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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.

				

			

			
						
					
			

	
		
		

			

				
				
January 17, 2017

				 A congressional staffer was sentenced to prison for willfully failing to file an individual income tax return. According to documents filed with the court, Issac Lanier Avant, a resident of Arlington, Virginia, has been employed by the U.S. House of Representatives as a Chief of Staff since 2002. In December 2006, Avant assumed the additional role of Democratic Staff Director for the House Committee on Homeland Security. Despite earning more than $165,000, Avant failed to timely file his 2009 through 2013 individual income tax returns, causing a tax loss of $153,522. Avant had no federal income withheld during those years because in May 2005, he caused a form to be filed with his employer that falsely claimed he was exempt from federal income taxes. Avant did not have any federal tax withheld from his paycheck until the Internal Revenue Service (IRS) mandated that his employer begin withholding in January 2013. Avant did not file tax returns until after he was interviewed by federal agents. DOJ				 					 

						
Tagged in:
													  Tax Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
January 11, 2017

				 A Montana couple pleaded guilty in federal court in Missoula, Montana to one count of conspiracy to defraud the United States. According to the government’s offer of proof, Peggy DeYoung and John DeYoung, both 71, have not filed an individual income tax return since 1998. From 2007 through 2011, Peggy DeYoung earned income through her ownership interest in two companies that own Southern California mobile home parks. The DeYoungs also enlisted the services of Joseph Hill of Creative Consulting Group to establish a number of purported trusts. The DeYoungs opened bank accounts in the names of those trusts using fabricated taxpayer identification numbers and paid personal expenses from the accounts. The plea agreement specifies that the DeYoungs caused the U.S. Treasury a tax loss of $376,350. DOJ				 					 

						
Tagged in:
													  Tax Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
December 30, 2016

				 An El Cajon, California tax return preparer pleaded guilty in the U.S. District Court for the Southern District of California, to three counts of aiding and assisting in the preparation of a false tax return, announced the Justice Department’s Tax Division. According to documents filed with the court, Marla Cunningham, 50, of San Diego, California, owned and operated Cunningham’s Tax Service, a tax preparation business in El Cajon, California.  Cunningham admitted that she prepared false individual income tax returns for her clients for tax years 2008 through 2010 that included false charitable deductions, unreimbursed employee expenses, education credits, medical and dental expenses and business expenses.  Cunningham agreed that she caused a loss of more than $1.2 million. DOJ				 					 

						
Tagged in:
													  Tax Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
December 27, 2016

				 The Department of Justice entered into a non-prosecution agreement with Redflex Traffic Systems Inc., a Phoenix-based automated safety company. The agreement was reached in part due to Redflex’s extensive and thorough cooperation over recent years, which is detailed in the agreement.  It included cooperation with the successful prosecutions of several individuals, including a high-ranking city of Chicago official and Redflex’s prior Chief Executive Officer. Among the company’s obligations under the agreement, which shall continue for two years, Redflex will pay restitution and compensatory damages to the City of Chicago, the amount of which will be determined either by a final judgment or a settlement agreement in Chicago’s pending civil lawsuit against Redflex.  Redflex will also pay restitution of $100,000 to the City of Columbus, Ohio. DOJ				 					 

						
Tagged in:
													  Tax Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
December 23, 2016

				 The last defendant in a domestic and international, multimillion-dollar cigarette tax fraud scheme has been sentenced, the Department of Justice announced. On Thursday, U.S. District Judge David L. Bunning sentenced Anthony Cosica, 54, of Pinetop, Ariz., to 24 months in federal prison.  Eight other defendants, including three from eastern Kentucky and two from Russia, have already been sentenced, for charges including conspiracy to commit mail fraud, wire fraud and money laundering and violations of the PACT Act. According to court documents and evidence presented at trial, from 2008 to 2013, the defendants devised a scheme that defrauded federal, state and local governments across the country, out of cigarette excise taxes totaling approximately $48 million. Specifically, the defendants operated mail order and internet businesses engaged in the delivery sales of untaxed cigarettes to customers in all 50 states. DOJ				 					 

						
Tagged in:
													  Tax Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
December 20, 2016

				 A Maryland man was sentenced to 135 months in prison on federal charges stemming from his role as a key organizer and leader of an identity theft and tax fraud scheme involving the filing of fraudulent returns falsely seeking more than $20 million in refunds, announced the Justice Department’s Tax Division. According to the government’s evidence, Brown, formerly of Capitol Heights, Maryland, and others 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.  Brown and his co-conspirators fraudulently claimed refunds 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.  Returns were also filed in the names of, and refunds were issued to, willing participants in the scheme.  The returns filed listed more than 400 “taxpayer” addresses located in the District of Columbia, Maryland and Virginia. DOJ				 					 

						
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													  Tax Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
December 16, 2016

				 A Greensboro, North Carolina couple, who operated an online sales business, was sentenced to prison for tax fraud and bank fraud charges, announced the Justice Department’s Tax Division. Daniel Balson, 51, and Renee Balson, 53, were sentenced to serve 27 months and 16 months in prison, respectively, by U.S. District Court Judge Catherine C. Eagles of the Middle District of North Carolina.  According to court documents, 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.  Daniel Balson admitted selling stolen merchandise through SSO.  Although SSO earned over $1 million in gross receipts during tax years 2005 through 2011, the Balsons failed to report the operation of SSO and its gross receipts on their individual income tax returns. The Balsons also failed to report the income from SSO on a bank application for a mortgage loan modification in 2011. DOJ				 					 

						
Tagged in:
													  Tax Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
December 7, 2016

				 A Louisiana criminal defense attorney pleaded guilty to tax evasion, announced the Justice Department’s Tax Division. Michael Thiel, 66, a resident of Baton Rouge, Louisiana, pleaded guilty to one count of evading the payment of federal income and employment taxes for 2003 through 2013.  According to documents filed with the court, Thiel operated a criminal defense law practice in Hammond, Louisiana.  Despite earning substantial income through his law practice, Thiel did not timely file income tax or employment tax returns, and did not timely pay tax due and owing to the United States.  Thiel agreed that as of April 30, he owed federal income tax, penalties and interest totaling $736,527, and employment tax, penalties and interest totaling $261,725. DOJ				 					 

						
Tagged in:
													  Employment Tax Fraud, 
													  Tax Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
December 2, 2016

				 A medical doctor and entrepreneur pleaded guilty to inducing interstate travel to commit a fraud and failing to account for and pay over employment taxes announced the Justice Department’s Tax Division. According to the plea agreement, statement of facts, and other court documents, in or about September 2000, Sreedhar Potarazu, 51, of Potomac, Maryland, an ophthalmic surgeon licensed in Maryland and Virginia, founded VitalSpring Technologies, Inc. (VitalSpring), a Delaware corporation.  From its inception, Potarazu was VitalSpring’s Chief Executive Officer and President, and served on its Board of Directors. As early as 2009, Potarazu provided materially false and misleading information to VitalSpring’s shareholders to induce more than $30 million in capital investments in the company.  Potarazu represented on numerous occasions that the sale of VitalSpring was imminent, which would have resulted in profits for shareholders, and concealed that VitalSpring failed to account for and pay over more than $7.5 million in employment taxes to the IRS. For example, in 2014, Potarazu provided shareholders with a written summary of operating results that reflected VitalSpring’s 2013 revenues to be approximately $12.9 million when, in fact, the 2013 revenue was less than $1 million. DOJ				 					 

						
Tagged in:
													  Employment Tax Fraud, 
													  Tax Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
December 2, 2016

				 A Cranston, Rhode Island resident was sentenced to serve 36 months in prison for aiding and assisting in the preparation of false tax returns, wire fraud, theft of government funds and aggravated identity theft. Belkis M. Guzman, 48, was a former employee of El Centro Multiservicios LLC, a tax preparation business located in Providence, Rhode Island.  Guzman was involved in two separate and distinct schemes. The first scheme involved the preparation and presentation of false individual income tax returns (Forms 1040) on behalf of El Centro clients for tax years 2009, 2010, and 2011, on which Guzman created, inflated and falsified dependents, exemptions, credits, deductions and expenses. The second scheme involved the deposit of more than 100 U.S. Treasury checks into Guzman’s personal checking account. The Treasury checks were generated by the filing of fraudulent individual income tax returns containing stolen personal identifying information and fraudulent amounts of income, deductions and credits. DOJ				 					 

						
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													  Tax Fraud, 
												
						

					
	
							
	
		
		
	


 			


											

						

								

									
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