TWO IRS, SSA SCAMMERS SENT TO PRISON

FROM:  U.S. JUSTICE DEPARTMENT 

Tuesday, May 31, 2016

Virginia Couple Sentenced to Prison in Tax Fraud Scheme

Defendants Submitted False Information to the IRS and Social Security Administration

Two Bedford, Virginia, residents were sentenced to prison today for criminal offenses arising out of a four-year scheme to defraud the Internal Revenue Service (IRS) and the Social Security Administration, announced Acting Assistant Attorney General Caroline D. Ciraolo and U.S. Attorney John P. Fishwick Jr. of the Western District of Virginia.

Edgar Foxx, 50, and Contina Foxx, 42, were sentenced to prison terms of 41 months and 30 months, respectively, by U.S. District Judge Norman K. Moon of the Western District of Virginia following their convictions by a Lynchburg, Virginia, jury for criminal tax offenses.  Judge Moon also ordered the defendants to pay $147,708 in restitution and serve three years of supervised release following their release from prison.

“Our nation’s tax system relies upon citizens to truthfully, accurately and timely report their income to the IRS,” said Acting Assistant Attorney General Ciraolo.  “When people like Mr. Foxx fail to file their income tax returns or file false tax returns and fail to pay the taxes they owe, and when individuals like Mrs. Foxx submit false information to government agencies in order to obtain benefits, they take advantage of, and plane an undue burden on, honest taxpayers who pay their fair share.  The Justice Department stands ready to prosecute these offenders and hold them accountable for their crimes.”

“Every year, millions of Americans file their taxes and fulfill their civic obligation,” said U.S. Attorney Fishwick.  “They must be able to do this knowing the process is safe and reliable.  When individuals fail to pay their obligations the entire system suffers.  We are proud to work with the Tax Division on holding accountable those who attempt to defraud the tax system.”

“Federal income tax compliance should be equally shared among all Americans,” said Special Agent in Charge Thomas Jankowski for IRS-Criminal Investigation’s (IRS-CI) Washington DC Field Office.  “IRS-CI will continue focusing investigative efforts on individuals who contribute to the tax gap and do not comply with the law.  Today’s sentencing is a reminder that there are detrimental consequences for this type of criminal behavior.”

Edgar and Contina Foxx were convicted on Nov. 6, 2015, following a four-day trial before Judge Moon. Edgar Foxx was convicted of filing a false 2008 income tax return, failing to file his 2009 through 2011 tax returns and theft of government money.  Contina Foxx was also convicted of theft of government money as well as providing a false statement for health care benefits.  According to evidence introduced at trial and witness testimony, the Foxxes, who are married to one another, owned and operated a metal recycling business between 2008 and 2012.  They gathered scrap metal materials including junk cars and old appliances and sold them to recycling facilities in Southwest Virginia and Tennessee.  During the 2008 through 2011 time period, the Foxxes received over $500,000 in payments from several metal recycling companies, and failed to report any of this income on their 2008 through 2011 individual income tax returns.  At the same time, Contina Foxx provided false information to the Social Security Administration by failing to disclose the income earned from the metal recycling business.  As a result, the Foxxes unlawfully received approximately $80,000 in Medicaid benefits between 2010 and 2012.

Acting Assistant Attorney General Ciraolo and U.S. Attorney Fishwick commended special agents of IRS-Criminal Investigation, the Office of Inspector General for the Social Security Administration, the Office of Inspector General for the Department of Health and Human Services, the Bedford Department of Social Services and the Bedford County Sheriff’s Office, who investigated the case and Assistant U.S. Attorneys Patrick Hogeboom and Charlene Day of the Western District of Virginia and Trial Attorney Joseph M. Giannullo of the Tax Division, who prosecuted the case.

OPERATORS OF ONLINE BUSINESS INDICTED IN TAX AND BANK FRAUD CASE

FROM:  U.S. JUSTICE DEPARTMENT 

Friday, March 4, 2016

North Carolina Couple Indicted for Tax Fraud and Bank Fraud Related to Their Online Business

A federal grand jury in the Middle District of North Carolina returned an indictment March 1 charging a Greensboro, North Carolina couple, who operated an online sales business with tax fraud as well as bank and wire fraud, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Ripley Rand of the Middle District of North Carolina. The defendants were arrested earlier today and had their initial court appearances this afternoon.

Daniel Balson and Renee Balson were charged with one count of conspiracy to defraud the United States and to commit bank fraud, one count of bank fraud and five counts of wire fraud.  Daniel Balson was additionally charged with three counts of filing false tax returns for 2009 through 2011 and Renee Balson was charged with one count of filing a false tax return for 2009.  

According to the indictment, Daniel Balson owned and operated Southern Sales Online (SSO), an online retail business that sold a variety of merchandise through eBay and Amazon, including scrapbooking and art materials, books, inspirational DVDs, pet supplies and tools.  It is alleged that although SSO earned more than $1 million in gross receipts during 2005 through 2011, the Balsons failed to report gross receipts for SSO on their tax returns filed with the Internal Revenue Service (IRS).  The Balsons also failed to report income from SSO on a bank application for a mortgage loan modification in 2011.  The indictment also alleges that the Balsons stole merchandise from LifeWay Christian Stores and Hobby Lobby and then knowingly sold the stolen merchandise through SSO at prices less than retail value.

If convicted, Daniel Balson and Renee Balson each face a statutory maximum sentence of five years in prison for the conspiracy count, 30 years in prison for the bank fraud count, 20 years in prison for each wire fraud count and three years in prison for each false tax return count.  The Balsons also face substantial monetary penalties and restitution.

An indictment is not a finding of guilt.  An individual charged by indictment is presumed innocent unless and until proven guilty at some later criminal proceeding.

Acting Assistant Attorney General Ciraolo and U.S. Attorney Rand commended special agents of IRS-Criminal Investigation, who investigated the case, and Assistant Chief Todd A. Ellinwood and Trial Attorney Mara Strier of the Tax Division, who are prosecuting the case.  Acting Assistant Attorney General Ciraolo also thanked the U.S. Attorney’s Office of the Middle District of North Carolina for their assistance.

WOMAN INDICTED FOR ROLE IN FEDERAL TAX FRAUD AND IDENTITY THEFT SCHEME

FROM:  U.S. JUSTICE DEPARTMENT

Tuesday, February 16, 2016

Illinois Woman Charged in Stolen Identity Tax Fraud Scheme

A Poplar Grove, Illinois resident was indicted by a federal grand jury today on six counts of mail fraud, six counts of aggravated identity theft and one count of access device fraud, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Zachary T. Fardon of the Northern District of Illinois.

According to the indictment, Shameka Carr filed fraudulent tax returns with the Internal Revenue Service (IRS) in the names of individuals whose identities she had stolen.  Carr is alleged to have directed the IRS to issue the tax refunds requested on these fraudulent returns in the form of prepaid debit cards and U.S. Treasury checks, both of which were mailed to addresses she had access to in Rockford, Illinois, and surrounding areas.  It is further alleged that Carr used the debit cards and U.S. Treasury checks for her personal benefit.

If convicted, Carr faces a statutory maximum sentence of 20 years in prison for each mail fraud count, 15 years in prison for the charge of access device fraud and a mandatory sentence of two years in prison for each count of aggravated identity theft, which would be in addition to any other term of imprisonment she receives.  Carr also faces potential fines and restitution.

An indictment merely alleges that crimes have been committed.  Defendants are presumed innocent until proven guilty beyond a reasonable doubt.

Acting Assistant Attorney General Ciraolo commended the U.S. Postal Inspection Service, IRS Criminal Investigation and the Boone County Sheriff’s Department, who investigated the case and Trial Attorneys Michael C. Boteler and John T. Mulcahy of the Tax Division, who are prosecuting the case.

MAN SENTENCED FOR ROLE IN ID THEFT AND TAX FRAUD

FROM:  U.S. JUSTICE DEPARTMENT 

Friday, January 15, 2016

District of Columbia Man Sentenced to 18 Months in Prison for Role in Massive Identity Theft and Tax Fraud Scheme

Worked With Others to Obtain More Than $315,000 in Fraudulent Refunds

A resident of the District of Columbia was sentenced today to 18 months in prison for his involvement in a far-reaching stolen identity refund fraud scheme in which he worked with others to obtain over $315,000 in income tax refunds through the filing of fraudulent federal income tax returns, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division, U.S. Attorney Channing D. Phillips of the District of Columbia, Special Agent in Charge Thomas Jankowski of the Internal Revenue Service-Criminal Investigation (IRS-CI), Inspector in Charge Maria L. Kelokates of the U.S. Postal Inspection Service, Washington Division and Assistant Inspector General for Investigations John L. Phillips of the U.S. Department of the Treasury.

Ezekiel Raspberry, 39, is among approximately 16 participants in this scheme who have pleaded guilty to charges in the U.S. District Court for the District of Columbia.  According to court documents, the overall case involves the filing of at least 12,000 fraudulent federal income tax returns that sought refunds of at least $42 million.  Raspberry pleaded guilty on Nov. 10, 2015, to conspiracy to defraud the United States with respect to claims.  Following his prison term, Raspberry will be placed on three years of supervised release. During that time, he must perform 100 hours of community service.  In addition, U.S. District Judge Ellen S. Huvelle of the District of Columbia ordered Raspberry to pay $315,076 in restitution to the IRS.      

According to the government’s evidence, Raspberry participated in a massive and sophisticated stolen identity refund fraud scheme that involved an extensive network of more than 130 people, many of whom were receiving public assistance.  The refunds were sought for tax years 2005 through 2012, often in the names of people, whose identities had been stolen, including the elderly, people in assisted living facilities, drug addicts and incarcerated prisoners.  In other cases, the refunds were sent to people who were willing participants in the scheme.  The refunds listed more than 400 “taxpayer” addresses located in the District of Columbia, Maryland and Virginia.

According to documents filed with the court, from September 2008 through November 2010, Raspberry and others conspired to defraud the IRS of approximately $315,076 through the filing of 145 fraudulent federal income tax returns.  Raspberry received refund checks from a co-conspirator and deposited them into his bank account.  He would then withdraw the funds and provide them to the co-conspirator, keeping a portion of the proceeds for himself.

The refund checks were generated by filing false federal income tax returns that included Schedules C or C-EZ that falsely claimed that each “taxpayer” operated a business, such as “barber” or “childcare,” as a sole proprietorship.  The returns falsely stated that the “taxpayer” had gross receipts and two or more dependent children, when, in fact, the “taxpayer” was either a victim of identity theft, was misled into providing his or her identifying information, or was a willing participant in the scheme.  The businesses listed on the Schedules C and C-EZ were entirely fictitious.

In a related case this week, Rashida King, 41, of Savannah, Georgia, pleaded guilty on Jan. 14 to conspiracy to defraud the United States with respect to claims.  According to court documents, King deposited at least 33 fraudulently obtained U.S. Treasury checks into her back account.  A sentencing date has not yet been set.

In announcing the sentence, Acting Assistant Attorney General Ciraolo, U.S. Attorney Phillips, Special Agent in Charge Jankowski, Inspector in Charge Kelokates and Assistant Inspector General Phillips commended those who investigated the case.  They also acknowledged the efforts of those who worked on the case from the U.S. Attorney’s Office of the District of Columbia, including former Assistant U.S. Attorney Sherri L. Schornstein and Paralegal Specialists Donna Galindo and Julie Dailey.  Finally, they expressed appreciation for the work of Assistant U.S. Attorney Ellen Chubin Epstein of the District of Columbia’s Fraud and Public Corruption Section and Trial Attorneys Jeffrey B. Bender and Thomas F. Koelbl and former Trial Attorney Jessica Moran of the Tax Division, who prosecuted the case.

BUSINESSMAN RECEIVES PRISON SENTENCE FOR TAX FRAUD

FROM:  U.S. JUSTICE DEPARTMENT

Thursday, January 7, 2016

Hawaii Businessman Sentenced to 46 Months in Prison for Tax Fraud

Diverted More than $2 Million from Company to Fund Lavish Lifestyle

A Honolulu County businessman was sentenced to prison yesterday for corruptly endeavoring to obstruct the Internal Revenue Service (IRS) and filing false tax returns, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Florence T. Nakakuni of the District of Hawaii.

Albert S.N. Hee, 61, of Kailua, Hawaii, was sentenced by Senior U.S. District Judge Susan Oki Mollway of the District of Hawaii to serve 46 months in prison, to be followed by one year of supervised release.  Hee was also ordered to pay a fine of $10,000 and  restitution to the IRS in the amount of $431,793.  In July following an 11-day jury trial, Hee was convicted of one count of corruptly endeavoring to obstruct the IRS and six counts of filing false individual income tax returns for the years 2007 to 2012.

According to court documents and the evidence introduced at trial, Hee owned Waimana Enterprises Inc., a telecommunications holding company based in Honolulu.  Between 2002 and 2012, Hee caused Waimana to pay more than $2 million of his personal expenses.  Hee then falsely characterized these personal expenditures as business expenses on Waimana’s corporate income tax returns.  Hee also filed false individual income tax returns for 2002 to 2012 on which he failed to report the expenditures as income.  Hee’s lavish spending included more than $90,000 for personal massages, which he deducted on the corporate tax returns as “consulting fees,” full-time salaries and benefits for his wife and children even though they performed little to no work for the company and more than $736,900 in college tuition, housing and other expenses for his children.

In 2008, Hee purchased a $1.3 million home in Santa Clara, California, with corporate money and told his accountants that the property would be used by Waimana employees.  Instead, from 2008 through 2012, Hee’s children lived in the home during and after they attended college in Santa Clara.  At trial, Hee’s children testified that they indeed lived at the home and did not pay any rent to Waimana for their use of the property.  Hee’s children also testified that the house was within walking and skateboarding distance of the college campus and that they rented out other rooms in the house to their college friends and collected rent from their roommates, which they kept rather than remit to Waimana.

Waimana financed Hee’s and his family’s trips to Disney World, Tahiti, France and Switzerland.  Hee also used company funds to pay for a $17,000, five-day family vacation at the Mauna Lani resort on the Big Island of Hawaii, which Hee falsely characterized as a “stockholder’s meeting” even though he was the only shareholder of the company at that time.

Acting Assistant Attorney General Ciraolo and U.S. Attorney Nakakuni commended the special agents of IRS-Criminal Investigation, who investigated the case, Assistant U.S. Attorney Larry Tong and Trial Attorney Quinn P. Harrington of the Tax Division, who prosecuted the case.

BUSINESSMAN PLEADS GUILTY TO FRAUD CRIME RELATED TO STEALING FROM HIS OWN BUSINESS

FROM:  U.S. JUSTICE DEPARTMENT 

Tuesday, November 24, 2015

President of North Carolina Board of Funeral Service and Business Partner Plead Guilty to Conspiracy to Defraud the United States

Two North Carolina businessmen pleaded guilty in the U.S. District Court in the Middle District of North Carolina to conspiracy to defraud the United States, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Ripley Rand of the Middle District of North Carolina.

Kenneth Dale Stainback, 61, of Burlington, North Carolina, pleaded guilty on Nov. 24 and Stephen Ray Smith, 60, of Mebane, North Carolina pleaded guilty on November 23.  According to court documents and statements in court, Stainback and Smith conspired to defraud the United States by filing false corporate tax returns for McClure Funeral Service (McClure).  Stainback, Smith and another co-conspirator bought McClure in 2004 and began diverting gross receipts from the business and omitting that income from the corporation’s tax returns.  The co-conspirators opened a checking account at Mid-Carolina Bank for the purpose of diverting funds from McClure, including commission checks from insurance providers and checks from clients for payment of services.  The co-conspirators wrote checks to themselves from this account, with Stainback and Smith receiving the vast majority of the diverted funds.  Stainback also opened another bank account at SunTrust Bank, which he used to divert additional funds from McClure without the knowledge of his co-conspirators.  Finally, the co-conspirators also pocketed cash payments from clients of McClure.  In order to conceal discovery of their scheme, the co-conspirators deleted and altered invoices in the business’s accounting system.  Stainback and Smith also closed their bank account at Mid-Carolina bank after being contacted by the Internal Revenue Service (IRS) regarding the corporate tax returns.

During the 2009 through 2012 fiscal years, Stainback, Smith and the other co-conspirator diverted more than $419,000 from McClure.  These diverted funds were not reported on McClure’s corporate tax returns, which resulted in a corporate tax loss of $158,530.11.  Stainback and Smith also failed to report the diverted funds on their individual income tax returns.

In addition to owning McClure, Stainback also serves as the President of the North Carolina Board of Funeral Service.

Stainback and Smith each face a statutory maximum sentence of five years in prison, a $250,000 fine and restitution to the IRS.  The court set sentencing for Smith and Stainback on March 24, 2016.

POSTAL WORKER PLEADS GUILTY FOR ROLE IN STOLEN IDENTITY TAX FRAUD RING

FROM:  U.S. JUSTICE DEPARTMENT 

Thursday, November 12, 2015

Alabama Resident and U.S. Postal Worker Pleads Guilty for Involvement in Stolen Identity Tax Refund Fraud Ring

Stole Identities of Individuals on Her Mail Route for Use in Filing False Tax Returns

An Alabama resident and U.S. Postal Service (USPS) employee pleaded guilty today in the U.S. District Court for the Middle District of Alabama to conspiring to defraud the United States with respect to false claims, aggravated identity theft and embezzling mail, Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney George L. Beck Jr. of the Middle District of Alabama announced.

According to court documents, between June 2012 and December 2013, Elizabeth Grant, 42, of Seale, Alabama, conspired with others to obtain fraudulent tax refunds by filing false federal income tax returns using stolen identities.  For a fee, Grant provided co-conspirators with addresses along her mail delivery route to use in filing false tax returns.  Grant then retrieved the fraudulent tax refund checks from the mail and delivered the checks to her co-conspirators.  The scheme resulted in the filing of more than 700 false returns claiming more than $1.5 million in refunds.

Several co-conspirators, including Tracy Mitchell and Keshia Lanier, have already pleaded guilty and were sentenced for their roles in this scheme.  On August 7, Mitchell was sentenced to 159 months in prison.  On September 25, Lanier was sentenced to 180 months in prison.  

Grant faces a statutory maximum sentence of 10 years in prison and a $250,000 fine for the conspiracy count and five years in prison and a $250,000 fine for the count of embezzling mail.  Grant also faces a mandatory minimum sentence of two years in prison for aggravated identity theft, which is in addition to the sentence she receives for the other counts, as well as a potential $125,000 fine.

Acting Assistant Attorney General Ciraolo and U.S. Attorney Beck Jr. commended special agents of IRS-Criminal Investigation and the USPS Office of the Inspector General, who investigated the case and Trial Attorneys Michael C. Boteler, Gregory Bailey and Robert J. Boudreau of the Tax Division and Assistant U. S. Attorney Jonathan Ross of the Middle District of Alabama, who are prosecuting this case.

DOJ ANNOUNCES CONVICTION FOR EMBEZZLEMENT AND FRAUD OF FORMER LAPORTE COUNTY, INDIANA CHIEF DEPUTY AUDITOR

FROM:  U.S. JUSTICE DEPARTMENT  

Thursday, September 17, 2015

Former County Chief Deputy Auditor Convicted of Embezzling Government Funds, Tax Fraud and Wire Fraud

A former chief deputy auditor for LaPorte County, Indiana, was convicted today by a federal jury in the Northern District of Indiana of embezzling over $150,000 from the LaPorte County government, tax fraud and defrauding her elderly father-in-law out of at least $400,000.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney David A. Capp of the Northern District of Indiana made the announcement.

Mary Ray, 67, of La Porte, Indiana, was convicted of two counts each of theft of government monies and making false statements on a tax return, and with seven counts of wire fraud.  Ray will be sentenced by Judge Jon E. Deguilio of the Northern District of Indiana on Dec. 22, 2015.

According to evidence presented at trial, from September 2011 through December 2012, while she served as deputy chief auditor for LaPorte County, Ray embezzled over $150,000 from county coffers, and underreported her income on her U.S. Individual Tax Returns for those years by failing to report the embezzled funds.  Evidence at trial also showed that Ray defrauded her 86-year-old father-in-law, a disabled veteran, out of at least $400,000 that he entrusted her to oversee.  The trial evidence also demonstrated that Ray used the funds that she embezzled from LaPorte County and stole from her father-in-law to gamble at casinos.

This case was investigated by the FBI and IRS-Criminal Investigation, with assistance from the Indiana State Police, the LaPorte County Sheriff’s Department and the Indiana State Board of Accounts.  The case is being prosecuted by Trial Attorney Peter Halpern of the Criminal Division’s Public Integrity Section and Assistant U.S. Attorney Donald J. Schmid of the Northern District of Indiana.

FORMER JAIL EMPLOYEE BECOMES INMATE AFTER STEALING IDENTITIES IN TAX REFUND FRAUD SCHEME

FROM:  U.S. JUSTICE DEPARTMENT 

Monday, August 3, 2015

Former Alabama Jail Employee Sentenced for Stealing Identities as Part of Tax Refund Fraud Scheme

A Troy, Alabama, man was sentenced to prison today in U.S. District Court for the Middle District of Alabama for his involvement in a stolen identity tax refund fraud scheme, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Department of Justice’s Tax Division and U.S. Attorney George L. Beck Jr. of the Middle District of Alabama.

Devon Tucker, 31, a former jailer of the Troy Police Department at the city jail, pleaded guilty earlier this year to one count of conspiracy to defraud the United States and one count of aggravated identity theft.  U.S. District Judge Callie V.S. Granade sentenced Tucker to serve 32 months in prison and three years of supervised release, and ordered him to pay $13,162 in restitution to the Internal Revenue Service (IRS).

According to court documents, from January 2014 to January 2015, Tucker stole the personal identification information of approximately 150 individuals who were processed into the Troy city jail.  Tucker provided those identities to his co-conspirators for the purpose of filing false federal income tax returns claiming fraudulent refunds from the U.S. Treasury.  Tucker was paid in pre-paid debit cards in the names of the identity theft victims for his involvement in the scheme.    

“The Tax Division will vigorously pursue and prosecute government employees who abuse their positions by exploiting their access to personal information to victimize members of the community and steal from the U.S. Treasury,” said Acting Assistant Attorney General Ciraolo.

“It is always a sad day when a law enforcement officer sworn to uphold the law, takes advantage of his position for his own personal gain,” stated U.S. Attorney Beck.  “This district will continue to vigorously prosecute those who steal identities and file fraudulent tax returns, regardless of where they are employed or what position they hold.”

Acting Assistant Attorney General Ciraolo and U.S. Attorney Beck commended special agents of IRS-Criminal Investigation, who investigated the case, and Trial Attorneys Gregory P. Bailey and Michael P. Hatzimichalis of the Tax Division and Assistant U. S. Attorney Jonathan Ross of the Middle District of Alabama, who prosecuted this case.

FORMER EMPIRE TOWERS OWNER PLEADS GUILTY FOR ROLE IN $7 MILLION BOND SCHEME AND FAILING TO PAY TAXES ON EMBEZZLED FUNDS

FROM:  U.S. JUSTICE DEPARTMENT
Wednesday, May 6, 2015
Former Owner of Empire Towers Pleads Guilty for Fraudulent $7 Million Bond Scheme and Filing False Tax Return
Misled More Than 50 Individual Investors Who Bought Bonds

A former Queenstown, Maryland, resident pleaded guilty today to securities fraud and filing a false tax return.

The guilty plea was announced by U.S. Attorney Rod J. Rosenstein of the District of Maryland, Special Agent in Charge Thomas J. Kelly of the Internal Revenue Service-Criminal Investigation (IRS-CI) Washington, D.C., Field Office and Special Agent in Charge Stephen E. Vogt of the FBI’s Baltimore Division.

In 1999, Wilfred T. Azar III, 53, became the president and majority owner of Empire Corporation and exercised complete control over the operations of Empire.  Empire Corporation owned Empire Towers Corporation.  Empire Towers Corporation’s primary asset was Empire Towers, a 10-story office building in Glen Burnie, Maryland.

According to Azar’s plea agreement, by January 2006, Empire Corporation could no longer pay its expenses and was effectively insolvent.  By 2007, Empire Towers Corporation had exhausted its lines of credit from lending institutions.

From January 2006 to April 2010, Azar caused Empire Corporation to sell bonds to more than 50 individual investors for more than $7 million.  While many of the bonds were titled “registered,” the bonds were not registered with either the U.S. Securities and Exchange Commission (SEC) or the state of Maryland.  In addition, Azar falsely told investors that Empire Corporation was in good financial health and that the company generated enough revenue to pay the promised 10 percent annual rate of return.  Azar falsely represented that the money invested would be used for a specific renovation project or other capital improvement at the Empire Towers office building.  Azar failed to inform investors that he used most of the money raised from previous bond sales for his own personal purposes.  Although the bonds were issued by Empire Corporation, Azar diverted millions of dollars of proceeds from the bond sales to his own bank account and to the bank accounts of other companies that he controlled.

During the period of the fraud, Azar misappropriated approximately $7,219,362 in investor proceeds raised through the sale of bonds.  Azar used the bond proceeds: to purchase a $100,000 Aston Martin luxury automobile; to pay the $3,000 monthly mortgage on his primary residence; to pay $51,000 to an Azar trust; to purchase Baltimore Ravens season tickets for $17,298; and to pay $25,389 in country club dues.  In addition, Azar charged more than $420,000 to a credit card paid by Empire Management Services, including daily living expenses, lavish vacations and university tuition for one of his children.  Azar also diverted more than $1.07 million in Empire funds to other unrelated businesses he controlled under the guise of “loans” which were never repaid.

During 2009, Azar embezzled approximately $1,959,250 in Empire funds, which he failed to report as income on his tax return.  This resulted in a tax loss to the government of $469,936.

Azar faces a statutory maximum sentence of 20 years in prison for securities fraud, and a maximum of three years in prison for filing a false tax return.  U.S. District Judge William D. Quarles Jr. has scheduled sentencing for Aug. 12 at 10:00 a.m.

The SEC has also filed a complaint against Azar and another individual in connection with the scheme, and that case is pending.

Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud.  Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations.  Since the inception of FFETF in November 2009, the department has filed more than 12,841 financial fraud cases against nearly 18,737 defendants, including nearly 3,500 mortgage fraud defendants.

U.S. Attorney Rosenstein praised the IRS-CI, FBI and SEC for their work in the investigation.  Mr. Rosenstein thanked Assistant U.S. Attorney Gregory Bockin of the District of Maryland and Trial Attorney Kenneth Vert of the Justice Department’s Tax Division, who are prosecuting the case.

7 FACED INDICTMENT IN ALLEGED TAX FRAUD SCHEME

FROM:  U.S. JUSTICE DEPARTMENT 

Friday, April 10, 2015

Seven Louisiana Residents Indicted in Tax Fraud Scheme

Seven Tangipahoa Parish, Louisiana, residents were indicted today on charges of conspiracy to defraud the United States, theft of public money, mail fraud, aggravated identity theft and conspiracy to commit money laundering, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Kenneth Allen Polite Jr. of the Eastern District of Louisiana.  According to the indictment, the defendants conspired to file false income tax returns using stolen identities and then launder the resulting fraudulent tax refunds.

The indictment charges Corey Lewis aka Coco, 37, Angela Chaney, 43, Cedrick Mitchell aka Skeet, 39, Craig Lewis, 40, Brad Lewis aka Bird, 32, Thaddeus Richardson, 49, and Martin Jackson Sr., 48, with conspiracy to defraud the United States, conspiracy to commit money laundering, conspiracy to commit mail fraud and conspiracy to commit theft of public money.  In addition, Corey Lewis, Chaney, Richardson and Jackson Sr. were charged with various counts of theft of public money.  Chaney was also charged with six counts of mail fraud and five counts of aggravated identity theft.  Corey Lewis was additionally charged with three counts of aggravated identity theft.

According to the allegations in the indictment, the defendants used individuals’ names and social security numbers in order to prepare false tax returns that claimed large tax refunds.  The refund checks were mailed to addresses in Louisiana, including to post office boxes that were opened by members of the conspiracy.  Once the tax refund checks were received, members of the conspiracy falsely endorsed the checks and cashed them.  Corey Lewis, Chaney and Mitchell deposited fraudulently obtained U.S. Treasury checks into bank accounts under their control.  Richardson and Jackson Sr. deposited checks into their business accounts, then provided some of the proceeds to their co-conspirators and kept the remaining proceeds for themselves.

If convicted, the defendants each face a statutory maximum sentence of 20 years in prison for each mail fraud count and each money laundering conspiracy charge, a statutory maximum sentence of 10 years in prison for each theft of public money count, a statutory maximum sentence of five years in prison for each conspiracy count, and a mandatory minimum sentence of two years in prison for each count of aggravated identity theft.  The defendants also face potential fines, forfeiture and restitution.

Acting Assistant Attorney General Ciraolo and U.S. Attorney Polite commended special agents of IRS-Criminal Investigation and the U.S. Postal Inspection Service, who investigated the case, and Trial Attorneys Hayden Brockett and Lauren Castaldi of the Tax Division and Assistant U.S. Attorney Dall Kammer of the Eastern District of Louisiana, who are prosecuting the case.

The charges contained in the indictment are only allegations.  A person is presumed innocent unless and until he or she is proven guilty beyond a reasonable doubt in a court of law.

OWNER HEALTH CARE COMPANIES PLEADS GUILTY FOR ROLE IN $12.6 MEDICARE FRAUD

FROM:  U.S. JUSTICE DEPARTMENT 

Friday, March 13, 2015

Owner of Detroit Home Health Care Companies Pleads Guilty to $12.6 Million Fraud Scheme

The owner of two home health care companies pleaded guilty to Medicare fraud and tax fraud charges in connection with his role in a scheme to fraudulently bill Medicare for $12.6 million in home health services that were not provided or were obtained through illegal kickbacks.  Ten other individuals have been convicted at trial or pleaded guilty in this case.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Barbara L. McQuade of the Eastern District of Michigan, Special Agent in Charge Paul M. Abbate of the FBI’s Detroit Field Office, Special Agent in Charge Lamont Pugh III of the U.S. Department of Health and Human Services, Office of Inspector General (HHS-OIG) Chicago Regional Office and Special Agent in Charge Jarod Koopman of the Internal Revenue Service Criminal Investigation (IRS-CI) Detroit Field Office made the announcement.

Mohammed Sadiq, 67, of Oakland County, Michigan, pleaded guilty today before U.S. District Judge Denise Page Hood of the Eastern District of Michigan to one count of health care fraud and one count of filing a false tax return.  A sentencing hearing is scheduled for June 18, 2015.

According to admissions in his plea agreement, Sadiq owned and directed operations at two home health care companies in Detroit.  Sadiq admitted that, working with co-conspirators, he created and operated the companies for the purpose of billing Medicare for home health services that he knew were not provided.  Sadiq also admitted to paying kickbacks to patient recruiters in order to obtain the information of Medicare beneficiaries, which he then used to bill Medicare for services that were not medically necessary or were not provided at all.

Sadiq further admitted that he created fake patient files to fool a Medicare auditor and make it appear as though home health services were provided and medically necessary.

Sadiq admitted that, as a result of the scheme, he received $12.6 million from Medicare.

Also according to Sadiq, he received proceeds of the fraud through bank accounts that he controlled, withdrew substantial sums for his personal use and failed to report these proceeds on his individual federal income tax return in 2008.  In total, Sadiq admitted that he currently owes approximately $1.5 million in taxes, interest and penalties for tax years 2008 through 2010.

This case was investigated by the FBI, HHS-OIG and IRS-CI, and was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office of the Eastern District of Michigan.  The case is being prosecuted by Trial Attorneys William Kanellis, Christopher Cestaro, Brooke Harper and Elizabeth Young of the Criminal Division’s Fraud Section, as well as Assistant U.S. Attorney Patrick Hurford of the Eastern District of Michigan.

Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged nearly 2,100 defendants who have collectively billed the Medicare program for more than $6.5 billion.  In addition, the HHS Centers for Medicare & Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.

JURY FINDS COUPLE GUILTY OF SKIMMING OVER $1.5 MILLION FROM BUSINESS

FROM:  U.S. JUSTICE DEPARTMENT
Friday, February 20, 2015
Georgia Couple Found Guilty of Tax Fraud

A Milledgeville, Georgia, couple were found guilty of tax fraud following a three-day jury trial for skimming more than $1.5 million in cash from their business without disclosing the income, the Department of Justice announced.

Kenneth Horner, 58, and Kimberly Horner, 53, were charged with filing false corporate and personal tax returns for the years 2007 and 2008.  They were convicted of all four counts charged.  Their sentencing is scheduled for May 6 at 10:00 a.m. before U.S. District Judge Timothy C. Batten Sr.

“This jury recognized the defendants’ handling of cash for what it really was: a ploy to avoid disclosing income and paying taxes,” said Acting U.S. Attorney John Horn of the Northern District of Georgia.

“In willfully failing to report their total business income to the IRS, the Horners cheated the system and dodged the same basic responsibility that millions of other business owners comply with every year:  fairly and honestly reporting their earnings,” said Principal Deputy Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.  “Today’s verdict establishes that those who engage in such criminal conduct will be held accountable. The Tax Division is committed to working with its law enforcement partners to identify, investigate and vigorously prosecute these offenders.”  

“At this time of year, when hard-working citizens are sitting down to prepare their tax returns, it is especially disappointing to see the overt steps some individuals will take to hide their taxable funds from the government,” said Special Agent in Charge Veronica F. Hyman-Pillot of the Internal Revenue Service (IRS)-Criminal Investigation.  “Taxpayers deserve our vigilance in the investigation and prosecution of individuals who willfully underreport their income and evade the payment of their fair share of taxes.”

According to Acting U.S. Attorney Horn, the charges and other information presented in court: Kenneth and Kimberly Horner owned Topcat Towing and Recovery Inc. (Topcat Towing), a towing business in Lithonia, Georgia.  Between 2005 and 2008, Topcat Towing had an exclusive contract with DeKalb County, Georgia, for all county car tows needed from the south precinct of the county.  Between 2005 and 2008, the defendants skimmed more than $1.5 million in cash receipts from their towing business and deposited those cash receipts into their personal bank account without disclosing the income to their tax return preparer or on corporate and personal tax returns filed with the IRS.  The defendants tried to conceal their cash deposits from the government by “structuring” their deposits, which is the act of splitting up cash deposits that exceed $10,000 for the purpose of evading a Currency Transaction Report (CTR) from being filed.

Most financial institutions, including banks, are generally required to file CTRs for cash transactions that exceed $10,000.  CTRs are submitted to the U.S. Department of Treasury.  In 2007 and 2008, the defendants used their unreported cash, in part, to build a custom home in Conyers, Georgia, that was appraised at more than $900,000.  The defendants owe approximately $400,000 in taxes to the IRS for their unreported income.

This case is being investigated by the IRS-Criminal Investigation. Trial Attorney Christopher J. Maietta of the Tax Division and Assistant U.S. Attorney Steven D. Grimberg of the Northern District of Georgia are prosecuting the case.

TAX PREPARER PLEADS GUILTY TO FILING FALSE CLAIMS WITH IRS

FROM:  U.S. JUSTICE DEPARTMENT 

Wednesday, February 4, 2015

Massachusetts Tax Return Preparer and Business Owner Pleads Guilty to Tax Fraud

A tax return preparer in Worcester and Hyde Park, Massachusetts, pleaded guilty today in the U.S. District Court for the District of Massachusetts to two counts of filing false claims with the Internal Revenue Service (IRS), the Department of Justice announced today.

Yaw Aboagye-Marfo, 42, of Worcester and Hyde Park, Massachusetts, was charged in a superseding indictment in August 2014 with filing false tax returns that claimed refunds to which clients were not entitled.  According to the indictment, Aboagye-Marfo also filed false tax returns on his own behalf that claimed refunds from the IRS to which he was not entitled.

According to the indictment, Aboagye-Marfo owned and operated People’s Choice Tax Service and National Taxpert, located in Worcester and Hyde Park, respectively.  Aboagye-Marfo used other individuals to recruit taxpayers for their personal identifying and related information so that he could use the information to file false tax returns on their behalf.  In some cases, Aboagye-Marfo obtained only the personal identifying information of individual taxpayers and filed tax returns that claimed false Schedule C businesses, regardless of the individual’s income or employment status, qualifying that individual for large tax refunds.  In some instances, Aboagye-Marfo also reported false dependents on the tax returns.  Aboagye-Marfo charged a fee for his services and he also claimed a portion of the false tax refund proceeds for himself.

Sentencing is scheduled for May 15 before U.S. District Court Judge George A. O’Toole.  Aboabye-Marfo faces a statutory maximum sentence of five years in prison and a $250,000 fine for each count.

This case was investigated by the special agents of IRS - Criminal Investigation.  Trial Attorney Jeffrey B. Bender and Assistant Chief Karen Kelly of the Justice Department’s Tax Division are prosecuting the case.

LUXURY CAR MECHANIC INDICTED FOR TAX FRAUD

FROM:  U.S. JUSTICE DEPARTMENT 

Monday, October 20, 2014

Michigan Luxury Car Mechanic Indicted for Tax Fraud

A mechanic who specializes in repairing exotic foreign cars and other high-end luxury vehicles was arrested on Friday after being indicted on tax charges by a grand jury in Detroit, the Justice Department announced.

Terry Myr, a resident of Smith’s Creek, Michigan, was charged with tax evasion and failure to file tax returns.  If convicted, Myr faces a maximum sentence of nine years in prison and a $650,000 fine.

According to the indictment, the Internal Revenue Service (IRS) assessed Myr approximately $195,000 in taxes, interest and penalties for his failure to report all of his income for the years 2000 through 2003.  To avoid the IRS collecting this money, Myr transferred property that he owned to a third party, used nominee companies to conceal his income and assets, and otherwise dealt in cash.  The indictment alleges that Myr failed to file tax returns from 2002 through 2010.

The case was investigated by special agents of the IRS – Criminal Investigation.  Trial Attorneys Tiwana Wright and Kenneth Vert from the Justice Department’s Tax Division are prosecuting the case.

An indictment merely alleges that a crime has been committed, and the defendant is presumed innocent until proven guilty beyond a reasonable doubt.

FORMER CORRECTIONS OFFICERS TO SERVE 120 MONTHS FOR IDENTITY THEFT, TAX FRAUD

FROM:  U.S. JUSTICE DEPARTMENT 

Tuesday, June 3, 2014

Former Alabama Corrections Officers Sentenced for Identity Theft and Tax Fraud

Bryant Thompson was sentenced today to serve 120 months in prison and Quincy Walton was sentenced to serve 84 months in prison for their roles in a stolen identity refund fraud scheme, announced Assistant Attorney General Kathryn Keneally of the Justice Department’s Tax Division and U.S. Attorney George L. Beck Jr. for the Middle District of Alabama.  Thompson and Walton, both former Alabama corrections officers, were convicted of conspiracy to defraud the United States following a week-long jury trial in January 2014.  Thompson was also convicted of seven counts of wire fraud and seven counts of aggravated identity theft, and Walton was also convicted of one count of aggravated identity theft.  In addition to their prison sentences Thompson and Walton have been ordered to pay $176,114 in restitution.

According to evidence introduced at trial, Thompson was assigned to the shift clerk position at an Alabama state prison, which gave him access to the personal identifying information of every inmate in the custody of the Alabama Department of Corrections, past and present.  Thompson and Walton, his former co-worker, used information stolen from the databases to file false federal income tax returns in the names and Social Security numbers of inmates.

According to the evidence introduced at trial, the investigation revealed that several internet protocol (IP) addresses were used to file the fraudulent tax returns, including one IP address directly assigned to Thompson’s residence at the time certain tax returns were filed.  Circumstantial evidence tied both Thompson and Walton to the other IP addresses.

Also according to the evidence introduced at trial, the two directed the stolen tax refunds onto prepaid debit cards and requested other refunds in the form of U.S. Treasury checks.  Evidence showed that the cards and checks were mailed to several addresses associated with Thompson and Walton in Montgomery and Prattville, Alabama, and that several of the checks were cashed at a local retail store by Walton’s uncle and by a local check casher.  During this time, Thompson purchased a new paint job and new rims for his SUV and later purchased a BMW.

According to evidence from the sentencing, altogether Thompson and Walton filed over 180 false tax returns claiming over $750,000 in tax refunds.  The IRS was able to identify many of the returns as fraudulent when filed and did not pay the refunds claimed, but was defrauded into issuing a total of $176,114 in improper refunds.

The case was investigated by IRS-Criminal Investigation and was prosecuted by Trial Attorneys Jason Poole and Alexander Effendi of the Tax Division, with the assistance of the U.S. Attorney’s Office for the Middle District of Alabama.

FORMER NFL PLAYER, TWO OTHERS FOUND GUILTY IN TAX FRAUD SCHEME

FROM:  U.S. JUSTICE DEPARTMENT 

Wednesday, May 28, 2014

Ex-Casino Owner, Nevada Businessman and Former National Football League Player Found Guilty in Massive Tax Fraud Scheme

A Las Vegas jury returned guilty verdicts yesterday against Alan Rodrigues, a former casino owner from Henderson, Nevada, Weston Coolidge, a former businessman from Las Vegas, and Joseph Prokop, a former National Football League punter from Upland, California, for conspiracy and fraud related to their promotion of a fraudulent tax product through the now-defunct National Audit Defense Network (NADN), the Justice Department and Internal Revenue Service (IRS) announced today.  The guilty verdicts came after a six week trial before U.S. District Court Judge Miranda Du in the District of Nevada.

All defendants were convicted of one count of conspiracy to defraud the IRS and four counts of mail fraud.  Rodrigues and Coolidge were additionally convicted of 15 counts of aiding in the preparation of false tax returns, while Prokop was convicted of 13 counts of aiding in the preparation of false tax returns.  During the conspiracy, Rodrigues was NADN’s general manager, Coolidge was NADN’s owner and president and Prokop was the national marketing director of Oryan Management and Financial Services.  Oryan, which was operated out of Upland, created the fraudulent tax product, called Tax Break 2000, and paid NADN a commission to sell Tax Break 2000.

“This jury verdict sends a message to those who promote fraudulent tax products like Tax Break 2000 – you do so at the risk of prosecution, prison time and substantial penalties,” said Assistant Attorney General Kathryn Keneally for the Justice Department’s Tax Division.  “Prosecuting individuals who market fraudulent tax schemes has been and always will be our priority.”

According to court documents and evidence presented at trial, NADN began selling Tax Break 2000 in early 2001.  Tax Break 2000 purported to be a shopping website that the defendants fraudulently said would allow customers to claim legitimate income tax credits and deductions by making the website accessible to the disabled.  The defendants chose the sale price for the modifications, $10,475, solely to maximize the fraudulent income tax credits and deductions.  To further the scheme, the defendants produced false IRS forms creating the appearance of fictitious commission income and prepared false tax returns on their customers’ behalf that improperly claimed the tax credits and deductions.  According to evidence presented at trial, the intended tax loss based on the purported tax benefits was approximately $100 million due to the scheme.

On April 13, 2004, the department’s Tax Division filed a complaint seeking to enjoin, among others, NADN, Rodrigues, Coolidge and Prokop from selling fraudulent tax schemes, including Tax Break 2000.  NADN ceased operations in May 2004, and in June 2004, a federal bankruptcy court in Las Vegas entered a permanent injunction against NADN.  Prokop was also enjoined in June 2004, after consenting to entry of a permanent injunction.  In April 2005, Rodrigues and Coolidge both consented to permanent injunctions.

The case was investigated by IRS - Criminal Investigation.  Trial Attorneys Timothy J. Stockwell and Katherine L. Wong of the Tax Division are prosecuting the case, with litigation assistance from Larry Garland and the U.S. Attorney’s Office for the District of Nevada.

MAN SENTENCED TO SERVE 55 MONTHS FOR TAX FRAUD

FROM:  U.S. JUSTICE DEPARTMENT 

Wednesday, May 21, 2014

South Florida Man Sentenced to Jail for Tax Fraud

Paul F. Wrubleski, a resident of Weston, Florida, was sentenced to serve 55 months in prison on tax fraud charges, the Justice Department and the Internal Revenue Service (IRS) announced today.  Wrubleski was convicted earlier this year of one count of corruptly impeding the due administration of the internal revenue laws and four counts of filing false claims for tax refunds following a jury trial in in the U.S. District Court in the Southern District of Florida.

According to court documents and the evidence presented at trial, Wrubleski had a decade-long pattern of filing false documents with the IRS.  Wrubleski impeded the IRS by filing false IRS forms that claimed he was exempt from income tax withholding and by filing false tax returns, including four tax returns that requested over $1.5 million in federal refunds.  Wrubleski also sent obstructive letters, tax returns and other false documents to the IRS between 1999 and 2010.  In addition, the indictment alleged and the evidence proved that Wrubleski filed for bankruptcy in 2006 in order to impede IRS collection actions.

In addition to the term of imprisonment, Wrubleski was ordered to pay $79,963 in restitution and to serve three years of supervise release following his release from jail.

The case was investigated by special agents of IRS-Criminal Investigation.  Trial Attorney Charles M. Edgar Jr. of the Justice Department’s Tax Division and Assistant U.S. Attorney Bertha R. Mitrani for the Southern District of Florida prosecuted the case.

MAN RECEIVES SENTENCE OF 87 MONTHS IN PRISON FOR IDENTITY THEFT AND TAX FRAUD

FROM:  U.S. JUSTICE DEPARTMENT 

Friday, April 25, 2014

Alabama Man Sentenced for Tax Fraud and Identity Theft

Nakia Jackson, of Montgomery, Alabama, was sentenced to serve 87 months in prison today for conspiring to defraud the United States and one count of aggravated identity theft for his role in a stolen identity refund fraud scheme, announced Assistant Attorney General Kathryn Keneally of the Justice Department's Tax Division, U.S. Attorney George L. Beck Jr. for the Middle District of Alabama and the Internal Revenue Service (IRS).

According to court documents, between January 2009 and March 2011, Jackson obtained stolen identities from an Alabama state employee and used those identities to file false tax returns.  Jackson recruited a bank employee, LaQuanta Clayton, to assist him in depositing the false income tax refunds into various bank accounts.  He obtained permission from several individuals to use their bank accounts to receive false refunds and when a false refund was deposited, Jackson would direct the individuals to withdraw the money and give the money to him.  In total, Jackson filed over 100 false tax returns and requested over $400,000 in refunds.

In addition, Jackson was ordered to serve three years of supervised release and pay $212,856 in restitution.

IRS-Criminal Investigation agents investigated this case and Trial Attorneys Charles M. Edgar Jr. and Michael Boteler for the Tax Division and Assistant U.S. Attorney Todd Brown are prosecuting the case.

MAN SENTENCED TO PRISON FOR MAKING FALSE STATEMENT TO BANK AND FILING FALSE TAX RETURN

FROM:  U.S. JUSTICE DEPARTMENT 
Friday, April 4, 2014

North Carolina Paving Contractor Sentenced to Prison for Tax and Bank Fraud
Tommy Edward Clack was sentenced today to serve 66 months in federal prison for tax and fraud crimes by U.S. District Judge Thomas D. Schroeder in Winston-Salem, N.C., the Justice Department and Internal Revenue Service (IRS) announced.  Clack was also ordered to pay $1,350,597 in restitution to the IRS and $20,945 in restitution to a bank he defrauded, and to serve five years of supervised release.  Clack previously pleaded guilty to one count of willfully filing a false federal income tax return for 2007 and one count of knowingly making a false statement to a federally insured bank in order to obtain a mortgage loan.

According to court documents, for approximately the past 10 years, Clack has been a traveling, self-employed paving contractor doing business in North Carolina, South Carolina, Maryland and Florida.  Clack operated under several different business names and changed the names frequently in order to avoid scrutiny by state and federal law enforcement agencies.  Over the years, Clack was charged with and convicted of multiple state criminal violations in Maryland, North Carolina, South Carolina and Florida as a result of his business practices.  Since June 2010, Clack has been under an injunction banning him from operating as a driveway paving contractor in North Carolina.  He is also subject to a cease-and-desist order in Maryland that bans him from various fraudulent practices.

According to court documents, Clack significantly underreported the income from his paving business on his tax returns.  From 2004 to 2007, Clack earned gross income of over $5.7 million, but reported only a fraction of it to the IRS.  In 2004, Clack underreported his income by approximately $294,829.  In 2005, he underreported his income by approximately $1,178,822.  In 2006, Clack underreported his income by approximately $1,868,556.  And in 2007, Clack underreported his income by $2,428,710.  Clack’s returns were prepared by a professional accountant, but Clack knowingly provided her with false information on which to base his returns, and he signed his returns knowing that they significantly understated his income.  Altogether, as a result of these false returns Clack underpaid his taxes by $1,350,597 for the 2004 through 2007 tax years.

According to court documents, Clack employed a number of strategies to conceal his tax fraud.  In addition to constantly changing the name of his paving company, Clack did not maintain books and records.  He also dealt extensively in cash, paid his employees in cash, and structured currency transactions with his bank in amounts designed to evade the bank’s requirement to file Currency Transaction Reports with the U.S. Treasury.

Court documents also state that in December 2003, Clack submitted a mortgage loan application in the name of his then-wife to a bank in Greensboro, N.C.  The application sought a $640,000 loan as financing for the purchase of a $1.2 million home.  As part of the loan application, Clack provided the bank with a tax return in his wife’s name for the year 2002 that claimed married filing separate status, reported adjusted gross income of $372,748 and claimed total tax liability of $127,745.  Clack claimed that this tax return had been filed with the IRS, when in fact Clack and his then-wife had filed a joint federal income tax return for 2002 that claimed that the couple had adjusted gross income of $17,656 and a total tax liability of $2,685.  The bank would not have approved the loan if they knew about the discrepancy.  Clack ultimately defaulted on the loan and the bank suffered a loss after foreclosing on the collateral.

The case was investigated by the IRS-Criminal Investigation, with assistance from the North Carolina State Bureau of Investigation.  It was prosecuted by Trial Attorney Jonathan Marx of the Tax Division with assistance from the U.S. Attorney’s Office for the Middle District of North Carolina.