Tax Fraud Blotter: Pain at the pump

Accounting

Run but can’t hide; lack of support; Romanian holiday; and other highlights of recent tax cases.

Rome, Georgia: Computer support employee Melvin Orellana has been sentenced in Nevada to 18 months in prison for participating in an ID-theft conspiracy.

Orellana worked for a company that provided software to tax prep businesses throughout the U.S. King Isaac Umoren operated Universal Tax Services, a Las Vegas-based prep firm that used software from Orellana’s company.

From about May 2016 through November 2017, Orellana conspired with Umoren to steal and transfer taxpayer and personal ID information from the software business. Umoren sought this taxpayer information to falsely inflate his client base to fraudulently sell Universal to an unsuspecting buyer. In exchange, Umoren agreed to pay Orellana $20,000 after Universal was sold.

In August 2017, Orellana provided Umoren with data for some 12,000 taxpayers whose returns were prepared by businesses using the tax software. In November 2017, Umoren used this data to fraudulently sell Universal for $6.7 million.

Elizabeth, Louisiana: A federal jury in Lake Charles, Louisiana, has returned a guilty verdict against Joseph Randall Boswell Sr., who was convicted of one count of bankruptcy fraud and one count of tax evasion.

Boswell fraudulently concealed property from the U.S. Bankruptcy Trustee and his creditors through his Chapter 7 case that he filed in September 2011. He concealed money earned from nominee business and service contracts that could have been paid to his creditors; Boswell was self-employed and withheld information about companies that he had control of through family members. 

Boswell was also convicted of attempting to evade income tax for 2001 through 2009, hiding assets from the IRS by putting them in the names of family members to avoid paying more than $597,000. He faces up to five years in prison and three years of supervised release on each count and a fine of up to $250,000. Sentencing is Jan. 23.

Sacramento, California: Former resident Virgil Sever Santa has pleaded guilty to failing to file an FBAR.

His wife, Maria Santa, was convicted of mail fraud in 2013; in February 2014, Virgil Santa reported to local authorities that his wife was missing and had left a note suggesting that she had committed suicide. Maria Santa was not found; it was later determined that she had faked her suicide and fled the country, eventually to Romania. In December 2014, Virgil Santa opened a foreign bank account in Romania. Five months later, he wired more than $50,000 from the U.S. to this account. In June 2015, he added his wife to the account, and while Maria Santa was hiding in Romania the couple made significant withdrawals. Santa willfully failed to file an FBAR by the deadline. In 2016, he also filed a U.S. return for 2015 on which he failed to disclose the foreign account. In August 2016, federal agents found Maria Santa living as a fugitive with her husband back in Sacramento. She was arrested and eventually pleaded guilty to failing to surrender for her prison sentence. In January 2018, she was sentenced to a year and a day in prison consecutive to her original 20-month sentence. Virgil Santa will be sentenced on Nov. 29. He faces a maximum of five years in prison and a $250,000 fine.

Oxford Junction, Iowa: Business owner Penny Lane Witt has been sentenced to 18 months in prison for tax evasion. 

In 2015, Witt operated businesses under the names of Ultimate Tree Service and Spruces Tree Service. Witt did not keep business records, did not have a business or individual bank account, and conducted all business and payroll expenses in cash.

Witt admitted concealing any usual record of the gross income she received, and admitted evading and attempting to evade federal income tax. In 2016 and 2017, she received some $469,000 in payments.

Witt was also ordered to serve three years of supervised release and pay $75,849 in restitution to the IRS.

Hands-in-jail-Blotter

Vallejo, California: Tax preparer Emilio Lara, of American Canyon, California, has pleaded guilty to willfully aiding and assisting in the preparation and presentation of fraudulent income tax returns.

Lara owned the tax prep business Lara’s Income Tax Services and from 2009 to 2012 prepared individual income tax returns for clients on which he falsely inflated certain Schedule A deductions, including medical and dental expenses, charitable contributions and unreimbursed employee expenses.

Lara agreed to pay $7,868 in restitution to the IRS. He also agreed to an injunction that will permanently prohibit him from preparing or filing federal returns for anyone other than himself.

Sentencing is Jan. 10. He faces a maximum of three years in prison and a $100,000 fine. 

Chino, California: Construction firm owner Liang “Paul” Chen, 63, has pleaded guilty to filing false returns that failed to report more than $4.8 million over five years, resulting in his failure to pay $1.6 million in taxes due to the IRS.

Chen owned Mass Development and has admitted that he filed false corporate tax returns for the years 2013 through 2016. To conceal income, he deposited only a portion of the checks made payable to the company into its bank account and then cashed nearly $5 million of additional checks at a bank and a local liquor store that offered check-cashing services.

Chen provided the tax preparer with statements from the business bank account and falsely advised the preparer that all of Mass Development’s income had been deposited into the business bank account. This underreporting resulted in an underpayment of federal taxes totaling $1,642,935.

Sentencing is Dec. 12. Chen faces a maximum of three years in prison. He has agreed to pay the IRS $1,642,935 in restitution.

Cleveland: Gas station owner Yaser Najjar, of Westlake, Ohio, has been sentenced to two years in prison and was ordered to pay a $100,000 fine and at least $503,398 in restitution to the IRS after pleading guilty to attempting to evade income tax.

From 2009 to 2017, Najjar failed to report the total income earned from his ownership and the operations of a gas station. As part of the scheme, he used cash from the business to make personal purchases and maintained a second, secret handwritten ledger documenting the station’s daily gross receipts, gasoline and convenience store sales.

Najjar used an accountant to prepare his taxes for 2009 through 2016 and deliberately concealed and misrepresented a substantial portion of the station’s gross receipts, providing the accountant with the markup per gallon of gasoline and convenience store sales; the figures substantially underreported actual gross receipts as reflected in the handwritten ledger.

Additionally, Najjar failed to provide the accountant with certain information related to actual sales and concealed other sources of income, including ATM fees, vacuum machine receipts and air machine receipts.

In total, Najjar defrauded the IRS of more than $1.5 million in income taxes.

Baton Rouge, Louisiana: Tax preparer Lakeisha Grayer, of Denham Springs, Louisiana, has pleaded guilty to making and subscribing false tax returns.

Grayer owned and operated Genesis Tax Service, and for tax years 2015, 2016 and 2017 Grayer prepared and e-filed federal income tax returns for more than 950 taxpayers. She reported her income on a Schedule C form attached to her personal return. The amount of gross receipts Grayer reported to the IRS was substantially lower than the actual amount. She also underreported her gross receipts for tax years 2018, 2019 and 2020.

The total tax loss exceeds $180,000.

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