Tax Fraud Blotter: Frauds uprooted

Accounting

Lack of Faith; concerted and conscious; Pipe schemes; and other highlights of recent tax cases.

Galloway, New Jersey: Tax preparer Michele Griffin, 42, has been sentenced to a year and a day in prison for using false information to inflate clients’ refunds and filing her own false returns.

Griffin, who previously pleaded guilty, prepared multiple returns for clients that falsified education expenses, dependent care expenses, business income, dependent information and unemployment income.

She prepared 19 false returns on behalf of six clients for tax years 2013 through 2016 and filed three false returns for herself for tax years 2013 through 2015. The tax loss was some $135,000.

Griffin was also sentenced to a year of supervised release and ordered to pay $135,063 in restitution.

Norwell, Massachusetts: Scott Herzog, owner of a residential and commercial landscaping business, has pleaded guilty in connection with his failure to report some $1.5 million in income to the IRS.

He owned and operated Herzog Landscape Solutions, and from 2016 through 2018 directed customers to pay him personally for jobs and then cashed many of these payments or deposited them into bank accounts unaffiliated with the business. Herzog then failed to report some $1.5 million in these receipts in the returns his tax preparer filed for him. 

He caused a federal tax loss of nearly $500,000.

Sentencing is Oct. 6. Filing a false tax return provides for a sentence of up to three years in prison, one year of supervised release and a fine of up to $250,000. 

Winter Springs, Florida: Rebecca Cyphers, 65, has pleaded guilty to filing a false federal return with the IRS for an undeserved refund.

Cyphers participated in a nationwide tax fraud where individuals prepared and assisted in the filing of returns for scheme participants, such as Cyphers. Participants falsely claimed that banks and other financial institutions had withheld large amounts of income tax that entitled them to a refund. The financial institutions had in fact paid no income to, nor withheld any taxes from, these individuals.

Cyphers admitted she filed a false 2013 amended income tax return claiming a refund she was not entitled to receive; the IRS issued her a refund of some $240,000. She then obstructed IRS efforts to recover this refund by transferring funds into a trust, making a large cash withdrawal from the refund deposit and sending frivolous correspondence to the IRS. She also admitted to helping others promote the fraud and recruit additional participants.

Three others have been sentenced in connection with the fraud.

Sentencing is Aug. 24. Cyphers faces up to three years in prison for filing a false return, as well as a period of supervised release, monetary penalties and restitution.

Brookfield, Wisconsin: Businesswoman Kimberly Zulkowski has been sentenced to 15 months in prison, to be followed by three years of supervised release, for her failure to account for and pay over federal taxes.

Zulkowski founded and managed Faith Family Services Inc., a personal care business with gross annual receipts exceeding $5 million and more than 150 employees. She refused to hand over monies she had withheld from her employees’ wages as part of her company’s payroll tax obligations.

Though the IRS warned Zulkowski in 2015 that she was violating tax laws, she kept up her conduct for nearly two more years, ultimately pleading guilty in February 2020.

Zulkowski was also ordered to pay $731,970 in restitution and a $100 assessment.

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Tampa, Florida: Medical biller Joshua Maywalt has been sentenced to 65 months in prison for health care fraud, aggravated ID theft, filing a false income tax return and failing to file an income tax return.

Maywalt worked at a company in Clearwater, Florida, that provided credentialing and medical billing services for its medical provider clients. He had access to the company’s financial, medical provider and patient information.

He was assigned to a Tampa Bay-area physician’s account and was responsible for submitting claims to a Florida Medicaid HMO for services rendered to Medicaid recipients. Maywalt wrongfully accessed and utilized the company’s patient information and the doctor’s name and ID number to submit false and fraudulent claims to a Florida Medicaid HMO for medical services never actually rendered by the physician. Maywalt also altered the “pay to” information associated with the HMO’s payment processor so that the payments for the non-rendered medical services were sent to bank accounts under his control.

He knowingly signed and filed a federal income tax return for 2019 that substantially understated his income and reported only his employment wages, and not the substantial amount of money he was depositing into his bank accounts as a result of his fraud. He also failed to file federal income tax returns for 2017 and 2018.

Maywalt, who pleaded guilty late last year, must also forfeit $2,257,029.86 and property in Tampa.

New York: A federal court has barred Brooklyn-based defendants Keith Sang, Kashana Sang, Tareek Lewis, Kimberly Brown and their business, K&L Accounting Group Inc., from preparing federal tax returns for others.

After bringing suit in July against the defendant preparers and business, the government obtained a preliminary injunction from the court to stop the defendants from preparing returns while the litigation was pending.

The court found that all defendants acted willfully or recklessly in preparing returns that understated clients’ tax liabilities; that the Sangs prepared paper returns that did not identify the preparer; and that all defendants took “concerted and conscious steps” to evade enforcement by the IRS.

The defendants recently consented to entry of a permanent injunction.

Boxford, Massachusetts: Plumbing contractor Jared Derrico, 35, has been sentenced to a year and a day in prison after engaging in a multiyear scheme to defraud clients and for evading his income taxes, defrauding the government of more than $1.45 million.

For tax years 2015 through 2019, Derrico operated a plumbing business known, variously, as Derrico Services and The Pipe Surgeon. He routinely overcharged customers for plumbing, maintenance and construction work and billed customers for work he did not perform at all. Derrico then cashed payments from his customers or deposited them into his personal accounts and misled his tax preparer about the gross receipts from his business to evade reporting this income on returns. He also obtained payments for installing air conditioning units at a property in Boston but in fact did not install the units.

Derrico, who pleaded guilty in February, was also sentenced to three years of supervised release and ordered to forfeit $315,000 in criminal proceeds and ordered to pay $1.45 million in restitution to the IRS.

Detroit: Tax preparer Daneilla Allen has pleaded guilty to preparing a false return.

Allen co-owned All Star Tax Services, a tax prep business with locations in Michigan and Ohio. Allen admitted that from 2014 through 2018 she prepared and filed false federal returns for clients. The returns contained fictitious business income and expenses and false itemized deductions and education credits to inflate refunds.

Even after the IRS informed her that she was the subject of a criminal investigation, she continued to prepare false returns for clients in 2020 and 2021.

Allen admitted to causing a total tax loss to the IRS of more than $815,000.

Sentencing is Sept. 7. She faces a maximum of three years in prison for assisting the filing of a false return, as well as a period of supervised release, restitution and monetary penalties. 

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