Tax Fraud Blotter: Garbage in…

Accounting

Angel of fraud; time with the kids; from one cell to another; and other highlights of recent tax cases.

Louisville, Kentucky: Attorney Keith Hunter has been convicted for engaging in tax evasion.

Hunter evaded federal income taxes, penalties and interest for 2000, 2001, 2002, 2006, 2008 and 2011, a total of $1,124,620, by concealing assets. Among the methods he used were storing personal income in a client escrow account and in a nominee bank account, purchasing a home through a nominee as an alleged charitable donation and by recycling cashier’s checks. Hunter also provided false and misleading information regarding his assets and income to the IRS.

He faces a maximum of five years in prison.

Panguitch, Utah: Exec Debra Frandsen has been sentenced to 18 months in prison, to be followed by two years of supervised release, for failure to pay over employee withholdings.

Frandsen and her husband own and operate a logging business. Although she withheld the money from the paychecks, Frandsen, the company’s financial officer, did not pay the withholdings to the IRS.

Frandsen pleaded guilty in March to failing to pay over taxes totaling $1,833,454 dating back to 2002. She was also ordered to pay full restitution to the U.S.

West Alexander, Pennsylvania: Businesswoman Tina L. Beck has been sentenced to six months in prison and a year of supervised release on her conviction of filing a false income tax return.

Beck filed federal income tax returns for 2014, 2015, 2017 and 2018 on which she underreported gross receipts by more than $980,000 from the operation of the garbage collection business she jointly operated with her husband.

In February, Beck pleaded guilty to filing a false income tax return for 2018, on which she underreported business income resulting in a tax loss to the IRS of more than $50,000. She further accepted responsibility for tax losses incurred by the IRS in 2014, 2015 and 2017, totaling more than $232,000.

She will also serve her first six months of supervised release in home detention and will pay $252,034.08 in restitution to the IRS.

Fort Myers, Florida: Registered nurse Jennifer Hansen has been sentenced to two years in prison for filing false returns for 2016 through 2018.

Hansen, who pleaded guilty in March, was employed by a medical examination company to evaluate individuals who were seeking life insurance policies. She earned hundreds of thousands of dollars during the years in question, all of which she intentionally omitted from her federal income tax returns. Investigators also learned that a substantial portion of Hansen’s unreported income was illegitimately earned: She generated income by submitting false records to her employer claiming that she had examined a patient when in fact she hadn’t.

Hansen was ordered to pay more than $1 million in restitution to her former employer. She caused a federal tax loss of $257,830.44 and was ordered to make full restitution to the IRS.

Orem, Utah: Tax preparer Sergio Sosa has pleaded guilty to tax evasion, conspiring to defraud the U.S. and obstructing the IRS’s efforts to collect his personal tax debt.

Sosa owned and operated the tax prep business Sergio Centro Latino. From 2004, he conspired with his two adult children to conceal his assets and income from the IRS. From 2003 through 2017, Sosa also did not timely file his own returns or pay the taxes he owed for these years.

After the IRS audited Sosa and began efforts to collect his tax debt of more than $750,000, he used nominees to open corporate bank accounts, renamed his business and placed it in the names of his children and made false statements to the IRS. He also directed his daughter to make mortgage payments on his personal residence using funds he provided to her.

In total, Sosa caused a tax loss to the IRS exceeding $1.1 million.

Sentencing is Sept. 19. He faces up to five years in prison for tax evasion, five years for conspiring to defraud the U.S. and three years for obstructing the IRS. He also faces a period of supervised release, restitution and monetary penalties. 

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Dunkirk, Maryland: Security company exec Edward Scott Finn has pleaded guilty to a federal tax evasion charge.

Finn owned and operated Edward Finn Inc. From about late 1995 to April 26, 2021, he was a member of the Prince George’s County Police Department, members of which were allowed to work part-time outside employment in addition to their full-time duties, known as secondary law enforcement employment.

From 2014 to 2021, Finn used EFI and employed off-duty law enforcement officers to provide security services to apartment complexes and other businesses, primarily in Prince George’s and Montgomery Counties. He admitted underreporting more than $1.3 million of EFI income on his 2014 through 2019 individual income tax returns.

During that time, Finn deposited checks payable to EFI into personal bank accounts or non-EFI bank accounts over which he had signature authority. Finn also created false business expenses by writing checks to relatives and friends for purported services performed and used business funds to purchase a boat, a car and other items for his personal use. This federal tax loss totaled $367,765.

Finn admitted that on April 22, 2021, as federal agents announced their presence at his front door to execute a search warrant on his residence, he initiated the erasure and resetting of his cellphone. Finn then opened the door to his residence and law enforcement recovered the phone in the master bedroom.

Finn faces a maximum of five years in prison for tax evasion. He will also be required to pay $367,765 in restitution. Sentencing is Oct. 7.

Jefferson City, Missouri: Tax preparer Josiah Mator Jr., 40, has been convicted of filing false federal income tax returns for himself and others.

Mator, a citizen of the U.S. who moved here from Liberia in 2001, prepared and e-filed tax returns for individuals in the Liberian community and other friends and acquaintances for tax years 2010 through 2015. He did not have a registered tax prep business but used Express 1040 software to prepare returns from his home.

He was found guilty of filing a false federal income tax return for his own 2015 income. He claimed an adjusted gross income in 2015 of $16,552 and that his taxable income was $0, knowing that he did not include the business income from his tax prep service. Mator also was found guilty of filing a false federal income tax return for two clients that reported $16,000 in unreimbursed employee business expenses in 2015 although Mator knew that the clients had no such expenses. 

Mator faces up to six years in prison.

Brookville, New York: Spa owner Sung Soo Chon, a.k.a. Steve Chon, 63, pleaded guilty to failing to collect and pay over federal employment taxes.

He was the CEO, president and majority owner of Spa Castle Queens in College Point, New York, and Spa Castle Texas, in Carrolton, Texas. Chon oversaw daily operations at the two spas and related businesses and had subordinates pay cash wages to some employees, many of whom were not legally permitted to work in the United States. From the first quarter of 2014 through the first quarter of 2017, Chon did not withhold all legally required federal payroll taxes from the wages of some of the spa employees and filed false employment tax returns with the IRS. During this period, he caused the businesses to conceal more than $1.3 million in cash wages.

In total, the spa companies did not pay $199,238 in federal payroll taxes due.

Sentencing is Dec. 6. Chon faces up to five years prison, as well as a period of supervised release, restitution and monetary penalties.

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