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Tax Enforcement Actions

The Internal Revenue Service (IRS) is the United States agency with primary responsibility for enforcing federal tax laws, working with the Department of Justice. Whistleblowers with knowledge of violations of the federal tax laws can submit a claim to the IRS under the IRS Whistleblower Reward Program, and may be eligible to receive a monetary reward.

Below are summaries of recently-announced settlements or successful prosecutions by the IRS or DOJ. If you believe you have information about fraud or wrongful conduct which could give  rise to a claim under the IRS Whistleblower Reward Program, please contact us to speak with one of our experienced whistleblower attorneys.

May 8, 2018

Posted  05/8/18
Korean national Un Hag Baeg has been sentenced to four years in prison and ordered to pay $7.26 million in restitution for his role in a scheme to evade the payment of excise taxes on cigarettes by falsely claiming that the cigarettes had been exported. Baeg, who operated Far East Marine Ship Supply Company, which provided services to cargo ships, created false records claiming that the cigarettes had been delivered...

April 26, 2018

A resident of Troy, Michigan, pleaded guilty to filing a false tax return, announced the Justice Department’s Tax Division. According to court documents, Mythi Nguyen co-owned Y & B Nail Supply, a nail salon wholesale business located in Madison Heights, Michigan. From 2009 through 2011, Nguyen underreported more than $1.1 million in business gross receipts from her tax returns, which caused a total tax loss of $272,680.72. DOJ

April 18, 2018

A Salinas, California, resident pleaded guilty to conspiring to file fraudulent claims for income tax refunds, announced the Justice Department’s Tax Division. According to documents and information provided to the court, during 2012, Ana Bajo a/k/a Ana Covarrubias, 43, conspired with others to obtain the personal identifying information of others and use it to file more than 2,300 fraudulent income tax returns with the Internal Revenue Service (IRS). These returns reported fake wages and fraudulently claimed dependents, education expenses and tax credits. In total, the returns sought approximately $9.7 million in refunds, of which the IRS paid more than $7.5 million. Bajo, and her co-conspirators, directed the fraudulently obtained refund checks into bank accounts that they controlled. DOJ

April 17, 2018

A federal grand jury sitting in Greenbelt, Maryland, returned an indictment, which was unseal, charging a married couple with conspiracy to defraud the United States and four counts of filing false tax returns, announced the Justice Department’s Tax Division. According to the indictment, Robert M. Underwood and Deborah J. Underwood, operated a used automobile parts and scrap metal business in Clinton, Maryland from 2009 through 2012 under the names “B Underwood’s Used Auto Parts” and “B Underwood Used Auto Parts, LLC.” The business allegedly purchased used and salvage cars, stripped them for parts to resell, and sold the remains to a Baltimore-based scrap yard. DOJ

April 16, 2018

A federal court in Orlando, Florida, ordered that Patrick Clarke disgorge $500,000, and Ruby Rodriguez disgorge $100,000, of the proceeds they received for the preparation of tax returns, the Justice Department announced. Clarke and Rodriguez agreed to the orders. On Nov. 13, 2017, the Court permanently barred Clarke, Rodriguez, Tax MD Inc., and V.I.P Tax Services Inc. from preparing federal tax returns for others. The civil injunction order, to which the defendants also agreed, was signed by Judge Carlos E. Mendoza of the U.S. District Court for the Middle District of Florida. DOJ

April 12, 2018

A Miami escort service owner pleaded guilty to filing a false tax return, announced the Justice Department’s Tax Division. According to court documents, Dennis Zarudny, 40, filed a false individual income tax return for 2012 that underreported his total income from his escort business, Denzar Inc., which did business as "Elite Escort Service" in the Miami area. Zarudny’s escort service was marketed on the internet as a "prestigious escort agency providing 24 hour outcall escort services & adult entertainment for upscale gentlemen and couples in South Florida." DOJ

April 5, 2018

A federal grand jury sitting in Fort Pierce, Florida, returned an indictment, charging a Hobe Sound, Florida, resident with tax evasion, mail fraud, wire fraud, theft of government funds, and Social Security disability fraud announced the Justice Department’s Tax Division. According to the indictment, Arthur John Kranz, was a doctor specializing in psychiatry. Beginning in 2002, Kranz allegedly made a claim on his private disability policy that he was unable to work, and began receiving disability payments from his insurance company. The indictment further alleges that in December 2003 Kranz submitted an application to the Social Security Administration (SSA) for disability benefits, which was approved. As part of his application, Kranz agreed to notify the SSA if he returned to work. The indictment charges that between 2006 and 2013, Kranz worked as a psychiatrist at a hospital in Pennsylvania and earned over $1.6 million in income, but did not report this fact to the SSA or the insurance company. DOJ

April 3, 2018

The DOJ sued Steven M. Doletzky, Michael A. Garno, Michael A. Bass, and Florida corporations they used to operate Liberty Tax Service stores in the St. Petersburg, Florida area. The complaint seeks to permanently bar Doletzky, Garno, and Bass from preparing federal tax returns for others. In addition, the complaint seeks orders from the federal court requiring all defendants to disgorge to the United States any ill-gotten fees Doletzky, Bass, and Garno charged customers for the preparation of false or fraudulent federal tax returns. According to the complaint, as part of his tax fraud scheme, Doletzky recruited homeless individuals as customers by offering food, beverages, and false promises of assistance with obtaining welfare benefits on their behalf. Doletzky allegedly obtained vans to transport homeless individuals to his Liberty Tax Service stores from locations in the St. Petersburg area where homeless people were known to congregate. Doletzky then directed others to prepare false tax returns on behalf of these homeless individuals that claimed fraudulent tax refunds, the bulk of which Doletzky retained as tax preparation fees, the complaint alleges. DOJ

April 3, 2018

A resident of West Bloomfield, Michigan, pleaded guilty to willfully failing to pay over employment taxes to the Internal Revenue Service (IRS). According to documents and information provided to the court, Dino Rotondo owned and operated four professional employer organizations (PEOs) located in Troy, Michigan, which provided payroll-related services to client companies. Rotondo processed payroll and agreed to withhold from client employee paychecks, and send to the IRS, the employment taxes that were due. Despite this obligation, Rotondo did not pay to the IRS employment tax withholdings that his PEOs collected during 2012 and the first quarter of 2013. Rotondo also admitted that he did not pay to the IRS employment taxes due for an additional business that he owned. In total, Rotondo did not pay more than $1.5 million in employment taxes owed to the IRS. DOJ

April 3, 2018

John Anderson Rankin, who owned a software company and a number of restaurant and entertainment businesses in Circleville, Ohio, was sentenced to five months in prison and ordered to pay restitution of $7.1 million for failure to account for and pay over employment taxes to the IRS and other tax charges.  DOJ
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