Tax Fraud Blotter: Risky business
Contemptuous; fashion misstatements; handwritten document; and other highlights of recent tax cases.
Miami: A federal court has held that preparer Jessyca Bernard has violated a 2018 permanent injunction that barred her from preparing returns for others.
Bernard admitted that she violated the injunction by preparing 438 returns for others, using her husband’s name to conceal her involvement. Bernard agreed to pay the U.S. $79,000 as reimbursement of its investigative expenses and disgorgement of fees she received from refunds claimed on returns she prepared in violation of the injunction.
The court ordered Bernard to pay these amounts and barred her from working at or maintaining any interest in any entity that offers prep services.
Las Vegas: Preparer William Pamintuan Craig, 60, has been sentenced to a year and a day in prison, to be followed by a year of supervised release, for falsely inflating deductions on clients’ returns and underreporting taxable income and claiming false expenses on his own returns.
The returns caused some $265,000 in losses to the IRS. Craig pleaded guilty in October to making and subscribing a false return.
He concealed the actual revenue from his tax prep business and claimed false work expenses. He underreported his taxable income for tax years 2012 to 2017 by some $439,000, causing $143,237 in tax loss to the IRS. During those same years, he also caused at least $128,000 in tax loss by filing false returns for his clients.
Craig was also ordered to pay $143,237 in restitution to the IRS.
Los Angeles: Federal prosecutors have filed charges against a clothing importer and the company’s owner concerning undervaluing imported garments to avoid millions in federal duties. The cases also allege a tax fraud in which the owner failed to report millions from cash transactions.
Prosecutors also filed plea agreements in which Ambiance Apparel and company owner Sang Bum “Ed” Noh agreed to plead guilty to felony offenses and pay $117,897,708, which includes nearly $36 million in cash seized from Ambiance and Noh in 2014.
Noh agreed to plead guilty to one count of conspiracy and one count of subscribing to a false tax return, charges that carry a maximum of eight years in prison. Ambiance Apparel agreed to plead guilty to eight counts, including conspiracy, money laundering and customs offenses.
Court documents outline separate schemes involving Ambiance and Noh, which came to an end in September 2014 when law enforcement authorities executed dozens of search warrants as part of an investigation into money laundering and other crimes at fashion district businesses.
In the customs fraud scheme, Ambiance imported clothing from Asian countries and submitted fraudulent invoices to U.S. Customs and Border Protection that undervalued the shipments and allowed Ambiance to avoid paying the full amount of tariffs owed on the imports, according to court documents.
Ambiance also admitted that it failed to file reports with the Treasury that documented cash transactions of more than $10,000. Ambiance employees received approximately 364 payments of more than $10,000 over two years — more than $11.1 million — and the company failed to file a single Form 8300.
Ambiance used two sets of books to record sales, one of which documented only cash transactions and was not reported to Ambiance's outside accountants. Noh also directed some of the second set of transactions to be underreported to the accountants. The lower sales figures were reported on 2011 and 2012 returns filed by Noh. Noh admitted that he failed to report income for those two years and now owes the IRS more than $16.8 million, which includes unpaid taxes, penalties and interest.
Arraignments are Sept. 14.
San Francisco: Robert Stein, a.k.a. Mikhail Solovey and Michael Swarovski, has pleaded guilty to filing a false return.
Stein admitted that while he was in prison serving a prior sentence for fraud, he met S.Z., who was also in prison for investment and securities fraud. After Stein and S.Z. were released from prison, S.Z. offered Stein a marketing job, to be paid by commission, selling securities and recruiting investors. Stein worked for S.Z. from 2012 through 2017. S.Z. provided Stein with a database of potential investors for him to make cold calls for securities sales and with a misleading script for these calls.
Stein admitted that he lied to investors in at least two ways: He concealed his prior convictions by misrepresenting his name and background and he misled the investors as he eventually figured out that the investments had overstated financial results.
During that time, Stein convinced investors to send at least $2,336,681 to S.Z. who paid Stein some $416,564 in commissions, which Stein didn’t report on his federal returns.
To conceal the income, Stein deposited the commissions into two nominee corporations’ bank accounts in 2014 through 2017 and caused a preparer to prepare and file false corporate income tax returns for the nominees. The unreported income resulted in $98,197 in tax due.
Stein’s sentencing is Oct. 30. The maximum for filing a false return is three years in prison, a fine of $250,000 and a year of supervised release.
Chapel Hill, North Carolina: Businessman Charles Agee Atkins has pleaded guilty to filing a false return and being a felon in possession of a firearm.
Atkins controlled and operated several risk consulting businesses, and from 2011 through 2017 underreported the income he received from them, causing a federal tax loss exceeding $380,000. He also admitted that he failed to pay more than $420,000 in federal taxes for several previous years. Atkins caused a total tax loss of more than $800,000 to the IRS.
He also pleaded guilty to being a felon in possession of a firearm. Atkins was convicted of tax fraud in 1988; a 2019 search of his residence revealed a 12-gauge shotgun, which Atkins could not legally possess because of his prior convictions.
Atkins faces a maximum of three years in prison on the tax charge and 10 years on the possession charge. He also faces a period of supervised release, restitution and monetary penalties.
Columbus, Ohio: Tax attorney Marcus “Marc” Dunn has been sentenced to 18 months in prison for obstructing the IRS.
From 2007 until his client, Dr. Kevin Lake, died, Dunn advised and assisted Lake in legal matters relating to the operation of his clinics. Around 2010, the IRS audited Lake’s entities; in response to a request for documentation supporting the entities’ claimed clinical equipment depreciation deductions, Dunn provided “bills of sale” purporting to support the deductions but which in fact falsely inflated the value of the equipment.
In 2011, Dunn filed petitions in U.S. Tax Court challenging the IRS determination that some of the audited entities owed additional taxes. The case was ultimately settled with an agreement that approximately $608,583 was due. When the IRS revenue officer attempted to collect the settlement amount in 2014, Dunn frustrated the IRS’s collection efforts by falsely representing that the relevant entities were defunct with no assets.
Dunn caused a tax loss of $513,960 to the United States. He pleaded guilty in 2018 to corruptly endeavoring to impede and obstruct the IRS; Ohio suspended Dunn’s law license in March 2019.
He was also ordered to serve three years of supervised release. Restitution to the government has been paid using funds seized from Lake.
Decatur, Alabama: Roofer Jerry Wayne Scott Jr., 47, has pleaded guilty to filing a false return.
Scott owned and operated Advanced Roofing, which in 2013 worked on projects for which it was paid some $750,083. Scott filed a 2013 extended return that reported gross receipts of $392,250 for Advanced; for preparation of the return, Scott provided a handwritten document to the preparer that listed the business income as $392,250 but failed to provide any other documentation.
The maximum for filing a false return is three years in prison and a $100,000 fine.