Archive

June 21, 2017

A federal grand jury in Madison, Wisconsin indicted a Johnson Creek, Wisconsin produce vendor corporate officer for tax evasion, failure to file a corporate tax return, and structuring currency transactions, announced the Justice Department’s Tax Division. According to the indictment, during the relevant timeframe, Thomas G. Paine was the Vice President and Treasurer of G.W. Paine Inc., which sold fresh fruit and other produce under the business name Tree Ripe Citrus Company. Paine was allegedly responsible for the finance and tax aspects of the company. The indictment alleges that Paine failed to file corporate tax returns with the Internal Revenue Service (IRS) for 2010 through 2012 and attempted to evade the taxes due and owing by G.W. Paine Inc. According to the indictment, Paine concealed the company’s income by structuring cash deposits so they were made in amounts less than $10,000 in order to evade the bank’s reporting requirements. Banks are required to file reports with the U.S. Treasury for cash deposits exceeding $10,000. These reports include the identity of the person who conducted the transaction. The indictment alleges that from 2012 through 2013, Paine structured more than $400,000. DOJ

June 20, 2017

A Boynton Beach, Florida resident pleaded guilty to corruptly endeavoring to obstruct the administration of the internal revenue laws and theft of government funds, announced the Justice Department’s Tax Division. According to documents filed with the court, from 2010 to 2015, David R. Andre, 41, filed fraudulent personal tax returns with the Internal Revenue Service (IRS) that sought more than $5.6 million in refunds to which he was not entitled. As a result of these returns, which falsely reported income earned and income tax withheld, the IRS paid Andre more than $485,000 in refunds. He used the funds to purchase his residence and multiple vehicles, including a Jaguar and Mercedes Benz. In late 2012, the IRS began trying to collect the taxes Andre owed and placed a lien on his residence. Days after the lien was recorded, Andre filed a form with the IRS that falsely claimed he was making a substantial payment, and the IRS released the lien. After Andre did not make the payment, the IRS revoked its release and re-filed the lien. In 2015, Andre also made false statements to IRS agents and told them that he purchased his residence with money he inherited, did not recall receiving any large refunds from the IRS and had not filed a tax return since 2008. DOJ

June 16, 2017

An Allentown, Pennsylvania resident was sentenced to serve 42 months in prison for conspiring to file tax returns using stolen IDs, announced the Justice Department’s Tax Division. According to the indictment and information presented to the court, Jessenia E. Cordero, 37, operated MJ & Associates and Express Tax Services, both located in Allentown. These businesses provided tax preparation, check cashing, and other services to customers. Cordero and her co-conspirators obtained lists of Puerto Rico residents’ names and social security numbers and used these IDs to file fraudulent tax returns seeking refunds with the Internal Revenue Service (IRS). The conspirators directed the IRS to mail the refund checks to addresses they controlled or to deposit the refunds onto pre-paid debit cards. Cordero used her businesses to cash fraudulently obtained refund checks totaling approximately $4,316,103. DOJ

June 15, 2017

A Pittsburg, California man pleaded guilty to conspiracy to commit theft of government money and wire fraud, announced the Justice Department’s Tax Division. According to documents filed with the court, while employed as a police officer, Gary Bostick, 39, participated in a conspiracy to cash stolen U.S. Treasury checks and file tax returns in the names of deceased individuals to obtain fraudulent refunds. Bostick filed some of the fraudulent returns from his residence and he and his co-conspirators directed the refund checks to addresses they could access. Bostick and his coconspirators, to include Hugh Robinson, also acquired stolen tax refund and social security checks, which they cashed at stores in various areas, including Kentucky. Bostick recruited and directed others who participated in the scheme. He admitted to causing a tax loss of more than $720,530. DOJ

June 14, 2017

A Canadian man pleaded guilty in Rochester, New York to conspiring to defraud the United States and commit theft of government funds, announced the Justice Department’s Tax Division. According to documents filed with the court, Timothy Johnston, 36, of Calgary, Alberta, Canada, along with other Canadian citizens, participated in a scheme to file fraudulent claims for refund with the Internal Revenue Service (IRS). In March 2009, Johnston filed a fraudulent nonresident alien income tax return seeking a refund of $642,947.26. On this return, Johnston falsely claimed that the requested refund represented the amount of income taxes that had been withheld and paid to the IRS on his behalf. After the IRS issued the refund to Johnston, he entered the United States and opened a bank account in Rochester, New York to deposit the fraudulently obtained check. Between August 2009 and December 2011, Johnston caused funds to be transferred from this account to a bank account in Canada and accounts in the United States in the names of his co-conspirators. DOJ

June 8, 2017

The former owner of a Las Vegas, Nevada strip club pleaded guilty in U.S. District Court in the District of Nevada to evading employment taxes, announced the Justice Department’s Tax Division. According to documents filed with the court, Frederick John Rizzolo, 58, of Las Vegas, the former owner of The Crazy Horse Too, evaded paying more than $1.7 million in employment taxes that he owed for 2000 through 2002. Rizzolo paid The Crazy Horse Too’s floormen, bouncers, bartenders and shift managers in cash, but failed to provide accurate records of these payments to the Club’s bookkeepers. As a result, Rizzolo caused false employment tax returns to be filed with the Internal Revenue Service (IRS), which underreported wages paid and thus the taxes due. In 2006, Rizzolo admitted this conduct and pleaded guilty to conspiring to defraud the United States. Following his plea, however, Rizzolo took affirmative steps to conceal his assets and income to thwart the IRS from collecting the delinquent taxes that he owed. For example, Rizzolo directed $900,000 that he received from the sale of the Crazy Horse Too to an offshore bank account in the Cook Islands. He also withdrew $50,000 from a bank account, writing a check to a third party, who in turn provided the money back to Rizzolo, thereby avoiding an IRS levy and seizure of the funds. Additionally, Rizzolo lied to an IRS collections attorney, falsely stating that he had no income or assets and no ability to pay the taxes owed. DOJ

June 5, 2017

An Ohio resident was convicted by a federal jury sitting in Cincinnati, Ohio of conspiracy to commit wire fraud, wire fraud, bank fraud, evasion of employment taxes and failure to pay over employment taxes, announced the Justice Department’s Tax Division. According to the evidence presented at trial, Fesum Ogbazion, 44, was the owner and CEO of ITS Financial LLC, which was the national franchisor of Instant Tax Service (ITS), a tax preparation business. Ogbazion founded ITS in 2004 and at one time it had more than 1,100 franchise locations throughout the United States. From approximately January 2009 through 2012, Ogbazion conspired with others at ITS to generate loan and tax return preparation fees for ITS and its franchises by luring taxpayers into ITS franchises through a fraudulent nationwide advertising campaign. The ITS ads offered tax refund anticipation loans through an independent third party lender, despite the fact that ITS did not have such a lender to fund the promised loans. The evidence introduced at trial established that Ogbazion used the false advertising campaigns to entice customers into coming to ITS locations for a loan and then used their loan applications to prepare and file income tax returns – often without customers’ authorization. ITS charged its customers between $500 to $800 in tax preparation fees. Between 2006 and 2011, ITS collected more than $70 million in fees. DOJ

May 26, 2017

A resident of College Station, Texas, pleaded guilty to conspiring to defraud the United States by using offshore accounts in Panama to conceal more than $1.3 million in royalty income that she earned from oil wells, announced the Justice Department’s Tax Division. According to documents and information provided to the court, Joyce Meads, 73, admitted that she filed false 1997 through 2009 individual income tax returns, omitting more than $1.3 million in royalty income that she received from oil wells. From approximately April 1997 through April 2010, she conspired with offshore promoters to disguise this income, setting up nominee companies in Delaware and Panama in the name of W.G. Holdings Corporation and transferring her interest in the oil wells to the nominee entity in Delaware. Meads’s monthly royalty checks were issued to W.G. Holdings. For approximately a decade, Meads had her royalty checks sent to a Miami post office box where they were picked up, couriered to Panama and deposited into her nominee accounts. Meads repatriated funds by disguising them as scholarships or loans from W.G. Holdings to herself. She later transferred the funds to bank accounts in her own name or her mother’s name. Meads admitted that she caused a tax loss of more than $250,000. Two of the promoters who assisted Meads, Marc Harris of The Harris Organization, Republic of Panama, and Boyce Griffin of Offshore Management Alliance Ltd., Republic of Panama, have also been convicted of conspiracy and other charges and were previously sentenced to prison. DOJ

May 25, 2017

A federal court in Minneapolis, Minnesota ruled that Wells Fargo is liable for a 20 percent negligence penalty in connection with $350 million of foreign tax credits that it claimed based on its participation in an abusive tax shelter known as Structured Trust Advantaged Repackaged Securities (STARS). This follows a Minnesota jury’s verdict on Nov. 17, 2016, that ruled Wells Fargo was not entitled to those foreign tax credits because the transaction lacked both economic substance and a non-tax business purpose. After a three-week trial, the jury in this case was asked to determine whether Wells Fargo’s STARS transaction had economic substance, and the jury made some key factual findings. Wells Fargo contended that STARS was a single, integrated transaction that resulted in low-cost funding, but the jury found that in reality, the transaction consisted of two economically distinct and independent transactions: a loan and a trust. The jury found that the trust structure had no reasonable potential for pretax profit and that Wells Fargo entered into the trust structure solely for tax reasons. The jury also found that Wells Fargo entered into the loan solely for tax-related reasons. DOJ

May 24, 2017

A federal grand jury sitting in the Eastern District of New York returned an indictment charging a former Brooklyn resident, who operated a precious metals brokerage firm with tax evasion and aiding and assisting in the preparation of false tax returns, announced the Justice Department’s Tax Division. According to the indictment, Christopher Wolf operated Rothchild & Associates LLC, in Brooklyn, New York, and was in the business of selling precious metals to investors over the telephone. Although Wolf controlled all aspects of Rothchild’s operations, it was technically owned by a third party. Wolf allegedly concealed the income he earned from Rothchild by causing his commissions to be paid to shell corporations and diverting the funds from those corporations to his own personal use. According to the indictment, Wolf filed a false 2010 individual income tax return that did not report the income he earned from selling precious metals and he failed to file a 2011 income tax return, despite earning brokerage commissions. The indictment further alleges that Wolf caused the shell corporations to file false 2010 and 2011 corporate tax returns that claimed deductions for phony expenses. DOJ