Tax Fraud Blotter: ‘Ace’ in the hole
From the oven to the money market; 38 phony checks in a day; software firm scheme crashes; and other highlights of recent tax cases.
Oxford, N.Y.: Preparer Lavyette Anna Louisa Garcia, 41, has pled guilty to making a false claim against the U.S. and to assisting in the preparation of a false return.
Garcia admitted to preparing at least 110 false tax returns between 2011 and 2014, resulting in a tax loss to the U.S. of $848,196. She admitted to preparing a 2012 return for a client that falsely claimed self-employment income and several tax credits, and to preparing a 2009 return for another client that falsely claimed income and several tax credits.
She faces up to eight years in prison, supervised release of up to three years and a maximum $250,000 fine when she is sentenced on July 17.
Old Saybrook, Conn: Pizza restaurant owner Robert Kehayias, 58, has been sentenced to three months in prison, followed by one year of supervised release, for filing false returns.
According to court documents and statements made in court, Kehayias owns and operates the local eatery Pizza Works; for the 2010 though 2014 tax years he deposited most of the cash receipts generated by the restaurant into his personal money market account, a portion of the cash receipts into other personal bank accounts and only a minimal amount of cash into the business bank account.
During this time, he provided his preparer with QuickBooks reports that significantly understated the gross receipts of the business each year. As a result, Kehayias failed to report more $765,733 in taxable income on his federal income tax returns for the 2010 through 2014 tax years. He failed to pay approximately $343,000 in taxes.
In September, Kehayias pleaded guilty to one count of filing a false return. He has paid all of his back taxes but still owes approximately $361,000 interest and penalties. He was ordered to make a $200,000 payment to the IRS within two weeks.
Montgomery, W. Va.: Business owner Steve Lopez, 68, has been sentenced to 15 months in prison for failing to pay over employment taxes.
According to case documents and information, from 2008 through 2012 Lopez owned and operated Ready Transport Services, which mainly provided taxi services. From 2009 through 2012 he also owned RTS Ice Cream, Coffee and Candy Shop. Lopez was responsible for collecting and paying over to the IRS Social Security, Medicare and income taxes withheld from his employees’ wages and for paying the employer’s share of Social Security and Medicare taxes.
He admitted that he did not pay approximately $393,851 in employment taxes due to the IRS, including funds he withheld from his employees’ paychecks as well as money he owed as their employer.
Lopez was also ordered to serve three years of supervised release and to pay $393,851 in restitution to the IRS.
Greenwich, Conn.: Landscaper Pasquale F. Furano, 48, has pleaded guilty to one count of tax evasion.
According to court documents and statements in court, Furano is the sole owner of Pasquale Furano Landscaping, which generated business income by providing landscaping and snowplowing services to approximately 150 to 200 commercial and residential customers in Fairfield County in Connecticut and Westchester County in New York. For the 2009 through 2013 tax years, he underreported more than $2.5 million in gross receipts on his federal returns.
For those five years, Furano falsely reported total taxable income of $264,697 when his actual total taxable income was $1,751,727. He only paid $44,213 in federal taxes when he actually owed an additional $540,182.
Investigation revealed that Furano evaded paying federal taxes by negotiating approximately 2,436 client checks, totaling approximately $1,295,990.23, at the bank for cash rather than depositing the checks into his business accounts, sometimes cashing up to 38 checks in one day. He also did not disclose to his tax preparer his receipt of cashed client checks and other deposited client checks.
Sentencing is June 8, when Furano faces a maximum of five years in prison.
In 2014, IRS agents searched Furano’s home and seized handwritten business records and $613,842 in cash. He has agreed that the seized cash will be applied to his outstanding tax liability and to make restitution to the IRS for the remaining penalties and interest for 2009 to 2013, estimated to be an additional $480,179. Furano also has agreed to pay the Connecticut Department of Revenue Services $112,360 in sales tax that he collected from his customers from 2009 to 2013 but did not pay to the state.
St. Louis: A jury found that preparer Asmerom “Ace” Keleta, 32, conspired to defraud the U.S. through tax fraud and that he prepared fraudulent returns.
According to court documents, Keleta operated University City Tax Service starting in 2012. He conspired with employees Miyoshi Lewis and Teklom Paulos to prepare fraudulent returns for clients, directing the employees to fraudulently inflate refunds by listing false American Opportunity Tax Credits and federal fuel tax credits, as well as by creating false Schedule C income to inflate the AOTC. The jury found that he also prepared false tax returns for clients.
Sterling, Va.: Two former executives at a software company have pleaded guilty to conspiring to defraud the government by failing to pay over employment taxes to the IRS.
According to documents and information provided to the court, Robert Lewis was the CEO and Kristie Lynn McDonald the vice president of finance and administration at the company. From January 2011 to February 2013, Lewis and McDonald conspired to defraud the U.S. by failing to pay over to the IRS more than $1.8 million in payroll taxes withheld from employee paychecks.
Lewis and McDonald admitted that they circumvented the company’s normal payroll and accounting procedures by paying some employees with manual checks. The employees still received their correct salary, but by bypassing the accounting system the two were able to hide the withholdings not being paid over to the IRS. Lewis and McDonald admitted that the practical effect of their scheme was to conceal the company’s failing financial condition from its board of directors; they also admitted that they caused the company to file false quarterly federal employment returns underreporting the tax due.
The pair also admitted that during this same period they failed to remit the full amount of employee retirement contributions to the company’s retirement plan. Through their actions, the company failed to transfer and credit nearly $225,000 in voluntary employee retirement withholdings.
Lewis and McDonald admitted that they used the misappropriated money to pay the operating expenses of the company, which included their own six-figure salaries and salary raises for other employees.
Lewis will be sentenced on June 29, McDonald on June 22. Each faces a maximum of five years in prison, as well as a period of supervised release and monetary penalties. They further agreed to restitution of $1,812,706.