DOJ Tax Crimes Roundup January 2020

Federal Court in Savannah, Georgia, Enters Permanent Injunction Against Tax Return Preparer

The U.S. District Court for the Southern District of Georgia has enjoined Andrea Nadel and her business, EZ Accounting & Tax Service LLC (EZ Accounting), along with Estelle Nadel, from preparing federal tax returns for others.

According to the United States’ complaint, Andrea Nadel, EZ Accounting, and Estelle Nadel prepared federal income tax returns that reported false Schedule A and Schedule C deductions in order to manipulate their customers’ claims for the Earned Income Tax Credit and reduce their taxable income. The complaint alleges that the defendants prepared returns that falsely claimed deductions for gifts to charity, unreimbursed employee expenses, tax preparation fees, and taxes paid, and that their practice of claiming these false deductions has resulted in significant lost tax revenues. As set out in the complaint, earlier this year, Andrea Nadel was indicted and pleaded guilty to aiding and assisting the preparation of a false tax return in violation of 26 U.S.C. § 7206(2).

Andrea Nadel, EZ Accounting, and Estelle Nadel agreed to entry of the permanent injunctions without admitting any factual allegations in the complaint.

Return preparer fraud is one of the IRS’ Dirty Dozen Tax Scams and taxpayers seeking a return preparer should remain vigilant. The IRS has information on its website about selecting a return preparer and has launched a free directory of federal tax preparers.

In the past decade, the Tax Division has obtained injunctions against hundreds of unscrupulous tax preparers. Information about these cases is available on the Justice Department’s website. An alphabetical listing of persons enjoined from preparing returns and promoting tax schemes can be found on this page. If you believe that one of the enjoined persons or businesses may be violating an injunction, please contact the Tax Division with details.


Owner of Tax Preparation Business Pleads Guilty to Filing False Returns

A former Gulfport, Mississippi, tax return preparer pleaded guilty on Friday  to aiding and assisting in the preparation of false tax returns, announced Principal Deputy Assistant Attorney General Richard E. Zuckerman of the Justice Department’s Tax Division and United States Attorney Mike Hurst for the Southern District of Mississippi.

According to documents and information provided to the court, Alvin Mays owned and operated City Tax Service, a tax return preparation business in the Gulfport, Mississippi area. From 2012 through 2017, Mays prepared—and trained his employees to prepare—false tax returns. To fraudulently inflate client refunds, the returns claimed false education credits and losses from fictitious businesses. Mays charged his clients exorbitant preparation fees, sometimes as high as $1,600 per return. In total, May’s conduct caused a tax loss to the United States of more than $900,000.

U.S. District Judge Halil S. Ozerden scheduled sentencing for April 16, 2020.  Mays faces a statutory maximum sentence of three years in prison on each count, as well as a period of supervised release and monetary penalties. In his plea agreement, Mays agreed to pay restitution of $321,605 to the United States.

Principal Deputy Assistant Attorney General Zuckerman and U.S. Attorney Hurst thanked special agents of IRS-Criminal Investigation, who conducted the investigation, and Assistant U.S. Attorney Stanley Harris and Trial Attorney Kevin Schneider of the Tax Division, who are prosecuting the case.


North Carolina Tax Preparer Pleads Guilty to Preparing False Returns

A Charlotte, North Carolina, tax return preparer pleaded guilty today to aiding and assisting in filing a false tax return, announced Principal Deputy Assistant Attorney General Richard E. Zuckerman of the Justice Department’s Tax Division and U.S. Attorney R. Andrew Murray of the Western District of North Carolina.

According to court documents and statements made in court, Ramonda Byrd owned and operated Divine Financial Solutions, a Charlotte, North Carolina, tax preparation business with locations on Beatties Ford Road and Central Avenue. From 2012 through 2017, Byrd prepared false tax returns on behalf of her clients. By reporting fictitious business income and expenses as well as false medical expenses, charitable contributions, and child and dependent care expenses, she sought to cause the Internal Revenue Service (IRS) to pay inflated refunds. Byrd’s fee was then often deducted from the client’s refund. In all, Byrd’s conduct caused a tax loss to the United States of more than $270,000.

Sentencing will be scheduled at a later date. At sentencing, Byrd faces a maximum sentence of three years in prison. She also faces a period of supervised release, restitution, and monetary penalties.


Jury Finds Texas Attorney and Client Guilty of Conspiring to Defraud the Internal Revenue Service

Used the Attorney’s IOLTA to Evade Paying Taxes

A federal jury convicted attorney John O. Green and his client Thomas Selgas today for conspiring to defraud the United States, announced Principal Deputy Assistant Attorney General Richard E. Zuckerman of the Justice Department’s Tax Division. The jury also convicted Selgas of tax evasion. Selgas’s wife, Michelle Selgas, was acquitted of conspiring to defraud the United States and tax evasion.

According to the evidence presented at trial, Selgas conspired with Green, an attorney licensed to practice in Texas, to defraud the United States by obstructing the Internal Revenue Service (IRS) from assessing and collecting Selgas’s taxes. Selgas and his wife owed approximately $1.1 million in outstanding taxes that Selgas refused to pay. When the IRS made efforts to collect the outstanding taxes, Selgas concealed funds by using Green’s Interest on Lawyers Trust Account

(IOLTA) rather than using accounts in his own name. An IOLTA is a bank account used by a lawyer to hold money in trust for clients. From 2007 to 2017, Selgas deposited proceeds from the sale of gold coins and other income into Green’s IOLTA and Green would then pay the Selgases personal expenses, including their credit card bills, from that account. Selgas and Green also filed a false tax return on behalf of MyMail, Ltd., an intellectual property development and licensing partnership Selgas co-founded, omitting a substantial portion of the partnership’s income.

U.S. District Judge Karen Gren Scholer will set sentencing at a later date. Selgas faces a statutory maximum sentence of five years in prison for each of the conspiracy and tax evasion counts.

Green faces a maximum sentence of five years in prison for the conspiracy count. They also face a period of supervised release, restitution and monetary penalties.


Pennsylvania Anesthesiologist Sentenced to Prison for Tax Fraud Hid Assets and Did Not Pay More than $900,000 Owed to IRS

A Philadelphia, Pennsylvania anesthesiologist was sentenced to 30 months in prison today for filing a false income tax return, announced Principal Deputy Assistant Attorney General Richard E. Zuckerman of the Justice Department’s Tax Division.

From 2010 through 2018, James G. Allen Jr., 54, filed and caused the filing with the Internal Revenue Service (IRS) of sixteen false tax returns for himself and his wife.  On these tax returns, Allen did not report more than $3 million in income that the pair earned as anesthesiologists.  In addition to filing false tax returns, Allen took steps to conceal the couple’s assets and income from the IRS, including depositing money in an offshore bank account held in the Bailiwick of Jersey, wiring money to Columbia to purchase a house, purchasing cryptocurrency and gold, and registering a vehicle in the name of a purported church. In total, Allen caused a tax loss of more than $900,000 to the United States.

In addition to the term of imprisonment, U.S. District Judge Arthur J. Schwab ordered Allen to serve a one year term of supervised release and pay restitution to the IRS in the amount of $ 1,084,658.52.


Gulfport Tax Preparer Sentenced to Prison for Preparing False Returns

A Gulfport, Mississippi, tax return preparer was sentenced to 15 months in prison today for aiding and assisting in the preparation of false tax returns, announced Principal Deputy Assistant Attorney General Richard E. Zuckerman of the Justice Department’s Tax Division and U.S. Attorney Mike Hurst for the Southern District of Mississippi.

According to documents and information provided to the court, Stacey Pritchett Williams owned and operated Stacey’s Unique Tax Service, a tax return preparation business located in the Gulfport area. From 2015 through 2016, Williams filed returns for her clients that reported false business income, education credits, and fuel credits, in an effort to obtain inflated refunds from the Internal Revenue Service (IRS). Williams often deducted her fee from the client’s refunds and, at times, charged $999 to prepare a return. In all, Williams caused a tax loss to the United States of at least $100,000.

In addition to the term of imprisonment, Senior U.S. District Judge Louis Guirola Jr., ordered Williams to serve one year of supervised release and to pay restitution of $102,382 to the United States.


Owner of D.C. Area Tax Preparation Business Indicted for Tax Fraud

A federal grand jury in Washington, D.C. returned an indictment today charging an Indianapolis, Indiana, resident with conspiracy to file false claims, wire fraud, aggravated identity theft, aiding and assisting the preparation of false tax returns, and tax evasion, announced Principal Deputy Assistant Attorney General Richard E. Zuckerman of the Justice Department’s Tax Division.

According to the indictment, Awett Tedla was the owner and operator of Speedy Tax Services LLC, a tax preparation business in Washington, D.C. and District Heights, Maryland. From 2012 through 2016, Tedla and her coconspirators allegedly obtained and used third party identities to file fraudulent tax returns with the Internal Revenue Service (IRS) claiming tax refunds. The indictment also charges that from 2013 through 2016, Tedla falsified her own personal returns by omitting business receipts.

An indictment merely alleges that crimes have been committed. The defendant is presumed innocent until proven guilty beyond a reasonable doubt.

If convicted, Tedla faces a statutory maximum sentence of 20 years in prison for each count of wire fraud, 10 years in prison for conspiring to file false claims for refunds, five years in prison for each count of tax evasion, and a mandatory sentence of two years in prison for aggravated identity theft. Tedla also faces a term of supervised release, restitution and monetary penalties.


Chicago-Area Resident Indicted for Scheme to File False Claims for Tax Refunds

A Chicago, Il resident was arrested today on a federal grand jury indictment charging him with mail fraud, submitting false claims to the United States for tax refunds, and aggravated identity theft, announced Principle Deputy Assistant Attorney General Richard E. Zuckerman of the Justice Department’s Tax Division. The Jan. 16, 2020, indictment was unsealed following today’s arrest.

According to the indictment, Wilmer Alexander Garcia Meza allegedly used personal identifying information of third parties—including their names, dates of birth, and identification documents such as foreign passports—to fraudulently obtain Individual Taxpayer Identification Numbers (ITINs) from the Internal Revenue Service (IRS). An ITIN is a tax processing number issued by the IRS to individuals who do not have, and are not eligible to obtain, a social security number. The indictment further alleges that from 2013 through 2017, Garcia used these ITINs to file fraudulent tax returns in the names of the third parties to claim thousands in fraudulent refunds.  Garcia also allegedly used the identification documents to cash the fraudulently obtained refund checks.

An indictment merely alleges that crimes have been committed. The defendant is presumed innocent until proven guilty beyond a reasonable doubt.

If convicted, Garcia faces a maximum sentence of 20 years in prison for each mail fraud count, five years in prison for each false claim count, and a mandatory minimum sentence of two years in prison for aggravated identity theft. He also faces a period of supervised release, restitution, and monetary penalties.


Manhattan Restauranteur Pleads Guilty to Tax Evasion Scheme

Concealed more than $2 Million in Business Income; Used Funds on Luxury Cars, High End Shopping and other Personal Expenses

The owner of a former New York City restaurant pleaded guilty to tax evasion today, announced Principal Deputy Assistant Attorney General Richard E. Zuckerman of the Justice Department’s Tax Division, U.S. Attorney Geoffrey S. Berman for the Southern District of New York, and Chief of Internal Revenue Service- Criminal Investigation (IRS-CI) Jonathan D. Larsen.

“The defendant funded his lavish lifestyle by failing to pay legally obligated taxes thus causing harm to all Americans,” said Principal Deputy Assistant Attorney General Richard E. Zuckerman. “We remain committed to prosecuting tax criminals who refuse to pay their fair share.”

“As he admitted in court, restaurateur Adel Kellel cooked his books for years, skimming money from his restaurant and salting it away in personal accounts or using it for personal expenses,” said U.S. Attorney Geoffrey S. Berman for the Southern District of New York. “His scheme was a recipe for making millions in unreported income, but now he will have to pay for his gluttony.”

“When Mr. Kellel chose to hide millions of dollars from the IRS, he unfairly shifted the tax burden to honest American taxpayers,” said IRS-CI Chief Jonathan D. Larsen. “As we start the tax filing season, this is a stark reminder of the serious consequences of tax evasion, including potential imprisonment. IRS-CI will continue to be relentless in our mission to root out tax fraud.”

According to the Information and statements made in court, in 2011, Adel Kellel was the President and a minority owner of K&H Restaurant Inc. (K&H), which operated Raffles Bistro (Raffles), a restaurant located at a New York City-based hotel. From 2012 through 2015, Kellel was the sole owner of K&H. K&H’s gross receipts consisted primarily of: (1) credit card payments by Raffles customers; (2) cash payments by Raffles customers; and (3) check payments by the hotel for services that Raffles provided to hotel guests and patrons, including room service, banquets, and catering.

From 2011 through 2015, Kellel concealed a substantial portion of K&H’s gross receipts by not fully reporting the cash received from Raffles’ customers. Kellel further hid the gross receipts by depositing cash into personal bank accounts, by spending funds directly on personal expenses, and by diverting checks paid by the hotel to K&H into non-business bank accounts that Kellel hid from his accountants. During this time, Kellel diverted more than 150 hotel checks, totaling more than $2 million, to more than a dozen bank accounts.

Kellel used the diverted income for personal expenses, including: overseas transfers; condominium fees; rent for a high-end Manhattan apartment; college tuition payments from his children; shopping at luxury retailers, such as Hugo Boss and Saks Fifth Avenue; payments for luxury cars manufactured by Mercedes, Porsche, and Maserati; and to pay for domestic and international travel.

By fraudulently concealing from his accountants the cash and a portion of the hotel checks received by Raffles, Kellel caused K&H’s corporate tax returns, and Kellel’s own tax returns from 2011 through 2015 to be materially false. Kellel admitted that his conduct caused a tax loss of at least $771,195 to the Internal Revenue Service (IRS) and the New York State Department of Taxation and Finance (NYSDTF).

U.S. District Judge Paul G. Gardephe set sentencing for April 23, 2020. At sentencing, Kellel faces a maximum sentence of five years in prison. He also faces a term of supervised release and monetary penalties. As part of his plea agreement, Kellel agreed to pay restitution of $613,478 to the IRS, and to pay restitution of $157,717 to NYSDTF.


Three Louisiana Residents Charged for Conspiring to File False Tax Returns

A federal grand jury in New Orleans, Louisiana, returned an indictment today charging three Louisiana residents with one count of conspiracy to defraud the United States, 14 counts of aiding and assisting in the preparation of a fraudulent tax return, three counts of wire fraud, and three counts of aggravated identity theft, announced Principal Deputy Assistant Attorney General Richard E. Zuckerman of the Justice Department’s Tax Division and the U.S. Attorney’s Office, Eastern District of Louisiana.

According to the indictment, throughout 2015, Morgan Antoine, Jennifer Austin, and Brittany Patterson conspired to file false tax returns for clients of Pelican Income Tax and Payroll Service, a tax preparation business located in Kenner and Westwego, Louisiana.   The coconspirators allegedly prepared client returns reporting false income, false withholdings, and false dependents, in order to cause the Internal Revenue Service (IRS) to pay inflated refunds.  The indictment further alleges that the coconspirators charged fees as high as $1,100 for preparing tax returns, which they often deducted from the clients’ refunds.

The indictment also charges that to conceal their involvement in the fraud, the coconspirators filed returns in the name of a third party whose personal identifying information was stolen.  Finally, the indictment alleges that Antoine and Patterson each falsified their own personal returns claiming false dependents.

If convicted, Antoine, Austin, and Patterson each face a statutory maximum sentence of five years in prison for the conspiracy charge and three years for each count of aiding and assisting in the preparation of a fraudulent tax return. Antoine and Patterson face an additional twenty years in prison for each count of wire fraud and a two-year mandatory minimum for each count of aggravated identity theft. They also face a period of supervised release, restitution, and monetary penalties.

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