warrant was issued at that time. [4]

According to the court documents, Chityal, a Canadian citizen and resident, knowingly and intentionally conspired with others to devise a scheme to defraud and to obtain money and property by means of materially false and fraudulent representations. The purpose of the conspiracy was to secretly obtain tax refunds in excess of $2 million for the conspirators’ personal enrichment when, in fact, the rights to receive such refunds had been transferred to a bankruptcy estate. [5]

Prior to meeting Chityal, his coconspirator (hereafter Conspirator 1) had been sentenced to 100 years in prison for his role as the mastermind of a fraud scheme and was ordered to pay over $128 million in restitution to victims. In part, the funds obtained by the bankruptcy estate, including tax refunds, were to be credited against the amounts owed for criminal restitution. The court-appointed trustee was tasked with recovering assets, and Conspirator 1 signed an Internal Revenue Service (IRS) Power of Attorney (POA) authorizing the bankruptcy estate’s accountant to represent him before the IRS. Returns filed by the accountant on Conspirator 1’s behalf claimed over $2 million in refunds. [6]

Chityal and Conspirator 1 met while incarcerated at the Beaumont Federal Correctional Complex in Beaumont, Texas. When Chityal was released from Beaumont Prison in 2010, he was deported to Canada and assumed the name “David Solomon”; however, he and Conspirator 1 continued regular contact by telephone as they developed their conspiracy to keep the tax refunds from the bankruptcy estate. [7]

While still incarcerated, Conspirator 1, together with Chityal, sought to retain a prestigious New York lawyer to represent him in his criminal appeal and claimed he was due a large tax refund with which he would be able to pay the attorney’s retainer fee. In fact, Chityal and Conspirator 1 knew at that time that the refund belonged to the bankruptcy estate. [8]

Conspirator 1 signed a new IRS POA making the New York attorney his representative before the IRS and revoked the previous court- appointed POA for the bankruptcy estate. The New York attorney exercised his POA and made repeated inquiries of the IRS about the status of Conspirator 1’s anticipated tax refund checks. [9]

In their contacts with each other, Chityal and Conspirator 1 made it clear that they knew the bankruptcy estate rightfully owned the tax refunds and discussed changing the POA from the New York attorney to someone else, because Conspirator 1 was afraid the refunds would be seized by the Government. They talked about setting up an off-shore account and intended to place the tax refunds in the account to shield their ownership and reduce suspicion about the origin of the funds. They remained in frequent contact with the attorney, with Chityal representing himself as “David Solomon” and not revealing his true identity. The conspirators repeatedly requested the attorney to provide them with information about the status of the refund checks. [10]

Chityal then hired another attorney, a Canadian lawyer, and Conspirator 1 instructed the New York attorney that the tax refund checks should be mailed to the Canadian attorney once they were obtained. Chityal and Conspirator 1 directed the New York attorney on several occasions to contact the circuit court regarding Conspirator 1’s criminal appeal, and Chityal provided a number of false statements regarding his relationship with Conspirator 1, the source of the attorney’s retainer fees, and the need to delay court-established deadlines. [11]

When the New York attorney received the two tax refund checks totaling over $2.3 million, he sent the checks to the Canadian attorney, as requested. The Canadian attorney, as instructed, met with Conspirator 1 at the Beaumont Prison for endorsement of the checks. He was directed to take the negotiated checks to the Turks and Caicos Islands, deposit them in a trust account, and, among other things, pay the New York attorney $550,000 for his retainer and costs. The Canadian attorney left the prison and flew to Turks and Caicos. [12]

When the bankruptcy trustee learned that the accountant for the bankruptcy estate no longer had a valid POA, the trustee’s attorney sought to discover what had happened, tracked down the Canadian lawyer in the Turks and Caicos within hours of depositing over $2.3 million in tax refund checks, and was able to have the checks returned. [13]

On October 29, 2015, Chityal was ordered to be detained pending trial. The court cited the nature of his offense, his extradition from Hungary, the lack of background and personal information, previous removal from the United States, and convictions for similar offenses as reasons for his continued detention. [14]

  • [1] E.D. Va. Detention Order Pending Trial filed Oct. 29, 2015.
  • [2] E.D. Va. Executed Arrest Warrant filed Oct. 25, 2015.
  • [3] E.D. Va. Indictment filed Mar. 20, 2012.
  • [4] E.D. Va. Executed Arrest Warrant filed Oct. 25, 2015.
  • [5] E.D. Va. Indictment filed Mar. 20, 2012.
  • [6] Id.
  • [7] Id.
  • [8] Id.
  • [9] Id.
  • [10] Id.
  • [11] Id.
  • [12] Id.
  • [13] Id.
  • [14] E.D. Va. Detention Order Pending Trial filed Oct. 29, 2015
  • Jury Finds IRS Employee Guilty of Disclosing Tax Information

    On October 16, 2015, in the Northern District of Ohio, Western Division, Internal Revenue Service (IRS) employee Jewel Washington was found guilty in a jury trial of the unauthorized disclosure of tax return information. [1]

    According to the court documents, Washington, while working as an employee of the IRS in Toledo, Ohio, [2] intentionally exceeded her authorized access to a computer and obtained information from the IRS for the purpose of private financial gain, and willfully disclosed the tax return information of a taxpayer without authority, including his identity, and the nature, source, and amount of his income. [3] Washington was charged with the offenses in a three-count indictment filed in January 2015. [4]

    As an IRS employee, Washington received training on the unauthorized access of tax returns and tax return information. She had been trained and warned not to access or research any account, file, or record that was not required for the performance of her official duties. Specifically, Washington was forbidden from accessing her own account or that of a spouse, relative, friend, neighbor, or any account in which she had a personal or financial interest. [5]

    The Government alleged that on four separate dates in 2012 and 2013, Washington used the IRS’s Transcript Delivery System to access tax returns and tax return information for her ex-husband; accessing 97 different transcripts through the system. It was further alleged that after the last date of access, Washington then disclosed the information to a hearing officer with the Lucas County Child Support Enforcement Agency in an effort to increase her ex-husband’s child support payments. [6]

    The Government dismissed the unauthorized access charges; [7] however, Washington could face a maximum of five years’ imprisonment for the unauthorized disclosure conviction. [8] Washington has filed a motion for acquittal. Sentencing is currently scheduled for February 16, 2016. [9]

    • [1] N.D. Ohio Verdict filed Oct. 16, 2015; N.D. Ohio U.S. Response in Opposition to Defendant’s Motions in Limine filed Sep. 23, 2015.
    • [2] N.D. Ohio U.S. Response in Opposition to Defendant’s Motions in Limine filed Sep. 23, 2015.
    • [3] N.D. Ohio Indict. filed Jan. 7, 2015.
    • [4] Id.
    • [5] N.D. Ohio U.S. Response in Opposition to Defendant’s Motions in Limine filed Sep. 23, 2015.
    • [6] Id.
    • [7] N.D. Ohio U.S. Motion to Dismiss Voluntarily Without Prejudice Certain Counts filed July 1, 2015.
    • [8] 26 U.S.C. § 7213(a)(1).
    • [9] N.D. Ohio Crim. Docket filed Jan. 7, 2015.
    • New Jersey Woman Sentenced for Impersonating Federal Officials

      On October 30, 2015, in the District of New Jersey, Sara Rong Liu was sentenced for impersonating an officer or employee of the United States. [1] Liu was initially charged and arrested in October 2013 for her role in an investment scheme, [2] and pled guilty to the impersonation in April 2015. [3]

      According to the court documents, between about October 2010 and October 2013, Liu knowingly and intentionally devised a scheme to defraud and to obtain money and property by means of materially false and fraudulent representations. [4]

      Liu resided in Mahwah, New Jersey and was the president of Westone, Inc., a company headquartered in Hackensack, New Jersey. Westone was purportedly involved in interior design and the wholesale distribution of textiles. [5] As part of her scheme to defraud, Liu falsely represented to prospective investors that Westone had been awarded a lucrative $156.6 million contract by the New York City Department of Design and Construction Fund (NYC DDC). [6]

      In fact, neither Liu nor Westone was ever awarded any such contract. In furtherance of her scheme, Liu falsely represented there was a problem with the fictitious contract and indicated Westone would be required to pay certain fees before receiving contract payments. Liu created and sent a number of fictitious and fraudulent contracts, e-mails, and documents to investors, including documents purportedly from the NYC DDC, the Federal Reserve Bank of New York, the Department of the Treasury (Treasury Department), the Federal Bureau of Investigation, and the United States Attorney’s Office for the Southern District of New York. [7] Liu did so to in order to support her false claims and to solicit funds from investors, characterized as short-term loans. [8]

      In November 2012, Liu falsely pretended to be an officer or employee of the Treasury Department by drafting and sending a letter purportedly from the Treasury Department to the victim investors in an effort to corroborate her fraudulent claims and with intent to falsely demand and obtain money. The victims believed these and other fictitious documents were authentic and sent more than $4 million to Liu. [9]

      Liu was sentenced to 36 months in prison followed by one year of supervised release. She was further ordered to pay restitution in the amount of $4,220,185. [10]

      • [1] D.N.J. Judgment filed Nov. 4, 2015.
      • [2] D.N.J. Crim. Compl. filed Oct. 21, 2013; D.N.J. Crim. Docket dated Nov. 5, 2015.
      • [3] D.N.J. Plea Agr. filed Apr. 27, 2015; D.N.J. Crim. Docket dated Nov 5, 2015..
      • [4] D.N.J. Crim. Compl. filed Oct. 21, 2013.
      • [5] Id.
      • [6] D.N.J Info. filed Apr. 27, 2015.
      • [7] D.N.J. Crim. Compl. filed Oct. 21, 2013.
      • [8] D.N.J Info. filed Apr. 27, 2015.
      • [9] Id.
      • [10] D.N.J. Judgment filed Nov. 4, 2015.
      • Former IRS Employee and Ex-Husband Arrested in Connection With Fraudulent Tax Refunds

        On October 14, 2015, in the Eastern District of California, former Internal Revenue Service (IRS) employee Maria Mora was arrested for conspiracy to defraud the Government by an employee, theft of public property, and unauthorized computer access. [1] Mora’s ex- husband, Uriel Perez, who resides in Texas, [2] was arrested for theft of public property. [3] Both were charged with the offenses in an indictment filed October 8, 2015. [4]

        According to the court documents, Mora was employed at the IRS Fresno Service Center from approximately January 1993 until June 2014. Her last position with the IRS was as a tax examining technician whose duties included reviewing taxpayer accounts and generating IRS correspondence. From at least 2012 until about July 2014, Mora conspired with Perez to defraud the United States by causing false Federal income tax returns to be filed with the IRS to fraudulently obtain tax refunds. [5]

        Specifically, Mora prepared tax returns in Perez’s name and knowingly placed false information in the returns to obtain and/or increase the tax refunds. Mora, without authorization, listed Perez’s niece as his dependent in order to claim the Earned Income Credit (EIC) on his behalf. Mora then either personally filed the fraudulent tax returns or mailed them to Perez, who later filed the returns in Texas. [6]

        Around February 2012, Mora filed three fraudulent Federal returns for Perez using the false dependent information to claim EIC for tax years 2008, 2009, and 2010. When the IRS held the returns and did not issue the refunds, Mora prepared duplicate returns on behalf of Perez for these tax years, plus an additional fraudulent return for 2011. The second submission of the 2008 through 2010 false returns included supplemental documentation purporting to substantiate Perez’s claim for EIC. Mora authored and submitted forged letters falsely claiming that Perez supported his niece financially and had permission from her mother to claim her as a dependent. Perez received checks for increased tax refunds as a result of the fraudulently prepared Federal returns. He then cashed the checks and subsequently used the money for personal expenses. Continuing the conspiracy, in February 2014 Perez filed a fraudulent 2012 return, which Mora had again prepared on his behalf, falsely claiming the EIC. [7]

        In addition to the conspiracy to defraud the Government and the theft of public funds, Mora also misused her position at the IRS. She exceeded her authority on four separate dates to access the tax records of Perez’s family members in order to determine whether they had already claimed Perez’s niece as a dependent for the purpose of the EIC. Mora made these unauthorized accesses shorty before the false returns were filed or caused to be filed. [8]

        As a result of their collusion in preparing and filing fraudulent Federal returns, Mora and Perez knowingly stole money and property of the IRS by causing the issuance of tax refunds and credits in excess of $13,000, to which they were not entitled. [9]

        If convicted, Mora and Perez could each face up to ten years in prison. Additional legal proceedings are anticipated.

        • [1] E.D. Cal. Executed Arrest Warrant filed Oct. 16, 2015.
        • [2] E.D. Cal. Indictment filed Oct. 8, 2015.
        • [3] S.D. Tex. Crim. Docket and Transfer Document filed Oct. 20, 2015
        • [4] E.D. Cal. Indictment filed Oct. 8, 2015.
        • [5] Id.
        • [6] Id.
        • [7] Id.
        • [8] Id.
        • [9] Id.
        • November 15, 2015

          New York Man Arrested for Impersonating an IRS Employee and Attempting to Interfere With the IRS

          On September 22, 2015, in the Western District of New York, Brian Becker was arrested for impersonating a Federal employee and attempting to interfere with the administration of the Internal Revenue laws. [1] Becker was charged with the offenses on September 21, 2015. [2]

          According to the court documents, Becker and his wife had an outstanding balance of over $224,000 owed to the Internal Revenue Service (IRS) for individual income taxes. In July 2013, an IRS revenue officer assigned to the Beckers’ collection case issued to their respective employers a Notice of Levy for the wages of both Brian and Lynn Becker. After not receiving the expected wage garnishments for two months, the revenue officer contacted both employers and discovered each had received a Release of Levy, purportedly from the IRS. The revenue officer confirmed that neither he, nor anyone else at the IRS, had issued these releases to the employers. However, Becker had previously been provided with a copy of a legitimate Release of Levy issued by, and containing the signature of, the assigned revenue officer. [3]

          Contact with Brian Becker’s employer revealed Becker himself had personally provided the Human Resources (HR) manager with the fraudulent Release of Levy. The document contained the assigned revenue officer’s signature, but his name had been replaced with another name. The HR manager further confirmed that the logo and fax number on the cover page that had been sent to Lynn Becker’s employer were associated with her company. [4]

          Lynn Becker’s employer verified receipt of a Release of Levy via fax from the number that was identified as belonging to Brian Becker’s employer. This release also contained the assigned revenue officer’s signature but with a different name. The handwriting on the cover sheet appeared to be that of Brian Becker. [5]

          The loss to the Government due to the fraudulent levy releases and ceased wage garnishments was estimated to be in excess of $17,800. [6] Brian Becker was released on his own recognizance after his initial court appearance. [7] If convicted of the offenses, he could face a maximum sentence of three years in prison. Additional legal proceedings are anticipated.

          • [1] W.D.N.Y. Crim. Docket filed Sep. 21, 2015.
          • [2] EW.D.N.Y. Crim. Compl. filed Sep. 21, 2015.
          • [3] Id.
          • [4] Id.
          • [5] Id.
          • [6] Id.
          • [7] W.D.N.Y. Order Setting Conditions of Release filed Sep. 22, 2015.
          • Woman Falsely Claims to be an IRS Employee to Obtain Loans and Purchase Vehicles

            On September 17, 2015, in the Western District of New York, Tamara Ward was indicted for bank fraud and making false statements on loan applications. [1] Treasury Inspector General for Tax Administration special agents took custody of Ward on September 23, 2015 at the Erie County Holding Center in Buffalo, New York, where she was incarcerated at the time, and transported her to the U.S. District Court for her arraignment on the charges. [2]

            According to the court documents, Ward knowingly executed a scheme to defraud two separate financial institutions and obtain funds from both by means of materially false and fraudulent pretenses and representations. Specifically, Ward prepared and signed two fraudulent loan applications, one for submission to Ally Financial, Inc. and one for JPMorgan Chase. In both applications, Ward falsely stated she that was employed by the Internal Revenue Service (IRS) and had been for five years. She further claimed that she earned an annual salary of $50,000. Ward made these false and fraudulent statements in order to obtain financing from each of the financial institutions for automobile loans, when in fact she well knew that she was not, and had not been, employed by the IRS. [3]

            Based on Ward’s false statements on the loan applications, Ally Financial, Inc. disbursed $9,941.45 toward Ward’s purchase of a Chevrolet Avalanche, and JPMorgan Chase disbursed $5,000 toward her purchase of a Chevrolet Impala. [4]

            If Ward is convicted of the violations, she will forfeit all of her interest in property derived from the crimes, including both of the vehicles. [5]

            Additional legal proceedings are anticipated.

            • [1] W.D.N.Y. Indict. filed Sep. 17, 2015.
            • [2] W.D.N.Y. Petition and Order for Writ of Habeas Corpus Ad Prosequendum filed Sep. 22, 2015.
            • [3] W.D.N.Y. Indict. filed Sep. 17, 2015.
            • [4] Id.
            • [5] Id.
            • IRS Employee Arrested for Soliciting and Accepting Bribe

              On September 21, 2015, in the Western District of Washington at Seattle, Internal Revenue Service (IRS) employee Paul G. Hurley was arrested and charged for soliciting and accepting a bribe in his capacity as a public official. [1]

              According to the court documents, Hurley corruptly sought and received something of value personally in return for being influenced in the performance of an official act. Hurley has been employed as an IRS revenue agent since June 2009 and is currently assigned to the Seattle, Washington IRS office. As a part of Hurley’s official duties, he is assigned to conduct audits of Federal tax returns to determine whether taxpayers correctly reported and paid their tax liability to the IRS. [2]

              In July 2015, a taxpayer who is part owner of a business operating recreational marijuana shops and medical marijuana dispensaries in the State of Washington was notified of an audit of his business’s Federal tax return. Hurley was listed as the assigned contact. The taxpayer and Hurley met at the taxpayer’s place of business several times during the course of the audit. During their initial meeting, Hurley advised the taxpayer that, per the Internal Revenue Code, no deduction or credit was allowed for a business whose activities consist of trafficking in illegal substances. Hurley noted that the taxpayer would be taxed on the business’ gross revenue with limited deductions. However, during the audit Hurley seemed sympathetic to the taxpayer regarding the limitations for businesses in the marijuana industry and talked about being unhappy at the IRS. [3]

              On September 11, 2015, Hurley gave the taxpayer the results of the audit with a proposed amount due of $292,175.41 for tax years 2013 and 2014, to which the taxpayer agreed. Hurley continued on to say he had saved the taxpayer over $1 million in the audit. He further indicated he (Hurley) was living paycheck to paycheck. With additional clarification between the taxpayer and Hurley, the taxpayer understood him to be asking for a personal payment of $20,000. Initially Hurley wanted the taxpayer to pay off his student loans in small amounts over time, but when the taxpayer declined, Hurley then said he wanted cash. Hurley and the taxpayer scheduled a time to meet several days later. Hurley told the taxpayer not to tell anyone, not even his business partner. [4]

              During a meeting on September 16, 2015, Hurley accepted $5,000 from the taxpayer in connection his official duties as an IRS revenue agent and in exchange for providing low tax assessments on the audit. On September 21, 2015, Hurley accepted the remaining $15,000, again in connection with the conduct of his official duties. Hurley was then arrested pursuant to a probable cause arrest. A search of Hurley’s person and backpack revealed the $15,000 cash plus three $20 bills with serial numbers matching those from the previous bribe payment. [5]

              Hurley’s initial appearance was held on September 21, 2015, and he was released on bond. Additional legal actions are pending. [6] The investigation of Hurley was worked jointly by agents of the Treasury Inspector General for Tax Administration and the Federal Bureau of Investigation. [7]

              • [1] W.D. Wash. Crim. Complaint filed Sep. 21, 2015.
              • [2] Id.
              • [3] Id.
              • [4] Id.
              • [5] Id.
              • [6] W.D. Wash. Crim. Docket filed Sep. 21, 2015.
              • [7] W.D. Wash. Crim. Complaint filed Sep. 21, 2015.
              • Man Arrested for Sending Suspicious Powder to the IRS

                On September 15, 2015, in the Southern District of New York, Enrique Santiago was arrested [1] for sending threatening correspondence and a white powdery substance to the Internal Revenue Service (IRS). Santiago was charged in a criminal complaint with one count of false information and hoaxes on September 10, 2015. [2]

                According to the court documents, Santiago mailed a letter containing threatening language in an envelope with a white powdery substance to the IRS in Holtsville, New York with the intent of conveying false and misleading information. [3]

                In May 2015, the IRS mailed a collection notice to the address of record for an individual named Enrique A. Santiago (E. Santiago). On or about June 3, 2015, the notice was mailed back to the IRS with threatening language and white powder. Upon receipt and discovery of the substance, the IRS mailroom was placed on lockdown and members of the Suffolk County Police Department Emergency Services Unit responded to the scene. It was determined the powder was a non-hazardous substance used to make soap. [4]

                When contacted, E. Santiago advised he had not lived at the address of record for several months and did not receive mail sent to that address. He indicated that some of his relatives, including his uncle, Enrique Santiago (defendant), currently resided at the address. [5]

                During an interview of defendant Santiago, Santiago admitted that he wrote the statements on the IRS notice, placed the powdery substance in the envelope, and mailed it to the IRS. He did so knowing the substance would be perceived as harmful. Forensic analysis confirmed that the fingerprints on the envelope matched those on file for the defendant. [6]

                Santiago was released on a $25,000 personal recognizance bond. His preliminary hearing is scheduled for October 15, 2015. [7]

                • [1] WS.D.N.Y. Crim. Docket filed Sept. 10, 2015; S.D.N.Y. Initial Appear. Document filed Sept. 15, 2015.
                • [2] S.D.N.Y. Crim. Complaint filed Sept. 10, 2015.
                • [3] Id.
                • [4] Id.
                • [5] Id.
                • [6] Id.
                • [7] S.D.N.Y. Crim. Docket filed Sept. 10, 2015; S.D.N.Y. Initial Appear. Document filed Sept. 15, 2015
                • October 15, 2015

                  IRS Employee Pleads Guilty in One Million Dollar Identity Theft Conspiracy

                  On August 12, 2015, in the Eastern District of California, Internal Revenue Service (IRS) employee Viririana Hernandez pled guilty to conspiracy to commit wire fraud, bank fraud, and mail fraud, as well as to charges of aggravated identity theft. [1] Hernandez and three co-conspirators were initially charged with the offenses in July 2014. [2]

                  According to the court documents, Hernandez, along with Daniel Miranda, Jr., Roberto Martinez, Jr., and Lilliana Gonzales, knowingly engaged in an identity theft conspiracy using the personal information of victims obtained through various methods, including IRS personnel records. Hernandez has been employed by the IRS in Fresno, California since 2006. During her employment, she has worked in a variety of administrative positions, some allowing her access to human resources files on other IRS employees. [3]

                  From at least June 2012, through at least January 2014, Hernandez, Miranda, Martinez, and Gonzales conspired to defraud retail merchants, cardholders, and banks to obtain money, services, and property under fraudulent pretenses. As part of the conspiracy, Hernandez mined IRS databases for personal information, such as dates of birth and Social Security Numbers belonging to current and former IRS workers, and made such information available for use by the other conspirators. By October 2012, defendant Miranda possessed the personal information of approximately 288 current and former IRS employees. The defendants also obtained personal information through a number of employment applications for a franchise restaurant. [4]

                  Once in possession of some initial personal information, the conspirators sought to obtain additional information, including details of credit cards and other financial accounts. They then used this personal information to fraudulently open new financial accounts in the victims’ names or to fraudulently gain access to the victims’ existing financial accounts, often by adding themselves as authorized users. The conspirators made a myriad of fraudulent purchases using this method of access to their victims’ bank and store credit accounts. The defendants also used their wrongful access to get cash advances from ATMs and in-person bank transactions. On at least two occasions, the victim’s personal data, including name, date of birth, address, and specific store credit account information was sent via text to IRS employee Hernandez. On one such occasion, the same day that she received the victim’s account information by text, Hernandez subsequently used it to purchase three Gucci watches at Macy’s totaling $3,348.89. [5]

                  To avoid detection and maximize the amount of money, goods, and services they could obtain, the conspirators often made numerous purchases on the accounts in a short amount of time before their fraud was discovered and the accounts were suspended. They also used the victims’ accounts to purchase gift cards or to purchase merchandise and then returned the merchandise for store credit. This allowed the defendants to continue to use gift cards or store credit even if a victim had cancelled access to the credit card. [6]

                  In total, the conspiracy involved at least 160 victims and fraudulent attempts to obtain over one million dollars in goods and services. [7] All three of Hernandez’s co-conspirators also have pled guilty to conspiracy and aggravated identity theft and have sentencing dates in November and December of this year. [8]

                  Hernandez could face a maximum sentence of 30 years in prison on the conspiracy charges, plus a mandatory two-year sentence for each of the two counts of aggravated identity theft. [9] Her sentencing is scheduled for November 2, 2015. [10]

                  • [1] E.D. Cal. Plea Agr. filed Aug. 12, 2015.
                  • [2] E.D. Cal. Indict. filed July 17, 2014.
                  • [3] Id.
                  • [4] Id.
                  • [5] Id.
                  • [6] Id.
                  • [7] Id.
                  • [8] E.D. Cal. Crim. Docket filed July 17, 2014.
                  • [9] E.D. Cal. Plea Agr. filed Aug. 12, 2015.
                  • [10] E.D. Cal. Crim. Docket filed July 17, 2014.
                  • Former IRS Employee Sentenced for Wire Fraud and Aggravated Identity Theft in Connection With Refund Scheme

                    On August 26, 2015, in the Western District of Texas, former Internal Revenue Service (IRS) employee Kenneth Goheen was sentenced for wire fraud and aggravated identity theft relating to a tax refund scheme. [1] Goheen was initially charged with the offenses in April 2015, [2] and pled guilty in June 2015. [3]

                    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 individuals authorized by the IRS to assist with the ITIN process, but in other cases, applicants provide original documents directly to the IRS for authentication and review. The IRS then establishes an ITIN for the individual, 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 assign ITINs. [4]

                    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 or knowledge, and caused the IRS to establish ITINs in their names. He then filed false tax returns with the IRS using the ITINS and obtained tax refunds in the names associated with the fraudulent ITINs. [5]

                    Goheen prepared and filed at least 51 Federal income tax returns in the names of at least 24 individuals, causing the Department of Treasury to issue a minimum of $124,852.48 in fraudulent tax refunds. The refund checks were mailed to mailboxes established by Goheen in either his name or the names of other individuals using copies of passports in the names of the other individuals. [6]

                    Goheen established several bank accounts, most via the Internet, using means of identification of other 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 by paying, among other things, living expenses, personal debts, mortgage loans, and his tuition at Texas State University. [7]

                    Goheen was sentenced to 24 months and one day in prison, followed by three years of supervised release. He was further ordered to pay $104,292.02 in restitution to the IRS and forfeit over $20,000 from multiple accounts. [8]

                    • [1] W.D. Tex. Judgment filed Aug. 26, 2015; W.D. Tex. Info. filed Apr. 22, 2015.
                    • [2] W.D. Tex. Info. filed Apr. 22, 2015.
                    • [3] W.D. Tex. Report and Recommendation of the United States Magistrate Judge filed 6/3/15.
                    • [4] W.D. Tex. Info. filed Apr. 22, 2015. .
                    • [5] Id.
                    • [6] Id.
                    • [7] Id.
                    • [8] W.D. Tex. Judgment filed Aug. 26, 2015.
                    • Three California Men Indicted on Charges of Defrauding the IRS

                      On August 20, 2015, in the Eastern District of California, three men – Scott T. Carlton, Robert J. Bejarano, and Matthew L. Cocola – were indicted on one count of conspiracy to defraud the Government and 41 counts of false statements. [1]

                      According to the court documents, the Internal Revenue Service (IRS) required uniformed armed security guard services at the Fresno Campus, as well as other IRS facilities in Fresno and Tulare, California, and entered into a contract with E&A Protective Services-Bravo, LLC (E&A). Pursuant to the contract’s Performance Work Statement, E&A was required to submit firearm certifications for each contract guard showing successful completion of the Federal Law Enforcement Training Center (FLETC) practical pistol course. A contract guard’s failure to maintain current qualifications would result in the immediate removal of the guard from duty. Carlton was the Regional Manager for E&A in Fresno, Bejarano was the onsite Project Manager, and Cocola was a Certified Firearms Instructor doing business in Clovis, CA. Carlton was required to report monthly on how many guards at the Fresno Campus qualified, passed, or failed the firearms certification, and he was also required to verify each month that the conditions and requirements under the IRS Fresno contract had been met, including firearm qualification requirements. [2]

                      The Government alleges that between March 2011 and December 2013, at the request of Bejarano and Carlton, Cocola falsified approximately 41 scores for 19 different E&A guards to show that the guards had obtained a passing score, so they could remain working on the IRS Fresno contract. In fact, the guards had failed the test. Bejarano allegedly collected the fraudulent qualification forms from Cocola and, knowing they were fraudulent, provided them to the IRS. Carlton allegedly falsely certified monthly that the conditions and requirements, including firearm qualification requirements, under the contract had been met, thus allowing E&A to be paid for invoices submitted under the contract. [3]

                      According the indictment, between 2011 and 2013, E&A was paid approximately $2,039,922 under the IRS Fresno contract on false and fraudulent claims submitted to the IRS for security guards who were not qualified to work under that contract. [4]

                      The conspiracy charge carries a potential sentence of up to 10 years in prison and a $250,000 fine, while each false statement charge carries a potential sentence of up to five years in prison and a $250,000 fine. [5]

                      • [1] E.D. Cal. Indictment filed August 20, 2015.
                      • [2] Id.
                      • [3] Id.
                      • [4] Id..
                      • [5] E.D. Cal. Indictment Penalty Slips filed August 20, 2015.
                      • New Hampshire Property Manager Sentenced for Attempting to Obstruct the IRS and Defrauding Clients

                        On July 28, 2015, in the District of New Hampshire, Courtney Stone was sentenced for corruptly impeding the due administration of the Internal Revenue laws and wire fraud. [1] Stone pled guilty to a six-count Criminal Information in March 2015. [2]

                        According to the court documents, Stone resided in Campton, New Hampshire, and was employed as the treasurer of B & D Stone, a property management company located in Waterville Valley, New Hampshire. [3] B & D Stone’s clientele principally consisted of local vacation condominium and homeowners’ associations. B & D Stone managed the real property and financial assets of approximately 28 condominium associations [4] and, among other things, collected association membership dues and paid the associations’ insurance, taxes, and other expenses. In her position as treasurer, Stone possessed single signing authority over many of the bank and other financial accounts of B & D Stone’s clients [5] and was responsible for the company’s bookkeeping and contacts with the Internal Revenue Service (IRS). [6]

                        Between 2008 and 2011, B & D Stone became delinquent on payment of its own Federal payroll taxes and accumulated a substantial outstanding debt to the IRS. In an attempt to secure payment of the tax debt, an IRS revenue officer issued levies totaling $472,659 on 35 accounts maintained by B & D Stone at financial institutions and other businesses. [7] Stone contacted the revenue officer and said she had secured personal financing and would be able to pay B & D Stone’s delinquent taxes, but that in order for her to make the payments, the levies needed to be released. The revenue officer agreed to release about 16 of the levies and issued IRS Forms 668-D, Release of Levy/Release of Property from Levy, to the applicable businesses and provided a copy of each to B & D Stone. However, he specifically told Stone he would not release the levies issued to Meredith Savings Bank and White Mountain Athletic Club. [8]

                        Stone subsequently attempted to obstruct and impede the due administration of the Internal Revenue laws by counterfeiting IRS documents and forging official signatures. [9] Specifically, in an effort to gain the release of B & D Stone’s levied funds from Meredith Savings Bank and White Mountain Athletic Club, Stone counterfeited and presented three fraudulent Forms 668-D to the entities: two purportedly to the bank and one to the athletic club. Officials from both entities contacted the IRS revenue officer who had issued the levies to verify the authenticity of the documents they had received. Both were informed the IRS had not issued these levy releases and the respective forms were not authentic. [10]

                        Approximately one year later, one of the condominium associations managed by B & D Stone discovered that bank statements Stone had provided to it were counterfeit and had substantially overstated the actual balances in the association’s bank accounts. The Waterville Valley Police Department executed a search warrant at B & D Stone’s office and obtained records identifying irregularities and missing funds from its clients’ accounts, as well as bank statements in the intermediate phase of being altered. Funds transferred to B & D Stone’s bank accounts without the condominium associations’ knowledge or authorization had been used, in part, to pay business expenses for B & D Stone, including its large IRS tax debt and rent. Household and personal expenses paid from the illegally acquired funds included mortgage payments, the purchase of a motorcycle, tickets to premium professional sports events, and hundreds of bank overdraft fees. At least 23 condominium associations were adversely affected by Stone’s embezzlement. [11]

                        Stone was sentenced to 18 months in prison, followed by three years of supervised release, and ordered to pay $956,718 in restitution. Stone is scheduled to surrender for her sentence on September 8, 2015. [12]

                        • [1] D.N.H. Judgment filed July 29, 2015.
                        • [2] D.N.H. Plea Agr. filed Mar. 31, 2015.
                        • [3] D. N.H. Information filed Mar. 2, 2015.
                        • [4] D.N.H. Plea Agr. filed Mar. 31, 2015..
                        • [5] D. N.H. Information filed Mar. 2, 2015.
                        • [6] D.N.H. Plea Agr. filed Mar. 31, 2015.
                        • [7] Id.
                        • [8] Id
                        • [9] D. N.H. Information filed Mar. 2, 2015
                        • [10] D.N.H. Plea Agr. filed Mar. 31, 2015.
                        • [11] Id.
                        • [12] D. N.H. Judgment filed July 29, 2015.
                        • September 15, 2015

                          Missouri Men Plead Guilty in a Conspiracy to Defraud the Government

                          On August 13, 2015, in the Western District of Missouri, Wesley Delport pled guilty to conspiracy to defraud the U.S. Government. [1] Delport and his co-defendant, Alton Louis Vaughn, Sr., were both charged and arrested in December 2014 for obstructing and impeding the administration of the Internal Revenue laws, conspiracy to defraud the United States, and false income tax returns. [2] Vaughn pled guilty to the conspiracy earlier this year. [3]

                          According to court documents, Delport, the 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. from February 2009 until September 2014, by impeding and obstructing the lawful functions of the Internal Revenue Service (IRS). [4]

                          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. [5]

                          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. Among other things, he transferred business funds to other accounts to pay personal expenses and registered entities in family members’ names, in his efforts to avoid, delay, and otherwise impede the IRS. [6]

                          Delport submitted multiple documents to the IRS with lengthy and frivolous arguments about the legality of taxes and claimed that he was a “Sovereign National” and that 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, and therefore not subject to taxation because of Indian treaties entered into by the United States, along with other claims and frivolous statements. [7]

                          From at least 2009 through September 2014, Vaughn, also known as “Bishop” Vaughn, advised and colluded with Delport on a number of activities designed to obstruct the IRS’s efforts, including the preparation of Federal income tax returns which were materially false and contained frivolous statements about an IRS employee. [8]

                          Delport and Vaughn refused to comply with IRS requests and summonses, as well as Grand Jury subpoenas for records, and continued to make the same false statement about the deceased revenue officer being in possession of Delport’s records. [9]

                          Vaughn provided false testimony to the Grand Jury about a meeting with the revenue officer and the special agent and stated that the revenue officer had verified he had been to Delport’s business to collect the documents. Vaughn knew the revenue officer had not been present and the claims were fictitious. [10]

                          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. [11]

                          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 that 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. [12]

                          Even after his arrest in December 2014 [13], and up to May 2015, Vaughn allegedly continued to misrepresent himself to the IRS and taxpayers. Vaughn falsely stated that he had worked for the IRS for 12 years, when in fact, he was never employed by the IRS. Vaughn also falsely claimed he was authorized to represent the taxpayers before the IRS and charged them for travel expenses to handle their tax matters. [14]

                          Delport and Vaughn could each face up to five years of imprisonment. [15]

                          Sentencing has not been set. This investigation was conducted jointly by agents of TIGTA and IRS Criminal Investigation.
                          • [1] W.D. Mo. Plea Agr. Wesley Delport filed Aug. 13, 2015.
                          • [2] W.D. Mo. Indict. filed Dec. 9, 2014; W.D. Mo. Crim. Docket filed Dec. 9, 2014.
                          • [3] W.D. Mo. Plea Agr. Alton Vaughn filed June 9, 2015.
                          • [4] W.D. Mo. Plea Agr. Wesley Delport filed Aug. 13, 2015.
                          • [5] Id.
                          • [6] W.D. Mo. Indict. filed Dec. 9, 2014.
                          • [7] Id.
                          • [8] Id.
                          • [9] Id.
                          • [10] Id.
                          • [11] Id.
                          • [12] W.D. Mo. Indict. filed Dec. 9, 2014.
                          • [13] W.D. Mo. Crim. Docket filed Dec. 9, 2014.
                          • [14] W.D. Mo. Plea Agr. Alton Vaughn filed June 9, 2015.
                          • [15] W.D. Mo. Plea Agr. Wesley Delport filed Aug. 13, 2015.
                          • Disbarred Attorney Found Guilty in IRS Impersonation Fraud Scheme

                            On July 23, 2015, in the District of Maryland, after a seven-day trial, a jury found Saundra Lucille White guilty of mail fraud, money laundering, and aggravated identity theft. [1]

                            According to the court documents, White was an attorney licensed in the District of Columbia (D.C.) and in Maryland. Between March 2010 and May 2013, White knowingly and willfully devised a scheme to defraud individuals and obtain money and property by means of fraudulent pretenses and representations. [2]

                            Specifically, White served as the attorney for an individual (the victim) residing in Washington, D.C. who was assisting an incapacitated relative. At White’s request, the victim provided her with an accounting of the relative’s assets. White then assisted the victim in obtaining permanent guardianship of the relative in late 2010. The relative died in January 2011. White was disbarred from practicing law in D.C. and Maryland in January 2011 and September 2011, respectively, but never informed the victim she was no longer a licensed attorney. [3]

                            As part of her scheme to defraud the victim, White created numerous fraudulent notices that purported to be from the Internal Revenue Service (IRS) demanding payment of taxes purportedly owed by the deceased relative and another of the victim’s deceased relatives. White mailed and faxed these fraudulent notices to the victim. [4]

                            White advised the victim that, as the legal guardian of the deceased relative, she (the victim) was required to remit payments for the taxes. The fraudulent notices stated payments were to be sent to an entity called Intel Realty Financial Service (IRFS) at an address that was controlled by White. [5]

                            In furtherance of her scheme, White attempted to obtain a Maryland driver’s license in the deceased relative’s name but bearing her own photograph. She opened bank accounts in the names of IRFS and the deceased relative, and obtained debit cards in the deceased name. [6]

                            White then deposited the checks, totaling over $500,000, that had been sent from the victim in response to the purported IRS notices. White wrote checks from the bank accounts to herself or others for her own benefit using the forged signature of the deceased relative. One such check was made payable to Herb Gordon Volvo in the amount of $20,500, to pay for part of the down payment on a Volvo later titled to White. [7]

                            White could face a maximum of 20 years in prison. The Government will also seek forfeiture of any property derived from the unlawful proceeds, including at least $500,000 in U.S. currency, three vehicles, a designer watch, and real property in North Carolina. [8] White’s sentencing is scheduled for January 25, 2016. [9]

                            • [1] D. Md. Verdict Form filed July 23, 2015.
                            • [2] D. Md. Superseding Indict. filed Sep. 22, 2014.
                            • [3] Id.
                            • [4] Id.
                            • [5] Id.
                            • [6] Id.
                            • [7] Id.
                            • [8] Id.
                            • [9] D. Md. Sentencing Order filed July 23, 2015.
                            • Florida Man Pleads Guilty for Threatening to Blow Up the Miami IRS Office

                              On June 29, 2015, in the Southern District of Florida, Morris Whitehead pled guilty to making a threat to damage or destroy a building by means of fire or explosives. [1] Whitehead was indicted for the offense in May 2015. [2]

                              According to court documents, Whitehead intentionally conveyed false information through the telephone concerning an attempt to unlawfully damage or destroy the Internal Revenue Service (IRS) office in Miami, Florida. [3]

                              Specifically, on April 20, 2015, the Federal Bureau of Investigations (FBI) office in Miami received a call from an individual who claimed that the Miami IRS building should be evacuated within two hours because it was going to go up in smoke. [4]

                              Subsequent investigation of the threat identified the originating telephone number, but the subscriber said she had loaned the phone to someone else, an individual later identified as Whitehead. Agents arrested Whitehead after he admitted he was the one who made the bomb threat regarding the IRS building. He further indicated that if he had wanted to follow through with the threat, he would have lit the building on fire rather than use a bomb. [5]

                              Whitehead could face up to 10 years in prison for the offense. [6]

                              • [1] S.D. Fla. Crim. Docket filed May 1, 2015.
                              • [2] S.D. Fla. Indict. filed May 4, 2015.
                              • [3] Id.
                              • [4] S.D. Fla. Crim. Complaint filed Apr. 22, 2015.
                              • [5] Id.
                              • [6] S.D. Fla. Indict.- Penalty Sheet filed May 4, 2015.
                              • IRS Employee Pleads Guilty to Stealing Government Funds Through Unemployment Fraud

                                On July 20, 2015, in the Eastern District of Pennsylvania, IRS employee Robin Wood pled guilty to the theft of Government funds and wire fraud. [1] Wood was indicted for the offenses in May 2015. [2]

                                According to the indictment, Wood devised a scheme to defraud the Commonwealth of Pennsylvania and the U.S. Department of Labor by receiving unemployment compensation benefits and additional Federal compensation to which she was not entitled. [3]

                                The IRS’s Unemployment Compensation Programs intended, in part, to assist IRS employees who are seasonally furloughed when work is not available to them. This program and the associated Federal Additional Compensation Program are both Federally funded. In the Commonwealth of Pennsylvania, the administrative functions of determining eligibility for unemployment benefits and administering the distribution of such funds are delegated to the Pennsylvania Department of Labor. Individuals are required to apply on a weekly basis and truthfully answer a series of questions, through an Internet site or a telephone response system, to determine their eligibility. [4]

                                Over a three-year period, Wood stole and knowingly converted to her own use a total of approximately $45,312 in weekly unemployment compensation and funds from the Federal Additional Compensation Program. Wood used the Internet and the telephone Interactive Claims Response System weekly, falsely stating that she was not working and that work was not available to her, and claiming that she was eligible to receive unemployment compensation. In fact, Wood was working at, and receiving income from, the IRS and was not eligible for such benefits. Wood fraudulently obtained approximately 100 weeks of unemployment compensation payments and over 60 weeks of funds from the Federal Additional Compensation Program. [5]

                                Wood could face a maximum of 20-years imprisonment.
                                • [1] E.D. Pa. Crim. Docket filed May 14, 2015.
                                • [2] E.D. Pa. Indict. filed May 14, 2015.
                                • [3] Id.
                                • [4] Id.
                                • [5] Id.
                                • Man Indicted for Impersonating an IRS Employee With the Intent to Harass

                                  On July 9, 2015, in the Northern District of California, Douglas York was charged in a superseding indictment with the false impersonation of a Federal employee and telecommunications device harassment. [1] York was initially indicted for the false impersonation in April 2015 [2] and was arrested in May 2015. [3]

                                  According to the court documents, York falsely pretended to be an officer or employee of the United States, specifically an agent of the Internal Revenue Service (IRS) engaged in the investigation of tax records. Without disclosing his true identity, and with intent to threaten and harass a specific person, York made a telephone call and left a voice mail for the victim indicating that he was from the IRS and was calling about a tax audit. [4]

                                  In a trial memorandum, the Government alleges York made an interstate communication for the purpose of harassment, i.e., a telephone call originating in California and utilizing an application called “Spoofcard,” whose servers were located in New Jersey. In the communication, York failed to truthfully identify himself and also used voice alteration feature to further conceal his identity. [5] The voice mail left for the victim represented that Judy Smith from the IRS was calling and stated that a tax audit was going to be requested for years 2005, 2006, and 2007. The caller requested a return call to the number listed on the caller ID and further said if the victim could not be reached, the IRS would be checking into his past and looking into his records. [6]

                                  The Government alleged it was York’s purpose to annoy and harass the victim with the voice mail, as well as with other continued instances of harassment. Among other things, York incessantly called the victim over the course of several months, placed a phony advertisement for the sale of a car on Craigslist with the victim’s address listed, and posted a sign on the victim’s street claiming he was a child predator. [7]

                                  York could face up to three years in prison and a $250,000 fine. [8] Additional legal activity is pending.
                                  • [1] N.D. Cal. Superseding Indict. filed July 9, 2015.
                                  • [2] N.D. Cal. Indict. filed Apr. 22, 2015.
                                  • [3] N.D. Cal. Crim. Docket filed Apr. 22, 2015.
                                  • [4] N.D. Cal. Superseding Indict. filed July 9, 2015.
                                  • [5] N.D. Cal. United States’ Trial Memorandum filed July 9, 2015.
                                  • [6] N.D. Cal. Superseding Indict. filed July 9, 2015.
                                  • [7] N.D. Cal. United States’ Trial Memorandum filed July 9, 2015.
                                  • [8] N.D. Cal. Superseding Indict.- filed July 9, 2015.
                                  • IRS Special Agent and Coconspirator Plead Guilty in Tax Refund Scheme

                                    Revenue Service (IRS) Special Agent Donald Centreal Smith and coconspirator Gary Gene Collins each pled guilty in June to his role in a tax refund scheme. [1] In the Northern District of Alabama, Smith entered a guilty plea to conspiracy, wire fraud, and aggravated identity theft on June 15, 2015, [2] and Collins pled guilty to conspiracy and wire fraud on June 30, 2015. [3] Both were initially charged in April 2015 with a variety of criminal violations associated with the tax refund scheme. [4]

                                    According to the court documents, Smith began his employment with IRS Criminal Investigation (IRS-CI) as a trainee in 2005 and became a special agent with IRS-CI in 2007. He was assigned to the Birmingham, Alabama field office. Co-defendant Collins, an Alabama resident, and Smith were friends. From about September 2011 through October 2013, Smith and Collins unlawfully conspired with each other and devised a scheme to make fictitious and fraudulent claims in the form of income tax returns filed with the IRS. [5]

                                    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. [6]

                                    Between June 2012 and October 2012, Smith and Collins electronically filed approximately 19 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 involving tax preparer fraud that he had conducted and prosecuted in his capacity as an IRS special agent. Smith retrieved the personal identifying information from the criminal case files, shared the information with Collins, and used the identifying information from the criminal files to prepare and file most of the false and fraudulent personal tax returns. [7] 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 Social Security Number, date of birth, and home address. [8]

                                    Smith and Collins requested, through the filing of these nineteen false claims, Federal tax refunds totaling $65,308.00. Before the scheme was detected, the IRS paid $12,908.94 in refunds. Smith and Collins converted these funds to their own use. [9]

                                    One victim attempted to file her 2011 return and was informed that a return had already been submitted in her name using her personal information and that the false return generated a refund payment that had been deposited into an account at Regions Bank. The victim went to Regions Bank and reported the fraud to the bank security officer. The security officer investigated the account and discovered two bank accounts receiving refunds in the name of Red Alliance and the account holders were Smith and Collins. The security officer placed a “no post” on the accounts. [10]

                                    Collins called Regions Bank after discovering the “no post” order on the accounts and spoke with the bank security officer. The security officer agreed to remove the “no post” if Collins provided a copy of the tax return filed on behalf of the reporting victim. The security officer never heard from Collins. Collins also made several calls to Smith that same day. [11]

                                    On two subsequent dates following the contact with Regions Bank, Smith searched a restricted and confidential Treasury database looking for Bank Secrecy Act information and records relating to himself, Red Alliance, the Employer Identification Number associated with Red Alliance, and the reporting identity theft victim. A search of Smith’s IRS workspace revealed handwritten notes associated with 18 of the fraudulent returns and a detailed spreadsheet containing the personal identifying information of individuals identified during the two prior criminal tax cases Smith had investigated. [12]

                                    The men could face up to 20-years imprisonment. [13] Sentencing for both is scheduled for October 14, 2015. [14]

                                    • [1] N.D. Ala. Plea Agr. Smith filed June 15, 2015; N.D. Ala. Plea Agr. Collins filed June 25, 2015.
                                    • [2] N.D. Ala. Plea Agr. Smith filed June 15, 2015.
                                    • [3] N.D. Ala. Plea Agr. Collins filed June 25, 2015.
                                    • [4] N.D. Ala. Indict. filed Apr. 30, 2015.
                                    • [5] N.D. Ala. Plea Agr. Smith filed June 15, 2015; N.D. Ala. Plea Agr. Collins filed June 25, 2015.
                                    • [6] N.D. Ala. Indict. filed Apr. 30, 2015.
                                    • [7] N.D. Ala. Plea Agr. Smith filed June 15, 2015; N.D. Ala. Plea Agr. Collins filed June 25, 2015.
                                    • [8] N.D. Ala. Indict. filed Apr. 30, 2015.
                                    • [9] N.D. Ala. Plea Agr. Smith filed June 15, 2015; N.D. Ala. Plea Agr. Collins filed June 25, 2015.
                                    • [10] Id.
                                    • [11] Id.
                                    • [12] N.D. Ala. Plea Agr. Smith filed June 15, 2015.
                                    • [13] N.D. Ala. Plea Agr. Smith filed June 15, 2015; N.D. Ala. Plea Agr. Collins filed June 25, 2015.
                                    • [14] N.D. Ala. Crim. Docket filed Apr. 30, 2015.
                                    • August 26, 2015

                                      Pennsylvania Tax Preparer Found Guilty in Extortion Scheme

                                      On June 11, 2015, in the Middle District of Pennsylvania, at the conclusion of a four-day trial, a jury found Maria Colvard guilty of aiding and abetting in extortion, aiding and abetting in the impersonation of an employee of the United States, and aiding and abetting in interference with commerce by threats. [1] Colvard and co-defendant Merarys Paulino were initially indicted in June 2013. [2] Paulino entered a guilty plea to the extortion charge in October 2013. [3] Colvard entered into a plea agreement for the false personation and interference with commerce charges in January 2015 [4], but subsequently withdrew her plea in February 2015. [5]

                                      According to the court documents, Colvard was the owner/operator of Tax Max, LLC, with locations in Chambersburg and Hanover, Pennsylvania. [6] Between February 2013 and May 2013, Colvard obstructed and affected the commerce of her competitor, Cristina’s Tax Service, by extortion with the use of fear and threats, including the fear of economic loss. [7] The operator of Cristina’s Tax Service, Cristina Gutierrez, was previously employed by Colvard in her (Colvard’s) tax preparation business. [8]

                                      As part of the extortion scheme against her business competitor, Colvard obtained and conspired to obtain property from Cristina’s Tax Service by the wrongful use of fear. She did so by aiding, counseling, and inducing Paulino into representing herself as an employee of the United States, specifically, a criminal investigator with the Internal Revenue Service (IRS) named “LaBella Williams.” Under the false pretense of her employment with the IRS, and purportedly on behalf of the United States, Paulino demanded the client list of Cristina’s Tax Service, sums of money, and the closure of the business. [9]

                                      Colvard’s sentencing has not been scheduled. [10]

                                      • [1] M.D. Pa. Verdict filed June 12, 2015.
                                      • [2] M.D. Pa. Indict. filed June 5, 2013.
                                      • [3] M.D. Pa. Crim. Docket filed June 5, 2013.
                                      • [4] M.D. Pa. Plea Agr. filed Jan. 6, 2015.
                                      • [5] M.D. Pa. Crim. Docket filed June 5, 2013.
                                      • [6] M.D. Pa. Motion to Withdraw Guilty Plea filed Jan. 22, 2015.
                                      • [7] M.D. Pa. Superseding Indict. filed Nov. 6, 2013.
                                      • [8] M.D. Pa. Motion to Withdraw Guilty Plea filed Jan. 22, 2015.
                                      • [9] M.D. Pa. Superseding Indictment filed Nov. 6, 2013.
                                      • [10] M.D. Pa. Crim. Docket filed June 5, 2013.
                                      • Leader of Telephone Impersonation Scheme Sentenced to Over 14 Years

                                        On July 8, 2015, the United States Attorney’s Office for the Southern District of New York announced the sentencing of Sahil Patel for his role in a massive impersonation scheme. Patel pled guilty in January 2015 to conspiracy to commit extortion, conspiracy to impersonate a Federal officer, conspiracy to commit wire fraud, and aggravated identity theft. [1]

                                        According to the court documents, from at least December 2011 through at least November 2013, Patel, an Indian citizen, knowingly conspired with others to commit extortion by falsely impersonating a Federal officer and demanding money under such false pretense. Victims were contacted by telephone and told they would be arrested or otherwise charged with crimes by agents of the Federal Bureau of Investigation (FBI) or the Internal Revenue Service (IRS) if they did not make payments to Patel and his co-conspirators. While Patel said he did not make any of the phone calls to victims, he admitted that he was aware his co-conspirators were falsely representing themselves as Federal officers to obtain money. [2]

                                        One of the victims received several telephone calls from two people claiming to be special agents with the FBI. The callers told the victim to make a payment in the amount of $583 by a specified date or be arrested on charges purportedly related to an overdue loan. The callers provided instructions to the victim for transmitting funds to them using an electronic money order. The victim followed the instructions, purchased a MoneyPak®, and provided the PIN to the callers. During approximately an eight- day period following the payment, 13 calls were placed to the victim from one of the same telephone numbers used in the initial contact. [3] The conspirators used the physical addresses of the FBI office and the United States Attorney’s Office in New York for the subscriber information associated with the telephone numbers used to call the victim. [4]

                                        Patel recruited others to obtain the prepaid debit cards to which the funds were then uploaded and subsequently withdrawn upon Patel’s direction. Patel told one co-conspirator that the transactions were related to a “telemarketing” or “debt collection” agency in India. Patel directed those assisting him to withdraw or convert funds into money orders within minutes of the upload to a prepaid debit card because the debit card company would place the funds “on hold” about 20 minutes after they were uploaded. Patel would then transfer the funds from the money order to a separate bank account and destroy the money order receipts and any prepaid debit cards used to effect the transaction. [5]

                                        According to the press release, Patel was sentenced to 175 months in prison, followed by three years of supervised release. The court further entered a forfeiture judgment in the amount of $1 million against Patel. [6]

                                        • [1] S.D.N.Y. Change of Plea Transcript filed Feb. 5, 2015; S.D.N.Y. Indictment filed October 9, 2014.
                                        • [2] Id.
                                        • [3] S.D.N.Y. Crim. Complaint filed Nov. 13, 2013.
                                        • [4] Id.
                                        • [5] Id.
                                        • [6] S.D.N.Y. Forfeiture Judg. filed July 8, 2015.
                                        • Twelve Year Prison Sentence for Perpetrator of Stolen Identity Refund Scheme

                                          On June 15, 2015, in the Northern District of New York, Anas Khalid Wilson was sentenced for his role in a stolen identity refund scheme. Wilson pled guilty in December 2014 to theft of Government property and aggravated identity theft. [1]

                                          According to the court documents, Wilson devised a scheme to defraud the Internal Revenue Service (IRS) by filing tax returns containing false and fraudulent information using personal identifying information (PII) acquired under false pretenses. [2]

                                          Wilson represented himself to be an IRS agent and Government employee in order to illegally obtain and use the identities of others to file false tax returns and claim fraudulent refunds. In addition to falsely representing himself as an IRS employee, which Wilson has never been, he advised the individuals that they were eligible for a fictitious stimulus program, knowing such program did not exist. [3]

                                          One of the victims indicated that Wilson came to her home and told her she may be eligible for a Federal stimulus payment since she was unemployed and was not required to file a tax return. The victim had been receiving Social Security disability payments and had not worked for several years. Wilson presented himself as an IRS agent who helped people in her situation file for stimulus payments. Wilson requested the individual’s name, Social Security Number, date of birth, and address in order to check her eligibility for the (fictitious) program, which she provided. He subsequently entered the information into his laptop computer and told the victim she would be receiving $500 in the mail. In furtherance of his scheme, Wilson told the victim that if she provided him with information for additional people with similar circumstances (i.e., people not required to file a tax return because they were either unemployed or disabled), he would pay her $100 for every ten eligible names she provided. Believing Wilson was a legitimate Government employee, the victim agreed to help him. She provided him with approximately 30 names, mostly of friends and relatives. [4]

                                          Wilson filed a total of 205 separate false tax returns, resulting in requested refunds totaling $414,886. The majority of the fraudulent tax returns were electronically filed in the names of people in Utica, New York; others were filed for people in Maryland, New Jersey, Virginia, Kentucky, South Carolina, Georgia, and Michigan. Each contained false information as to income received and eligibility for the Earned Income Tax Credit. The fraudulent tax refunds were directed to bank accounts established in other individuals’ names. Wilson then directed these individuals to withdraw the funds from the accounts and provide him the money. In return he promised to pay them for their services. Wilson directed the individuals to open business accounts at specified banks. He further instructed them never to withdraw more than $10,000 per day. Wilson paid travel expenses for the individuals when they conducted banking transactions and would pick up proceeds the same day as the withdrawal. [5]

                                          Wilson was sentenced to 144 months in prison, followed by three years of supervised release. He was ordered to pay $1,431 in restitution and to forfeit $414,000. [6] Wilson is appealing his sentence. [7]

                                          The investigation was worked jointly by agents from the Treasury Inspector General for Tax Administration, IRS Criminal Investigation, and Defense Criminal Investigative Service.

                                          • [1] N.D.N.Y. Judgment filed June 22, 2015.
                                          • [2] N.D.N.Y. Crim. Complaint filed May 13, 2013.
                                          • [3] N.D.N.Y. Change of Plea Transcript filed Jan. 16, 2015.
                                          • [4] N.D.N.Y. Crim. Complaint filed May 13, 2013.
                                          • [5] Id.
                                          • [6] N.D.N.Y. Judgment filed June 22, 2015.
                                          • [7] .D.N.Y. Crim. Docket filed June 26, 2013.
                                          • Former Internal Revenue Service Employee Pleads Guilty to Involvement in Stolen Identity Refund Scheme

                                            On June 1, 2015, in the Western District of Missouri, Central Division, former Internal Revenue Service (IRS) employee Demetria Brown pled guilty to wire fraud and aggravated identity theft. [1] Brown was indicted for the offenses in a 22-count indictment in October 2013. [2]

                                            According to the court documents, Brown knowingly and willfully devised a scheme to defraud and obtain money from the IRS and the Missouri Department of Revenue (MDOR) by means of materially fraudulent representations. Brown worked for the IRS in St. Louis, Missouri, and lived in Fairview Heights, Illinois, at all times relevant to the charges. [3]

                                            As part of her scheme, Brown obtained the personal identifiers (including names, Social Security Numbers, and dates of birth) of individuals without their consent or knowledge and completed fraudulent U.S. Individual Tax Returns and Missouri State Tax Returns using their identifiers. Brown added false information to the returns, such as addresses, place of employment, wages earned, and taxes withheld, and claimed refunds that were, in fact, not due. [4]

                                            Using a false identity, Brown established an account with an Internet service provider and an e-mail address in order to submit these false returns to the IRS and MDOR. In furtherance of her scheme, Brown opened nominee bank accounts with at least six financial institutions in five different States, and used the bank information to direct the fraudulent refund payments to accounts which she controlled. [5] Over a four- year period, 29 fraudulent State income tax refunds were deposited into accounts opened by Brown in the names of her three children. Brown was listed as the custodian on each account. [6]

                                            Brown admitted she had been preparing and electronically filing fraudulent Federal and State returns using the e-mail address established and her home computer. The IRS determined that Brown filed in excess of 120 fraudulent Federal tax returns. [7] Through her scheme, Brown unlawfully acquired approximately $326,260 ($211,474 from the IRS and $114,786 from the MDOR). [8]

                                            Sentencing has not been scheduled.

                                            • [1] W.D. Mo. C.D. Plea Agr. filed June 1, 2015.
                                            • [2] W.D. Mo. C.D. Indict. filed Oct. 2, 2013.
                                            • [3] Id.
                                            • [4] Id.
                                            • [5] Id.
                                            • [6] W.D. Mo. C.D. Plea Agr. filed June 1, 2015.
                                            • [7] Id.
                                            • [8] W.D. Mo. C.D. Indict. filed Oct. 2, 2013.
                                            • Mississippi Woman Indicted for Assaulting Special Agent

                                              On May 19, 2015, in the Northern District of Mississippi, Veronica Lloyd, of Enid, Mississippi, was indicted for forcible interference with the Internal Revenue laws. [1]

                                              Lloyd knowingly and intentionally, by force and by threats of force, endeavored to intimidate and impede an officer of the United States acting in an official capacity. Specifically, on or about May 12, 2015, Lloyd assaulted and attempted to assault a Department of the Treasury special agent by charging her with a dangerous weapon, a shovel, and verbally accosting the special agent while she was engaged in the course of her official duties. [2]



                                              Lloyd could face up to three years imprisonment and a $5,000 fine. [3] Additional legal action is pending.

                                              • [1] N.D. Miss. Indict. filed May 19, 2015; N.D. Miss. Crim. Cover Sheet filed May 19, 2015.
                                              • [2] Id.
                                              • [3] N.D. Miss. Notice of Penalties filed May 19, 2015.
                                              • July 15, 2015

                                                Former IRS Employee Pleads Guilty to Wire Fraud and Aggravated 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 individuals authorized by the IRS to assist with the ITIN process, but in other cases, applicants provide original documents directly to the IRS for authentication and review. The IRS then establishes an ITIN for the individual, 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 assign 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 or knowledge, and caused the IRS to establish ITINs in their names. He then filed false tax returns with the IRS using the ITINS and obtained 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 Treasury to issue a minimum of $124,852.48 in fraudulent tax refunds. The refund checks were mailed to mailboxes established by Goheen in either his name or the names of other individuals using copies of passports in the names of the other individuals. [4]

                                                Goheen established several bank accounts, most via the Internet, using means of identification of other 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 by paying, among other things, living expenses, personal debts, mortgage loans, and his tuition at Texas State University. [5]

                                                On June 3, 2015, Goheen entered a guilty plea to one count of Wire Fraud (18 USC 1343) and one count of Aggravated Identity Theft (18 USC 1028A). [6] Goheen’s sentencing is scheduled for August 26, 2015. [7]

                                                • [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. Report and Recommendation of the United States Magistrate Judge filed 6/3/15.
                                                • [7] W.D. Tex. Crim. Docket entry filed 6/3/15.
                                                • Man Indicted for Threatening to Blow Up the Miami IRS Office

                                                  On May 1, 2015, in the Southern District of Florida, Morris Whitehead was indicted for making a threat by telephone to damage or destroy a building by means of fire or explosives, and false information or hoaxes. [1]

                                                  According to the court documents, Whitehead intentionally conveyed false information through the telephone concerning an attempt to unlawfully damage or destroy the Internal Revenue Service (IRS) office in Miami, Florida. [2]

                                                  Specifically, on April 20, 2015, the Federal Bureau of Investigations (FBI) office in Miami received a call from an individual who claimed the Miami IRS building should be evacuated within two hours because it was going to go up in smoke. [3]

                                                  Subsequent investigation of the threat identified the originating telephone number, but the subscriber said she had loaned the phone to someone else, an individual later identified as Whitehead. Agents arrested Whitehead after he admitted he was the one who made the bomb threat regarding the IRS building. He further indicated if he had wanted to follow through with the threat, he would have lit the building on fire rather than use a bomb. [4]

                                                  A trial date has been set for June 29, 2015. [5] Whitehead could face up to 10 years in prison for the offenses.

                                                  • [1] S.D. Fla. Indict. filed May 4, 2015.
                                                  • [2] Id.
                                                  • [3] S.D. Fla. Crim. Complaint filed Apr. 22, 2015.
                                                  • [4] Id.
                                                  • [5] S.D. Fla. Crim. Docket filed May 1, 2015.
                                                  • IRS Employee Indicted for Stealing Government Funds Through Unemployment Fraud

                                                    On May 14, 2015, in the Eastern District of Pennsylvania, Internal Revenue Service (IRS) employee Robin Wood was indicted for the theft of Government funds and wire fraud. [1]

                                                    According to the indictment, Wood devised a scheme to defraud the Commonwealth of Pennsylvania and the U.S. Department of Labor by receiving unemployment compensation benefits and additional Federal compensation to which she was not entitled. [2]

                                                    The Unemployment Compensation Program for the IRS is intended, in part, to assist IRS employees who are seasonally furloughed when work is not available to them. This program and the associated Federal Additional Compensation Program are both Federally funded. In the Commonwealth of Pennsylvania, the administrative function of determining eligibility for unemployment benefits and administering the distribution of such funds is delegated to the Pennsylvania Department of Labor. Individuals were required to apply on a weekly basis and truthfully answer a series of questions, through an Internet site or a telephone response system, to determine their eligibility. [3]

                                                    In a three-year period, Wood stole and knowingly converted to her own use a total of approximately $45,312 in weekly unemployment compensation and funds from the Federal Additional Compensation Program. Wood used the Internet and the telephone Interactive Claims Response System weekly, falsely stating that she was not working and that work was not available to her, and claiming that she was eligible to receive unemployment compensation. In fact, Wood was working at, and receiving income from, the IRS and was not eligible for such benefits. Wood fraudulently obtained approximately 100 weeks of unemployment compensation payments and over 60 weeks of funds from the Federal Additional Compensation Program. [4]

                                                    A trial date has been set for July 20, 2015. [5] Wood could face a maximum of 20-years imprisonment.

                                                    • [1] E.D. Pa. Indict. filed May 14, 2015.
                                                    • [2] Id.
                                                    • [3] Id.
                                                    • [4] Id.
                                                    • [5] E.D. Pa. Crim. Docket filed May 14, 2015.
                                                    • Man Sentenced to More Than Six Years in Prison for Interference With the IRS and Related Offenses

                                                      Scott Bodley was sentenced on May 12, 2015, in the Western District of Wisconsin, for corruptly endeavoring to obstruct and impede the Internal Revenue laws, filing fictitious instruments, making false statements, committing fraud in connection with Federal income tax returns, and attempting to evade tax. [1] Earlier this year, a jury found Bodley guilty of all charges included in a 26-count indictment. [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 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]

                                                      In furtherance of his corrupt interference, Bodley knowingly submitted numerous other 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 mailed other packages of false documents to the IRS, 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 and contained fraudulent statements related to the withholding and payment of Federal income taxes for Bodley and others. [4]

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

                                                      Bodley was sentenced to 78 months in prison, followed by three years of supervised release. He was ordered to pay $32,077.49 in restitution to the IRS and submit to financial monitoring during his supervised release. [6] Bodley filed a notice of appeal on May 13, 2015. [7]

                                                      • [1] W.D. Wis. Judgment filed May 14, 2015.
                                                      • [2] W.D. Wis. Verdict filed Feb. 6, 2015.
                                                      • [3] W.D. Wis. Indict. filed May 16, 2013.
                                                      • [4] Id.
                                                      • [5] Id.
                                                      • [6] W.D. Wis. Judgment filed May 14, 2015.
                                                      • [7] W.D. Wis. Notice of Appeal filed May 13, 2015.
                                                      • 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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