The following examples of general fraud investigations are excerpts from public record documents on file in the courts in the judicial district in which the cases were prosecuted.

Oklahoma Man Sentenced to 10 Years in Prison; Ordered to Pay $1 Million in Restitution for Fraudulent Investment Scheme

On September 30, 2008, in Muskogee, Okla., Phillip Levaughn Raglin, of Wagoner, Oklahoma, was sentenced to 120 months in federal prison and ordered to pay $1 million in restitution to victims for money laundering. Raglin pleaded guilty in May 2008 to money laundering in a fraudulent investment scheme. His business, Raglan Industries, LLC was not a registered investment advisor or broker-dealer. From July 2006 through December 2006, Raglin devised a scheme where he sold memberships in Raglin Industries. He held himself out to be a multi-millionaire businessman experienced in investments and described his company to potential investors as a highly profitable company investing in securities and real estate around the world. He also described his company as an investment firm possessing unique computer software under patent application which enabled him to make optimum trading decisions to maximize profit. Raglin assured investors a 30 percent monthly return on their investments with guaranteed monthly pay-outs and promised investors that their principal investment was without risk because it was insured. Raglin paid early investors using money from later investors in order to lull investors into believing Raglin Industries legitimately invested their funds to promote future investments by new investors, and to prevent early detection of the scheme to defraud. Raglin did not invest funds as investors were told, but instead deposited investor funds into several bank accounts in his control for his own personal benefit and for the benefit of his family and associates.

Former President of Operating Engineers Local 825 Sentenced to 27 Months in Prison for Union Corruption and Tax Evasion

On September 16, 2008, in Newark, N.J., Peter O. Strannemar, the former president of Local 825 of the International Union of Operating Engineers, was sentenced to 27 months in prison for tax evasion and conspiring with others to demand and receive labor bribes totaling approximately $112,000 from construction contractors that worked at the Goldman Sachs construction project in Jersey City. Strannemar pleaded guilty on May 28, 2008. At his hearing, Strannemar admitted that beginning about May 2001, he conspired with Anthony Mann, a lead engineer at the project, and Craig Wask, a Local 825 business agent, to unlawfully demand and receive cash payments and other things of value from two construction companies at the project – a steel erector company and a plumbing company. Strannemar acknowledged that he requested and received free household appliances, valued at approximately $1,900, from the plumbing company, and that the appliances were delivered to his residence by Mann. In total, Strannemar acknowledged that he and his co-conspirators unlawfully received approximately $112,000 in labor bribe payments from the steel erector company and plumbing company. In addition, Strannemar admitted that on or about April 15, 2004, he filed a federal tax return that concealed approximately $50,000 in taxable income that he had received in 2003.

Montana Woman Sentenced to 75 Months in Prison for Tax Evasion

On September 16, 2008, in Helena, Mont., Susan Tocci Campbell was sentenced to 75 months in prison and ordered to pay $973,866 in restitution for embezzlement, income tax evasion and aggravated identity theft. Campbell was an accountant for the Facilities Management Bureau of the Montana Department of Administration General Services Division in Helena. According to court records, Campbell’s husband had a maintenance contract with the agency from 2002 until 2007. In 2007, it was discovered that Campbell continued to issue agency checks to her husband’s business for maintenance work that was never performed. The total amount of money embezzled between December 2002 and June 2007 was $739,312. Shortly after depositing the checks into Jack’s Technical Assistance’s bank account, Campbell wrote checks payable to herself, her son and her daughter-in-law by signing her husband’s name.

Iowa Man Sentenced to Prison for Filing False Tax Returns

On September 12, 2008, in Cedar Rapids, Iowa, Thomas Dillavou was sentenced to 12 months and one day in prison for filing false income tax returns. According to a plea agreement, Dillavou, co-owner of Plastic Injection Molders, Inc., admitted to diverting approximately $598,172 in company funds and spending the money in a variety of ways, including a personal investment scheme overseas, paying for repairs and remodeling for his personal residence, making payments for personal loans, and paying for vacation expenses. Dillavou admitted to failing to report the funds he diverted from the company as personal income on tax returns for 1997 through 2000. Tax returns for these four years were eventually filed in 2002 and 2003.

Minnesota Man Sentenced to 134 Months for Tax Evasion

On September 11, 2008, in Minneapolis, Minn., Robert B. Beale, the founder and former chief executive officer of a computer parts firm, Comtrol Corp., was sentenced to 134 months in prison and ordered to pay a $175,000 fine for conspiracy to defraud the U.S., tax evasion and failing to appear in federal court. Beale, with the assistance of Lee Stagni, the former president of Comtrol, engaged in a concerted effort to conceal and disguise Beale’s salary from the Internal Revenue Service (IRS). Stagni was convicted in 2006 and was sentenced to 43 months in prison. According to court documents, prior to July 2000, Beale was paid as an employee of Comtrol using an automated payroll system, with standard withholdings for state and federal taxes. In July 2000, although his duties at Comtrol had not changed, Beale directed the company’s payroll department to change his employment designation from “employee” to “consultant.” Beale began submitting invoices to Comtrol for his salary under the name of the Chayil Corp., a shell corporation which served no purpose other than as a pass-through entity for concealing Beale’s income from the IRS. From 2000 to September 2004, Comtrol failed to report to the IRS more than $5.1 million in income paid to Beale. According to court records, Beale never personally reported the income, and never filed a tax return or paid any income taxes on the money. A warrant was issued for his arrest after he failed to appear for the start of his tax evasion trial on Aug. 14, 2006. U.S. Marshals captured him in Orlando, Fla. in November 2007. Beale was convicted by a jury on April 30, 2008 following an eight-day trial.

Florida CPA Sentenced on Tax Charges

On September 4, 2008, in Miami, Fla., Orlando Benjamin Roche, Jr., of Marathon, Florida, was sentenced to 18 months in prison for his guilty plea to failing to pay Federal Insurance Contributions Act (FICA) and withholding taxes, and failing to file individual income tax returns. He was ordered to file amended tax returns and cooperate with the Internal Revenue Service (IRS) in its determination, assessment, and collection of income taxes relating to the years 2001 through 2004. According to court documents, Roche will also relinquish his CPA license.

Owner of Trash Empire Sentenced to More Than Seven Years in Federal Prison

On September 3, 2008, in New Haven, Conn., James Galante was sentenced to 87 months of imprisonment and ordered to pay $1.6 million to the IRS and fined $100,000 for racketeering, conspiring to defraud the IRS, and wire fraud. Galante’s sentencing follows a long-term investigation into the waste-hauling industry in Connecticut and eastern New York. According to court documents, Galante was the majority owner of 25 trash companies in western Connecticut. He admitted to fixing a bid for the operation of a transfer station in Connecticut. To insure that the transfer station would be operated by a specific individual, Galante directed several co-conspirators to rig the bid. Galante also admitted to defrauding the IRS on his personal tax returns and corporate returns. His scheme involved: preparing false and fraudulent expense checks that were paid to himself; placing a number of no-show employees on the payrolls of trash hauling companies and deducting the expenses related to these employees, including their salaries, health care costs, and  expenses associated with the use of free cars, on corporate tax returns; filing false tax returns for 530 Main Street North, a company whose only asset was a house occupied by a co-conspirator; providing payroll kickbacks to Galante from certain employees who received an extra paycheck that was cashed and provided to Galante; and, skimming cash from various business operations. In addition, Galante admitted to instructing another co-conspirator to tamper with a witness scheduled to appear before the grand jury. As the owner of the Danbury Trashers a United Hockey League team, during the 2004-2005 season, Galante admitted to mail fraud by circumventing the League’s $275,000 annual salary cap by causing other co-conspirators to prepare and fax approximately 30 fraudulent salary cap reports to the UHL office in Iowa. Galante knew the salary cap reports were false, as he was aware that several Trashers players were receiving income above what was reported to the League. Additionally, several Trashers players and/or their spouses were on the payroll of various waste hauling companies even though they performed no work for those companies. Certain players also received additional unreported compensation in the form of double housing allowance payments and/or cash bonuses that were not reported to the League. As part of his guilty plea, Galante forfeited his ownership interests in 25 trash hauling companies; a residence located in Southbury, Connecticut and adjoining parcels of land; six race cars; and $448,153 in currency. As a condition of his guilty plea, Galante is required to withdraw from participating in the trash industry in the United States. Thirty-three individuals and 10 businesses have been charged with various offenses as a result of this investigation. Thirty-two individuals have pleaded guilty.

Texas Man to Serve Two Years in Federal Prison for Failing to Report Nearly $400,000 In Lawsuit Settlement Proceeds on His Income Tax Return

On August 26, 2008, in Dallas, Texas, Malcolm M. Kelso was sentenced to 24 months in prison and ordered to pay a $50,000 fine for filing a false tax return. Kelso pleaded guilty in May 2008 to one count of making and subscribing to a false tax return under penalty of perjury. According to the United States Attorney, Kelso admitted that he received $399,981 in proceeds from the settlement of a lawsuit. Those proceeds were income to Kelso and he signed and filed his 2004 individual income tax return knowing that he did not report the the proceeds from the settlement of the lawsuit as income.

Ohio Women Sentenced on Identity Theft and Tax Fraud Charges

On August 25, 2008, in Toledo, Ohio, Wendy Hakeos was sentenced to 18 months in prison, to be followed by three years of supervised release, and ordered to pay $224,000 in restitution. Hakeos pleaded guilty to one count of identity theft and one count of filing false income tax returns in March 2008. According to her plea agreement, Hakeos signed the name of her employer on checks drawn on the employer's bank accounts, signed her employer's name on credit card convenience checks drawn on the employer's credit cards, and signed her employer's name to an authorization to transfer funds from her employer's investment account to the employer's bank account. She further admitted that her actions facilitated the theft of $175,000 from her employer. The plea agreement also stated that Hakeos failed to report as income the stolen funds and caused a tax loss of $49,000.

Illinois Man Sentenced to 30 Years for $5 Million Ponzi Scheme

On August 19, 2008, in Chicago, Ill., Frank Panice was sentenced to 360 months in prison and ordered to pay $4.9 million in restitution for money laundering, unlawful structuring of transactions, mail fraud and transportation of stolen securities. Panice was indicted by a federal grand jury in December 2005. While free on bond, Panice was charged by complaint and arrested in December 2006 on separate charges related to a new multi-million dollar Ponzi scheme he started while he was free on bond for his 2005 charges. In March 2007, Panice was charged again, this time in a 20 count indictment related to running a Ponzi scheme. To perpetrate his scheme, Panice established a business called Bank Watch. He induced 87 investors and prospective investors to invest more than $5 million with Bank Watch, falsely representing to them that their funds would be invested in CDs maintained at FDIC-insured institutions. In fact, rather than investing their funds in FDIC-insured CDs, Panice converted the victims' funds to his personal benefit. Investor funds were converted to cash by structuring cash withdrawals from financial accounts into which investors' checks had been deposited.

Member of Chicago Outfit Sentenced to Over Three Years in Prison

On August 14, in Chicago, Ill., Joseph Venezia was sentenced to 40 months in prison for conspiracy to commit tax fraud and operating an illegal gambling business. Venezia was among the 14 "Family Secrets" defendants indicted in April 2005. Prior to the landmark Chicago trial, Venezia pleaded guilty to the charges and admitted to conducting an illegal gambling business that operated for the financial benefit of the Chicago Outfit. For approximately seven years, Venezia was employed by "M&M Amusements," a large-scale illegal gambling business owned solely by Michael (Mickey) Marcello, brother of Outfit boss, James Marcello. M&M Amusements placed and maintained video gambling machines at various taverns, restaurants and clubs in the Chicago area. Venezia's incarceration will be followed by 36 months of supervised release.

Ponzi Scheme Operator Sentenced to 17 ½ Years in Prison for Defrauding Investors of $25 Million and Failure to File Tax Returns

On August 13, 2008, in Dallas, Texas, James Ray Phipps was sentenced to 210 months in prison.  Phipps was convicted in April 2007 of mail fraud, wire fraud, money laundering,  corrupt endeavor to obstruct and impede the Internal Revenue Service (IRS) laws, and  income tax evasion.  According to court documents, from 1998 to 2006, Phipps received more than $25 million from the more than 30,000 participants in his “Life Without Debt” pyramid scheme.   He used unsolicited faxes, unsolicited mailings, weekly conference calls and live seminars that encouraged others to become members and contribute money to “Life Without Debt,” promising that in return, they would receive money for recruiting other members.  Members contributed between $2,000 and $100,000. The larger the contribution to “Life Without Debt,” the larger the supposed return of money from the plan. Contributions were restricted to cash and money orders only, but eventually Phipps began requiring payments in cash only.  Phipps represented that he would collect a four percent fee for administering “Life Without Debt” and would distribute the remainder of the contributed money to people above them in the pyramid matrix.  Evidence at trial showed that even after Phipps was indicted in April 2006, he continued to hold conference calls to recruit new members.  At trial,          the government presented evidence that Phipps failed to report any income on a tax return since 1987 and failed to file a tax return since 1988. Further, he responded to legal IRS correspondence with frivolous arguments that he was a “sovereign” citizen not subject to the jurisdiction or tax laws of the United States.

Home Healthcare Service Provider Sentenced for Tax Fraud

On August 11, 2008, in Los Angeles, Calif., Maria Cecilia Sy Chico, aka Mario Chico, the owner and operator of several home healthcare service providers, was sentenced to 18 months in prison and one year of supervised release. In addition, Chico was ordered to pay all outstanding taxes due for the years of conviction.  In April 2008, Chico was convicted of tax fraud charges related to her participation in a scheme to divert income from the business she and a co-defendant controlled to their personal benefit.  According to the indictment, Chico owned and operated RBJ Management, Inc., dba Helping Hands Health Care, from 2000 through 2004.  During this time, Chico also operated three additional healthcare related businesses, including Total Quality Home Care, Inc., Four Seasons Quality Home health, Inc., and Global Management Support Services, Inc.  For the tax years 2000 and 2001, Chico failed to report hundreds of thousands of dollars in income on her federal income tax returns – income that included payments disguised as loan repayments, payments to third parties on her behalf, and payments to her gambling account at Caesar’s Palace.  Specifically, Chico failed to report to the Internal Revenue Service approximately $220,000 on her 2000 federal income tax return and approximately $87,000 on her 2001 tax return.

Florida Lottery Winner Sentenced for Filing False Return

On August 8, 2008, in Tampa, Fla., Rhoda Toth was sentenced to 24 months in prison, to be followed by one year of supervised release, and ordered to pay $1,110,458 in restitution and to pay a $100 special assessment.  Toth pleaded guilty in November 2007 to subscribing to a false income tax return.  According to court documents, in 1990, Rhoda and Alex Toth won $13.3 million in the Florida State Lottery.  In 1999, they exchanged their annual payments from the lottery for one lump sum payment.  The sentencing memorandum states that Rhoda Toth failed to report the lump sum payment on her 1999 income tax return. 

Internet Entrepreneur Sentenced for Filing a False Tax Return

On August 6, 2008, in Seattle, Wash., Lyle R. Larson was sentenced to 18 months in prison and ordered to pay $879,252 in restitution.  Larson, the owner of the software development company Red Planet Corp., pleaded guilty in April 2008 to filing a false tax return. As part of the plea, Larson admitted that he had significantly under-reported his business income and failed to report self-employment taxes on his 2000 through 2003 income tax returns.  According to documents filed in this case and statements made in court, from 2000 to 2003 Larson earned over $2.8 million in compensation and commissions as a self-employed computer programmer and consultant.  However, he reported only $38,035 in business income on his income tax returns.  Additionally, Larson filed no personal income tax returns for 2004, 2005, or 2007.

“Diploma Mill” Promoter Sentenced to Prison; Ordered to Forfeit Over $500,000 in Cash, Bank Accounts, and Assets

On August 5, 2008, in Spokane, Wash., Steven Karl Randock, Sr. was sentenced to 36 months in prison, to be followed by three years of supervised release, and ordered to forfeit his interest in over $500,000 in seized cash and various bank accounts, real property and a 2001 Jaguar XK8.   According to the plea agreements, from August 1999 until August 2005, Steven Karl Randock, Sr. and seven others operated an Internet-based diploma business selling false and fraudulent academic products.  These products included high school degrees, college and graduate-level degrees, fabricated academic transcripts, and “Professorships.”  During this period, the diploma business sold approximately $6,282,679 of fraudulent academic products to over nine thousand individuals located in the United States and elsewhere.  The counterfeit diplomas and academic products were purportedly from legitimate academic institutions, as well as fictitious institutions created by the defendants.  According to the plea agreement for co-defendant Richard Novak, between October 2002 and September 2004, approximately $19,200 was wired from an account in the State of Washington controlled by Dixie Ellen Randock and Steven Karl Randock, Sr., to a bank account in Maryland in the name of the Liberian Consul.  Previously, Dixie Ellen Randock was sentenced to a 36 month term of imprisonment, followed by three years of court supervision; her daughter, Heidi Kae Lorhan was sentenced to 12 months and one day imprisonment, followed by two years of court supervision; and Roberta Markishtum was sentenced to a 4 month term of imprisonment followed by one year of court supervision.

Missouri Residential Property Project Manager Sentenced for Tax Evasion

On August 5, 2008, in St. Louis, Mo., Edward Barrier was sentenced to 30 months in prison for tax evasion. According to court documents, during the years 2002 through 2005, Barrier was self-employed as a project manager supervising the development of high-end residential property in the St. Louis area. Barrier also identified properties for development, and was paid substantial sums of money for these services during each of these years. His total income for those four years was $2.46 million. However, Barrier did not file any federal income tax returns for those years. The total tax liability for the four years after allowing for expenses and deductions totaled $796,514. Barrier was audited by the IRS and additional taxes were assessed against him for tax years 1987 through 1994. Barrier failed to pay the taxes due and quit filing tax returns. After the audit, the IRS sent Barrier numerous notices regarding his tax liabilities; however, he did not pay any of the taxes or dispute the assessment. Instead, according to the U.S. Attorney, Barrier attempted to evade the payment of these taxes by doing business in cash; not acquiring any assets in his own name; residing with his mother; titling vehicles in the name of an unregistered business entity and limiting his use of bank accounts.  The total tax due, including the unpaid liabilities for the years 2002 and 2005, and the liabilities assessed for the years 1987 through 1994 totaled $1 million. Barrier also began structuring his cash transactions in 2002 to prevent detection of his income by the IRS. He took the checks he earned from his property and construction management services to the bank on which the check was drawn and obtained a combination of cash and cashiers checks from that bank. Barrier usually obtained an amount of cash under $10,000 and structured over $700,000 in these types of transactions between August 2002 and January 2006.

Former Indiana Fire Department Treasurer Sentenced to 30 Months in Prison

On August 1, 2008, in Indianapolis, Ind., Susan D. Wargel was sentenced to 30 months imprisonment and ordered to pay $263,331 in restitution to the German Township Fire Department and $40,378 restitution to the IRS. Wargel was a volunteer firefighter and treasurer for the German Township Fire Department in Vanderburgh County, Indiana. In 2004, Wargel became a full-time employee of the fire department. She held a position of a firefighter with the rank of captain and was responsible for the fire department's bookkeeping duties. In 2007, the fire department discovered that approximately $263,331 was missing. A criminal investigation began, and in April 2007, Wargel was charged with forgery and four counts of filing false federal returns. Wargel pleaded guilty to the charges and admitted to forging the signature of a fire department official on approximately 352 checks from the fire department's checking account for her personal benefit, and that she concealed her theft by making false entries in the check ledger. The forged checks were traced to Wargel's personal payments for furniture, clothing, a vacation and a Caribbean cruise. From 2003 through 2006 Wargel had failed to report the funds she obtained from the forgery scheme on her tax returns.

Wife and Husband Sentenced in Embezzlement Scheme and Ordered to Pay Over $870,000 in Restitution

On July 29, 2008, in Boston, Mass., Natalie and Thomas Fleury were sentenced to 36 months in prison and 18 months in prison, respectively.  Both defendants were also sentenced to two years of supervised release.  Natalie Fleury was ordered to pay $755,479 in restitution; Thomas Fleury was ordered to pay $118,034 in restitution.  According to the Indictment, Natalie was the office manager and bookkeeper of Florence Crittenton League (FCL) Adoption Agency, a non-profit organization located in Lowell, Mass., that provided adoption services for prospective parents in the United States seeking to adopt children from Russia, China and other foreign countries.  The Indictment states: from on or about December 16, 1998, through on or about March 28, 2006, Natalie Fleury devised and executed a scheme to defraud FCL of approximately $637,444 by means of false and fraudulent pretenses, representations, and promises.  Natalie Fleury altered checks to make them payable to her after those checks were signed by the director of FCL.  The indictment further charged both Natalie and Thomas Fleury with tax evasion for the tax years 2000 through 2005.  The Fleurys failed to report $562,744 on their income tax returns over those five tax years.

Three Defendants in Minnesota Mortgage Fraud Scandal Sentenced

On July 31, 2008, in Minneapolis, Minn., the owners of Parish Marketing and Development Corp. (PMDC), a long-time Minnesota homebuilder, were sentenced for conspiring to commit mortgage fraud and money laundering in connection with a scheme involving approximately 200 residences and $100 million in loan proceeds. According to the Minnesota United States Attorney, Michael Alan Parish was sentenced to 156 months in prison; Ardith Ann Parish was sentenced to 60 months in prison; and Christopher David Troup was sentenced to 120 months. According to their November 2007 guilty pleas, PMDC utilized “straw buyers” to buy about 200 properties built by PMDC. Their scheme generated nearly $100 million in loan proceeds, with PMDC receiving in excess of $25 million from these loan proceeds. The defendants acknowledged that they completed loan applications for the straw purchases, which included false information; executed loan documents in the names of the straw buyers; and, manufactured and provided false documentation, such as false representations of employment and false verifications of deposit, to obtain loans to buy the properties from PMDC. The straw buyers did not execute the sales documents and loan documentation, which were instead signed by the defendants, and they made no payments on the mortgages that were taken out in their names. Instead, PMDC made the payments or allowed the mortgages to go into foreclosure. Often, PMDC utilized proceeds from the sale of one residence to a straw buyer to make monthly payments for the mortgages held on other residences in the names of other straw buyers.

Former Lead Salesman of Danbury Trash Companies Sentenced to 46 Months in Prison

On July 29, 2008, in New Haven, Conn., Richard Galietti, of Fort Myers, Florida, was sentenced to 46 months in prison, followed by three years of supervised release, for conspiring to violate the federal Racketeer Influenced and Corrupt Organizations (RICO) Act and for making a false statement to a federal law enforcement officer. Galietti pleaded guilty to the charges on May 8, 2008. According to court documents and statements made in court, Galietti, a former lead salesman at Automated Waste Disposal (AWD) an affiliated Danbury-based companies operated by James Galante, conspired with other carting companies to perpetuate the “property rights system.”  Carters engaged in the property rights system would not service or compete for other carters’ customers. The property rights system essentially destroys free enterprise, allowing the participating carters to artificially inflate their prices and leaving waste removal customers with no other options. Galietti and others participated in the affairs of the enterprise by agreeing to respect the unwritten rules of the property rights system. The false statement charge to which Galietti pleaded guilty stems from an Indictment from the Middle District of Florida. On December 14, 2006, special agents of the Internal Revenue Service, Criminal Investigation Division executed a search warrant at a business in Fort Myers, Florida. On that date, Galietti, who had been released on bond following his June 2006 arrest in Connecticut and was employed by the Florida business being searched, was encountered by federal agents executing the warrant and asked if he worked for the company. Galietti falsely stated that he did not, and that he simply was “dropping by to say ‘hello.” As a condition of his plea agreement, Galietti agreed to forfeit $130,750 to the government.

Former Government Services Administration (GSA) Employee Sentenced for Bribery and Tax Evasion Involving Over $130 Million in Federal Contracts

On July 28, 2008, in Greenbelt, Md., Dessie Ruth Nelson, of Oakland, California, a former longtime employee of General Services Administration (GSA), was sentenced to 60 months in prison, followed by three years of supervised release, and ordered to forfeit $138,500 and to pay $38,780 in restitution to the Internal Revenue Service (IRS). In January 2008, Nelson pleaded guilty to accepting over $100,000 in bribes and evading income taxes on the bribe payments she accepted in return for her assistance in awarding three federal contracts worth over $130 million. According to the plea agreements of Nelson and Michael Holiday, Nelson was responsible for contracting on behalf of GSA with private companies to provide security to GSA managed buildings.  Former Montgomery County police officer Michael Holiday was the chief executive officer and owner of Holiday International Security, Inc. (HIS) which provided federal facilities with physical security, primarily through armed guards. In May 2003, HIS changed its name to USProtect Corporation. Between 2000 and 2003, Holiday and other contractors provided Nelson with cash, vacations and other benefits worth over $100,000, in exchange for her assistance, including the award of three multi-million dollar contracts to HIS. GSA solicited bids for a contract to provide security services to California federal facilities in November 1999. Although HIS’s bid was almost $10 million higher than the lowest bid received by GSA, Nelson awarded the contract to HIS in May 2000. From 2000 through 2004, GSA paid HIS and USProtect more than $54 million pursuant to this contract. Nelson admitted that in return for her assistance in obtaining several contracts, Holiday provided her with, among other benefits, cash and a Caribbean cruise. In addition, Nelson admitted that she failed to report the cash and other illicit payments from Holiday and other contractors as income on her federal individual income tax returns for 2000 through 2003. Nelson concealed the income by arranging to make cash deposits into her bank accounts in amounts that did not exceed $10,000, in order to evade federal reporting requirements regarding cash transactions. Holiday was sentenced to 48 months in prison and ordered to pay $400,000 in restitution to the IRS on July 14, 2008.

Jordanian Citizen Sentenced to 42 Months in Prison; Ordered to Forfeit More Than $3 Million in Cash and Property

On July 23, 2008, in Bridgeport, Conn., Fares Khraisat, a citizen of Jordan, last residing in Easton, Connecticut, was sentenced to 42 months in prison for his participation in a commercial bribery scheme, and for violating federal tax and immigration laws. Khraisat was ordered to forfeit more than $3 million in cash, real estate and other items, and to pay a $30,000 fine. On February 11, 2008, Khraisat pleaded guilty to mail fraud, conspiracy to commit money laundering, making a false statement on an immigration application, and making a false statement on a tax return. According to documents filed with the court and statements made in court, Khraisat owned and operated Zam-Zam Telecard, Inc., a Bridgeport-based phone card company. In pleading guilty, Khraisat admitted that he paid more than $400,000 in bribe payments to Jonathan Kaplan, a co-defendant, in order to receive favorable treatment from Kaplan’s company. Khraisat also admitted that he and others provided between $400,000 and $500,000 in cash, which represented proceeds of illegal activity, to several other co-defendants, who then transferred the funds to a bank account in Jordan. Khraisat also admitted that he made false statements on an immigration application and on his 2005 tax return. Khraisat is subject to deportation after serving his prison term. On November 14, 2007, Jonathan Kaplan pleaded guilty to wire fraud and tax evasion. He awaits sentencing.  

South Bend Man Sentenced to 294 Months for Scams Targeting Seniors

On June 23, 2008, in South Bend, Ind., Perry F. Motolo was sentenced to 294 months in prison and ordered to pay $2.6 million in restitution to his victims and $592,133 to the IRS. Motolo pleaded guilty to an Indictment which charged him with mail fraud, tax evasion, failure to file tax returns and money laundering. According to the Indictment, Motolo targeted senior citizen clients; convincing them he would set up trust accounts for them and persuaded them to fund the accounts by transferring their assets into his control. Instead of setting up the trusts as promised, Motolo transferred most of the client’s funds into a brokerage account he controlled. He used the proceeds to pay for personal expenses. Motolo convinced clients that his dealings with them had to be confidential so that the trust would be preserved. As part of his scam, Motolo created various business entities which he used as nominees in order to evade taxes.

Former President of Frazier Historical Arms Museum Sentenced to Two Years in Prison for Failing to Pay Taxes

On July 22, 2008, in Louisville, Ky., Michael K. Salisbury, of Owens Crossroads, Alabama, was sentenced to 24 months in prison, to be followed by one year of supervised release, and ordered to pay a $25,000 fine. In January 2008, Salisbury was found guilty on two counts of willfully failing to pay taxes in 2000 and 2002. The Indictment filed against Salisbury alleged that he had conspired to defraud a local philanthropist and his former employer, the Frazier Historical Arms Museum, between September 17, 1997 and September 18, 2002, and that he evaded paying taxes on the substantial income he made from those crimes in the tax years 1999 through 2002. Evidence at trial showed Salisbury made over $1.75 million from inflating the prices he paid for antique firearms in those years, resulting in a tax liability of $655,702.

Seattle Spammer Sentenced to 47 Months in Prison for Mail Fraud, Spam and Tax Charges

On July 22, 2008, in Seattle, Wash., Robert Alan Soloway, owner of Newport Internet Marketing Corporation (NIM), was sentenced to 47 months in prison for mail fraud, electronic mail fraud, and willful failure to file a tax return.  Soloway pleaded guilty in March 2008.  Soloway was dubbed the “Spam King” by investigators, because of his prolific and prolonged spamming.  According to court records, Soloway offered a “broadcast e-mail” software product and “broadcast e-mail” services.  These products and services constituted criminal “spam” i.e. bulk, high volume commercial e-mail messages that contained false and forged headers and were relayed using networks of proxy (botnet) computers.  Soloway and NIM made false and fraudulent claims about the products and services on their Web site.  Among them was a claim that the e-mail addresses used for the product and services were “opt-in” e-mail addresses.  The Web site promised a satisfaction guarantee with a full refund to customers who purchased the broadcast e-mail product.  However, customers who later complained were threatened with additional financial charges and referral to a collection agency.  In his plea agreement, Soloway admitted that in tax year 2005 he earned $309,725 in gross revenue, but failed to file an income tax return.

Dentist Sentenced to 120 Months in Prison for Multi-Million Dollar Mortgage Fraud

On July 21, 2008, in Trenton, N.J., Terrance D. Stradford, aka Wayne Sellers, was sentenced to 120 months in prison and ordered to pay $592,000 in restitution.  On September 26, 2007, a jury convicted Stradford on 24 federal charges including tax evasion, wire fraud and money laundering.  During the trial, the jury heard how Stradford, a former Staten Island, N.Y., dentist, operated a scheme in which he fraudulently obtained approximately $2.76 million in mortgage loans, and spent the proceeds on luxury items including the purchase of a 46-foot yacht and a North Carolina residence.  Stradford and others used fraudulent documents, made false statements, and established fictitious companies and opened bank accounts in various company names to fraudulently obtain mortgages secured by a property at Commerce Lane in Berlin Township.  At the trial, evidence showed that in October 1999, Stradford formed a limited liability company called 412-414 Commerce Lane, LLC (412-414 LLC).  In December 1999, Stradford, acting through 412-414 LLC, purchased the Commerce Lane property for $337,500 with a first mortgage in the amount of $310,000 held by American Business Credit Inc. In September 2002, Stradford encumbered the Commerce Lane property with a second mortgage in the amount of $244,756.  The evidence presented to the jury showed that in June 2004, Stradford used the Commerce Lane property as collateral for a $500,000 mortgage loan from Quantum Corporate Funding, Ltd.  In obtaining the loan, Stradford provided fraudulent documents to Quantum, including income tax returns containing a fake social security number and a commitment for title insurance which falsely indicated that there were no current mortgages on the Commerce Lane property.  In August 2004, Stradford used the Commerce Lane property as collateral for a $585,000 mortgage loan from Eastern Savings Bank.  In September 2004, the defendants repeated the scheme to obtain a $275,000 mortgage loan.  In addition to the $1.36 million in loans at issue in the Superseding Indictment, at sentencing, the judge held the defendant responsible for an additional $1.4 million in fraudulently obtained loans. These included a $595,000 loan that Stradford fraudulently obtained from GE Capital, which Stradford had represented would be used to purchase medical equipment for his dental practice, as well as two mortgages obtained from Countywide Home Loans, in which Stradford fraudulently represented that he had sold certain properties to his father.  The judge also entered a $720,000 criminal forfeiture judgment against the Stradford, which the government sought as proceeds derived from the scheme.

New Jersey Man Sentenced to 46 Months for Tax Evasion; Ordered to Pay Restitution of $5.8 Million to Investors

On July 21, 2008, in Trenton, N.J., Brian Winters was sentenced to 46 months in prison and ordered to pay approximately $5.8 million in restitution to investors whom Winters scammed into buying interests in fictitious private hedge funds.  In April 2008, Winters pleaded guilty to one count of tax evasion for not reporting approximately $481,402 in income for tax year 2002.  At his plea hearing, Winters admitted that during the tax years 2002 and 2003, he owned and operated Global Trading Investments (GTI) and the Wyndham Group (WG), both located in Lacey Township. Winters admitted that through GTI and WG, he sold interests in fictitious private hedge funds to investors and then commingled the investment funds in his business accounts. Winters withdrew and used the investment funds for his own personal use.  In January 2004, Winters filed a U.S. Individual Income Tax Return, Form 1040, for tax year 2002, which stated his taxable income for that year was $96,787.  He failed to disclose and report additional taxable income from the fraudulent scheme of approximately $481,402, upon which an additional tax of approximately $187,413 was due.  Winters also admitted that he failed to pay an additional tax of $751,716 due the United States for tax year 2003.  As part of Winters’ plea agreement, he will be responsible for restitution to the victim investors of GTI and WG. 

Montana Woman Sentenced for Embezzlement Scheme

On July 18, 2008, in Missoula, Mont., Jamee Lee Ferlic was sentenced to 18 months in prison and ordered to pay $103,293 in restitution for tax evasion.  Ferlic worked as the office manager at Jerome’s Drilling, a water well drilling company in Missoula.  Her duties included preparing payroll documents, billing, bill paying, and other general office work.  During a routine check of business records by a credit union upon Ferlic’s application for a loan, auditors discovered a discrepancy between the salary she listed on her application and deposits to her bank accounts.  Further investigation revealed that she embezzled approximately $380,000 from her employer.  According to evidence presented at trial, Ferlic stole the money by changing the payee on expenses entered into Jerome’s Drilling’s accounting system to show the names of vendors that the company dealt with on a regular basis.  Ferlic then wrote checks to herself and coded transactions to make it look as if the check was written to a vendor. She had no authority to sign business account checks and also, business checks required two signatures. To overcome this obstacle, Ferlic obtained pre-signed checks and wrote the checks to herself and to personal creditors to pay off personal debt.  On her federal income tax returns Ferlic failed to add the additional income she embezzled from Jerome’s Drilling.

Former Attorney Sentenced to Nine Years in Prison on Fraud and Tax Charges

On July 15, 2008, in Boston, Mass., Alan Mason, of Princeton, Mass., was sentenced to 108 months in prison, to be followed by three years of supervised release, and ordered to pay $6,628,119 in restitution.  Mason, dba Alan Mason Legal Services, Inc., was an attorney whose law practice was centered on providing legal services in connection with real estate closings.  According to court documents, Mason from at least June 2001 through June 2006, engaged in a fraudulent scheme in which he took funds he received from banks for the purpose of paying off prior liens on properties for closings he was handling, and converted those funds for his own personal and business purposes.  Mason prepared documents, including checks and HUD-1 forms, which made it appear that he had in fact paid off the prior liens.  Instead, Mason made monthly mortgage payments to the prior lienholders in order to prevent the loans from going into default and thus alerting the buyers, sellers and new lenders that the prior lien had not been paid off.  His scheme defrauded more than ten lenders, including several federally insured financial institutions and Stewart Title, of more than $6.6 million.  Mason also evaded the payment of more than $3 million in taxes by, among other things, setting up and controlling multiple real estate trusts and bank accounts using the names of employees and relatives but which did not identify Mason's interest in writing to prevent the tax authorities from attaching those assets.

Former CEO of Security Company Sentenced in Bribery Scheme Involving $130 Million in Federal Contract

On July 14, 2008, in Greenbelt, Md., Michael B. Holiday, a former Montgomery County police officer, was sentenced to 48 months in prison, followed by three years of supervised release, and was ordered to pay $400,000 in restitution to the Internal Revenue Service (IRS).  According to his plea agreement, Holiday was the chief executive officer and owner of Holiday International Security, Inc. (HIS), based in Silver Spring, Maryland.  In May 2003, HIS changed its name to USProtect Corporation.  Dessie Ruth Nelson, a former longtime employee of General Services Administration (GSA), was responsible for contracting on GSA’s behalf with private companies to provide security to GSA-managed buildings.  According to court documents, between 2000 and 2003, Holiday provided Nelson with cash, vacations and other benefits in exchange for Nelson’s assistance in awarding three multi-million dollar contracts to HIS.  One contract involved GSA-managed federal buildings in San Diego and three other counties in southern California. GSA solicited bids for a contract to provide security services to these federal facilities in November 1999.  Holiday caused HIS to submit a bid of approximately $50 million.  Although the company’s bid was almost $10 million higher than the lowest bid received by GSA, Nelson awarded the contract to HIS in May 2000.  From 2000 through 2004, GSA paid HIS and USProtect more than $54 million pursuant to this contract.  Nelson also caused several other multi-million dollar contracts to be awarded to HIS and USProtect in exchange for cash and a Caribbean cruise.  Holiday also received substantial compensation from HIS and companies he controlled from 2001 to 2004 for which he failed to file federal income tax returns and failed to pay more than $400,000 in taxes owed to the IRS.  Instead, Holiday tried to conceal his income, including transferring funds into bank accounts of companies he controlled. Dessie Ruth Nelson is awaiting sentencing. 

Virginia Business Owner Sentenced for Tax Evasion

On July 11, 2008, in Alexandria, Va., John Marcus Green was sentenced to 30 months in prison, followed by two years of supervised release, and ordered to pay a $6,000 fine and to pay $942,352 in restitution to the government.  Green pleaded guilty on March 31, 2008, to federal tax evasion charges.  According to court documents, Green was the founder, chief executive, and part-owner of Germane Systems, a Chantilly, Virginia, computer engineering firm that did business primarily as a subcontractor for the Department of Defense.  Despite earning substantial income in 2002, 2003, and 2004, Green evaded his income taxes for those years by failing to file tax returns, by concealing his ownership in Germane through the use of a nominee company held by another for Green’s benefit, and by having Green’s monthly salary payments deposited into the account of another nominee.

Two Individuals Sentenced for Bilking City of New Orleans of Over $1 Million

On July 9, 2008, in New Orleans, La., Stanford Barre and Reginald Walker were sentenced for their involvement in a kickback scheme. Barre was sentenced to 60 months in prison to be followed by three years of supervised release. Walker was sentenced to 30 months in prison to be followed by three years of supervised release.  In addition, they were ordered to pay more than $1,064,000 in restitution to the city of New Orleans. In January 2007, Barre and Walker pleaded guilty to charges of conspiracy, mail fraud, and obstruction of justice. According to court documents, Johnson Controls, Inc, was a company contracted by the city of New Orleans to increase energy efficiency through the replacement and upgrading of fixtures and equipment such as chillers and boilers. In their plea agreements, Barre and Walker admitted to bilking the city of New Orleans through concealed kickbacks and fraudulent billing practices. As a result of the fraud scheme, the citizens of the city of New Orleans were denied millions of dollars in benefits intended to be achieved by the energy saving contract with Johnson Controls, Inc. 

Georgia Mother Sentenced in Fraud Scheme

On July 7, 2008, in Gainesville, Ga., Molly A. Smith, of Lula, Georgia, was sentenced to 57 months in prison and ordered to pay restitution of $413,847 to the Internal Revenue Service (IRS) and $777,901 to the state of North Carolina following her guilty plea to program fraud and tax fraud.  Smith operated Georgia Nutrition Program, Inc. (GNP), a Lula, Georgia, non-profit corporation that sponsored day care centers in North Carolina and Georgia. Smith admitted to altering applications and to submitting false information to the North Carolina Department of Health and Human Services in order to receive more than $775,000 in Department of Agriculture funds. Those funds were deposited into a GNP financial account. Smith then wrote a substantial number of checks from GNP’s accounts payable to herself, her husband, and her daughter, Maykie Blevins. They deposited those checks and used the money to buy property, jewelry, home improvements, and expensive vehicles. Smith then deceived her accountant by providing copies of the checks to him after they were altered to make it appear that the checks had been written for GNP expenses; specifically, as payments made to the day care centers that GNP sponsored. The money the defendants received was not reported as income on Smiths’ or Blevins’ individual federal income tax returns.

Colorado Man Sentenced to Prison for Ponzi Scheme

On July 3, 2008, in Denver, Colo., David William Thomas was sentenced to 42 months in prison and ordered to pay $4.4 million in restitution for conspiracy to commit securities fraud and money laundering. Thomas operated several businesses and falsely told potential investors that the companies were involved in the installation of high-speed data transmission equipment in hotels, the production and installation of tracking devices in long-haul trucks and investments in power companies. Thomas also mailed investors false periodic earning statements and checks that represented earnings from their investments. The checks were funded by contributions from other investors. Thomas’ scheme involved more than 50 victims who lost as much as $7 million.

Kentucky Veteran of Foreign Wars (VFW) Commander Sentenced for Scheme to Defraud Insurance Company

On June 30, 2008, in Bowling Green, Ky., Donald Mudd was sentenced to 121 months in prison and ordered to pay $271,160 in restitution for conspiracy to defraud the IRS, illegal gambling, arson and mail fraud. His co-defendant, Martha Towe received a 68 month prison sentence for illegally structuring the purchase of an automobile, conspiracy to defraud the IRS, illegal gambling and mail fraud. Both Mudd and Towe were also ordered to pay $259,988 in restitution to the Bowling Green Veterans of Foreign Wars (VFW). Mudd and Towe were found guilty for the arson of the Veterans of Foreign Wars Post, and of mail fraud for stealing VFW proceeds from the sale of pull-tab games. Mudd also operated video slot machines at the Post, which violated Kentucky law. Mudd devised a scheme to defraud an insurance company following the arson by providing false and fraudulent claims about the fire. Westport Insurance Corporation issued $246,688 to the VFW Post and Mudd diverted the money for his personal benefit.  From 1999 through 2004, Mudd and Towe conspired to defraud the IRS by structuring their cash transactions over $10,000 in order to avoid the filing of currency transaction reports with the IRS.

“Mafia Cop” Author Sentenced for Felony Tax Offense

On July 1, 2008, in Las Vegas, Nev., Louis Eppolito, author of the paperback book, “Mafia Cop,” was sentenced to 18 months in prison and ordered to pay $102,108 in restitution to the Internal Revenue Service (IRS) following his guilty plea to making and filing a false income tax return.  According to court documents, Eppolito and his wife, Frances Eppolito, were indicted in January 2006 and charged with making and subscribing false income tax returns.  Frances Eppolito will be permitted to enter into a diversion agreement for the tax charges, while Louis Eppolito pleaded guilty to that offense in February 2008.  In the plea agreement, the parties stipulated that on about April 13, 2001, Louis and Frances Eppolito filed an individual income tax return for the calendar year 2000 reporting total income of $127,386, when they knew their true income for that year was $327,386.  Additionally, Louis Eppolito failed to declare $130,000 in income in 2001 and $45,000 in income in 2002.  The resulting tax loss to the IRS because of these omissions was $102,108.

West Virginia Woman Sentenced for Tax Evasion; She Embezzled Over $1 Million from Physician's Group

On June 30, 2008, in Huntington, W.Va., Diann Richmond, of Fort Gay, West Virginia, was sentenced to 30 months in prison, to be followed by five years of supervised release, and ordered to pay $1.174 million in restitution.  In February 2008, Richmond pleaded guilty to income tax evasion.  According to court documents, she admitted to embezzling over $1.174 million from the Huntington Emergency Physician's Group from 2000 through 2004.  Richmond was employed to handle the Group's payroll and billing when working for an accountant in Huntington, West Virginia.  Richmond failed to pay over $300,000 of taxes resulting in her conviction for income tax evasion.

Rhode Island Man Sentenced for Participation in E-Rate Program Fraud Scheme

On June 26, 2008, in Hartford, Conn., Joseph E. Mello, of Pawtucket, Rhode Island, was sentenced to 18 months in prison, followed by three years of supervised release, the first 12 months of which Mello must spend in home confinement.  Mello was also ordered to pay back taxes, plus penalties and interest, on $175,199 that he failed to report to the Internal Revenue Service.  On October 9, 2007, Mello pleaded guilty to federal charges related to a scheme to defraud the Federal Communications Commission (FCC) in connection with the E-Rate program, which provides funding to qualifying school districts nationwide to upgrade their Internet access capabilities.  In Connecticut, the Hartford, New London, New Haven and Bridgeport school districts received E-Rate funding.  Each school district selected SBC/Southern New England Telephone (SNET) as the prime contractor to perform its Internet upgrades.  In October 2003, Mello left his position as Director of Project Management for SBC and became Vice President of Operations for Innovative Network Solutions (INS), a first-tier subcontractor of SBC for performing E-Rate funded telecommunication upgrades.  According to court documents, Mello admitted that, from October 2003 through March 2004, he participated in a scheme to defraud the FCC with SBC account Managers Richard E. Brown and Keith J. Madeiros.  Mello, in his position with INS, agreed to accept invoices submitted to INS by two fictitious companies, Responsive Communication Services, Inc. (RCS) and Chariho Associates (Chariho), created by Madeiros and Brown, respectively, for work purportedly performed on E-Rate funded school district projects.  INS made payments on those invoices – $161,933 to RCS and $446,572 to Chariho – and then passed the costs on to SBC.  The kickbacks to Mello were paid through BAJ Consulting, a company establish for the sole purpose of receiving money from the scheme.  Today, Mello was also ordered to pay, jointly and severally with Brown, restitution in the amount of $608,565.  On August 29, 2007, Brown was sentenced to 27 months of imprisonment, and on December 7, 2007, Madeiros was sentenced to nine months of imprisonment.

Owners and Former Bookkeeper of Commercial Construction Firm Sentenced in Multi-Million Dollar Tax Fraud Scheme

On June 20, 2008, in Atlanta, Ga., Gerald Marchelletta, Jr., Gerald Marchelletta, Sr., and Theresa Kottwitz were sentenced on charges of committing and conspiring to commit tax fraud.  Marchelletta, Jr. was sentenced to 36 months in prison, followed by three years of supervised release, and ordered to pay a $50,000 fine.  Marchelletta, Sr. was sentenced to 33 months in prison, followed by three years of supervised release, and ordered to pay a $50,000 fine.  Kottwitz was sentenced to 24 months in prison, to be followed by one year of supervised release.  Although the defendants have paid a substantial portion of taxes owed, the judge ordered the Marchellettas to cooperate with the Internal Revenue Service (IRS) in paying back the remainder, approximately $200,000, as a condition of their supervised release following their prison term.  According to information presented in court, the Marchellettas are the owners of Circle Industries, Inc., a multi-million dollar international commercial construction firm based in Alpharetta.  Kottwitz served as the bookkeeper of the business.  Circle has been the principal construction firm on many prominent Atlanta area projects, including the construction of the Olympic Village in downtown Atlanta in 1996 and the Atlantis hotel and casino on Paradise Island in the Bahamas.  Evidence at trial revealed that the Marchellettas paid millions in company money for their own personal benefit.  Kottwitz falsely recorded these expenses as purported job-related or other business expenses.

Missouri Man Sentenced for $1 Million Securities Fraud, Filing a False Tax Return

On June 18, 2008, in Springfield, Mo, Mark Leon Henry, of Joplin, Missouri was sentenced to 78 months in prison and ordered to pay $1.1 million in restitution to his victims and to the Internal Revenue Service (IRS).  Henry pleaded guilty in November 2007 to a securities scheme that defrauded more than $1 million from his victims and he admitted to filing a false federal income tax return.  Henry operated a financial brokerage business as an investment advisor for Investment Centers of America (ICA) from November 1996 to August 2005.  ICA terminated its business relationship with Henry in September 2005, but he continued to operate his office and advertise himself as an ICA representative.  After September 2005, Henry lied about being an agent for Harbour Investments, despite the fact that he was not a licensed securities broker.  In 1996, Henry devised a scheme to defraud at least 14 investors, including his father and his stepmother.  At various times, Henry, acting as a stockbroker for ICA, recommended legitimate securities or investments for his customers.  Instead of investing the funds provided by his customers, Henry deposited the funds into his own bank accounts for his own personal benefit.  In order to hide this scheme, Henry provided his customers with fictitious account statements that falsely represented their securities holdings and account values.  In his plea, Henry admitted that he filed a 2002 income tax return that failed to report $187,206 in income.  According to court documents, the amount of unreported income that Henry failed to report on his 2002 through 2005 tax returns totaled $538,449, which resulted in a total tax loss to the Government was $102,126.

Pennsylvania Business Man Sentenced on Conspiracy and Tax Evasion Charges

On June 13, 2008, in Philadelphia, Pa., Thomas L. Root was sentenced to 66 months in prison, followed by three years of supervised release, and ordered to pay $25,069 in restitution to the Internal Revenue Service (IRS).   Root was convicted in March 2008 on charges of conspiracy and tax evasion.  According to court documents, beginning in approximately September 1996, Root was employed by Reading Broadcasting, Inc. (RBI), a Pennsylvania corporation which owned a local television station.  Root and Francis D. McCracken, as president of RBI, agreed to divert their commissions to companies they owned and controlled to prevent disclosure to the IRS.  On or about November 2001, Root and McCracken directed the RBI bookkeeper to issue Root's commission checks to New Perspectives, LLC and instructed the bookkeeper not to issue IRS Forms 1099 to New Perspectives.  As a result, no federal income taxes were withheld from his commissions or income reported to the IRS. 

Texas Attorney Sentenced for Tax Evasion

On June 13, 2008, in Dallas, Texas, Attorney Carl Edmond Gaines was sentenced to 24 months in prison and ordered to pay $90,838 in restitution to the Internal Revenue Service (IRS) for tax evasion.  According to court documents, Gaines and his law firm handled both criminal and personal injury matters.  From 2003 to 2006, the law firm defrauded the private health care system by diverting settlement monies from the firm’s trust account.  Insurance settlement proceeds were deposited into the firm’s trust account.  The funds were specifically held in trust by the firm for firm clients as settlement proceeds reimbursing the victim for personal injury and for reimbursement of medical providers that provided service to the client for treatment of the sustained injury. Gaines withdrew money from the trust account and spent it for personal benefit.  Gaines, an attorney, admitted that he knew that he was required to file a corporate tax return for the firm and further admitted that he did not file returns for 2003 and 2004, resulting in $80,438 taxes evaded. 

Owner of Virgin Islands Bar Sentenced to Prison for Filing False Tax Returns and Structuring Currency Transactions

On June 12, 2008, in St. Thomas, Virgin Islands, Allan J. MacPhee was sentenced to 20 months in prison, to be followed by three years of supervised release, and ordered to pay a $7,500 fine and $200 special assessment.  In addition, MacPhee was ordered to make full restitution to the Internal Revenue Service (IRS) and the Virgin Islands Bureau of Internal Return in the total amount of $446,002 and to forfeit $223,117 to the United States.  On October 17, 2008, MacPhee pleaded guilty to willfully filing false tax returns and structuring currency transactions to avoid reporting requirements.  According to court documents, MacPhee willfully filed materially false income tax, self employment, and Virgin Islands gross receipts tax returns involving the 2000 through 2005 tax years, because he omitted income he earned from his sole proprietorship, The Beach Bar.  MacPhee kept two sets of books for The Beach Bar; one reflecting the true and correct gross income of the business; and, the other a reduced amount of income which the accountant received to prepare the tax returns.  MacPhee consistently under reported large amounts of income and knowingly gave his accountant false gross income figures to prepare his tax returns.  The end result was that MacPhee evaded approximately $446,002 in taxes for the 2000 through 2005 tax years.  In addition, between December 2002 and March 2005, MacPhee made or directed others to make 27 cash deposits from The Beach Bar in amounts all below $10,000 into his bank accounts to avoid the currency transaction reporting requirements.

Michigan Insurance Agent Sentenced to Jail for Failing to File Tax Returns

On June 16, 2008, Detroit, Mich., William Arce, a self-employed insurance agent, was sentenced to one year and one day imprisonment, followed by two years supervised release and ordered to pay $444,742 restitution to the Internal Revenue Service.  According to court records, an August 2007 information charged Arce with five counts of failure to pay tax for the years 1998 through 2002, and two counts of failure to file tax returns.  In addition, from 1998 through 2004, Arce received over $1 million in taxable income and failed to pay over $200,000 in taxes due and owing.  Despite being advised by the IRS and his CPA, he did not withhold the appropriate amount of money, resulting in large amounts of outstanding taxes.  Arce contended that he was not in a financial position to pay the taxes owed, even though he took numerous vacations to Florida, Las Vegas, and Hawaii and maintained a membership with a golf country club.

Former USProtect Chairman Sentenced for Concealing Prior Civil Fraud Judgments and Evading Taxes on More Than $1million in Unreported Income

On June 13, 2008, in Greenbelt, Md., Richard S. Hudec, former Chief Operating Officer of Holiday International Security, Inc. (HIS), now known as USProtect Corporation, was sentenced to 33 months in prison, to be followed by three years of supervised release, ordered to forfeit $1.25 million, and ordered to pay a $10,000 fine and $290,360 in restitution to the Internal Revenue Service (IRS).  According to court documents, Hudec attempted to evade federal income taxes and conceal numerous civil fraud judgments from federal contracting officials to obtain federal security contracts worth over $150 million.  In May 2003, Hudec's wife purchased HIS and changed the name to USProtect Corporation.  By 2005, the company provided armed and unarmed security guards for 18 federal agencies at 120 installations in 32 states and territories.  From 2001 through February 2005, Hudec assisted in preparing and submitting the company’s proposals to provide security to federal agencies.  As of October 2001, Hudec had been convicted of fraud in four separate federal criminal prosecutions and had numerous civil judgments for fraud and false statements entered against him.  However, in proposals submitted in 2002 and 2004 to provide physical security to Social Security Administration (SSA) facilities in Baltimore and the FBI Academy in Quantico, Virginia, Hudec, as either the chief financial officer or chief operating officer, caused the company to falsely certify that no principal of the company had a civil judgment for fraud or false statements rendered against him within the three years preceding the company’s proposal.  This resulted in SSA awarding the company contracts worth more than $50 million and the FBI awarding the company contracts worth $3.5 million.  In November 2002, the same false certifications were made in the company’s application to the General Services Administration (GSA) to be eligible for contracts under the Federal Supply Schedule.  Beginning in 2004, the company was awarded several federal security contracts, including more than $100 million in contracts to provide security to more than 12 bases operated by the U.S. Air Force.  As a result of this scheme, the company obtained contracts worth more than $150 million through proposals that concealed the prior judgments against Hudec.  Between 2001 and 2003 Hudec received more than $1 million for his services as an officer with the company.  Yet for tax years 2002 and 2003 Hudec reported income of only $18,000 and $21,000 respectively, in order to evade the assessment of more than $200,000 in income taxes for those years.

Former Bookkeeper Sentenced for Embezzling More Than $1.5 Million from Heating Oil Company

On June 9, 2008, in Newark, N.J., James Grey was sentenced to 63 months in prison, to be followed by three years of supervised release, and ordered to pay $1,515,942 in restitution, a $5,000 fine and a $200 special assessment.  Grey pleaded guilty in November 2007 to one count each of mail fraud and filing a false income tax return in connection with his fraud against the Bonded Oil Company.  At his plea hearing, Grey admitted that between January 2001 and December 2003, he issued more than 150 fraudulent Bonded Oil checks to embezzle more than $1.5 million from the company.  He used the money to pay for various personal expenses, which included credit card expenses, financial support for a girlfriend, mortgage payments, expensive vehicle leases for his family members, and to maintain a horse named "Nike," valued at approximately $30,000.  In addition, Grey admitted that he attempted to conceal his illegal activities by, among other things, creating phony invoices from Bonded Oil vendors in the amounts corresponding to the Bonded Oil checks to make it appear as though the checks that he wrote were used to pay for legitimate company expenses.  Grey also admitted that he filed a false 2003 tax return that failed to report the income he received in 2003 from his illegal activities.  In addition, Grey’s plea agreement acknowledges that he also filed false tax returns for the tax years of 2001 and 2002.

Husband and Wife Sentenced in Embezzlement Scheme

On June 9, 2008, in Portland, Maine, Johanne M. Elie and Ricky L. Elie, of Biddeford, Maine, were sentenced for their roles in an embezzlement scheme.  Johanne M. Elie, who pleaded guilty on February 12, 2008, to wire fraud and tax evasion charges, was sentenced to 37 months in prison to be followed by three years of supervised release and ordered to pay $7,600 in assessments.  Her husband, Ricky L. Elie, who pleaded guilty on February 14, 2008, to tax evasion charges, was sentenced to 18 months in prison to be followed by three years of supervised release and ordered to pay $400 in assessments.  The defendants were also ordered to pay $395,000 in restitution to Provencher Fuels, Inc. (Provencher) and $49,683 to the Internal Revenue Service (IRS).  According to court documents, from 2000 until September 12, 2005, Johanne Elie worked as the treasurer and/or office manger for Provencher, a family-owned fuel oil and propane delivery and burner service company.  In her capacity, Johanne Elie was responsible for handling all of Provencher's financial affairs and had full check writing authority with respect to Provencher's checking account.  Between 2000 and 2005, Ricky Elie was employed at Provencher as an assistant office manager.  According to Provencher's payroll records, between January 2001 and December 2004, Johanne Elie received a net paycheck of between $491 and $644 per week and Ricky Elie received a net paycheck of between $375 and $513 per week.  However, between December 2000 and October 2005, the defendants charged over $195,000 for, among other things, jewelry, recreational vehicles, boats, vacations, and sporting events and memorabilia.  Both defendants failed to report the embezzled funds on their joint federal tax returns for 2001 through 2004, thereby evading $49,863 in income taxes.  Johanne Elie was also found responsible for embezzling about $180,000 in cash from Provencher.

Bookkeeper Sentenced for Embezzling $687,674 from Law Firm Employer and Employer's Mother

On June 9, 2008, in Hartford, Conn., Karen Davis-Jennings was sentenced to 16 months in prison, followed by two years of supervised release, and ordered to pay $621,174 in restitution for embezzling money from her former employer and his elderly mother.  On August 22, 2007, Davis-Jennings pleaded guilty to three counts of mail fraud and one count of filing a false tax return.  According to court documents and statements made in court, Davis-Jennings worked as a paralegal and bookkeeper of a law firm in West Hartford, Connecticut.  As part of her responsibilities at the law firm, Davis-Jennings also handled some personal finances for the principal of the law firm and his mother, an elderly woman who suffers from dementia.  Davis-Jennings admitted that, between approximately September 1998 and May 2005, she devised a scheme to defraud the law office, its principal and the principal’s elderly mother of approximately $687,674.  As part of the scheme, Davis-Jennings wrote checks on the law office’s operating account to pay for her mortgage and credit card bills.  In order to conceal the theft of the funds from the operating account, Davis-Jennings falsified entries in the law firm’s accounting system.  In addition, Davis-Jennings wrote checks on a joint account in the name of the principal and his mother to pay for her personal expenses.  Since she did not have signatory authority on the account, Davis-Jennings forged the signature of the principal’s mother.  On approximately August 15, 1999, without the authority and knowledge of the principal, Davis-Jennings activated a debit card connected to the joint account and used the debit card to pay for personal expenses, including gambling expenses at the Mohegan Sun Casino.  Davis-Jennings also falsely reported that she worked overtime for the law firm, which resulted in a payroll service issuing checks to her in the amount of $96,788 for hours that she never worked.  Finally, Davis-Jennings filed false income tax returns for the years 2001 through 2004, resulting in a tax loss of approximately $142,259.

Ohio Woman Sentenced for $1.5 Million Embezzlement Scheme

On June 4, 2008, in Columbus, Ohio, Rebecca Johnson was sentenced to 60 months in prison, to be followed by five years of supervised release, and ordered to pay over $1.8 million in restitution.  Johnson pleaded guilty in January 2008 to a three count Bill of Information charging her with willfully filing a fraudulent federal income tax return with the Internal Revenue Service (IRS), money laundering, and bank fraud relative to an approximate $1.5 million embezzlement scheme.  According to court documents and testimony, between April 2005 and July 2006, Johnson used her position as the controller of Saint Gobain Autover USA, Incorporated (SGA) and devised a scheme to embezzle approximately $1.5 million from SGA.  Johnson fraudulently opened a business checking account in the name of SGA at Fifth Third Bank without the knowledge, consent, or authorization of SGA.  Johnson stole checks made payable to SGA and deposited them into the Fifth Third Bank account.  In addition, Johnson made false entries into SGA’s books and records in an effort to hide the embezzlement from SGA.  Furthermore, Johnson stole and destroyed SGA computers and documents in an attempt to conceal her fraudulent scheme.  Johnson accomplished this theft by staging a break-in at the office in which she worked.  In total, Johnson deposited $1,507,269 into the Fifth Third Bank account, and proceeded to withdraw the money and spend the illegally obtained proceeds on personal living expenses.  Johnson willfully filed a fraudulent federal income tax return with the IRS for the 2005 income tax year, in which she failed to report approximately $1,082,045 of the embezzled funds.  On the 2005 federal income tax return that Johnson filed with the IRS, she reported total income in the amount of $66,557.

Law Firm Co-Founder Sentenced to 30 Months in Prison for Racketeering

On June 2, 2008, in Los Angeles, Calif., Melvyn I. Weiss, a founding partner of the New York law firm now known as Milberg LLP, was sentenced to 30 months in prison and ordered to forfeit $9.75 million and to pay a criminal fine of $250,000.  Weiss admitted in April 2008 that he and others, including former law firm partners William S. Lerach, David J. Bershad and Steven G. Schulman, participated in a scheme that paid millions of dollars in secret kickbacks to people in exchange for them serving as named plaintiffs in more than 225 class-action and shareholder derivative-action lawsuits that were filed across the United States.  Weiss and others named friends and relatives to serve as plaintiffs in the lawsuits.  To conceal the illegal kickback scheme from judges presiding over the lawsuits and other parties involved in the cases, participants in the conspiracy allegedly made false and misleading statements in court documents and in under-oath depositions.  The illegal kickbacks were secretly paid by Milberg Weiss to the named plaintiffs in cash or through various intermediary law firms and lawyers selected by the paid plaintiffs.

Alabama Construction Company Bookkeeper Sentenced on Tax and Mail Fraud Charges

On May 28, 2008, in Birmingham, Ala., Beverly Ann Byers, of Leeds, Alabama, was sentenced to 33 months in prison, to be followed by three years of supervised release, and ordered to pay $249,454 plus interest in restitution to her former employer, Plateau Construction Company, Inc.  Additionally, she was ordered to pay $23,952 to the Internal Revenue Service (IRS).  According to court documents, Byers was the bookkeeper for Plateau Construction Company in Leeds.  Between December 5, 2002 and December 25, 2005, she mailed 44 letters to herself containing unauthorized company checks totaling almost $249,454.  She also failed to report approximately $90,576 of the embezzled funds on her 2004 income tax return which resulted in her failure to pay $23,952 in tax.

Virginia Man Sentenced to 20 Years in Prison on Federal Charges Including Money Laundering, Conspiracy, Tax Evasion, and Obstruction of Justice

On May 19, 2008, in Abingdon, Va., Timothy Carl Ling, of Hurley, Virginia, was sentenced to 20 years in prison for orchestrating and directing multiple fraud schemes in which he, his mother, and his father participated and benefitted financially. Timothy Ling pleaded guilty in August 2007 to a variety of charges, including obstruction of justice, Social Security fraud, conspiracy to commit mail fraud, conspiracy to commit bank fraud, conspiracy to commit income tax evasion, money laundering and aggravated identity theft.  According to evidence presented in court, Ling began portraying himself as a quadriplegic in January 2004 in order to avoid being sent to prison for a probation violation.  In the course of his fraudulent conduct, Ling applied for, and received, benefits from the Social Security Administration and Medicaid.  In addition, Ling and his family defrauded the Virginia Consumer Services Fund and Clinch Independent Living Services, Inc., which provided funding for, among other things, a specially equipped van and the construction of ramps at his mother's home.  Additionally, Ling’s fabricated medical condition led to the payment of over $200,000 of his medical bills by Medicaid and $19,000 in social security benefits, payments to which he was not entitled.  The investigation also uncovered that Ling and his mother, Carol Irene Estep, had perpetrated a credit card fraud scheme between the summer of 2005 and October 2006 in which they defrauded five separate credit card companies incurring a total loss $344,465.  In order to hide their criminal activity, Ling and Estep used the social security number and date of birth of another family member.  Some of the proceeds from the fraud were used to establish a recycling business known as “The Yard.”  Although “The Yard” had gross profits of $210,641 during 2005 and 2006, the profits were divided between Ling, Estep, and others.  None of these individuals reported the income earned from “The Yard” to the Internal Revenue Service (IRS) or the Social Security Administration.  Timothy Ling, Estep, and Herman Ling, Timothy's father, actively tried to hide this income from the IRS by engaging in money laundering transactions.  Carol Irene Estep was sentenced to 94 months in prison in March 2008.  Herman Scott Ling is currently serving a five-year probation sentence.  All three family members were ordered to pay more than $500,000 in restitution and ordered to forfeit two parcels of property.

California Man Sentenced to Federal Prison for Obstructing the IRS and Loan Fraud-Related Charges

On May 16, 2008, in Los Angeles, Calif., Steven Jyegeo Shia, also known as Steven Shaw, of San Gabriel, was sentenced to 27 months in prison and ordered to pay $882,404 in restitution to State Street Bank International for conspiring to obstruct and impair the Internal Revenue Service (IRS) in its collection of taxes owed and making false statements to lenders.  Shia pleaded guilty in October 2007.  He was the vice president and co-owner of Full Shine Enterprise, Inc., a buyer and seller of paper goods for export.  Shia obtained a $12 million line of credit for Full Shine through State Street Bank International.  Shortly after obtaining the line of credit, Shia and a co-defendant submitted inaccurate and false loan requests so that the bank would loan Full Shine more money.  Shia admitted that he and his co-defendant owed the IRS more than $57,000 and that they impeded and obstructed the IRS in the collection of the taxes that they owed.  To do this, Shia opened a bank account in the name of another company and diverted money that should have been reported to the IRS.  Further, neither Shia nor Ning used the diverted funds to pay the debt they owed to the IRS.

Former Beauty School Owner Sentenced to One Year in Prison for Filing False Tax Returns

On May 12, 2008, Minneapolis, Minn., Viet Quoc Nguyen, the former owner and operator of Rose Beauty School in St. Paul, was sentenced to 12 months in prison for filing false income tax returns.  Nguyen was indicted in June 2007, and pleaded guilty in October 2007.  According to court documents, Nguyen’s school provided retail cosmetic services to customers and took fees from students who sought cosmetic services training.  Nguyen, however, deposited only some of the receipts into the school’s bank account.  The remainder of the receipts was deposited into Nguyen’s personal account, spent in cash or hidden.  Nguyen filed a tax return with the Internal Revenue Service (IRS) for 2001 which reported no tax due and a net loss from the school, when Nguyen knew his net profit was at least $51,256.  This resulted in an underpayment of approximately $17,961 in taxes to the IRS.  Also on April 15, 2002, Nguyen reported $501 in taxes due and a net profit of $6,209 for tax year 2002, when he knew his net profit was at least $92,144.  This resulted in an underpayment of approximately $35,369 in taxes.  On April 15, 2004, Nguyen reported a $76 refund and a net profit of $3,521 for tax year 2003, when he knew his net profit was at least $48,732.  This resulted in an underpayment of $15,877 in taxes.

Wife of Former Manager of Air Force Base Exchange Services Sold Stolen Merchandise on eBay

On May 5, 2008, in Columbia, S.C., Annette Shockley, the wife of the former store manager of the Army and Air Force Exchange Services (AAFES) Base Exchange located at Shaw Air Force Base, was sentenced to 18 months in prison and ordered to pay $44,799 in restitution to the Internal Revenue Service (IRS).  According to court documents, the Shockleys were selling a large quantity of electronics on the internet site eBay which were similar to merchandise offered at the Shaw Base Exchange where Paul Shockley worked as the manager.  The investigation revealed that between 2003 and 2006, the Shockleys sold hundreds of items on eBay, including camcorders, digital cameras, Microsoft XBox 360 systems, Apple iPod units, and Nintendo DS systems.  Investigators confirmed that Paul Shockley stole the merchandise from the Shaw Base Exchange inventory, and Annette Shockley listed the stolen items for sale on eBay.  An audit of the Shaw Base Exchange inventory confirmed the fraud, and investigators were able to track down purchasers of the stolen merchandise and match serial numbers on the auctioned items to those listed in inventory records for the Shaw Base Exchange.  The Shockleys hid the illicit income from the IRS to evade taxes.  Paul Shockley pleaded guilty in November 2007 and was sentenced on April 29, 2008, to 37 months of in prison.

Former Fairbanks Mayor and Wife Sentenced to Prison for Conspiracy, Misapplication of Government Grant Funds, Money Laundering and Filing False Tax Returns

On May 2, 2008, in Fairbanks, Alaska, Murilda C. “Chris” Hayes and James C. “Jim” Hayes were sentenced to 36 months and 66 months respectively for illegally diverting government funds and money laundering.  The Hayes’s diverted charitable funds for their personal use and for building and furnishing a Fairbanks church.  Chris Hayes was the executive director of Love Social Services Center (LSSC), a charitable organization, set up to provide social and educational services to low income and disadvantaged youth in the Fairbanks community.  Jim Hayes, her husband and the pastor of Lily of the Valley Church of God in Christ (LOVCOGIC), was also a board member of LSSC.  Between 2001 and 2005, LSSC received over $2.7 million in government grants from the Department of Housing and Urban Development and the Department of Justice Office of Juvenile Programs.  LSSC used the original grant money to purchase the old LOVCOGIC church building.  LOVCOGIC then built a new and larger church across the street from its old location.  When construction costs for LOVCOGIC’s new church exceeded its sources of funding, Chris Hayes and Jim Hayes illegally diverted LSSC government grant funds to pay construction bills and provide furnishings and operating expenses for the new church.  The Hayes also used government funds to pay for personal bills and expenditures such as a plasma television for their home, a family wedding reception, credit card bills and old debts, and other personal items.  Chris Hayes concealed the source of the above payments by causing the charity to write checks to cash that she then converted to money orders and cashier’s checks to make the illegal payments.

Illinois Man Sentenced in Nike Shoe Scam to Serve 13 Months for Tax Evasion

On May 1, 2008, in Peoria, Ill., Kent R. Randolph was sentenced to 13 months in prison and two years of supervised release for tax evasion.  Randolph was indicted in August 2007 on conspiracy charges and four counts of tax evasion.  Randolph was a sales representative responsible for placing orders for Nike shoes on behalf of authorized retailers.  The authorized retailers were billed directly by Nike.  Through the use of a separate corporation, formed by Randolph, he executed a scheme to re-route the Nike shoes to unauthorized retailers.  The payments Randolph received from the unauthorized dealers for the Nike merchandise were not reported on his tax returns.  In November 2007, Randolph entered a guilty plea to one count of tax evasion.  He was also ordered to cooperate with the IRS in paying his tax bill.

Hawaii Businessman Sentenced to Prison for Filing False Tax Returns

On April 29, 2008, in Honolulu, Hawaii, Andy S. S. Yip was sentenced to 66 months in prison and ordered to pay $1.76 million in restitution to the Internal Revenue Service for subscribing to false tax returns and related tax offenses.  Yip pleaded guilty to four charges of filing false tax returns for the years 1995 through 1998 and was convicted by a jury of filing a false 1999 tax return by failing to disclose his interest in financial accounts in Hong Kong as well as a related conspiracy charge.  According to evidence introduced during the trial, Yip, a Hawaii resident, ran an "off the books" business which grossed approximately $4 million in receipts in the form of Japanese yen during the period 1995 to 1998 that he converted to U.S. currency.  Yip’s sentence was based on information that the tax loss to the United States was $733,302 and the state of Hawaii was $319,693.

Colorado Man Sentenced to 330 Years in Prison for Multi-Million Dollar “High Yield” Investment Fraud

On April 29, 2008, in Denver, Colo., Norman Schmidt was sentenced to serve 330 years in prison and ordered to forfeit $38.4 million for his role in a fraudulent “high yield investment scheme.”  Schmidt was found guilty in May 2007 following an eight week jury trial, of conspiracy to commit mail fraud, wire fraud and securities fraud, as well as substantive counts of mail fraud, wire fraud and securities fraud, and separately, money laundering.  Schmidt’s wife, Jannice Schmidt, was previously sentenced to serve nine years in prison.  Investors gave Schmidt tens of millions of dollars on the premise that he would invest the victims’ money with return rates of 2 percent to 400 percent per month.  To perpetuate the scheme, the defendants sent investors fraudulent monthly statements which falsely reflected the growth of and earnings on their invested funds. To further their scheme, the defendants created corporate alter egos through which the investment program was offered.  Entities involved in the scheme included the Reserve Foundation Trust, Smitty’s Investments, Capital Holdings, Monarch Capital Holdings, and Fast Track.  The Schmidts and others used investor funds for purposes other than those represented to investors, such as making loans or payments to the defendants, personal expenses, acquisition of unrelated businesses and assets, payments to other investors, and payments of monthly commissions or “overrides” to members of a network of individuals, acquaintances, and insurance agents recruited by the defendants to obtain new investors in the fraudulent program.  Authorities seized money in approximately 60 bank accounts and eight NASCAR race cars, one race truck, as well as other race related vehicles and items.  Federal agents seized assets, including cash and property, worth approximately $24 million.  To date over $18 million in forfeited funds have been returned to the crime victims.

Colorado Man Sentenced for His Role in “High Yield” Investment Fraud

On April 30, 2008, in Denver, Colo., Charles Lewis, of Littleton, Colorado, was sentenced to 30 years in prison and ordered to pay restitution to his victims for his role in a fraudulent “high yield investment scheme.”   A jury returned a guilty verdict against Lewis in May 2007, following an eight week trial.  He was convicted of conspiracy to commit mail fraud, wire fraud, securities fraud, mail fraud, wire fraud and securities fraud, and money laundering.  The scheme’s leader, Norman Schmidt, was sentenced to serve 330 years in prison.  Lewis, Schmidt, and others obtained tens of millions of dollars from hundreds of investors, and used the money for the defendants’ own personal gain.  The defendants engaged in a scheme to defraud investors by implementing a “high-yield investment program.”  Schmidt, with assistance from others, led investors to believe that they would invest the victims’ money, promising rates of return up to 400 percent per month.  To perpetuate the scheme, the defendants sent investors fraudulent monthly statements which falsely reflected the growth and earnings of their invested funds.  To lure and reassure investors, the defendants said that the investments were safe because invested funds could not be moved, and that the investments were insured by insurance companies.  Defendants also misled investors by using false legal opinion letters concerning the status of insurance on investor funds.  To further their scheme, the defendants created corporate alter egos through which the investment program was offered.  The defendants then used investor funds for their own benefit. 

Investment Fraud Scheme Promoter Sentenced to 60 Months for Tax Evasion

On April 29, 2008, in Los Angeles, Dante Marco Fala, of Canoga Park, was sentenced to 60 months in prison and ordered to pay $16.9 million restitution for tax evasion.  During 2002, Fala failed to report over $316,888 in taxable income to the IRS.  As a result of his actions, Fala evaded over $105,981 in federal income tax.  Fala admitted that he owned and operated Harrison Asset Management, Inc., Money Asset Management, Inc., and Cash Asset Management, Inc. as a part of a scheme to defraud investors. Fala’s asset management companies purported to offer investments into distressed debt portfolios.  Fala diverted funds from accounts of the asset management companies to other accounts he controlled and then used the money for his own personal purposes.  Fala also had telemarketers working for him called victims and offered investments in the debt portfolios they had acquired.  As a part of the solicitation, Fala and the telemarketers claimed that they acquired distressed debt portfolios at deep discounts and that the asset management companies were highly successful, making profits and distributing dividends to investors from these supposed profits.  In truth, the asset management companies collected far less on the debt portfolios they acquired than they had spent on their purchase, the companies used victim investors’ money for unauthorized expenses such as excessive and undisclosed commissions, expenditures were made to bring in additional victim funds, and money was used to allow Fala to engage in the day trading of stocks.

Colorado’s Internet Spammer Sentenced to Federal Prison for Tax Evasion

On April 28, 2008, in Denver, Colo., Edward “Eddie” Davidson, of Louisville, Colorado, was sentenced to 21 months in prison and ordered to pay $714,139 in restitution to the IRS for tax evasion and falsifying header information to send spam electronic mail.  Davidson was also ordered to forfeit property, including gold coins, with the ill gotten proceeds of his offense.  Davidson pleaded guilty in December 2007.  He operated Power Promoters, a business that sent unsolicited commercial electronic messages (“spamming”).  The spamming was designed to promote the visibility and sale of products offered by various companies.  From 2005 through 2006, Davidson sent spam on behalf of a Texas company to promote the sale of the company’s stock.  Davidson, aided by several sub-spammers sent unsolicited e-mail messages worldwide, touting the company’s penny stock as an excellent investment.  Davidson’s e-mail messages contained false header information, which concealed the actual sender from the recipient of the e-mail.  Between 2003 and 2006, Davidson received about $1.4 million from the Texas company.  He avoided filing and paying his income taxes from 2003 through 2006, using several tactics, such as:  providing a false social security number for the Texas company to used in issuing his Forms 1099s; providing a false social security number to his bank; having money deposited in a bank account held in the name of his girlfriend; and making cash withdrawals in amount less than $10,000 to avoid the filing of currency transaction reports with the Treasury Department.  The total tax due and owing to the IRS as determined from the IRS criminal investigation was $714,139.

Former Vice President of New Jersey Company Involved in Fraud Scheme Sentenced to 27 Months in Prison

On April 24, 2008, in Hartford, Conn., Jerry D’Aquino, of Lagrangeville, New York, was sentenced to 27 months of in prison to be followed by three years of supervised release.  In addition, D’Aquino was ordered to pay $4.7 million in restitution and pay back taxes in the amount of $73,939, plus penalties and interest.   D'Aquino pleaded guilty in September 2007 to charges of mail fraud in connection with the defrauding a commercial lender, Siemens Financial Services, Inc., out of approximately $11.5 million, and for conspiring to defraud the Internal Revenue Service (IRS).  According to court documents, D’Aquino was the vice president of Operations of Haband, a New Jersey-based apparel company that uses direct mail solicitations.  Thomas Rueli was the president and owner of Total Logistic Services, Inc. (TLSI), a Connecticut-based mail consolidation and transportation provider.  In June 2004, Siemens and TLSI entered into a Loan and Security Agreement pursuant to which Siemens agreed to provide a line of credit to TLSI of up to $12 million.  The amount of money TLSI was able to borrow under the loan agreement was based upon a specified percentage of accounts receivable due to TLSI from its customers.  Under the loan agreement, Siemens had a security interest in all of TLSI’s assets, including its accounts receivable.  On June 1, 2004, the day of the closing of the loan agreement, Rueli represented to Siemens that TLSI’s current accounts receivable totaled approximately $10 million.  The vast majority of this amount was false and fraudulent.  D’Aquino used his position at Haband to assist Rueli with the scheme.  On the date of the closing, Siemens called D’Auino to verify the amount of TLSI accounts receivable from D’Aquino’s company.  D’Aquino falsely verified to Siemens that the receivable balance was $4.8 million.  However, D’Aquino well knew that the amount was truthfully approximately $258,000.  In addition, D’Aquino formed an entity called International Products Corporation (IPC), to which Rueli regularly sent between $2,000 and $4,000.  From June 2001 through December 10, 2005, these payments totaled approximately $314,000.  D’Aquino made clear to Rueli that TLSI should not issue an IRS Form 1099 for these payments, as D’Aquino did not want to report this income to the IRS.  In fact, D’Aquino did not report these payments as income on either IPC’s federal income tax returns – IPC filed no such returns with the IRS for the tax years 2001, 2002 or 2003 – or on his personal federal income tax returns.  The tax loss to the government resulting from the conspiracy to defraud was $73,939.  On October 31, 2006, Rueli pleaded guilty to two counts of mail fraud and one count of conspiracy to defraud the IRS.  On June 28, 2007, he was sentenced to 57 months of imprisonment.

Wesley Snipes Sentenced to Three Years in Prison; Co-Defendants Receive 10 Years and Four and a Half Years in Prison

On April 24, 2008, in Ocala, Fla., Wesley Trent Snipes was sentenced to 36 months in prison for charges of failing to file income tax returns.  Snipes was found guilty by a jury on February 1, 2008.  Eddie Ray Kahn, of Sorrento, Florida, was sentenced to 120 months in prison and Douglas P. Rosile, of Venice, Florida, was sentenced to 54 months in prison.  The same jury found Kahn and Rosile guilty of conspiracy to defraud the Internal Revenue Service and presenting a fraudulent claim for payment to the IRS.  Kahn was the founder and leader of American Rights Litigators (ARL) based in Lake County, Florida.  Rosile prepared returns for ARL clients, such as Snipes.  According to an indictment filed in October 2006, Kahn and Rosile through ARL promoted a fraudulent tax scheme based on the so-called "861 argument," asserting that United States citizens and residents could be taxed only on income derived from certain foreign-based activities and not on wages and other income earned within the United States.  The argument has been consistently rejected by courts. 

Former District of Columbia Employee Sentenced to 51 Months in Prison

On April 24, 2008, in Washington, D.C., Stephanie Emerson Olds, a former District of Columbia employee, was sentenced to 51 months in prison to be followed by three years of supervised release for the federal charges and five years of probation for the District of Columbia charge.  She was also ordered to pay $88,050.33 in restitution to the United States and District of Columbia governments.  Olds pleaded guilty in November 2007 to charges of filing false claims, first-degree fraud, and theft from a program receiving federal funds.  According to the proffer of evidence by the government at the time of the plea, Olds filed a false federal income tax return in 2001 and false District of Columbia income tax returns in 2001 and 2002.  Olds provided her tax preparer with forged W-2 forms stating that an employer, for whom Olds no longer worked, withheld from her salary large amounts of money for federal and District of Columbia taxes.  As a result, the tax preparer filed false returns on Olds’s behalf claiming over $58,000 in fraudulent refunds.  In addition, in 2003, Olds was employed at the District of Columbia Child and Family Services Agency (CFSA) as a budget analyst.  Her duties included processing invoices for the agency.  In the summer and fall of 2003, Olds obtained checks from businesses that owed money to CFSA.  She then deposited these checks into her personal bank account.  In this scheme, Olds stole over $24,000 from CFSA.

Wisconsin City Employee Sentenced to Prison for Using City Resources to Operate Private Business

On April 22, 2008, in Madison, Wis., Robert D'Angelo was sentenced to 12 months plus one day in prison and ordered to pay a $4,000 fine for mail fraud and filing a false income tax return.  On October 10, 2007, a federal grand jury sitting in Madison returned a 39 count indictment against D'Angelo.  The indictment charged D'Angelo with 15 counts of mail fraud, 15 counts of wire fraud, four counts of filing false federal income tax returns, four counts of money laundering, and one count of asset forfeiture.  The mail and wire fraud counts alleged that D'Angelo defrauded the city of Madison by operating two side businesses from his city office, using city resources, including his office computer, office employees, office supplies and equipment, and office storage facilities.  The indictment also alleged that D'Angelo filed false income tax returns for the years 2001 through 2004.  On January 31, 2008, D'Angelo entered guilty pleas to a mail fraud count and a false tax return count.  D'Angelo admitted that he used city resources to operate his used book business and consulting business.

Wisconsin Businessman Sentenced for Tax Evasion and Money Laundering

On April 21, 2008, in Milwaukee, Wis., Ronald Miserendino was sentenced to 48 months in prison for tax evasion and conspiracy to commit money laundering.  Miserendino owned Trace Corporation, a Wisconsin corporation primarily engaged in the business of renting and developing real estate.  Miserendino’s wife filed for divorce and sought a division of the couple’s property, including the assets of his businesses.  Miserendino’s took action to reduce his assets.  He named his son the president and owner of Trace Corporation and gave him 49 percent of his company.  He received $4.5 million in loans and a $500,000 line of credit from a bank purportedly for buying investment property. He liquidated $10 million in treasury bonds owned by Trace and sold real estate.  Miserendino traveled to Australia where he opened accounts and leased safe deposit boxes at various banks.  On these trips, Miserendino took proceeds from his activities and placed cash into safe deposit boxes. In 2001, Miserendino filed a tax return stating that his income was $4.3 million.  On his federal tax return, he did not report all of the proceeds from various transactions in 2001.  Failure to report the loans and revenue on his tax return was estimated to be between $400,000 and $1 million in additional income.

Man Who Took Money from Trust Sentenced to 8½ Years in Federal Prison for Wire Fraud and Money Laundering Scheme

On April 17, 2008, in Anchorage, Alaska, Mark J. Avery was sentenced to 8½ years in prison and ordered to pay $52.125 million in restitution for wire fraud and money laundering.  Avery’s sentencing is the result of his guilty plea in March 2006, to seven counts of wire fraud and seven counts of money laundering in connection with his actions in arranging for, and spending $52 million dollars secured by the assets of the May Smith Trust, a trust created for the care and maintenance of May Wong Smith, for which he was an appointed trustee.  Evidence obtained from search warrants for Avery businesses, including Security Aviation, Inc., included thousands of pages of documents detailing his breach of fiduciary duty as Trustee.  The court was told during the sentencing hearing that the matter was a massive breach of trust in that none of Avery’s purchases nor his business plans were in any way designed to benefit May Wong Smith or her personal trust but were in fact designed to benefit Avery and the businesses he purchased.

Texas Man Sentenced for Tax Fraud

On April 16, 2008, in Tyler, Texas, Jimmy Max Wilson was sentenced to 24 months in federal prison and ordered to pay $73,554 in restitution for tax fraud.  Wilson was indicted in September 2007 and charged with presenting false claims against the Internal Revenue Service (IRS).  He pleaded guilty to that charge on November 20, 2007.  According to the factual statement filed in court, Wilson admitted filing false claims against the IRS using identities that he knew were false and that he claimed refunds he knew that he was not entitled to receive.  Wilson also used false identifications to open bank accounts and apply for loans.

Oregon Resident and Corporation Sentenced in Securities Fraud Scheme

On April 15, 2008, in Eugene, Ore., Michael Marks Rich (also known as Richard Forbes Williams and Michael Richard Brown), former president and chief executive officer of Pac Equities, Inc., was sentenced to serve 20 years in prison and ordered to pay $10.4 million in restitution to his victims.  Rich and Pac Equities were found guilty in December 2007 of securities fraud, wire fraud, mail fraud, bank fraud, attempted bank fraud, money laundering, obstruction of justice and tax fraud.  Rich and Pac Equities solicited investors to invest in real estate development projects and loans promising annual returns of at least 10 percent.  They claimed that the investments were secured by trust deeds and always had at least 30 percent in equity, with no more than 70 percent loan to value ratio.  Rich and Pac Equities created the facade of a successful business by using investor principal to make monthly payments to investors.  They claimed that the payments constituted interest earned from profitable investment and loan activity, then used this facade to recruit additional investors and retain existing investors, knowing that the only sources of income for Pac Equities were from a few projects and loans.  These amounts were insufficient to meet monthly interest obligations which Pac Equities owed its investors.  Rich misrepresented his educational background, his employment history, and the nature and security of the contracts, which caused over 300 people to invest more than $18 million with Pac Equities.  The money laundering charges were based upon Rich’s use of investor money to pay personal expenses.  The obstruction of justice charges were based on evidence Rich that hid from authorities.  The tax fraud charges were based upon $139,500 Rich failed to report to the IRS in 2003 and $155,000 Rich failed to report to the IRS in 2004.

California Real Estate Developer Sentenced for Filing a False Tax Return and Failure to Disclose Foreign Bank Accounts to IRS

On April 14, 2008, in Santa Ana, Calif., Igor Olenicoff, founder and president of real estate company Olen Properties Corp., was sentenced to two years probation and 120 hours of community service for filing a false 2002 tax return related to foreign bank accounts he failed to disclose to the IRS.  As part of his December 2007 plea Olenicoff also paid $52 million to the IRS for six years of back taxes, penalties and interest.  According to court documents, during the years 1992 through 2004, Olenicoff owned financial accounts outside of the United States.  As early as August 1997, Olenicoff listed himself as chairman of Sovereign Bancorp LTD and president and director of National Depository Corporation, Ltd on signature cards for Barclays Bank in the Bahamas, which also listed Olenicoff as an authorized signatory on these accounts.  During this period, Olenicoff also had signatory authority and controlled several financial accounts with Solomon Smith Barney, which were held in the London, England office of Solomon Smith Barney.  Olenicoff’s accounts in the England offices of Solomon Smith Barney were held in the names of Sovereign Bancorp, Ltd., National Depository Corporation, Ltd., Guardian Guarantee Company, Ltd, Continental Realty Funding Corporation, and Swiss Finance Corporation.  Olenicoff opened several accounts at UBS (formerly known as Union Bank of Switzerland), in Switzerland, in which Olenicoff had signatory authority and listed himself as vice president and director of accounts under the name of Guardian Guarantee Company Ltd. and New Guardian Bancorp APS.  In addition, Olenicoff also had signatory authority and control over several financial accounts at Neue Bank in Liechtenstein, including an account in the name New Guardian Bancorp APS.  According to the plea agreement, Olenicoff filed his personal income tax returns with the IRS for the respective tax years but he failed to report the foreign bank accounts and the names of the financial institutions on IRS Schedule B, Part III.  Line 7a of Schedule B asks: “At any time during [calendar year], did you have an interest in or a signature or other authority over a financial account in a foreign country, such as a bank account, securities account, or other financial account?”  On his tax returns, Olenicoff falsely answered “no”.

Two Mississippi Mortgage Brokers Sentenced in Separate Mortgage Fraud Schemes

On April 4, 2008, in Jackson, Miss., David Kennedy and LaVonne Hamilton, two former mortgage brokers, were sentenced for their roles in separate mortgage fraud schemes.  David Kennedy was sentenced to 24 months in prison followed by three years of supervised release.  LaVonne Hamilton was sentenced to 16 months in prison followed by two years of supervised release.  In November 2007, Kennedy and Hamilton each pleaded guilty to conspiracy to commit money laundering of the proceeds from their individual mortgage fraud schemes.  According to court documents, Kennedy and Hamilton conspired with others to submit false information to mortgage lenders and secure fraudulent mortgage loans for others by using interstate wires.  From these fraudulent proceeds Hamilton and Kennedy and their co-conspirators received numerous fees, commissions and other profits to which they were not entitled. To promote the continuation of the mortgage fraud schemes, from the proceeds of these fraudulent loans Kennedy and Hamilton each received additional profit from the real estate transactions to which they were not entitled under the guise of payments to fictitious creditors which were actually alter ego companies associated with Hamilton or Kennedy.  As a result of the fraudulent information submitted to the various mortgage lenders by Hamilton, Kennedy and their co-conspirators in each of these cases, fraudulent mortgage loans exceeding $835,000 were collectively disbursed.

Waste Hauler Involved in Racketeering Conspiracy Sentenced to One Year in Prison

On April 3, 2008, in New Haven, Conn., Dennis Bozzuto was sentenced to 12 months in prison, followed by three years of supervised release, and ordered to pay a $10,000 fine.  Bozzuto pleaded guilty on November 16, 2006, to conspiring to violate the federal Racketeer Influenced and Corrupt Organizations (RICO) Act.  According to court documents and statements made in court, Bozzuto, while he was an owner and operator of John’s Refuse of Northford, Connecticut, conspired with others to perpetuate a system, commonly called the “property rights system.”  Carters engaged in the property rights system would not service or compete for other carters’ customers.  The property rights system essentially destroys free enterprise, allowing the participating carters to artificially inflate their prices and leaving waste removal customers with no other options.  In this scheme, which was directed at commercial and municipal customers, Bozzuto admitted that he participated in the affairs of the enterprise by agreeing to respect the unwritten rules of the property rights system.  To date, 33 individuals and 10 businesses have been charged with various offenses stemming from a long-term investigation into the waste-hauling industry in Connecticut and eastern New York.

Former Employee at Regional Medical Center at Memphis Sentenced to Five Years in Prison

On April 1, 2008, in Memphis, Tenn., Cassandra J. Stanfield, a former employee at the Regional Medical Center at Memphis, was sentenced to 60 months in prison, followed by six years of supervised release, and ordered to pay $2.8 million in restitution.  Stanfield pleaded guilty to embezzling monies from the medical center and income tax evasion on September 24, 2007.  As part of her plea agreement, Stanfield agreed to forfeit her interest in all property derived from her criminal conduct and to pay restitution to all identifiable victims who suffered losses as a result of her criminal conduct.  In pleading guilty to income tax evasion, Stanfield admitted that for calendar year 2004 she did not file a tax return despite the fact that she received taxable income in the approximate amount of $968,523 on which she owed approximately $317,051 in taxes.

Leader of $17 Million Investment Fraud Scheme Sentenced to 37 Months in Prison

On March 27, 2008, in Baltimore, Md., Joseph Poteat was sentenced to 37 months in prison, followed by three years of supervised release for conspiracy to commit mail fraud and conspiracy to commit money laundering in connection with a fraudulent investment scheme.  According to his plea agreement, Poteat controlled a “private membership organization” known as the CEP Group, and JLR Development, Ltd., both of which operated out of Danville, Virginia.  Poteat represented to potential investors that JLR was an entity that invested in offshore ventures.  In order to invest in JLR, individuals had to first join CEP by paying a membership fee of $80.  Poteat and others recruited individuals from throughout the United States to join CEP, making misleading representations to the investors as to how their investment in JLR would work and the amount of guaranteed return.  Poteat would send the investors monthly and quarterly statements containing false information about the returns the investors were earning.  According to court documents, between 1999 and 2001, Poteat and his co-conspirators collected approximately $17 million from investors in JLR and from members in CEP.  In order to lull investors into believing that their investments were earning returns, Poteat and his co-conspirators made several million dollars in payments to investors by providing them with funds invested by newer investors.  Between 1999 and 2001, Poteat engaged in a series of financial transactions through which he and/or family members received approximately $700,000 in CEP member and JLR investor funds.  During that same time frame, Poteat made periodic transfers of funds from JLR and/or CEP bank accounts into bank accounts controlled by Marie Bellamy.  Bellamy admitted she willfully failed to report some of the funds from JLR as income on her tax returns for tax years 1999 and 2000, and that she did not file a federal income tax return for tax year 2001.  Ultimately, Poteat and his co-conspirators caused the investors to lose more than $7 million.  Co-defendant Marie Bellamy was sentenced to 18 months probation with the first six months to be served in home detention with electronic monitoring, for filing a false tax return.  Bellamy was also ordered to pay $56,768 in restitution to the Internal Revenue Service. 

California Executive Assistant Sentenced to 20 Months in Prison for Embezzling $1.4 Million and Filing False Tax Returns

On March 24, 2008, in San Jose, Calif., Suzie Moy Yuen was sentenced to 20 months in prison, followed by three years of supervised release, and ordered to pay $182,000 in restitution.  Yuen pleaded guilty on October 9, 2007, to mail fraud and to willfully subscribing to a false tax return.  According to her plea agreement, Yuen served as an executive assistant to an individual for over ten years and that during that time her duties included paying the individual’s bills and recording the payments in a general ledger. To permit her to do her job, the victim, who is now 99 years old, had given Yuen signature authority over two of his checking accounts.  Between 1999 and 2003, Yuen fraudulently used the victim’s checking accounts to pay her own personal credit card bills and made false entries in the general ledger to conceal her fraud.  Yuen admitted to embezzling over $1.4 million.  She further admitted that she failed to report the money she embezzled as income on her tax returns for the 1999 to 2003 tax years.  As a result, Yuen owes the IRS, excluding interest and penalties, a total of $492,646 in taxes.

Georgia Businessman Skimmed Over a Half-Million Dollars from His Company

On March 21, 2008, in Gainesville, Ga., Robert Merickle, owner of East Coast Marketing, dba Blue Haven Pools, was sentenced to 12 months and one day in federal prison, to be followed by one year of supervised release, and ordered to cooperate with the IRS in determining an amount of restitution.  Merickle pleaded guilty on December 20, 2007, to the charges of filing a false tax return in 2001.  According to court documents and information presented in court, in 2001, Merickle spent over $200,000 out of his company’s account for personal expenses, including the financing of a 55' luxury yacht, but treated those expenses as business expenses.  He also accepted tens of thousands of dollars in cash from customers, which he kept off of the company’s books and therefore off of its tax returns.  Merickle engaged in similar conduct in 2000, 2002 and 2003, which along with 2001, amounted to over $500,000 in unreported income.

Owner of Company Involved in Waste-Hauling Conspiracy Sentenced to 15 Months in Prison

On March 20, 2008, in New Haven, Conn., Arthur Wallinger, aka AJ Wallinger, was sentenced to 15 months in prison, to be followed by three years of supervised release, and ordered to forfeit $25,000 to the United States.  Wallinger, who is the owner and operator of AJ Waste Systems, a carting company located in Cheshire, pleaded guilty in June 2007 to conspiring to violate the federal Racketeer Influenced and Corrupt Organizations (RICO) Act.  According to court documents and statements made in court, Wallinger and others conspired to perpetuate a system, commonly called the “property rights system.”  Carters engaged in the property rights system do not service or compete for other carters’ customers.  The property rights system essentially destroys free enterprise, allowing the participating carters to artificially inflate their prices and leaving waste removal customers with no options.  To date, 33 individuals and 10 businesses have been charged with various offenses stemming from a long-term investigation into the waste-hauling industry in Connecticut and eastern New York.

Virginia Woman Sentenced to 94 Months in Prison for Role in Fraud and Tax Evasion Schemes

On March 18, 2008, in Abingdon, Va., Carol Irene Estep, of Hurley, Va., was sentenced to 94 months in prison for her role in a wide ranging fraud scheme involving herself, her son and her ex-husband.   Estep pleaded guilty in August 2007 to one count of conspiracy to commit mail fraud, one count of conspiracy to commit bank fraud, one count of conspiracy to defraud the United States, one count of aggravated identity theft, one count of money laundering, and one count of Social Security fraud.  According to court documents, Estep, Timothy Carl Ling, her son, and Herman Scott Ling, her ex-husband, entered into a scheme in which the family defrauded the Virginia Consumer Services Fund and received money to which they were not entitled by falsely claiming that Timothy Carl Ling was a quadriplegic.  The Virginia Consumer Services Fund and Clinch Independent Living Services, Inc., which provides funding and services to disabled individuals so that they may live a more independent life, purchased a specially equipped van and built ramps at Estep’s home based upon the pair’s fraudulent representations that Timothy Carl Ling was a quadriplegic.  According to testimony presented at the sentencing hearing, the agencies spent more than 50 staff hours and more than $14,000 assisting Timothy Carl Ling and Estep.  Additionally, Timothy Carl Ling and Estep perpetrated a credit card fraud scheme between the summer of 2005 and October 2006 in which they defrauded five separate credit card companies and incurred a loss to these companies and merchants of $344,465.  None of these individuals reported their income to the Internal Revenue Service (IRS) or the Social Security Administration Office and Timothy Carl Ling, Estep, and Herman Ling actively tried to hide this income from the IRS by engaging in money laundering transactions.

Connecticut Man Sentenced for Embezzling Nearly $2 Million and Filing False Tax Returns

On March 10, 2008, in Hartford, Conn., Jeffrey M. Bourke was sentenced to 18 months in prison, to be followed by three years of supervised release, and ordered to pay $1,985,123 in restitution.  On October 2, 2007, Bourke pleaded guilty to four counts of mail fraud and one count of filing a false tax return.  According to documents filed with the court and statements made in court, from approximately June 2001 through August 2006, Bourke was an employee of a major health insurer in Connecticut.  Bourke worked in the company’s East Region marketing area and had responsibilities in the areas of finance, vendor management, and operations.  In September 2003, Bourke formed, in name only, a sham company called Health Management Solutions LLC.  Starting in October 2003, Bourke used Health Management Solutions as a means to embezzle money from his employer.  As part of his employment duties, Bourke was involved in vendor services and aware of the types of goods and/or services for which his employer contracted.  Using this knowledge, he created fictitious invoices that falsely represented goods and/or services provided by Health Management Solutions.  Bourke then presented the false invoices to company management for authorization.  As a result, the company mailed checks totaling approximately $1,985,123 to Bourke.  Bourke spent the money for his own personal use.  Bourke also filed false tax returns for the years 2003 through 2005 because he either failed to report the money that he had embezzled or reported some of the embezzled funds as gross receipts and then reported false expense deductions to reduce his income.  As a result, Bourek owes back taxes in the total amount of $428,260, plus penalties and interest. 

Indiana Woman Sentenced to 48 Months for Million Dollar Fraud

On March 7, 2008, in Indianapolis, Ind., Anne Geyman, former treasurer of the Switzerland County School Corporation was sentenced to 48 months in prison and ordered to pay $1.15 million in restitution for filing false federal tax returns and mail fraud.  Geyman pleaded guilty in January 2008 to embezzling $1.1 million from the Switzerland School Corporation.  She illegally wrote 200 checks to pay for personal credit card debts and altered bank statements and canceled checks to hide the embezzlement.  The scheme was discovered during a 2007 audit by the Indiana State Board of Accounts.  In addition, when she worked as the treasurer of Madison Regatta, Inc., a not-for-profit organization, Geyman used organization funds to pay $24,489 in personal debts.  In another scheme, she perpetrated a $76,074 fraud on a car dealership.  Through a public auction arranged by federal authorities, Geyman has already repaid $56,773 to the school corporation. 

Michigan Man Sentenced for Tax Evasion

On March 6, 2008, in Grand Rapids, Mich., Charles E. Hughes, of Dansville, Mich., was sentenced to 15 months in prison and ordered to pay restitution of $37,559 to the U.S. Treasury for tax evasion.  Hughes was convicted by a federal jury of four counts of tax evasion on December 6, 2007.  Hughes, a sprinkler fitter, purchased a “16th Amendment Reliance Defense Package” for $3,500 in 2000 from William Benson, of Chicago, Ill.  This package of material purports to establish that the federal income tax, as applied to individuals, is unconstitutional. Although the legal analysis and claims contained in the package have been thoroughly discredited, some persons who buy these kinds of packages have used it in attempts to justify their decision to stop paying federal income taxes.  Hughes failed to file his 2000 through 2002, and 2004 federal tax returns, despite having more than $300,000 in income over that period.  In addition to his failure to file returns, Hughes also avoided having federal tax withheld from his income.

Former Securities Broker Sentenced to 42 Months in Federal Prison for Stock and Extortion Schemes

On March 3, 2008, in Camden, N.J., Rhett Howard Kirchhoff, a former securities broker, was sentenced to 42 months in prison and ordered to pay $11.6 million in restitution.  Kirchhoff pleaded guilty on March 13, 2006, to a four count Information that charged him with conspiracy to commit securities and wire fraud; conspiracy to commit money laundering; conspiracy to affect commerce by extortion; and bankruptcy fraud.  At his plea hearing, Kirchhoff admitted his involvement in an intricate stock fraud and money laundering scheme that cost public investors more than $15 million in losses and a scheme to extort money and stock from several stock promoters and corporate insiders through the use of threats and violence.  From 1995 until 1998, Kirchhoff, who was licensed to sell securities by the NASD, owned and controlled DiMedio Kirchhoff & Co., Inc. and was an employee of the Kirchhoff Organization, Ltd.  Both companies were registered securities brokerages with offices in Cherry Hill, Marlton and Ocean City.  Kirchhoff admitted that he conspired with Robert P. Gordon, of St. Petersburg, Fla., who was the chairman and CEO of TeleServices Internet Group, Inc., (TSIG) and others in a scheme in which they used deceptive and manipulative practices in connection with the fraudulent issuance, purchase and resale of stock of TSIG from December 1996 through October 2000.  On April 9, 2007, with the assistance of Kirchhoff’s cooperation and testimony, Gordon was convicted by a jury of one count each of conspiracy to commit securities and wire fraud and conspiracy to commit money laundering.  Gordon, who was the ringleader of the scheme, was sentenced to 240 months in federal prison on September 24, 2007. 

Leaders of Multi-Million Dollar Immigration and Tax Scam Sentenced to Prison

On March 3, 2008 in Grand Rapids, Mich., Richard M. Rosenbaum, of Longwood, Fla.; Edward Scott Cunningham, of West Palm Beach, Fla.; and Christina A. Flocken, of Longwood, Fla., were sentenced for tax evasion and operating a nationwide janitorial service staffed almost exclusively with illegal aliens.  Rosenbaum, the former president of Rosenbaum-Cunningham International (RCI), was sentenced to 10 years in prison for conspiring to defraud the United States and harboring illegal aliens.  Cunningham, the company’s former vice president, was sentenced to a four year and three month prison term.  Flocken, the company’s former controller was sentenced to two years and six months in prison.  In addition, Rosenbaum was ordered to pay $16.9 million; Cunningham was ordered to pay $16.3 million; and Flocken was ordered to pay $15.7 million.  The three also forfeited numerous bank accounts, life insurance policies and $3 million derived from their illegal activity.  According to the Indictment and a Superseding Felony Information, RCI operated as a cleaning and grounds-maintenance service company for theme restaurant chains and hospitality venues throughout the United States.  It was staffed predominantly with illegal aliens.  By failing to collect and pay federal income, Social Security and Medicare, and federal employment taxes on the wages it paid to its workforce, RCI evaded $15.7 million in employment taxes.  Much of the money was used by Rosenbaum, Cunningham and Flocken to support extravagant lifestyles.

Doctor and Son Sentenced for Conspiracy to Evade Federal Income Taxes

On March 3, 2008, in Jackson, Miss., Dr. Billy Ray Shows of Newton, Mississippi, and his son, Billy Ray Shows, II, of Jackson, Mississippi, were sentenced for conspiring to evade federal income taxes.  Dr. Shows was also sentenced on three counts of attempted tax evasion for the years 1999, 2000, 2001.  Dr. Billy Ray Shows was ordered to serve 27 months in prison, to be followed by three years of supervised release, and ordered to pay a $50,000 fine.  Billy Ray Shows II was sentenced to serve 24 months in prison, to be followed by three years of supervised release.  In addition, the two defendants must jointly pay $9,946 for costs of prosecution.  Evidence at trial showed that Dr. Shows practiced medicine at Shows Medical Clinic and at various emergency rooms throughout the state.  Billy Ray Shows II was the alleged owner of the building in which Shows Medical Clinic was located.  The Shows established a sham business which was used to divert and conceal the income of Dr. Billy Ray Shows and to reduce the taxable income of Billy Ray Shows II.  This was accomplished by Dr. Billy Ray Shows diverting income to his son and claiming such income as “rental payments,” which Dr. Billy Ray Shows then would record as rental business expenses on his books and records.  Billy Ray Shows II in return used the income he received from Dr. Billy Ray Shows to purchase assets and invest in businesses that were not in Dr. Billy Ray Shows’ name but were controlled by him.  Further, Billy Ray Shows II actually diverted some of this money in the form of “rental payments” back to Dr. Billy Ray Shows for his personal use.  This money was paid back to Dr. Shows in the form of checks written to him and checks made payable to “Cash” which were deposited into Dr. Shows’s personal checking account. When the defendants were confronted by the IRS special agents investigating the matter, the Shows made false statements and representations to the agents in order to disguise Dr. Show’s income and conceal his interest in certain property and businesses.

Michigan Certified Public Accountant Goes to Jail for Filing False Tax Returns

On February 28, 2008, in Detroit, Mich., Certified Public Accountant Abraham Nicola Nunu, of Dearborn Heights, was sentenced to a year and a day imprisonment and ordered to pay a $3,000 fine and restitution to the Internal Revenue Service (IRS) for filing false tax returns.  According to court records, Nunu filed false 2000 and 2001 personal income tax returns with the IRS that reflected taxable income of approximately $99,000, when his actual taxable income for those tax years was approximately $337,000.  Nunu pleaded guilty on October 31, 2007.

Former Wisconsin Restaurant Owner Receives Prison Term for Evading Income Taxes

On February 27, 2008, in Madison, Wis., Sabi Atteyih was sentenced to 12 months and one day in prison, to be followed by a three year term of supervised release for income tax evasion.  On January 2, 2008, Atteyih pleaded guilty to evading his income taxes for 2002.  While owning the Casbah Restaurant in Madison, Atteyih underreported his taxable income from the restaurant from 2002 through 2005 by $349,673 and he evaded income taxes totaling $128,938.

Former Owner of Adult Entertainment Clubs is Sentenced to Prison

On February 15, 2008, in Memphis, Tenn., Ralph Lunati, former owner of adult entertainment establishments throughout the country, was sentenced to 18 months in prison following enforcement actions involving two Memphis adult entertainment clubs, Platinum Plus and Tunica Caberet.  In November 2007, Lunati pleaded guilty to conspiracy to facilitate the carrying on of an unlawful activity, specifically a business enterprise involving prostitution and promoting prostitution.  Lunati agreed to forfeit any property derived from proceeds obtained directly or indirectly as a result of the unlawful activity, including over $200,000 in United States currency and real estate property.

Ex-Restaurant Owner Sentenced to Prison for Tax & Bankruptcy Fraud

On February 15, 2008 in San Diego, Calif., Karl James, the former owner and operator of more than 50 Taco Bell franchises in southern California and Arizona, was sentenced to serve 36 months in prison and ordered to pay $1.12 million in restitution to the victims of his bankruptcy fraud and $1.17 in restitution to the Internal Revenue Service (IRS) for unpaid taxes.  James pleaded guilty on October 19, 2005 to bankruptcy fraud and tax evasion.  In his plea agreement, James, who at that time was the president and chief executive officer of Golden West Tacos Inc. (GWT), admitted that from May 2, 1998, through June 5, 2001, he fraudulently diverted more than $3 million in GWT income and assets for his personal use, including beverage and food supplier rebate checks issued to GWT and expensive residences purchased with the company’s funds.  James admitted to hiding the scheme by transferring GWT assets to "off book" company accounts and accounts in the name of others, including his late father, his stepmother, and Sea Horse Enterprises LLC, a limited liability company that James owned and controlled.  He further admitted that he transferred residences in Rancho Santa Fe and Palm Springs, Calif., to his nominees and concealed these transfers by making false entries in GWT’s books and records.  In pleading guilty, James admitted that in filing Chapter 11 bankruptcy petitions, he concealed the existence and fraudulent diversion of approximately $2 million.  James also admitted that he filed fraudulent individual income tax returns for the tax years 1998, 1999 and 2000 and failed to report more than $3 million in diverted GWT funds.  In doing so, James evaded more than $1.1 million in personal income taxes for the three years.

Second-in-Command in Massive Mortgage Fraud Scheme Sentenced to 7 Years in Prison; Ordered to Pay Over $40 Million in Restitution

On February 14, 2008, in Atlanta, Ga., Leslie Rector was sentenced to 84 months in prison to be followed by three years of supervised release, and ordered to pay $40.2 million in restitution.  Rector was convicted by a trial jury on March 14, 2007 on charges of conspiracy, loan fraud, mail and wire fraud, and money laundering.  According to the information presented in court, Rector was the right-hand man of co-conspirator, Phillip E. Hill, and assisted Hill in orchestrating a massive mortgage fraud scheme that targeted the Atlanta area from 2000 through 2003.  The criminal activities related to mortgages obtained in the sale of over 50 homes and over 250 condominiums in eight Atlanta-area condominium complexes.  Each property was sold at an inflated price to a “straw purchaser” who applied for a mortgage loan based upon the inflated price.  Such a fraudulent transaction is called a mortgage “flip.”  The straw purchasers who participated in these mortgage flips were paid a kickback out of the excess loan proceeds for the use of their name and credit.  The victim lenders granted the loans based upon numerous false representations and documents regarding the credit qualifications of the straw purchaser as well as false representations that the straw purchaser had paid a down payment, would reside in the home, and would be responsible for the loan payment.  In addition, the lenders were induced to make the loans based on fraudulently inflated appraisals.  Some of the properties were “flipped” more than one time. Hill was sentenced in September 2007 to 28 years in prison.  Also convicted at trial with Rector and Hill were eight other co-defendants.  In addition, eleven other individuals pleaded guilty to mortgage fraud charges related to the scheme.    

North Carolina Resident Sentenced for Filing False Income Tax Returns

On February 8, 2008, in Winston-Salem, N.C., Louie George Sinclair, of Durham, N.C., was sentenced to 18 months in prison and ordered to pay $62,203 in restitution to the United States Department of the Treasury for filing false federal income tax returns during a wire fraud scheme.  Sinclair was originally indicted by a federal grand jury in Greensboro in February 2007.  According to court documents, Sinclair persuaded a friend that he had expertise in financial planning and tax preparation, she provided him with her tax information and agreed to allow him to file timely personal income tax returns for her for the tax years 2000 and 2001.  Although the friend actually owed additional taxes and directed Sinclair to pay those taxes, Sinclair instead filed fraudulent returns without the friend’s knowledge that claimed inflated medical and employment expenses and requested large refunds.  Sinclair also filed a third return entirely without the friend’s knowledge for 2003 that requested an additional refund to which she was not entitled.  Sinclair’s scheme was uncovered when his friend attempted to file her own income tax return for 2003 and was notified by the Internal Revenue Service that a return for that year had already been filed for her and a refund had been issued.

Former Auburn University Professor Sentenced to 63 Months in Prison; Ordered to Pay Over $1.3 Million in Restitution

On February 5, 2008, in Montgomery, Ala., Loyd Frank Lawing, Jr., a former Auburn University professor and Army Lt. Col., was sentenced to 63 months in prison without parole for singlehandedly embezzling nearly $100,000 from the Small Business Administration (SBA) in 9/11 disaster relief funds and over $940,000 from the Auburn University branch of Alpha Tau Omega (ATO).  Lawing was ordered to pay nearly $1 million to ATO, nearly $100,000 to the SBA, and over $300,000 to the Internal Revenue Service (IRS).  In August 2007, Lawing pleaded guilty to embezzling over $940,000 in monies he was entrusted with as chapter advisor, secretary, and treasurer of the Auburn University branch of the social fraternity Alpha Tau Omega.  Lawing also pleaded guilty to tax evasion and to a fraud in connection with Small Business Administration 9/11 Disaster Loans.  During his plea hearing, Lawing admitted that from approximately June 2002, and continuing until approximately July 13, 2005, he had access to the fraternity’s banking accounts and embezzled nearly all the fraternity’s funds from area Auburn banks.  Lawing was able to accomplish the scheme because he controlled proceeds of the fraternity’s sale of its building, totaling nearly $1 million.  Lawing also admitted that he implemented a series of lulling tactics designed to conceal the fraternity’s increasingly depleted funds. These tactics first included false assurances that the initial proceeds from the sale of the property had been invested in a CD and a money market account.  Later, Lawing falsely assured that a “nest egg” had been created in the form of a fraternity trust with the assistance of a local Auburn, Alabama, attorney.  Finally, Lawing admitted that he failed to report his embezzled income on his and his wife’s federal income tax return.

Rhode Island Businessman is Sentenced for Tax Evasion

On February 1, 2008, in Providence, R.I., Neil Stierhoff was sentenced to 46 months in prison and ordered to pay a $40,000 fine for tax evasion.  A jury found Stierhoff guilty of failing to pay taxes on about $1.2 million in income he earned from selling electronic testing equipment between 1999 and 2002.  He sold the equipment by mail, in person, and through eBay.  To conceal his income, Stierhoff did business under several aliases, including Joseph Adams, Adams Associates, and Universal Audio.  To further distance himself from his income, Stierhoff used mail drops in Providence and White Plains, New York.  He also extensively used cash, regularly withdrawing money from ATMs and using money orders to pay debts.  The evidence showed that he withdrew approximately $240,000 from ATMs between 1999 and 2002.  A Rhode Island State Police detective testified during the trial that he found more than $100,000 in cash in Stierhoff’s room.  Stierhoff will also have to pay all back taxes, plus interest and penalties.

Pennsylvania Businessman Sentenced in Payroll Tax Scheme

On January 31, 2008, in Philadelphia, Penn., Kheirallah Ahmad was sentenced to 48 months in prison and ordered to pay $1.2 in restitution to the Internal Revenue Service for conspiracy and for filing a false tax return.  Ahmad, chief executive officer of the Cousins Food Market (CFM) chain in North Philadelphia, pleaded guilty to the charges in July 2007.  According to court documents, Ahmad paid some of his employees in cash and he did not withhold federal, state or local payroll taxes as required by law.  Ahmad paid more than $3.6 million in wages under-the-table.  In an effort to hide the scheme, Ahmad and others skimmed approximately $7.7 million of receipts from his company’s revenues and intentionally failed to report these receipts to their accountant for inclusion on CFM’s income tax returns.  Ahmad admitted that his 20-year conspiracy resulted in tax losses totaling more than $1.5 million.

Attorney for Former Chairman of Palm Beach County Commission Sentenced to Prison

On January 25, 2008, in Miami, Fla., Attorney William R. Boose, III, of Palm Beach Gardens, Fla., was sentenced to 24 months in prison and fined $25,000.  Boose also forfeited $400,000 as part of his plea agreement.  Boose was involved in a public corruption conspiracy stemming from Anthony R. Masilotti’s unlawful use of his official position as an elected county commissioner to promote and conceal Masilotti’s honest services fraud.  Boose admitted to helping Masilotti’s secret participation in a land deal, which involved the sale of land to the South Florida Water Management District (SFWMD).  Masilotti admitted that he misused his official position in this transaction to advocate and publicly endorse the SFWMD’s purchase of the land without publicly disclosing his ownership interest in the property.  To hide his ownership interest in the property, Boose created a secret land trust to buy the property.  After a complicated series of transactions, during which the SFWMD was deceived as to the true sellers of the property, Masilotti made $1.7 million from the sale.  Boose admitted knowing of the secret scheme and then taking steps to hide the crime.

Virginia Man Sentenced for Filing False Federal Tax Returns

On January 25, 2008, in Alexandria, Va., Robert Main, was sentenced to 12 months and one day in prison and ordered to pay a $5,000 fine for filing false federal income tax returns.  Main pleaded guilty to four counts of filing a false federal income tax return on October 24, 2007.   According to court documents, Main underreported Schedule E rental income by $1.6 million and falsely claimed refunds totaling $56,131 for tax years 2001 through 2004.  He was assessed $844,115 back taxes, penalties and interest.  The investigation of Main began when law enforcement officers noticed that he was making cash deposits into his money market account on consecutive days, over a short period of time, in round numbers just under $10,000, the amount that triggers the filing of a Currency Transaction Report required by the IRS.  Main agreed as part of the investigation to forfeit $52,010 that was seized from his bank account.

Former Girl Scout Troop Leader Sentenced to 10 Years for Filing False IRS Claims and Identity Theft

On January 24, 2008, in Pensacola, Fla., Holley M. Barnes was sentenced to 120 months in prison and ordered to pay $87,976 in restitution to the Internal Revenue Service (IRS) and to pay $5,720 in restitution to the Navy Exchange Service.  In October 2007, Barnes pleaded guilty to 19 counts of filing false and fictitious tax refund claims to the IRS, 15 counts of identity theft and one count of theft of government property.  In her October plea hearing, Barnes admitted to having used her position of trust as a Girl Scout leader in Pea Ridge, Fla., to obtain personal history information from the members of her Girl Scout Troop.  Barnes created a fraudulent “Girl Scout Medical Release” form in order to get personal information, such as the children’s Social Security Numbers (SSN).  Barnes used the SSN’s of the children to prepare and file electronic federal income tax returns with the IRS, submitting false information regarding income and employment.  The false refunds were then transferred into five bank accounts which Barnes controlled. 

Cannon Falls Woman Sentenced to Nearly Four Years for Mail Fraud and Money Laundering

On January 24, 2008, in St. Paul, Minn., Susan Ann Von was sentenced to 46 months in prison, ordered to serve three years of supervised release and pay restitution for executing a scheme to defraud her former employer out of more than $700,000.  Von pleaded guilty in May 2007 to one count of mail fraud, one count of money laundering and two counts of tax evasion.  According to her plea agreement, Von was employed as the finance manager for Sustane, a division of Natural Fertilizer of America, Inc.  She had access and authority to sign checks drawn on the company’s bank account.  During her employment, Von admitted to fraudulently writing checks from Sustane’s bank account to pay for personal credit card charges.  Von also fraudulently entered transactions in the company’s records to make it appear that checks had been issued for a legitimate business purposes.  In total, Von stole approximately $739,834 from Sustane.  Von also admitted to income tax evasion from 2000 through 2005 by filing federal income tax returns which did not report any of the income she unlawfully obtained from Sustane.  According to the plea agreement, Von owes the Internal Revenue Service $208,240.

Connecticut Man Sentenced to Prison His Role in a Federal E-Rate Program Fraud Scheme

On January 23, 2008, in Hartford, Conn., Thomas J. Kennedy, III, of Spring Hill, Fla., formerly of Monroe, Conn., was sentenced to 21 months of in prison and ordered to pay $485,202 in restitution for defrauding Southwestern Bell Communications (SBC) and the Federal Communications Commission (FCC) in connection with the E-Rate program.  In August 2007, Kennedy pleaded guilty to mail fraud and filing a false tax return.  The federal E-Rate program funds internet access upgrades to school districts from money collected through surcharges added to customer’s telephone bills.  In Connecticut, three school districts that received E-Rate funding selected SBC/Southern New England Telephone (SNET) to perform their internet upgrades.  Kennedy was an account manager for an information technology company that had a partnership arrangement with SBC.  Kennedy and three SBC employees hired engineers for certain E-Rate funded school district projects, the costs for which would be billed first to SBC/SNET, and later an SBC/SNET subcontractor.  Kennedy arranged for the hiring of engineers and also arranged for the billings to SBC/SNET and to the subcontractor for their services.  However, those billings, which SBC/SNET paid and then invoiced to the FCC, were inflated by more than $500,000.  That money was split among Kennedy and the three SBC employees, with Kennedy receiving $249,525. 

Carting Company Sales Representative Involved in Racketeering Conspiracy Sentenced to Federal Prison

On January 22, 2008 New Haven, Conn., Timothy Arciola, of Washington, Conn., was sentenced to 15 months in prison, followed by three years of supervised release and ordered to forfeit $15,000.  On May 11, 2007, Arciola pleaded guilty to one count of conspiring to violate the federal Racketeer Influenced and Corrupt Organizations (RICO) Act.  According to documents filed with the court and statements made in court, Arciola, while a sales representative at Automated Waste Disposal, Inc., conspired to perpetuate a scheme in which participating carters artificially inflated their prices and left waste removal customers with no option but to retain the service at increased rates.  In this scheme, which targeted both commercial and municipal customers, participating carters agreed to quote inflated prices to customers controlled by other carters.

Connecticut Man Sentenced to Three Years in Prison for Embezzling More Than $5.3 Million from Employer

On January 18, 2008, in New Haven, Conn., Jeffrey F. Grous was sentenced to 36 months in prison and ordered to pay a $10,000 fine for wire fraud, mail fraud, tax evasion and filing a false tax return.  Grous pleaded guilty to a decade long scheme in which he embezzled approximately $5.3 million from his former employer.  According to court documents and statements, Grous was an investment firm employee specializing in fixed-income products.  Between 1991 and 2005, Grous held various positions at the investment firm, including assistant vice president, assistant controller and controller.  Grous admitted to defrauding the investment firm and spending the money for his own personal use, including buying $449,219.02 worth of watches, the construction of a luxury home and the purchase of expensive cars, clothing, and vacations.  As part of his scheme, Grous formed two sham companies, Equity Analysis and Research Consultants.  He then submitted false invoices for consulting services by these sham companies and approved the fraudulent requests, or forged the signature of an officer at the investment firm with the authority to approve the payment requests.  Those actions resulted in the investment firm paying approximately $1.86 million to Equity Analysis and $1.25 million to Research Consultants.  In addition, Grous submitted to the investment firm AMEX charges and fraudulent payment forms, including a false description that the expenses were for business purposes of officers of the investment firm.  Grous approved, or forged the signature of others for approval, AMEX charges, which resulted in the investment firm making payments of approximately $2.24 million to AMEX for Grous’ personal expenses.  Finally, Grous filed false income tax returns for the years 2000 through 2002 and evaded the payment of taxes for the years 2003 and 2004.

St. Louis City Man Sentenced to 44 Months in Prison on Mortgage Fraud and Money Laundering Charges

On January 16, 2008, in St. Louis, Mo., Dack Daugherty was sentenced to 44 months in prison and ordered to pay $576,390 to twenty-one different banks and mortgage companies on conspiracy and money laundering charges in connection with a mortgage fraud ring.   According to court documents, Daugherty and a number of others, including real estate appraisers and loan officers, arranged for the fraudulent purchase of 52 properties.  As part of the scheme, Daugherty convinced corrupt appraisers to inflate the values of properties he would arrange to buy.  He then convinced corrupt loan officers to make up favorable information about the income and assets of the buyers that he had lined up.  In all, Daugherty admitted to defrauding lenders of more than $500,000 and agreed to pay that money back.  Daugherty also admitted laundering the proceeds of the scheme through a local credit union.  In an unusual twist, Daugherty admitted to a second fraud scheme, which resulted in an increased sentence.  In a rare post-plea filing, Daugherty admitted going on a "spending spree" as his criminal indictment for mortgage fraud loomed, borrowing hundreds and thousands of dollars for classic cars, a grand piano, motorcycles, commercial equipment and even a high-end Jacuzzi spa.  Just as his borrowers did in the fraud scheme, Daugherty lied in his credit applications for these items and, after successfully deceiving the lenders, never made a payment on any of these purchases.  Most of the items have been successfully repossessed.

Memphis Businessman Sentenced on Tax Charges

On January 14, 2008, in Memphis, Tenn., Lawrence M. Simmons was sentenced to 18 months in prison, followed by two years of supervised release, and ordered to pay $184,642 in restitution to the Internal Revenue Service (IRS).  According to court documents, Simmons was president of Simmons Industries, Inc., an outdoor sign manufacturing company located in Memphis, from 1994 through 2000.  In August 2005, he was indicted on three counts of income tax evasion pertaining to his 1998, 1999 and 2000 federal income tax returns.  Simmons pleaded guilty on October 5, 2007, to one of those counts.  According to his plea agreement, Simmons admitted that from 1998 and into 2000 he orchestrated a scheme where he diverted funds from Simmons Industries to pay his personal expenses.  Simmons utilized accounts maintained at various local banks in the name of Simmons Industries to divert in excess of $370,000.  Simmons admitted that he failed to report approximately $646,675 in income for 1998 through 2000, resulting in a tax loss to the United States of approximately $184,641.

Connecticut Man Sentenced to Federal Prison for Fraud Schemes

On January 9, 2008, in Bridgeport, Conn., Ronald A. Lupica, of Norwalk, Conn., was sentenced to 15 months of imprisonment, followed by three years of supervised release.  Lupica pleaded guilty in July 2007 to bankruptcy fraud, tax evasion and mail fraud.  According to court documents, Lupica and Daniel Arciola, an employee of Advanced Recycling Corporation (“ARC”), diverted waste paper from ARC for delivery to paper mills for recycling.  From approximately mid-1999 to August 2002, Lupica and Arciola issued invoices to mills from Empire Trucking with the understanding that it was a subsidiary of ARC.  Empire Trucking was a nonexistent trucking company over which Lupica had sole control.  The mills would then mail checks to Empire Trucking as payments for the waste paper.  The receipts of this fraud totaled approximately $1.4 million.  With respect to the tax evasion offense, Lupica received taxable income of approximately $323,727 from Empire Trucking in 2000 and owed $104,124 in federal taxes.  However, in order to hide receipt of this income, Lupica failed to file a tax return for the 2000 tax year, failed to pay the Internal Revenue Service the federal taxes owed, and deposited funds received for diverted recycled materials into the bank accounts of Empire Trucking.  Lupica agreed to repay Advance Recycling Corporation $1.4 million and to repay the U.S. Treasury all taxes for the 1999 through 2002 tax years.  Arciola pleaded guilty to tax evasion and was sentenced to 12 months and one day of imprisonment in December 2007.

Former Pennsylvania Police Officer Sentenced for Filing False Tax Return

On January 8, 2008, in Pittsburgh, Pa., former Police Officer Christopher Floyd was sentenced to 24 months in prison followed by one year of supervised release for filing a false federal tax return.  Floyd pleaded guilty to one count of filing a false tax return in July 2007.  According to the court’s sentencing memorandum, Floyd filed false employment tax returns for Blessed Dawn Watch, an organization he operated.  He also filed false personal tax returns from 2000 through 2004 that failed to correctly report his income. 

Two Massachusetts Men Receive Prison Terms for Tax Violations

On January 7, 2008, in Boston, Mass., Joseph A. Yerardi and John J. Toyias were sentenced for conspiring to defraud the United States by engaging in a scheme to divert income from their businesses to their personal benefit without reporting that income to the Internal Revenue Service.  Yerardi was also sentenced for tax evasion for failing to pay $180,000 in taxes for the 2002 tax year.  He received a 30 month sentence and was ordered to pay $454,639 in restitution.  Toyias was also sentenced for filing a false tax return for tax year 2000 that understated his total taxable income by over $100,000.  He received a year and a day prison sentence and was ordered to pay $115,093 in restitution.  Yerardi and Toyias conspired to divert proceeds from their respective businesses to several sham bank accounts, which they used to pay themselves and their employees without reporting the income to the IRS.  In some instances, Toyias created fictitious invoices to make it appear that the payments to the hidden bank accounts were for legitimate business purposes.  Yerardi and Toyias diverted at least $1.4 million to themselves and their employees through the hidden bank accounts.

Lawyer Sentenced for Evading More Than $600,000 in Taxes

On December 19, 2007, in Bridgeport, Conn., Joseph Richichi, an attorney, was sentenced to 16 months in prison, to be followed by two years of supervised release, and ordered to pay a $15,000 fine.  According courts documents filed and statements made in court, Richichi evaded paying taxes on more than $1.8 million he earned from the practice of law during the years 2000 through 2005.  In total, Richichi admitted that he failed to pay more than $600,000 in taxes that were due for those tax years.  Richichi has paid full restitution of $614,231 to the Internal Revenue Service, and an additional $763,076 in civil fraud penalties and interest.

Birmingham Pastor Sentenced for Under-Reporting Income

On December 18, 2007, in Birmingham, Ala., Gregory Louis Clarke was sentenced to 21 months in prison and ordered to pay $35,684 in restitution.  Clarke was convicted by a federal jury in July 2007 of filing false income tax returns for the 2000, 2001 and 2002 tax years.  At trial, evidence revealed that Clarke had under-reported his income by approximately $110,000 for the three tax years.  Also at trial, the jury found that the unreported income was compensation to Clarke from the New Hope Baptist Church, the New Hope Christian School, the New Hope Federal Credit Union, and other sources.  Specifically, Clarke attempted to conceal receipt of funds by directing payment from New Hope Baptist Church directly to his creditors.  Court filings showed that some of those unreported funds included a “bonus” in the amount of $51,125 from New Hope Baptist Church, or payment in that approximate amount, went directly from the church bank account to Clarke’s creditors.  Funds in the amount of $16,090 were paid to Clarke’s housing allowance account for his service as interim manager of New Hope Federal Credit Union.  Other amounts of income not reported by Clarke included $14,906.67 as a car allowance, more than $15,000 in life insurance and disability premiums, and more than $11,000 in payments to Clarke from other sources. 

Defendant Sentenced to Prison for Tax Evasion

On December 18, 2007, in Bridgeport, Conn., Daniel J. Arciola was sentenced to 12 months and one day in prison, to be followed by three years of supervised release, for evading the payment of federal income taxes.  According to court documents, Arciola filed a false and fraudulent 2000 income tax return reporting that his taxable income for 2000 was only $37,476.  In fact, Arciola had received additional taxable income of approximately $162,273 in cash from Empire Trucking in 2000 and therefore owed an additional $60,711 in federal taxes.  During 2000, in order to conceal his receipt of this additional income, Arciola regularly made cash expenditures and avoided making bank deposits of the cash he had received from Empire Trucking.  Arciola has agreed to pay to the IRS $155,019 for additional taxes owed for 1999 through 2002, plus penalties and interest.

West Virginia Man Sentenced on Tax Evasion Charges

On December 17, 2007, in Beckley, W.Va., Luther T. Wills, Jr., was sentenced to 12 months and one day in prison, to be followed by three years of supervised release and ordered to pay a $100 special assessment and a $100,000 fine.  Wills was indicted in February 2007 and pleaded guilty in July 2007 to willfully evading income taxes for the period 1998, 1999, and 2000.  According to the indictment, Wills engaged in several different small business enterprises which generated cash. Therefore, some business transactions were not documented nor deposited in a bank account.  In addition, Wills took steps to disguise a portion of his income, specifically Wills used a nominee name to purchase certificates of deposits between January 1999 and July 2000 in amounts totaling over $649,000. 

California Couple Sentenced for Defrauding Employer and Evading Taxes

On December 11, 2007, in Sacramento, Calif., Susan Michelle Pruett, and her husband, Kenneth R. Pruett, were sentenced to 51 months and 21 months in prison, respectively.  On July 31, 2007, Michelle Pruett pleaded guilty to mail fraud and three counts of tax evasion; Ken Pruett pleaded guilty to three tax evasion charges. According to court documents, Michelle Pruett embezzled $756,139 from her employer, Cal Worthington, when she was a bookkeeper at Folsom Imports.  The couple failed to report the embezzled funds as income on their federal tax returns for three years, resulting in the tax evasion charges.  The court ordered Michelle Pruett to repay Worthington the money she stole from him, and ordered both Pruetts to pay $133,807 in restitution to the Internal Revenue Service (IRS).  The Department of Justice will take steps to give to Cal Worthington - in partial satisfaction of Michelle Pruett’s restitution obligation - nearly $500,000 in funds seized by the IRS after she won a million dollar grand prize in a video poker tournament.  The judge also imposed a restriction on Kenneth Pruett that he not work in a fiduciary capacity unless his probation officer verifies that he has fully disclosed his criminal history to the potential employer.

Illinois Self-employed Insurance Salesman Sentenced for Obstructing IRS

On December 7, 2007, in Chicago, Ill., Walter M. Helwich, of Homer Glen, Illinois, was sentenced to 27 months in prison and ordered to pay $388,000 in restitution to the Internal Revenue Service (IRS).  On July 25, 2007, following a three-day jury trial, Helwich was convicted of corruptly obstructing and impeding the IRS from 1997 through 2000.  Helwich filed purported income tax returns on behalf of "Senior America Estate Planning Trust."  On those returns, he reported his own income and claimed that it was the trust's income.  He further claimed that the trust owed no taxes.  Additionally, Helwich filed federal tax returns for the years 1997 through 2003 on behalf of himself and his spouse.  On those returns he claimed he did not earn any taxable income, when in fact he had earned approximately $740,000 during the years under investigation.  His corrupt endeavor was further demonstrated by not cooperating with IRS audits and by making outstanding income tax payments using checks on a closed bank account.  From 2002 through 2004, Helwich submitted approximately 40 checks to the IRS, written on a closed account.  Throughout the adjudication of the case, Helwich challenged the authority of the federal judge, the U.S. Court and the IRS to prosecute him on obstruction charges. Helwich filed motions claiming the Department of Justice and IRS used fraud to deny his constitutional rights.  In 2007, Helwich filed a motion for acquittal or a new trial claiming that the government knowingly used false testimony to convict him.  Despite Helwich's argument that the U.S. court lacked jurisdiction on his case, Helwich was ordered by Judge Robert W. Gettleman to begin serving his sentence.

Massachusetts Man Sentenced For Tax Evasion

On December 5, 2007, in Boston, Mass., Gerald R. Coulstring, the owner of Jerico Concrete Cutting, Inc., was sentenced to 14 months in prison for tax evasion.  Coulstring pleaded guilty in August 2007 to an Information charging him with evading taxes in 2002.  According to the Information, from 1998 through 2002, Coulstring took more than $600,000 in customer payments, cashed them at a check cashing business in South Boston, and diverted the cash for his own personal use. Coulstring did not report the cashed checks, either on his personal income tax returns or on Jerico’s corporate tax returns. By failing to report the cashed checks, Coulstring evaded approximately $254,000 in federal income taxes.

Former Fire Safety Manager Sentenced for Fraud

On December 4, 2007, in Providence, R.I., Patrick Clyne was sentenced to 27 months in prison, ordered to repay the Rhode Island School of Design (RISD) $981,794 and ordered to forfeit property he bought in Ireland.  Clyne admitted to mail and tax fraud in a fraudulent billing scheme that defrauded the RISD. According to the U.S. Attorney, Clyne, a fire safety manager for RISD, set up a shell company that billed RISD for work that was never performed. Clyne also admitted to filing a false income tax return for 2003.  As a condition of supervised release, Clyne was ordered to file accurate income tax returns and pay all due taxes, plus interest and penalties.

Texas Oil and Gas Manager Sentenced to Prison for Embezzlement Scheme

On December 3, 2007, in Houston, Texas, Mario M. Garza was sentenced to 37 months in prison to be followed by three yeras of supervised release.  Garza, a former Anadarko Petroleum Corporation manager, embezzled more than $800,000 from Anadarko and filed a false income tax return.  In 1996, Anadarko formed two subsidiary companies to explore for oil and gas in Peru and named Garza as the project manager.  Garza submitted fraudulent invoices to Anadarko for services the subsidiary companies never performed.  Anadarko issued the checks and Garza accessed the money by arranging for Anadarko to give checks to him, which he, in turn, cashed or deposited into bank accounts over which he had control.  Garza used the funds to pay personal expenses, including an automobile loan, a health club membership and credit card bills.  Garza obtained approximately $809,440 from Anadarko through this scheme.  He failed to report this income on his Form 1040 Individual Tax Returns for tax years 2000 through 2003, which he signed under penalties of perjury. The omitted income in these tax years resulted in an underpayment of federal income taxes of $267,874.

Missouri Woman Sentenced for Embezzling $440,000 from Her Employer

On November 30, 2007, in Kansas City, Mo., Jenifer Lyne Merriman was sentenced to 37 months in prison and ordered to pay $440,430 in restitution for mail fraud, identity theft and filing a false tax return. Merriman was employed as the office manager of Boschert Equipment Company (BECO), a small, family-owned business that distributed industrial parts for process heating in North Kansas City, Mo. Merriman maintained the computerized accounting and payroll systems and printed payroll checks for the company’s owner to review and sign. She also performed secretarial duties, including picking up mail from the company’s post office box. On August 7, 2007, Merriman pleaded guilty to printing payroll checks in her own name, forging her employer’s signature and depositing the checks into her personal bank accounts. Merriman also admitted that she drafted company checks to pay for her personal credit card bills. Merriman admitted that she failed to report the money she embezzled as income on her annual income tax returns. Under the terms of the plea agreement, Merriman must pay the Internal Revenue Service $116,602 in back taxes.

Montana Inmate Sentenced for Stealing from Employer

On November 21, 2007, in Billings, Mont., John C. Kuchinski was sentenced to 71 months in prison for his conviction on charges of mail fraud and filing a false tax return, to run consecutively with a child pornography prison sentence that he currently serves.  Kuchinski was also ordered to pay $1.4 million restitution, with $1.2 million going to his former employer and $209,546 for the Internal Revenue Service.  Kuchinski admitted that from 1992 until 2004, he worked for Wyoming Feeders Inc. and had signature authority over its checking account.  In 1992, Kuchinski also opened an account at Yellowstone Bank in Laurel under the name "Agri Systems, John Kuchinski."  Over 12 years, Kuchinski wrote about $1.4 million in checks from Wyoming Feeders to Argi Systems, deposited them in the Yellowstone Bank account and spent the money on himself.  Kuchinski also filed a false income tax return for 2004 in which he did not report $140,000 he took from Wyoming Feeders.  Kuchinski nurtured a trust relationship with the company's owner and gained a position that had access to the checkbook.  Kuchinski then started writing himself checks, taking $10,000 to $20,000 a year in the beginning up and as much as $177,000 a year toward the end.  Kuchinski was previously sentenced to five years and four months in prison for receipt and possession of more than 19,000 child porn images child porn found on his computer.  Kuchinski caught the attention of law enforcement officers who were investigating prostitution in Billings and uncovered extortion of Kuchinski over pictures involving a juvenile prostitute.

Landscaping and Contracting Business Owner Sentenced to Prison for Tax Evasion

On November 20, 2007, in Newark, N.J., Christopher M. Aldarelli, Sr., was sentenced to 15 months in prison and ordered to pay the Internal Revenue Service (IRS) more than $864,000 in back taxes, penalties and interest.  Aldarelli, owner of a large landscaping and contracting business, pleaded guilty in April 2007 to tax evasion.  According to the Indictment, Aldarelli reported to the IRS that his taxable income was $66,232 with a resulting tax of $12,121.  During his plea hearing, Aldarelli admitted that he intentionally failed to include an additional $300,000 in personal income.  The additional income stemmed from the receipt of cash for work his companies performed, as well as from cash he withdrew from business accounts but used for personal expenses.  In addition, he admitted to writing checks to himself from the business accounts and using the funds for personal and non-business-related expenses.  Aldarelli failed to report more than $700,000 in taxable income during a three year period and he failed to pay approximately $317,000 in income taxes. 

Four Mortgage Fraud Defendants Sentenced to Prison

On November 20, 2007, in Atlanta, Ga., three defendants were sentenced for their roles in a mortgage fraud scheme.  Eric Friedman, of Atlanta, Ga., was sentenced to 70 months in prison, to be followed by three years of supervised release, and ordered to pay $1,689,222 in restitution; Brianne Friedman, Tucker, Ga., was sentenced to 12 months and one day in prison, to be followed by six months of home confinement and then three years of supervised release, and ordered to pay $196,058 in restitution; and Timothy Bauer, of Braselton, Ga., was sentenced to 12 months probation and ordered to pay $545 in restitution.  Co-defendant Michael Hipe, of Cumming, Ga., was sentenced on November 16, 2007, to 30 months in prison, to be followed by three years of supervised release, and ordered to pay $289,370 in restitution.  According to the indictment and evidence in court, beginning in 2000, Eric Friedman and Michael Hipe became involved in a mortgage fraud scheme in order to finance “Hipe Motors,” an Atlanta-based used car business in which Hipe was an investor and Eric Friedman ran daily operations.  They purchased and sold properties to finance Hipe Motors, drawing money out of each loan under false pretenses.  Some of the lenders were part of the sub-prime mortgage industry.  For each property, the defendants obtained a loan in their own names or in the names of family or friends using false financial information and tax returns to qualify for the loans.  Also, between 1996 and 2002, Eric Friedman illegally evaded paying $659,739 in federal income taxes by concealing his income and assets from the Internal Revenue Service. 

Indianapolis Man Sentenced for Filing False Income Tax Returns

On November 20, 2007, in Indianapolis, Ind., Javier Varela-Sanchez was sentenced to 12 months and one day in prison and ordered to pay $94,447 in restitution to the Internal Revenue Service.  Varela’s sentencing follows his earlier guilty pleas to filing false individual and corporate income tax returns. Varela, a Mexican citizen and legal resident of the United States, operated a drywall finishing business called Red Monster, Inc. in Indianapolis between 1996 and 1998.  Varela was a part owner of the corporation and was responsible for the financial aspects of the business, including preparing books and records and tax returns and providing information to the tax return preparer for preparation of corporate returns.  Varela received the gross receipts for Red Monster, Inc. in the form of checks made out to the business or to himself.  Instead of depositing all of the gross receipts to the corporate bank accounts, Varela diverted a portion of the checks by cashing them at the banks on which they were drawn or at check cashing stores.  Varela diverted almost $600,000 in corporate gross receipts.  This money was not reported on the corporation’s income tax returns, and subsequently Varela’s income was not reported on his personal income tax returns and he did not report and pay over $90,000 in individual income taxes.

Former U.S. Forest Service Employee Sentenced to Prison for Embezzlement and Tax Fraud Charges

On November 20, 2007, in Portland, Ore., Debra Kay Durfey was sentenced to 21 months in prison, followed by three years of supervised release and ordered to pay $642,319 in restitution to the U. S. Forest Service.  Durfey pleaded guilty in June 2007 to single counts of embezzlement and theft of public money or property and aiding and assisting in the presentation of a false and fraudulent tax document.  According to court documents, Durfey was employed by the U. S. Forest Service since 1986 as a Local Agency Program Coordinator (LAPC) for their Purchase Card program, a system by which the Forest Service pays vendors for goods and services.  As the LAPC for the Umatilla, Malheur, and Wallowa-Whitman National Forests, Durfey’s responsibilities included oversight of purchase card transactions and writing checks to pay Forest Service vendors.  In her plea agreement, Durfey admitted she stole money from the Forest Service’s account by depositing the Forest Service checks into her personal account.  She then used the money to gamble, shop and make payments on her car and mortgage.  Durfey also caused a false Form 1099 to be filed with the IRS on behalf of Hollinger, attributing around $137,000 of the embezzled funds to him in an attempt to hide her embezzlement.

Arkansas Woman Sentenced for Mortgage Fraud and Filing a False Tax Return

On November 19, 2007, in Little Rock, Ark., Debby Cossitt was sentenced to 30 months in prison, followed by three years of supervised release, and ordered to pay $120,000 in restitution to victims of her fraud and $9,560 to the Internal Revenue Service.  The Judge also barred Cossitt from working in the loan industry during her period of supervised release.  In December 2006, Cossitt pleaded guilty to one count of conspiracy to commit mortgage loan fraud and one count of filing a false income tax return for 1998.  Cossitt, owner/manager/operator of several manufactured home sales companies in Searcy, Batesville, Jonesboro, and Harrison, Arkansas, admitted to fraudulently submitting falsified mortgage loan applications and supporting document to lenders in order to increase sales. These misrepresentations included falsified customer bank statements with inflated balances, falsified cashier’s checks reflecting an inflated customer down payment, inflated W-2 forms, falsified pay stubs or wage and earning statements, and falsified customer loan applications.  Additionally, Cossitt participated in “telephone audits” with mortgage lenders, impersonating customers and/or directing customers to make misrepresentations directly to lenders.  These actions allowed higher credit risk customers to appear more qualified for mortgage loans.  Additionally, Cossitt admitted to not reporting over $32,000 in income on her 1998 federal income tax return.  This income was derived from cash sales for wheels and axles no longer needed once manufactured homes were delivered to customers.  During Cossitt’s sentencing hearing, evidence was presented which revealed that even after her plea in December 2006, Cossitt continued to commit the similar fraudulent loan actions to which she pleaded guilty to as part of the scheme.

Indiana Man Sentenced for Income Tax Evasion

On November 19, 2007, in Indianapolis, Ind., Jerry D. Rutherford, of Scottsburg, Ind., was sentenced to 18 months imprisonment following his guilty plea to three counts of income tax evasion.  Rutherford admitted that he did not report a substantial amount of the income he received from 1998 to 2001 on his personal federal income tax returns.  Rutherford owes between $200,000 and $400,000 in federal income tax, the exact amount of which will be determined by Internal Revenue Service Examination in a civil proceeding.

California Man Sentenced to Nine Years in Prison in Multi-Million Dollar Fraud Scheme

On November 16, 2007, in Oakland, Calif., Francis William (Bill) Reimers was sentenced to 108 months in prison and ordered to pay $9.6 million in restitution to the victims of his fraud schemes.  Reimers pleaded guilty on March 23, 2007, to mail fraud and money laundering charges.  According to his plea agreement, Reimers admitted that he established an entity called Advisory Services Group (ASG), purportedly to provide financial and investment management services to individual investors.   Reimers provided investors with a series of false statements in order to convince them to give him control of their money.  Reimers also admitted that he did not invest his client's funds, but instead he used their money to pay his mortgage and to buy luxury cars, vacations, and hunting trips.  He also used client money to fund two other businesses he owned and operated, Plan Compliance Group (PCG) and Univest Capital Management (UCM).  PCG and UCM were created to handle third-party administration of 403(b) accounts of school employees (PCG) and third-party administration of benefits for federal government employees (UCM).  As third-party administrators, PCG and UCM collected payroll distributions from thousands of employees and remitted them to institutional investment companies and to insurance providers, as directed by the employees.  However, Reimers used PCG and UCM cash flow to pay off ASG investors who requested monthly dividends or who asked to close their account.  To perpetuate and to conceal his scheme, Reimers sent fictitious account statements to his clients which falsely reflected that his clients’ funds were invested in various mutual funds and tax-free money market funds.

Former Maryland State Senator Sentenced to 7 Years on Charges of Racketeering Conspiracy and Filing a False Tax Return

On November 16, 2007, in Baltimore, Md., former Maryland State Senator Thomas L. Bromwell, Sr., of Baltimore, was sentenced to seven years in prison and ordered to forfeit more than $2 million for racketeering conspiracy and filing a false tax return.  Bromwell’s wife, Mary Patricia Bromwell, was also sentenced to 12 months and a day in prison for mail fraud arising from a related minority-contracting fraud scheme.  Bromwell and his wife, along with David Stoffregen, who was the president of the Poole and Kent Corporation (P&K), and others conspired to engage in a criminal money-making enterprise in which the Bromwells accepted benefits from Stoffregen and others in exchange for Senator Bromwell using his official influence and position to intervene in business disputes on behalf of P&K.  The conspiracy further involved the use of a minority front company, Namco Services Corporation, to obtain construction contracts for P&K.  Stoffregen used the front company to disguise payments made to the Bromwells in the course of the conspiracy.  Mary Patricia Bromwell posed as an employee of Namco in order to deceive state inspectors.  Thomas Bromwell admitted that he had filed false tax returns in which he failed to report both personal and business income for the 2000 and 2001 years, and that he had made false statements to federal investigators.

Montana Man Sentenced for Tax Fraud

On November 15, 2007, in Helena, Mont., Rolan Ralph Becker, of Ronan, Mont., was sentenced to 27 months in prison, ordered to pay $91,794 in restitution and $50,000 in fines, to be followed by three years of supervised release.  Following a three day trial, a jury found that Becker committed tax fraud by failing to file and pay federal taxes in 2000, 2001 and 2002.

North Carolina Woman Sentenced for $7 Million Embezzlement

On November 13, 2007, in Columbia, S.C., Angela Timmons was sentenced to 70 months in prison for embezzling approximately $7 million from her former employer, Peace Textiles, Inc.  Timmons was ordered to make full restitution and to transfer to Peace Textiles approximately $2.8 million in cash, real estate, automobiles, and other personal property she bought with the stolen money.  According to court documents, Timmons was employed by Peace Textile for 10 years as the director of finance.  In June 2007, Timmons pleaded guilty admitting that between 2003 and 2006, she devised a scheme to skim money from the company’s accounts for herself and to buy real estate, jewelry, expensive automobiles, and other luxury items.  As the director of finance, she was able to hide the thefts from other company officials by altering or omitting financial records and making false statements on the company’s banking documents. 

Former Seaport Museum Head Sentenced to 15 Years

On November 2, 2007, in Philadelphia, Pa., John S. Carter was sentenced to 15 years in prison, ordered to pay $1.3 million in restitution and to forfeit $1.56 million for fraud and tax evasion stemming from his schemes to defraud the Independence Seaport Museum, a Philadelphia non-profit corporation. Carter pleaded guilty in June 2007 to mail fraud and tax evasion.  He made numerous purchases for personal use in the Seaport Museum’s name and used Seaport Museum vessels for his own personal enjoyment.  His actions defrauded the museum of more than $900,000.  Carter fraudulently obtained ownership of a “split dollar” life insurance policy by forging the signatures of two Seaport Museum board members intending to cause losses of approximately $1.1 million. Carter also failed to report on his tax returns more than $1.5 million in fraud proceeds that he received.

North Dakota Man Sentenced to 12 Years in Prison for Defrauding Investors

On November 2, 2007, Frederick W. Keiser, Jr. of Minot, N.D., was sentenced to serve 12 years in federal prison, followed by three years of supervised release.  A restitution hearing was scheduled for November 29, 2007.  Keiser was sentenced for his role in two fraudulent international bank debenture schemes and his involvement in a conspiracy to defraud the Internal Revenue Service by concealing income to avoid federal income taxes through the use of foreign corporations, offshore bank accounts, debit cards, and document destruction.  Between approximately July 1999 and April 2001, Keiser and others devised a scheme to defraud and obtain money from potential investors by inducing them to invest in a so-called international bank debenture trading program through a Grenada, West Indies, company called Preferred Trust and Management, Ltd. (PTM).  The PTM scheme involved investments exceeding $14 million and 500 victims.  As part of the scheme, Keiser solicited in excess of $2 million from over 200 investors for PTM’s fictitious bank trading program.  Over a one year period from approximately January 2000 to January 2001, Keiser received nearly $950,000 in bonuses from investors’ funds.  During that same one year period that Keiser received the bonus money, the vast majority of those who invested in PTM through Keiser received nothing.  The North Dakota securities commissioner issued a cease and desist order to halt Keiser’s activities related to PTM in January 2001.  Keiser then became involved with a second bank debenture investment scheme affiliated with a company called Mid-China Capital Management.  Keiser again promoted the scheme to investors, and approximately $2 million dollars was invested in the new scheme between August 2001 and December 2002.

Massachusetts Man Sentenced to Two Years for Tax Evasion

On November 2, 2007, in Boston, Mass., Robert D. Epstein, was sentenced to 24 months in prison and ordered to assist the Internal Revenue Service in its collection of his unpaid taxes in an attempt to evade more than $2 million in income taxes.  Epstein pleaded guilty on March 28, 2007, to failing to report $5.95 million in income that he secretly removed from his law partnership.  By failing to record the money he took from the partnership, Epstein evaded approximately $2.2 million in federal income taxes.

Owners of Tire Store in Sacramento Underreported Income on Tax Returns; Ordered to Pay Over $100,000 in Restitution

On October 30, 2007, Sacramento, Calif., Mohammad Ahad Parvez and Ijaz Ghani were sentenced to 16 months in prison and 10 months of imprisonment/home detention, respectively.  In May 2007, Parvez and Ghani, owners of A & A Tires, pleaded guilty and admitted that they maintained two sets of accounting books for A & A, one which accurately reflected the gross receipts or sales for the business, and one which substantially understated the gross sales for the business.  In 2004, A & A had gross sales of approximately $1,586,998 and each defendant, a 50% partner, had to declare that he had received approximately $793,499, on his individual tax return.  However, on his 2004 tax return, Parvez reported only $30,732 in income from another unrelated business and did not report any of the $793,499 in income he had received from A & A.  Ghani reported on his 2004 tax return that he received $329,065 of gross receipts associated with A & A, but falsely failed to report that he had received $464,434 of additional income from A & A in that year.  Their underreporting of income resulted in a tax loss of $57,051 from Parvez and $52,832 from Ghani.  In addition, Parvez acknowledged as part of his plea agreement that, on a series of occasions, he purposefully made deposits at various local banks in amounts less than $10,000 or “structured deposits” in order to avoid the currency transaction reporting requirements.  As part of the plea and sentence, Parvez forfeited approximately $24,000 from one of his business bank accounts and paid full restitution of $57,051 to the IRS for his owed taxes.  Ghani has paid restitution of $52,832 to the IRS for his owed taxes and was ordered to pay a fine of $3,000.00.

Texas Man Sentenced to Nearly Four Years in Federal Prison

On October 30, 2007, in Amarillo, Texas, James R. Lyon was sentenced to 46 months in prison and ordered to pay $144,701 restitution to the Internal Revenue Service.  Lyon pleaded guilty in August to two counts of income tax evasion and agreed to pay restitution.  He agreed that he failed to report a total of $603,213 in income, which resulted in a total tax loss due and owing of $144,701.  According to the documents filed in this case, Lyon stated his taxable income for 2003 was $37,058, and that the amount of tax due was $4,180.00.  Lyon admitted that he knew his taxable income for 2003 was $225,836 and that he owed an income tax of $54,750.  Lyon also admitted in court documents that he stated his taxable income for 2004 was $12,902 and that he owed $645 in tax.  He further admitted that he knew that his taxable income for 2004 was $253,432 and that he owed an income tax of $61,571.  The court documents further reveal that beginning in 2001, Lyon was employed by Amarillo Natural Gas (ANG) and he diverted checks from ANG and deposited them into his personal account and his partnership, Spanky’s Outdoor Services.

Former Investment Broker Receives 42 Months in Prison for Role in CD Scam

On October 29, 2007, in San Jose, Calif., Vincent Joseph Ferro, a former principal with the Capital Advisory Group investment firm, was sentenced to 42 months in prison to be followed by three years of supervised release.  According to the indictment and his plea agreement, Ferro began selling brokered Certificates of Deposit (CDs) using Advent Trust Company, formerly based in Houston, Texas, as the custodian in approximately 1997.  The “brokered” CDs were fractional interests in long-term, “zero coupon” jumbo CDs, held by Advent Trust as the custodian and not in the purchasers’ own names, in which all of the principal and interest was to be paid at maturity.  Ferro admitted that he knew that his elderly clients were not interested in holding those CDs to maturity.  In order to induce them to invest, Ferro admitted that he made several false and misleading representations regarding the investments.  The brokered CDs were advertised and sold as if there were no commissions.  In fact, substantial up-front commissions were taken from investors’ principal.  However, statements mailed to the investors reflected the full amount of the client’s purchase and did not reveal the amount taken as commissions.  Ferro also admitted that he told his customers that although they were buying longer-term instruments, they could, at any time after one year, redeem their CD with “no fixed early withdrawal penalty,” or words to that effect.  This statement was intentionally misleading, because the ability to fulfill that promise depended upon Ferro’s ability to re-sell the redeemed CD to another buyer.  In his plea agreement and sentencing papers, Ferro agreed to accept an order requiring him to make full restitution to his victims.

Four Defendants Sentenced in Scheme to Defrauded Microsoft Corporation of Over $29 Million Worth of Discounted Software

On October 24, 2007, in Oakland, Calif., four individuals were sentenced for their roles in devising a scheme to defraud Microsoft Corporation by obtaining discounted software under false pretenses.  The scheme involved purchasing more than $29 million worth of software that was steeply discounted for academic institutions, and selling it to non-academic entities, in violation of the Microsoft agreement.  Mirza and Sameena Ali, husband and wife, were sentenced to 60 months in prison, to be followed by three years of supervised release, and ordered to forfeit $5,105,977, as well as to pay $20,000,000 in restitution to Microsoft Corporation and $3,000 in special assessments.  Keith Griffen was sentenced to 33 months in prison, to be followed by three years of supervised release, and ordered to pay $20,000,000 in restitution to Microsoft Corporation and to pay $900 in special assessments.  William Glushenko was sentenced to one year probation and 100 hours of community service.  The Alis, former owners of Samtech Research Inc., were convicted on November 28, 2006, of 30 counts of conspiracy, mail fraud, wire fraud, and money laundering.  Griffen was convicted of nine counts of conspiracy, mail fraud, and wire fraud.  Glushenko pleaded guilty to misprision.  According to the trial evidence, the Alis and Griffen formed several nominee corporations and purchased existing corporations holding Microsoft licensing agreements for the purpose of participating in Microsoft’s Authorized Education Reseller (AER) program.  Through the life of the scheme, the Alis and their co-conspirators purchased more than $29 million worth of AER software from Microsoft and sold this software to non-academic entities for a profit of more than $5 million.  The Alis were also convicted of laundering the proceeds of this scheme, including purchasing real property in the name of their college age son and wiring more than $300,000 of the proceeds from the illegal sales of the Microsoft educational software to Pakistan.

Defendant Sentenced for Role in Mortgage Fraud Scheme

On October 17, 2007, in Anchorage, Alaska, Azem Limani was sentenced to 18 months in prison for violations of wire fraud and engaging in monetary transactions in criminally derived property related to a mortgage fraud scheme.  In addition to prison time, Limani was ordered to pay $190,000 in restitution to Countrywide Home Loans and FNMA.  According to the information presented to the court, Limani engaged in a wide ranging mortgage fraud scheme using a number of others to obtain a series of nominee loans that hid the true borrower.  Limani was aided in the scheme by his co-defendant, Kourosh Partow, who was a loan officer and branch manager of Countrywide Home Loans and arranged for fraudulent loans to be issued to the nominees by falsifying their income, assets and other matters on the loan applications.  Partow was previously sentenced to a term of 25 months in prison.

Pennsylvania Burial Services Company Owner Sentenced on Tax and Fraud Charges

On October 17, 2007, in Pittsburgh, Pa., Joseph M. Stabile, president of Celestial Burial Company, was sentenced to 77 months in prison to be followed by three years of supervised release.  In April 2007, Stabile pleaded guilty to fraud and tax charges.  According to court documents, Stabile admitted to taking approximately $2.5 million that his customers paid him for preplanned burial merchandise instead of placing the money in trust accounts.  Stabile also admitted not paying the Internal Revenue Service approximately $14.8 million in taxes he withheld from his employees.

Bookkeeper Sentenced to 30 Months for Bilking Clients out of Hundreds of Thousands of Dollars and Evading Taxes

On October 15, 2007, in Nashville, Tenn., Mary K. Barber, of Clarksville, Tenn., was sentenced to 30 months in prison in connection with embezzling hundreds of thousands of dollars from clients for whom she performed bookkeeping services. Barber pleaded guilty in July 2007 to a two-count Information charging her with bank fraud and income tax evasion.  According to court documents, Barber, operating a bookkeeping business as “NUNYA Business,” engaged in a scheme to steal and embezzle funds totaling nearly $300,000 from four businesses and two individuals, and then evaded payment of income tax on the funds she received from her theft and embezzlement.   When Barber filed her federal income tax return for the calendar year 2005, she intentionally failed to report $224,946 of income she had received by her criminal acts.  She also intentionally failed to report additional income, including cash she stole from her clients.

Airport Advertising Consultant Sentenced on Tax Evasion and Fraud Charges

On October 15, 2007, in Philadelphia, Pa., Joseph Moderski, owner of J.C. Moderski, Inc., was sentenced to 37 months in prison, to be followed by three years of supervised release, and ordered to pay $1,293,339 in restitution.  According to courts documents, J.C. Moderski, Inc., was marketed as providing services to companies and individuals wanting to secure and/or maintain display advertising business in the Philadelphia metropolitan area and New Jersey, or to secure various types of business at the Philadelphia International Airport (PIA).  Moderski was indicted in January 2007 and charged with evading more than $600,000 in income taxes for the years 1999 through 2004 and defrauding both the City of Philadelphia and advertising company JCDecaux of approximately $180,000 in advertising fees.  In July 2007, Moderski pleaded guilty to one court of tax evasion, ten counts of filing false tax returns, and ten counts of mail fraud.  In his plea agreement, Moderski admitted that he under-reported his income in calendar years 1999 through 2004 by over $1.9 million, resulting in a $764,215 tax loss.

Eleven Defendants Sentenced to Prison for Mortgage Fraud Scheme

On October 12, 2007, in Oklahoma City, Okla., eleven defendants were sentenced for their role in a mortgage fraud scheme involving the prestigious Oak Tree properties in Edmond, Okla.  Evidence at trial showed that Brandon L. Baum, a real estate agent, acted as the buyers’ agent in the purchases of properties and told them that they could receive substantial funds at the time of closing under the guise of “repair costs,” which they could use for their personal benefit, if they agreed to purchase homes at an inflated price.  Charles E. Caldwell, Jr., a broker, facilitated the submission of fraudulent loan applications to lenders for buyers who could not qualify to purchase the homes at the artificially inflated prices.  In some cases, certain defendants and/or others would provide temporary loans to buyers for down payments with the understanding they would be reimbursed at closing.  Mortgages were approved by lenders based on false statements and fraudulent representations contained in the loan applications and other documents required by the lenders prior to closing.  Baum, Caldwell, and other co-conspirators received commissions from the sales of the homes.  Prior to the closing on each of the properties, loan proceeds were wire-transferred from lenders to the bank accounts of closing companies.
The defendants were convicted or pleaded guilty to various federal charges, including engaging in a monetary transaction in criminally derived property, money laundering, and wire fraud.  They were sentenced to the following terms: 
• Brandon L. Baum was sentenced to 87 months in prison, followed by three years of supervised release, and ordered to pay $511,735 in restitution.
• Gayle L. Caldwell was sentenced to 18 months in prison followed by two years of supervised release.
• Charles E. Caldwell, Jr. was sentenced to 18 months in prison, followed by two years of supervised release, and ordered to pay $185,740 in restitution.
• Joseph Conrad Therrien was sentenced to 12 months and one day in prison, followed by two years of supervised release, and ordered to pay $59,771 restitution.
• Teresa M. Therrien was sentenced to one month in prison, followed by two years of supervised release which will include 90 days home detention, and ordered to pay $82,710 in restitution.
• Rusty Real Therrien was sentenced to 18 months in prison, followed by two years of supervised release, and ordered to pay $82,710 in restitution.
• Timothy J. McDanie was sentenced to six months in prison, followed by two years of supervised release, and ordered to pay $57,641 in restitution.
• Anthony Jew was sentenced to 12 months in prison, followed by three years of supervised release, to perform 104 hours of community service, and ordered to pay $13,700 in restitution.
• Dalton Joe Alford was sentenced to eight months in prison, followed by two years of supervised release, to perform 104 hours of community service, and ordered to pay $172,489 in restitution.
• Toney Charles Mykel was sentenced to six months in prison, followed by one year of supervised release, to perform 104 hours of community service, and ordered to pay $263,489 in restitution.
• Theresa Ann Campbell (a/k/a Ann Campbell) was sentenced previously to two months in federal prison, followed by two years supervised release, and ordered to pay a $4,000 fine and $52,490 in restitution.

Office Manager Sentenced to 18 Months for Tax Evasion

On October 10, 2007, in Oklahoma City, Okla., Margaret Renee Schram, of Enid, Okla., was sentenced to 18 months in prison, to be followed by three years of supervised release, and ordered to pay $278,429 in restitution to M. Crow Construction, Inc. and $69,118 in restitution to the Internal Revenue Service (IRS).  According to court documents, Schram was employed as the office manager of M. Crow Construction, also known as Grant Construction, during 2000 through 2002.  Her duties included assisting in the preparation of documents relating to employment taxes for the company’s employees.  On March 7, 2007, a federal grand jury indicted her for evading personal income taxes by failing to file returns and for filing four false quarterly employment tax returns on behalf of M. Crow Construction.  The indictment also charged her with a scheme to embezzle money from her employer through interstate wire transmissions.  During a plea hearing in June 2007, Schram admitted that in early 2003, she created a false Form W-2 for herself for the 2002 calendar year by including her salary of $19,740 but not including tens of thousands of additional dollars that she received from the company during 2002.

Former Stock Options Administrator Sentenced on Tax Evasion and Fraud Charges

On October 9, 2007, in San Diego, Calif., Vencent A. Donlan was sentenced to 46 months in prison, to be followed by two years of supervised release, and ordered to pay $6,252,715 in restitution to Wireless Facilities, Inc. (WFI) and $2,202,917 to the Internal Revenue Service (IRS).  Donlan, the former stock options administrator at WFI, a San Diego based company with shares of common stock sold on the NASDAQ, pleaded guilty on July 3, 2007, to stealing more than $6 million worth of WFI’s stock during his employment.  In his plea agreement, Donlan admitted that between November 2002 and November 2003, he used his position as WFI’s stock option administrator to issue without authorization 728,229 shares of WFI stock to a brokerage account he controlled and that he sold the stock for a net gain of $6,252,715.  He also admitted that he evaded paying $2,202,917 in federal income taxes for calendar years 2002 and 2003 by failing to declare the income he derived from the fraudulent WFI stock sales.  For calendar year 2002, Donlan falsely declared a capital loss of $42,743 on the fraudulent WFI stock transactions, instead of the $594,917 gain he received from the sale of the stock.  For calendar year 2003, he falsely declared only $9,955 in capital gains from the fraudulent WFI stock transaction, instead of the $5,580,235 he received from the sale of the stock.

Three Sentenced in Scheme to Sell Fraudulent Certificates of Deposits

On October 4, 2007, in San Jose, Calif., three defendants who were involved in a scheme to defraud investors, many of them elderly, were sentenced this week.  Mark C. Selby, formerly of Campbell, Calif., was sentenced to 18 months in prison.  Kummel Heir, of San Jose, was placed on five years probation, to include 12 months of home confinement and the payment of a $15,000 fine.  Walter Zlotnicki, of Thousand Oaks, was placed on two years probation.  According to the indictment and defendants’ respective plea agreements, beginning in about 1996, Selby began selling brokered Certificates of Deposit (CDs) using Advent Trust Company, formerly based in Houston, Texas, as the custodian.  Heir began selling those brokered CDs, with Selby as her broker in 1997.  The brokered CDs were not certificates of deposit in the traditional sense.  They were, instead, interests in long-term, “zero coupon” jumbo CDs, held by Advent Trust as the custodian and not in the purchasers’ own names, in which all of the principal and interest was to be paid at maturity.  According to the indictment and plea agreements, the brokered CDs were advertised and sold as if there were no commissions.  This representation was false.  In fact, substantial up-front commissions were taken from investors’ principal.  The statements mailed to the investors by Advent Trust furthered the fraud, as they reflected the full amount of the client’s purchase and did not reveal the amount taken as commissions.  Additionally, customers were advised that, although they were buying longer-term instruments, they could, at any time after one year, redeem their CD with “no fixed early withdrawal penalty,” or words to that effect.  This statement was intentionally misleading.  The ability to fulfill that promise depended upon Selby and Heir’s ability to re-sell the redeemed CD in the “secondary market,” meaning sell it to another buyer. 

Walter Zlotnicki worked for another CD broker, Vincent Ferro, of Westlake Village, Calif.  According to his plea agreement, Zlotnicki began working for Capital Advisory Group, in 1997, as a sales associate.  In admitting to misprision of a felony, Zlotnicki acknowledged that, toward the end of his employment with Capital Advisory Group, he came to realize that clients were being misled.  Zlotnicki further admitted that, rather than informing the authorities regarding the misconduct he had observed, he instead concealed the crime by attempting to reassure the customers or, if that failed, simply passing their calls on to Capital Advisory.

Pennsylvania Man Sent to Prison for Tax Evasion

On October 4, 2007, in Johnstown, Pa., Tye Dively was sentenced to 16 months in prison and ordered to pay $10,000 and forfeit $50,000 for tax evasion.  Dively was also ordered to pay back taxes to the Internal Revenue Service.  Dively pleaded guilty to falsifying his tax return for tax years 2000 through 2003.

Defendant Sentenced to 130 Months in Prison for Defrauding Victims across U.S. and Switzerland out of $6 Million

On October 1, 2007, in Los Angeles, Calif, Steven M. Ferguson was sentenced to 130 months in prison for running a scheme that bilked several victims out of more than $5 million with promises of huge returns on their investments that they thought were being used to make “bridge loans” or to invest in projects such as a waste-treatment plant in New Jersey.  In addition to the 10 year, 10 month prison term, Ferguson was ordered to pay $6,335,146 in restitution to 13 victims of his crimes.  In June 2007, a federal jury convicted Ferguson of 23 felony counts, including obstruction of justice, money laundering, mail fraud, and tax evasion.  The evidence presented at trial showed that Ferguson solicited money from investors by posing as a successful businessman and promising that investments would yield large returns.  However, instead of investing any of the money, Ferguson used most of the investors’ money to pay for his lavish lifestyle, which included part ownership of a Lear jet, golf trips to Pebble Beach, and luxury homes.  Ferguson attempted to shield himself from detection by setting up a series of shell companies and obtaining credit in the names of his victims.  The fraud scheme was run out of a Beverly Hills shell company called Global Venture Group and, prior to that, a company called Environmental Technologies International Holdings.  Ferguson also allegedly used an entity known as S. M. Ferguson & Associates. 

Los Angeles Man Sentenced for Failure to Report $600,000 in Income to IRS

On October 1, 2007, in Los Angeles, Carl Orlando was sentenced to 40 months in federal prison after pleading to tax evasion for failing to report approximately $600,000 on his 2002 federal tax return.  In addition to time in prison, Orlando was ordered to pay a $30,000 fine.  According to court document, Orlando used false identifications and several bank accounts to conceal his income from the Internal Revenue Service (IRS).  Orlando was initially scheduled to be sentenced on September 17, but he failed to appear and a bench warrant was issued for his arrest.  He was arrested on September 26.

FY 2007 Examples of General Tax Fraud Investigations

Table of Contents - General Tax Fraud Investigations

Criminal Investigation (CI) home page

How to Report Suspected Tax Fraud Activities