Tax Fraud

January 23, 2017

A Pennsylvania man pleaded guilty to conspiring to defraud the United States and to aiding and abetting the filing of false claims for tax refunds. According to the indictment and information presented to the court, Shamback Francois, 27, engaged in a scheme to fraudulently obtain income tax refunds through the filing of false returns using stolen personal identifying information. At least one of Francois’s co-conspirators electronically filed the false tax returns, which directed that the fraudulently claimed refunds be deposited into a bank account in the name of Shamback Tax Service. Francois did not have a tax preparation service, but had opened up the account in order to facilitate the crime. Francois withdrew funds from this account to pay his co-conspirators. As part of the plea, Francois admitted to causing a loss of $425,841.14. DOJ

January 23, 2017

The owner of a St. Louis, Missouri tax return preparation business was sentenced to 27 months in prison following his conviction on two counts of tax evasion. According to court records, Semere Tsehaye, 39, was the owner and operator of at least 20 Instant Tax Service (ITS) franchise locations operating in Illinois, Kansas and Missouri from 2005 to 2011. ITS was a brand name of ITS Financial LLC, a nationwide tax preparation business headquartered in Dayton, Ohio. Tsehaye owned and operated his ITS franchise locations using two entities named A&S Tax Service LLC (A&S) and ERI Enterprises LLC (ERI). Court records show that during the years 2010 and 2011, Tsehaye generated fraudulent financial summaries that understated the gross receipts generated by A&S and ERI and provided them to his tax return preparer. Tsehaye’s tax return preparer used these financial summaries to prepare Tsehaye’s individual income tax returns, which Tsehaye then filed with the IRS. These tax returns were false in that they underreported A&S and ERI’s gross receipts by a total of approximately $547,895 in 2010 and $1.03 million in 2011, and resulted in Tsehaye evading a total of approximately $581,264 in tax due and owing. DOJ

January 18, 2017

Three Orange County, California residents pleaded guilty to willfully failing to report their foreign bank accounts in Switzerland and Israel. Dan Farhad Kalili, 55, a resident of Irvine, California, together with his brother, David Ramin Kalili, 52, and his brother-in-law, David Shahrokh Azarian, 67, residents of Newport Coast, California, admitted that they willfully failed to file Reports of Foreign Bank and Financial Accounts (FBARs) with the Internal Revenue Service (IRS) regarding secret bank accounts in Switzerland and in Israel that each respectively maintained and controlled, many for well over a decade. These secret accounts held assets that reached into the millions of dollars. DOJ

January 17, 2017

A Northern District of Illinois resident was sentenced to 60 months in prison. From approximately January 2011 through April 2015, Carlos Smith stole personal identifying information obtained from individuals who sought credit repair or credit card processing services through CLS Financial Services Inc. (CLS), a business Smith operated, and used the information to file false individual income tax returns. Smith also stole identities of individuals who worked for Chicago’s Board of Education and used this information to file false individual income tax returns. Smith filed approximately 92 fraudulent income tax returns, claiming more than $1 million in refunds. Smith directed the fraudulently obtained tax refunds to prepaid debit cards, addresses, and bank accounts he controlled, including accounts opened in the names of individuals whose identities he had stolen. Smith also filed his own false individual income tax returns for 2012 through 2014. DOJ

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

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

January 10, 2017

New York announced the convictions of Lawrence D. Rosenbaum, 65, of Albany, New York, and his wife, Thomasine Henderson, 66. On January 5, 2017, Rosenbaum pleaded guilty to Grand Larceny, Securities Fraud and Tax Fraud for fraudulently soliciting hundreds of thousands of dollars from investors for kosher and halal cheese factories in upstate New York and bio-energy companies in New York State and Costa Rica. As part of his plea, Rosenbaum agreed to execute nearly $1,000,000 in judgments in favor of his victims, and he will be sentenced to 3 to 9 years in state prison. Also on January 5, Henderson pleaded guilty to Insurance Fraud and Falsifying Business Records in connection with her submission of a false claim in an attempt to obtain payment on a life insurance policy after her son’s suicide last year. According to the prosecution, Rosenbaum is an insurance broker who owned and operated Rosenbaum Financial Services in Albany, New York for decades. In approximately 2001, Rosenbaum formed a limited liability company, Saratoga Cheese Company LLC, which he claimed would develop a halal and kosher cheese plant in the Capital Region, using local dairy products and a cheese coagulator that he had learned about when he was an exchange student in Germany decades earlier. In 2006, Rosenbaum reformed this entity as Saratoga Cheese Corporation, with the stated purpose of developing a cheese manufacturing facility in Cayuga County. NY

January 4, 2017

New York announced the plea and conviction of Gary Mole, 52, an Australian citizen and the former CEO of Glacial Energy Holdings (“GEH”), stemming from the underreporting of over $18.5 million dollars in taxable income by Glacial Energy of New York (“GENY”), a wholly owned subsidiary of GEH. Mole pleaded guilty to Criminal Tax Fraud in the Second Degree, a class C felony. According to prosecutors, from 2006 through 2008, Mole was the CEO and sole shareholder of GEH, an energy service company incorporated in Nevada. In approximately 2006, Mole allegedly began personally investing taxable revenue of GENY in a mining operation in the Democratic Republic of Congo (“DRC”), Generales Des Mines Au Congo SPRL, known as “Gemico.” Between January 1, 2006 and December 31, 2008 Mole diverted over $18.5 million in taxable revenue from GENY to Gemico. Mole instructed subordinates to wire money to bank accounts in the Democratic Republic of Congo, Switzerland, Lichtenstein, South Africa, and China, among others, all for the benefit of Gemico. NY

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

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