Tax Fraud

September 12, 2022

Two cigarette companies, Canada-based Grand River Enterprises Six Nations, Ltd., and its wholesaler, New York-based Native Wholesale Supply Company, Inc., have agreed to pay $50 million and follow corrective measures to resolve charges of evading New York state taxes.  According to the AG, Grand River—which manufactures Couture, Opal, and Seneca cigarettes—knew that its distributor, Native Wholesale, was not licensed to distribute or sell cigarettes in the state, and thus their cigarettes would not be taxed or stamped in accordance with state law, making their prices artificially lower and more accessible to young consumers.  NY AG

August 10, 2022

Melissa Lynne Horner, co-owner of H & H Earthworks, Inc., will spend 30 months in prison and pay over $2.8 million in restitution for failing to pay employee and employer taxes to the IRS, as well as Earthworks’ portion of the FICA taxes. Rather than paying taxes, Horner used the money for her personal gain, spending over $100,000 on motor sport vehicles, $90,000 to a real estate title company, and at least $50,000 on home renovations and $20,000 for a motorhome. USAO MT

August 10, 2022

Thomas Valdez Rodriguez will spend 24 months in prison and will pay over $12.7 million in restitution to the IRS. As owner of Tom-E-Lee Trucking and Tom-E-Lee Industries, Rodriguez failed to withhold employment taxes from his employees. In addition to his failures to meet his businesses’ tax obligations, Rodriguez has not paid personal income taxes since 2011. Rather than paying his taxes, Rodriguez lived extravagantly and enjoyed flying his friends on private jets to Dallas Cowboys games, where Rodriguez was a season ticket holder on the 50-yard line. All told, the harm to the government equated $12,714,214.42, of which Rodriguez paid $1 million immediately prior to his sentencing. USAO WDTX

July 14, 2022

Jesus Jose Mendez, co-owner of J&J Drywall, Inc., was sentenced to 3 years probation and ordered to pay $2.8 million to the IRS, and $62,730 to the MA DOL for evading income and employment taxes, and not making the requisite state unemployment contributions. From 2013 to 2017, defendants cashed over $16 million in business checks at check-cashing businesses and would leave cash-filled backpacks at their worksites from which to pay their employees. Meanwhile, deposits into the J&J bank account during this same timeframe equaled only $4 million, and deposits were frequently structured in amounts less than $10k, evading reporting requirements. Federal tax losses are estimated at just over $2.8 million, and the loss to MA DOL equaled nearly $63,000. Jamie Zambrano, Mendez’s business partner, is currently a fugitive. USAO RI

July 13, 2022

The owner and operator of North Carolina-based Kapital Financial Services, Joseph Octave, has been sentenced to over 3 years in prison after being convicted of orchestrating a criminal conspiracy that caused a $2.5 million loss to the IRS.  Between 2014 and 2019, under Octave’s direction, employees at the tax preparation business’s two offices falsified clients’ tax returns by claiming false deductions, business losses, and credits.  DOJ

June 16, 2022

A Florida man who was convicted of defrauding Medicare of over $20 million and evading taxes has been sentenced to 14 years in prison and ordered to pay $4 million in restitution to the IRS.  As the owner and operator of multiple telemarking and telemedicine companies, Marc Sporn marketed and sold signed prescription orders for medically unnecessary genetic tests, in exchange for illegal kickbacks from pharmacies and laboratories.  USAO SDFL

June 13, 2022

Akrum Alrahab will spend 5 years in prison and pay over $10 million for providing untaxed Other Tobacco Products to a series of individuals and businesses operating in California, resulting in over $10 million in lost excise tax revenue for the State of California. USAO EDCA

April 12, 2022

Aaron Aqueron of Florida has been sentenced to 4 years in prison and ordered to pay $5.9 million in restitution to the IRS for promoting a nationwide scheme that caused more than $7.6 million in fraudulent tax refund claims to be filed.  The scheme involved convincing more than 200 participants in at least 19 states that they were entitled to tax refunds due to debt, then using the participants’ financial information to prepare tax returns with false information.  Two other co-conspirators, Iran Backstrom and Mehef Bey, were sentenced to more than 8 years and 11 years in prison respectively.  USAO MDFL