IRS EMPLOYEE, CORRECTIONS OFFICER, FDA EMPLOYEE, CHARGED IN MULTIMILLION DOLLAR TAX REFUND FRAUD

FROM:  U.S. JUSTICE DEPARTMENT 

Friday, January 16, 2015

FDA Employee, Former New York City Corrections Officer and Former IRS Employee Charged in Multimillion Dollar Tax Refund Conspiracy

Three New York residents were indicted in the Eastern District of New York for defrauding the U.S. government by filing false claims for millions in false tax refunds, the Justice Department and Internal Revenue Service (IRS) announced today.

Charged in a 20-count indictment are Rodney Chestnut, of Middle Island, New York, a retired New York City Department of Corrections officer; Clive Henry, a former IRS employee in the business of preparing tax returns and Nafeesah Hines, a former U.S. Food and Drug Administration (FDA) employee, both of  Jamaica, New York.  Chestnut and Henry were arrested on Jan. 15, and appeared in federal court in Brooklyn, New York.

The defendants are each charged with one count of conspiracy to defraud the United States, 11 counts of assisting preparation of false returns and four counts of filing false tax returns.  Hines and Chestnut are each charged with one additional count of filing false tax returns.  If convicted, the defendants each face a statutory maximum sentence of five years in prison for conspiracy and a statutory maximum sentence of three years in prison for each false return charged against them.  All of the defendants are also subject to fines and mandatory restitution, if convicted.

According to the indictment, between 2008 and 2012, Hines, Chestnut and Henry recruited clients to a scheme using fake IRS Forms 1099-OID (Original Issue Discount) claiming fictitious tax withholdings and were attached to tax returns that falsely claimed refunds of taxes that were never paid to the IRS.  Hines used an electronic system to transmit the false Forms 1099-OID to the IRS.  The false refund claims listed in the indictment total more than $3.4 million.

According to the indictment, the defendants collected fees based on a percentage the false refunds that they claimed as part of the scheme.  The indictment also charges the defendants with filing false income tax returns for themselves pursuant to the scheme.

In 2013, a federal court permanently barred Hines and Chestnut from promoting an alleged tax fraud scheme involving thousands of false tax returns and from preparing tax returns for anyone other than themselves.

The case was investigated by special agents of IRS-Criminal Investigation.  Trial attorneys Mark Kotila, Jeffrey McLellan and Erin Pulice of the Justice Department’s Tax Division are prosecuting the case.  An indictment is only an accusation and a defendant is presumed innocent until proven guilty beyond a reasonable doubt.