TWO TAX PREPARERS INDICTED FOR ROLES IN STOLEN IDENTITY REFUND SCHEME

FROM:  U.S. JUSTICE DEPARTMENT 

Tuesday, October 28, 2014

Alabama Tax Preparers Indicted for Stolen Identity Refund Fraud

Two women from Phenix City, Alabama, were indicted yesterday for their involvement in a stolen identity refund fraud scheme (SIRF), Acting Deputy Assistant Attorney General Larry J. Wszalek for the Justice Department's Tax Division and U.S. Attorney George L. Beck Jr. for the Middle District of Alabama announced today following the unsealing of the indictment.

Teresa Floyd and her daughter, Lasondra Davis Miles, were charged with conspiracy to submit false claims, wire fraud and aggravated identity theft.  Floyd was also charged with theft of public money.

According to the superseding indictment, Floyd and Davis operated several tax preparation businesses in the Phenix City area, including T & L Tax Service and T & C Used Cars & Tax Service.  Floyd and Davis obtained stolen identities and used those identities to file more than 900 federal income tax returns that claimed more than $2.5 million in tax refunds.  To obtain the money from the scheme, the defendants applied for bank products from various financial institutions, which provided to the defendants blank check stock.  The bank products allow a tax preparer to deduct their fees directly from a tax refund and then print out the remainder of the refund as a check.  Floyd and Davis created fictitious identification documents and bills to provide to the financial institutions in an attempt to verify that the returns were filed in the names of legitimate customers.  The defendants caused the fraudulent checks to be cashed at several businesses in Alabama and Georgia.  Floyd also deposited fraudulent income tax refund checks into her bank account.

If convicted, the defendants face a statutory maximum sentence of 10 years in prison for the conspiracy to file false claims count, a statutory maximum sentence of 20 years in prison for each wire fraud count, a statutory maximum sentence of 10 years in prison for each theft of public money count and a mandatory sentence of two years in prison for the aggravated identity theft counts.  The defendants are also subject to fines, forfeiture and mandatory restitution if convicted.

The case was investigated by special agents of the Internal Revenue Service - Criminal Investigation.  Trial Attorney Michael Boteler of the Tax Division and Assistant U.S. Attorney Todd Brown for the Middle District of Alabama are prosecuting the case.

An indictment merely alleges that crimes have been committed and the defendants are presumed innocent until proven guilty beyond a reasonable doubt.

THINGS ARE NOT PEACHY AT TWO GEORGIA BASED TAX PREPARERS

FROM: U.S. DEPARTMENT OF JUSTICE

Friday, December 21
Justice Department Seeks to Shut Down Georgia Tax
Preparers
Falsify Tax Returns, Costing U.S. Treasury More Than $100 Million Dollars

The United States has asked a federal court in Atlanta to bar Larry J. Heath, who operates Heath’s Income Tax II in Cartersville, Ga., and his brother Andrew R. Heath, who operates Excellent Tax Service of Acworth, Ga., from preparing tax returns for others, the Justice Department announced today. According to the government complaint, the Heaths and their businesses have repeatedly prepared federal tax returns that unlawfully understate customers’ federal tax liabilities. The suit alleges that the defendants concoct bogus losses, expenses, education credits, business expenses and charitable contributions, which they falsely report on their customers’ federal income tax returns.

According to the complaint, the Internal Revenue Service (IRS) previously suspended Larry Heath’s IRS-issued electronic filing identification number (EFIN) because of the large number of erroneous returns he prepared. In response, the complaint alleges, Larry Heath purported to "sell" his business to two different individuals and used their EFINs to continue to file tax returns.

The suit alleges that the IRS has examined thousands of income tax returns prepared by the Heaths and their businesses and found that 94.5 percent of tax returns required IRS adjustments. According to the complaint, the total harm to the U.S. Treasury caused by Larry and Andy Heath’s misconduct could exceed $100 million.

THREE TAX PREPARERS CHARGED WITH HIDING MILLIONS IN SECRET ACCOUNTS IN ISRAEL

 FROM: U.S. DEPARTMENT OF JUSTICE
Friday, June 15, 2012
Three Tax Return Preparers Charged with Helping Clients Evade Taxes by Hiding Millions in Secret Accounts at Two Israeli Banks Defendants Operated Return Preparation Businesses Located in 12 Locations Throughout the U.S., Including California, New York and Maryland

David Kalai, Nadav Kalai and David Almog were indicted by a federal grand jury in the Central District of California and charged with conspiring to defraud the United States, the Justice Department and Internal Revenue Service (IRS) announced today. The superseding indictment, which was returned late yesterday, was unsealed following the defendants’ arrests.

According to the superseding indictment, David Kalai and Nadav Kalai were principals of United Revenue Service Inc. (URS), a tax preparation business with 12 offices located throughout the United States. David Kalai worked primarily at URS’s former headquarters in Newport Beach, Calif., and later at URS’s location in Costa Mesa, Calif.  Nadav Kalai, who is David Kalai’s son, worked out of URS’s headquarters in Bethesda, Md., as well as URS locations in Newport Beach and Costa Mesa, Calif.  David Almog was the branch manager of the New York office of URS and supervised tax return preparers for URS’s East Coast locations.

As alleged in the superseding indictment, U.S. citizens, resident aliens and legal permanent residents have an obligation to report to the IRS on Schedule B of the U.S. Individual Income Tax Return, Form 1040, whether they had a financial interest in, or signature authority over, a financial account in a foreign country in a particular year by checking “Yes” or “No” in the appropriate box and identifying the country where the account was maintained.  They further have an obligation to report all income earned from the foreign financial account on the tax returns.  Separately, U.S. citizens, resident aliens and permanent legal residents with a foreign financial interest in, or signatory authority over, a foreign financial account worth more than $10,000 in a particular year, must also file a Report of Foreign Bank and Financial Accounts (FBAR) with the Treasury disclosing such an account by June 30 of the following year.

 The superseding indictment alleges that the co-conspirators prepared false individual income tax returns which did not disclose the clients’ foreign financial accounts nor report the income earned from those accounts.  In order to conceal the clients’ ownership and control of assets and conceal the clients’ income from the IRS, the co-conspirators incorporated offshore companies in Belize and elsewhere and helped clients open secret bank accounts at the Luxembourg locations of two Israeli banks, Bank A and Bank B.  Bank A is a large financial institution headquartered in Tel-Aviv, Israel, with more than 300 branches across 18 countries worldwide.  Bank B is a mid-size financial institution also headquartered in Tel-Aviv, with a worldwide presence on four continents.
                                                                                                                     
As further alleged in the superseding indictment, the co-conspirators incorporated offshore companies in Belize and elsewhere to act as named account holders on the secret accounts at the Israeli banks.  The co-conspirators then facilitated the transfer of client funds to the secret accounts and prepared and filed tax returns that falsely reported the money sent offshore as a false investment loss or a false business expense.  The co-conspirators also failed to disclose the existence of, and the clients’ financial interest in, and authority over, the clients’ secret accounts and caused the clients to fail to file FBARs with the Department of the Treasury.
         
If convicted, each defendant faces a maximum of five years in prison and a maximum fine of $250,000.  The charges contained in the indictment are only allegations.  The defendants are presumed innocent and it is the government’s burden to prove guilt beyond a reasonable doubt.

Kathryn Keneally, Assistant Attorney General of the Justice Department’s Tax Division, thanked Tax Division Trial Attorneys Christopher S. Strauss and Ellen M. Quattrucci, who prosecuted the case, and Assistant U.S. Attorney Sandra A. Brown of the U.S. Attorney’s Office for the Central District of California, who assisted with the prosecution.  The case was investigated by special agents of IRS – Criminal Investigation.