Fraud Friday: 13,000 lottery “wins”

A man who has “won” the Massachusetts lottery in excess of 13,000 times has pleaded guilty to charges of tax fraud conspiracy, money laundering conspiracy, and filing false tax returns. The man and family members operated a lottery ticket cashing scheme that brought in $21 million between 2011 and 2019. In Massachusetts, money owed in federal taxes or child support can be deducted from lottery wins over $600. To avoid this deduction, winners often use underground ticket cashing businesses, which take a cut of the winnings. The family members reported fraudulent gambling losses and understated their income, resulting in large refunds. 

(www.casino.org/news/mass-lottery-frequent-winner-pleads-guilty-to-tax-fraud-conspiracy/)

CPAs, get four hours of fraud CPE with our Fraud Essentials for CPAs WebinarClick here for more information.

Fraud Friday: The Nigerian Prince e-mail scam

The Nigerian Prince e-mail scam is a modern interpretation of the Spanish Prisoner scam that dates back to the late 18th century. Originally, businessmen were contacted by an individual allegedly trying to smuggle someone connected to a wealthy family out of a prison in Spain. The scammer promised to share money with the victim in exchange for a small amount of money up front to bribe prison guards. The scam has persisted, shifting to requests for assistance purportedly coming from a Nigerian prince. While Nigeria is most often the nation referred to in these scams, they originate in other nations as well. The scam is also known as the “419 scam”; 419 refers to the article of the Nigerian Criminal Code dealing with fraud (in Chapter 38: “Obtaining property by false pretenses; Cheating”).

(https://en.wikipedia.org/wiki/Advance-fee_scam)

CPAs, get four hours of fraud CPE with our Fraud Essentials for CPAs WebinarClick here for more information.

Fraud Friday: Rap duo

Two female Detroit rappers (known on stage as Deuces Wild) are charged with identity theft and conspiracy for a scheme going back to 2013 that involved filing fraudulent estate and trust tax returns claiming $13.6 million, of which they had already received more than $5 million. The duo filed 122 returns, opened 29 bank accounts, and roped friends and acquaintances into the scheme by promising them a cut of the money in exchange for receiving checks. One of the women used stolen identification to open accounts, rent apartments, open a UPS Box, and purchase expensive items, including jewelry and watches. Both women are facing ten years in prison if convicted.

(www.fox2detroit.com/news/metro-detroit-rappers-charged-with-stealing-over-5-million-from-irs)

CPAs, get four hours of fraud CPE with our Fraud Essentials for CPAs WebinarClick here for more information.

Fraud Friday: Julia Butterfly

“Tax redirection” is a form of tax rebellion where the individual pays their tax directly to another source rather than the IRS as a form of protest. Julia “Butterfly” Hill, an environmentalist turned proponent of tax redirection, sent about $150,000 in federal taxes directly to schools, arts and culture programs, community gardens, and other recipients, stating in a letter to the IRS, “I’m not refusing to pay my taxes. I’m actually paying them but I’m paying them where they belong because you refuse to do so.” Hill is best known for her tree sit in the late 1990s, when she lived in a 180-foot tall Redwood tree named Luna for 738 days to protect it from being cut down by the Pacific Lumber Company.

(https://en.wikipedia.org/wiki/Julia_Butterfly_Hill)

CPAs, get four hours of fraud CPE with our Fraud Essentials for CPAs WebinarClick here for more information.

Fraud Friday: The Whiskey Rebellion

In 1791, Treasury Secretary Alexander Hamilton proposed the first U.S. tax, an excise on distilled spirits, to pay down the debt incurred from the American Revolution. Large whiskey producers paid the tax annually at a rate of six cents per gallon, with further tax breaks the more they produced. But small producers were charged nine cents per gallon in taxes. Farmers in western Pennsylvania who used whiskey for trade objected to the tax and protested by tarring and feathering the tax collectors. The rebellion lasted from 1791 to 1794, ending with a confrontation that caused President George Washington to send 13,000 troops to contain what some feared would become another revolution. (www.history.com/topics/early-us/whiskey-rebellion)

CPAs, get four hours of fraud CPE with our Fraud Essentials for CPAs WebinarClick here for more information.

Fraud Friday: “Illegal tax protestors”

Tax protestors rely on various arguments, such as the Sixteenth Amendment not being properly ratified, income is not defined in the Internal Revenue Code or the Constitution, or that the Internal Revenue Code actually doesn’t require anyone to pay tax. Prior to 1998, the IRS would label such individuals as “illegal tax protestors” in their system to flag them for enforcement actions and alert IRS employees to be cautious in dealing with them. But in 1998, Congress passed the Internal Revenue Service Restructuring and Reform Act of 1998 (P.L. 105-206) prohibiting the IRS from continuing this practice because it stigmatized these individuals and biased IRS employees against them, even if they had ultimately paid their tax.

(www.washingtonpost.com/news/federal-eye/wp/2014/09/11/what-is-an-illegal-tax-protester-and-why-cant-the-irs-use-that-term-any-more/)

CPAs, get four hours of fraud CPE with our Fraud Essentials for CPAs WebinarClick here for more information.

Fraud Friday: In the doghouse

A Minnesota dog breeder is in the doghouse after an investigation discovered that they were reporting income on their tax returns from fewer sales of puppies than they actually made in the years at issue. The Facebook page for BrookeMarie’s Goldendoodle Love clearly showed the number of litters and how many total puppies were for sale, which did not match up with the amounts reported. The puppies were going for between $2,500 and $3,500 each, plus there should have been charged 7% Minnesota sales tax, which the breeder also failed to pay. The owner has been charged with three felony counts of filing fraudulent income and sales tax returns and failing to pay or collect income and sales tax.

(www.southernminnesotanews.com/dog-breeder-accused-of-tax-fraud/)

CPAs, get four hours of fraud CPE with our Fraud Essentials for CPAs WebinarClick here for more information.

Fraud Friday: $62 million in Paycheck Protection Program fraud

A California tax preparer was sentenced to ten years in prison for orchestrating a scheme that defrauded the Paycheck Protection Program out of $62 million. At the time he engaged in the fraud, he was on supervised release for a previous fraud scheme in which he filed false income tax returns on behalf of more than nine professional athletes. In the PPP scam, he filed false applications for PPP loans on behalf of small businesses and shell companies in exchange for 30% of the loan proceeds. He also filed fraudulent supporting tax returns that the small business owners never saw or approved. To hide the funds he received from the scam, he asked the businesses to pay the fee with cashier’s checks and to write “payroll” in the memo line.

(www.wric.com/news/crime/man-sentenced-for-tax-fraud-schemes-resulting-in-more-than-62-million-loss-for-us-government/)

CPAs, get four hours of fraud CPE with our Fraud Essentials for CPAs WebinarClick here for more information.

Fraud Friday: Distributing false resale certificates

Sotheby’s auction house is under investigation in New York for allegedly distributing false resale certificates to around a dozen clients, allowing them to pose as art dealers and avoid paying tax on revenue from their sales. The scheme is related to a lawsuit in which a Sotheby’s client purchased $27 million in art for his personal collection in transactions that avoided tax. Initially, it seemed this was an isolated incident, but further investigation revealed multiple fraudulent resale certificates, indicating that staff at Sotheby’s had “willfully turned a blind eye to the fraudulent distribution of resale certificates.” Sotheby’s argues it shouldn’t be held responsible for the actions of low-level employees. (www.artnews.com/art-news/news/sothebys-tax-fraud-investigation-expands-1234637480/)

CPAs, get four hours of fraud CPE with our Fraud Essentials for CPAs WebinarClick here for more information.

Fraud Friday: AI pool-finding

France is using AI to find undeclared swimming pools, which so far has generated 10 million in tax. In France, a swimming pool can affect tax because housing taxes are calculated based on a property’s rental value. Since the beginning of the pandemic, and with recent heat waves affecting Europe, the number of pools in France has greatly increased. The AI pool-finding project so far has only covered nine of France’s 96 metropolitan areas, but it has already discovered 20,356 undeclared swimming pools. The French tax office DGFiP (a.k.a., Le Fisc) estimates it can bring in an additional €40 million in tax once it’s finished using AI to analyze the rest of metropolitan France. (www.theverge.com/2022/8/30/23328442/france-ai-swimming-pool-tax-aerial-photos)

CPAs, get four hours of fraud CPE with our Fraud Essentials for CPAs WebinarClick here for more information.

Fraud Friday: Romanian taxes on imported diesel fuel

The U.S. will return $1.2 million in forfeited funds to Romania, stemming from a tax fraud scheme involving diesel fuel. A Romanian couple avoided Romanian taxes on imported diesel fuel by claiming the fuel was a lower grade of industrial and maritime fuel. The untaxed income from the sale of the higher value diesel was laundered through a number of bank accounts and shell companies controlled by the couple, and resulted in an overall $58.677 million tax loss to Romania. Before they could be arrested, the couple fled to Washington state, but eventually were extradited, leaving behind a large piece of property and assets that were sold. The funds from the sale will be returned to the government of Romania. 

(www.justice.gov/opa/pr/12-million-be-returned-romanian-government-victim-international-tax-fraud-and-money, www.justice.gov/opa/pr/12-million-be-returned-romanian-government-victim-international-tax-fraud-and-money)

CPAs, get four hours of fraud CPE with our Fraud Essentials for CPAs WebinarClick here for more information.

Fraud Friday: Paid public restrooms

A German woman who owns a cleaning company that earns revenue from paid public restrooms is on trial for failing to report around €1.2 million. The restrooms have voluntary contribution plates where visitors can leave change, which generated the income that she failed to report. But the case is complicated in that some of the charges date back more than 14 years, the German statute of limitations for tax fraud. Also, some of the restrooms were near the Austrian border and present a jurisdictional problem. And because income from the restrooms is based on voluntary donations, it’s difficult to nail down an exact amount of revenue; even the judge in the case suggested that an amount of €600,000 may be more appropriate than €1.2 million. 

(www.taxbuzz.com/blog/germany-toilet-tax-evasion-trial-begins)

CPAs, get four hours of fraud CPE with our Fraud Essentials for CPAs WebinarClick here for more information.

Fraud Friday: Yoga studio stacking parties

Owners of a NYC yoga studio are facing 30 years in prison for conspiracy and tax evasion for failing to file returns while the yoga studio raked in millions. The chain of studios closed in 2020 following allegations of questionable business practices such as pressuring instructors to work for free. Yoga session fees were donation-based and collected in tissue boxes that were passed around, but instructors were not allowed to count the money collected. Instead, the cash was brought to one studio owner’s home for “stacking parties” where the bills were counted and stacked. The owners spent the funds on personal items such as $270,000 on airfare, $76,000 on hotels, $40,000 on Denver Broncos season tickets, $39,000 at restaurants, and more than $60,000 spent at country clubs and on event tickets. 

(www.nytimes.com/2022/08/24/nyregion/tax-fraud-yoga-to-the-people.html)

CPAs, get four hours of fraud CPE with our Fraud Essentials for CPAs WebinarClick here for more information.

Fraud Friday: Imprecise IQ scores

A Court of Appeals upheld a ruling against a taxpayer for filing false tax returns connected to his wife’s embezzlement of millions of dollars from her employer. The taxpayer argued he thought the funds were his wife’s gambling winnings, which he used to buy a yacht, a snowmobile, and other luxury items. At the appeal trial, the taxpayer argued the district court erred in not allowing evidence of his cognitive deficiencies, consisting of expert testimony and his high school transcript that contained numerous “E” grades. However, the expert could not rule out that the taxpayer’s performance during his cognitive exam was the result of malingering, and the high school transcript contained “an unexplained grading system and imprecise IQ scores.” Based on these and the taxpayer’s own testimony, the court agreed he was aware the couple was spending more than they reported and was found to have not disclosed all income to his accountants. (U.S. v. Mills (July 22, 2022) U.S. Court of Appeals, Third Circuit, Case No. 21-2423)

CPAs, get four hours of fraud CPE with our Fraud Essentials for CPAs WebinarClick here for more information.

Fraud Friday: 76 fraudulent charities

The House Ways and Means Oversight Subcommittee has contacted the IRS looking for answers regarding the streamlined process for applications for tax-exempt status, which allowed one fraudster to have 76 fraudulent charities approved. The fake nonprofits all had names that sounded similar to legitimate nonprofits, such as “American Cancer Society of Michigan.” The actual American Cancer Society had even gotten wind of its fraudulent namesake and contacted the IRS. The IRS is now under fire for not noticing that this particular group of fraudulent charities all used the same Staten Island address. It also highlights the IRS’s own statistics that only one in 2,400 of these streamlined applications gets denied. (www.wealthmanagement.com/philanthropy/irs-hot-water-over-fraudulent-charities)

CPAs, get four hours of fraud CPE with our Fraud Essentials for CPAs WebinarClick here for more information.

Fraud Friday: A vexatious litigant

After being disbarred for bringing numerous unmeritorious litigations and being declared a vexatious litigant (one trial judge wrote in a statement of decision that the taxpayer is “a relentless bully” who displays “terrifying arrogance”), a former attorney found himself in Tax Court regarding disallowed Schedule C expenses. The claimed Schedule C business activities did not generate a profit and mostly stemmed from litigation relating to challenging the taxpayer’s disbarment and lawsuits that would otherwise personally benefit him. He deducted court filing fees, life insurance policy expenses, and various utility expenses, none of which were allowable expenses because the taxpayer failed to show that he engaged in any business activities for the year at issue. (Kinney v. Comm., TCM 2022-81)

CPAs, get four hours of fraud CPE with our Fraud Essentials for CPAs WebinarClick here for more information.

Fraud Friday: A sovereign citizen

A Michigan man is facing felony charges and prison time for bouncing three checks he wrote to pay his taxes. The man, who also claims to be a sovereign citizen, sent the State of Michigan three checks for $1 million each, which bounced because they had routing numbers for TCF Bank. That in and of itself is not a crime, except he did not actually have an account at TCF Bank. Under Michigan law, no-account checks/writing checks on closed account is a class H felony that carries up to 2 years in prison. (www.michigan.gov/ag/news/press-releases/2022/02/10/self-proclaimed-sovereign-citizen-charged-with-writing-fake-checks)

CPAs, get four hours of fraud CPE with our Fraud Essentials for CPAs WebinarClick here for more information.

Fraud Friday: Shakira, Shakira

After being accused by the Spanish government of failing to pay €14 million in tax on income earned between 2012 and 2014, pop star Shakira has rejected a plea deal with Spanish authorities and is moving forward with a trial that she says will prove she has already paid the tax in question and owes no tax debt. For the tax years at issue, Shakira’s official residence was the Bahamas, but she also lived with footballer Gerard Pique in Barcelona. If found guilty, she could face fines and a prison term. (www.euronews.com/2022/07/27/shakira-opts-to-go-to-trial-in-spain-over-alleged-145m-tax-fraud)

CPAs, get four hours of fraud CPE with our Fraud Essentials for CPAs WebinarClick here for more information.

Fraud Friday: Nine professional athletes

A Los Angeles tax preparer has pleaded guilty to engaging in two separate fraud schemes. The first involved filing fraudulent income tax returns for at least nine professional athletes, reporting fabricated business and personal losses. The tax pro and his associates claimed they had specialized knowledge that the athletes’ prior tax professionals lacked and convinced the athletes to amend past returns to generate large fraudulent refunds. They then charged the athletes a fee of 30% of the resulting refund and directed the athletes to send the fee to shell entities. Second, the tax pro and his associates applied for PPP loans on behalf of a number of small businesses, shell entities with few or no employees that they controlled, and business entities controlled by others. They inflated the number of employees and monthly payroll costs claimed on the PPP loan applications and submitted fabricated tax returns in support of the applications. Some of the business owners never saw their loan applications before they were filed. The tax pro charged a fee of 30% of the loan amounts. He’s facing up to 25 years in prison. (https://www.justice.gov/opa/pr/second-defendant-pleads-guilty-multimillion-dollar-tax-fraud-scheme-involving-professional)

CPAs, get four hours of fraud CPE with our Fraud Essentials for CPAs WebinarClick here for more information.

Fraud Friday: Capital with a K

A North Carolina tax preparation business owner has been sentenced to almost four years in prison for a tax fraud scheme that involved hundreds of tax returns and that netted him $700,000. Kapital Financial Services had two locations in Charlotte, and the business owner directed employees to falsify clients’ tax returns, including claiming false deductions, business losses, American Opportunity credits, education credits and earned income tax credits. He also trained his employees on how to create the fraudulent returns to avoid IRS detection and provided them with scripts and cheat sheets. Employees were not allowed to provide clients with copies of their returns, they were only allowed to give clients their refund amount because the fees Kapital charged were taken from the inflated refunds. (https://www.justice.gov/opa/pr/charlotte-tax-preparer-sentenced-prison)

CPAs, get four hours of fraud CPE with our Fraud Essentials for CPAs WebinarClick here for more information.

Fraud Friday: $1 billion in crypto scams

Crypto scams have reached the $1 billion mark for the period between January 2021 and March 2022. Almost 40% of the scams originated on social media. In terms of type of fraud, most scams relate to fake investments that promise large returns, with second place going to “romance scams” that involve gaining trust using a fake online identity and then manipulating funds out of the victim. Most of the scams involve Bitcoin (70%), followed by tether (10%) and Ethereum (9%). (www.forbes.com/sites/rosemariemiller/2022/06/06/bitcoin-leads-crypto-fraud-as-ftc-confirms-1-billion-milestone)

CPAs, get four hours of fraud CPE with our Fraud Essentials for CPAs WebinarClick here for more information.

Fraud Friday: A seized show jumping horse

After busting a tax shelter promoter, the U.S. government seized many of the assets he purchased with the proceeds, including a $750,000 show jumping horse. However, after realizing that it was going to cost at least $50,000 to feed and care for the horse, the government agreed to sell the horse back to the tax shelter promoter’s daughter for $25,000. The daughter had been planning to ride the horse down the aisle on her wedding day. The government has seized horses before; in 2012 they sold 150 horses for $4.8 million, which were seized from a comptroller who had been misappropriating city funds. But maintaining assets before they’re sold can be expensive, as the government has found regarding the maintenance of superyachts seized from Russian oligarchs. (https://finance.yahoo.com/news/horse-seized-tax-fraud-case-133413396.html)

CPAs, get four hours of fraud CPE with our Fraud Essentials for CPAs WebinarClick here for more information.

Fraud Friday: Counterfeit chocolate

A bust of U.S.-themed candy stores on Oxford Street in London raked in £22,000 worth of counterfeit Wonka bars and over £100,000 of counterfeit goods such as vapes, Apple and Samsung products, hookah products, and watches. All counterfeit vapes recovered contained excessive levels of nicotine and had not been approved by the Medicines and Healthcare Products Regulatory Agency. The Food Standard Agency also warned anyone who purchased the counterfeit Wonka bars not to eat them, as there is no way of knowing what ingredients were used or whether food hygiene practices were followed. The stores are being investigated for millions of pounds in tax evasion as well.

CPAs, get four hours of fraud CPE with our Fraud Essentials for CPAs WebinarClick here for more information.

Fraud Friday: That’s a lot of Happy Meals

McDonald’s France has agreed to pay a total of €1.25 billion in fines, penalties, and back taxes to settle a tax evasion case after years of negotiations.  McDonalds France was accused of hiding French profits in lower-tax Luxembourg from 2009 through 2020, and reporting lower profits in France. An investigation was started in 2016 after union officials reported the company for tax evasion. The settlement is made up of a €508 million fine and €737 million in back taxes and is the second-biggest tax settlement in French history. (The largest was the €2.1 billion fine paid by aircraft builder Airbus in 2020.) (https://abcnews.go.com/Business/wireStory/mcdonalds-pay-france-13-billion-tax-fraud-case-85434599)

CPAs, get four hours of fraud CPE with our Fraud Essentials for CPAs WebinarClick here for more information.

Fraud Friday: Go Go Power Ranger

Austin St. John, the actor who played the Red Power Ranger in the 1990s TV show Mighty Morphin’ Power Rangers is facing up to 20 years in prison for participating in COVID-19–related wire fraud. St. John was part of a ring of 18 people who filed for $3.5 million in fraudulent PPP loans for existing or newly created small businesses. This is just the latest in the curse of the Red Power Ranger: in 2017 the actor who portrayed the Red Wild Force Ranger in Power Rangers Wild Force pled guilty to voluntary manslaughter for stabbing his roommate with a sword.

CPAs, get four hours of fraud CPE with our Fraud Essentials for CPAs WebinarClick here for more information.

Fraud Friday: A 70-year-old tax collector

A 70-year-old tax collector in Pennsylvania was sentenced to one year in prison for filing false returns that understated her income. She started underreporting in 2014 and gradually increased the unreported amount each year until her actual income was six times higher than what she reported to the IRS in 2018. She used the funds to buy a mobile home at the Jersey Shore, fund home renovations, and pay for a family vacation to Hawaii. The tax collector and her family argued for her to serve the sentence at home so she could begin paying restitution to the IRS, but the judge was unmoved considering the seriousness of the crime and the fact that she was an elected county tax collector who used her position to not pay her own taxes. (https://www.inquirer.com/news/rosezanna-czwalina-ridley-township-false-income-tax-sentence-20220518.html)

Fraud Friday: Sheep Ministries, Inc

A Tennessee woman is serving 51 months in prison for attempting to cash a fraudulent $1 million bill of exchange from a foreign source. The bill of exchange was flagged because it didn’t have magnetic ink coding like an ordinary check, it contained an “autograph” line instead of a signature line, and wording at the bottom of the document contained the misspelled word “neogotobile.” A private investigator at the bank alerted the police that the bill of exchange was fraudulent. Just prior to the bank fraud incident, she had also filed a fraudulent tax return claiming a $250,000 refund. At trial, it was revealed that in 2006 she had been convicted of multiple counts of filing fraudulent returns using personal information stolen through Sheep Ministries, Inc., the faith-based nonprofit that she ran. (United States v. Marilyn Cook (May 6, 2022) U.S. Court of Appeals, Sixth Circuit, Case No. 20-5622)

Fraud Friday: $1 billion cryptocurrency Ponzi scheme

Tax investigators from the J5 (Joint Chiefs of Global Tax Enforcement) have uncovered evidence of a $1 billion cryptocurrency Ponzi scheme. The leads concern transactions around the world, including crypto transactions in the J5 nations: the U.S., the U.K., the Netherlands, Canada, and Australia. Some of the leads involve individuals with significant NFT transactions; NFTs are becoming a new tool in money laundering practices. The IRS is now making tracking cryptocurrency one of its primary priorities, because the lack of regulation and oversight makes cryptocurrency vulnerable to fraud. (https://www.thestreet.com/investing/crypto-ponzi-scheme-irs-regulators)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection On-Demand WebinarClick here for more information.

Fraud Friday: Daycare center credit cards

Married taxpayers were liable for fraud penalties for failing to report wage and dividend income from the daycare centers they owned and operated. The taxpayers also each had a credit card tied to the corporate bank account, which they used to purchase personal items such as college tuition, vacations, jewelry, and other luxury items. Their adult children also made personal purchases using the corporate credit cards, even though they were not employees of the daycare centers. The daycare center also paid for a Hummer, a BMW, and an Escalade for the taxpayers and their children to drive as their personal vehicles. (Hacker v. Comm., TCM 2022-16)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection On-Demand WebinarClick here for more information.

Fraud Friday: Consulate conspiracy

A U.S. Consulate officer in Vietnam was charged with conspiracy after participating in a scheme where nonimmigrant visa applicants paid him to approve their visas, netting him over $3 million. He initially kept his payments in a home safe, but as the stash grew, he purchased nine properties in Thailand to attempt to hide the proceeds of the scam. On his tax return for the year at issue, he reported his income from the Consulate Office, but did not report the bribery income. As part of his plea agreement, he agreed to sell the Thailand properties to help pay off the money judgement against him. The properties were sold at a loss, which the taxpayer deducted from his bribery proceeds. But the Tax Court determined that loss deductions are disallowed where the deduction would frustrate federal or state policy. Allowing a deduction for losses arising from the properties obtained through illegal activities would undermine public policy because a portion of the forfeiture would be borne by the Government. (Sestak v. Comm., TCM 2022-41)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection On-Demand WebinarClick here for more information.

Fraud Friday: Questionable business practices

A real estate developer in Michigan is facing five years in prison plus penalties and restitution for lying to the IRS in an attempt to hide his failure to pay employment taxes he withheld from employee wages. During the investigation, the developer (who is a former CPA) lied to IRS special agents about his companies’ assets income, filed false employment tax returns stating he had no employees, and claimed he could not afford to pay his tax debts. Meanwhile, he was using business accounts to pay for his Lake Michigan vacation home, Lansing condo, car payments, college tuition, personal credit card bills, and his boat. In 2021, he had filed a defamation suit against an East Lansing news outlet for publishing a story on his questionable business practices. The suit was dismissed. (www.justice.gov/Usao-wdmi/pr/2022_0426_Chappelle)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection On-Demand WebinarClick here for more information.

Putting your child’s name on your home

Dear [CLIENT NAME]:

Many people think it’s a good idea to put their child’s name on the title to their home. Sometimes the parent adds the child’s name to the title and sometimes the parent changes the title to the child’s name. This is generally a very bad idea. Here are five reasons why:

  1. Gift tax return: If you give your child a gift of equity in the home that exceeds $16,000 in value (in 2022), there may be a gift tax to pay and a gift tax return to file.
  2. No gain exclusion: Tax law allows a taxpayer to exclude up to $250,000 of the gain on the sale of a principal residence ($500,000 for a married couple). However, the exclusion is only available if the seller owns and occupies the property for at least two out of the last five years. If the child does not live in the home for that period, the gain on the child’s share of the home is fully taxable.
  3. Equity subject to debts of the child: Property is subject to the debts of its owners. If the child owns the home or is a partial owner, a creditor may file a lien on the property for any of the child’s debts. Although your child may have excellent credit and good fiscal responsibility, your home could be lost if there is an accident or a lawsuit.
  4. You are now a renter: If you give 100% of the property to a child, you are now at the mercy of the child. If the child decides to sell the property, you must move out. There is no guarantee that the child will continue to care for you.
  5. Medicaid problems: Under some circumstances, the gift of the home to the child could be considered a gift for Medicaid purposes. If you give the home to the child and the child subsequently sells it, you could be ineligible for Medicaid benefits in the event of a long-term health crisis.

What should you do instead?

Usually a parent gives the home to the child to make sure that the child easily gets the home at the parent’s death or so the child can manage the affairs of the parent. If this is the case, the parent will be better served by establishing a living trust, along with powers of attorney, so the child can manage the parent’s affairs.

If the reason is to help the child buy his or her first house, a better way is to lend the child money with a low but reasonable interest rate, and set up a program to give annual gifts in the form of principal forgiveness.

If you are considering giving your home to your child, contact me so we can discuss alternatives.

Sincerely,

Your tax professional

Fraud Friday: Philadelphia cheesesteak

In 2020, the 82-year-old owner of a South Philadelphia cheesesteak shop and his son were indicted on tax fraud charges for failing to report more than $8 million between 2006 and 2016. However, there’s so much material to discover in their complex tax case that a Pennsylvania federal court continued discovery until May 2022. The father-son duo are accused of paying wages partially in cash to avoid payroll taxes and filing numerous false returns understating their business income. During a franchising rights dispute, the pair worried their tax fraud scheme would come to light, so they amended several returns to increase reported sales, but then claimed additional fraudulent expenses to offset the income. If they’re convicted, they face five years in prison for conspiracy and for each count of tax evasion, and three years in prison for each false return charge. (https://6abc.com/tony-lukes-tax-fraud-evasion-anthony-lucidonio-sr-nicholas/6332901/)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection On-Demand WebinarClick here for more information.

Fraud Friday: If preparing (fraudulent) tax returns is wrong…

If preparing (fraudulent) tax returns is wrong, then I don’t want to be right! A Texas tax pro was banned in 2011 from conducting a tax preparation business after she admitted to preparing or assisting to prepare approximately 200 false tax returns. The tax credits she tried to obtain in that case were described in a filing as “so exaggerated that no reasonable person could conclude they were anything but deliberately fabricated.” But she was back at it again, and since 2016, she had been preparing income tax returns for clients despite the prohibition. She prepared numerous false returns which claimed various false items on her clients’ behalf: false wages, salaries, tips, and tax credits such as the Earned Income Credit, Child Tax Credit, and American Opportunity Tax Credit. She has been sentenced to 15 months in prison. (www.justice.gov/usao-sdtx/pr/tax-preparer-sent-prison-tax-fraud-again)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection On-Demand WebinarClick here for more information.

Fraud Friday: The taxpayer hatched a plan for revenge

After a routine inspection by the Bureau of Alcohol, Firearms, Tobacco, and Explosives (ATF) uncovered violations that resulted in a taxpayer’s business ultimately closing, the taxpayer hatched a plan for revenge. Five years later, he issued W-9s to the two ATF agents, requesting their Social Security numbers. He never received that information, and he then issued a Form 1099-MISC to each of the agents, showing he paid them $250,000 apiece. The agents did not report the income, and the taxpayer deducted $500,000 on the company’s return, flowing the loss through to his individual return. At trial, the taxpayer insisted he had spoken with an IRS agent who said it was acceptable to write off the $500,000. He was sentenced to two years in prison for filing false returns. (U.S. v. Petrunak (May 4, 2017) U.S. Court of Appeals, Seventh Circuit, Case No. 16-3631)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection On-Demand WebinarClick here for more information.

Fraud Friday: Detached and disinterested generosity

A taxpayer successfully argued that $10,500 in checks she received from her boyfriend were gifts, not income. Her boyfriend had reported the payments on a 1099-MISC and deducted them from his income, claiming that he had paid her wages. As a result, the IRS had come looking for income tax since the taxpayer had not reported the income. At trial, the ex-boyfriend changed his story and was evasive in answering questions. The taxpayer, on the other hand, answered every question asked — even those that did not help her case. The court found the taxpayer’s testimony to be forthright and the ex-boyfriends to be untrue, and determined that the $10,500 was paid to the taxpayer with “detached and disinterested generosity,” and held that it was a gift, not reportable income. (Jue-Ya Yang v. Comm., TCS 2008-156)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection On-Demand WebinarClick here for more information.

Fraud Friday: Stolen identities and fraudulent tax returns

The owner of a Georgia IT business is in prison for almost seven years for using a computer program that he built to store stolen identities and automatically submit fraudulent tax returns using those stolen identities. The program could be accessed remotely, and he hid his IP address whenever he accessed the program, making it difficult for the IRS to trace a tax return back to “one particular origination point.” Refunds were issued on prepaid debit cards and totaled around $600,000. After being indicted, he was out on bond, but was discovered to be threatening potential witnesses against his case and sent back to prison. (www.sacbee.com/news/nation-world/national/article259620689.html)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection On-Demand WebinarClick here for more information.

Fraud Friday: $3.6 billion in illicit cryptocurrency

IRS Criminal Investigation (IRS-CI) is the only federal law enforcement agency authorized to investigate federal criminal tax violations and related financial crimes: money laundering, corruption, currency violations, and terrorist financing. IRS-CI seized more than $3.5 billion of illicit cryptocurrency in fiscal year 2021, and they’ve already seized more than this amount in fiscal year 2022. So far in 2022, $3.6 billion has been seized by CI agents who tracked unauthorized transactions that sent stolen Bitcoin from a 2016 digital asset exchange hack to digital wallets under the control of the launderers. (FS-2022-18)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection On-Demand WebinarClick here for more information.

Fraud Friday: Defrauding the California Department of Public Health

A California woman and her five co-conspirators have been charged with defrauding the California Department of Public Health for a scheme that diverted CDPH funds for their private use. The woman was a former manager at CDPH and she billed the agency for “consulting work” that included purchasing a large number of gift cards supposedly as patient incentives, but which she herself used. She and the other fraudsters also billed the state for HIV prevention services that were never provided. Together, the group scammed CDPH out of $2 million; the woman is liable for $750,000 and faces 20 years in prison if charged. (https://fox40.com/news/local-news/former-manager-with-cdph-office-of-aids-charged-in-connection-with-fraud-scheme/)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection On-Demand WebinarClick here for more information.

Fraud Friday: Software and dementia

In 2020, Robert Brockman was charged with tax evasion, wire fraud, money laundering and other crimes as part of a nearly 20-year scheme to conceal billions in income from the IRS and defraud investors in software company Reynolds & Reynolds, of which he was the CEO. In December 2020, Brockman’s attorneys announced that despite the fact that he was running a multi-billion dollar software company up until November 2020, he was suffering from extreme dementia which prevents him from standing trial. Most recently, he has been accused of continuing to hide assets offshore and transferring property to family members in an attempt to avoid paying his $1.4 billion tax bill. (https://www.autonews.com/dealers/former-reynolds-and-reynolds-ceo-robert-brockman-still-hiding-assets)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection On-Demand WebinarClick here for more information.

Fraud Friday: Two sisters, five different companies, 16,000 false returns

Two sisters are serving prison sentences for tax evasion and defrauding the government. The sisters created five different companies, some in the names of other people, and filed over 16,000 false returns that netted them almost $25 million in fraudulent refunds. The sisters used the funds to purchase multiple luxury homes and vehicles, before the IRS caught on that one sister had earned over $1 million during one year they were engaged in the fraud, but she had only reported earning around $200,000. In addition to prison time the sisters will pay to the IRS restitution of $24.9 million plus $500,000 for tax evasion. (www.irs.gov/compliance/criminal-investigation/orlando-sisters-sentenced-in-25-million-tax-fraud-scheme)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection On-Demand WebinarClick here for more information.

Fraud Friday: Dozens of fraudulent and stolen identities

In the first pandemic relief fraud case to go to trial, three San Fernando Valley family members were sentenced to prison for fraudulently obtaining $20 million in PPP loans and EIDL relief funds. The family used dozens of fraudulent and stolen identities – including names belonging to elderly or deceased people and foreign exchange students who briefly visited the U.S. and never returned — to submit fraudulent applications for approximately 150 PPP and EIDL loans. They used the funds to buy homes in Tarzana, Glendale, and Palm Desert, as well as gold coins, diamonds, jewelry, luxury watches, fine imported furnishings, designer handbags, clothing and a Harley-Davidson motorcycle. Two of the sentenced family members are fugitives, having cut their tracking bracelets and going on the run. (https://www.justice.gov/usao-cdca/pr/san-fernando-valley-family-members-sentenced-years-prison-fraudulently-obtaining-tens)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection On-Demand WebinarClick here for more information.

Fraud Friday: Online auction fraud

A Bulgarian national was sentenced to 10 years and one month in prison for operating an online auction fraud that posted ads on craigslist and eBay for high-cost goods like vehicles that did not actually exist. The buyer’s payment then went through a complex money laundering scheme where someone in the U.S. would receive the payment, convert it to cryptocurrency, and then transfer it to foreign money launderers. The man sentenced had laundered nearly $5 million in cryptocurrency over three years. (https://www.justice.gov/opa/pr/owner-bitcoin-exchange-sentenced-prison-money-laundering)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection On-Demand WebinarClick here for more information.

Fraud Friday: Renounced U.S. citizenship

The founder of a Russian online bank was required to pay $508 million in tax, interest, and a $100 million fraud penalty for large stock gains following taking his company public on the London Stock Exchange. Three days after the IPO, which netted $1.1 billion, he renounced his U.S. citizenship. He did not report his assets on his expatriation forms, which require expats with a net worth of $2 million or more to report their assets and pay tax; he reported a net worth of $300,000. He also filed a false tax return, leading to his arrest and extradition. Had he paid the tax owed after the IPO ($248,525,339), his bill would have been less than half of what he paid with his plea agreement. (www.justice.gov/opa/pr/founder-russian-bank-pleads-guilty-tax-fraud)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection On-Demand WebinarClick here for more information.

 

Fraud Friday: $11 million from the Department of Veterans Affairs

A New Mexico couple has been sentenced to prison for embezzling $11 million over a decade from their guardianship and financial services firm. The couple siphoned payments to clients from the Department of Veterans Affairs and Social Security Administration and used the funds to buy RVs, homes, luxury vacations, and to pay over $4 million in AmEx charges. The authorities began an investigation when employees noticed funds were missing from client accounts. The couple fled before their sentencing because they “wanted to get away one last time before they went to prison,” but were located in Oklahoma and arrested, and handed harsher prison sentences. (www.abqjournal.com/2409934/founder-of-guardianship-firms-gets-47-years-in-federal-prison.html)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection On-Demand WebinarClick here for more information.

Fraud Friday: Chief of the Questionable Refund Unit

The chief of the Questionable Refund Unit for the New Mexico Taxation and Revenue Department was apparently confused about the purpose of his job. Rather than making sure taxpayer returns and refund claims were on the up-and-up, he altered returns and had the resulting fraudulent refunds deposited into his own bank account. In total, he siphoned almost $700,000 from New Mexico’s taxpayers. He’s facing a minimum of 32 years in federal prison on charges of wire fraud, identity theft, and money laundering. (https://www.krqe.com/news/crime/tax-official-pleads-guilty-to-stealing-nearly-700k-in-taxpayer-money/)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection On-Demand WebinarClick here for more information.

Fraud Friday: Banned for life from acquiring antiquities

An antiquities collector has been banned for life from acquiring antiquities after numerous pieces in his collection were determined to be stolen. An investigation into a statue stolen from Lebanon during the Lebanese Civil War led authorities to the collector, and it was determined that 180 pieces worth $70 million in his possession were stolen or had other evidence of looting. The collector claims he had no idea the items were stolen. The lifetime ban was imposed in lieu of a criminal trial, and the collector has stated that he plans to recoup his losses from the antiquities dealers he was working with. (www.wealthmanagement.com/high-net-worth/billionare-michael-steinhardt-surrenders-70-million-stolen-antiquities)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection On-Demand WebinarClick here for more information.

Fraud Friday: Attorney in hot water

A French attorney for years had been hounding her client’s stepson, accusing him of stealing her client’s inheritance, which triggered a criminal investigation into his tax reporting of various trusts. The stepson was acquitted of fraud, but the attorney is now in hot water for not reporting the $5 million her client paid her for her efforts. She has been found guilty of aggravated tax fraud and money laundering for her attempt to hide that money, on which she now owes $170,000 in income tax, $135,000 in wealth tax, and $800,000 in fines. (www.artnews.com/art-news/news/claude-dumont-beghi-1234613490/)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection On-Demand WebinarClick here for more information.

Fraud Friday: $3.5 billion in cryptocurrency

The Cyber Crime Unit of the Internal Revenue Service’s Criminal Investigation Division released a report on its activities, which included seizing $3.5 billion in cryptocurrency in fiscal year 2021 (93% of all of its seizures). The Infrastructure Investment and Jobs Act contained provisions expanding the reporting requirements for cryptocurrency, so this will continue to be a focus for the CI division. The report also noted that in 2021, the CI division identified $2.19 billion in tax fraud and another $8.18 billion in other financial crimes. Tax-related issues accounted for 72% of its direct investigative time, with 15.4% spent on non-tax issues such as money laundering and corporate fraud, and 11.2% spent on narcotics crimes. (www.irs.gov/pub/irs-pdf/p3583.pdf)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection On-Demand WebinarClick here for more information.

Fraud Friday: The fall of Enron

Although it’s probably not reason to celebrate, the 20-year anniversary of the fall of Enron is upon us. While most of the main players have served their time and moved on (many back into the energy world), they left behind a legacy of corporate greed. The company’s predecessors were formed in the 1920s and 30s and through a series of mergers, landed with Kenneth Lay. It was then known as InterNorth, and Lay spent over $100,000 on focus groups to come up with a new name: Enteron. Since this word was already taken (it means “digestive tract or system”), it was shortened to Enron. But this never-adopted moniker seemed to inform company practices, which took shady accounting practices and lying to investors to new heights before a whistleblower pulled the chain and sent it all down the drain. (https://en.wikipedia.org/wiki/Enron)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection On-Demand WebinarClick here for more information.

Fraud Friday: A typo in the plea agreement

In 2006, Walter Anderson was convicted of tax evasion for his scheme that hid $450 million in income over five years, the largest individual tax fraud case in history at the time. However, there was a typo in the plea agreement: the wrong law was cited in the restitution order and a judge ruled there was nothing he could do about it. The judge noted, “The court is not free to read something into a contract that is not there or to interpret uncertain language in the government’s favor.” The mistake essentially erased the almost $200 million of restitution that Anderson was required to pay. However, an appeals court allowed the restitution order to stand because the “conduct of the parties made it very clear that they intended the plea agreement to provide restitution authority.” (https://en.wikipedia.org/wiki/Walter_Anderson_(entrepreneur))

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection On-Demand WebinarClick here for more information.

Fraud Friday: A solar energy Ponzi scheme

One of the owners of a California solar energy company was sentenced to 30 years in prison for engaging in a $1 billion Ponzi scheme that fooled investors like Berkshire Hathaway and Sherwin-Williams. The company built mobile solar generators, which investors purchased at a reduced cost. The company then leased the generators to end-users to pay down the remainder and any profit would go to the investors. Except the generators weren’t leased, and investors were paid from money coming in from new investors. The company owners acquired a baseball team, the ubiquitous stable of 150 classic cars, and threw a holiday party headlined by Pitbull. A former employee tipped off federal authorities that the company was lying about the number of leased units it had. The feds have since auctioned off 148 of the vehicles, including the 1978 Firebird previously owned by Burt Reynolds. (www.yahoo.com/news/california-man-gets-30-years-005549058.html)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection On-Demand WebinarClick here for more information.

Fraud Friday: An entire family

An entire family landed in prison after alluding police and the FBI for a decade, for a string of thefts that targeted banks and armored vehicles. The Cabello family moved to Oregon after the father, Archie, was fired from his job in Wisconsin as an armored car driver when a bag of cash containing $150,000 went missing. No one was able to pin the theft on him, but then the bank his son Vincent worked at was robbed. The thief stole $750,000 from the vault, and while police suspected Vincent was involved, he stuck to his story. Archie landed another job as an armored vehicle driver, and was the “victim” of a heist that grabbed $3 million from the truck. The family lived very modestly but a closer look discovered huge credit card bills paid off with money orders. When Vincent paid cash for a Hummer, the authorities moved in and ultimately Vincent cracked and spilled the beans. And in case you were wondering, no, they didn’t report any of the income on their tax returns. (https://abcnews.go.com/US/family-thieves-hide-4m-stolen-cash-finally-caught/story?id=40782366)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection On-Demand WebinarClick here for more information.

Fraud Friday: A single Pokémon card

In case you thought the things people spent PPP loan money on couldn’t get any weirder, one man in Georgia is charged with wire fraud after spending most of his loan disbursement on a single Pokémon card. He claimed he had a business with 10 employees and revenue of $235,000 over a year, netting him $85,000. The court documents don’t say which card he purchased for $57,789, but unopened first-edition Pokémon cards can go for as much as $400,000. (www.washingtonpost.com/nation/2021/10/24/pokemon-card-fraud-case-covid-relief/)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection On-Demand WebinarClick here for more information.

Fraud Friday: Charity Fraud Awareness Week

October 18–22 is Charity Fraud Awareness Week, highlighting efforts to curb cyberattacks on charities, which lose an estimated 5% of revenue to fraud each year. Also problematic are fake charities, which are on the IRS’s Dirty Dozen list of tax scams for 2021. Fake charity scammers take advantage of tragedies and disasters such as the COVID-19 pandemic, and commonly solicit donations by phone, using organization names that sound similar to legitimate charities. They also tend to ask for donations in the form of a gift card or wired funds.

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection On-Demand WebinarClick here for more information.

Fraud Friday: Alley-oops

In a gross attempt to skirt the rules, a taxpayer thought if he kept his foreign-earned income to himself it would be….all net? The taxpayer played professional basketball in China and was charged with wire fraud for failing to report multiple years of foreign-earned income. He retained a U.S. firm to do his taxes for one of the early years of his career in China, and a CPA at the firm found an online article about his career in Beijing. He told the CPA he didn’t have any foreign income in that year and never returned to the firm for subsequent years’ tax return preparation. However, he had applied for an insurance policy and reported income of $1.25 million. Alley-oops. (U.S. v. Morris (September 16, 2021) U.S. District Court, Eastern Dist. of Kentucky, Case No. 5:21-014-DCR)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection On-Demand WebinarClick here for more information.

Fraud Friday: Love & Hip Hop & PPP Loan Fraud

Soon after PPP loans started being disbursed, there were a number of fraudsters identified as having set up fictitious businesses to take advantage of these loans. The investigations and prosecutions are ongoing, and one reality TV star who got caught early on for scamming the government was recently sentenced to 17 years in prison and ordered to pay $4 million in restitution. Arkansas Mo (who lives in Georgia) used his defunct trucking company to get a $3.7 million PPP loan, which he used to fund a long-running Ponzi scheme, and to purchase a Rolex, a diamond bracelet, and a diamond ring somewhere around 6 carats (reports range from 5.75 to 7.73 carats). Mo appeared on Season 8 of VH1’s Love & Hip Hop: Atlanta. (www.fox5atlanta.com/news/love-hip-hop-atlanta-star-maurice-fayne-gets-17-years-in-fraud-case)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection On-Demand WebinarClick here for more information.

Fraud Friday: Variances in punctuation marks

Tax protestor-type arguments sometimes find their way to Tax Court, but they’re never effective and will often only achieve the addition of a frivolous argument penalty. One tax protestor-type argument regarding the Sixteenth Amendment isn’t just that it wasn’t properly ratified and therefore doesn’t permit the taxation of individual income, instead it focuses on states’ bills of ratification that employed variances in punctuation marks. The use of semicolons instead of commas thus renders the entire Amendment null and void, freeing us all from the odious task of paying income tax. (Only four state instruments of ratification contain the language of the Sixteenth Amendment exactly as approved by Congress.) (https://en.wikipedia.org/wiki/Tax_protester_arguments; U.S. v. Thomas (1986) 788 F.2d 1250)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection On-Demand WebinarClick here for more information.

Fraud Friday: A right to international travel

After failing to file returns and pay taxes for five years, the IRS certified the taxpayer as having a seriously delinquent tax debt which resulted in his passport being denied. The taxpayer argued that he never received any of the deficiency notices from the IRS, and that he didn’t actually owe any of the tax due. He also argued that a right to international travel is a fundamental right and that the Tax Court should declare unconstitutional a statute that allows or requires the Secretary of State to deny or take away an individual’s passport for nonpayment of taxes. (Kaebel v. Comm., TCM 2021-109)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection On-Demand WebinarClick here for more information.

Fraud Friday: Cut and run

A Tarzana couple is on the run after cutting off their ankle tracking bracelets while they awaited trial for their part in a COVID-19 fund scam. The two fugitives and two relatives were found guilty in June for fraudulent loan applications that netted them more than $18 million in PPP and EIDL program funds. The scam focused on vulnerable victims such as the elderly, foreign exchange students, and deceased individuals. The couple used the funds to put down payments on luxury homes in Tarzana, Glendale, and Palm Desert and purchase diamonds, designer handbags, and a Harley Davidson motorcycle. They were scheduled to be sentenced on October 4. (https://abc7.com/tarzana-fugitives-fbi-couple/11019826/)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection On-Demand WebinarClick here for more information.

Fraud Friday: Just because the word “tax” is in his title…

Just because the word “tax” is in his title, doesn’t mean he’s familiar with the IRC. A taxidermist in Minnesota is facing a stiff prison sentence for tax fraud stemming from failure to file sales and use tax and employment tax returns related to his taxidermy business, plus failure to file his individual returns. When state DOR investigators asked the taxidermist why he hadn’t filed his taxes for 2018–20, he allegedly replied, “I really don’t have a good answer.” There are multiple charges against him, each carrying a five-year prison sentence and a $10,000 fine. (www.swnewsmedia.com/savage_pacer/news/public_safety/savage-taxidermist-accused-of-tax-fraud-following-dept-of-revenue-investigation/article_3a751c3e-d473-5394-9838-b9c80f124d36.html)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection On-Demand WebinarClick here for more information.

Fraud Friday: A South Carolina resort project

A Utah man was found guilty of wire fraud and tax fraud tied to his involvement with a South Carolina resort project. He had purchased the resort after borrowing $17.5 million and obtaining another $10 million from investors. But from the beginning he was unable to make the mortgage payments on the property. In a last ditch effort to keep the property from being sold at auction, he faked a payment receipt for $502,759 in property taxes paid to the County Treasurer’s Office. At the time, the resort only had $121.07 in its bank account. He also collected payroll taxes from his employees which he did not pay over to the IRS, and he used some of the investment funds for personal purposes and failed to report it on his tax return. (www.fitsnews.com/2021/08/30/daufuskie-island-developer-pleads-guilty-in-multimillion-dollar-fraud-scheme/)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection Live WebinarClick here for more information.

Fraud Friday: A Las Vegas tax preparer

A Las Vegas tax preparer was sentenced to two years in prison for causing over $500,000 of tax loss to the IRS. The preparer engaged in the typical scam of reporting fictitious business deductions on client returns to inflate their refunds. Between 2014 and 2019, she estimated that she applied these false deductions to approximately 75% of the returns she filed. However, she also took the extra step of going to the IRS website and applying for and receiving Employer Identification Numbers for the fictitious businesses in order to make them appear legitimate. (www.8newsnow.com/news/local-news/woman-sentenced-to-2-years-in-prison-for-tax-fraud-that-cost-irs-more-than-500k/)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection Live WebinarClick here for more information.

Fraud Friday: Renewable energy entrepreneur

Renewable energy entrepreneur David Dunham was sentenced to seven years in prison and ordered to pay $10,207,000 in restitution for defrauding government subsidy programs. Dunham started Smarter Fuel Inc. after converting his Volkswagen to run on cooking oil to keep his commuting costs down. He and his business partner planned to collect used cooking oil from restaurant and cafeteria kitchens to process into biodiesel to power vehicles and heat buildings. However, the company claimed credits for partially processed oil and oil that the company never possessed, and claimed credits for the same oil multiple times. Then during an audit, Dunham fabricated paperwork, hid the identities of his customers, provided fraudulent explanations and directed his customers to do the same. (www.justice.gov/opa/pr/biofuel-fraudster-sentenced-seven-years-prison-scamming-multiple-federal-agencies-and)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection Live WebinarClick here for more information.

Fraud Friday: The cost of tax evasion

According to IRS Commissioner Rettig at a presentation to a Senate panel in April, tax evasion may cost the U.S. $1 trillion a year. In the past when this number was calculated, it came in at around $440 billion per year because of tax evasion techniques that the IRS was not yet focused on. New estimates of the tax gap include cryptocurrency, offshore tax evasion, illegal income that goes undetected by the IRS, and underreporting from passthrough businesses. (www.chicagotribune.com/business/ct-biz-tax-cheating-irs-trillion-20210414-kbl3og5orndm3nmbdmkquokvrq-story.html)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection Live WebinarClick here for more information.

Fraud Friday: Lord of the Pies

Celebrity pizza chef Bruno DiFabio was sentenced to 30 days in prison for tax evasion. Known as “Lord of the Pies,” he pleaded guilty in 2018 to conspiracy to file false income tax returns and false payroll tax returns resulting in a more than $800,000 loss in tax revenue to the federal government. When caught, he admitted he knew what he was doing was wrong and had let the issue spiral out of control as he opened more restaurants and became more successful. His business partner as well as his bookkeeper and accountant also pleaded guilty. (https://apnews.com/article/business-tax-evasion-entertainment-arts-and-entertainment-76d7ca76bc80d150d7b38e5352b506c8)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection Live WebinarClick here for more information.

Fraud Friday: Allegations of tax evasion in Spain

A Spanish judge has recommended that Colombian pop star Shakira go to trial on allegations of tax evasion in Spain. Shakira was charged in December 2019 with not paying 14.5 million euros ($16.4 million) in taxes in Spain between 2012 and 2014. During that time, she lived mostly in Spain, although her official residence was in Panama. She faces a fine and even possible jail time if found guilty. (https://apnews.com/article/entertainment-business-europe-arts-and-entertainment-trials-8205aa4b2e0f599468cd4efe12739a47)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection Live WebinarClick here for more information.

Fraud Friday: India-based call center scam ring

An Illinois man was found guilty for operating an India-based call center scam ring that impersonated IRS and U.S. Citizenship and Immigration Services officials. Beginning in 2013, call center operators targeted U.S. victims who were threatened with arrest, imprisonment, fines, or deportation if they failed to pay amounts allegedly owed to the government. Victims who did pay the scammers were instructed to provide payment by purchasing reloadable debit cards or wiring money. Upon payment, the call centers would immediately turn to a network of co-conspirators in the United States to liquidate and launder the funds. Seven of the U.S. co-conspirators were also found guilty. (www.justice.gov/usao-sdtx/pr/last-us-defendant-pleads-guilty-multimillion-dollar-india-based-call-center-scam)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection Live WebinarClick here for more information.

Fraud Friday: Fraudulent returns for a former Massachusetts senator

A CPA is serving prison time for filing fraudulent returns for a former Massachusetts senator in a scheme that lost the IRS $600,000 in tax. The CPA reported income that should have appeared on the senator’s corporate tax return on his personal tax return, and created a SEP for the senator and his wife (which they were not entitled to) followed by an illegal rollover of the SEP account to purchase stock in a private company. The senator also pled guilty to racketeering, money laundering, mail fraud, conspiracy, and scheming to defraud the IRS, in addition to the especially egregious crime of accepting hundreds of pounds of free coffee from a local Dunkin’ Donuts owner. (www.justice.gov/usao-ma/pr/former-state-senator-s-accountant-sentenced-tax-fraud; https://en.wikipedia.org/wiki/Brian_A._Joyce)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection Live WebinarClick here for more information.

Fraud Friday: Previously worked at the Franchise Tax Board

A California tax preparer who had previously worked at the Franchise Tax Board was sentenced to 5 years in prison in 2019 for claiming bogus withholdings that fraudulently generated substantial tax refunds. Between 2012 and 2019, he submitted 222 false client tax returns claiming approximately $5,648,809 in fabricated income tax withholdings. More recently, the tax pro argued against the omission of a neuropsychologist’s testimony that a 1992 head injury affected his ability to judge right from wrong. The court upheld that evidence being omitted from the trial, along with the tax pro’s sister’s vague testimony that after the head injury he never returned to normal and his memory was worse. (U.S. v. Williams (June 6, 2021) U.S. Court of Appeals, Ninth Circuit, Case No. 2:19-cr-00280-PA-1)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection Live WebinarClick here for more information.

Fraud Friday: Farm to prison

A Florida couple who claimed to be farming in the front yards of their homes were sentenced to prison terms for using those “farms” to claim $1.1 million in PPP loans and EIDLs. The couple also claimed to operate a beauty supply store and an auto leasing business, both of which were inactive. Between the four fictitious enterprises, they claimed dozens of employees on their SBA loan applications, which were approved by a local bank. (www.justice.gov/opa/pr/couple-who-falsely-claimed-be-farmers-sentenced-11-million-covid-relief-fraud)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection On-Demand WebinarClick here for more information.

Fraud Friday: Collecting criminal restitution

TIGTA recently released a report on the IRS’s process for collecting criminal restitution from taxpayers convicted for tax-related crimes. The Firearms Excise Tax Improvement Act allows the IRS to assess and collect criminal restitution in certain cases as if it were a civil tax. Before this Act, the IRS lacked the legal authority to assess the amount of restitution ordered. During 2016–2020, defendants were ordered to pay over $2.7 billion in criminal restitution to the IRS but paid only $844 million, or 31%. In its report, TIGTA made recommendations to the IRS regarding procedures to ensure that defendants are held responsible for their crimes and the maximum amount of criminal restitution is collected. (www.treasury.gov/tigta/auditreports/2021reports/202130033fr.pdf)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection On-Demand WebinarClick here for more information.

Fraud Friday: Gold and silver coins

Married California doctors were charged with tax evasion for hiding income by converting revenue from their alternative medicine clinic into gold and silver coins, placing assets under different names, and using cash to conduct business. The couple instructed their patients to pay for their medical services with checks payable to gold dealers, who then would purchase gold and silver coins. The couple converted nearly $4 million of revenue to gold and silver coins between 2007 and 2014. (https://sanfrancisco.cbslocal.com/2020/03/02/santa-rosa-husband-wife-doctors-gold-coin-purchases-tax-evasion/)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection Live WebinarClick here for more information.

Fraud Friday: Truckloads of cut-rag tobacco

A North Carolina man was sentenced to 6 years in prison for money laundering and filing false tax returns stemming from a scheme where he smuggled tobacco into Canada without paying federal excise duties and provincial taxes. He shipped truckloads of cut-rag tobacco, totaling 6 million pounds, to a Mohawk Nation reservation that straddles the U.S.-Canada border where it was then sent on to make contraband cigarettes. He was paid in cash and cigarettes and laundered more than $2 million in proceeds. The estimated tax loss borne by Canada was $600 million. (https://www.justice.gov/opa/pr/north-carolina-man-sentenced-78-months-money-laundering-and-filing-false-tax-return-tobacco)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection Live WebinarClick here for more information.  

Fraud Friday: A former U.S. representative

Corrine Brown, the former U.S. representative who was in prison for two years following her conviction for operating a sham charity, was released in May when her conviction was overturned. Ms. Brown was found to have used donations to her charity, One Door for Education, for various luxury personal expenses. However, she was released after a federal appeals court determined that a juror was wrongly dismissed for his comments that the Holy Spirit told him Brown was innocent. The court has ordered a new trial for Brown. (https://www.orlandosentinel.com/politics/os-ne-corrine-brown-conviction-overturned-20210507-wwkgggh7u5bjnd2rucrbovh2me-story.html)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection Live Webinar. Click here for more information.

Fraud Friday: Blame it on the kids

A Florida convenience store owner was sentenced to 78 months in prison for charges stemming from a fraud scheme he operated with his two children out of the convenience store. The daughter purchased stolen identities which were used to file false returns claiming large refunds that were mailed to addresses owned by the store owner. He would often bring the checks to the store to endorse and then deposit into one of many accounts the trio opened for this purpose. At trial, the store owner claimed he had no idea what he was doing was fraud, and that the whole scheme, which netted over $2.7 million in two years, was under the direction and control of his children. (U.S. v. Jeanty (April 21, 2021) U.S. Court of Appeals, Eleventh Circuit, Case No. 6:17-cr-00140-PGB-LRH-3)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection Live WebinarClick here for more information.

Fraud Friday: “Mr. X”

The first person outside the United States to receive a permanent artificial heart pump was Leif Stenberg in 1985, who was known in Sweden as “Mr. X” in a series of fraud investigations, and who was under indictment for tax evasion at the time of his surgery. However, the case was dropped when he went into surgery because he was not expected to survive the operation. Further complicating matters, not only did Stenberg survive, but because Sweden defines death as death of the heart, many wondered whether he had found a loophole. Stenberg died 229 days after the surgery. (Tax Trivia, California Taxpayers Association CalTaxletter Vol. XXXIV, No. 17 (May 7, 2021))

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection Live WebinarClick here for more information.

Fraud Friday: The mistress as trustee

A taxpayer recently had his motion denied for reconsideration of a fraud penalty, causing us to recall a Tax Court case involving the same taxpayer in which he attempted to hide millions of dollars by having his mistress “hold on to” a condo, cars, furs, and jewelry, totaling $8.7 million. He also transferred shares of his company to a trust, with the mistress as trustee, for the future benefit of the mistress and their child. Once the taxpayer was legally divorced, the mistress ended their relationship and would not transfer the shares back to the company. A state court judgment ordered the mistress to repay $4,551,931 to the company, but she filed for bankruptcy and the money was never recovered. (Boulware v. Comm. (April 27, 2021) U.S. Court of Appeals, Ninth Circuit, Case No. 19-73235; HIE Holdings, Inc. v. Comm., TCM 2009-130)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection Live WebinarClick here for more information.

Fraud Friday: A Chinese Ghost Story

Chinese actress Zheng Shuang is being investigated for tax evasion after information was leaked that she was paid $24.6 million for 77 days of filming for the show “A Chinese Ghost Story.” This sum exceeds government-approved salary limits in China and also makes her one of the top paid actresses in the world. A statement from Chinese production firms notes that actors should not be paid more than $7.7 million per production. (https://variety.com/2021/biz/news/zheng-shuang-tax-fraud-1234962762/)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection Live WebinarClick here for more information.

Fraud Friday: A Florida father/daughter duo

A Florida father/daughter duo is in prison for defrauding the IRS out of millions in false tax refunds. They each filed several fraudulent returns starting in 2015, claiming refunds on their lottery winnings. They were both issued multiple refund payments, totaling $3.4 million, before the IRS realized they had never even won the lottery. According to a 2018 GAO report, the IRS estimated that it paid out $1.7 billion dollars in invalid refunds in 2016, but the IRS also estimated that it eventually caught about 84% of these fraudulent filings. (www.sun-sentinel.com/local/palm-beach/fl-ne-dad-and-daughter-irs-fraudsters-sentenced-20200222-lxoaosuebzf25gw4e72ey5yilq-story.html)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection Live WebinarClick here for more information.

Fraud Friday: A living breathing self-aware woman

Two Miami-area tax preparers are charged with filing false returns to get large refunds for their clients. The women prepared the fraudulent returns in exchange for fees equal to 30 percent of the tax refunds issued over a four-year period. One of the accused is working without a lawyer, and has filed a 23-page response to her charges in which she challenged the authority of the IRS and the validity of U.S. tax laws and referred to herself as “a living breathing self-aware woman.” (www.cpapracticeadvisor.com/tax-compliance/news/11670243/two-miami-women-face-tax-fraud-charges-3-millionplus-in-bogus-refunds)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection Live WebinarClick here for more information.

Fraud Friday: Whistleblower awards

The IRS Whistleblower Office pays money to people who blow the whistle on persons who fail to pay the tax that they owe. If the IRS uses information provided by the whistleblower, it can award the whistleblower up to 30% of the additional tax, penalties, and other amounts collected. For example (although probably an unrealistically high one), Brad Birkenfeld, the UBS whistleblower, received an award of $104 million dollars from the IRS. This is the largest amount ever paid to a single whistleblower.

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection Live WebinarClick here for more information.

Fraud Friday: Arrested in a supermarket

In 2014, a Georgia woman filed a state income tax return that claimed a $94 million refund. The return was fraudulent, but Georgia revenue agents went ahead cut a check for $94,323,148 and invited her to come on down to a bank inside a supermarket to cash it. She was arrested upon arrival. Investigators were tipped off when the woman kept calling the Georgia DOR to check on the refund. (www.wsbtv.com/news/local/woman-arrested-allegedly-filing-fake-94-million-ta/138017395/)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection Live WebinarClick here for more information.

Fraud Friday: A nonprofit executive

A nonprofit executive is going to jail for 24 months after convincing her employer to take her off the books and pay her under the table. The exec incurred medical and student loan debt that led to her wages being garnished. She worked out a deal where the nonprofit’s director instead diverted funds for her salary into his own personal bank account and then cut her checks or paid her in cash, in excess of what her salary had been. The exec then filed false returns that didn’t report the income and reported other fraudulent entries to create large refunds. The nonprofit’s director was also sentenced to 27 months.

(www.justice.gov/usao-md/pr/former-executive-director-maryland-center-adult-training-sentence-two-years-federal)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection Live WebinarClick here for more information.

Fraud Friday: Fraudulent charities

An embezzlement scheme involving Bank of America and fake charities was also a family affair: a Georgia woman was recently charged with tax fraud for using fraudulent charities to funnel money back to family members who had embezzled the funds from Bank of America, where one was a Senior VP. The bank VP authorized the donations, and then she and her husband would intimidate the donee into returning a portion of the funds directly to them. She also authorized donations to fraudulent charities, which then kicked back some of the funds to her and her husband. The Georgia woman ran several of these charities that received the embezzled funds; she returned 25% to her family members and spent the rest on personal items. (https://www.justice.gov/usao-ma/pr/owner-fake-georgia-charitable-organizations-pleads-guilty-tax-fraud)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection Live WebinarClick here for more information.

Fraud Friday: Prolific, pernicious, and utterly unrepentant

In 2016, tax attorney Paul Dagueras was sentenced to 180 months for conspiring to defraud the IRS, evading taxes, mail and wire fraud, and four counts of tax evasion relating to the use of tax shelters for clients. Prosecutors called him “the most prolific, pernicious and utterly unrepentant tax cheat in United States history.” He was tried twice, the second time after it was discovered an original juror had lied to get on the jury. It was until only recently that Mr. Dagueras held the distinction of biggest tax cheat; his $1 billion scam now pales in comparison to Robert Brockman’s $2 billion tax evasion case that broke earlier this year. (U.S. v. Daguerdas (September 21, 2016) U.S. Court of Appeals, Second Circuit, Case No. 14–2437–cr)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection Live WebinarClick here for more information.

California has NOT passed AB 80: the PPP forgiveness bill

AB 80, the bill that would allow up to $150,000 of expenses to be deducted if paid with PPP forgiven loan amounts has not yet passed. There has been no activity, and we can’t get good information on when and if it will pass, and what will actually be included in the final bill. Here are a few important things to know:

  • We will send you a Flash E-mail as soon as it passes providing complete information on the details of the final bill (Click here to sign up for our free Flash E-mail);
  • Because there is speculation that the $150,000 amount could change, we suggest you extend any returns where the taxpayer received a PPP loan or had EIDL or other federal grant payments until we know the details;
  • Consider filing extensions for all returns that have been filed and if there is a change you can file a superseded return, rather than an amended return.

Get details on the American Rescue Plan — as well as a brief update on AB 80 when you attend The American Rescue Plan: Tax Implications webinar on March 22 or March 23. Click here for more information or to register for the webinar.

Fraud Friday: Alien harboring conspiracy

A restaurant owner in Nashville is facing 45 years in prison for tax evasion, money laundering, failing to pay employment tax, and harboring illegal aliens who he employed at his restaurant. The workers were from China and Guatemala, and lived with the taxpayer at his home. He would transport them back and forth to work in the restaurant, where they only worked in the kitchen so they would avoid interacting with restaurant patrons. (www.justice.gov/usao-mdtn/pr/clarksville-resturant-owner-pleads-guilty-alien-harboring-and-tax-fraud-conspiracy)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection Live WebinarClick here for more information.

Fraud Friday: Financial crimes by a financial crimes detective

A Pennsylvania couple is facing up to 30 years in prison for mail fraud, filing false tax returns, and submitting falsified loan documents. The wife was the COO of a hospital and used her position to embezzle $1.3 million, which the couple used on vacations, home renovations, and a 70-acre motocross course. She used her corporate credit card for many of the purchases, and then disguised the charges as business-related. For example, she purchased hundreds of gift cards worth more than $350,000, claiming they were for distribution to “focus groups” or physicians. Ironically, her husband was a financial crimes detective who investigated theft and fraud. (www.justice.gov/usao-wdpa/pr/butler-county-couple-plead-guilty-fraud-and-tax-charges)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection Live WebinarClick here for more information.

Fraud Friday: Xiao Long Bao

Brothers who own one of the two locations of Mama Lu’s Dumpling House in Monterey Park have been charged with underreporting sales by millions of dollars and underpaying sales and use tax, and the CDTFA is steamed. The Lu brothers face 17 counts, including conspiracy to file false sales tax returns, filing false sale tax returns, and filing false income tax returns. The second Monterey Park location is under separate ownership and is not being investigated. Still, you may want to pick up some xiao long bao before we have to say xiao long to one of these locations. (https://laist.com/latest/post/20210216/charges-mama-lus-dumpling-house-monterey-park-11-million-tax-sales-fraud-attorney-general)

CPAs, get four hours of fraud CPE with our 2020 Fundamentals of Fraud Prevention and Detection On-Demand WebinarClick here for more information.

Fraud Friday: Don’t put all your eggs in one basket

“Don’t put all your eggs in one basket” is typically good advice, except in the case of a North Carolina tax preparer who diversified her practice to include dealing meth. When an undercover agent placed an order for a pound of meth and she took the bait, it was safe to say that she was likely engaged in other unsavory business practices. It turned out she had been fraudulently e-filing returns claiming false wage income and had done so on at least 489 false returns that generated $3.2 million in fraudulent refunds. She faces five years in prison for tax fraud and five to 40 years for methamphetamine distribution. (https://www.accountingtoday.com/news/tax-fraud-blotter-junior-achievements)

CPAs, get four hours of fraud CPE with our 2020 Fundamentals of Fraud Prevention and Detection On-Demand WebinarClick here for more information.

Fraud Friday: Campaign money for personal expenses

Former Illinois senator Sam McCann was indicted on charges of fraud, money laundering, and tax evasion for misuse of over $200,000 of campaign money for personal expenses. After a failed run for Governor, he employed a scheme that caused the Conservative Party of Illinois to issue approximately $187,000 in payments to himself personally and an additional $52,282 in payments for payroll taxes by using a payroll service to conceal himself as the payee. He also spent campaign funds on an RV, a Ford F-250 truck, credit card charges related to a family vacation in Colorado, charges from Apple iTunes, Amazon, a skeet and trap club, Best Buy, a gun store, and cash withdrawals. He’s facing 20 years in prison. (https://wrex.com/2021/02/03/former-illinois-senator-indicted-for-alleged-misuse-of-campaign-funds-tax-evasion-money-laundering/)

CPAs, get four hours of fraud CPE with our 2020 Fundamentals of Fraud Prevention and Detection On-Demand WebinarClick here for more information.

Fraud Friday: Operating out of hotel rooms

A Virginia tax preparer was sentenced to two years in prison for filing over 400 false returns. The preparer owned At Ease Tax Services, a tax preparation business that was so at ease that she operated it out of hotel rooms, preparing tax returns that claimed fraudulent credits and deductions that inflated her clients’ refunds. She did not sign any of the returns, she didn’t review the completed returns with clients, and she never provided a copy of the return, even when clients asked for one. Early in 2020, her husband was convicted of felony murder. She met him in 2015 while preparing his taxes. (https://www.dailypress.com/news/crime/dp-nw-federal-tax-fraud-20200814-mtamqe3h7bbcvpvvknr6t6fmwe-story.html)

CPAs, get four hours of fraud CPE with our 2020 Fundamentals of Fraud Prevention and Detection On-Demand WebinarClick here for more information.

Fraud Friday: A fictitious IRS revenue agent

An office manager/bookkeeper at a medical office was sentenced to four years in prison after it was discovered she had been writing checks to herself and adjusting invoices and expenses to cover up the theft. She opened a business bank account in the owner’s name without his knowledge and deposited checks made out to the Oregon Department of Revenue into her own personal account. When the IRS came calling, the office manager created a fictitious IRS revenue agent named “Linda Gibson” – complete with a phone number and voicemail – and “assisted” the owner with the collections action using this alias. (www.justice.gov/usao-or/pr/eastern-oregon-medical-practice-employee-pleads-guilty-tax-crimes-bank-fraud)

CPAs, get four hours of fraud CPE with our 2020 Fundamentals of Fraud Prevention and Detection On-Demand WebinarClick here for more information.

Fraud Friday: Stolen wine and damaged pasta sauce

A Northern California man who opened a wine storage facility was charged with stealing wine from customers (wineries) who stored their product there. He sold the stolen wine using aliases and kept the proceeds. After he was charged with stealing 8,000 bottles, he burned down the facility, destroying 4.5 million bottles valued at over $100 million. The fire also damaged pasta sauce stored in the facility by the Francis Ford Coppola brand and sugar stored by C&H Sugar. Sentenced to 27 years in prison and $73 million in restitution, he sought release to home confinement due to COVID-19. He was denied due to risk of harm to the community and the fact that he had already contracted the virus once and recovered. (U.S. v. Anderson (January 6, 2021) United States District Court, Eastern District of California, Case No. 2:07-cr-00096-KJM)

CPAs, get four hours of fraud CPE with our 2020 Fundamentals of Fraud Prevention and Detection On-Demand WebinarClick here for more information.

Fraud Friday: Former chief of collections

The former chief of collections for the D.C. Office of Tax and Revenue was sentenced to 14 months in prison for his conviction for a bribery charge. He paid an OTR official $5,000 to remove $150,000 in tax liabilities for a business; he then turned around and charged the business $25,000 for his efforts in having their tax liability reduced. After collecting part of the payment, he met the OTR official in a parking garage to split the cash. His arrest was part of an ongoing investigation and years-long audit that also nabbed two other government workers and a businessman who were involved in the scheme. (www.justice.gov/usao-dc/pr/former-office-tax-and-revenue-head-collections-sentenced-paying-bribes-otr-official-help)

CPAs, get four hours of fraud CPE with our 2020 Fundamentals of Fraud Prevention and Detection On-Demand WebinarClick here for more information.

Fraud Friday: False claims filed under Feinstein’s name

A former EDD employee, Andrea Gervais, is accused of filing 100 false Pandemic Unemployment Assistance claims. Of those claims, 12 were processed for over $200,000 in unemployment benefits; if all 100 had been processed, she would have received around $2 million. Authorities were tipped off to the scam when $21,000 in PUA benefits were filed under Senator Dianne Feinstein’s name. Gervais was then caught on camera withdrawing cash from an ATM using at least seven PUA debit cards, including the one issued to Senator Feinstein. If convicted, Gervais faces 20 years in prison. (https://sacramento.cbslocal.com/2020/12/18/fired-edd-employee-andrea-gervais-edd-fraud/)

CPAs, get four hours of fraud CPE with our 2020 Fundamentals of Fraud Prevention and Detection On-Demand WebinarClick here for more information.

Fraud Friday: Prepared returns on a smuggled smartphone

A New York tax preparer was already serving 41 months in federal prison for preparing false returns, and during his stay he used a smuggled smartphone to continue to prepare returns for clients and divert the refunds to an account he controlled. The clients received documents showing a lower refund amount and in some cases the tax preparer took a $900 fee from their refunds without their knowledge. Several clients did not know that the tax preparer was in prison when he filed their returns. (www.nytimes.com/2020/12/03/us/abdel-soliman-tax-fraud.html)

CPAs, get four hours of fraud CPE with our 2020 Fundamentals of Fraud Prevention and Detection On-Demand WebinarClick here for more information.

Fraud Friday: Call centers that defrauded U.S. victims out of millions

Hitesh Patel has been sentenced to 20 years in prison for his role in operating and funding India-based call centers that defrauded U.S. victims out of millions. Patel ran a complex telephone scheme in which employees from call centers in India impersonated officials from the IRS and U.S. Citizenship and Immigration Services. Victims were threatened with arrest, imprisonment, fines, or deportation if they did not pay money supposedly owed to the U.S. government. Victims were instructed to provide payment by purchasing reloadable debit cards or wiring money. Patel was prosecuted after being extradited from Singapore in April 2019 and he was ordered to pay $8,970,396 in restitution. (www.justice.gov/opa/pr/owner-and-operator-india-based-call-centers-sentenced-prison-scamming-us-victims-out-millions)

CPAs, get four hours of fraud CPE with our 2020 Fundamentals of Fraud Prevention and Detection On-Demand WebinarClick here for more information.

Fraud Friday: Hot water and the mode of secrecy

The owner of Beebe’s Roaring River Waterslide in Cassville, MO is in hot water: he’s facing prison time after meeting with an undercover federal agent to discuss the sale of his business. During the meeting, Beebe showed the agent records with the business’s true gross receipts, which were different from the amount reported on his federal tax returns. Beebe also admitted to routinely destroying business records, explaining to the agent that he was in “the mode of secrecy” and used cash whenever possible. But old records were found during a search of his residence, and he now owes restitution to the state and the feds.

CPAs, get four hours of fraud CPE with our 2020 Fundamentals of Fraud Prevention and Detection On-Demand WebinarClick here for more information.