Don't Mess With Taxes

Photo by RODNAE Productions

Welcome to the continuation of the ol' blog's Tax Crime Weekend!

Yesterday's post featured efforts to end abusive tax schemes and bring their promoters to justice.

Today's post expands on the legal reckoning theme. The Internal Revenue Service's Criminal Investigation division, known as IRS-CI, recently revealed its top 10 cases of 2022.

Wide variety of schemes, one outcome: The tax evasion attempts included Ponzi pyramid schemes, fake businesses, COVID-19 fraud, bogus tax credit, and even a reality TV couple. And more.

Despite the diversity of their criminal tax acts, they shared one thing. They got caught. And sent to jail.

"This year's top 10 cases demonstrate that no one — not attorneys, not reality television stars, not law enforcement officers — are above the law," said IRS-CI Chief Jim Lee in announcing his group's successes. "The defendants in these cases brazenly tried to victimize others through fake investment schemes or steal money from government coffers, and thanks to our investigative work, there are consequences for the financial crimes they committed."

Here's a quick overview of IRS-CI's Top 10 Cases of 2022, which also are this weekend's By the Numbers honoree. They are counted down from number 10 to 1.

And while the IRS includes offenders' names in its release, I'm not doing so in this post. You can, however, find the identities and read more about each case by following the links that are part of each of the list's enumerated intro descriptions.

10. D.C. man gets 10 years for attempt to steal $31+ million in COVID funds.
The Washington, D.C., man fraudulently applied for at least 25 Paycheck Protection (PPP) loans totaling more than $30 million, and submitted at least four false Economic Injury Disaster Loan (EIDL) applications totaling $950,000. Before IRS-CI agents stopped him, he managed to steal $2.385 from these relief programs that were created to help business owners facing tough times during the pandemic. He used a stolen identity to disguise ownership of his company; he used the same fake ID to submit most of the PPP and EIDL applications.

He used the stolen funds to buy a Tesla Model 3, and pay for personal expenses ranging from hotels to attorney fees. He also converted hundreds of thousands of dollars into cryptocurrency. As part of his plea agreement, he had to forfeit the Tesla and the contents of 21 bank accounts, as well as liquidate his cryptocurrency, and return the funds to the U.S. government.

9. Las Vegas tax preparer sentenced to prison for multiple fraud schemes.
A Sin City resident was sentenced to 13 years and three months in prison for filing false tax returns, aggravated identity theft, wire fraud, money laundering and impersonating an FBI agent. He was also ordered to pay nearly $9.7 million in restitution to the United States and the other victims of his fraud schemes.

Photo by Kay Bell

The man owned and operated a Las Vegas-based tax preparation business that he used in two separate fraud schemes. First, he prepared and filed federal tax returns for clients that included false deductions and fictitious businesses in an effort to generate fraudulent larger refunds. At times, he used the names and IRS Preparer Tax Identification Numbers of his firm's other employees without their knowledge or consent, making it seem as if they, not he, had prepared the false returns. In addition, he required his clients to use a refund anticipation check program, which he then utilized to secretly take fees out of the clients' tax refunds without their knowledge.

In addition, he created an elaborate ruse to sell his business, using forged bank statements, fabricated return preparation fee reports, false personal tax returns, and other tax forms that had never actually been filed with the IRS, as well as the stolen tax and personal identifying information of approximately 12,000 taxpayers who were not company clients. The scam managed to convince a buyer to pay $3.8 million for his firm, significantly more than it was worth. On a smaller, but still bizarre, scale, he pretended to be an FBI agent, wearing a fake badge and tactical gear, and attaching police lights to his car, in order to pressure a client to pay a tax preparation fee.

8. San Bernardino County man sentenced to 14 years for multimillion-dollar investment fraud, tax cheating.
A former sheriff's deputy was sentenced to 168 months in federal prison and ordered to pay nearly restitution for a nearly seven-year fake investment scheme in which he netted around $7.6 million. He falsely claimed to be a wealthy businessman, making up stories about tens of millions of dollars he purportedly won in variety lawsuits against the California county where he lived and a health care provider, as well as from other fake business accomplishments. He used that veneer of wealth to get people to invest with him, offering exclusive opportunities that promised rates of returns as high as 100 percent.

The returns, however, were all for the con artist's benefit. He spent the money on gambling and luxury items, including private jet trips, designer merchandise and luxury cars. He also failed to report any of the money he received from victims in 2011 or 2012 on his income tax returns. He did report gambling winnings income for those years, but then offset that estimated $1-plus million by gambling losses.

7. Serial tax fraudster sentenced to more than 19 years in federal prison.
He should have learned from his 1999 and 2003 tax fraud convictions, but no. During his hearing in an Orlando, Florida, federal court, he was sentenced to 19½ years in prison, and ordered to forfeit at least $12.3 million he stole in schemes from 2019 to 2021. In these most recent years, he filed a series of false tax returns claiming massive, bogus fuel tax credits. He filed the false returns in his own name and in the names of co-conspirators and identity theft victims.

It could have been worse for Uncle Sam. The felon also tried to steal at least $27 million more. As for the illicit funds that were obtained, the man and his criminal cohorts conspired to launder their ill-gotten gains, and used significant portions of the fraudulent tax refunds to purchase real estate and other assets

6. TV personalities sentenced to federal prison for fraud and tax evasion.
OK, here I'm using the names, since these folks already put themselves out there, annoyingly, based on my brief views of their television show as I clicked through the cable channels. But back to the tax crime. Todd and Julie Chrisley, the parental duo in the "Chrisley Knows Best" show, were convicted of tax evasion and conspiracy to defraud the IRS. Todd was sentenced to 12 years in prison, with three years of supervised release for eight federal felonies. Julie was sentenced to seven years in prison and three years of supervised release for 10 federal felonies. Their accountant also got three years jail time and three years of supervised release for three federal felonies.

Throughout the conspiracy, the Chrisleys operated a loan-out company. To evade collection of half a million dollars in delinquent taxes owed by Todd, the couple opened and operated corporate bank accounts in Julie's name only. When the IRS requested information about the bank accounts, the Chrisleys transferred ownership of the corporate bank account to a relative to further conceal their income. The Chrisleys also failed to file tax returns or pay any taxes during the 2013, 2014, 2015, or 2016 tax years.

5. Two promoters of nationwide tax scheme sentenced to prison.
Two men were sentenced to 11 years and 8 years, respectively, in prison. The men, along with a third accomplice who got a 57-month jail term, conspired to promote a nationwide tax fraud scheme to more than 200 participants in at least 19 states. The result was the filing of more than $64 million in false tax refund claims. Between 2014 and 2016, the men held seminars across the United States publicizing their scheme that convinced taxpayers that their mortgages and other debts entitled them to tax refunds. The two main promoters also were ordered to serve three years of supervised release after they get out of jail, and pay approximately $26.35 million in restitution to the United States.

4. Calabasas man sentenced to 17½ years in prison for multi-million dollar cannabis vaping investment scam.
A former decathlete for the Philippines was sentenced to nearly two decades in prison for fraudulently raising more than $45 million from investors. He created, as far back as 2010, various business entities that he claimed were involved in the cannabis industry and the sale of vape pens containing cannabis products such as CBD oil and THC. But rather than use the invested funds, from at least 100 victims, to finance vaping operations, the con man used the vast majority of the money to pay for his own lifestyle. That included trips to Las Vegas, jewelry, designer handbags, a lavish birthday party for his daughter, horses, and a luxurious house in Calabasas, California.

In handing down the 17½ year sentence, the judge said the defendant had "preyed on individuals who believed he was their friend" and that the "seriousness of [his] conduct cannot be captured in mere dollars and cents." He also was ordered to pay more than $35 million in restitution.

3. Solar company owner sentenced to over 11 years in prison for billion dollar Ponzi scheme.
A San Francisco area woman was sentenced to 11 years and 3 months in prison for her role in what law enforcement says was the biggest criminal fraud scheme in the history of the Eastern District of California. She was chief operating officer of a business where she controlled Ponzi-like payments. The scheme hid the company's lack of third-party lease revenue and produced fake engineering reports for manufactured mobile solar generators (MSGs) that the company sold but never built. That in turn helped fool investors into thinking the company was a success.

At least it was something she shared with her husband. In 2021 he was sentenced to 30 years in prison and ordered to pay $790.6 million in restitution for conspiracy to commit wire fraud and money laundering.

2. Sarasota man gets 23-year prison term for running $80 million FOREX Ponzi scheme. 
For nearly eight years, the Florida resident ran an investment company named that he and co-conspirators used to persuade at least 700 victims to invest in the foreign exchange trading (FOREX) scheme through promissory notes and other means. The investments, however, produced losses for the victims of more than $80 million.

The man and his criminal colleagues used some of their victim-investors' funds to make Ponzi-style payments to perpetuate the scheme. The balance of the scammed money paid for their lavish lifestyles, which included luxury cars, multimillion dollar homes, lavish trips and more. As a tax insult added to injury, the Sarasota convicted felon underreported his income on his 2017 return. He claimed negative income on that filing, and received a tax refund.

He also received a 23-year federal prison sentence last year for conspiracy to commit wire fraud and mail fraud, money laundering, and filing a false income tax return. In addition, the court also entered an order of forfeiture of nearly $2.82 million, a portion of the proceeds of the charged criminal conduct.

And the IRS-CI top tax case of 2022 involves yet another well-known, and named, person. Drum roll, please.

1. Celebrity attorney sentenced to 14 years for stealing millions from clients and tax fraud.
Michael Avenatti burst onto the national scene when he represented an adult film actress in a case against the 45th president of the United States. But he had other clients, some of which he was convicted of defrauding.

Avenatti was sentenced to 14 years in prison last year for cheating four of his clients out of millions of dollars and obstructing the IRS' attempts to collect payroll taxes from his coffee business. He must also pay $10.8 million in restitution to his clients and to the IRS.

The 14-year sentence will be served consecutively to sentences Avenatti is already serving in a Southern California prison. He's there after being convicted of stealing proceeds from Stormy Daniels, the aforementioned actress. Avenatti also was convicted for trying to extort millions of dollars from Nike.

He pleaded guilty plea in June 2022 to the tax-related charge and four counts of wire fraud. At the time, he said he wanted to spare his family from any additional embarrassment. Good luck with that.

If you're a true tax crime aficionado, bookmark the IRS-CI page at IRS.gov. There you can keep up with the tax agency's criminal investigative arm, which conducts financial crime investigations, including tax fraud, narcotics trafficking, money-laundering, public corruption, healthcare fraud, identity theft, and more. You also can follow @IRS_CI on Twitter.

You also might find these items of interest:

• IRS-CI countdown of 2021's Top 10 criminal tax cases
• Second defendant in alleged vast connected federal tax evasion network dies
• IRS-Criminal Investigation tax crime efforts pay off domestically and globally in FY22

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