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Augsut 23, 2016

IRS Employee Pleads Guilty to Conspiracy Involving Unauthorized Disclosure of IRS Records

On July 19, 2016, in the Western District of Tennessee, Internal Revenue Service (IRS) employee Michael Anthony Jones pled guilty to conspiracy to commit identity theft and unauthorized disclosure of information. [1] A criminal information was filed on the same date detailing the charge. [2]

According to the court documents, Jones, a resident of Memphis, Tennessee, was employed by the IRS as a contact representative at the IRS Service Center in Memphis. Jones had a personal relationship with his coconspirator, identified only as “TFB.” Jones knowingly and willfully agreed and conspired with TFB and others to commit identity theft and unauthorized disclosure of information. The object of this conspiracy was for TFB to obtain IRS taxpayer information from Jones and use such information for unjust financial enrichment. [3]

As part of the conspiracy, Jones used his access to the IRS databases, specifically the Remittance Transaction Research (RTR) system, to obtain taxpayer information without authorization. [4] According to the Internal Revenue Manual the RTR system provides access to remittance processing data and images, which generally include the front and back of a cancelled check or money order from a taxpayer, and a voucher, if submitted with the payment.

Jones obtained RTR printouts of cancelled checks made payable to the U.S. Treasury Department and other personal information submitted by taxpayers to the IRS. Jones then disclosed such information to his coconspirator, providing TFB with the printouts and Social Security Numbers (SSNs) of at least three taxpayers for use in fraudulent activities. TFB used the illegally obtained information to breach taxpayers’ bank accounts, obtain monies, and commit other financial fraud against the taxpayers and the IRS. Jones received a portion of the proceeds from TFB. [5]

Jones could face a maximum of five years’ imprisonment and a fine up to $250,000. [6] His sentencing is scheduled for November 21, 2016. [7]

  • [1] W.D. Tenn. Plea Agreement filed July 19, 2016.
  • [2] W.D. Tenn. Information filed July 19, 2016.
  • [3] Id.
  • [4] Id.
  • [5] Id.
  • [6] W.D. Tenn. Plea Agreement filed July 19, 2016.
  • [7] W.D. Tenn. Criminal Docket filed July 19, 2016.


  • California Tax Return Preparer Pleads Guilty to Federal Charges for Defrauding Clients

    On June 21, 2016, [1] in the Central District of California, Hollywood Hills resident Michael J. Calalang Cabuhat pled guilty to wire fraud and subscribing to file a false tax return. [2] Cabuhat had been arrested in April 2016 on charges of wire fraud, aggravated identity theft, and structuring financial transactions. [3]

    According to court documents, Cabuhat was the Executive Vice President and 50% owner of VisionQwest Resource Group, Inc., which operated VisionQwest Accountancy Group (VAG), located in Glendale, California, and later also did business as Icon Tax Group. From 2010 to April 2016, Cabuhat knowingly devised and participated in a scheme to defraud VAG’s clients and obtain money by means of false and fraudulent representations. [4]

    In furtherance of the scheme, Cabuhat defrauded customers of his tax preparation business in at least two ways. In some instances, Cabuhat would show a small refund on the copy of the tax return that he had prepared for his client, whereas he would claim a larger refund on the return that Cabuhat actually filed with the Internal Revenue Service (IRS). Without the client’s knowledge, Cabuhat would attach a form to the filed tax return directing the larger refund into a bank account he controlled. [5]

    In other cases, Cabuhat would falsely show a tax liability due on the client's copy of the tax return, whereas a refund would be claimed on the return that Cabuhat would file with the IRS. In these instances, Cabuhat would tell the client-taxpayer to make the "tax payment" directly to him so he could send the payment to the IRS. In fact, Cabuhat would keep the "tax payment" made by the client and direct the IRS to deposit the refund that Cabuhat claimed on the filed tax return into a bank account that he controlled. [6]

    Between 2010 and 2015, Cabuhat allegedly used this scheme to obtain and attempt to obtain more than $1.2 million in tax refunds that should have gone to 144 clients. [7]

    Cabuhat claimed to be an enrolled agent; however, the investigation confirmed that he is not, and has never been, an enrolled agent. As defined by the IRS, an enrolled agent is a person who has earned the privilege of representing taxpayers before the IRS, either by passing a three- part comprehensive IRS test covering individual and business tax returns or as a result of experience as a former IRS employee. This credential is the highest that the IRS awards. Cabuhat also stated that he was a licensed Certified Public Accountant (CPA) in the Phillipines, but he does not hold a CPA license issued in the United States. [8]

    > In addition to the tax refund scheme, in September 2014, Cabuhat structured cash deposits to avoid Federal bank reporting requirements. Specifically, Cabuhat made three separate cash deposits of $9,900 each over seven days, totaling $29,700. On the day after these structured transactions were completed, Cabuhat wrote a $24,500 check to purchase a Ferrari. [9]

    As part of the plea agreement, Cabuhat will be forbidden from engaging in any aspect of preparing tax returns other than for himself and his legal spouse, as well as from owning, operating, or managing a tax preparation business. He agreed to forfeit his 2001 Ferrari 360 Spider vehicle. Cabuhat admitted that he received at least $957,822 in unreported income and agreed to cooperate with the IRS to determine his tax liability and to pay additional taxes, penalties, and interest, including fraud penalties. Cabuhat will also be required to pay full restitution of at least $957,822 to the victims. [10]

    Cabuhat could face a maximum of 23 years’ imprisonment for the offenses. [11] Sentencing is scheduled for August 29, 2016. [12] The investigation was conducted jointly by agents of the Treasury Inspector General for Tax Administration and IRS Criminal Investigation. [13]

    • [1] C.D. Cal. Criminal Docket filed June 15, 2016.
    • [2] C.D. Cal. Plea Agreement filed June 15, 2016.
    • [3] C.D. Cal. Criminal Docket Report as of July 14, 2016.
    • [4] C.D. Cal. Information filed June 15, 2016.
    • [5] C.D. Cal. Criminal Complaint filed April 5, 2016.
    • [6] Id.
    • [7] Id.
    • [8] Id.
    • [9] Id.
    • [10] C.D. Cal. Plea Agreement filed June 15, 2016.
    • [11] Id.
    • [12] C.D. Cal. Criminal Docket Report as of July 14, 2016.
    • [13] C.D. Cal. Criminal Complaint filed April 5, 2016.


    • Texas Man Sentenced to 15 Years in Prison for Fraudulent Form 1099-OID (Original Issue Discount) Scheme

      On June 22, 2016, in the Southern District of Texas, Kenneth Robert Bruce was sentenced [1] after a jury convicted him on all 27 counts of an indictment. [2] Bruce had been charged with 26 counts of making false claims and one count of interfering with the administration of Internal Revenue laws. [3]

      According to the court documents, Bruce, while aiding and abetting others and while being aided and abetted by others, made and presented to the Internal Revenue Service (IRS) 26 fraudulent claims against the United States for payments of false income tax refunds by preparing and causing to be prepared U.S. Individual Income Tax Returns, Amended U.S. Individual Income Tax Returns, and a U.S. Income Tax Return for Estates and Trusts containing materially false, fictitious, and fraudulent IRS Forms 1099-0ID (Original Issue Discount) and other material false items. [4]

      From November 2008 through June 2012, Bruce corruptly endeavored to obstruct and impede the due administration of the Internal Revenue Code by preparing and filing numerous fraudulent federal income tax returns claiming false income tax refunds, in some cases of over $1 million, in a false IRS Form 1099-0ID scheme. Bruce attached to the various fraudulent income tax returns false IRS Forms 1099-0ID claiming that certain entities had paid large amounts of income to the taxpayer in the form of Original Issue Discount and claiming that the entities had withheld all or a large portion of such alleged income as federal tax withholdings. In truth, the taxpayers had no income from Original Issue Discount, and the entities named on the false Forms 1099-0ID did not make any of the alleged payments or withholdings. [5]

      On November 24, 2008, Bruce made an application to the IRS for, and was granted, an account for Filing Information Returns Electronically (FIRE account), which allowed him to electronically file information returns, such as Forms 1099-0ID, on behalf of entities. Using his FIRE account, Bruce filed many false Forms 1099-0ID, purportedly from the entities named on the forms, reporting income in the nature of Original Issue Discount paid to taxpayers and reporting withholdings of some or of all of the income. The false Forms 1099-0ID that Bruce filed with the IRS matched many of the false Forms 1099-0ID that he attached to the various fraudulent income tax returns that he prepared . [6]

      To prepare a fraudulent income tax return for a taxpayer, Bruce would ask the taxpayer to supply him with financial information related to his or her bank accounts, credit cards, lenders, and the names of the cell phone company, electric utility company, etc., with whom the taxpayer had executed contracts during the taxable year and the principal amounts owed on such contracts. Bruce would then use this information to create false Forms 1099-0ID. The false Forms 1099-0ID would name as entities paying income to the taxpayer and making federal tax withholdings the banks, credit card companies, mortgage companies and other lenders, and contracting companies that the taxpayer had supplied Bruce. On Bruce’s own fraudulent 2008 U.S. Individual Income Tax Return, he listed the U.S. Treasury as the payer on the false Forms 1099-0ID attached to his return . [7]

      Bruce charged the taxpayers substantial fees to prepare the false income tax returns and also collected from the taxpayers approximately 35% of all income tax refunds received, despite falsely placing the words "self-prepared" in the boxes meant for the signature of the paid income tax return preparer. [8]

      Bruce caused one taxpayer to file a frivolous lawsuit that named as a defendant an IRS civil collection officer who had taken steps to collect amounts wrongly refunded on one of the fraudulent amended tax returns prepared by Bruce. Bruce also prepared for that taxpayer a fraudulent 2009 U.S. Income Tax Return for Trusts and Estates for a trust allegedly related to that taxpayer. This trust tax return falsely claimed a fraudulent income tax refund of $351,856 of alleged withholdings of income from Original Issue Discount and falsely named the IRS civil collection officer as the fiduciary of the alleged trust. Bruce also told other taxpayers to create trusts in order to avoid or to stymie IRS civil collection activity . [9]

      Bruce was sentenced to a term of 180 months in custody, followed by three years of supervised release, and ordered to pay $3,342,962.15 in restitution to the IRS. [10]

      • [1] S.D. Tex., Sentencing Document filed June 22, 2016.
      • [2] S.D. Tex., Jury Verdict filed March 19, 2015.
      • [3] S.D. Tex., Indictment filed June 19, 2014.
      • [4] S.D. Tex., Indictment filed June 19, 2014.
      • [5] Id.
      • [6] Id.
      • [7] Id.
      • [8] Id.
      • [9] Id.
      • [10] S.D. Tex., Sentencing Document filed June 22, 2016.


      • Three of Five Individuals Arrested for Fraud in IRS Phone Scam Indicted

        TIGTA agents arrested Dennis Delgado Cabellero and Jennifer Valerino Nunez in Miami, FL, on May 23, 2016, for wire fraud and conspiracy to commit wire fraud. The arrests were based on criminal complaints alleging that they were involved in schemes to impersonate Internal Revenue Service (IRS) agents and that they used intimidation and threats to obtain money from victims by falsely representing that the victims owed back taxes or other fees. According to the court documents, the suspects are responsible for almost $2 million in schemes that defrauded more than 1,000 victims. [1]

        On June 8, 2016, in the Eastern District of Arkansas, two of the five suspects, Dennis Delgado Caballero and Jennifer Valerino Nuñez, were indicted for conspiracy to commit wire fraud and wire fraud for their participation in an impersonation scheme. [2] On June 21, 2016, a third suspect, Arnoldo Perez Mirabal, was indicted in the Northern District of Texas for his role in the impersonation scheme. [3] All three had previously been arrested for the offenses in the Southern District of Florida on May 23, 2016. [4]

        According to the court documents, from about August 2015 until approximately May 2016, Caballero and Nuñez knowingly and intentionally conspired with each other and others to devise and participate in a scheme to obtain money by means of false and fraudulent pretenses. [5] Mirabal is alleged to have willingly participated in the same or similar activities, and also to have executed a scheme to defraud through false representations. [6]

        Pursuant to the conspiracy involving Caballero and Nuñez, taxpayers across the United States received telephone calls from persons who falsely represented themselves to be employees of the IRS. The callers would advise taxpayers that they owed money to the IRS, when in fact they did not. The callers would then use various methods of intimidation and threats to convince taxpayers to provide money to resolve their supposed tax debt. Taxpayers were instructed to go to a nearby business that offered wire transfer services and to wire the money immediately. Typically, the victims were provided with a fictitious IRS employee’s name and the State where the money was to be sent. The taxpayers then wired the money to the name and State provided, generally using either MoneyGram or Walmart-2- Walmart wire transfer services. [7]

        Caballero and Nuñez, using fictitious identities, collected the wired money. The two were known to have travelled together to at least 18 States to collect money wired by unsuspecting taxpayers. They used approximately 31 different false identities and received monies totaling over $2 million from approximately 1,000 victims. [8]

        Similarly, beginning around September 2015, and continuing until about April 2016, Mirabal knowingly and willing conspired with others in an impersonation scheme. Mirabal and others made unsolicited phone calls to innocent taxpayers and claimed to be employees of the IRS. The callers would tell taxpayers that they owed the IRS an outstanding debt and typically threatened the taxpayers with arrest or the filing of a lawsuit if the debt was not immediately paid. Mirabal directed the taxpayers, just as Caballero and Nuñez did, to wire the funds via MoneyGram or Walmart-2-Walmart services. [9] The impersonators often provided identification information, including IRS badge numbers, department and work titles, and telephone numbers that appeared to be legitimately associated with the IRS. [10]

        As a result of the false representations, the victims would wire money to the impersonators to avoid the threatened actions. Mirabal told one victim she needed to wire the money within 10 minutes. He further told her not to tell anyone what she was doing and to stay on the telephone with him throughout the entire transaction. As of May 16, 2016, Mirabal had received $130,244.78 from 255 unique senders via MoneyGram and/or Walmart-2-Walmart transactions conducted between September 2015 and April 2016. [11]

        Additional legal proceedings are anticipated for the remaining two subjects.

        • [1] E.D. Ark. Criminal Docket filed June 8, 2016; N.D. Tex. Criminal Docket filed June 21, 2016.
        • [2] E.D. Ark. Indictment filed June 8, 2016.
        • [3] N.D. Tex. Indictment filed June 21, 2016.
        • [4] E.D. Ark. Criminal Docket filed June 8, 2016; N.D. Tex. Criminal Docket filed June 21, 2016.
        • [5] E.D. Ark. Indictment filed June 8, 2016.
        • [6] N.D. Tex. Indictment filed June 21, 2016.
        • [7] E.D. Ark. Indictment filed June 8, 2016.
        • [8] Id.
        • [9] N.D. Tex. Indictment filed June 21, 2016.
        • [10] N.D. Tex. Criminal Complaint filed May 16, 2016.
        • [11] Id.


        • Jamaican Citizen Sentenced for Role in International Lottery Scheme

          On June 10, 2016, in the Northern District of West Virginia, Davel Godfrey Young was sentenced for conspiracy to commit wire fraud as a result of his role in an international lottery scheme. [1] Young and coconspirator Zicko Peterkin were indicted in September 2013, [2] and Young pled guilty to the conspiracy in November 2015. [3]

          According to the court documents, Young and Peterkin, who both were residents and citizens of Jamaica, conspired with each other and others to fraudulently obtain money from U.S. citizens through an international lottery scam. [4]

          As part of their conspiracy, Young and his coconspirators obtained the phone numbers and e-mail addresses of numerous U.S. citizens and then made unsolicited phone calls or sent unsolicited e-mail messages to them. In these communications, the victims were falsely informed that they had won a multi-million dollar lottery prize and a new Mercedes Benz or BMW vehicle. Young and his coconspirators advised the victims that they were required to pay taxes and processing fees prior to the release of the lottery prizes. [5]

          In furtherance of the scheme, Young and his coconspirators sent to the victims fraudulent documentation that purported to be official Government forms and unlawfully portrayed the names and symbols of the Internal Revenue Service (IRS), the Department of the Treasury, and the Federal Reserve Board. Some of these fraudulent documents also solicited personal identifying information, such as address, e-mail address, phone number, and date of birth. Some victims received e-mail messages and phone calls from an individual fraudulently impersonating the Commissioner of the IRS and claiming to represent the IRS in facilitating the release and delivery of the lottery prizes. Additionally, Young and his coconspirators e-mailed images of forged multi-million dollar cashier’s checks to victims, showing them as the payees of the checks [6]

          Young was sentenced to 30 months in prison, with credit for time served since August 2015. Following his prison sentence, Young will be on supervised release for 24 months and will be removed from the United States. Young was further ordered to pay $232,118.78 in restitution to victims. [7]

          • [1] N.D. W.Va. Judgment filed June 13, 2016.
          • [2] N.D. W.Va. Indictment filed Sep. 4, 2013.
          • [3] N.D. W.Va. Plea Agreement filed Nov. 24, 2015.
          • [4] N.D. W.Va. Indictment filed Sep. 4, 2013.
          • [5] Id.
          • [6] Id.
          • [7] N.D. W.Va. Judgment filed June 13, 2016.


          • Individual Pleads Guilty to Role in Jamaican Lottery Scheme

            On May 19, 2016, Daile Ferguson, a/k/a Normandale Ferguson, pled guilty [1] in the Southern District of New York to conspiracy to commit wire fraud associated with a Jamaican lottery scheme. [2] Ferguson had been arrested in December 2015 for the offense [3] and was indicted in February 2016. [4]

            According to the court documents, Ferguson was involved in a scheme to obtain money from elderly victims by informing them that they had won substantial cash prizes in an international sweepstakes lottery, but that before they could claim their prizes they had to pay fees and taxes. The victims were contacted by telephone, fax, and e-mail and were requested to pay fees and taxes on the winnings; however, there was no sweepstakes lottery and the victims never received any cash prizes. The victims sent hundreds of thousands of dollars in cash and checks to conspirators in the United States and in Jamaica. Ferguson received more than $430,000 from approximately 87 different individuals throughout the United States. Of those 87 individuals, approximately 43 were over seventy years old and approximately 59 were over sixty years old. [5]

            One of the victims, a resident of Connecticut, received a letter purporting to be from a “tax return officer” with the Internal Revenue Service (IRS). That letter advised that the victim had won $750,000, which was processed through the IRS office, and that the IRS "has also verified and has recorded the payment.” The letter also stated that insurance fees had to be paid before the victim could receive the money. The victim also received several telephone calls from various individuals, including an individual who identified herself as an employee of the IRS and demanded that the victim make payments in order to receive the supposed winnings. As a result of the telephone calls and e-mails that the victim received from the conspirators, the victim sent approximately $20,000 through various means to numerous individuals, including Daile Ferguson. [6]

            When interviewed, Ferguson admitted that in or around 2011 he began collecting money from individuals located in the United States on behalf of his acquaintances in Jamaica and kept a portion of the money he collected for himself. He also admitted that he heard that at least one of the individuals on whose behalf he collected money was involved in a lottery scheme. He admitted that "something felt wrong" and "not right" about collecting the money. [7]

            Sentencing is scheduled for September 9, 2016. [8]

            • [1] S.D. N.Y. Plea Allocution filed May 19, 2016.
            • [2] S.D. N.Y. Indictment filed Feb. 17, 2016.
            • [3] S.D. N.Y. Bail Disposition filed Dec. 22, 2015.
            • [4] S.D. N.Y. Indictment filed Feb. 17, 2016.
            • [5] S.D. N.Y. Crim. Compl. filed Dec. 16, 2015.
            • [6] Id.
            • [7] Id.
            • [8] S.D. N.Y. Crim. Docket as of June 27, 2016.


            • July 20, 2016

              Delaware Restaurant Owner Indicted for Attempting to Bribe an IRS Employee

              On June 7, 2016, in the District of Delaware, Domenico Procope was indicted for bribery of a public official. [1] Procope had been arrested on May 18, 2016, [2] for knowingly and corruptly offering and promising something of value to an employee of the Internal Revenue Service (IRS) with the intent to influence official acts. [3]

              According to the court documents, Procope is a Delaware resident who owns and operates several restaurant establishments in the State. Procope had accumulated a significant business-related and personal income tax liability, which, as of February 2016, had grown to a total liability of approximately $531,000. Of that amount, Procope’s personal liability was approximately $434,000. [4]

              Around October 2015, an IRS revenue officer was assigned to Procope’s IRS case and was working to resolve his tax liabilities. In December 2015, the revenue officer requested a personal financial statement from Procope. When Procope failed to provide the requested documentation, the revenue officer issued a Notice of Levy to the insurance company that maintains Procope’s retirement account. As a result, approximately $16,000 was turned over to the IRS from Procope’s retirement account.

              Prompted by the levy on his retirement account, in February 2016, Procope communicated with the revenue officer several times by telephone and in person to discuss his income tax liability. During these contacts, Procope offered to pay the IRS revenue officer a sum of money in exchange for the revenue officer’s taking the official action of reducing or eliminating his income tax liabilities with the IRS. [5] Specifically, Procope told the revenue officer he wanted “this to go away,” referring to his personal tax liability. Procope indicated he was not interested in submitting an offer in compromise to settle his IRS debts and told the revenue officer that he would give her $70,000 to make his tax debt “go away.” [6]

              During a personal meeting at Procope’s place of business in Bear, Delaware, immediately after the departure of Procope’s accountant from the meeting, Procope reiterated that he had $70,000 to resolve his tax debt. Procope proposed he pay $40,000 to the Government and $30,000 in cash for the revenue officer. Procope said the cash payment would be in exchange for a reduction in his IRS tax liabilities and indicated that he expected the revenue officer, in her official capacity, to cause the IRS to issue a letter stating he had satisfied his personal liability of approximately $434,000. [7]

              The following day, the revenue officer again met with Procope. During this meeting, Procope gave the revenue officer a check in the amount of $40,000, made payable to the IRS, with the memo of “paid in full” written on the check. Additionally, he gave the revenue officer $30,000 in cash. At the end of the meeting, Procope requested to meet with the revenue officer one or two weeks later to resolve his business-related tax debt. [8]

              Procope could face a maximum penalty of 15 years’ imprisonment. Additional legal proceedings are anticipated.

              • [1] D. Del. Indict. filed June 7, 2016.
              • [2] D. Del. Executed Arrest Warrant filed May 18, 2016.
              • [3] D. Del. Crim. Complaint filed May 16, 2016.
              • [4] Id.
              • [5] D. Del. Indict. filed June 7, 2016.
              • [6] D. Del. Crim. Complaint filed May 16, 2016.
              • [7] D. Del. Indict. filed June 7, 2016.
              • [8] D. Del. Crim. Complaint filed May 16, 2016.


              • IRS Employee Sentenced to 30 Months in Prison for Taking Bribe

                On May 13, 2016, in the Western District of Washington at Seattle, former Internal Revenue Service (IRS) employee Paul G. Hurley was sentenced [1] after a jury found him guilty [2] of receiving a bribe and receiving an illegal gratuity in his capacity as a public official. [3]

                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 had been employed as an IRS revenue agent since June 2009 and was assigned to the Seattle, Washington IRS office. As a part of Hurley’s official duties, he conducted audits of Federal tax returns to determine whether taxpayers had correctly reported and paid their tax liability to the IRS. [4]

                In July 2015, a taxpayer who is part owner of a business that operated 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 the Internal Revenue Code (IRC) does not allow deductions or credits for a business whose activities consist of trafficking in illegal substances. Hurley noted that the taxpayer would be taxed on the business’s gross revenue with limited deductions. However, during the audit Hurley seemed sympathetic to the taxpayer regarding the IRC’s prohibition against deductions and credits for businesses in the marijuana industry and talked about being unhappy at the IRS. [5]

                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 that he had saved the taxpayer over $1 million in the audit. He further indicated that 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 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. [6]

                During a meeting on September 16, 2015, Hurley accepted $5,000 from the taxpayer in connection with the conduct of 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. [7]

                Hurley was sentenced to 30 months in prison, followed by three years of supervised probation and 100 hours of community service. [8] Hurley is appealing his conviction and sentence. [9]

                • [1] W.D. Wash. Judgment filed May 13, 2016.
                • [2] W.D. Wash. Verdict Form filed Feb. 12, 2016.
                • [3] W.D. Wash. Judgment filed May 13, 2016.
                • [4] W.D. Wash. Crim. Complaint filed Sep. 21, 2015.
                • [5] Id.
                • [6] Id.
                • [7] Id.
                • [8] W.D. Wash. Judgment filed May 13, 2016.
                • [9] W.D. Wash. Notice of Crim. Appeal filed May 27, 2016.


                • IRS Employee Pleads Guilty to Identity Theft in Connection with an Audit

                  On May 10, 2016, in the Northern District of Georgia, Internal Revenue Service (IRS) employee Creshika Wise pled guilty to aggravated identity theft in connection with a fraudulent scheme. [1] Wise had been indicted for mail fraud, wire fraud, and aggravated identity theft in January 2016, [2] and was subsequently arrested for the offenses in Atlanta, Georgia. [3]

                  According to the court documents, at all times relevant, Wise was an IRS revenue agent in Atlanta. Her official duties as a revenue agent included regularly auditing individual, business, and corporate tax returns, and calculating taxpayers’ correct tax liability based on her examinations. [4]

                  In approximately August 2013, Wise was assigned to audit an individual tax return jointly filed by two married taxpayers. The taxpayers had authorized a certified public accountant (CPA) to transact business with the IRS on their behalf. Due to erroneous information received from a third party, the taxpayers had initially underreported and underpaid their Federal tax and, upon correction of the error, owed $758,846 in additional personal income tax, plus interest. The taxpayers, through their CPA, agreed with this assessment. [5]

                  Wise subsequently devised a scheme to knowingly defraud the taxpayers and to obtain money by means of false and fraudulent representations. Wise’s scheme was designed to take all or part of the additional Federal tax and interest owed to the IRS by these taxpayers and keep it for herself. Wise created a fictitious IRS Form 4549, Income Tax Examination Changes, for the taxpayers and placed the fictitious form in the IRS’s files. The fictitious Form 4549 showed a balance due of only $282,363 rather than the $758,846 already agreed upon. Wise also forged the signature of the taxpayers’ CPA on the fictitious form. [6]

                  Wise then opened a checking account in the name “Creshika C. Wise Sole Prop D/B/A U.S. Treasury and Accounting Service.” She later sent a deceptive e- mail to the taxpayer-husband instructing him to send a wire transfer to this account, which she described as being titled in the name “U.S. Treasury and Accounting Service,” failing to disclose that the bank account belonged to her personally rather than to the IRS. [7]

                  Wise also attempted to open a bank account through the Internet at a different financial institution, this time in the names of the married taxpayers. As a follow-up, Wise sent a signature card via facsimile to the bank and called the bank impersonating the taxpayer-wife in order to inquire about the status of the new account. In furtherance of her scheme, Wise changed, or caused to be changed, the taxpayers’ addresses in the IRS computer system, from their actual residence to a United Parcel Service mailbox opened and controlled by Wise. [8]

                  Wise will face a mandatory minimum term of two years’ imprisonment for the identity theft. [9] Her sentencing is scheduled for August 3, 2016. [10]

                  • [1] N.D. Ga. Plea Agr. filed May 10, 2016; N.D. Ga. Information filed May 10, 2016.
                  • [2] N.D. Ga. Indictment filed Jan 14, 2016.
                  • [3] N.D. Ga. Executed Arrest Warrant filed Feb. 5, 2016.
                  • [4] N.D. Ga. Indictment filed Jan 14, 2016.
                  • [5] Id.
                  • [6] Id.
                  • [7] Id.
                  • [8] Id.
                  • [9] N.D. Ga. Plea Agr. filed May 10, 2016.
                  • [10] N.D. Ga. Criminal Docket filed May 10, 2016.


                  • Jury Finds IRS Employee Guilty of Defrauding the Government with False Tax Returns

                    On May 23, 2016, at the conclusion of a five-day trial [1] in the Eastern District of California, a jury reached a unanimous verdict finding Internal Revenue Service (IRS) employee Kimberly Brown-English guilty on all six counts of an indictment charging her with Offenses by Officers and Employees of the United States (U.S.) for preparing and filing false Federal tax returns. [2]

                    According to the indictment, Brown-English was employed by the IRS at the Fresno Service Center, Fresno, California, at all times relevant to the charges. Brown-English initially was employed by the IRS in 2002 and worked as a seasonal Data Transcriber from 2004 to 2012. She was promoted in September 2012 to the position of Correspondence Examination Technician. Her primary duty was to provide assistance to taxpayers throughout the U.S. that were under IRS examination by educating them on tax laws and helping them to resolve IRS examination issues. Brown-English was required to complete training courses for this position that included the topics of Earned Income Tax Credit, Child Tax Credits, claimed dependents, and filing status. [3]

                    In 2012 and 2013, respectively, Brown-English prepared and filed her own 2011 and 2012 Federal income tax returns, in which she falsely claimed two dependents and listed them as her “parent” and her “nephew.” She also claimed her filing status was Head of Household. The tax returns each contained materially false items. Neither of the individuals claimed as dependents had a familial relationship with Brown- English. One lived with her during 2011 and 2012, but paid rent and had an income. The other was homeless and did not reside with Brown-English. As a result of Brown-English’s false returns, made under penalty of perjury, she obtained refunds from the IRS to which she was not entitled. [4]

                    Additionally, between January 2012 and April 2013, Brown-English created opportunities for other individuals to defraud the U.S. by preparing and filing fraudulent Federal income tax returns for them. Brown-English prepared and filed the 2011 and 2012 returns for one individual falsely claiming dependents, Earned Income Tax Credit, Child Tax Credit, and Head of Household filing status. In fact, the dependents did not live with the taxpayer more than half of the year, nor was more than 50% support provided for the dependents, thus making the taxpayer ineligible to claim them as dependents, file as Head of Household, or receive the Earned Income Credit and Additional Child Tax Credit. [5]

                    During the same time period, Brown-English prepared and filed the 2011 and 2012 tax returns of a second individual with similar false claims. On the individual’s 2011 return, five dependents were fraudulently claimed. One dependent was claimed for 2012. The returns also contained false claims for the Child Tax Credit, the Additional Child Tax Credit, the Earned Income Tax Credit, and Head of Household filing status. Again, this taxpayer did not meet the eligibility requirements for claiming the dependents or the associated tax credits. As a result of Brown- English’s preparation and submission of the false returns for these two individuals, they had the opportunity to falsely decrease their tax liability and obtain refunds from the IRS to which they were not entitled. [6]

                    Sentencing is scheduled for August 15, 2016. [7]

                    • [1] E.D. Cal. Criminal Docket as of May 25, 2016.
                    • [2] E.D. Cal. Verdict Form filed May 23, 2016.
                    • [3] E.D. Cal. Indictment filed Oct. 9, 2014.
                    • [4] Id.
                    • [5] Id.
                    • [6] Id.
                    • [7] E.D. Cal. Criminal Docket as of May 25, 2016.


                    • Five Individuals Arrested for Fraud in IRS Phone Scams

                      Please click on the following link to access this press release: Five Individuals Arrested for Fraud in IRS Phone Scams

                      Ft Lauderdale Man Arrested for Threatening IRS Employee With a Shotgun

                      On May 20, 2016, in the Southern District of Florida, Ft. Lauderdale resident Bruce Hacker was arrested [1] and charged with forcible interference with an employee of the U.S. Government. [2]

                      According to the court documents, Hacker is charged with forcibly assaulting, intimidating, and interfering with an Internal Revenue Service (IRS) revenue officer by using a deadly weapon, to wit, a shotgun, while the revenue officer was engaged in the performance of his official duties. [3]

                      On May 19, 2016, the IRS revenue officer went to Hacker’s residence regarding an official IRS matter. The revenue officer identified himself and displayed his credentials to a female occupant who came to the door. After answering the door, the female told Hacker that an individual from the IRS was at the front door requesting to speak with him. Hacker said, “I’ll take care of this” and retrieved his shotgun. [4]

                      A short time later, Hacker opened the door, pointed the loaded shotgun at the revenue officer, shouted expletives at him, and told him to get off of his property, which the employee did. [5]

                      Hacker was not home when agents from the Treasury Inspector General for Tax Administration (TIGTA) responded to the incident; however, he self-surrendered to the U.S. Marshals Service the following morning. [6]

                      Additional legal actions are anticipated.
                      • [1] S.D. Fla. Crim. Docket filed May 20, 2016.
                      • [2] S.D. Fla. Crim. Complaint filed May 20, 2016.
                      • [3] Id.
                      • [4] Id.
                      • [5] Id.
                      • [6] Id.


                      • June 22, 2016

                        U.S. Postal Service Employee and Coconspirator Indicted for Stealing IRS Refund Checks from the Mail

                        On May 5, 2016, in the Southern District of Florida, Tara Marshea Tucker and David Earl Tucker were indicted for a conspiracy to steal Government funds from the mail and aggravated identity theft. [1]

                        According to the court documents, Tara and David Tucker knowingly and willfully conspired to steal and convert to their own use for the purpose of unjust enrichment, U.S. Treasury tax refund checks issued to other persons. As part of the conspiracy, Tara Tucker, a U.S. Postal Service employee, would steal Federal income tax refund checks belonging to other individuals while in the performance of her duties as a postal carrier and provide them to David Tucker. David Tucker was to cash the stolen checks and distribute the proceeds among the conspirators. [2]

                        In July 2015, Tara Tucker stole a Federal income tax refund check payable to another in the amount of $8,578.47, which had been entrusted to her and came into her possession with the intent she deliver it by mail. She then provided the refund check to David Tucker, who knew the check had been stolen from an authorized U.S. mail depository in Miami, Florida. [3]

                        Additionally, during and in relation to the felony offense of theft of Government funds, Tara and David Tucker knowingly transferred, possessed, and used, without lawful authority, the means of identification of another person, to wit, the name and address of the individual to which the refund check had been issued. In August 2015, David Tucker sent a text message to an individual with the same name as the victim in an effort to cash the check and subsequently sent another text with the victim’s address, which was consistent with the address on the refund check. The following day, David Tucker was found in possession of the stolen $8,578.47 refund check. [4]

                        Each could face a maximum of 10 years in prison for the theft of Government funds, plus two additional years for the aggravated identity theft. [5] Additional legal proceedings are anticipated.

                        • [1] S.D. Fla. Indictment filed May 6, 2016.
                        • [2] Id.
                        • [3] Id.
                        • [4] Id.
                        • [5] Id.


                        • Woman Falsely Claims to Be an IRS Employee to Obtain Loans and Purchase Vehicles

                          On May 2, 2016, in the Western District of New York, Tamara Ward pled guilty to a superseding information charging her with fraud and related activity in connection with identification documents. [1] Ward had been indicted for bank fraud and making false statements on loan applications in September 2015, [2] and she was taken into custody by Treasury Inspector General for Tax Administration special agents. [3]

                          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 ever been, employed by the IRS. [4]

                          As a result of Ward’s false statements on the loan applications, the banks’ total aggregate loss was $14,914.75. Ally Financial, Inc. disbursed $9,914.75 toward Ward’s purchase of a Chevrolet Avalanche, and JPMorgan Chase disbursed $5,000 toward her purchase of a Chevrolet Impala. [5]

                          Ward will be required to pay restitution to JPMorgan Chase and agreed to forfeit the Chevrolet Avalanche. Ward could face a possible sentence of one year in prison and a fine of $100,000. [6] Sentencing is scheduled for July 29, 2016. [7]

                          • [1] W.D. N.Y. Plea Agreement filed May 2, 2016; W.D. N.Y. Superseding Information filed May 2, 2016.
                          • [2] W.D. N.Y. Indict. filed Sep. 17, 2015.
                          • [3] W.D. N.Y. Petition and Order for Writ of Habeas Corpus Ad Prosequendum filed Sep. 22, 2015.
                          • [4] W.D. N.Y. Indict. filed Sep. 17, 2015.
                          • [5] W.D. N.Y. Plea Agreement filed May 2, 2016.
                          • [6] Id.
                          • [7] W.D. N.Y. Criminal Docket filed Sep. 17, 2015.


                          • Two IRS Employees Arrested for Preparing and Filing Fraudulent Tax Returns

                            On April 15, 2016, in the Eastern District of California, Internal Revenue Service (IRS) employees Della Ornelas and Randall Ruff were arrested for their roles in the preparation and filing of fraudulent Federal tax returns. [1] The day prior to their arrests, a 38-count indictment was filed charging the two with aiding and assisting in the preparation of fraudulent income tax returns and offenses by officers and employees of the United States for making fraudulent tax returns. [2]

                            According to the court documents, Ornelas and Ruff are both IRS employees in Fresno, California. Ruff has been employed by the IRS for approximately 31 years, and Ornelas for approximately 25 years. The two have been married since 2012 and lived together for approximately 20 years prior to that time. [3]

                            Between 2005 and 2012, Ornelas and Ruff prepared and filed, or caused to be filed, numerous fraudulent Federal income tax returns for themselves, their family members, their friends, and others. They knowingly placed false information on the returns to reduce the amount of tax liability or to increase the amount of the refund. [4]

                            Specifically, Ornelas willfully aided in the preparation and presentation of 20 Forms 1040, U.S. Individual Income Tax Return, all of which contained fraudulent information, such as falsely claiming Head of Household status and/or false dependency exemptions. These false claims resulted in tax higher refunds for the taxpayers. Additionally, Ruff willfully aided in the preparation and filing of 14 Forms 1040, all containing similar types of fraudulent information. [5]

                            Many of the fraudulent refunds, when paid, had portions electronically deposited into bank accounts owned or controlled by Ornelas or Ruff, often without the taxpayer’s knowledge. [6]

                            In addition to the fraudulent returns of others, Ornelas, as an employee of the IRS, and in connection with a U.S. revenue law, knowingly made and signed her own Federal income tax return for tax year 2009, making false claims as to Head of Household status and dependents, resulting in a tax loss of $6,262. Ruff made the same false claims on three of his own tax returns for Tax Years 2009, 2010, and 2011, which resulted in an aggregate tax loss of $10,956. [7]

                            As a result of their fraudulent conduct, Ornelas and Ruff defrauded the United States in a total amount of $145,561. [8]

                            Additional legal proceedings are anticipated for both.

                            • [1] E.D. Cal. Executed Arrest Warrant Ornelas filed Apr. 15, 2016; E.D. Cal. Executed Arrest Warrant Ruff filed Apr. 15, 2016.
                            • [2] E.D. Cal. Indictment filed Apr. 14, 2016.
                            • [3] Id.
                            • [4] Id.
                            • [5] Id.
                            • [6] Id.
                            • [7] Id.
                            • [8] Id.


                            • IRS Employee Pleads Guilty to Unauthorized Access and Disclosure of Tax Information

                              On March 28, 2016, in the District of Massachusetts, Internal Revenue Service (IRS) employee Nicole Johnson pled guilty [1] to an Information charging her with conspiracy to make unauthorized accesses to a Government computer for financial gain and disclosure of tax return information. [2]

                              According to the court documents, Johnson was employed as an IRS contact representative in Andover, Massachusetts. In her capacity as a contact representative, Johnson was responsible for responding to telephone inquiries from taxpayers concerning issues that included, among other things, the taxpayers’ Federal income tax returns and Federal income taxes owed. For the purpose of performing her official duties, Johnson had access to the IRS databases housing personal identifying information and Federal income tax information for millions of U.S. taxpayers. Johnson understood, and was required to certify on a yearly basis, that she could only access this information for an official business purpose and that willful unauthorized access could result in serious penalties, including prosecution. [3]

                              Between January 2011 and April 2014, Johnson knowingly agreed with a coconspirator to intentionally access a computer without authorization and exceed her authorized access in order to obtain information from the IRS for the purpose of private financial gain and in furtherance of a criminal act, namely the unauthorized disclosure of tax return and tax return information. Johnson and her coconspirator, who worked at a debt collection agency in Andover, lived together. He knew she worked for the IRS, had access to taxpayer information, and was not permitted to disclose such information to unauthorized persons. [4]

                              It was the object of the conspiracy to abuse Johnson’s access to the IRS databases and to obtain information on several taxpayers associated with her coconspirator. It was further the object of the conspiracy to disclose the victim taxpayers’ information to Johnson’s coconspirator, specifically to assist him in a child support dispute, aid in his debt collection work, seek a reduction of his own Federal income tax, and delay IRS levy and garnishment proceedings on his tax account. Johnson’s coconspirator provided her with the names and/or other information pertaining to the victims in order for Johnson to perform searches in the IRS databases. [5]

                              One victim (Victim 1) was the coconspirators’ girlfriend from approximately 2009 to 2010 and resided with him at a residence in Lawrence, Massachusetts at various times during that period. After Victim 1 filed for child support against the coconspirator in probate court in 2011, the coconspirator sent a text to Johnson regarding access to Victim 1’s information. Johnson subsequently made accesses to the IRS databases and provided the victim’s taxpayer information to her coconspirator via text message. In 2012, just days prior to a child support probate court hearing, Johnson again accessed the taxpayer information of Victim 1 and sent the information by text to her coconspirator. Shortly thereafter, the coconspirator filed a pre-trial memorandum in probate court, which stated that he intended to introduce the “Tax Returns of Mother” (Victim 1), and listed Johnson as a probate trial witness. [6]

                              Another victim (Victim 2) also had been a previous girlfriend of Johnson’s coconspirator from approximately 2003 to 2009, and had lived with him at the Lawrence residence. Due to the coconspirator’s credit issues, among other things, Victim 2 had agreed to apply for and put the mortgage of the Lawrence residence in her name. Around February 2012, at her coconspirator’s direction, Johnson began accessing Victim 2’s taxpayer information, including information pertaining to the victim’s deduction of mortgage interest on the Lawrence residence. During the same time Johnson was accessing the account, her coconspirator sent a text message to Victim 2 stating, “Why do u keep stealing my money,” referring to the deduction of mortgage interest on the Lawrence residence. Several months later in 2012, again at her coconspirator’s direction, Johnson accessed Victim 2’s tax information, including the deduction of approximately $13,109 in mortgage interest. The following day, the coconspirator filed his Federal income tax return declaring a home mortgage interest deduction in the same amount, $13,109. [7]

                              In 2013, Johnson accessed the IRS databases and obtained taxpayer information to aid the coconspirator in his debt collection work. Also in 2013, Johnson accessed her coconspirator’s account and placed a delay notice on his taxes due and owing for tax years 2009, 2010, and 2011. In April 2014, Johnson again accessed her coconspirator’s tax information to assist him concerning his Federal tax matters. [8]

                              Johnson’s sentencing is scheduled for June 20, 2016. [9]

                              • [1] D. Mass. Criminal Docket filed Sep. 23, 2015.
                              • [2] D. Mass. Information filed Sep. 23, 2015.
                              • [3] Id.
                              • [4] Id.
                              • [5] Id.
                              • [6] Id.
                              • [7] Id.
                              • [8] Id.
                              • [9] D. Mass. Criminal Docket filed Sep. 23, 2015.


                              • Maryland Man Living in the United States Illegally Pleads Guilty to Money Laundering Conspiracy

                                Kaushik K. Modi, also known as Kaushik K. Patel, [1] a native of India who is living illegally in the United States, pled guilty on March 22, 2016, in the District of Maryland, to m oney laundering c onspiracy for his role in an impersonation fraud scheme. [2]

                                According to the court documents, s ometime in early 2014, Modi was recruited by other Indian nationals to participate in a scheme to launder millions of dollars in fraud proceeds obtained from individual victims through a variety of schemes. [3]

                                Modi was instructed via text messages received on his cell phone to purchase large numbers of stored value cards, principally Green Dot cards, and to forward the PIN numbers of the cards to other unidentified individuals. After forwarding the PIN numbers, MODI would receive instructions to use the cards, which had been loaded with monetary value by the coconspirators, to purchase money orders, principally MoneyGram money orders at Walmart stores. He was further instructed to then deposit those money orders into bank accounts, either in Modi's name or in the names of third parties.

                                The money loaded onto the stored value cards by the coconspirators was derived from a variety of fraud schemes. Some of the money was derived from calls made by persons who impersonated Internal Revenue Service (IRS) employees to convince innocent taxpayers that they owed taxes to the IRS and needed to send money to the coconspirators to avoid arrest and incarceration. Other money was derived by offering merchandise for sale on the Internet and then failing to provide the merchandise once money was received from the victim-purchasers. On at least two occasions, victims of the IRS impersonation fraud deposited money directly into accounts held in Modi's name. [4]

                                Between January 1, 2014 and March 24, 2015, Modi deposited into his bank accounts 241 money orders totaling $2,077,308.20, all in furtherance of the instructions he received from the coconspirators. Moreover, Modi frequently purchased the money orders using stored value cards that were activated by using the identification information of persons who were the victims of identity theft. At the time of his arrest, MODI had the identification documents of numerous third parties in his possession, and he admitted to investigators that he knew "something was not right" about the source of the money and the manner in which he was converting the money from stored value cards to money orders to bank deposits. Accordingly, Modi knew that the money represented proceeds from some form of unlawful activity, and that the purpose of the transactions was to conceal or disguise the source, nature, location, ownership, or control of the proceeds. [5]

                                As part of the plea agreement, Modi may be subject to deportation or other loss of immigration status, as well as to an order of restitution . Additionally, the Court will order the forfeiture of all property involved in the money laundering conspiracy, including all funds seized from accounts held in Modi’s name, in the name of his alias, and in the name of his business, Modi Management. [6]

                                Modi could face a maximum penalty of 20 years' imprisonment and a fine of $500,000 or twice the value of the property involved in the transaction, whichever is greater. [7] Modi’s sentencing is set for May 12, 2016. [8]

                                • [1] D. Md. Criminal Docket filed May 27, 2015.
                                • [2] D. Md. Plea Agreement filed Mar. 22, 2016.
                                • [3] Id.
                                • [4] Id.
                                • [5] Id.
                                • [6] Id.
                                • [7] Id.
                                • [8] D. Md. Criminal Docket filed May 27, 2015.


                                • May 25, 2016

                                  Two Missouri Men Sentenced in an Elaborate Conspiracy to Defraud the Government

                                  On March 2, 2016, in the Western District of Missouri, Southern Division, Wesley Vernon Delport and Alton Louis Vaughn, Sr. were both sentenced for their roles in a conspiracy to defraud the United States. [1] Delport and Vaughn were initially 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] Each pled guilty to the conspiracy in 2015. [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 United States 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 that 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. He claimed that he was a “Sovereign National” and that the IRS was “a bogus agency not of government.” He further claimed that he “is a NON-TAXPAYER” and that, as part of the Cherokee Republic of North America, he is not subject to taxation because of Indian treaties entered into by the United States. [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 that he had been to Delport’s business to collect the documents. Vaughn knew the revenue officer had not been to Delport’s business and that 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 by 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 that he was authorized to represent the taxpayers before the IRS and charged them for travel expenses to handle their tax matters. [14]

                                  Delport was sentenced to 46 months in prison; Vaughn was sentenced to 42 months. Both will be on supervised release for three years following incarceration. Delport and Vaughn are jointly and severally liable for restitution to the IRS in the amount of $585,733. Delport was also fined $5,000, and Vaughn was ordered to pay an additional $3,595 in restitution to an individual. [15] Delport is appealing his sentence. [16]

                                  The investigation was conducted jointly by agents of TIGTA and IRS Criminal Investigation.

                                  • [1] W.D. Mo. Judgment Wesley Delport filed Mar. 7, 2016; W.D. Mo. Judgment Alton Vaughn filed Mar. 7, 2016.
                                  • [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; W.D. Mo. Plea Agr. Wesley Delport filed Aug. 13, 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] Id.
                                  • [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. Judgment Wesley Delport filed Mar. 7, 2016; W.D. Mo. Judgment Alton Vaughn filed Mar. 7, 2016.
                                  • [16] W.D. Mo. Notice of Appeal filed Mar. 14, 2016.


                                  • California Man Indicted for Intentionally Running Over a Federal (DHS) Employee

                                    On March 16, 2016, in the Central District of California, Geoffrey D. Rickner was indicted for assaulting a Federal employee using a dangerous and deadly weapon, [1] after intentionally running into the employee with his car. [2]

                                    According to the court documents, on March 3, 2016, Rickner intentionally and forcibly assaulted a Federal employee in the performance of his official duties at the Chet Holifield Federal Building, resulting in the infliction of bodily injury to the individual. [3]

                                    The Chet Holifield Federal Building, located in Laguna Hills, California, is commonly referred to as the Ziggurat Building and houses employees of the Internal Revenue Service (IRS), the Department of Homeland Security (DHS), and other Federal Government officers. Around noon on March 3, 2016, DHS Federal Protective Service (FPS) received a call regarding a suspicious male at the Ziggurat Building, who was driving a silver Mercedes in an unusual manner and, at times, exiting his vehicle and pacing. FPS responded to the site and made contact with the driver, identified as Rickner from his driver’s license. When questioned about his suspicious activity, Rickner continually repeated that he owed money to the IRS. [4]

                                    Officers obtained consent to search the trunk of Rickner’s vehicle, in which they found nothing, and he then left the premises. Later that afternoon, Rickner returned to the Ziggurat Building and was reported to be pacing in front of the south entrance. FPS returned to the site and observed Rickner in his silver Mercedes. Rickner drove up to and stopped at a stop sign near the south entrance. Shortly after 4:30 pm, while a Federal employee was walking in the crosswalk en route to his vehicle, Rickner “gunned it,” accelerating his car quickly, and drove through the intersection, hitting the pedestrian in the crosswalk. The pedestrian was thrown in the air. The Mercedes continued forward after hitting the pedestrian, rammed through a metal roll-down gate, and finally came to a stop inside the Ziggurat Building. [5]

                                    Rickner, who appeared to be conscious and alert, was removed from the vehicle and taken into custody. A subsequent interview of Rickner’s parents revealed he had visited them the previous day and had informed them of his debt to the IRS in the amount of $200,000, plus penalties. On the morning of March 3, 2016, Rickner had also contacted his father by telephone to further discuss his IRS issues. His father indicated that Rickner had been feeling guilty about his debt issues and seemed to be more quiet and depressed during the last few days preceding the incident. [6]

                                    The unfortunate victim of the assault was a security specialist working with DHS, Customs and Border Patrol, in the Ziggurat Building. He was wearing an employee access card when he walked out of the building and into the crosswalk. He noticed a silver vehicle approximately 20 feet away and thought it was going to turn when it began to move. However, the vehicle veered towards the victim and accelerated. The victim heard the engine rev and felt his head hit the hood or windshield of the car after he was hit head on. Prior to being hit, the victim saw the driver’s face and said the driver had a determined look. The employee suffered broken ribs, a broken nose, and several other injuries. [7]

                                    The court ordered Rickner to remain in custody. [8] Additional legal proceedings are anticipated.

                                    • [1] indict
                                    • [2] Crim compl
                                    • [3] indict
                                    • [4] Crim compl
                                    • [5] Id.
                                    • [6] Id.
                                    • [7] Id.
                                    • [8] Docket


                                    • Nevada Trio Indicted for Participation in a Telemarketing Fraud Scheme

                                      On March 16, 2016, in the District of Nevada, Reginald A. Lowe, Willie J. Montgomery, and Tanika Armstrong were indicted for conspiracy to commit wire or mail fraud and money laundering, mail fraud, wire fraud, and money laundering in connection with a telemarketing scheme that was intended to target victims over the age of 55. [1]

                                      According to the indictment, from November 2008 to September 2013, Lowe, Montgomery, and Armstrong obtained “lead sheets,” which identified persons who had previously entered sweepstakes, lotteries, or other prize-drawing contests, and who were thus thought to be susceptible to misrepresentations regarding potentially winning a prize, sweepstakes, or lottery. Using the lead sheet information, Lowe, Montgomery, and Armstrong, in the role of "talkers," would contact potential victims by telephone and falsely represent to them that they had won prizes consisting of large amounts of cash or other high-value merchandise. In doing so, the talker would hold himself out as being an official or employee of a lottery/sweepstakes committee or a government regulatory authority. The talker would frequently represent himself to be an official or employee of the Internal Revenue Service (IRS). The talker would tell the victim that, in order to receive the prize, he or she must first send money to a person named by the talker, as payment for taxes on prize winnings. [2]

                                      The talker would then direct the victim to send payment in the form of checks, money orders, U.S. currency, or other negotiable instruments via Western Union or MoneyGram wire transfer, United States Postal Service, United Parcel Service (UPS) or FedEx. Lowe, Montgomery, and Armstrong would direct victims to send the money to individuals referred to as “runners.” The runners would retrieve the payments and deliver the money to Lowe, Montgomery, Armstrong, and others. The runners were given a small percentage of the criminal proceeds. [3]

                                      Lowe, Montgomery, Armstrong and others called at least 66 victims in 22 states. The defendants caused victims to send approximately $96,983 via MoneyGram and at least $366,238 via Western Union wire transfers. The defendants also fraudulently induced the victims to send a total of at least $389,924 through the U.S. mail, UPS, and FedEx. As a result of the scheme, defendants Lowe, Montgomery, Armstrong, and others fraudulently obtained approximately $1,175,670 from their victims. [4]

                                      According to court documents, Lowe was arrested on March 23, 2016 [5] , and Montgomery and Armstrong were arrested on March 24, 2016. [6] , [7]

                                      • [1] D. Nev. Indictment filed Mar. 16, 2016.
                                      • [2] Id.
                                      • [3] Id.
                                      • [4] Id.
                                      • [5] D. Nev. Arrest Warrant filed March 23, 2016.
                                      • [6] D. Nev. Arrest Warrant filed March 24, 2016.
                                      • [7] D. Nev. Arrest Warrant filed March 25, 2016.


                                      • California Tax Return Preparer Arrested on Federal Fraud Charges

                                        On April 7, 2016, in the Central District of California, Michael J. Calalang Cabuhat was arrested on charges of wire fraud, aggravated identity theft, and structuring financial transactions. [1]

                                        According to court documents, from 2010 to April 2015, Cabuhat defrauded customers of his tax preparation business in at least two ways. In some instances, Cabuhat would show a small refund on the copy of the tax return that he had prepared for the client, whereas he would claim a larger refund on the return that he filed with the IRS. Without the client’s knowledge, Cabuhat would attach a form to the filed tax return directing the larger refund into a bank account that he controlled. [2]

                                        In other cases, Cabuhat would falsely show a tax due on the client's copy of the tax return, whereas he would claim a refund on the return that he filed with the IRS. In these instances, Cabuhat would tell the client-taxpayer to make the "tax payment" directly to him, so he could send the payment to the IRS. In fact, Cabuhat would keep the "tax payment" made by the client and would direct the IRS to deposit the refund claimed on the client’s filed tax return into a bank account that he controlled. [3]

                                        Between 2010 and 2015, Cabuhat allegedly used this scheme to obtain or attempt to obtain more than $1.2 million in tax refunds that should have gone to 144 clients. [4]

                                        Cabuhat claimed to be an enrolled agent; however, the investigation confirmed that he was not, and had never been, an enrolled agent. As defined by the IRS, an enrolled agent is a person who has earned the privilege of representing taxpayers before the IRS, either by passing a three-part comprehensive IRS test covering individual and business tax returns or through experience as a former IRS employee. This credential is the highest that the IRS awards. Cabuhat also stated that he was a licensed Certified Public Accountant (CPA) in the Phillipines, but he does not hold a CPA license issued in the United States. [5]

                                        In addition to the tax refund scheme, in September 2014, Cabuhat structured cash deposits to avoid Federal bank reporting requirements. Specifically, Cabuhat made three separate cash deposits of $9,900 each over seven days, totaling $29,700. On the day after these structured transactions were completed, Cabuhat wrote a $24,500 check to purchase a Ferrari. [6]

                                        The investigation was conducted jointly by agents of the Treasury Inspector General for Tax Administration and IRS Criminal Investigation. [7] Additional legal proceedings are anticipated.

                                        • [1] C.D. Cal. Criminal Docket Report as of April 13, 2016.
                                        • [2] C.D. Cal. Criminal Complaint filed April 5, 2016.
                                        • [3] Id.
                                        • [4] Id.
                                        • [5] Id.
                                        • [6] Id.
                                        • [7] C. D. Cal. Criminal Complaint filed April 5, 2016.


                                        • April 21, 2016

                                          Former IRS Employee Sentenced for Involvement in a Stolen Identity Refund Scheme

                                          On February 22, 2016, in the Western District of Missouri, Central Division, former Internal Revenue Service (IRS) employee Demetria Brown was sentenced for her role in a stolen identity tax refund scheme. [1] Brown pled guilty to charges of wire fraud and aggravated identity theft related to the scheme in June 2015. [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 the 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 that she had been preparing and electronically filing fraudulent Federal and State returns using the e-mail address she had 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 $326,000. [8]

                                          Brown was sentenced to 30 months in prison, followed by three years of supervised release. Additionally, she was ordered to pay a total of $326,000 in restitution; $211,000 to the IRS, and $115,000 to MDOR. Brown is scheduled to begin her sentence on June 1, 2016. [9]

                                          • [1] W.D. Mo. C.D. Judgment filed Feb. 24, 2016.
                                          • [2] W.D. Mo. C.D. Plea Agr. filed June 1, 2015.
                                          • [3] W.D. Mo. C.D. Indict. filed Oct. 2, 2013.
                                          • [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.
                                          • [9] W.D. Mo. C.D. Judgment filed Feb 24, 2016.


                                          • Nigerian Man Arrested for Role in Large-Scale Scheme Using Stolen Identities to Interfere With and Defraud the IRS

                                            Michael Oluwasegun Kazeem was indicted in the District of Oregon for mail fraud, conspiracy to commit mail fraud, and aggravated identity theft on February 4, 2016, [1] and was subsequently arrested for those same offenses in Atlanta, Georgia on February 17, 2016. [2]

                                            According to the indictment, beginning as early as Tax Year 2012 and continuing until May 2015, Kazeem knowingly conspired with others to commit mail fraud, to defraud the Internal Revenue Service (IRS) and obtain money through false and fraudulent representations, and to use the means of identification of others without lawful authority. Kazeem resides in Nigeria and in the State of Georgia. His brother (and coconspirator) lives in Maryland, and a third coconspirator resides in Georgia. [3]

                                            It was the object of the conspiracy to obtain stolen personally identifying information (PII) and use that information, coupled with information illegally obtained from IRS data systems, for the purpose of preparing and electronically filing fraudulent tax returns with the IRS to claim fraudulent refunds. [4]

                                            Kazeem and his coconspirators obtained the names and other PII of over 250,000 U.S. taxpayers without their knowledge or consent. The stolen PII included information originating from a database owned by an Oregon company that conducts background checks for volunteers and job applicants. The coconspirators exchanged hundreds of communications containing the stolen Social Security Numbers (SSN) and other PII from the Oregon database. [5]

                                            In furtherance of the conspiracy, Kazeem and his coconspirators used the stolen PII for unauthorized access to the IRS transcript system, which was available online through the “Get Transcript” application, in order to obtain over 1,200 taxpayer transcripts for subsequent use in filing fraudulent returns in those taxpayers’ names. An IRS transcript shows the taxpayer’s tax return information, including line items from the return, income information from the Forms W-2, 1099, and 1098, and basic data such as marital status, adjusted gross income, and taxable income. The online “Get Transcript” application requires a multi-step authentication using the taxpayer’s PII and personal identity verification questions. The coconspirators used the stolen names and other PII, along with any IRS transcript information acquired, to create fraudulent income tax returns and false Forms W-2. [6]

                                            The coconspirators also used the stolen PII to obtain Electronic Filing PINs in the names of the victims. An Electronic Filing PIN is a five-digit personal identification number required for electronically filed tax returns when the filer does not have certain items of information from the previous year. A filer can request an Electronic Filing PIN using the website IRS.gov by authenticating his/her identity through a variety of prompts for personal information, including SSN, name, address, and date of birth. Kazeem sent communications to his brother containing over 4,000 fraudulently obtained Electronic Filing PINS and stolen taxpayer PII. The fraudulent Electronic Filing PINs sent to Kazeem’s brother, as well as disposable e-mail addresses, were used to file over 1,375 fraudulent Federal returns for Tax Year 2013, claiming refunds in excess of $11 million. The actual loss based on the returns accepted for payment exceeded $2.6 million. [7]

                                            The coconspirators acquired hundreds of Green Dot debit cards with the stolen PII and used them to receive fraudulent tax refunds. They retrieved the fraudulent refunds from the debit and/or stored value cards through various purchases, including the purchase of money orders or wire transfers payable to themselves, and converted cash and money orders for their personal use. [8]

                                            In total, Kazeem and his coconspirators used the stolen PII to file over 2,900 false Federal income tax returns seeking more than $25 million dollars in fraudulent refunds. The actual losses to the IRS exceeded $4.7 million. [9]

                                            Additional legal proceedings are anticipated.

                                            • [1] D. Or. Indictment filed Feb. 4, 2016.
                                            • [2] D. Or. Executed Arrest Warrant filed Feb. 18, 2016.
                                            • [3] D. Or. Indictment filed Feb. 4, 2016.
                                            • [4] Id.
                                            • [5] Id.
                                            • [6] Id.
                                            • [7] Id.
                                            • [8] Id.
                                            • [9] Id.


                                            • IRS Employee Pleads Guilty to Orchestrating Large-Scale Identity Theft Refund Scheme

                                              On February 8, 2016, in the Northern District of Alabama, Internal Revenue Service (IRS) employee Nakeisha Hall pled guilty to the theft of Government funds, aggravated identity theft, unauthorized access to a protected computer, and conspiracy to commit mail fraud affecting a financial institution and bank fraud. [1] Hall was initially charged in a sealed indictment in September 2015 with the theft of Government funds, identity theft, and unauthorized access violations. [2] In December 2015, the conspiracy charge was added against Hall, and two coconspirators, Jimmie Goodman and Abdulla Coleman, were charged as well. [3] A third coconspirator, Lashon Roberson, had been charged in the conspiracy in October 2015. [4] Hall and Goodman were arrested on December 22, 2015; Coleman was arrested on January 7, 2016. [5]

                                              According to the court documents, Hall began working at the IRS in 2000. She was employed in the IRS Taxpayer Advocate Service (TAS) office in Birmingham, Alabama from 2007 to 2011, and has worked in TAS offices in Omaha, Nebraska, New Orleans, Louisiana, and Salt Lake City, Utah since November 2011. The TAS function is responsible for assisting taxpayers who are having difficulties with the IRS, often because they are victims of identity theft needing assistance in removing fraudulent tax information from their accounts, and with filing corrected tax returns. [6]

                                              By virtue of her IRS employment, Hall had the ability to access taxpayers’ personal identifying information (PII), including names, dates of birth, and Social Security Numbers (SSN). Hall’s authority to access this information, however, was limited to official business purposes. Hall was fully aware of these limitations, had completed training regarding such, and knew accesses made for non-business reasons could be subject to criminal prosecution. As a result of her lengthy IRS employment, Hall was also familiar with the process of filing tax returns and how to maximize tax refund amounts. [7]

                                              As part of her scheme to defraud the IRS, and for the purpose of personal financial gain, [8] Hall intentionally exceeded her authorization at work and accessed thousands of names, dates of birth, and SSNs for non-business purposes, running various searches through the IRS’s system looking for individuals who met certain criteria. Between 2008 and 2011, Hall used fraudulently obtained PII to file hundreds of fraudulent individual income tax returns. Not only were these returns not authorized by the taxpayers whose identities were used, they also contained false and fraudulent Forms W-2 and other information in order to generate improper and artificially inflated refunds.

                                              Hall prepared the fraudulent returns on her own computer using online tax software programs and requested that the associated refunds be put on debit cards designed solely for the purpose of accepting tax refunds. [9]

                                              After Hall came up with the idea for the scheme, she approached the others (coconspirators) for assistance in retrieving and liquidating the refunds. Hall solicited and obtained “drop addresses” from Goodman, Coleman, Roberson, and at least one other unnamed individual. Hall then had the tax refund debit cards sent by mail to the various “drop addresses.” [10]

                                              Once the refund debit cards arrived via mail, Hall and her coconspirators retrieved and activated them using the taxpayers’ PII previously obtained by Hall. Hall and her coconspirators accessed the associated funds through ATMs or by purchasing goods and services with the cards and receiving cash back on any unspent balance. For returns that generated refunds in the form of paper Treasury checks instead of debit cards, fraudulent endorsements were used to cash the Treasury checks at financial institutions. Hall compensated her coconspirators by giving them a portion of the money obtained or by giving them refund cards. [11]

                                              The conspiracy involved fraudulent returns with an intended loss by way of fraudulent refunds of more than $550,000. The Government will recommend that Hall and her charged coconspirators be joint and severally liable for restitution in the amount of $438,187, but reserves the right to request additional restitution if additional amounts become known before Hall’s sentencing date. [12]

                                              Hall’s sentencing is set for June 29, 2016. [13] She could potentially face a maximum sentence of 32 years’ imprisonment for the conspiracy and aggravated identity theft charges. [14] Coconspirator Roberson entered a guilty plea on February 11, 2016 and is scheduled to be sentenced on May 10, 2016. [15] Additional legal proceedings are anticipated for Goodman and Coleman. [16]

                                              • [1] N.D. Ala. Plea Agreement Hall filed Feb. 8, 2016.
                                              • [2] N.D. Ala. Indictment Hall filed Sep. 24, 2015.
                                              • [3] N.D. Ala. Superseding Indictment Hall et al filed Dec. 15, 2015.
                                              • [4] N.D. Ala. Information Roberson filed Oct. 15, 2015.
                                              • [5] N.D. Ala. Criminal Docket Hall et al filed Sep. 24, 2015.
                                              • [6] N.D. Ala. Plea Agreement Hall filed Feb. 8, 2016.
                                              • [7] Id.
                                              • [8] N.D. Ala. Superseding Indictment Hall et al filed Dec. 15, 2015.
                                              • [9] N.D. Ala. Plea Agreement Hall filed Feb. 8, 2016.
                                              • [10] Id.
                                              • [11] Id.
                                              • [12] Id.
                                              • [13] N.D. Ala. Criminal Docket Hall et al filed Sep. 24, 2015.
                                              • [14] N.D. Ala. Plea Agreement Hall filed Feb. 8, 2016.
                                              • [15] N.D. Ala. Criminal Docket Roberson filed Oct. 15, 2015.
                                              • [16] N.D. Ala. Criminal Docket Hall et al filed Sep. 24, 2015.


                                              • IRS Employee Arrested in Fraud Scheme

                                                On January 20, 2016, Internal Revenue Service (IRS) employee Creshika Wise was arrested in Atlanta, Georgia. [1] Wise had been indicted in the Northern District of Georgia for mail fraud, wire fraud, and aggravated identity theft on January 14, 2016. [2]

                                                According to the court documents, at all times relevant to the charges, Wise was an IRS revenue agent in Atlanta, Georgia. Her official duties as a revenue agent included regularly auditing individual, business, and corporate tax returns, and calculating taxpayers’ correct tax liability based on her examination. [3]

                                                In approximately August 2013, Wise was assigned to audit an individual tax return jointly filed by two married taxpayers. The taxpayers had authorized a certified public accountant (CPA) to transact business with the IRS on their behalf. Due to erroneous information received from a third-party, the taxpayers had initially underreported and underpaid their Federal tax and, upon correction of the error, owed $758,846 in additional personal income tax, plus interest. The taxpayers, through their CPA, agreed with this assessment. [4]

                                                Wise subsequently devised a scheme to knowingly defraud the taxpayers and to obtain money by means of false and fraudulent representations. The object of Wise’s scheme was to take all or part of the additional Federal tax and interest owed to the IRS by these taxpayers and keep it for herself, personally. Wise created a fictitious IRS Form 4549, Income Tax Examination Changes, for the taxpayers and placed the fictitious form in the IRS’s files. The fictitious Form 4549 showed a balance due of only $282,363 rather than the $758,846 already agreed upon. Wise also forged the signature of the taxpayers’ CPA on the fictitious form. [5]

                                                Wise then opened a checking account in the name “Creshika C. Wise Sole Prop D/B/A U.S. Treasury and Accounting Service.” She later sent a deceptive e-mail to the taxpayer-husband instructing him to send a wire transfer to this account, which she described as being titled in the name “U.S. Treasury and Accounting Service,” failing to disclose that the bank account belonged to her personally rather than to the IRS. [6]

                                                Wise also attempted to open a bank account through the Internet at a different financial institution, this time in the names of the married taxpayers. As a follow-up, Wise sent a signature card via facsimile to the bank, and called the bank impersonating the taxpayer-wife in order to inquire about the status of the new account. In furtherance of her scheme, Wise changed, or caused to be changed, the taxpayers’ addresses in the IRS computer system, from their actual residence to a United Parcel Service mailbox opened and controlled by Wise. [7]

                                                Additional legal proceedings are anticipated.

                                                • [1] N.D. Ga. Executed Arrest Warrant filed Feb. 5, 2016.
                                                • [2] N.D. Ga. Indictment filed Jan 14, 2016.
                                                • [3] Id.
                                                • [4] Id.
                                                • [5] Id.
                                                • [6] Id.
                                                • [7] Id.


                                                • March 15, 2016

                                                  Disbarred Attorney Sentenced in IRS Impersonation Fraud Scheme

                                                  On February 2, 2016, in Maryland, Saundra Lucille White was sentenced for mail fraud, wire fraud, money laundering, and aggravated identity theft. [1] White had been found guilty of the offenses in a seven-day jury trial in July, 2015. [2]

                                                  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. [3]

                                                  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. [4]

                                                  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. [5]

                                                  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 that payments were to be sent to an entity called Intel Realty Financial Service (IRFS) at an address that was controlled by White. [6]

                                                  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’s name. [7]

                                                  White then deposited the checks, totaling over $500,000, which 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. [8]

                                                  White was sentenced to a total of 11 years in prison, followed by three years of supervised release. She was also ordered to pay restitution in the amount of $841,908.57. [9]

                                                  • [1] D. Md. Judgment filed Feb. 4, 2016.
                                                  • [2] D. Md. Verdict Form filed July 23, 2015; D. Md. Crim. Docket retrieved Feb. 22, 2016.
                                                  • [3] D. Md. Superseding Indict. filed Sep. 22, 2014.
                                                  • [4] Id.
                                                  • [5] Id.
                                                  • [6] Id.
                                                  • [7] Id.
                                                  • [8] Id.
                                                  • [9] Md. Judgment filed Feb. 4, 2016.


                                                  • Two Individuals Sentenced in Georgia for Impersonation Scheme

                                                    On January 5, 2016, in the Northern District of Georgia, Kenneth Kaufman was sentenced for conspiracy to commit mail and wire fraud associated with an impersonation scheme. [1] Kaufman and coconspirator Kecia Place were initially indicted for the scheme in March 2015. [2] Place pled guilty to an Information charging her with money laundering in August 2015 [3] and was sentenced for that offense on November 18, 2015. [4] Kaufman entered a guilty plea for the conspiracy charge on September 10, 2015. [5]

                                                    According to the court documents, from early 2014 until February 2015, Kaufman, Place, and others knowingly and willfully conspired to devise a scheme to defraud and obtain money through the use of materially false and fraudulent representations. In execution of the scheme, Kaufman rented a Post Office (PO) Box in Atlanta, Georgia and established a bank account in his name. The conspirators then established a Georgia business named Brand New Day Management, LLC (Brand New Day) and opened a second bank account in the name of the business. Place was listed on this bank account as a co-signer and as Secretary of Brand New Day. Kaufman later added the business name as a mail recipient at the PO Box in Atlanta. [6]

                                                    In furtherance of the scheme to defraud, the conspirators contacted individuals and falsely advised them that they had to first pay a sum of money to cover taxes or fees in order to receive the lottery or prize money. Victims were instructed to send the taxes or fees through a variety of methods, such as a U.S. Postal Money Order or check mailed to Kaufman or Brand New Day at the established PO Box, a direct deposit of funds into one of the two bank accounts established for the scheme, or via Western Union or Moneygram funds sent to the conspirators. Some victims were contacted again after making their initial payment and falsely advised that the value of the lottery or prize had increased and additional taxes or fees were needed in order to receive their prize money. [7]

                                                    Kaufman and Place received approximately $380,000 from at least 20 victims. None of the victims ever received the promised winnings. [8]

                                                    Kaufman was sentenced to 33 months in prison, and Place was sentenced to one year and one day in prison. Each will be on supervised release for three years following his or her respective prison term. Kaufman was ordered to make restitution in the amount of $355,433.00. Place is jointly and severally liable for $78,864.50 of the restitution. [9]

                                                    • [1] N.D. Ga. Amended Judgment Kenneth Kaufman filed Jan. 7, 2016.
                                                    • [2] N.D. Ga. Indictment filed Mar. 18, 2015.
                                                    • [3] N.D. Ga. Information filed Aug. 17, 2015.
                                                    • [4] N.D. Ga. Judgment Kecia Place filed Nov. 19, 2015.
                                                    • [5] N.D. Ga. Minute Sheet Change of Plea Kenneth Kaufman filed Sep. 10, 2015.
                                                    • [6] N.D. Ga. Indictment filed Mar. 18, 2015.
                                                    • [7] Id.
                                                    • [8] Id.
                                                    • [9] N.D. Ga. Amended Judgment Kenneth Kaufman filed Jan. 7, 2016; N.D. Ga. Judgment Kecia Place filed Nov. 19, 2015.


                                                    • IRS Employee Pleads Guilty to Aiding and Assisting Fraud and False Statements

                                                      On January 7, 2016, Internal Revenue Service (IRS) employee Yolanda Castro pled guilty to aiding and assisting fraud and false statements. [1] She was arrested on February 27, 2015, [2] and 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. [3]

                                                      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. 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, in 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 on her own Federal tax returns education expenses and child care expenses 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 to 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 for which Castro and the taxpayers whose returns she prepared were not eligible.” 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. [6]

                                                      • [1] E.D. Cal. Plea Agreement filed Jan. 7, 2016.
                                                      • [2] E.D. Cal. Executed Arrest Warrant filed Feb. 27, 2015.
                                                      • [3] E.D. Cal. Indict. filed Feb. 26, 2015.
                                                      • [4] Id.
                                                      • [5] Id.
                                                      • [6] Id.


                                                      • Former IRS Employee and Another Individual Charged in California With Stolen Identity Theft Refund Fraud Scheme

                                                        On January 14, 2016, in the Eastern District of California, former Internal Revenue Service (IRS) employee Lorita Marie Rocha and her associate and former roommate Nereida Rodriguez were indicted on charges of conspiracy to commit wire fraud and wire fraud. [1]

                                                        According to court documents, Rocha was employed by the IRS at the Fresno Service Center as a seasonal tax examiner in the Error Resolution System (ERS) unit, where she had access to the names, Social Security Numbers, dates of birth, and other personally identifiable information of certain taxpayers and their claimed dependents. Her duties at the IRS included verifying the accuracy of dependents claimed on tax returns. [2]

                                                        Between February 2008 and January 2012, Rocha and Rodriguez participated in a scheme to obtain and to help others obtain the payment of false and fraudulent claims for refunds from the IRS through the preparation and submission of false and fraudulent Federal income tax returns. Rocha fraudulently obtained the personal information of dependents through her employment at the IRS. Rocha, Rodriguez, and those they aided, used that fraudulent dependent information to falsely claim dependents on Federal income tax returns, most of which were filed electronically. The refunds were typically issued in the form of either a direct deposit into Rocha’s or Rodriguez’s bank account or a direct deposit to a lender as reimbursement for a previously-issued refund anticipation loan. [3]

                                                        Rocha and Rodriguez misappropriated more than two dozen individuals’ names and means of identification from the ERS unit and subsequently caused them to be used in false and fraudulent tax returns. As a result of their conduct, Rocha and Rodriguez caused tax returns to be filed with the IRS that fraudulently claimed tax refunds in excess of $100,000. [4]

                                                        Rocha was arraigned and entered a not guilty plea on January 22, 2016. [5] Her accomplice, Rodriguez, was arraigned and entered a not guilty plea on January 21, 2016. [6]

                                                        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] E.D. Cal. Indict. filed January 14, 2016.
                                                        • [2] Id.
                                                        • [3] Id.
                                                        • [4] Id.
                                                        • [5] E.D. Cal. Arraignment filed January 22, 2016
                                                        • [6] E. D. Cal. Arraignment filed January 21, 2016


                                                        • February 17, 2016

                                                          California Man Sentenced for Impersonating an IRS Employee With the Intent to Harass

                                                          On January 4, 2016, in the Northern District of California, Douglas York was sentenced for the impersonation of an employee of the United States. [1] York was indicted for the offense in April 2015, [2] and a jury found him guilty in August 2015. [3]

                                                          According to the court documents, York pretended to be an officer or employee of the United States, specifically an agent of the 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 alleged that York made an interstate communication for the purpose of harassment, i.e., a telephone call originating in California by means of an application called “Spoofcard,” whose servers were located in New Jersey. In the communication, York failed to truthfully identify himself and also used a 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 that 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 was sentenced to 12 months and one day in prison, followed by one year of supervised release. The special conditions of York’s supervision state that York is to have no contact with the victim during his supervision, is to abstain from the use of all alcoholic beverages, and shall participate in a mental health treatment program. [8] York appealed his conviction and sentence on January 7, 2016. [9] He was scheduled to begin his sentence on February 3, 2016; [10] however, on January 19, 2016, the court issued a no-bail warrant for York’s arrest because he had violated the conditions of his pretrial release, including removal of his monitoring device and excessive consumption of alcohol. As of the date of the warrant, attempts to locate York were unsuccessful and his whereabouts were unknown. [11]

                                                          • [1] N.D. Cal. Judgment filed Jan. 7, 2016.
                                                          • [2] N.D. Cal. Indict. filed Apr. 22, 2015.
                                                          • [3] N.D. Cal. Verdict Form filed Aug. 28, 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. Judgment filed Jan. 7, 2016.
                                                          • [9] N.D. Cal. Notice of Appeal filed Jan. 7, 2016.
                                                          • [10] N.D. Cal. Judgment filed Jan. 7, 2016.
                                                          • [11] N.D. Cal. Petition for Arrest Warrant for Defendant Under Pretrial Supervision filed Jan. 19, 2016.




                                                          • Three to Seven Years in Prison for IRS Employee and Coconspirators

                                                            An Internal Revenue Service (IRS) employee and two of her coconspirators were sentenced in the Eastern District of California [1] for their roles in a $1.4 million identity theft conspiracy. [2] IRS employee Viririana Hernandez was sentenced on November 2, 2015. [3] Coconspirators Daniel Miranda, Jr. and Roberto Martinez, Jr. were each sentenced on December 7, 2015. [4] A fourth conspirator, Lilliana Gonzales, is scheduled to be sentenced on February 8, 2016. [5] Hernandez and her three coconspirators were charged in a 23- count indictment in July 2014 with various Federal offenses, including conspiracy to commit wire fraud, bank fraud, and mail fraud, as well as aggravated identity theft. [6] All four pled guilty between August 2015 and September 2015. [7]

                                                            According to the court documents, Hernandez, Miranda, Martinez, and Gonzales knowingly engaged in an identity theft conspiracy using the personal information of victims obtained through various methods, including IRS personnel records. Hernandez had been employed by the IRS in Fresno, California since 2006. During her employment, she had worked in a variety of administrative positions, some allowing her access to human resources files on other IRS employees. [8]

                                                            From at least June 2012 through at least January 2014, the four 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, Miranda possessed the personal information of approximately 288 current and former IRS employees. The conspirators also obtained personal information through a number of employment applications for a franchise restaurant. [9]

                                                            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. They 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. [10]

                                                            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 merchandise that was later returned for store credit. This allowed them to continue to use gift cards or store credit even if a victim had cancelled access to the credit card. [11]

                                                            In total, the conspirators used the means of identification of more than 250 people without lawful authority and sought to obtain at least $1.4 million in money, services, and property from merchants, cardholders, and financial institutions. [12]

                                                            Hernandez was sentenced to 54 months in prison. Miranda was sentenced to 94 months of imprisonment and Martinez to 36 months. Each will be on supervised release for three years following their imprisonment and are jointly and severally liable for restitution in the amount of $125,884. [13]

                                                            • [1] E.D. Cal. Criminal Docket USA v. Miranda et al filed July 17, 2014.
                                                            • [2] E.D. Cal. Plea Agr. Miranda filed June 5, 2015.
                                                            • [3] E.D. Cal. Judgment Hernandez filed Nov. 4, 2015.
                                                            • [4] E.D. Cal. Judgment Miranda filed Dec. 11, 2015; E.D. Cal. Judgment Martinez filed Dec. 11, 2015.
                                                            • [5] E.D. Cal. Criminal Docket Gonzales filed July 17, 2014.
                                                            • [6] E.D. Cal. Indict. filed July 17, 2014.
                                                            • [7] E.D. Cal. Criminal Docket USA v. Miranda et al filed July 17, 2014.
                                                            • [8] E.D. Cal. Indict. filed July 17, 2014.
                                                            • [9] Id.
                                                            • [10] Id.
                                                            • [11] Id.
                                                            • [12] E.D. Cal. Plea Agr. Miranda filed June 5, 2015.
                                                            • [13] E.D. Cal. Judgment Hernandez filed Nov. 4, 2015; E.D. Cal. Judgment Miranda filed Dec. 11, 2015; E.D. Cal. Judgment Martinez filed Dec. 11, 2015.


                                                            • Day Care Owner Sentenced for Submitting Fake IRS Document to Obstruct Collection of Funds

                                                              Deborah Cellucci was sentenced on December 1, 2015 in the Eastern District of Pennsylvania for obstructing the administration of the Internal Revenue laws and wire fraud. [1] Cellucci was indicted for the offenses in September 2014 [2] and pled guilty in June 2015. [3]

                                                              According to the court documents, Cellucci was the owner and operator of a day care center in Philadelphia, Pennsylvania called Our Little Rascals (OLR). OLR received monthly public subsidy payments from a designated agency in support of Pennsylvania’s subsidized child care program. [4]

                                                              Cellucci’s day care business became delinquent on various corporate tax payments, owing more than $50,000 to the Internal Revenue Service (IRS). The IRS made efforts to collect the debt, which Cellucci was aware of and had discussed with an accountant and the assigned IRS Revenue Officer. As part of its collection efforts, the IRS sent a Notice of Levy to the State’s designated payment agency in order to redirect the monthly day care subsidy payment to the IRS instead of to OLR, in order to pay part of the business’s delinquent tax bill. [5] The subsidy due to OLR the following month was $28,103.20. In light of the Notice of Levy, the payment agency prepared a check in that amount payable to “US Treasury.” [6]

                                                              Cellucci then corruptly endeavored to obstruct and impede the administration of the Internal Revenue laws, devising a scheme to defraud the IRS and obtain money by means of false pretenses and representations. As part of the scheme, Cellucci created or obtained a false Release of Levy and transmitted it via facsimile from her home in New Jersey to the agency in Philadelphia. Relying upon the false Release of Levy received, the agency set aside the check payable to the U. S. Treasury and instead issued a check in the amount of $28,103.20 to OLR, thus causing the levied funds to be paid to the day care business instead of the IRS. Cellucci received and cashed the check, depositing the proceeds in an OLR bank account. [7]

                                                              Cellucci was sentenced to 12 months and one day in prison, followed by three years of supervised release. She was further ordered to pay $28,103.20 in restitution to the IRS. Cellucci is scheduled to begin her sentence on January 22, 2016. [8]

                                                              • [1] E.D. Pa. Judgment filed Dec. 1, 2015.
                                                              • [2] E.D. Pa. Indict. filed Sep. 30, 2014.
                                                              • [3] E.D. Pa. Crim. Docket filed Sep. 20, 2014.
                                                              • [4] E.D. Pa. Indict. filed Sep. 30, 2014.
                                                              • [5] E.D. Pa. Govt. Change of Plea Memorandum filed June 23, 2015.
                                                              • [6] E.D. Pa. Indict. filed Sep. 30, 2014.
                                                              • [7] Id.
                                                              • [8] E.D. Pa. Judgment filed Dec. 1, 2015.


                                                              • Former IRS Special Agent Sentenced to More Than Five Years in Prison for Tax Refund Scheme

                                                                Former Internal Revenue Service (IRS) Special Agent Donald Centreal Smith was sentenced in the Northern District of Alabama on November 10, 2015 for his role in a tax refund scheme. [1] Smith entered a guilty plea to conspiracy, wire fraud, and aggravated identity theft in June 2015. [2] His coconspirator, Gary Gene Collins, pled guilty to conspiracy and wire fraud in June 2015 [3] and was sentenced on November 18, 2015. [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. 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]

                                                                Red Alliance, LLC—a business used by Smith and Collins to carry out their scheme—was registered with the Secretary of State in Delaware in April 2012. 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. Most of 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 19 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 of the identity theft victims 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 that two bank accounts were receiving refunds in the name of Red Alliance, and that 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 again . Collins also made several calls to Smith that same day. [11]

                                                                On two subsequent dates following Collins’s 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]

                                                                Smith was sentenced to a total of 61 months in prison, followed by three years of supervised release. He is scheduled to surrender to begin serving his sentence on February 3, 2016. [13] Collins was sentenced to three years of supervised probation, to include nine months of home detention. [14] Smith and Collins are jointly and severally responsible for restitution to the IRS in the amount of $12,908.94, and both are prohibited from preparing tax returns other than their own during the periods of their sentence and supervised release. [15]

                                                                • [1] N.D. Ala. Judgment Smith filed Nov. 16, 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. Judgment Collins filed Nov. 19, 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. Judgment Smith filed Nov. 16, 2015.
                                                                • [14] N.D. Ala. Judgment Collins filed Nov. 19, 2015.
                                                                • [15] N.D. Ala. Judgment Smith filed Nov. 16, 2015; N.D. Ala. Judgment Collins filed Nov. 19, 2015.


                                                                • Former IRS Employee Pleads Guilty in Scheme Designed to Defraud the IRS and the Commonwealth of Pennsylvania

                                                                  On November 6, 2015, in the Eastern District of Pennsylvania, former Internal Revenue Service (IRS) employee Modestine Gillette, a/k/a “Cookie,” pled guilty to filing false claims, theft of Government property, aggravated identity theft, access device fraud, wire fraud, and filing a false Federal income tax return. [1] Gillette was indicted for the offenses in February 2015. Her daughter, Moniquetta Coats, was also charged with wire fraud in the February 2015 indictment. [2]

                                                                  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. [3]

                                                                  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 directed the inflated refund into a bank account in the name of her (Gillette’s) spouse. [4]

                                                                  Gillette then 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, generally without the taxpayers’ knowledge. [5]

                                                                  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 self-employed, 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 a bout $46,322, in unemployment benefits , to which she was not entitled and which had been fraudulently obtained. [6]

                                                                  Gillette’s daughter, Coats, was also an owner, operator, and employee of A Unique Experience during the same time period. Coats similarly 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. [7] Coats pled guilty to wire fraud related to the unemployment compensation fraud on November 6, 2015. [8]

                                                                  Moreover, in January 2012, Gillette willfully filed her own 2011 joint Federal income tax return, under penalty of perjury, knowing that 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. [9]

                                                                  Both Gillette and Coats are scheduled for sentencing on February 8, 2016. [10]

                                                                  • [1] E.D. Pa. Criminal Docket filed Feb. 18, 2015.
                                                                  • [2] E.D. Pa. Indict. filed Feb 18, 2015.
                                                                  • [3] Id.
                                                                  • [4] Id.
                                                                  • [5] Id.
                                                                  • [6] Id.
                                                                  • [7] Id.
                                                                  • [8] E.D. Pa. Criminal Docket filed Feb. 18, 2015.
                                                                  • [9] E.D. Pa. Indict. filed Feb 18, 2015.
                                                                  • [10] E.D. Pa. Criminal Docket filed Feb. 18, 2015.


                                                                  • Arkansas Man Sentenced for Retaliating Against the IRS

                                                                    On October 28, 2015, in the Western District of Arkansas, Philip Roberts was sentenced for corrupt interference with the Internal Revenue laws. [1] Roberts was indicted for the offense in June 2014 [2] and pled guilty in June 2015. [3]

                                                                    According to the court documents, Roberts, a resident of Fort Smith, Arkansas, was determined to have an outstanding Federal income tax liability of over $2 million. As the Internal Revenue Service (IRS) started its efforts to collect Roberts’ outstanding tax liability, he engaged in protracted and open defiance, corruptly endeavoring to obstruct and impede the Internal Revenue Code by submitting numerous frivolous documents to the IRS with the intention of obstructing its efforts to collect his unpaid tax liability. [4]

                                                                    Included in Roberts’ fraudulent submissions were numerous documents falsely naming former Secretary of the Treasury Henry Paulson Jr. as his fiduciary; documents falsely claiming Secretary Paulson, former IRS Commissioner Douglas Schulman, and several named IRS employees were involved in cash transactions with Roberts, ranging in amounts from $2.5 million to $300 million; and IRS Forms 1099-OID (Original Issue Discount) claiming payments were made to three IRS employees engaged in the collection of Roberts’ tax liability, when in fact, Roberts made no such payments to the employees. [5]

                                                                    According to the Government’s sentencing memorandum, this is the second time Roberts has been convicted of a Federal tax crime. In 2000, Roberts was convicted for failing to file Federal income tax returns and was sentenced to 16 months in prison. By 2008, Roberts’ tax liability had grown to over $2 million. Roberts then not only tried to pay his outstanding taxes using bogus financial instruments, he also engaged in a concerted effort to thwart the IRS’s attempts to collect his unpaid taxes, including singling out the IRS employees who were simply doing their jobs, for his revenge. Forms filed against the three IRS revenue officers assigned to collect Roberts’ taxes were in apparent retaliation because they did not accept his fraudulent documents as payment. Additionally, Roberts threatened that the revenue officers would be civilly liable for his taxes and threatened them with possible criminal prosecution. [6]

                                                                    Roberts was sentenced to 17 months in prison, followed by one year of supervised release. He was further ordered to pay a $3,000 fine and cooperate with the IRS in the ascertainment of any taxes owed. Roberts is to self-surrender on December 7, 2015. [7]

                                                                    • [1] W.D. Ark. Judgment filed Oct. 30, 2015.
                                                                    • [2] W.D. Ark. Indict. filed June 25, 2014.
                                                                    • [3] W.D. Ark. Plea Agr. filed June 22, 2015.
                                                                    • [4] W.D. Ark. Indict. filed June 25, 2014.
                                                                    • [5] Id.
                                                                    • [6] W.D. Ark. United States Sentencing Memorandum filed Oct 14, 2015.
                                                                    • [7] W.D. Ark. Judgment filed Oct. 30, 2015.



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