Don't Mess With Taxes

More than 22 million U.S. workers lost their jobs during the early stages of the COVID-19 pandemic. Crooks took advantage of their misfortune to file fraudulent unemployment insurance claims.

COVID-19 has to be one of the most persistent illnesses ever, from both medical and financial perspectives.

While federal health agencies debate COVID vaccine recommendations and warnings, Uncle Sam’s law enforcement officers, including those with the Internal Revenue Service’s Criminal Investigation unit, continue their efforts to prosecute those who abused coronavirus relief programs.

On June 24, officials notched another win when David Godin was sentenced by a federal judge in Baltimore to six and a half years in prison, to be followed by three years of supervised release, for his part in a COVID-19 unemployment insurance benefits fraud scheme.

Those false claims netted resulted in $2.3 million fraudulently paid benefits, according to court filings. Prosecutors say Godin personally netted more than $1 million of the fraud's funds, and used the money “to buy nice things and live a life of luxury.”

Now, however, the Miami, Florida, has to return the ill-gotten gains. The sentencing judge also ordered Godin to pay a forfeiture money judgment of $1,087,345.66 and restitution of $1,137,894.56.

This week’s jail term and monetary judgements were issued following Godin’s guilty pleas on March 26 to wire fraud and aggravated identity theft.

Pandemic help also meant fraud possibilities: When the COVID-19 pandemic was declared in March 2020, millions of workers lost their jobs as workplaces closed in an effort to stem the illness’ spread.

That meant state workforce assistance programs, including those that issue unemployment payments, were swamped.

At the federal level, the Coronavirus Aid, Relief, and Economic Security (CARES) Act, signed into law on March 27, 2020, provided emergency financial assistance to those suffering the COVID’s economic effects. It included the exempting of state unemployment benefits from federal taxation.

Unfortunately, in many cases the claims for job-loss assistance were fake.

In the Godin cases, his plea agreement documents stated that from June 2020 through November 2023, he “engaged in a sophisticated scheme” to defraud the Maryland and California offices by using identity theft victims’ personal information, along with anonymous email addresses, virtual private networks, and proxy servers.

This enabled Godin, whom court filings indicate was known by the aliases James St Patrick, David Wetty, and Vic Pro, to file numerous fraudulent unemployment insurance (UI) claims with multiple states from a single location, according to federal officials. He also was able to aggregate UI information in discrete accounts, and avoid fraud safeguards put in place by the state benefits programs.

Prosecutors say in total Godin, submitted and caused the submission of at least 140 fraudulent unemployment claims to the Maryland and California agencies, as well as other state workforce offices.

Godin’s proceeds from the fraud scheme was well over $1 million, according to court filings. Prosecutors’ official sentencing submission said that Godin “recorded himself with the spoils of his fraud, including stacks of cash, expensive watches, and sports cars.”

Tax Felon Friday: Federal law enforcement officers who worked to bring Godin to justice included the District of Maryland COVID-19 Strike Force.

The special team is one of five strike interagency law enforcement groups — hence the involvement of the IRS-CI, which is continuing its own pursuit of COVID tax criminals — established by the Department of Justice across the country to investigate and prosecute COVID-19 fraud, including those related to the CARES Act.

The participation of the IRS’ law enforcement arm is one reason the Godin sentencing to be tagged as this week’s Tax Felon Friday post.

Another reason is that in addition to the illegally obtained COVID unemployment relief obtained by Godin from state agencies, the people whose personal information was used to file the false job assistance claims were victims.

And it’s a good bet that some of them didn’t realize their identities had been stolen until they heard from the IRS. Since their information was used to get the unemployment benefits, they got a 1099-G tax form detailing the benefit amounts they never sought or received.

The COVID unemployment cases were special, since some of the benefits were not taxable. But when we’re not in the midst of a global pandemic and consequent special tax rules, unemployment benefits are taxable income.

Identity theft victims in these cases then face not only the hassle of resolving their stolen personal data, but also explaining to the IRS that they shouldn’t have received a tax bill for the fraudulently claimed assistance.

You can read about what to do if you ever find yourself in such a situation in my post Unemployment tax troubles: wrong 1099-G amounts & benefits ID theft.

You also can catch up on all sorts of tax miscreants at the ol' blogs' special Tax Felon Friday page is a good place to start.

And if you want more tax crime posts, notably those that were published long before I gave them a special end-of-week feature, you can peruse, what else, the tax crimes category. You'll find this post at the top of that collection right now, so just scroll down for more.

You also might find these items of interest:

• IRS makes progress in cutting tax ID theft victims' wait times (2025)
• Some states struggling to pay coronavirus-created unemployment claims (2020)
• GOP tax committee members seek COVID unemployment fraud investigation (2021)
• Labor Department joins IRS in offering online resources for unemployment fraud victims (2021)

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