IRS-CI countdown of 2021's Top 10 criminal tax cases
The Internal Revenue Service Criminal Investigation (IRS-CI) unit is my favorite section of the tax agency. Part of it is because I've always been fascinated by law enforcement. Add tax geek to the mix, and it's a natural fit.
My investigative bent was bolstered when my first full-time job as a young newspaper reporter on the cop beat. Those West Texas police officers tried their best to intimidate and gross out this young woman. They failed.
Many times, solving a crime also is like unravelling a mystery, especially when the crooks are inventive. As a life-long mystery fan, that component of the criminal investigation world also appeals to me. That's also why I always offered my insights to the detectives that spent my work time covering.
Here they are as presented by the tax cops in a countdown to Number 1. You can click on the links to read more from the IRS about each case.
10. Albuquerque couple sentenced to federal prison in Ayudando Guardians case. The couple in this case were sentenced to 47 years (her) and 15 years (him) in federal prison. They pleaded guilty to stealing funds from Ayudando Guardians Inc., a nonprofit organization that provided guardianship, conservatorship, and financial management to hundreds of people with special needs.
The stolen money came from Department of Veterans Affairs and Social Security beneficiaries. "Criminal acts by would-be fiduciaries are most heinous because they violate veterans' trust and put in jeopardy the benefits on which they are dependent," said Special Agent in Charge Rebeccalynn Staples, Veterans Affairs, Office of Inspector General whose department assisted IRS-CI in the case.
9. Rochester, N.Y., man going to prison and ordered to pay millions in restitution for his role in Ponzi scheme that bilked investors out of millions of dollars. The defendant in this case was sentenced to 84 months in federal prison and ordered to pay restitution totaling $19,842,613.66 after he was convicted of conspiracy to commit mail fraud and filing a false tax return.
He conspired with others to obtain money through an investment fraud Ponzi scheme. Approximately 400 investors were defrauded out of around $18 million, resulting in financial hardship to more than 25 of its investor victims.
8. Orlando sisters sentenced in $25 million tax fraud scheme. The women were sentenced to eight and four years in federal prison, respectively, after both pleaded guilty to conspiracy to defraud the government. One sister also admitted to the additional charge of tax evasion. IRS-CI investigators went after the scheme in which the siblings operated a tax preparation business with five locations in central Florida.
Using those outlets, they filed more than 16,000 false tax returns for clients from 2012 to 2016. The total estimated loss to the IRS was $25 million. In addition to jail time, the women were ordered by the court to pay $24,940,495 in restitution to the IRS. One of the women also was ordered to pay an additional $510,999 in connection with the tax evasion charge.
7. Russian bank founder sentenced for evading exit tax upon renouncing U.S. citizenship. We get international intrigue with this case, in which the defendant was convicted of filing a false tax return. The Russian native was arrested in London in 2019, fought IRS extradition, and finally in October 2021 pleaded guilty to the tax charge. He was sentenced to time served, and one year of supervised release.
More notable is that the man, who had become a U.S. citizen, paid almost $509 million in connection with his conviction. That's more than double the amount of tax he sought to escape paying the U.S. Treasury when he renounced his naturalized citizenship and permanently left the United States. The payment included the more than $248 million in exit tax he should have paid on capital gains from his company's initial public offering, along with statutory interest on that tax, and a nearly $100 million fraud penalty. The Russian/ex-American also was fined an additional $250,000, which is the maximum allowed by law.
6. Ontario, California, man who ran multimillion-dollar unlicensed bitcoin exchange business sentenced to 3 years in federal prison. You knew cryptocurrency crime would make the list. In this case, the California resident was sentenced to three years in federal prison, and required to forfeit all assets derived from running an unlicensed business that exchanged at least $13 million in Bitcoin and cash, and vice versa. He charged commissions for the transactions and established separate companies to mask his true activity.
During the investigation, tax officers used an undercover client, who also revealed that some transactions were for the benefit of an Australian methamphetamine dealer. The convicted man "knew about the applicable regulations governing his money exchange business and purposefully flouted them," prosecutors wrote in a sentencing memorandum. "That is because [the defendant] structured his money exchange business with the intent to establish an anonymous conduit for money laundering of drug trafficking proceeds."
5. Owner of bitcoin exchange sentenced to prison for money laundering. And the crypto crimes keep coming, this time in another international case. A Bulgarian national was sentenced to 121 months in federal prison for participating in a scheme where popular online auction and sales websites (such as Craigslist and eBay) falsely advertised high-cost goods (typically vehicles) that did not actually exist.
Once victims sent payment for the goods, the conspiracy engaged in a complicated money laundering scheme where U.S.-based associates would accept victim funds, convert these funds to cryptocurrency, and transfer the cryptocurrency to foreign-based money launderers.
4. Ex-pastor of Orange County church sentenced to 14 years in federal prison for orchestrating $33 million con that defrauded investors. The former leader of a California-based church that operated out of a strip mall was convicted of using the nonprofit as a Ponzi scheme. Investigators said the ex-pastor directed representatives to make television and live seminar appearances to solicit investments in the church's investment arm. Many of these appearances were recorded and uploaded onto YouTube.
The scheme resulted in the defrauding of $33 million from investors, who had received fabricated statements reassuring them that their funds had been invested. He did make Whitney also made approximately $11 million in payments to some investors, but it came from money brought in by later victims. The former spiritual leader, who pleaded guilty to mail fraud and filing a false federal income tax return, was sentenced to 14 years in federal prison, and ordered to pay $22.66 million in restitution to victims.
3. Kansas Man Sentenced to 12 Years for $7.3 Million Dollar Payday Loan Fraud, $8 Million Tax Evasion. A Prairie Village, Kansas, man Tucker pleaded guilty to one count of transporting stolen money across state lines as part of the debt fraud scheme, one count of bankruptcy fraud, and one count of tax evasion. He was sentenced to 12½ years in federal prison, and ordered to pay over $8 million in restitution to the IRS in connection with his fraud schemes, which involved false payday loan debt.
Investigators say the man sold fabricated information or fictitious debts to payday loan businesses for several years. Plus, he didn't file federal tax returns for himself or his businesses. And insult to injury, he used the proceeds to pay for jet travel and luxury cars. "[The defendant] used the proceeds of his criminal activity to live a lavish lifestyle and defraud the American people. His sentencing shows the courts take tax and related fraud schemes seriously," said Amanda Prestegard, Acting Special Agent in Charge of IRS-Criminal Investigation's St. Louis Field Office, in announcing his sentencing last summer.
2. DC Solar owner sentenced to 30 years in prison for billion dollar Ponzi scheme. The owner of California-based DC Solar, was sentenced to 30 years in federal prison and forfeited $120 million in assets to the U.S. government for victim restitution in what law enforcement described as the biggest criminal fraud scheme in the history of the Eastern District of California. The Ponzi scheme that involved the sale of thousands of manufactured mobile solar generator units that didn't exist.
The faux business owner "claimed to be an innovator in alternative energy, but he was really just stealing money from investors and costing the American taxpayer hundreds of millions in tax credits," said Acting U.S. Attorney Talbert in announcing the sentencing. "In reality, he manipulated the system to his advantage by lying to investors, promising significant federal tax credits, and laundering his ill-gotten gains, " added Special Agent in Charge Mark H. Pearson added.
Investigators say faux energy businessman used the illegally obtained money to purchase a minor-league professional baseball team, a NASCAR racecar sponsorship, and to purchase luxury real estate in California, Nevada, the Caribbean, and Mexico. In addition, the convicted man's seized and forfeited assets included 148 luxury and collector vehicles, including a 1978 Firebird previously owned by actor Burt Reynolds.
And at Number One on the IRS-CI 2021 tax crime list, we have the tale of the family that followed the old saying, "The family that crimes together, does the time together." Or something like that. The crime bonus is that it involved federal coronavirus relief funds.
1. San Fernando Valley family members sentenced to years in prison for fraudulently obtaining tens of millions of dollars in COVID relief. Three members of a San Fernando Valley family were sentenced last November — two of them in absentia after they fled justice following their convictions at trial — to years in federal prison for scheming to fraudulently obtain more than $20 million in Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) COVID-19 relief funds.
The family, a married couple and the husband's brother, were convicted of using stolen and fictitious identities to submit 150 fraudulent applications for COVID-relief funds based on phony payroll records and tax documents to the Small Business Administration. They then used the funds they received to purchase, among other things, multiple luxury homes, gold coins, and jewelry.
The brother is serving a five-year sentence. However, the convicted couple is not yet in jail. They were sentenced to 17 years (husband) and 6 years (wife) in absentia after they cut their ankle monitoring devices and went on the run prior to their sentencing hearing. The FBI is offering a reward of up to $20,000 for information leading to the couple's arrest.
If that happens this year, I'm sure it'll make the IRS-CI 2022 Top 10 list.
They didn't make the 2021 Top 10, but you also might find these tax crime items of interest:
- Ohio man pleads guilty to $1 million lottery win tax fraud
- Swiss banker wanted in U.S. tax evasion cases escapes IRS clutches
- Dallas man already jailed for tax fraud, pleads guilty to new PPP criminal charges