Tax Fraud Blotter: Reality bites

Accounting

Amicable crooks; a load of kibble; what a stool; and other highlights of recent tax cases.

Atlanta: Reality TV stars Todd and Julie Chrisley have been found guilty of conspiring to defraud community banks out of millions of dollars in loans. The jury also convicted Todd and Julie Chrisley and their accountant, Peter Tarantino, of tax crimes, including conspiring to defraud the IRS.

The Chrisleys were found guilty of tax evasion and Tarantino of filing two false corporate returns on behalf of the Chrisleys’ company. The jury also found Julie Chrisley guilty of wire fraud and obstruction of justice. 

Before the couple became reality television stars, they conspired to defraud community banks in the Atlanta area to obtain more than $30 million in personal loans. The Chrisleys, with the help of their former business partner, submitted false bank statements, audit reports and personal financial statements to banks to obtain the loans. They then spent the money on luxury cars, designer clothes, real estate and travel, also using new fraudulent loans to pay back old ones. After spending all the money, Todd Chrisley filed for bankruptcy and walked away from more than $20 million of the fraudulently obtained loans.  

In 2014, while Todd Chrisley was in bankruptcy proceedings, Julie Chrisley again manufactured financial documents and lied to real estate agents to obtain a luxury rental in Los Angeles. As soon as the Chrisleys began renting the house, they failed to pay rent, and the homeowner filed an eviction lawsuit.

Around the time that Todd Chrisley filed for bankruptcy, the couple became the stars of their own reality show, which was initially recorded in Atlanta. While they were earning millions from their show, the Chrisleys, along with Tarantino, conspired to defraud the IRS.

Throughout the conspiracy, the Chrisleys operated a loan-out company that received their income from their show and other entertainment ventures. To evade collection of half a million dollars in delinquent taxes owed by Todd Chrisley, the couple opened and kept the corporate bank accounts only in Julie Chrisley’s name. A day after the IRS requested information about bank accounts in her name, the Chrisleys transferred ownership of the corporate bank account to Todd Chrisley’s mother. All the while, Todd Chrisley operated the loan-out company behind the scenes and controlled the company’s finances.

They also failed to file returns or pay taxes for 2013 through 2016. At one point, Todd Chrisley falsely claimed on a radio program that he paid $750,000 to $1 million in federal income taxes every year, even though he had not filed or paid his personal income tax returns for years.

Tarantino was also convicted of filing two false corporate returns for the loan-out company, which falsely claimed that the company earned no money and made no distributions in 2015 and 2016. 

After learning of the grand jury investigation, Julie Chrisley submitted a fraudulent document in response to a subpoena to make it appear that the Chrisleys had not lied to the bank when they transferred ownership of the loan-out company’s bank account to Todd Chrisley’s mother. 

Sentencing is Oct. 6.

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Duncanville, Texas: The owners of a tax prep business have been sentenced to a combined five and a half years in prison for defrauding the IRS out of more than $3.3 million.

Valencia Janee Mack, 40, and her former husband, Rodney Lamond Bowman, 47, pleaded guilty in 2021 to conspiracy to defraud the U.S. Bowman was sentenced to three years in prison; Mack was sentenced to 30 months.

From January 2015 through April 2019, Mack owned and operated Phase US Tax Services, where she and Bowman knowingly prepared and filed fraudulent client returns with the IRS. The false tax returns reported fictitious Schedule C losses and Schedule A deductions: The false Schedules C included purported losses from travel businesses Phase 4 Global (a real business based in Decatur, Alabama) or PlanNet (a real business based in Atlanta), to reduce clients’ total income and entitle them to larger refunds.

The clients were not legitimate employees, contractors or franchisees of Phase 4 Global or PlanNet. Neither of these entities knew that Mack falsely claimed business expenses associated with their companies on client returns.

Bowman and Mack hid the false Schedule C losses by, among other things, omitting relevant pages in the paper copy of the returns they provided to clients. The two also provided fraudulent documentation to clients audited by the IRS, including fake mileage logs and other documents that appeared to substantiate the false business expenses in the fraudulent Schedules C. 

Mack further admitted that she fraudulently filed her 2014 personal return, failing to report any income or expenses from Phase US Tax Services, and that she failed to file her personal tax return for 2015 to 2018, despite earning income from Phase US Tax Services.

The couple shared in the fraud by splitting the prep fees. They were held liable for $210,442 in restitution.

Saylorsburg, Pennsylvania: Dr. Karin Breitlauch of Saylorsburg, and Linda Breitlauch of Stroudsburg, Pennsylvania, have each been sentenced to a year and a day in prison for failure to remit payroll taxes from their veterinary business.

Karin Breitlauch is a veterinarian who owns and operates Creature Comforts Veterinary Service; Linda Breitlauch, her sister, is comptroller for the business. They withheld federal income taxes from employees’ paychecks but failed to remit the withholdings to the IRS for tax quarters 2013 through 2016 and failed to pay the employer portion of the payroll taxes.

The Breitlauchs were ordered to pay $2,486,495.99 in restitution and serve three years of supervised release following their incarceration. A judge ordered the Breitlauchs to surrender themselves to the Bureau of Prisons on July 29, 2022, to commence their sentence.

Naugatuck, Connecticut: Tax preparer Ana Nunez, a.k.a. Ana Pagoaga, 51, has been sentenced to three years in prison to be followed by three years of supervised release for filing false returns for clients.

From 2011 to 2016, Nunez owned and operated the tax prep service Nunez MultiServices. During that time, she filed some 6,000 returns for about 2,600 individual taxpayers. On numerous returns, Nunez routinely inflated income or created fictitious income; falsified expenses, including education and childcare expenses, and falsified deductions, such as business mileage.

In 2018, a grand jury returned an indictment charging Nunez with multiple counts of filing false returns. Nunez subsequently obstructed the prosecution of this matter by creating false invoices to clients, which she provided to the government in an apparent attempt to justify additional monies she took from her clients’ refunds, and by attempting to intimidate a potential witness.

Nunez, who in 2020 pleaded guilty to two counts of aiding and assisting the filing of a false return, was also ordered to pay $501,933 in restitution to the IRS and $78,829 to the State of Connecticut.

Garnet Valley, Pennsylvania: Donna Fecondo has pleaded guilty to failing to collect and pay over employment taxes and failing to file returns.

Fecondo was the president and sole owner of Joseph Silvestri & Sons, which operated a mushroom farm. Fecondo did not timely file 943s for tax years 2013 through 2016. Instead, she filed the 943s for tax years 2013 through 2016 in or about July 2017, well after the due dates and after the Internal Revenue Service had contacted her about her failure to file or pay employment taxes.

For 2013 through 2016, Fecondo should have withheld and paid over to the IRS $1,255,068.94 in employment taxes but paid over nothing; of this amount, she should have withheld and paid over $599,159.94 related to tax years 2015 and 2016, but again paid over nothing. She also failed to file her 2015 and 2016 personal income tax returns and failed to file corporate returns for 2015 and 2016.

Sentencing is Sept. 27. The total maximum sentence is 14 years in prison and a $900,000 fine, together with the costs of prosecution, a three-year period of supervised release and $600 special assessment. Restitution up to $3,810,427 may be ordered.

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