Tax Fraud Blotter: That’s a wrap

Accounting

Kin capers; Easy money; just feeling frivolous; and other highlights of recent tax cases.

San Diego: Attorney Elliot Adler has been sentenced to a year and a day in custody for conspiring with former Chabad of Poway Rabbi Yisroel Goldstein to commit tax fraud. 

Beginning at least as early as 2010 and continuing through October 2018, Adler participated in a so-called “90/10” tax scheme with Rabbi Goldstein. Adler gave money to Rabbi Goldstein that purported to be a donation to Chabad of Poway. Goldstein then secretly funneled 90% of the funds back to Adler, keeping 10% as his fee. None of the donated funds was given to the Chabad as a charitable donation. Adler then falsely claimed that the fraudulent donations were tax-deductible on his returns, allowing him to reduce his personal income tax liability by some $500,000 cumulatively for tax years 2011 through 2017. 

Goldstein would refer to cash as “challah,” the source of the cash as “the baker,” and would invite co-conspirators to “wrap tefillin” when he proposed meeting to receive checks or deliver cash.  

Adler is the 11th and final individual to be sentenced for crimes discovered in this investigation. He was also ordered to pay a $20,000 fine. A restitution hearing is set for Oct. 24. 

Myrtle Beach, South Carolina: Three family members have been sentenced for a scheme to defraud the government by submitting false returns and stealing economic impact payments sent to others as part of the CARES Act.

Donna Karakatsani was sentenced to two years in prison; her son Ivo Krasimirov Ivanov was sentenced to a year and a half. Todor Milkov Stoenchev, Karakatsani’s husband and Ivanov’s stepfather, was sentenced to five years of probation.

Beginning in 2020, the IRS and the Department of State Office of Inspector General began investigating the family regarding false claims for refunds and stolen refunds. Karakatsani and Ivanov held themselves out as tax preparers and targeted foreign individuals, usually Bulgarians, who had spent time in the U.S. They would recruit the foreign nationals through the internet and at various locations around Myrtle Beach.

They submitted numerous returns in the names of these foreign individuals and would often cause those individuals to receive refunds, primarily undeserved education credits. The trio enlisted other individuals to open U.S. bank accounts into which these refunds were deposited, paying these individuals $100 for each account they opened.

Ultimately, the three caused 68 accounts to be opened across 16 different banks in the names of 14 people.

When as part of the CARES Act the government sent economic impact payments to qualifying individuals to their bank accounts on file, hundreds of EIPs were deposited into the bank accounts under defendants’ control. They kept the payments and used the money for personal expenses and to buy real estate.

Ultimately, the three defrauded the government out of $530,292.60.

Karakatsani and Ivanov were also each ordered to serve three years of supervision. The government recovered some $380,000 of stolen funds primarily through sales of the ill-gotten property, and the defendants were ordered to pay an additional $150,893.58 in restitution.

Pittsburgh: Tax preparer Brian A. VanDusen has pleaded guilty to tax and wire fraud.

VanDusen operated the prep company Easy Tax Refund, and between 2014 and 2018 he and preparers at his company prepared and transmitted hundreds of federal income tax returns that falsified Schedule C profits and losses, resulting in illegal refunds.

Sentencing is Jan. 19. The maximum per count is three years in prison or a $250,000 fine, or both.

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Elka Park, New York: Former Wall Street broker Joseph D. Radcliffe has been sentenced to three years of probation, and to spend four weekends in jail as a condition of his probation, for conspiring to evade taxes on income from stock sales.

He pleaded guilty in December, admitting that from at least 2013 through 2019 he conspired with two family members to receive hundreds of thousands of dollars in personal income that went unreported to the IRS, allowing him to evade assessment and payment of taxes on some $500,000. At the time, Radcliffe also owed more than $1 million to the Securities and Exchange Commission after settling fraud allegations in 2011; he has also failed to repay the SEC.

Radcliffe’s unreported income originated from capital gains earned in brokerage accounts in the names of Crackerjack Classics LLC and Universal Consulting LLC. These companies made payments to Radcliffe, and for his benefit, including $128,147 in mortgage payments and interest; $109,022 to a New Jersey law firm to settle Radcliffe’s unpaid bills; and $99,675 in checks made out to “cash” and which Radcliffe negotiated for himself or had others negotiate for his benefit.

Radcliffe further admitted that he did not file a return for himself, or otherwise report his income to the IRS, for the tax years 2013 through 2019. He did not maintain any bank or brokerage accounts in his name and he did not hold or trade any securities in his own name.

He was also ordered to pay $109,106 in restitution to the IRS.

Winter Springs, Florida: Rebecca Cyphers has been sentenced to a year and a day in prison for helping execute a nationwide tax fraud and attempting to prevent the IRS from recovering a fraudulent refund she received after filing a false return.

Cyphers participated in the nationwide fraud from at least September 2014 to May 2016. Promoters recruited clients by convincing them that their mortgages and other debts entitled them to tax refunds. Other members of the scheme prepared federal returns on behalf of clients, falsely reporting that banks and other financial institutions had withheld large amounts of income tax that entitled the clients to refunds. The financial institutions had actually paid no income to or withheld any taxes from the clients. Her role included inviting potential clients to at least one recruiting seminar and encouraging prospective clients to participate.

Cyphers filed an amended 2013 income tax return that falsely claimed her mortgage holder had withheld more than $560,000 in taxes; the IRS issued her a refund of some $240,000. She obstructed IRS efforts to recover this money by making large cash withdrawals from a bank account containing the refund amount, transferring much of the remaining amount into a trust and sending frivolous correspondence to the IRS.

Cyphers was also ordered to serve a year of supervised release and to pay some $232,185.20 in restitution to the United States.

Several others have previously been sentenced for their roles in the fraud.

Washington: Zachary A. Friedman, of New York, a former senior exec for a defense contractor, has pleaded guilty to tax evasion.

From 2013 through 2015, he worked in the United Arab Emirates as a senior executive for a U.S. Department of Defense contracting company. During that time, Friedman evaded federal taxes by providing information to his tax preparer that underreported the income he earned for each of those years.

He concealed some $530,000 in income, causing a tax loss of more than $207,000.

Friedman is the fourth defendant associated with the defense contracting company to plead guilty. He faces a maximum of five years in prison plus supervised release, restitution and monetary penalties.

Wilmington, Delaware: Brenda Mathis, owner of the daycare center LJ’s Playpen Academy, has pleaded guilty to three counts of tax evasion. 

She failed to declare all of the income received by LJ’s on its corporate tax returns; the daycare underpaid taxes in 2015, 2016 and 2017.

Mathis faces a maximum of five years in prison for each count. Sentencing is Dec. 16.

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