The following examples of general fraud investigations are excerpts from public record documents on file in the courts in the judicial district in which the cases were prosecuted.
Illinois Mail Transporter Sentenced to 18 Month Prison Term
On September 11, 2006, in Benton, IL, Hal D. Hicks was sentenced to 18 months in prison followed by 36 months supervised release and ordered to pay $228,028 in restitution to the Internal Revenue Service for filing a false tax return and falsifying a fuel certification form with the U.S. Postal Service. Hicks owned and operated “Hal D. Hicks Mail Transportation”. Hicks negotiated rebate deals with large fuel suppliers and received rebate checks from these suppliers. He failed to truthful report his actual fuel costs, including discounts, in his reports to the United States Postal Service. Hicks also failed to report $199,800 in rebate income on his federal tax return.
Kansas City Man Sentenced for Filing False Tax Return After Sale of Lake of the Ozarks Marina
On September 27, 2006, in Kansas City, MO, Donald Ray Hannah was sentenced to 27 months in prison for filing a false tax return. In March 2006, Hannah was found guilty of failing to claim $1.7 million in taxable income. Hannah failed to report the long-term capital gain for the sale of the Millstone Marina at Lake of the Ozarks in 1997. The long-term capital gain was required by law to be reported as capital gain but, was not reported on Hannah’s tax return.
Texas Man Sentenced to 24 Months in Federal Prison, Without Parole, for Failing to File Income Tax Returns
On September 25, 2006, in Fort Worth, TX, Phil Loren Myers was sentenced to 24 months in prison and ordered to pay $107,092 in restitution for failing to file personal income tax returns in 2001 and 2002. In June, a federal jury found the retired Braniff Airlines pilot guilty of failing to file tax returns after receiving more than $320,000 in profits from investments in a currency trading business as well as other taxable income. The investment business was an illegal “Ponzi scheme” run by Ronald Lovelady, of Garland, Texas, under the names Alpha Equities, Grupo Greystone, TXX-01 and Response Equities. Lovelady was convicted and was sentenced last year to five years in prison and ordered to pay more than $10 million in restitution to victims. Myers, although not charged with knowing involvement in the Ponzi scheme, was one of the first investors and received profits of more than $300,000 on an investment of less than $10,000. Myers admitted that he quit filing tax returns in 1984 after losing a civil court case against the IRS. In the years since, he sent the IRS correspondence and literature asserting various reasons why he did not have to file a return such as the claims that: he was not subject to the tax laws because he was not a “person subject to taxation” as defined in the tax code, that the IRS was an illegal foreign corporation, that the 16th Amendment was unconstitutional and that IRS returns were illegal because they failed to comply with the Paperwork Reduction Act. He also claimed that he could not be investigated because his name was copyrighted. In finding the defendant guilty after deliberating less than an hour, the jury rejected his claim that these asserted arguments proved Myers did not willfully violate federal laws requiring him to file a tax return.
Illinois Tax Preparer Sentenced to 46 Month Prison Term
On September 20, 2006 in Chicago, IL, Donald Bingham was sentenced to 46 months in prison, followed by 36 months of supervised release and ordered to pay $330,859 in restitution to the IRS for filing false claims and “executing a scheme to defraud by transmitting a wire communication” (electronically filing false tax returns). According to the Plea Agreement, while working at Instant Tax Service, Bingham filed 72 false and fraudulent tax returns that claimed $330,859 in false tax refunds. On the tax returns, he overstated clients’ income so they could qualify to receive the Earned Income Tax Credit. Clients paid up to $2,000 for Bingham to create false W-2 “Wage and Tax Statement” forms. Bingham also increased his clients’ tax refund amounts by claiming dependent children who did not belong to his clients on their tax returns.
Former Oklahoma University Football Player Sentenced to More Than Six Years in Prison for Money Laundering and Securities Fraud
On September 18, 2006 in Oklahoma City, OK, Adrian Cooper was sentenced to 75 months in prison for securities fraud and money laundering. Cooper was also ordered to pay almost $1 million in restitution to his victims when he worked as their stock broker. In November 2005, Cooper was indicted on charges of securities fraud, mail fraud, wire fraud, money laundering, and the use of false social security numbers. Cooper, a Merrill Lynch stock broker from 1999 until August 2004, defrauded individuals by directing them to send money to him or to third parties for the purchase of stock. Instead of investing this money, Cooper used it to pay for his personal living expenses and he lulled people who sent him money in the course of his fraudulent schemes into believing that the schemes were legitimate transactions. The indictment did not allege any wrongdoing on the part of Merrill Lynch.
Corporate Executives and Legal Counsel Sentenced for Tax Fraud
On September 13, 2006, in Salt Lake City, UT, Thomas E. Mower, Leslie D. Mower, and James L. Thompson were sentenced for their roles in a scheme to defraud the United States. Thomas Mower was sentenced to 33 months in prison to be followed by 3 years supervised release and ordered to pay a $75,000 fine in addition to paying prosecution costs; Leslie Mower was sentenced to 27 months in prison to be followed by 3 years supervised release and ordered to pay a $60,000 fine; James Thompson was sentenced to 12 months and one day in prison to be followed by two years of supervised releases. The Mowers founded, co-owned and controlled Neways, Inc., an international multi-level marketing company based in Salem, Utah. Thomas Mower was the Chief Executive Officer, Leslie Mower was the Chief Financial Officer and both served as company directors. Thompson was employed as corporate counsel for Neways, Inc., from the fall of 1995 through the summer of 1997. According to the indictment and the evidence introduced at trial, the defendants devised and executed a scheme to conceal from the IRS more than $1 million of Neways, Inc.'s gross receipts received from Neways Australia, as well as more than $3 million of commission income the Mowers received from distributorships in the multi-level marketing structure of their United States, Australian and Malaysian companies. As part of the scheme to conceal income from the IRS, the Mowers used nominee entities, nominee bank accounts and fictitious social security numbers.
Former Allegheny Energy Employee Sentenced to 6 Years in Prison, Ordered To Pay $1.4 Million in Restitution for Racketeering Scheme
On September 13, 2006, in Pittsburgh, PA, Brian Ramsey was sentenced to 72 months in prison followed by three years supervised release and ordered to pay $1,400,000 restitution to Allegheny Power and $85,000 forfeiture to the United States on his conviction of operating a Rico enterprise, Rico Conspiracy, five counts of mail fraud and three counts of filing false income tax returns. According to information presented to the court Ramsey was an employee of Allegheny Energy during the period of the scheme responsible for oversight of construction work at Allegheny Power's headquarters in Greensburg, Pennsylvania. He allegedly accepted bribes from three contractors, and approved payment of their false bills.
Illinois Mail Transporter Sentenced to 18 Month Prison Term
On September 11, 2006, in Benton, IL, Hal D. Hicks was sentenced to 18 months in prison followed by 36 months supervised release and ordered to pay $228,028 in restitution to the Internal Revenue Service for filing a false tax return and falsifying a fuel certification form with the U.S. Postal Service. Hicks owned and operated “Hal D. Hicks Mail Transportation”. Hicks negotiated rebate deals with large fuel suppliers and received rebate checks from these suppliers. He failed to truthful report his actual fuel costs, including discounts, in his reports to the United States Postal Service. Hicks also failed to report $199,800 in rebate income on his federal tax return.
Beckley Woman Sentenced For Embezzlement and For Filing a False Tax Return
On September 5, 2006, in Beckley, WV, Deborah Mitchell, former executive secretary of RESA I, was sentenced to 52 months in prison for embezzlement and for filing a false tax return to the Internal Revenue Service. Mitchell was also ordered to pay restitution in the amount of $1,341,691 to RESA I and to the Internal Revenue Service in the amount of $221,815. Mitchell pled guilty to the offenses on May 22, 2006 admitting that she had embezzled over 1.3 million dollars from RESA from 1998 to 2006 and had failed to report the embezzled funds on her 2005 tax return to the Internal Revenue Service.
Missouri Attorney Sentenced for Tax Evasion and Interstate Transportation of Money Obtained by Fraud
On August 31, 2006, in St. Louis, MO, Attorney Charles E. Polk was sentenced to 46 months in prison, followed by 3 years of supervised release and ordered to pay $560,623 in restitution for tax evasion and interstate transportation of stolen property. Polk pleaded guilty in April to felony tax evasion and fraud charges and admitted to fraudulently obtaining money from clients and associates and concealing his activities from his law firms. While working at a law firm, Polk fraudulently took more than $45,000 from a client, the St. Louis Metropolitan Sewer District (MSD) by endorsing a $70,719 check that MSD wrote to a consultant. The consultant discovered that the payment was $45,190 more than it should have been and refunded the money to Polk, who deposited the money into his personal bank account in Massachusetts. Polk also admitted to willfully failing to file a federal tax return for 2002.
Former Employee of PinnFund, a Mortgage Lending Company, Evaded Over $103,000 in Taxes
On September 5, 2006, in San Diego, CA, Christopher Brent Belaire, a former employee of PinnFund, USA, Inc., was sentenced to 18 months in prison, six months in a half-way house, one year supervised release, and fined $1,000. Belaire was also ordered to pay $103,090.05 to IRS for back taxes, penalties and interest. On May 30, 2006, Belaire pleaded guilty to two counts of filing false tax returns for tax years 2000 and 2001. Belaire admitted to failing to report over $348,000 in income during 2000 and 2001. According to court records, Belaire was an associate of PinnFund's Chief Executive Officer and was given access to substantial amounts of company funds, a large portion of which Belaire misappropriated for his own use.
Singer Ronald Isley Sentenced for Evading Nearly $3.1 Million in Taxes
On September 1, 2006, in Los Angeles, CA, Ronald Isley, the lead singer of the Isley Brothers musical group, was sentenced to 37 months in prison to be followed by three years of supervised release. Isley was convicted on October 31, 2005, of five counts of tax evasion and one count of willful failure to file a tax return. During the trial, federal prosecutors showed how from 1997 through 2002 Isley received and spent millions of dollars on personal assets and expenses while evading the payment of approximately $3.1 million in income taxes. According to evidence presented at trial, Isley created a web of bank accounts and shell companies that he used to conceal his income. He controlled and personally benefited from Isley Brothers royalty checks that he had issued to other individuals and Isley Brothers-related entities including the estate of Okelly Isley, a deceased brother. Checks for Isley’s royalties were deposited into several accounts that he controlled including one purportedly owned by his wife. Isley also incurred expenses associated with his lifestyle which included the lease/purchase of a second high-end Bentley automobile for $280,000; a Los Angeles apartment leased for $5,000 per month and $60,000 spent to furnish the apartment; and $400,000 paid to an interior decorator. Isley attempted to deduct some of these personal expenses as business expenses on his 2002 tax return. For the years 1997 through 2001, while involved with IRS collection and bankruptcy proceedings, Isley failed to file tax returns although he continued to earn and receive income. This investigation was a result of a referral under the IRS’s Fraud Referral Program.
Parking Lot Owner Sentenced for Failing to Report Over $900,000 of Income
On September 1, 2006, in San Francisco, CA, Minesh Krishnadas Mehta was sentenced to 15 months in prison to be followed by three years of supervised release. In addition, Mehta was ordered to pay $340,111 in restitution and fined $200. On April 21, 2006, Mehta pleaded guilty to two counts of tax evasion. According to the plea agreement, Mehta admitted that during the years 1999 and 2000, he operated numerous parking lots in the San Francisco Bay Area under various names of incorporated entities which served as nominees for his parking lot operations. The parking lot businesses generated a substantial amount of cash receipts. Mehta deposited the cash receipts in amounts less than $10,000 into his bank accounts so that banks would not file Currency Transaction Reports. Mehta admitted that he had failed to report on his individual income tax returns a total of $926,304 for the years 1999 and 2000.
President of Investment Company Operated Ponzi Scheme that Defrauded Investors of Over $6.6 Million
On August 31, 2006, in Fort Myers, FL, Tim Ray Sacora, president of Florida Secured Funding (FSF) investment company, was sentenced to 78 months in prison to be followed by three years supervised release, and ordered to pay $6,344,873.49 in restitution to victims of his scheme and a $200 assessment. Sacora pleaded guilty to money laundering and wire fraud charges in May 2006. According to the plea agreement, Sacora promoted FSF as an opportunity to invest in medical receivables guaranteeing a 9.75 to 12 percent return on investment. Sacora failed to invest the funds in medical receivables or certificates of deposit, as promised, and instead converted the funds to his own use. Sacora laundered the proceeds of his illegal activities by conducting monetary transactions through financial institutions. In total, Sacora defrauded investors of over $6.6 million.
Red Bank Builder Sentenced to 15 Months in Federal Prison for Tax Evasion
On August 29, 2006, in Trenton, NJ, Guy Ferraro was sentenced to 15 months in prison following his guilty plea to four counts of tax evasion. Ferraro was also ordered to pay a $16,000 fine and to make a payment to the IRS for $940,521 plus interest. Ferraro admitted that from 1998 until 2002 he attempted to evade paying taxes owed by diverting approximately $762,557 in income from Ferraro Builders to his own use and benefit. As part of the scheme, Ferraro instructed buyers of homes constructed by Ferraro Builders to make checks for non standard features in their homes payable to Ferraro personally rather than Ferraro builders. Ferraro thereby diverted income form the company, which otherwise would have flowed through to Ferraro’s Individual Income Tax Returns. Ferraro would then generally invest the extra check in personal certificates of deposit or place the funds in a safety deposit box. Additionally, during tax years 1999 through 2001, Ferraro directed the company’s bookkeeper to prepare and record checks drawn on the company’s account as business expenses. Ferraro then cashed the expense checks and used the proceeds for his own personal use.
Owners of A-Ju Tours in Los Angeles Korea Town Sentenced on Tax Charges
On August 28, 2006, in Los Angeles, CA, Helen Bak, aka Young-Soon Bahk, was sentenced to 15 months in prison for tax evasion and filing false tax returns. Her husband, Daniel Bak, aka Pyoung-Sik Bahk, was sentenced to one year probation for filing a false tax return. According to her plea agreement, Helen Bak failed to report all of the gross business receipts earned through A-Ju Tours, Inc. on the business’s tax returns filed for the years 1998, 1999, and 2000. On these returns, Bak omitted at least $2,356,593 of income causing a tax loss to the government of $162,259. Acting on behalf of the corporation, Helen Bak signed the year 1998 return while her husband Daniel signed both the 1999 and 2000 year returns. The Baks also underreported income on their joint personal tax returns filed for the same years resulting in additional tax loss to the government of $38,214. Helen and Daniel Bak failed to report personal income they earned from rental property as well as additional income from A-Ju Tours, Inc. The plea agreement further states that Helen Bak diverted business receipts from A-Ju Tours, mostly cash, and deposited into nominee bank accounts established at Hanmi Bank and Pacific Union Bank. At least one of these accounts had been set-up in the name of Bak’s brother-in-law.
Former Fresno Business Man Sentenced to 24 Months in Prison
On August 28, 2006, in Fresno, CA, Jeffrey Lawrence Malicoat was sentenced to 24 months in prison to be followed by three years supervised release and ordered to pay a $100 fine. In June 2006, Malicoat pleaded guilty to one count of tax evasion which stemmed from a $2.5 investment fraud scheme. According to court documents, Malicoat admitted that on or about 1997, he formed JEMA Holdings, Inc. (“JEMA”), a Nevada corporation, and that JEMA was established for the purpose of providing a fraudulent investment scheme. As part of the investment scheme, Malicoat convinced one investor to make several wire transfers into JEMA’s bank account totaling $2.5 million. Malicoat further admitted that the $2.5 million was income received by him though JEMA for which he was required to report on his 1999 tax return. Malicoat used JEMA’s bank account as his own by paying for personal luxury items such as diamonds, a Rolex watch, luxury automobiles, a $320,000 residence, as wells as numerous other expenses.
Brothers, Co-Owners of Computer Depot Warehouse, Together Evaded Over $1.7 Million in Taxes
On August 25, 2006, in San Diego, CA, Sherif S. Gadalla, former co-owner of Computer Depot Warehouse, was sentenced to 12 months and one day in prison and ordered to pay $852,057 to the IRS for taxes due on $2.2 million in unreported income. On August 18, 2006, Samer S. Gadalla, brother of Sherif Gadalla and co-owner of Computer Depot Warehouse, was sentenced to 12 months and a day in prison and ordered him to pay $907,788 to the IRS for taxes due on nearly $2.5 million in unreported income he received from 1998 to 2002. In addition to jail time, both brothers were ordered to serve one year supervised release and ordered to pay a $100 special assessment. According to the plea agreements and the criminal informations filed in the case, from 1998 to 2002, Sherif and Samer Gadalla were partners and operators of Computer Depot Warehouse. During this period, the defendants received business revenue in cash, which was spent for their personal benefit or concealed in various locations in their residences. Sherif's unreported income totaled $2,224,210 while Samer's unreported income totaled $2,469,225. At the sentencing hearing, Sherif Gadalla handed a check to representatives of the IRS for the full amount of unpaid taxes, which totaled $857,041. At the time of Samer Gadalla sentencing hearing, he handed two checks to representatives of the IRS for the full amount of the unpaid taxes, which totaled $907,788.
Defendant in Investment Fraud Scheme is Sentenced to Over 11 Years in Prison
On August 25, 2006, in San Diego, CA, James F. Garro was sentenced to 135 months in prison to be followed by three years of supervised release and ordered to pay $6,484,607 in restitution. In April 2005, a jury convicted Garro of 20 counts of fraud, money laundering, and tax evasion. Evidence at trial, established that Garro raised $37.5 million from several investors by falsely promising them 100% profit within 15 calendar days from the trading of bank debentures in an allegedly secret, exclusive market in which only those with humanitarian purpose for their proceeds could participate. After obtaining control of investor funds, Garro never traded bank debentures as promised and instead spent the money in various unauthorized ways, including spending more than $8 million on luxury homes for himself in California and New Mexico.
Colorado Woman Sentenced to Hefty Prison Sentence in Connection With $56 Million Redstone Castle Investment Scam
On August 25, 2006, in Denver, CO, Jannice McLain Schmidt was sentenced to 108 months in prison, followed by 36 months of supervised release and ordered to pay restitution to victims for securities fraud and criminal forfeiture in a Superseding Information. Schmidt was charged with an alleged $56 million investment fraud scheme that led to the seizure of Colorado's historic Redstone Castle by the IRS. She pleaded guilty in May 2006, admitting her involvement in schemes known as High Yield Investment or Prime Bank and that she used wire transfers (interstate commerce) as part of the scheme. Schmidt also agreed to forfeit real property that was purchased with proceeds of the illegal scheme. According to the US Attorney, more than 1,000 people were defrauded of about $56 million.
Corporate Manager Sentenced to 18 Months in Prison for Evading Taxes
On August 25, 2006, in Oakland, CA, Robert G. Gardner, General Manager of Pacific Coasts Metals (PCM), Inc., a metal fabricating corporation, was sentenced to 18 months in prison to be followed by three years supervised release, fined $3,000, and ordered to pay $119,579 in restitution. On April 7, 2006, Gardner pleaded guilty to three counts of income tax evasion. In his plea agreement, Gardner admitted that during 1998, 1999, and 2000, he took money from PCM in the form of fictitious loans, checks paid to cash, and diverted PCM funds to himself through nominees and third parties who were friends. As an example of PCM paying his personal expenses, Gardner admitted that during 1998 he used the PCM corporate credit card to pay for more $6,000 of jewelry for his girlfriend. Gardner also instructed PCM accountants to falsely treat these items as corporate expenses instead of treating them as income to him. Gardner ultimately failed to report as much as $413,000 in income to the Internal Revenue Service during the years 1998, 1999, and 2000.
Texas Resident Sentenced to 40 Month Prison Term for Filing a False Claim
On August 25, 2006, in Fort Worth, TX, Ricky L. Ross was sentenced to 40 months imprisonment and ordered to pay $4,403 in restitution for filing a false claim with the Internal Revenue Service (IRS). Ross pleaded guilty in May 2006 admitting that he received a false Form W-2 from another co-conspirator and that he took the false Form W-2 to a Jackson-Hewitt tax service in Fort Worth to create a false tax return that was sent to the IRS. That false tax return resulted in a tax refund of $4,403.
Husband and Wife Sentenced to 18 Months for Tax Evasion
On August 21, 2006, in Los Angeles, CA, Sun Hi Lee and Wilford Johnson were sentenced to 18 months in prison and agreed to forfeit $2,434,000 in cash and $355,862 in bank account funds seized during the federal investigation. On April 26, 2006, the Johnsons each pleaded guilty to one count of federal tax evasion. According to publicly-filed documents, the Johnsons owned and operated a business known as Oriental Acupressure, in Inglewood, CA. Oriental Acupressure was a mostly cash business and had approximately 100-150 customers per day. The customers paid "house fees" ranging from $50-$90, to buy time with a prostitute working under the guise of a licensed massage or acupressure technician. The customers would then pay an additional fee directly to the prostitute depending on the agreed upon sex act. On their 2001 tax return, the Johnsons willfully and intentionally omitted income in the amount of $255,306 and failed to pay to the Government $81,848 in income taxes.
Attorney Sentenced to 15 Months in Prison on Tax Evasion Charges
On August 18, 2006, in Detroit, MI, William Hatchett, an attorney with the law firm of Hatchett, DeWalt & Hatchett, was sentenced today to 15 months in prison after pleading guilty earlier this year to attempting to evade and defeat the payment of his taxes. Hatchett admitted that he had an outstanding federal tax liability, but never made payment on approximately $382,000 in federal income and self-employment taxes due and owing. He willfully tried to evade these payments by using cash and cashier's checks to impede the ability of the IRS to collect on his federal tax liabilities. Hatchett also used another person's American Express Cards for his personal expenses and had no bank accounts in his name. Hatchett used the Hatchett, DeWalt & Hatchett firm checking account to finance his personal expenses, which including tuition payments for his children's education.
Defendant Embezzled Funds from Employer; Failed to Report Funds on Tax Returns
On August 17, 2006, in Chattanooga, TN, Margaret Sanson was sentenced to 21 months in prison to be followed by three years of supervised release, and ordered to pay restitution of $129,000 to the IRS. Sanson failed to report approximately $437,000 in income on her federal tax returns for 2000 through 2003 filed with the IRS, resulting in a tax loss to the government of approximately $129,321. According to the factual basis, a majority of the unreported income came from funds Sanson embezzled from her employer, The Pediatric Center, located in Tullahoma, TN. Sanson directed approximately $210,131 in insurance payments received by the medical practice into a dormant bank account, and then transferred the funds to herself. She also caused the business to pay for her and her husband’s American Express personal credit card expenditures in the amount of $226,879. Sanson engaged in multiple acts of concealment to hide the embezzlement from both her employer and IRS. She maintained the dormant bank account she used to divert the business receipts and forged the signature of her employer on corporate resolutions, signature cards, and corporate checks, and altered the business’ books and records to conceal her embezzlement.
Title Company Owner Sentenced for Filing Failure Tax Returns and Mail Fraud
On August 10, 2006, in Little Rock, AR, Mary O’Hanlon Smith was sentenced to 12 months in prison to be followed by 3 years of supervised release. In addition to jail time, Smith was ordered to pay restitution of $2,296,965.31 to Columbia National Title Insurance Company and $28,590 to Leroy Brockington. Also, Smith was ordered to cooperate with the IRS on criminal restitution of the tax count. Smith pleaded guilty on March 23, 2006, to one count of mail fraud and one count of failure to file tax returns with the IRS for calendar years 2002 and 2003. According to the Information filed in court, Smith owned and operated Global Title Company, a fiduciary and closing agent for real estate transactions. From December 2003 until October 2004, Smith admitted to receiving funds from buyer’s financial institutions and diverting those funds for her own use and benefit, rather than disbursing them to pay off the seller’s existing mortgages as required by the closing instructions. Smith’s diversions resulted in a loss to others of approximately $2,324,965.31. Smith also admitted that she failed to file federal income tax returns for calendar years 2002 and 2003 with the IRS resulting in a tax loss of $131,585.
Former Bookkeeper Sentenced to 36 Months in Federal Prison for Stealing from Her Employer
On August 8, 2006, in St. Paul, MN, Heather Rae Makwana, a former bookkeeper for Data Center Systems, a company that sells and services computer equipment, was sentenced to 36 months in federal prison and ordered to pay $944,424.92 in restitution. According to court documents, Makwana admitted that from September 2001 until her scheme was discovered in April 2005, she regularly stole funds from her employer totaling approximately $1,044,424. Makwana stole the funds by issuing a number of checks payable to herself and credit card companies to which she owed money. The fraudulent checks were prepared using a typewriter to avoid detection through the company's accounts payable computer system. She then forged the signature of the company's owner on those checks. In an attempt to conceal the theft, Makwana routinely entered false payee information and invoice numbers into the company's accounts payable computer system. Then, when the company's bank statements and cancelled checks arrived in the mail, she removed and destroyed the original fraudulent checks so others at the company would not discover their existence. Makwana admitted using the funds for her own benefit.
Three Family Members Sentenced for eBay Fraud Conspiracy
On August 7, 2006, in Springfield, MO, three family members were sentenced in federal court for participating in a conspiracy. Thomas Westwood; his wife, Jennifer Westwood; and Kathleen Dodson, the mother of Jennifer Westwood, were each sentenced to 18 months in federal prison without parole and ordered to pay $88,507 in restitution, for which they are jointly and severally liable. The defendants created false Universal Product Code (UPC) labels on a home computer, then traveled to retail stores and affixed the false UPC labels over the true UPC labels on retail merchandise. This caused the merchandise to scan at a lower price during checkout resulting in a loss of more than $88,000 to those businesses. After fraudulently purchasing the items, the defendants sold the items on Ebay. They used the proceeds of those sales, in part, to purchase additional merchandise at a reduced price by using the false UPC labels.
Woman Sentenced for Failure to Pay Federal Income Tax on Embezzled Money
On August, 4, 2006, in Urbana, IL, Lori Renee Nickel was sentenced to 30 months in prison to be followed by 3 years of supervised release and ordered to pay $517,489 in restitution. According to her plea agreement, Nickel admitted that she embezzled funds from her former employer, A.L. Dougherty Co, Inc., of Danville, IL. Nickel admitted that she failed to declare the embezzled funds, approximately $398,000, as income on her personal tax returns for the tax years 1998, 1999, and 2000.
South Carolina Doctor Sentenced to Federal Prison for Tax Evasion
On August 3, 2006, in Columbia, SC, Samuel C. Covington was sentenced to 12 months and one day in prison followed by 12 months of supervised release and ordered to cooperate with the IRS following his conviction of tax evasion. Covington is a medical doctor who refused to file federal or state income tax returns for tax years 1998 through 2000. He claimed that he was a resident alien and not a United States citizen and that he was not subject to the provisions of the Internal Revenue Code.
Ponzi Scheme Nets 33 Months in Prison for Florida Man
On August 2, 2006, in Jacksonville, FL, Gregory Scott Smith was sentenced to 33 months in prison, three years of supervised release, and ordered to pay restitution of $554,993 to the victims of his Ponzi investment scheme. In addition, Smith was ordered to forfeit $555,000 in US currency and two Ford trucks purchased with the proceeds of his criminal activity. In October 2005, Smith pleaded guilty to one count of engaging in a monetary transaction with funds from a specified unlawful activity and one count of mail fraud. According to the plea agreement, from July 1999 to February 2003, Smith received funds totaling $1,350,000 from investors to engage in High Yield Investments. Instead, the defendant operated a Ponzi scheme and used new investors' funds to pay prior investors and to pay personal expenses.
County Deputy Sheriff Sentenced to Serve 41 Months in Prison for Tax Crimes
On July 31, 2006, in Los Angeles, CA, Patrick J. Dain, a Ventura County senior deputy sheriff was sentenced to 41 months in prison for filing false income tax returns and obstruction. Dain was convicted in March 2006 for filing false tax returns for the years 1994 - 2000. He claimed to have earned no income during those years; however, evidence proved that he earned a low of $58,841 to a high of $83,177 each year. Dain was also convicted for obstruction for threatening IRS employees. Dain threatened to swear out a criminal warrant against an IRS Revenue Officer unless the officer released an IRS levy on his wages. He also threatened to arrest an IRS Special Agent.
Floridians Sentenced for Income Tax Evasion
On July 31, 2006, in Orlando, FL, Richard H. MacLean, Jr. was sentenced to 33 months in prison and his wife, Mary Ann MacLean, received a 24 month prison sentence for income tax evasion. During the years 1999 - 2003, the MacLean's had a taxable income of more than $500,000, but they failed to file tax returns or pay income taxes. The couple used a bogus trust to hide their income and assets and made withdrawals from the bogus trust to pay for all of their personal living expenses. They also used bogus nominee trusts to hide their titled property and they endorsed their checks with the language "Foreign Trust Proceeds" to conceal the source of their income and assets. Richard MacLean claimed that neither he nor his wife was required to pay income taxes based on his study of the tax laws. Mary Ann MacLean said that she relied on her husband's views and he was the one who made all of the decisions in the household. The jury rejected their arguments. Richard MacLean is currently in prison for a 2004 conviction for conspiracy, obstruction of justice, tampering with witnesses, and concealing objects from a federal grand jury.
Illinois Car Salesman Sentenced to 20 Month Prison Term
On July 25, 2006, in Chicago, IL, Charles Seriano was sentenced to 20 months in prison, followed by one year of supervised release and ordered to pay a $3,000 fine for filing false income tax returns and for obstruction. Seriano worked as an automobile salesman and finance manager. On his Schedule C tax return, he falsely claimed that he owned two businesses and that he had total business losses of $55,550 and as a result, he was due a tax refund of $18,791. He was charged with obstruction for having co-defendant Michael Maza prepare false documents for him and for making false statements to the IRS. Michael Maza was sentenced in June to 16 months in prison.
Ohio Man Receives 41 Months Prison Sentence for Investor Fraud Scheme
On July 20, 2006, in Cleveland, OH, John W. Kinney, III was sentenced to 41 months in prison, followed by 36 months supervised release, ordered to pay his victims $2.1 million and pay $144,000 in taxes to the IRS for income tax evasion, conspiracy, securities fraud and wire fraud. Kinney and other people defrauded investors by selling fraudulent and fictitious investments. According to the indictment, Kinney promised that investors could get high yield with no risk by investing in "bank debtures," "medium term notes," "prime bank instruments," "program loans," and "high-yield investment programs." Kinney told investors that these investments were available to the very wealthy and only in Europe and that the investments had to be purchased in large blocks of $1 million or more. Kinney promised that he would pool investors' funds to buy the investments. According to the indictment, instead of placing investors' money into the programs that he sold, he used the money to pay back other investors as purported payments of "interest," "principal" as part of the ponzi scheme, and for his own personal use. Kinney was also charged with failing to report over $356,300 in corrected taxable income, resulting in tax due and owing to the Internal Revenue Service of $144,781.
Securities Fraud Scheme Ends in 36 Month Prison Term
On July 20, 2006, in Cleveland, OH, Derrick McKinney was sentenced to 36 months in prison, followed by 3 years of supervised release, ordered to pay restitution of $1 million to victims, $444,437 to the IRS and $107,636 to a mortgage company for tax evasion, conspiracy, securities fraud and mail fraud. McKinney and others sold fraudulent investments to hundreds of investors, promising no risk and monthly returns of up to 100 percent. Instead, McKinney used investors' money to pay for his personal living expenses. McKinney admitted to owing more than $440,000 in taxes on taxable income exceeding $1 million.
Wyoming Bookkeeper Sentenced for Tax Fraud
On July 19, 2006, in Casper, WY, Julie Ann Jacobsen, also known as Julie Ann Deliramich, was sentenced to 18 months in prison, 36 months of supervised release and ordered to pay $162,977 restitution to the IRS for tax evasion. Jacobsen pleaded guilty to one count of a five count indictment in January 2006. According to the indictment, Jacobsen filed false tax returns with the IRS and failed to report all of her income. The indictment also charged her with hiding assets under the name of another person to evade her income taxes.
Tennessee Woman Sentenced to 12 Months in Prison for Tax Evasion
On July 17, 2006, in Knoxville, TN, Sarah Ann Staup was sentenced to serve 12 months and one day in prison, followed by 24 months of supervised release and ordered to pay a $10,000 fine. Staup pleaded guilty to income tax evasion charges in March 2006. While serving as the chief executive officer of Hensley Direct Inc., she admitted to writing 10 checks drawn on the Hensley checking account made payable to her husband or herself. She deposited the checks into her bank account and used the money for her personal benefit. To hide her actions, Staup classified the 10 checks as payments for Hensley’s postage fees. Staup failed to report the income on her tax returns and failed to pay $101,203 in income tax.
Restaurant Owners Sentenced for Tax Fraud and Money Laundering
On July 12, 2006, in Madison, WI, You Bin Yang and You Lin Yang were each sentenced to 34 months in prison, followed by 36 months of supervised release, fined $60,000 and ordered to jointly pay $366,800 for conspiracy to commit income tax fraud and conspiracy to structure financial transactions. The restaurant owners pleaded guilty in May 2006, admitting to evading $761,457 in federal income taxes from 1997 to 2001. They deposited credit card and check receipts into their business bank account, but pocketed cash receipts after taking the money to a credit union and converting it to larger bills. In addition, the defendants provided false monthly gross receipts totals to their accountants and underreported more than $2.6 million on their business tax return. The defendants also hired illegal aliens and failed to report employee wages or pay employment taxes to the IRS. After the IRS informed the defendants that they were subjects of a criminal tax investigation, they threw business and tax records into trash dumpsters.
Ohio Man Sentenced to Prison in Mortgage Fraud Case
On July 6, 2006, in Cincinnati, OH, Larry D. Hensley was sentenced to 16 months in prison, followed by 36 months of supervised release and ordered to pay $30,000 in fines for money laundering, failure to file a tax return and conspiracy to commit fraud. Hensley was originally indicted on 21 counts, but, he pleaded guilty to three of the charges in 2005. According to the plea agreement, Hensley, through his company, Creekview Investments, bought real estate and immediately sold property to buyers at inflated amounts. Hensley recruited buyers with newspaper ads claiming that they could buy homes with full financing and no down payment. In order to get loans, Hensley falsified loan and government documents so his clients would qualify. Closing statements were also falsified to show that the buyer provided a down payment when, in fact, Hensley paid the down payment. Henley admitted to using his company to launder $412,059.
Former Kentucky Road Contractor Sentenced for Tax Fraud
On July 6, 2006, in Bowling Green, KY, James D. Scott, former owner of Scotty’s Paving and Contracting, was sentenced to serve 12 months and one day in prison, followed by 12 months of supervised release. Scott paid approximately $1.2 million for back taxes, penalties and interest due and owing to the Internal Revenue Service before his sentencing. Scott pleaded guilty in March 2006, admitting to defrauding the IRS by filing tax returns from 1995 through 1996 that under reported his gross income by more than $986,000 and by taking false deductions for expenses in building his personal residence.
Florida Doctor Sentenced to Seven Years in Prison for Tax Evasion
On July 6, 2006 in Pensacola, FL, Dr. Ward Dean, was sentenced to seven years in prison followed by six years of supervised release, a fine of $7500 and restitution to the IRS of approximately $300,000. Dean was convicted on seven counts of tax evasion in December 2005. A jury found that he fraudulently filed his 1997-2002 tax returns, claiming no income, when he actually received approximately $1.3 million dollars in income and owed more than $300,000 in taxes. A retired Navy Commander; Dean received a pension and other consulting income during the six year period. After the IRS began its review of Dean’s failure to report income, Dean sent certified letters to financial institutions and others claiming the IRS summons were phony and threatened legal action if summons recipients disclosed his records to the IRS. According to the US Attorney in the case, Dean was a noted 'anti-tax' promoter in Pensacola, FL.
Nevada Businessman Sentenced to 46 Months in Prison for Tax Evasion
On July 6, 2006, in Los Angeles, CA, Las Vegas businessman Garth Kloehn was sentenced to 46 months in prison, ordered to serve three years of supervised release and pay a $100,000 fine for tax evasion on his corporate and personal tax returns. Kloehn was convicted in December 2005 for causing his medical devices manufacturing firm to take false business deductions for marketing expenses paid to nominee companies in Bermuda and the Cayman Islands. Kloehn used money sent overseas to buy land and build homes for himself and his son. Kloehn also failed to report income he received from a limited partnership. Kloehn failed to pay approximately $1.2 million in federal taxes.
San Francisco Remodeling Contractor Receives 10 Month Sentence for Tax Evasion
On June 27, 2006, in San Francisco, CA, Sam Ho Low was sentenced to five months in prison, five months home confinement, ordered to pay $73,954 in restitution and pay a $6,000 fine for intentionally underreporting his business income between 1997 and 1999. According to the plea agreement, the defendant owned and operated Frank and Sam’s Construction and Remodeling Company, Inc., which was an "S" corporation under the Internal Revenue laws. Frank and Sam’s Construction provided remodeling and construction services for residential and commercial clients in the Bay Area. Low admitted to asking clients to pay by check or cash and that he cashed the checks and used some of the money to pay business expenses such as salaries, wages, building materials and building supplies. He also admitted that he did not tell his tax return preparer about the checks he cashed or the currency he received and that none of it was reported on his income tax returns. He also admitted that he gave his income tax return preparer only the business bank statements to calculate his gross receipts for years including 1997 and 1999. The net tax loss to the United States was $73,954.
Kentucky Man Sentenced for Failing to Report $947,350 in Gambling Winnings to the IRS
On June 12, 2006, in Bowling Green, KY, Cyrus Jeffrey Bland was sentenced to 24 months in prison, followed by 12 months of supervised release for filing false federal income tax returns. On January 26, 2006, Bland was found guilty of willfully failing to report gambling winnings of $499,640 in 1998 and $477,700 in 1999. On his income, he failed to pay $178,642 and $193,501, respectively, in federal income taxes.
Minnesota Man Receives 108 Month Prison Sentence
On May 31, 2006, in St. Paul, MN, Scott Donald Wiele was sentenced to 108 months in prison and three years of supervised release for mail fraud, wire fraud, and money laundering. Wiele, pleaded guilty to the charges in August 2005. Through his company, First International Corp., Wiele promised investors large returns on their investments with little or no risk. Instead of investing the money as promised, Wiele used the money to pay for his personal expenses and to pay earlier investors. Wiele used some of the investors’ money to finance high-yield investment deals called "pump and dumps." Through a "pump and dump" scheme, the value of company stock is artificially inflated by false representations made to the investing public. The promoters of the "pump and dump" then sell their shares before the false representations are discovered, causing the value of the stock to drop.
West Virginia Coal Company Secretary Sentenced in Embezzlement Case
On May 25, 2006, in Clarksburg, WV, Lee Ann Jones was sentenced to 27 months in prison, followed by three years of supervised release and ordered to pay $355,000 in restitution to her former company and pay $105,000 to the IRS for tax fraud and mail fraud. Jones pleaded guilty in January 2006 to embezzling approximately $335,240 from her employer. She failed to include the money she embezzled on her federal tax returns.
Charter School Owners Sentenced for Defrauding School to Pay for Lavish Lifestyle
On May 24, 2006, in Minneapolis, MN, William Pierce was sentenced to 37 months in federal prison, followed by three years of supervised release. His wife, Shirley Pierce, was sentenced to 30 months in prison and three years of supervised release. They were ordered to pay $489,239.65 in restitution to the Minnesota Department of Education. William and Shirley Pierce owned and operated the Right Step Academy, a not-for-profit school. An audit in 2000 revealed financial mismanagement at the academy, as well as failing to provide an adequate education for the students and unsafe transportation and facilities. The Pierces were convicted in October 2005 of conspiracy, filing false tax returns, mail fraud and wire fraud. Evidence during the trial revealed that the Pierces committed tax fraud when they failed to include as income about $55,701 on their federal tax returns in funds diverted from the academy. The Pierces set up a separate company to handle the school’s accounting, payroll and human resource functions and excessively over-charged the school. The court found that Shirley Pierce, a former IRS revenue officer and special agent, committed perjury when she testified she was unaware of her tax obligations.
Kentucky Certified Public Accountant Sentenced to Prison for Filing False Tax Returns
On May 23, 2006, in Covington, KY, Gary W. Collier was sentenced to 24 months in prison, followed by one year of supervised released for filing a false tax return. Collier, a certified public accountant, pleaded guilty on February 10, 2006 to one count of a four count indictment. In the Plea Agreement, Collier agreed that he failed to report more than $435,000 in taxable income from his 1998, 1999, and 2000 personal tax returns. Collier was ordered to pay $165,083 in taxes, plus interest and penalties. Collier was also ordered to pay restitution to the Internal Revenue Service.
Wisconsin Chiropractors Sentenced For Tax Evasion
On May 18, 2006, in Madison, WI, Ernst J. Neumeyer and Erich G. Neumeyer were each sentenced to 15 month prison terms and ordered to pay a $30,000 fine. The two co-owners of Neumeyer Chiropractic Clinic in Wausau, WI pleaded guilty on March 3, 2006 to filing false income tax returns by understating their incomes. The two brothers diverted receipts from their company and did not pay taxes on the diverted income.
Four California Defendants Sentenced for Money Laundering and Tax Evasion in Residential Brothel Case
On May 24, 2006, in San Jose, CA, Xiao Feng Shen was sentenced to 24 months in prison and Ming Sun received a 20 month prison sentence for conspiracy to harbour aliens, money laundering and tax evasion in connection with the operation of 10 residential brothels. Two other defendants, Jia Jing Chu and Ai-Ching Chang were sentenced earlier. Chu was sentenced on May 23, 2006 to an 18 prison term and Chang was sentenced on May 3, 2006 to a prison term of 30 months. According to the plea agreements, Shen, Sun, Chu and Chang admitted that in 2004 and 2005, they hid women who did not legally enter the United States. The defendants admitted that they employed up to 99 women as prostitutes in rented, residential locations and kept some of the women’s earnings as their own income. As part of the money laundering conspiracy, Shen, Sun, and Chang admitted that they collected money from the locations where the alien women were being harboured and used the proceeds to further promote the operation by paying expenses associated with harbouring the women. More than $708,000 has been seized by the government.
"Survivor" Winner Sentenced to 51 Months in Prison for Tax Evasion
On May 16, 2006, in Providence, RI, Richard Hatch was sentenced to 51 months in prison for failing to report $1 million of income to the IRS that he won from the "Survivor" television series and about $391,000 income from other sources. Hatch was also ordered to pay $474,971 in taxes, interest and penalties he owes for 2000 and 2001. The evidence showed that, in 2000, Survivor Entertainment Group (SEG) paid Hatch $1,010,000 for winning and appearing on the final episode of the initial "Survivor" series. Hatch's contract noted that he was responsible for paying taxes on his winnings. In 2001 and 2002, two accountants prepared returns for Hatch that reflected the Survivor income. The first showed that Hatch owed $441,501 in taxes and the second showed him owing $234,807. Hatch never filed either return. Instead, he asked the second accountant to prepare an "informational" return so he could know what his taxes would have been without the Survivor show income. According to the evidence, Hatch filed that return, despite an explicit warning from the accountant that he should not file it. As a result of that return, Hatch was due a $4,483 refund.
Oklahoma Woman Sentenced to Two 40 Month Prison Sentences for Wire Fraud and Money Laundering
On May 12, 2006, in Muskogee, OK, Angela Rae Williams was sentenced to two 40 month prison sentences for wire fraud and money laundering for embezzling from her employer, Unarco Industries Inc., where she worked as an account manager. The sentences against Williams will run concurrently. Williams was also ordered to pay $319,802.65 restitution to Unarco Industries, Inc. upon her release from prison. Williams, who pleaded guilty in December 2005, devised a scheme to divert money from her employer by manipulating the petty cash, advance accounts, as well as other accounts and financial procedures established at the company.
Ex-Stockbroker Sentenced to 40 Months in Prison for Defrauding Former Clients of Millions of Dollars
On May 10, 2006 in White Plains, NY, former stockbroker Joseph Kane, Jr. received a 40 month prison sentence for defrauding private investors and two charitable institutions of $2.6 million and laundering the money. Kane was also sentenced to three years of supervised release and ordered to pay $2.6 million in restitution. Kane admitted to telling investors and entities that he was investing their money in bonds, mutual funds and other documented investments, but then put their money to different uses, including the payment of his own personal expenses and to repay other victims. When confronted by his victims, Kane made false and misleading representations about their supposed investments. According to the U.S. Attorney, much of Kane's fraudulent behavior in this case took place while he was on probation in connection with a previous securities fraud conviction.
California Woman Sentenced to 6.5 Years for Embezzling $11 Million from Her Employer
On May 10, 2006, in San Jose, CA, Carol Ann Huang was sentenced to 78 months in prison and ordered to pay restitution to be determined later for mail fraud and money laundering in connection with her embezzlement of over $11 million from her employer. Huang admitted to providing false payroll data to an employee at a payroll processing company that handled the payroll administration for two of her employer's companies. As a result, Huang received grossly inflated fictitious pay checks on a biweekly basis for at least six years. Huang also had the employee at the payroll processing company "back out" the tax and payroll data that showed that she had received the fraudulently issued pay checks. In support of this "adjustment," Huang provided the payroll company with bank records purportedly showing that the amount of money that she had fraudulently obtained had been reimbursed to the accounts. However, in fact the funds for these monthly "reimbursements" had been fraudulently obtained by Huang by making unauthorized withdrawals on personal lines of credit that she had taken out in her employer's name, without his knowledge, at three banks.
Former Title Company Owner Sentenced to Almost Two Years in Prison for Identity Theft and Tax Evasion
On May 10, 2006, in Reno, NV, Donna Lynn Glock was sentenced to 21 months in prison, ordered to pay $319,386.83 in restitution, and serve three years of supervised release on federal identity theft and tax evasion charges. Glock, a former real estate title company owner, pleaded guilty in November 2005 to obtaining mortgage loans in the names of other individuals and diverting corporate monies for her own personal use.
San Diego Couple Sentenced in Connection with Fraudulent Investment Scheme
On May 8, 2006, in San Diego, CA, Susan Browne and Charles Edward Browne were sentenced in connection with their roles in a fraudulent investment scheme called Alliance Leasing. Susan Browne was sentenced to 60 months in prison after entering a guilty plea to mail fraud and tax evasion. Charles Browne was sentenced to 51 months in prison on mail fraud charges. The Browne's and other defendants devised an investment scam promising investors a return of 16 percent per year with no risk. Investors were told that 90 percent of their funds would be used to purchase equipment that would be leased to independent businesses, and only 10 percent going to management fees. In reality, on top of the 10 percent management fee, at least 30 percent and sometimes more, of the investor funds were immediately siphoned off in the form of "commissions" to the Browne's, codefendants and others. In addition, later investors' funds were used to make up the shortfall created by high and undisclosed commissions, in classic Ponzi scheme fashion. More than 1,600 investors were defrauded of more than $46 million before the scheme collapsed.
Ukrainian Software Pirate Sentenced to 35 Months in Prison
On May 8, 2006, in San Jose, CA, Maksym Vysochanskyy, aka Maksym Kovalchuk, of Ternopil, Ukraine, received a 35 month prison term for selling pirated software. According to the plea agreement and other court records, Vysochanskyy sold pirated software programs, such as Adobe, Autodesk, Borland and Microsoft software on eBay and on Web sites he operated, including cdservice.org, bigcds.net and gold-cds.com. Vysochanskyy pleaded guilty in November 2005 to criminal copyright infringement, trafficking in counterfeit goods, and money laundering. The sentencing follows the defendant's extradition from Thailand, where he was arrested in May 2003. According to the U.S. Attorney, this case was one of the first involving an extradition for intellectual property crimes.
Former Fargo Real Estate Developer Sentenced for Mail Fraud and False Statements on Tax Returns
On May 5, 2006, in Fargo, ND, Richard Louis Mische was sentenced to 24 months in prison, followed by three years of supervised release for mail fraud and filing false tax returns. Mische was also ordered to pay more than $1 million in restitution to 10 real estate partnerships from which he embezzled money. Mische managed apartment complexes for investors and he admitted to giving himself advances and loans between 1997 to 2002. He provided false financial reports in an attempt to hide his scheme from partners and prepared false K-1 tax reports. Mische did not declare the embezzled income on his federal income tax returns.
Kansas City Attorney Sentenced for Failure to Pay Taxes
On April 6, 2006, in Kansas City, MO, Dale E. Lovelace was sentenced to one year in prison for failing to pay $109,584 in federal income taxes for the calendar year 2000. Lovelace admitted that he received taxable income of $266,076 from his law practice during 2000. He also admitted that he failed to pay his income taxes for 1996 and 1997 and that he failed to file his income tax returns and pay income tax from 1998 through 2002.
Florida Attorney Sentenced in Tax Evasion Case
On March 31, 2006, in Miami, FL, Matthew J. Schaefer was sentenced to one year and one day imprisonment, followed by three years of supervised release on one count of income tax evasion. Schaefer pleaded guilty in December 2005 for failure to pay taxes of approximately $133,000 for tax years 1999-2001. Schaefer failed to report his business receipts and overstated business expenses. The case judge denied Schaefer's request for probation, citing the importance of deterrence as a sentencing factor. The judge also ordered Schaefer to comply with the terms of his plea agreement in which Schaefer agreed to file amended income tax returns for tax years 1999 through 2001 and to pay the IRS more than $175,000 in back taxes.
Florida Chiropractor Sentenced on Tax Evasion Charges
On March 31, 2006, in Miami, FL, Eric Innes was sentenced to 36 months imprisonment, followed by three years supervised release, on three counts of tax evasion. The chiropractor was convicted for evading $40,000 in taxes on income earned in 1998 and 1999. It further alleged that Innes evaded the collection of more than $120,000 in taxes, interest, and penalties that he owed for tax years 1992-1995. During the trial, Innes testified that he was not a U.S. citizen for purposes of federal income taxes but was a US citizen for all other purposes including carrying a passport and registering to vote. Innes testified that he was not required to pay income taxes and that the income tax on wages was unconstitutional. Innes testified that he attended a meeting at a restaurant in West Palm Beach were he met people who taught him anti-tax ideas. Innes further testified that since his arrest, he realizes that the views regarding the tax system were wrong.
West Virginia Man Sentenced for Filing False Income Tax Return
On March 14, in Charleston, WV, Noel Richardson was sentenced to two years in prison, one year of supervised release, and ordered to pay $91,032 in restitution to the IRS for filing a false income tax return. According to the information and plea agreement, Richardson failed to report $375,000 in income he received. While working for several California motorcycle parts companies, Richardson admitted that he attempted to hide income by having checks payable to him written to names other than his own. He deposited the checks into bank accounts opened under other names to hide his income.
Sacramento Man Sentenced for Tax Fraud
On March 9, 2006, in Sacramento, CA, Jose J. Ramirez, was sentenced to a year and a day in federal custody and fined $10,000. He will also pay the taxes and penalties he owes to the Internal Revenue Service and the California State Franchise Tax Board. On September 22, 2005, Ramirez pleaded guilty to tax evasion. Under the terms of the plea agreement, he admitted that he filed false federal tax returns for 1997, 1998, and 1999, as well as false state tax returns for tax years 1997 and 1998. The tax loss to both the federal and state government was as much as $100,000.
James Marietta Sentenced to 14 Months Imprisonment
On March 7, 2006, in Youngstown, OH, James M. Marietta, III, was sentenced to serve 14 months in prison and three years supervised release for conspiracy to defraud the United States regarding the tax liabilities of the former president of the PIE Mutual Insurance Company (PIE). He was also fined $10,000 and ordered to pay $86,900 to the Internal Revenue Service. According to the indictment, Marietta was a consultant and chief financial officer of PIE, a large medical malpractice insurer. In 1998, the Ohio Department of Insurance ordered the company liquidated. In his plea agreement, Marietta admitted to conspiring with Larry E. Rogers, a former president of PIE, in order to help Rogers hide his taxable income from the IRS. Specifically, Rogers arranged for the company to pay $400,000 worth of consulting fees to a company owned by Marietta. Between October and December of 1994, Marietta paid $320,000 of these funds back to PIE to reduce Rogers’ loan account with the company. Through this scheme, Marietta was able to help Rogers understate his taxable income by $320,000. In 2002, Rogers plead guilty to preparing a false tax return, misappropriation from an insurance company and conspiracy. He was sentenced to serve 40 months imprisonment and ordered to pay more than $13 million in restitution.
Bowie Man Sentenced for Tax Evasion
On March 3, 2006, Baltimore, MD, Richard Taylor was sentenced to one year and a day in prison followed by three years of supervised release for tax evasion. He was also ordered to perform 100 hours of community service and to cooperate with the Internal Revenue Service in determining and paying his correct tax liability. Taylor pleaded guilty on November 2, 2005. According to the statement of facts presented to the court, Taylor evaded taxes for the tax years 1998 and 1999 in which he received taxable income of $350,868 and $436,507, in that order. Taylor did not file tax returns or pay taxes on the income. The tax due for 1998 was $106,974 and for 1999 was $148,507, for a total tax loss of $255,481. Taylor admitted that he used a Mastercard credit card issued by Leadenhall Trust Co. Ltd., of the Bahamas, to access money generated through the tax fraud scheme.
I.D. Theft Ring Leader Gerald Small Sentenced 101 months in Multi-Million Dollar Mortgage Fraud Scheme
On March 3, 2006, in Denver, CO, Gerald P. Small, III was sentenced to serve 101 months in federal prison and ordered to pay restitution of more than $37 million. The court gave a judgment and restitution deferment of 10 days so disputed issues in a related forfeiture proceeding could be resolved. Small and five others were indicted on April 6, 2004 for implementing a scheme to obtain hundreds of millions of dollars in bogus mortgages and multi-million dollar lines of credit by falsifying documents submitted through Small’s company, Amerifunding, and another company controlled by Small named, 20th Century Mortgage, Inc. According to the plea agreement, Small and his associates at Amerifunding used help-wanted advertisements published in a Denver newspaper to solicit job applicants, promising salaries of more than $100,000 in order to get the applicants’ personal identification information to obtain fraudulent mortgage loans. On February 7, 2006, Harry Lou Gayle, an employee of Gerald Small, was charged by Criminal Information with one count of filing a false tax return for 2002. According to the Information, Gayle received $44,000 for signing four false loan applications related to real estate fraud, but did not report the proceeds on his tax return. Gayle plead guilty on March 1, 2006 and is scheduled to be sentenced at a later date. During the course of the investigation and prosecution, assets obtained by Small and his associates were seized. The assets included 15 homes in Nevada and Colorado, a 2004 Jaguar, a 2003 Lexus, and more than $8 million.
National Operator of Sexually Oriented Business Sentenced On Federal Obscenity and Tax Charges
On March 2, 2006, in Dallas, TX, Edward J. Wedelstedt was sentenced to 13 months in prison followed by one year of supervised release and ordered to perform 120 hours of community service. Wedelstedt pleaded guilty November 4, 2005 to charges of transporting obscene matters for sale or distribution and engaging in a conspiracy to defraud the United States. Wedelstedt was also ordered to terminate all current sexually-oriented business activities in the State of Texas and to forfeit all business property located in the state. In a previous civil hearing related to property seized during this investigation, Wedelstedt forfeited $1.25 million to the government. Wedelstedt admitted that he conspired with certain arcade managers within his company to have large amounts of cash generated from his company's arcade operations provided directly to him, giving him absolute control over the funds. Wedelstedt collected these large amounts of cash during trips on his private jet to Goalie Entertainment Holdings, Inc. (GEH) regional offices and carried the cash back to his headquarters in Denver. Wedelstedt directed his arcade managers to supply him with weekly summary sheets, along with the currency, that detailed the total amount of arcade revenue being provided to him personally. These weekly summary sheets, the only written record of the amount collected by Wedelstedt, were not retained by GEH. From these cash funds, Wedelstedt frequently paid cash salaries and cash bonuses to employees and other parties without reporting the payments to the company accounting or payroll departments. These recipients frequently did not report these payments as income to the IRS. These actions resulted in a tax loss to the government.
Sentence Imposed In “Advance Fee” Scam
On February 23, 2006, in Greensboro, NC, Donald Gary Desorbo was sentenced to six years, eight months in prison, followed by three years supervised release. Desorbo pled guilty to charges in two indictments, admitting that he ran an advance fee scheme to defraud in which he promised to secure investment capital for entrepreneurs in return for a substantial pre-payment for his expenses. He never succeeded in securing the investment money, returned none of the pre-paid funds, and promptly converted the entrepreneurs’ monies to his own use and benefit. Desorbo also admitted laundering the proceeds of his scheme through financial institutions. The investigation identified 48 victims who entrusted approximately $ 6,700,000 to Desorbo in the hope that he could raise money as promised. In the second indictment, Desorbo pleaded guilty to making false statements to the Government in order to secure a passport. Desorbo acknowledged at an earlier hearing that he was not truthful when he declared in a passport application that he had lost a previously-issued passport, when, in fact, he knew it had been seized by federal agents during a search of his residence. As a part of the plea agreement, Desorbo signed a forfeiture agreement so that any funds and assets recovered would become the property of the Government
Tax Resister Sentenced to Prison for Tax Fraud
On February 23, 2006, in Las Vegas, NV, Cynthia Neun, long time associate of Irwin Schiff, was sentenced to 68 months in prison, followed by three years supervised release for her convictions on conspiring to defraud the United States, aiding and assisting in the preparation of false income tax returns, failing to file her own tax returns, Social Security disability fraud, and theft of government property. Neun was also ordered to pay $1,107,357 in restitution to the IRS. Neun and Irwin Schiff were found guilty in October 2005 for their involvement in aiding thousands of taxpayers in the filing of false federal income tax returns with the IRS that reported zero taxable income, in spite of the taxpayers earning reportable income. Nuen was second in command at Irwin Schiff’s Freedom Books and actively sold products encouraging customers not to pay taxes, prepared numerous false returns, and represented hundreds of taxpayers before the IRS where she promoted Schiff’s misleading and incorrect arguments.
Divorce Attorney Sentenced to Prison for Tax Evasion
On February 15, 2006, in San Jose, CA, Demetrious Eugenios was sentenced to 30 months in prison, and ordered to pay $1,265,662 in restitution for evasion of payment of income taxes for 1989 and 1991 through 1999. Eugenios, a former divorce attorney was convicted on June 28, 2005, for evasion of payment of income taxes evidence showed that Eugenios reported gross income for the years 1989 and 1991 through 1999 totaling $2,561,656. He reported income tax due and owing for those years totaling $654,724 of which he paid only $43,202. Evidence was presented that Eugenios concealed assets from the IRS including interests in several real estate properties and the ownership of a Porsche and a Toyota Tundra truck. During the execution of a search warrant on Eugenios’ residence on October 20, 2003, IRS agents discovered $42,575 in cash and $10,686 in gold and silver coins.
Portland Resident Sentenced in $1.2 Million Dollar Investment Fraud Scheme
On February 13, 2006, in Portland, OR, Peter F. McKinnon was sentenced to 40 months in prison, followed by 36 months of supervised release for the crimes of mail fraud and money laundering. Restitution in the amount of nearly $1.2 million was ordered to be repaid to the victims. In October of 2005, McKinnon pled guilty to single counts of mail fraud and money laundering and admitted to stealing more than $1.2 million from individuals seeking to invest money. According to the plea agreement, between approximately August 20, 1999 and May 19, 2004, McKinnon engaged in a scheme to defraud at least 12 investors of approximately $1,219,605 by making false promises to invest their funds in legitimate stocks and mutual funds. In truth, McKinnon converted the funds and enriched himself by using the money to pay his own business and personal expenses. The sources of the victims' nearly $1.2 million that was lost include: retirement savings; trust funds; proceeds from a house refinance; proceeds from the sale of a house; the transfer of family trust funds; a lawsuit settlement; previous investments and proceeds from the sale of properties.
Man Who Ran Ponzi Scheme gets 70 Months in Prison
On February 13, 2006, San Diego, CA, Edmundo P. Rubi was sentenced to 70 months in prison for conspiracy to commit mail fraud and money laundering. Rubi previously pleaded guilty to the charge that the conspired to conduct a scheme to defraud investors out of more than $12 million using his companies, Knights Express, Ltd. and Djmler Enterprises, Inc. Rubi was also ordered to pay restitution in the amount of $12,483,000. According to the plea agreement, beginning in 1999 and continuing up to October 31, 2001, Rubi formed and operated Knights Express Ltd. and Djmler Enterprises, Inc. for the purpose of soliciting investments from members of the public. In connection with his guilty plea, Rubi admitted that he made false, fraudulent, and misleading representations that investor funds would be used to purchase and resell Federal Reserve notes in an international trading program. In actuality, no such international trading program existed. Rubi further admitted that he knew that the investors’ funds were not being used for the purported investment program. Millions of dollars of investor funds were used instead to pay the periodic returns that investors received and to make unsecured investments. Rubi also intentionally concealed from investors the fact that millions of dollars of investor funds were converted for his own personal use and benefit.
Man Who Purported to be a CPA and Former IRS Employee Sentenced
On February 7, 2006, in Oakland, CA, Raymond Francis Hill was sentenced to 21 months in prison. On May 5, 2005, on the second day of trial, Hill pleaded guilty to one count of assisting and advising in the preparation of false tax returns. Hill began performing tax preparation work in 1967, and started a hearing aid business in the 1980s. Starting in 1997, while operating his hearing aid business, the defendant prepared so-called "zero-returns" for taxpayers. Hill prepared these false returns knowing that the "zero" income which he reported was false because the W-2 forms attached to the returns reflected significant wages. According to the testimony at trial, Hill falsely told others that he was a CPA and a former employee of the IRS. As part of the plea agreement, Hill is enjoined from preparing other individuals' income tax returns for a period of seven years.
Defendant Sentenced to 51 Months in Loan Fraud Case; Ordered to Pay Restitution of $661,695
On February 3, 2006, in Riverdale, CA, Javeed Siddiqui was sentenced to 51 months in prison and ordered to pay restitution of $661,695. Siddiqui pleaded guilty in February 2004, to six criminal charges, including mail fraud, bankruptcy fraud, using an unauthorized access device, and aiding and abetting an Internal Revenue Service revenue officer in the receipt of unauthorized compensation. Siddiqui admitted to using false income information and a false social security number to apply for numerous loans under his name and in the names of others. Siddiqui would than default on the loans. He also admitted unauthorized use of a credit card, false statements in a bankruptcy proceeding, and aiding and abetting an Internal Revenue Service revenue officer in the receipt of unauthorized compensation. A former IRS revenue officer and associate of Siddiqui was sentenced to one year of probation on March 22, 2004, after pleading guilty to accepting compensation for unauthorized employment outside of the IRS and making false statements to federal agents. According to documents filed with the court, Jon T. Elliott prepared federal income tax returns and Offer in Compromises at one of Siddiqui's businesses, "Asset Protection Services" while he was an employee of the IRS. These documents allege that Siddiqui told clients that he knew someone at the IRS “that could do stuff.” It is also alleged that Elliott was paid by Siddiqui because of official duties performed by Elliott, including accessing an IRS computer database and preparing a release of a federal tax lien. Elliott denied receiving any compensation when initially interviewed by TIGTA. Siddiqui also pleaded guilty to paying Elliott.
Tax Resistor Sentenced to Prison for Aiding in Preparation of False Income Tax Returns
On February 3, 2006, in Las Vegas, NV, Lawrence Cohen was sentenced to 33 months in prison followed by one year supervised release and ordered to pay $480,000 in restitution to the IRS. Cohen, an associate of long time tax resistor Irwin Schiff, was convicted in October 2005 of aiding and assisting in the preparation of a false and fraudulent 2000 individual income tax return for Virginia Olen. The return represented that Olen had total income of zero during calendar year 2000 and was entitled to a refund of $3,505, when Cohen knew she had substantial income during that year. Co-defendants Irwin Schiff and Cynthia Neun were convicted of conspiring to defraud the United States and aiding and assisting in the preparation of false and fraudulent tax returns. According to the indictment and evidence introduced at trial, Cohen, Schiff and Neun aided thousands of taxpayers in the filing of false federal income tax returns with the IRS and reported zero taxable income in spite of the taxpayers earning reportable income. Cohen was a salesman at Freedom Books and actively sold products encouraging customers not to pay taxes.
Husband and Wife Sentenced for Falsifying Tax Returns
On February 1, 2006, in San Francisco, CA, Hong Van Phan and Khanh Dieu Hoang, husband and wife, were sentenced for falsifying their federal income tax returns between 1999 and 2002. Hoang was sentenced to 28 months in prison and ordered to pay $271,111 in restitution and a $7,500 fine. Phan was sentenced to 16 months in prison and ordered to pay $76,163.07 in restitution and a $7,500 fine. The defendants delivered to the government a check for $2,816,788.43 just minutes before sentencing as partial payment for their unpaid taxes, penalties, and interest. Defendant Phan worked for Lucent Technologies and its predecessor company Ascent Communication from 1996 until 2003. Phan invented a testing device which he then sold to Lucent. However, since his employment contract with Lucent prohibited such sales, Phan and his wife created a company to manufacture and sell the product to Lucent, without Lucent knowing of his involvement. The defendant received approximately $8,000,000 in sales revenue which they did not report on their 1998-2002 tax returns, resulting in unpaid tax of approximately $3,300,000, excluding interest and penalties. Hoang and Phan pleaded guilty on September 28, 2005, to four counts and one count, respectively, of filing false tax returns. There was no plea agreement with Hoang, who admitted in court to preparing their joint tax returns for the years 1999 through 2002 and failing to report approximately $8 million of income they earned from a business they owned and operated. According to the plea agreement with Phan, he admitted to being aware of his wife’s failure to report approximately $200,000 of income from their business on their 2002 tax return.
Former Business Planning Manager at the 3M Corporation Sentenced
On January 31, 2006, in Minneapolis, MN, Bruce Alan Baird was sentenced to 33 months in prison and ordered to pay approximately $1.7 million in restitution. Baird pled guilty in August 2004 to one count of forged securities, one count of mail fraud, and two counts of filing false federal tax returns. A former Business Planning Manager at the 3M Corporation, Baird admitted that he prepared and submitted to 3M for payment fraudulent invoices, purported to be from 3M vendors, and directed the checks to be delivered to post office boxes he controlled. Baird then intercepted the checks, deposited the funds in his bank account, and used the money for personal purposes. Baird also forged vendor endorsements on the checks and converted the monies to his own use. Baird’s scheme defrauded 3M of more than $1.7 million over ten years. Baird also admitted to filing false federal tax returns for 2001 and 2002. For calendar year 2001 he failed to declare on his federal tax return approximately $125,000 in embezzled funds. For calendar year 2002, Baird failed to declare on his federal tax return approximately $247,000 in embezzled funds.
Centerville Woman Sentenced on Money Laundering and Tax Charges
On January 25, 2006, in Boston, MA, Lynn Alberico was sentenced to 27 months in prison, followed by two years supervised release, and ordered to forfeit $100,000. Alberico was convicted by a jury of conspiracy to commit money laundering, making and subscribing to a false tax return, and failure to file a tax return. Evidence presented at trial proved that on July 9, 1997, Stephen Queen illegally obtained over $900,000 in cash from his parents' safe deposit boxes in Florida. Alberico, along with her now ex-boyfriend, George Upton, stole the money from Queen and subsequently laundered a portion of it through the purchase of two pieces of real estate. The property was purchased with 13 separate cashier's checks that were acquired by Alberico, Upton, and four other individuals recruited by Upton. The cashier's checks were purchased through a series of convoluted currency transactions, involving structured deposits in amounts below $10,000, deposits into individual and business bank accounts, and cash purchases. In addition, the evidence proved that Alberico and Upton put a phony mortgage on the property in order to conceal the purchase of the property with cash. The evidence also established that of the $900,000 stolen, Alberico received approximately $100,000 of it. She did not report this additional income on her 1997 federal tax return, but instead reported an adjusted gross income of $17,341 from her business. In 1999, Alberico and Upton sold one of the properties in which Alberico received approximately $39,000 of the profit. Despite this profit, Alberico did not file an income tax return at all in 1999. Her co-defendant, George Upton was convicted and sentenced to 13 ½ years' in prison and ordered to forfeit over $395,000.
Ex-School Official is Sentenced
On January 13, 2006, in Minneapolis, MN, Colleen J. Gardner was sentenced to 37 months in prison, and ordered to pay restitution in the amount of $130,766 to the Winona Area Catholic Schools after pleading guilty in April 2005 to one count of mail fraud and two counts of tax evasion. Gardner admitted she misappropriated funds from five different checking accounts maintained by the Winona Area Catholic Schools. She fraudulently took cash that was to be deposited into the various bank accounts and also diverted funds by writing and cashing checks payable to cash and to herself. In an attempt to conceal her actions, Gardner made false accounting entries. During the course of the scheme, which ran from January 1998 to September 2003, Gardner misappropriated approximately $787,479. Gardner told the court that she lost most of the money gambling at a local casino. Gardner also admitted to tax evasion for calendar years 2002 and 2003. Her tax returns for those two years understated her income because they did not include the money she took from WACS. For calendar year 2002, Gardner claimed her taxable income was $10,306, when her taxable income was approximately $196,965, resulting in the underpayment of taxes of nearly $50,000. For calendar year 2003, Gardner claimed her taxable income was $17,098, when her taxable income was more than $97,000, resulting in the underpayment of taxes of approximately $16,000.
Rapper “Mystikal” Sentenced for Failure to File Federal Tax Returns
On January 12, 2005, in the Baton Rouge, LA, Michael L. Tyler was sentenced to 12 months in prison to be followed by two years supervised release. Tyler was also ordered to pay restitution in the amount of $270,891.52 less payments already made to the Internal Revenue Service. This follows his August 12, 2005, guilty plea to a two-count Bill of Information (BOI) charging Tyler, better known as rap artist “Mystikal”, with failure to file federal income tax returns. According to the BOI, Tyler received gross income of approximately $824,915.79 and $930,953.49 for the 1998 and 1999 tax years, respectively. Tyler, by reason of such gross income, was required by law to file a tax return following the close of the calendar year with the IRS.
Former President and COO of Parsons & Whittemore Pleads Guilty to Making False Statements to The IRS
On January 4, 2006, in New haven, CT, Arthur L. Schwartz, the former President and Chief Operating Officer of Parsons & Whittemore, Inc., pleaded guilty to two counts of making false statements to the Internal Revenue Service during the course of two separate audits at Parsons & Whittemore. According to court records Schwartz was responsible for overseeing Parsons & Whittemore’s financial activities and its personnel, insurance, legal and tax matters. Schwartz admitted that he falsely told the Revenue Agent during a 1999 civil audit that the CEO’s tax returns for 1995, 1996 and 1997 had been filed when he knew that they had not been filed. Also, Schwartz stated that he would provide the IRS with copies of the returns when he knew that none existed because the returns at issue had not been filed. From March 1999 to January 2001, Schwartz continued to falsely represent to the IRS that the tax returns had been filed when he knew they had not been. Schwartz also admitted that during a 1996 audit he provided copies of individual income tax returns for 1992 and 1993 knowing they were not copies of the returns he had filed with the IRS. Schwartz will be sentenced on March 23, 2006
Prison Sentence for Non-Filing of Federal Tax Returns
On January 3, 2006, in Green Bay, WI, Lester C. Minard, III, was sentenced to one year in prison for failing to file federal income tax returns for the years 1999 through 2001. Minard has also been ordered to spend 120 days in a community correctional facility as part of his one year probation period upon release. Minard pleaded guilty in September 2005, to all three charges brought against him for failure to file his individual federal income tax returns with the IRS. According to the plea agreement, Minard set up a telemarketing business in Antigo in 1995 that sold magazine subscription renewals. All of his business activity was processed through Nationwide Marketing Services which is located in Redwood City, California. Minard purchased lists of names of people with magazine subscriptions from Nationwide and then hired people to call these individuals to solicit renewals of the subscriptions. Minard then submitted to Nationwide the names and payment information for individuals who had purchased subscription renewals. Nationwide would calculate the commissions owed to Minard and send him a check every two weeks paying him his net commissions. In addition, at the end of each year, Nationwide sent Minard a Form 1099 summarizing the payments that had been made to him during the year. Based on an analysis of these payments, the IRS calculated the gross receipts for the years 1999 through 2001 to be in excess $1.3 million dollars and the tax due on this income of $156,155. As a special condition of his release, Minard is required to cooperate with the IRS, submit delinquent returns, and pay back taxes and interest.
Leader of Motor Vehicle Department Bribery Ring Sentenced to Over 17 Years in Prison
On December 19, 2005, in Phoenix, AZ, Moustapha Lotfi ElJammal was sentenced to 17½ years in prison and ordered to pay restitution in the amount of by $326,333. In March 2005, ElJammal was convicted of 15 counts including conspiracy, altering vehicle identification numbers and transportation and sale of stolen vehicles. According to the indictment, ElJammal conspired with other defendants to steal motor vehicles from Canada and the United States. Before or after a motor vehicle was stolen, the defendants searched for and found a Vehicle Identification Number (VIN) from a “donor” vehicle, usually the same make, model and year as the stolen vehicle. ElJammal and other defendants would copy or acquire the donor’s VIN or other identification markings. They would then make a matching fictitious VIN plate, almost identical to the manufacturer’s original VIN plate on the donor vehicle or remove the actual VIN plate from the donor vehicle, which is known as “VIN-switching.” ElJammal and the other defendants created counterfeit title/registration documentation for each “cloned” vehicle. They then used this counterfeit documentation to obtain fraudulent title and registration documentation from the State of Arizona. The evidence at trial, showed that ElJammal and co-conspirators engaged in activity from 1999 through 2002 that involved the theft and VIN switching of motor vehicles with an estimated value of millions of dollars.
Ponzi Scheme Nets Businessman 240 Months in Prison; Ordered to Pay Over $145 Million in Restitution
On December 16, 2005, in Los Angeles, CA, Larry Toshio Osaki, who ran a gigantic Ponzi scheme, was sentenced to 240 months in prison. In addition to prison time, Osaki was ordered to pay more than $145 million in restitution to victims. Osaki pleaded guilty on March 22, 2005 to conspiracy to commit securities fraud, two counts of securities fraud, obstruction of justice and one count of money laundering. Osaki’s scheme cumulatively collected a quarter billion dollars from nearly 7,000 investors and caused $145 million in losses. From at least 1997 until his arrest in October 2003, Osaki offered investments in accounts receivable financing, which is sometimes called factoring. Investors were told that their money would be used to purchase the accounts receivable of latex glove manufacturing companies based in Asia and that investments would yield returns of 20 percent every 90 days. Instead, Osaki used investors’ money to improperly pay the salaries for him and his associates and run his own venture capital firm.
Bay Harbor Island Real Estate Broker Sentenced for Tax Evasion
On December 15, 2005, in Miami, FL, Angelo Pizzuto was sentenced to 18 months’ in prison, followed by three years supervised release, and ordered to pay restitution to the IRS in the amount of $807,240 following his guilty plea to one count of income tax evasion. According to the criminal charges and court records, Pizzuto was a real estate broker who often handled large development projects for foreign investors. Because the investors came to the United States infrequently, Pizzuto was entrusted with considerable funds to manage their projects, including the hiring and paying of builders. Beginning in approximately 1999, Pizzuto used investor funds for his personal benefit and failed to disclose these funds as income. In total, Pizzuto used more than $2 million of investors' funds to finance his own lifestyle, including the payment of rental cars, dinners, consumer goods, and even the purchase of real estate. By failing to report this income, Pizzuto failed to pay the IRS substantial taxes.
Zanesville Man Sentenced to Prison for Fraud Charges
On December 8, 2005, in Columbus, OH, Joseph E. Kennedy was sentenced to 49 months in prison, followed by three years supervised release and fined $500 for his role in a conspiracy to defraud the IRS and others using bogus cashiers checks. According to testimony given at trial, Kennedy attempted to defraud the IRS and others by mailing counterfeit and fraudulent cashiers’ checks from a fictitious foreign Swiss bank, called Euro Credit and Exchange Bank, Ltd., operated by an unindicted co-conspirator. Kennedy submitted at least twelve counterfeit checks worth over $900,000 to various entities. However, he mailed most of the checks to the IRS to “pay” the delinquent tax liabilities for himself, a co-defendant, and several clients of an entity known as American Financial. Enclosed with the fraudulent cashiers’ checks were bogus legal orders called “Writs of Praecipe” that were allegedly issued by a non-existent common law court. These “Writs’ directed the IRS to cash the checks and refund the balance to Kennedy or others or pay damages in excess of $10,000,000. Evidence at trial showed that Kennedy used one check in an attempt to purchase $525,000 of pay phones as an investment for a group he claimed he represented in the Bahamas.
Northridge Businessman Sentenced to Prison for Submitting False Corporate Income Tax Return
On December 5, 2005, in Los Angeles, CA, Michael Paul Monroe was sentenced to a year and a day in federal prison, followed by one year of supervised release with a condition of six months of home confinement, and a fine of $22,640 following his August 2005 guilty plea to one count of subscribing to a false corporate federal income tax return for Swim Pool Construction Co., Inc. for its fiscal year ending April 30, 2000. Monroe admitted that he held an ownership interest in, worked for, and participated in the management of Swim Pool Construction Co., Inc. and Monroe Pool Service, Inc., both of which conducted business in the Los Angeles area. Monroe admitted that Swim Pool Construction Co., Inc. failed to report business receipts of $2,196,893 for the three year period ending April 30, 2001, and that Monroe Pool Service, Inc. failed to report business receipts of $419,790 during the same time period. Monroe admitted that he cashed some customers’ checks paid to the corporations, rather than deposit the checks into the corporations’ bank accounts. Monroe failed to report the gross receipts from the cashed checks on the corporations’ tax returns. As part of the plea entered in this matter, Monroe also agreed to have true and accurate tax returns filed for Swim Pool Construction Co, Inc. and Monroe Pool Service, Inc. for the fiscal years ending April 30, 1999, 2000, and 2001 and to have the corporations pay the IRS the taxes, penalties, and interest assessed on these tax returns.
Odessa Attorney Sentenced on Tax Charges
On November 29, 2005, in San Antonio, TX, Stephen C. Ashley was sentenced to two years in prison, followed by two years supervised release and fined $5,000 for filing a false United States Estate Tax Return and unlawfully conspiring with other individuals to defraud the IRS in its efforts to collect estate taxes. Ashley was the executor of his father’s estate and assumed responsibility for filing all pertinent documents with the IRS concerning the estate’s affairs. Ashley admitted that during the preparation of the tax return of his father’s estate he directed his secretary to type four backdated Gift Deeds falsely reflecting his father had deeded a certain portion of a ranch he owned to his sons in 1989 – 1992, when in fact his father had not deeded portions of the ranch until 1993. He also had his father’s former secretary forge his signature on the false deeds and had false notary records created. In 2002 during an IRS audit of the estate return, Ashley and his accountant submitted to the IRS copies of the four fraudulent gift deeds, and admitted to lying to the IRS about the fraudulent deeds and later directing his secretary to lie to the IRS agents investigating the case.
Proponent of 861 Argument Sentenced for Failure to Timely File Income Tax Returns
On November 22, 2005, in Philadelphia, PA, Larken Rose was sentenced to 15 months in prison, followed by one year supervised release and fined $10,000. Rose was convicted by jury in August 2005 to five counts of willful failure to file federal income tax returns. According to the evidence introduced at trial, Rose willfully failed to file personal federal income tax returns for calendar years 1998 through 2002, despite earning $500,000 during those years. On those amended returns, he reported no tax due and requested a refund for all income taxes paid in those years. At trial, Rose claimed that he failed to file returns and sought refund claims based on his determination that his income received inside the United States was not taxable under Internal Revenue Code Section 861 and regulations. The judge instructed the jury that this Section 861 argument is incorrect as a matter of law.
Former Accountant Sentenced for Tax Evasion
On November 21, 2005, in New Haven, CT, David E. Montesi was sentenced to 27 months in prison, followed by three years of supervised release. On August 17, 2005, Montesi waived indictment and pleaded guilty to one count of income tax evasion. According to Court records, Montesi, formerly employed as an accountant with a firm in Norwalk, attempted to evade the payment of a large part of the income tax owed by him and his spouse for the calendar year 1999 by filing a false and fraudulent amended joint U.S. Individual Income Tax Return, Form 1040. Specifically, Montesi stated on the return that their joint taxable income for the calendar year 1999 was $46,048, and that the amount of tax due and owing was $6,616 when, in fact, their joint taxable income for that year was $220,020. By omitting this additional income, Montesi evaded the payment of $56,272 in taxes. During the course of the investigation, it was learned that, over several years, Montesi had embezzled $550,520 from a Norwalk medical practice and failed to pay taxes on the unreported stolen funds. Montesi was also ordered to pay $177,461 in federal taxes he evaded paying from 1997 to 2000, plus penalties and interest.
Westchester Pair That Owned More Than Two Dozen Dunkin Donuts Franchises Plead Guilty to Tax Evasion and Bank Fraud Charges
On November 17, 2005, in White Plains, NY, Constantine Gianopoulos and his brother Anastasios Gianopoulos pleaded guilty to tax fraud and other charges relating to their ownership of more than two dozen Dunkin Donuts franchises. According to the Informations filed, the pair engaged in a scheme to evade both income and payroll taxes in connection with their operation of the donut shops by failing to file corporate and partnership tax returns, failing to file their personal income tax returns, disguising the salaries of certain employees as nontaxable “expense reimbursements,” and submitting false W-2 forms and payroll tax forms to the IRS. The pair evaded more than $1.5 million in payroll and income taxes and agrees as part of the plea agreement to make restitution in the full amount of the tax loss. Both defendants also pleaded guilty to making false statements on a series of loan applications. The applications requested a total of more than $3 million in loans.
Dallas Man Sentenced to Nearly 20 Years in Prison Following Conviction for $10 Million Tax-Evasion Scheme
On November 16, 2005, in Dallas, Texas, Daniel A. Fisher was sentenced to 235 months imprisonment and ordered to pay a $1,000,000 fine. Fisher was convicted by jury on 34 counts of aiding and assisting in the preparation and presentation of false and fraudulent tax returns, one count of bank fraud, one count of making a false statement in connection with a loan application and one count of making a false declaration before a court. The tax returns were fraudulent because they involved the creation of sham business entities and transactions aimed at eliminating taxes owed by the tax payers. Count 35 of the indictment charged Fisher with committing perjury during a civil hearing related to his tax activities where he testified under oath that he did not have any tax clients and did not perform any work for these clients. The false statement and bank fraud counts related to Fisher and his wife making false statements to Wells Fargo Bank and attempting to defraud that bank in connection with their application for a $300,000 revolving credit line at the bank.
From 2001 through 2003, Fisher convinced many successful, prominent individuals around Dallas/Fort Worth and other cities across the United States that he could set up business entities for them and eliminate their tax liabilities. Fisher specialized in targeting wealthy married couples, convincing them to “restructure” their tax returns. The government provided evidence that Fisher’s scheme involved creating and backdating sham partnerships for his tax clients. Under these sham business entities, the defendant fabricated transactions and “intangible assets” to create “deductions” used to wash out the couples’ income and create a loss in the partnership.
Defendant Nate Gray Sentenced to 15 Years in Jail in Broad National Public Corruption, Fraud Scheme
On November 16, 2005 in Cleveland, OH, Nate Gray was sentenced to 15 years in prison, followed by three years of supervised release and ordered to pay $1.5 million in restitution to the Internal Revenue Service. Gray was convicted in August 2005 following a corruption conspiracy trial and had also pleaded guilty to evading payment of previously assessed income taxes. The sentencing for one of Gray's co-defendants, New Orleans businessman Gilbert Jackson was continued to a later date. Jackson was also remanded into custody, and still faces trial the Eastern District of Louisiana in January 2006 on a multi-count indictment for tax evasion. The sentence imposed today was the result of a multi-district probe of public corruption offenses in Cleveland, East Cleveland, Ohio, Houston and New Orleans. In all, eight defendants have been convicted and sentenced in the case. The investigation revealed a wide range of public corruption, including the providing of money and luxury items to public officials in exchange for official acts such as the awarding of municipal contracts.
Former President of Disaster Recovery and Clean-up Company Sentenced in FEMA Fraud
On November 1, 2005, in St. Paul, MN, Kieger Enterprises (KEI) and Edward Kieger, Jr., former president and owner of KEI, were sentenced for engaging in a fraud scheme to enrich themselves by taking advantage of funds available for disaster relief efforts. Kieger was sentenced to 42 months in prison and ordered to pay $1.2 million in restitution, jointly and severally with Kieger Enterprises and other defendants. Kieger Enterprises was sentenced to one year probation and ordered to pay $1.2 million in restitution, jointly and severally with Kieger and other defendants. Kieger pled guilty to racketeering conspiracy and obstruction of justice. KEI, represented by Edward Kieger, pled guilty to mail fraud and obstruction of justice Kieger and KEI and other defendant sought to enrich themselves and defraud their customers by exaggerating and inflating the amount of work being performed. From 1998 to July 2002, Kieger, KEI and others routinely submitted false bills and documents and engaged in an orchestrated pattern of fraud that bilked corporate customers. Kieger, KEI and others, on occasion, would pay bribes and kickbacks to employees of private companies. In return, those employees would use their influence to see that KEI was awarded contracts and that the employees’ companies would pay the inflated bills submitted by KEI.
Eight Sentenced to Federal prison for Investment Fraud Scheme
On October 28, 2005, in Grand Rapids, MI, Janet Mavis Marcusse, the ringleader, along with seven other defendants were sentenced for their part of a large investment fraud scheme that collected approximately $20.7 million from 577 victims. The eight defendants sentenced were:
Janet Mavis Marcusse, 25 years in prison, three years supervised release, $12,651,244 in restitution.
David Rex Albrecht, five years in prison
George Terrance Besser, 20 years in prison
Diane Renae Boss, 10 years and one month in prison
Wesley Myron Boss, 8 years and one month in prison
Donald Maynard Buffin, Jr., 15 years in prison
William Edward Flynn, 9 years in prison
Jeffery Alan Visser, 15 years in prison
Evidence presented at trial showed the defendants represented that their investment activities had a long history of high monthly profits plus complete safety of a customer’s principal, the organization operated as a charitable entity allowing their investors to receive their “profits” tax free and that monthly interest checks of between 3-10% were paid making the scheme look legitimate. The investigation showed that the alleged international trading markets touted by the defendants did not exist; the monthly “interest” checks were not generated from successful financial activity but were simply the victims’ own money paid back to make the scheme look profitable; and the victims’ principal was not kept safe from risk but was spent by the defendants for personal items. The defendants reported none of the income they received from victims’ funds on their federal tax returns.
Hawaii Businessman Sentenced for Tax Evasion
On October 24, 2005, in Honolulu, HI, Michael H. Boulware, the principal founder of Hawaiian Isles Enterprises, Inc. (HIE), was sentenced to 60 months in prison, followed by three years supervised release, and fined $25,000 for filing false individual income tax returns for 1989 through 1993 and evading income tax owed from 1994 through 1997. According to the evidence introduced at trial, from 1989 through 1997 Boulware used various schemes to divert approximately $10.2 million from HIE - a tobacco, coffee, water and vending machine business with annual sales of approximately $85 million - which he failed to report on his federal income tax returns. The government's evidence also showed that from 1995 through 1997, Boulware received income in excess of $1.7 million from nominee entities and bank accounts located in the Kingdom of Tonga and Hong Kong, which he failed to report on his income tax returns. The combined tax loss to the IRS and the State of Hawaii totaled $8,105,714.
Dayton Man Sentenced to Prison for Tax Evasion
On October 19, 2005, in Dayton, OH, Walter M. Maken, a former employee of Joyce-Dayton Corporation and a freelance photographer, was sentenced to 30 months in prison, followed by three years of supervised release, 100 hours of community service, and ordered to pay the costs of prosecution. Maken was also ordered to pay $25,644 plus penalties and interest as restitution to the IRS. A jury convicted Maken after a two-week trial in April 2004 of one count of willful failure to file a federal income tax return for 1993 and one count of attempted evasion of 1994 federal income taxes. According to the indictment and the evidence introduced at trial, Maken failed to file a federal income tax return for the calendar years 1993 and 1994. In addition, Maken tried to mislead the IRS and conceal his income by submitting false W-4 forms to his employer, which claimed he was exempt from income tax withholdings. He also liquidated his retirement account without having any taxes withheld. Maken received about $70,000 in 1994 and had a tax due and owing of over $23,000. In addition, the government introduced evidence that Maken was involved at the time with anti-tax organizations such as Our One Supreme Court and the Freedom Connection, both now defunct. In convicting Maken, the jury rejected his defense that he believed the federal income tax laws did not apply to him. Evidence showed that Maken had not filed federal or state income tax returns from 1993 through 2004, and that he had not paid any federal or state income tax during those years.
Racine Man Sentenced to 28 Months Imprisonment for Tax Evasion and Perjury in Grand Jury Testimony
On October 14, 2005 in Milwaukee, WI, Paul Gregory Koleske was sentenced to 28 months in prison to be followed by three years supervised release. Koleske was found guilty by jury in July 2005 of willfully attempting to evade federal income tax due and owing from him and his spouse for calendar year 1997 and for knowingly making a material false statement to a federal grand jury in June 2001 about a fraudulent investment scheme in which he was involved. Koleske failed to file a federal income tax return or otherwise pay income taxes for 1997, when he earned in excess of $200,000 from various sources, including income from a pyramid scheme, the sale of his long distance business, and early IRA distributions. By failing to file a tax return for that year, Koleske evaded the payment of more than $36,000 due and owing to the IRS. Further evidence at trial showed that Koleske attempted to evade the payment of his tax obligations by making false statements to IRS agents, by establishing and depositing investment income into fraudulent trust accounts, and by advancing various illegitimate theories about his status as a non-taxpayer - including that he was a “non-resident alien,” that he was “sovereign” and that he had “expatriated” from United States citizenship.
Ex-Manager Gets Nine Years in FEMA Fraud
On October 12, 2005, in St. Paul, MN, Patrick Iwan, former general manager of Kieger Enterprises (KEI), was sentenced to 108 months in prison and ordered to pay $1.2 million in restitution for his role in a fraud scheme to swindle disaster relief money. Iwan pled guilty in February 2005 to racketeering conspiracy, mail fraud and obstruction of justice. KEI and Edward Kieger, Jr., are scheduled to be sentenced on November 1, 2005. Edward Kieger pled guilty to racketeering conspiracy and obstruction of justice. KEI, represented by Edward Kieger, pled guilty to mail fraud and obstruction of justice. Iwan and other defendants admitted to engaging in a fraud scheme to enrich themselves by taking advantage of funds available for disaster relief efforts. Iwan, Kieger and KEI sought to enrich themselves and defraud their customers by exaggerating and inflating the amount of work being performed. From 1998 to July 2002, Iwan and others routinely submitted false bills and documents and engaged in an orchestrated pattern of fraud that bilked corporate customers. Iwan and others, on occasion, would pay bribes and kickbacks to employees of private companies. In return, those employees would use their influence to see that Kei was awarded contracts and that the employees’ companies would pay the inflated bills submitted by KEI.
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