Tax Fraud Blotter: Refunds, rebates, remanded

Gone Pro’s; various ways to fraud; oxymoron; and other highlights of recent tax cases.

Trenton, New Jersey: Angelo Thompson, 39, of Reisterstown, Maryland, a former employee of Tax Pro’s and Tax Solutions & Associates, has been sentenced to 27 months in prison for conspiring to defraud the U.S. by filing false income tax returns.

Thompson previously pleaded guilty to conspiracy to defraud the IRS.

From at least 2009 to April 2015, Joseph Kenny Batts was co-owner, along with Damien Askew, of the tax prep and payroll service Tax Pro’s, where Thompson, Tony V. Russell, Rudolph Sanders, Batts and Askew prepared returns. To boost their business, Thompson and these others conspired to falsify clients’ federal returns to inflate refunds. The fraudulent practices included fabricating and inflating credits for education and child care; deductions, such as charitable contributions and unreimbursed employee expenses; and Schedule C losses.

Thompson and other conspirators also permitted Batts to use their PTINs to conceal Batts’ identity as the actual preparer, due to, among other things, Batts having been previously convicted of federal tax fraud.

After authorities searched Tax Pro’s around April 2015, Batts discontinued Tax Pro’s and opened Tax Solutions and Associates nearby, where Thompson, Russell and Batts continued preparing false federal income tax returns.

The conspirators caused a total tax loss to the IRS of more than $1.6 million.

Askew, Sanders and Russell have pleaded guilty. Batts was convicted in September 2019 of one count of conspiracy to defraud the U.S. and five counts of aiding and assisting in the preparation of false federal income tax returns. Russell has been sentenced to four years in prison; Askew, Sanders and Batts are awaiting sentencing.

Thompson was also ordered to serve three years of supervised release and to pay $103,320 in restitution.

San Francisco: Robert F. Smith, chairman and CEO of a private equity company, has entered into a non-prosecution agreement with the Department of Justice for his involvement from 2000 through 2015 in a scheme to conceal income and evade millions in taxes by using an offshore trust structure and offshore bank accounts.

Smith, of Austin, Texas, formed the Excelsior Trust in Belize, and a shell company, Flash Holdings, in Nevis in 2000. He used third parties to conceal his ownership and control of the Excelsior Trust and Flash Holdings and has admitted that he formed these foreign entities to use them to avoid payment of U.S. taxes. Smith did not report to the IRS over $200 million of partnership income. Smith also failed to report his ownership of his foreign bank accounts in the British Virgins Islands and Switzerland. He used millions of this unreported income to acquire and make improvements to real estate used for his personal benefit.

Smith has agreed to continue cooperating in other related investigations and to pay some $56 million in taxes and penalties stemming from the unreported income and another $82 million in penalties stemming from his concealment of his offshore bank accounts. He will pay more than $139 million in taxes and penalties and has agreed to abandon protective claims for a federal refund totaling some $182 million.

Las Vegas: Terry Williamson has been sentenced to 70 months in prison for conspiracy to commit mail and wire fraud regarding refunds.

Williamson played a leading role in a mail and wire fraud conspiracy from January 2009 through April 2011 in which he and conspirators filed false federal returns to fraudulently obtain refunds; they used the names and Social Security numbers of deceased taxpayers.

To handle the refund checks, Williamson opened a bank account using the business name Refund and Rebates Management Inc. After he or his conspirators deposited the refund checks into the Refund and Rebates bank account, Williamson transferred large amounts of cash to his personal account and to the accounts of his conspirators and used the remaining funds in the account for his own. More than 480 fraudulent refund checks totaling almost $2 million were deposited into Williamson’s account.

He was also ordered to serve a year of supervised release.

Birmingham, Alabama: Preparer Shuntan Rue has pleaded guilty to aiding and assisting in the preparation of a false return.

Rue owned and operated Rue Tax Service, and between 2013 and 2016 she prepared and filed false returns for clients by claiming unjustified education credits and itemized deductions, among other items. She also claimed similar false items on her own 2012 and 2013 federal income tax returns.

She caused a loss to the IRS of more than $250,000.

Sentencing is Feb. 3. Rue faces a maximum of three years in prison. She also faces a period of supervised release, restitution and monetary penalties.

Rocky Mount, North Carolina: Preparer Adrienne Williams has pleaded guilty to conspiring to defraud the U.S.

Between 2009 and 2017, Williams owned and operated Ultimate Tax Service, where she trained employees on various ways to prepare false returns, including by claiming false federal income tax withholdings. The false returns prepared and filed by Williams and her employees on behalf of clients sought more than $3.5 million in inflated refunds.

Williams faces a maximum of five years in prison, as well as a period of supervised release, restitution and monetary penalties.

New Bern, North Carolina: Dr. Sanjay Kumar has been sentenced to 20 years in prison for unlawful distribution of oxycodone, money laundering and tax fraud.

Kumar, was a physiatrist who operated New Bern Medicine and Sports Rehabilitation. From 2004 through 2011, he treated chronic pain patients with a wide variety of methods, including physical therapy, massage, electrical stimulation and non-narcotic prescription medications.

In the summer of 2011, Kumar’s business was on the brink of financial collapse after Blue Cross Blue Shield — his primary source of insurance reimbursements — terminated his provider contract after discovering excessive billing irregularities. He began to transition his therapy-based practice into an opioid-based pill mill through which opioid narcotics (primarily oxycodone) were prescribed indiscriminately to patients at their first visits, regardless of their diagnosis, in exchange for $200 cash. His prescriptions for Schedule II controlled substances (e.g., oxycodone) skyrocketed; for the seven years in question, Kumar prescribed more than 1.2 million oxycodone pills.

In June 2016, Kumar was arrested and search warrants were executed at his residence and business. Officers recovered a loaded handgun and three magazines of ammunition at his business; he was also in possession of more than $145,000 in cash. At his house, law enforcement recovered 35 additional firearms, many loaded with high-capacity magazines, and more than 40,000 rounds of ammunition. Investigators also discovered five large PVC tubes containing nearly $450,000 in cash.

Investigation revealed that in 2013 Kumar stopped keeping financial books and records. Between 2013 and 2016, Kumar made 121 separate cash deposits into a dozen different bank accounts, totaling more than $439,000. He also used his gains to spend more than $175,000 on four vehicles, $70,000 in purchases from Best Buy, $60,000 on real property and hundreds of thousands in purchases from Amazon.

Investigation into Kumar’s federal income tax filings revealed that he had filed fraudulent personal and corporate returns for his medical practice during those seven years. Despite having thousands of patient visits per year, during which he charged $200 in cash on average, Kumar reported losses on his returns.

Kumar will be placed on a three-year term of supervised release at the conclusion of his term of imprisonment. He’s also been ordered to pay $471,758.40 in restitution to the IRS and a criminal fine of $50,000.

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