Tax Fraud Blotter: Financial wrecks
Quite an education; food for thought; Motion denied; and other highlights of recent tax cases.
Tampa, Florida: A federal court has permanently barred Steven Doletzky, formerly doing business as Liberty Tax Service, from operating a prep business and preparing federal returns for others.
The court also ordered Doletzky to disgorge $175,000 that the U.S. alleges he received from filing federal returns that claimed improper tax refunds, understated clients’ federal tax liabilities or otherwise included false or fraudulent claims.
Doletzky was sued along with two co-defendants, Michael Garno and Michael Bass. According to the complaint, employees at stores owned by Doletzky, Garno and Bass prepared federal income tax returns that claimed fraudulent claims for tax credits, including for education credits and the Earned Income Tax Credit. For example, the complaint alleges that from 2013 to 2015, Liberty stores owned by Doletzky or his co-defendants prepared and filed federal returns that claimed more than 500 false claims for education credits.
The court previously entered orders of permanent injunction and disgorgement against Garno and Bass. Doletzky, Garno and Bass agreed to the injunctions and judgments without admitting to the allegations.
Potomac, Maryland: Food service provider Steve Choi has pleaded guilty to failing to account for and pay over more than $10 million in employment and sales tax.
Choi was the founder and operator of nine companies that provided food services in government buildings in the Washington, D.C. area. Choi failed to pay the companies’ employment taxes, even after he acknowledged in a 2011 interview with the IRS that he had failed to pay more than $4.4 million in employment taxes. During the same period, Choi also did not pay more than $6.2 million in sales taxes to the D.C. Office of Tax and Revenue. He instead had his companies pay millions in other expenditures.
Sentencing is June 2, when Choi faces a maximum of five years in prison. He also faces a period of supervised release and monetary penalties. He has agreed to pay $6,490,515 in restitution to D.C. and $4,903,820 to the United States.
St. Louis: Preparer Aaron Mitchell, 31, has been sentenced to 34 months in prison after pleading guilty to charges involving a federal refund scheme.
Mitchell admitted to preparing more than 160 returns for the years 2013 through 2015 that contained false W-2 information as well as false claims of credits for education expenses. The IRS lost $99,576 in refunds paid.
In sentencing Mitchell, the judge noted his many fraud convictions and his pending fraud charges and noted that Mitchell had been taken off bond in the tax case after being arrested for shoplifting at a nearby Walmart. The judge told Mitchell that he was a “one-man financial wrecking crew.”
Mitchell was also ordered to pay $99,576 in restitution to the IRS.
New York: Restaurateur Adel Kellel has pleaded guilty to tax evasion.
Kellel was the president and a minority owner of K&H Restaurant Inc., which operated Raffles Bistro, a restaurant located at a New York hotel. From 2012 through 2015, Kellel was the sole owner of K&H, where gross receipts consisted primarily of credit card and cash payments by Raffles customers and check payments by the hotel for services that Raffles provided. From 2011 through 2015, Kellel concealed a substantial portion of K&H’s receipts by not fully reporting the cash received from Raffles’ customers. He also hid the receipts by depositing cash into personal bank accounts, spending funds directly on personal expenses and diverting checks paid by the hotel to K&H into non-business bank accounts that Kellel hid from his accountants.
Kellel diverted more than 150 hotel checks, totaling more than $2 million, to more than a dozen bank accounts. He used the income for personal expenses, including overseas transfers, condominium fees, rent for a high-end Manhattan apartment, college tuition for his children, shopping at luxury retailers, payments for luxury cars and travel.
Kellel caused K&H’s corporate returns and his own returns from 2011 through 2015 to be materially false, causing a tax loss of at least $771,195.
Sentencing is April 23. Kellel faces a maximum of five years in prison and a term of supervised release and monetary penalties. He has agreed to pay $613,478 in restitution to the IRS and $157,717 to New York State.
Hammond, Indiana: A federal court has permanently barred Daniel Bewley, a former Hobart and Lake Station, Indiana, tax preparer, from preparing federal returns for others.
Bewley operated a tax prep business under the names Bewley’s Tax Service and Forward Motion Tax Service. The complaint alleges that he prepared returns that included false Schedules C that understated the amount of the customer’s income and false Schedules A that inflated deductions. The complaint further alleges that IRS examination of 208 of some 1,602 returns he prepared for tax years 2011 through 2014 determined that 75 percent of the returns falsely understated the amount of tax due.
Bewley previously pleaded guilty to one count of wire fraud and one count of filing a false return; he was sentenced to 33 months in prison and three years of supervised release and ordered to pay some $331,000 in restitution to the United States.
Milledgeville, Georgia: Preparer Willie Moore Jr., 48, of Braselton, Georgia, has been sentenced to 33 months in prison and ordered to pay $1 million in restitution to the IRS after admitting he manipulated and falsified client information on returns.
Moore pleaded guilty last year to one count of conspiracy to defraud the U.S. Co-defendant James Prather, 47, of Douglasville, Georgia, pleaded guilty last year to one count of conspiracy to defraud the U.S. Prather faces a maximum of five years in prison.
Moore and Prather orchestrated a refund scheme through Moore’s prep business, AMAB Enterprises, d.b.a. Mr. Tax, Etc. Investigators identified 5,529 suspicious federal income tax returns for the 2011 through 2014 tax years, with 97 percent of the returns receiving a refund. Moore admitted that he listed fraudulent businesses, profits, educational expenses and household income.
Most of the clients said that their returns were not explained to them nor were they reviewed with them. Some clients never even received a copy of their returns or were given partial copies missing pages, parts or schedules. Bank records show more than $400,000 in transfers to the defendants, the profits of the scheme.
Moore and Prather also agreed to no longer prepare or file federal returns for anyone other than themselves.
Brick, New Jersey: Home health care agency owner Richard Dale, of Manahawkin, New Jersey, has been sentenced to a year and a day in prison for failing to pay over employment taxes.
Dale, who pleaded guilty last year, operated Advanced Pro Home Care and from 2012 through 2014 did not pay to the IRS substantial employment taxes owed by Home Care, including employee federal income tax withholdings, Social Security taxes and Medicare taxes. During this period, Home Care amassed more than $500,000 in employment tax liabilities but Dale only made a single payment of approximately $30,000.
Dale was also ordered to serve three years of supervised release and to pay approximately $504,145 in restitution to the United States.
Macon, Mississippi: Preparer Shelleen Ivory-Farmer has been sentenced to 16 months in prison for aiding and assisting in the preparation and filing of a false return.
From approximately January 2012 through April 2016, Ivory-Farmer managed the tax prep business ABS Tax Services, and through the firm falsified clients’ returns by claiming false education credits, itemized deductions and business and farming losses to inflate federal refunds. The tax loss resulting from the false education credits alone exceeded $870,000; the total tax loss was more than $1.1 million.
She was also ordered to serve a year of supervised release and to pay $236,887 in restitution to the United States.