Teaching your nieces to file false returns; thousands of gallons of fake gas purchases; and other highlights of our favorite recent cases.
Rockingham, N.C.: Preparer Herbert Lee Martin, 53, has pleaded guilty to one count of conspiracy to defraud the IRS and two counts of assisting in the preparation of false returns.
According to court documents, from at least January 2012 through last April Martin, owner and operator of the prep business “Herb’s Helping Hands,” prepared and e-filed false federal income tax returns that claimed fraudulent refunds for clients. He also taught his three nieces how to prepare false returns and supervised preparation of these returns.
Martin and his co-conspirators reported fictitious or inflated income and dependency exemptions to generate false or inflated EITCs, false business income and losses and false deductions. On occasion, Martin and his co-conspirators bought or stole personal ID information of individuals, including minors, and listed these individuals as false dependents on returns to inflate fraudulent refunds.
Martin directed some of the clients’ refunds into his own bank account or a bank account he controlled.
Sentencing is May 12, when according to the terms of his plea agreement Martin will be sentenced to 132 months in prison and be ordered to pay at least $10,705,968 restitution to the IRS. He also faces a period of supervised release and monetary penalties.
Atlanta: Preparer Frazier B. Todd Jr., 58, has been found guilty of preparing fraudulent returns for clients.
Todd owned and operated Diverse Resource Business and Tax Firm, along with Cozzie Walker and Robert Sheffield, in nearby Union City, Ga. Walker and Sheffield were also charged in the case and previously pleaded guilty.
According to case information, Todd conspired with Walker and Sheffield to exploit the American Opportunity Tax Credit, marketing it as a “stimulus” available to almost anyone and preparing false returns for thousands of clients, many of whom were disabled, elderly or low-income.
Todd was also convicted for a fraud in which he exploited not only the AOTC but other tax credits to maximize clients’ refunds. He filed dozens of corporate returns falsely claiming that the businesses purchased tens of thousands of gallons of gasoline for “off-highway business use” and were entitled to the fuel tax credit. He also falsely claimed that clients had installed solar panels on their homes to claim the residential energy credit.
The jury found Todd guilty of conspiracy to commit mail and wire fraud, obstructing the internal revenue laws, and 10 counts of presenting false claims for refund to the IRS; the government voluntarily dismissed two additional counts of presenting false claims prior to the trial.
Walker pleaded guilty last March to conspiracy to commit mail and wire fraud; Sheffield pleaded guilty in March to conspiracy to commit mail and wire fraud, and 14 counts of presenting false claims for refund to the IRS.
Todd’s sentencing is March 8. The sentencings of Walker and Sheffield are Feb. 23.
Chappaqua, N.Y.: PricewaterhouseCoopers tax partner William J. O’Hagan, 56, has been arraigned for allegedly failing to file his state personal income tax returns for three years in a row.
O’Hagan was charged with two counts of criminal tax fraud, both felonies, and repeated failure to file a personal income tax return in a timely manner for the years 2010, 2011, and 2012, also a felony.
O’Hagan is an attorney and a CPA with PwC in its New York office. The New York State Tax Department estimates that the defendant “willfully failed to pay the state” $86,457, according to court documents.
O’Hagan, who pleaded not guilty, was released on his own recognizance. The next court date is Jan. 6.
If convicted, he could face a maximum of 28 months to seven years in prison.
Jeff Stimpson is a veteran freelance journalist who previously served as editor of The Practical Accountant.