Tax Fraud Blotter: Relief rip-offs

Accounting

A busy year; must love scams; state of emergency; and other highlights of recent tax cases.

Salem, Massachusetts: Tax preparer Roosevelt Fernandez, 42, has been sentenced to five years in prison and three years of supervised release after orchestrating two schemes involving COVID-19 relief funds and returns submitted using stolen IDs.

As early as 2018, Fernandez operated the tax prep business Soluciones Multi Service. He used personal ID information of taxpayers to prepare and file fraudulent federal and state returns on their behalf without their knowledge. A number of these returns included fraudulent W-2s purportedly issued by employers for whom the named taxpayer did not in fact work.

Various fraudulent refunds were deposited into an account in the name of Soluciones Multi Service. A May 2020 fraudulent EIP was also deposited into this same account. 

Investigation uncovered some 40 fraudulent returns associated with Fernandez, totaling more than $620,000 in requested refunds.

In addition, he applied for 10 Economic Injury Disaster Loans, either in his own name or in the names of entities he controlled. In June 2020, Fernandez applied for an EIDL under Soluciones Multi Service and submitted a false tax filing in support of the application; the Small Business Administration deposited $124,900 into a bank account controlled by Fernandez from which he withdrew more than $80,000 in cash over the next two weeks. In August 2020, Fernandez applied for an EIDL in the name of another business using fraudulent tax filing information; the SBA deposited $149,900 into the same account.

Fernandez, who pleaded guilty earlier this year, was also ordered to pay $198,402 in restitution and forfeiture.

New York: Patrick Poux has pleaded guilty to filing false applications for hundreds of thousands of dollars in Paycheck Protection Program and EIDL relief.

Poux also pleaded guilty to fraudulently generating and submitting false return applications claiming millions of dollars in unearned refunds between 2016 and 2019.

Between March and September 2020, Poux fraudulently applied for PPP and EIDL funds of some $320,000 on behalf of himself and corporate entities he controlled. He received some $183,000 and he spent the money on such personal expenses as a life coach and luxury goods.

Between 2016 and 2019, Poux and others used false wage and withholding information in income tax returns to steal refunds. Poux created false tax forms for shell companies that had no operations or employees. He gave conspirators tax forms that falsely reported that the conspirator had worked at a shell company and had withheld income. Conspirators could then claim substantial refunds from the IRS; Poux received a percentage.

Poux and others submitted some 250 claims seeking a total of about $2.8 million in federal refunds.

He faces up to 30 years in prison and a fine of up to $1 million.

Tampa, Florida: Tax preparer Monica Clyburn has pleaded guilty to three counts of aiding in the filing of false returns. 

Cyburn worked for a tax prep business in Sarasota, Florida, for tax years 2014, 2015 and 2016. To inflate refunds, she prepared 1040s that falsely reported fictitious amounts in Schedules A. Many returns that she prepared for clients also contained false information on dependents and some contained fictitious information regarding profit/loss from the operation of businesses. 

Tax loss for those three returns is some $11,921. The tax loss for other returns she had a role in preparing and that contained similar false statements was some $186,834.

She faces up to three years in prison on each count.

Hands-in-jail-Blotter

Brentwood, California: Jehoaddan Wilson, 41, has been sentenced to 81 months for filing false tax claims, wire fraud and aggravated ID theft in a tax fraud that caused losses of $902,040.

She obtained victims’ Social Security numbers and then filed returns in the victim’s names that contained false information and that fraudulently claimed refunds; Wilson requested tax refunds be deposited between at least two bank accounts, one or both of which were hers.

One victim provided her personal ID information to Wilson with the understanding that Wilson, who presented herself as a legitimate tax preparer, would help file her return. Unbeknownst to the victim, Wilson made numerous false statements about the victim’s employment, expenses and income in the tax return, which fraudulently claimed a refund. Wilson also requested, without the victim’s knowledge or consent, that about half of the refund be deposited into Wilson’s bank account.

Wilson or one of her associates also visited a woman’s retirement community and convinced her to provide her ID information to obtain free money from an alleged federal government “Obama Stimulus” plan. Wilson used the information to file a return on the elderly woman’s behalf and without her knowledge. The return generated a fraudulent refund and Wilson directed about half of the refund into her own bank account. Wilson obtained a third victim’s information and filed a false return in his name while he was incarcerated and without his knowledge.

Searches at Wilson’s home and office turned up numerous additional documents containing ID information of victims, including copies of drivers’ licenses and Social Security cards.

In just 2011, she victimized some 388 people and her fraud cost the federal government $902,040.

She was also ordered to pay restitution of $902,040 and must serve three years of supervised release.

North Scituate, Rhode Island: Businessman Steven M. Allard, convicted of misusing more than $500,000 in employment taxes collected from his employees to finance personal expenditures, has been sentenced to 33 months in prison.

Allard, owner and operator of two local steel and iron companies, admitted that from at least 2017 through 2018 he failed to turn over to the IRS more than $570,000 in federal employment taxes and FICA payments withheld from his employees. Instead, Allard used the money to pay for personal expenditures including the purchase of more than $216,000 in credits to the online dating website RussianBrides.com and $93,000 in rent payments for a luxury home.

Allard, who pleaded guilty in 2020, was also sentenced to three years of supervised release and must pay $625,186.29 in restitution to the IRS.

This case marks the third federal conviction and sentencing of Allard. In 2009, he pleaded guilty to tax evasion and bankruptcy fraud and was sentenced to 30 months in prison. Prior to that, he was found guilty of accepting kickbacks from public employees and sentenced to 10 months in prison.

Germantown, Maryland: Former Federal Emergency Management Agency employee Shanta Johnson, 44, has pleaded guilty to aiding in the preparation of false returns.    

From January 2013 through at least April 2016, while employed at FEMA, Johnson prepared and filed false federal returns on behalf of her taxpayer clients; she prepared at least some of these returns while at work at FEMA. False items on these returns included deductions, business expenses and education expenses, all faked to inflate clients’ refunds.

In total, Johnson prepared at least 194 returns. She created and used numerous email accounts to establish accounts in the names of her clients on the online tax prep software she used to make it appear as if her clients were preparing their own returns. Johnson did not list herself as the paid preparer on any of them.

She charged for her services and, in many cases, directed a portion of her clients’ refunds into more than 20 bank accounts that she controlled. She also did not report her tax prep income on her own returns.

She caused a tax loss to the IRS of $217,424.

Johnson faces six to 15 months in prison and will be required to pay restitution to the IRS. Sentencing is Aug. 30.

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