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

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

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

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

November 29, 2016

A Stillwell, Kansas tax return preparer was sentenced to 48 months in prison for stealing his clients’ identities and federal income tax refunds falsely claimed in their names. According to documents filed with the court, Richard Drake used three of his clients’ personal identities to file false federal income tax returns that claimed inflated refunds. As part of his scheme, Drake prepared accurate federal income tax returns for these clients, which he provided to them but did not file with the Internal Revenue Service (IRS). He then had these clients make estimated tax payments to the IRS during the year. Once it was time to file on behalf of his clients, Drake filed false tax returns with the IRS that underreported his clients’ income and claimed false expenses in order to generate large income tax refunds which he directed to accounts under his control. In total, Drake stole and converted to his own use $2,432,147. DOJ

November 21, 2016

Ahmad Sheikhzadeh, 60, a U.S. citizen and resident of New York City, New York, pleaded guilty to filing a false income tax return that substantially understated the amount of cash salary the defendant received from Iran’s Permanent Mission to the United Nations (IMUN) and conspiring to facilitate the transfer of funds to Iran without the required license from the Treasury Department in violation of the International Emergency Economic Powers Act (IEEPA). According to court filings and facts presented during the plea proceeding, beginning in January 2008, Sheikhzadeh was employed as a consultant to the IMUN and received a regular salary, in cash, approximately once per month, through an intermediary who was an official at the IMUN. Sheikhzadeh was not a declared IMUN official. From 2008 through 2012, Sheikhzadeh filed personal income tax returns that substantially understated the amount of income he received from his work for the IMUN. In addition, distinct from his work for the IMUN, Sheikhzadeh provided money remitting (“hawala”) services to co-conspirators in the U.S. to facilitate investments in Iran and to direct disbursements from Iranian bank accounts. Sheikhzadeh engaged in these money transfers without a license from the Treasury Department’s Office of Foreign Assets Control in violation of IEEPA. DOJ

November 21, 2016

An Oregon, Ohio psychiatrist was sentenced to serve 18 months in prison announced the Justice Department’s Tax Division. According to court records, from as early as 2005, Sandra Vonderembse failed to pay taxes and filed and caused to be filed with the Internal Revenue Service (IRS) false and fraudulent tax returns that included false statements regarding her income and the amount of tax due and owing. Additionally, from 2009 through 2011, Vonderembse falsely claimed to have no taxable income and to owe no taxes, despite earning more than $240,000 each year while working as a psychiatrist. Vonderembse used nominee entities to conceal income from the IRS, and sent fake financial instruments to the IRS in purported payment of her taxes. In total, from 2005 through 2011, she attempted to evade more than $360,000 in income tax liabilities. DOJ

November 17, 2016

A Kenner, Louisiana couple was sentenced for crimes related to the operation of their check cashing business, VJ Discount Inc., announced the Justice Department’s Tax Division. Susantha Wijetunge, aka VJ, 52, was sentenced by U.S. District Court Judge Lance M. Africk of the Eastern District of Louisiana to serve 44 months in prison and his spouse, Manula Wijetunge, aka Manu, 48, was sentenced by Judge Africk to serve three years of probation. The Wijetunges owned VJ Discount Inc., a Louisiana corporation that operated a convenience store and check cashing business in Kenner. Susantha Wijetunge, VJ Discount Inc. and others cashed, for an inflated fee, fraudulently obtained tax refund checks for multiple co-conspirators. These transactions often involved multiple checks and tens of thousands of dollars. In an attempt to conceal this illegal activity, Susantha Wijetunge and others failed to file, or filed false, required currency transaction reports with the government. Susantha Wijetunge also filed multiple false individual and corporate income tax returns that underreported income. The Wijetunges admitted that VJ Discount Inc. had third party check deposits totaling more than $59 million in 2011; $47 million in 2012; and $66 million in 2013. Despite this large volume of business, the Wijentunges’ individual income tax returns reported total income of less than $100,000 per year. DOJ

November 16, 2016

A congressional staffer pleaded guilty to willfully failing to file an individual income tax return, announced the Justice Department’s Tax Division. According to court filed documents, Issac Lanier Avant, a resident of Arlington, Virginia, is a staff member who has been employed by the U.S. House of Representatives since approximately 2000. Despite earning more than $165,000 each year from 2008 through 2013, Avant failed to timely file personal income tax returns for any of those years. Avant filed returns for tax years 2006 and 2007, but those returns each contained false deductions. In May 2005, Avant 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. DOJ