Convictions and pleas

Friday, September 23rd, 2016 @ 5:45PM

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The Treasury Inspector General for Tax Administration (TIGTA) was established under the IRS Restructuring and Reform Act of 1998 to provide independent oversight of IRS activities. TIGTA promotes the economy, efficiency, and effectiveness in the administration of the internal revenue laws. It is also committed to the prevention and detection of fraud, waste, and abuse within the IRS and related entities.

CFEG reports that TIGTA announced cases involving fraud, waste, and abuse for 2016 on its website where IRS employees were convicted or pled guilty to committing various crimes and sentenced. CFEG has compiled a list of these cases for our readers’ review from TIGTA’s website. The crimes in the listed cases consist of bribery as a public official, orchestrating a large-scale identity theft tax refund fraud scheme, identity theft in connection with an audit, defrauding the Government with false tax returns, unauthorized access and disclosure of tax information, identity theft conspiracy, aiding and assisting fraud and false statements.

IRS Employee Sentenced to 30 Months in Prison for Taking Bribe

On May 13, 2016, in the Western District of Washington at Seattle, former Internal Revenue Service (IRS) employee Paul G. Hurley was sentenced [1] after a jury found him guilty [2] of receiving a bribe and receiving an illegal gratuity in his capacity as a public official. [3]

According to the court documents, Hurley corruptly sought and received something of value personally in return for being influenced in the performance of an official act. Hurley had been employed as an IRS revenue agent since June 2009 and was assigned to the Seattle, Washington IRS office. As a part of Hurley’s official duties, he conducted audits of Federal tax returns to determine whether taxpayers had correctly reported and paid their tax liability to the IRS. [4]

In July 2015, a taxpayer who is part owner of a business that operated recreational marijuana shops and medical marijuana dispensaries in the State of Washington was notified of an audit of his business’s Federal tax return. Hurley was listed as the assigned contact. The taxpayer and Hurley met at the taxpayer’s place of business several times during the course of the audit. During their initial meeting, Hurley advised the taxpayer that the Internal Revenue Code (IRC) does not allow deductions or credits for a business whose activities consist of trafficking in illegal substances. Hurley noted that the taxpayer would be taxed on the business’s gross revenue with limited deductions. However, during the audit Hurley seemed sympathetic to the taxpayer regarding the IRC’s prohibition against deductions and credits for businesses in the marijuana industry and talked about being unhappy at the IRS. [5]

On September 11, 2015, Hurley gave the taxpayer the results of the audit with a proposed amount due of $292,175.41 for tax years 2013 and 2014, to which the taxpayer agreed. Hurley continued on to say that he had saved the taxpayer over $1 million in the audit. He further indicated that he (Hurley) was living paycheck to paycheck. With additional clarification between the taxpayer and Hurley, the taxpayer understood him to be asking for a personal payment of $20,000. Initially Hurley wanted the taxpayer to pay off his student loans in small amounts over time, but when the taxpayer declined, Hurley said he wanted cash. Hurley and the taxpayer scheduled a time to meet several days later. Hurley told the taxpayer not to tell anyone, not even his business partner. [6]

During a meeting on September 16, 2015, Hurley accepted $5,000 from the taxpayer in connection with the conduct of his official duties as an IRS revenue agent and in exchange for providing low tax assessments on the audit. On September 21, 2015, Hurley accepted the remaining $15,000, again in connection with the conduct of his official duties. Hurley was then arrested pursuant to a probable cause arrest. A search of Hurley’s person and backpack revealed the $15,000 cash, plus three $20 bills with serial numbers matching those from the previous bribe payment. [7]

Hurley was sentenced to 30 months in prison, followed by three years of supervised probation and 100 hours of community service. [8] Hurley is appealing his conviction and sentence. [9]

[1] W.D. Wash. Judgment filed May 13, 2016.

[2] W.D. Wash. Verdict Form filed Feb. 12, 2016.

[3] W.D. Wash. Judgment filed May 13, 2016.

[4] W.D. Wash. Crim. Complaint filed Sep. 21, 2015.

[5] Id.

[6] Id.

[7] Id.

[8] W.D. Wash. Judgment filed May 13, 2016.

[9] W.D. Wash. Notice of Crim. Appeal filed May 27, 2016.

IRS Employee Pleads Guilty to Orchestrating Large-Scale Identity Theft Refund Scheme

On February 8, 2016, in the Northern District of Alabama, Internal Revenue Service (IRS) employee Nakeisha Hall pled guilty to the theft of Government funds, aggravated identity theft, unauthorized access to a protected computer, and conspiracy to commit mail fraud affecting a financial institution and bank fraud. [1] Hall was initially charged in a sealed indictment in September 2015 with the theft of Government funds, identity theft, and unauthorized access violations. [2] In December 2015, the conspiracy charge was added against Hall, and two coconspirators, Jimmie Goodman and Abdulla Coleman, were charged as well. [3] A third coconspirator, Lashon Roberson, had been charged in the conspiracy in October 2015. [4] Hall and Goodman were arrested on December 22, 2015; Coleman was arrested on January 7, 2016. [5]

According to the court documents, Hall began working at the IRS in 2000. She was employed in the IRS Taxpayer Advocate Service (TAS) office in Birmingham, Alabama from 2007 to 2011, and has worked in TAS offices in Omaha, Nebraska, New Orleans, Louisiana, and Salt Lake City, Utah since November 2011. The TAS function is responsible for assisting taxpayers who are having difficulties with the IRS, often because they are victims of identity theft needing assistance in removing fraudulent tax information from their accounts, and with filing corrected tax returns. [6]

By virtue of her IRS employment, Hall had the ability to access taxpayers’ personal identifying information (PII), including names, dates of birth, and Social Security Numbers (SSN). Hall’s authority to access this information, however, was limited to official business purposes. Hall was fully aware of these limitations, had completed training regarding such, and knew accesses made for non-business reasons could be subject to criminal prosecution. As a result of her lengthy IRS employment, Hall was also familiar with the process of filing tax returns and how to maximize tax refund amounts. [7]

As part of her scheme to defraud the IRS, and for the purpose of personal financial gain, [8] Hall intentionally exceeded her authorization at work and accessed thousands of names, dates of birth, and SSNs for non-business purposes, running various searches through the IRS’s system looking for individuals who met certain criteria. Between 2008 and 2011, Hall used fraudulently obtained PII to file hundreds of fraudulent individual income tax returns. Not only were these returns not authorized by the taxpayers whose identities were used, they also contained false and fraudulent Forms W-2 and other information in order to generate improper and artificially inflated refunds.

Hall prepared the fraudulent returns on her own computer using online tax software programs and requested that the associated refunds be put on debit cards designed solely for the purpose of accepting tax refunds. [9]

After Hall came up with the idea for the scheme, she approached the others (coconspirators) for assistance in retrieving and liquidating the refunds. Hall solicited and obtained “drop addresses” from Goodman, Coleman, Roberson, and at least one other unnamed individual. Hall then had the tax refund debit cards sent by mail to the various “drop addresses.” [10]

Once the refund debit cards arrived via mail, Hall and her coconspirators retrieved and activated them using the taxpayers’ PII previously obtained by Hall. Hall and her coconspirators accessed the associated funds through ATMs or by purchasing goods and services with the cards and receiving cash back on any unspent balance. For returns that generated refunds in the form of paper Treasury checks instead of debit cards, fraudulent endorsements were used to cash the Treasury checks at financial institutions. Hall compensated her coconspirators by giving them a portion of the money obtained or by giving them refund cards. [11]

The conspiracy involved fraudulent returns with an intended loss by way of fraudulent refunds of more than $550,000. The Government will recommend that Hall and her charged coconspirators be joint and severally liable for restitution in the amount of $438,187, but reserves the right to request additional restitution if additional amounts become known before Hall’s sentencing date. [12]

Hall’s sentencing is set for June 29, 2016. [13] She could potentially face a maximum sentence of 32 years’ imprisonment for the conspiracy and aggravated identity theft charges. [14] Coconspirator Roberson entered a guilty plea on February 11, 2016 and is scheduled to be sentenced on May 10, 2016. [15] Additional legal proceedings are anticipated for Goodman and Coleman. [16]

[1] N.D. Ala. Plea Agreement Hall filed Feb. 8, 2016.

[2] N.D. Ala. Indictment Hall filed Sep. 24, 2015.

[3] N.D. Ala. Superseding Indictment Hall et al filed Dec. 15, 2015.

[4] N.D. Ala. Information Roberson filed Oct. 15, 2015.

[5] N.D. Ala. Criminal Docket Hall et al filed Sep. 24, 2015.

[6] N.D. Ala. Plea Agreement Hall filed Feb. 8, 2016.

[7] Id.

[8] N.D. Ala. Superseding Indictment Hall et al filed Dec. 15, 2015.

[9] N.D. Ala. Plea Agreement Hall filed Feb. 8, 2016.

[10] Id.

[11] Id.

[12] Id.

[13] N.D. Ala. Criminal Docket Hall et al filed Sep. 24, 2015.

[14] N.D. Ala. Plea Agreement Hall filed Feb. 8, 2016.

[15] N.D. Ala. Criminal Docket Roberson filed Oct. 15, 2015.

[16] N.D. Ala. Criminal Docket Hall et al filed Sep. 24, 2015.

IRS Employee Pleads Guilty to Identity Theft in Connection with an Audit

On May 10, 2016, in the Northern District of Georgia, Internal Revenue Service (IRS) employee Creshika Wise pled guilty to aggravated identity theft in connection with a fraudulent scheme. [1] Wise had been indicted for mail fraud, wire fraud, and aggravated identity theft in January 2016, [2] and was subsequently arrested for the offenses in Atlanta, Georgia. [3]

According to the court documents, at all times relevant, Wise was an IRS revenue agent in Atlanta. Her official duties as a revenue agent included regularly auditing individual, business, and corporate tax returns, and calculating taxpayers’ correct tax liability based on her examinations. [4]

In approximately August 2013, Wise was assigned to audit an individual tax return jointly filed by two married taxpayers. The taxpayers had authorized a certified public accountant (CPA) to transact business with the IRS on their behalf. Due to erroneous information received from a third party, the taxpayers had initially underreported and underpaid their Federal tax and, upon correction of the error, owed $758,846 in additional personal income tax, plus interest. The taxpayers, through their CPA, agreed with this assessment. [5]

Wise subsequently devised a scheme to knowingly defraud the taxpayers and to obtain money by means of false and fraudulent representations. Wise’s scheme was designed to take all or part of the additional Federal tax and interest owed to the IRS by these taxpayers and keep it for herself. Wise created a fictitious IRS Form 4549, Income Tax Examination Changes, for the taxpayers and placed the fictitious form in the IRS’s files. The fictitious Form 4549 showed a balance due of only $282,363 rather than the $758,846 already agreed upon. Wise also forged the signature of the taxpayers’ CPA on the fictitious form. [6]

Wise then opened a checking account in the name “Creshika C. Wise Sole Prop D/B/A U.S. Treasury and Accounting Service.” She later sent a deceptive e- mail to the taxpayer-husband instructing him to send a wire transfer to this account, which she described as being titled in the name “U.S. Treasury and Accounting Service,” failing to disclose that the bank account belonged to her personally rather than to the IRS. [7]

Wise also attempted to open a bank account through the Internet at a different financial institution, this time in the names of the married taxpayers. As a follow-up, Wise sent a signature card via facsimile to the bank and called the bank impersonating the taxpayer-wife in order to inquire about the status of the new account. In furtherance of her scheme, Wise changed, or caused to be changed, the taxpayers’ addresses in the IRS computer system, from their actual residence to a United Parcel Service mailbox opened and controlled by Wise. [8]

Wise will face a mandatory minimum term of two years’ imprisonment for the identity theft. [9] Her sentencing is scheduled for August 3, 2016. [10]

[1] N.D. Ga. Plea Agr. filed May 10, 2016; N.D. Ga. Information filed May 10, 2016.

[2] N.D. Ga. Indictment filed Jan 14, 2016.

[3] N.D. Ga. Executed Arrest Warrant filed Feb. 5, 2016.

[4] N.D. Ga. Indictment filed Jan 14, 2016.

[5] Id.

[6] Id.

[7] Id.

[8] Id.

[9] N.D. Ga. Plea Agr. filed May 10, 2016.

[10] N.D. Ga. Criminal Docket filed May 10, 2016.

Jury Finds IRS Employee Guilty of Defrauding the Government with False Tax Returns

On May 23, 2016, at the conclusion of a five-day trial [1] in the Eastern District of California, a jury reached a unanimous verdict finding Internal Revenue Service (IRS) employee Kimberly Brown-English guilty on all six counts of an indictment charging her with Offenses by Officers and Employees of the United States (U.S.) for preparing and filing false Federal tax returns. [2]

According to the indictment, Brown-English was employed by the IRS at the Fresno Service Center, Fresno, California, at all times relevant to the charges. Brown-English initially was employed by the IRS in 2002 and worked as a seasonal Data Transcriber from 2004 to 2012. She was promoted in September 2012 to the position of Correspondence Examination Technician. Her primary duty was to provide assistance to taxpayers throughout the U.S. that were under IRS examination by educating them on tax laws and helping them to resolve IRS examination issues. Brown-English was required to complete training courses for this position that included the topics of Earned Income Tax Credit, Child Tax Credits, claimed dependents, and filing status. [3]

In 2012 and 2013, respectively, Brown-English prepared and filed her own 2011 and 2012 Federal income tax returns, in which she falsely claimed two dependents and listed them as her “parent” and her “nephew.” She also claimed her filing status was Head of Household. The tax returns each contained materially false items. Neither of the individuals claimed as dependents had a familial relationship with Brown- English. One lived with her during 2011 and 2012, but paid rent and had an income. The other was homeless and did not reside with Brown-English. As a result of Brown-English’s false returns, made under penalty of perjury, she obtained refunds from the IRS to which she was not entitled. [4]

Additionally, between January 2012 and April 2013, Brown-English created opportunities for other individuals to defraud the U.S. by preparing and filing fraudulent Federal income tax returns for them. Brown-English prepared and filed the 2011 and 2012 returns for one individual falsely claiming dependents, Earned Income Tax Credit, Child Tax Credit, and Head of Household filing status. In fact, the dependents did not live with the taxpayer more than half of the year, nor was more than 50% support provided for the dependents, thus making the taxpayer ineligible to claim them as dependents, file as Head of Household, or receive the Earned Income Credit and Additional Child Tax Credit. [5]

During the same time period, Brown-English prepared and filed the 2011 and 2012 tax returns of a second individual with similar false claims. On the individual’s 2011 return, five dependents were fraudulently claimed. One dependent was claimed for 2012. The returns also contained false claims for the Child Tax Credit, the Additional Child Tax Credit, the Earned Income Tax Credit, and Head of Household filing status. Again, this taxpayer did not meet the eligibility requirements for claiming the dependents or the associated tax credits. As a result of Brown- English’s preparation and submission of the false returns for these two individuals, they had the opportunity to falsely decrease their tax liability and obtain refunds from the IRS to which they were not entitled. [6] Sentencing is scheduled for August 15, 2016. [7]

[1] E.D. Cal. Criminal Docket as of May 25, 2016.

[2] E.D. Cal. Verdict Form filed May 23, 2016.

[3] E.D. Cal. Indictment filed Oct. 9, 2014.

[4] Id.

[5] Id.

[6] Id.

[7] E.D. Cal. Criminal Docket as of May 25, 2016.

IRS Employee Pleads Guilty to Unauthorized Access and Disclosure of Tax Information

On March 28, 2016, in the District of Massachusetts, Internal Revenue Service (IRS) employee Nicole Johnson pled guilty [1] to an Information charging her with conspiracy to make unauthorized accesses to a Government computer for financial gain and disclosure of tax return information. [2]

According to the court documents, Johnson was employed as an IRS contact representative in Andover, Massachusetts. In her capacity as a contact representative, Johnson was responsible for responding to telephone inquiries from taxpayers concerning issues that included, among other things, the taxpayers’ Federal income tax returns and Federal income taxes owed. For the purpose of performing her official duties, Johnson had access to the IRS databases housing personal identifying information and Federal income tax information for millions of U.S. taxpayers. Johnson understood, and was required to certify on a yearly basis, that she could only access this information for an official business purpose and that willful unauthorized access could result in serious penalties, including prosecution. [3]

Between January 2011 and April 2014, Johnson knowingly agreed with a coconspirator to intentionally access a computer without authorization and exceed her authorized access in order to obtain information from the IRS for the purpose of private financial gain and in furtherance of a criminal act, namely the unauthorized disclosure of tax return and tax return information. Johnson and her coconspirator, who worked at a debt collection agency in Andover, lived together. He knew she worked for the IRS, had access to taxpayer information, and was not permitted to disclose such information to unauthorized persons. [4]

It was the object of the conspiracy to abuse Johnson’s access to the IRS databases and to obtain information on several taxpayers associated with her coconspirator. It was further the object of the conspiracy to disclose the victim taxpayers’ information to Johnson’s coconspirator, specifically to assist him in a child support dispute, aid in his debt collection work, seek a reduction of his own Federal income tax, and delay IRS levy and garnishment proceedings on his tax account. Johnson’s coconspirator provided her with the names and/or other information pertaining to the victims in order for Johnson to perform searches in the IRS databases. [5]

One victim (Victim 1) was the coconspirators’ girlfriend from approximately 2009 to 2010 and resided with him at a residence in Lawrence, Massachusetts at various times during that period. After Victim 1 filed for child support against the coconspirator in probate court in 2011, the coconspirator sent a text to Johnson regarding access to Victim 1’s information. Johnson subsequently made accesses to the IRS databases and provided the victim’s taxpayer information to her coconspirator via text message. In 2012, just days prior to a child support probate court hearing, Johnson again accessed the taxpayer information of Victim 1 and sent the information by text to her coconspirator. Shortly thereafter, the coconspirator filed a pre-trial memorandum in probate court, which stated that he intended to introduce the “Tax Returns of Mother” (Victim 1), and listed Johnson as a probate trial witness. [6]

Another victim (Victim 2) also had been a previous girlfriend of Johnson’s coconspirator from approximately 2003 to 2009, and had lived with him at the Lawrence residence. Due to the coconspirator’s credit issues, among other things, Victim 2 had agreed to apply for and put the mortgage of the Lawrence residence in her name. Around February 2012, at her coconspirator’s direction, Johnson began accessing Victim 2’s taxpayer information, including information pertaining to the victim’s deduction of mortgage interest on the Lawrence residence. During the same time Johnson was accessing the account, her coconspirator sent a text message to Victim 2 stating, “Why do u keep stealing my money,” referring to the deduction of mortgage interest on the Lawrence residence. Several months later in 2012, again at her coconspirator’s direction, Johnson accessed Victim 2’s tax information, including the deduction of approximately $13,109 in mortgage interest. The following day, the coconspirator filed his Federal income tax return declaring a home mortgage interest deduction in the same amount, $13,109. [7]

In 2013, Johnson accessed the IRS databases and obtained taxpayer information to aid the coconspirator in his debt collection work. Also in 2013, Johnson accessed her coconspirator’s account and placed a delay notice on his taxes due and owing for tax years 2009, 2010, and 2011. In April 2014, Johnson again accessed her coconspirator’s tax information to assist him concerning his Federal tax matters. [8]

Johnson’s sentencing is scheduled for June 20, 2016. [9]

[1] D. Mass. Criminal Docket filed Sep. 23, 2015.

[2] D. Mass. Information filed Sep. 23, 2015.

[3] Id.

[4] Id.

[5] Id.

[6] Id.

[7] Id.

[8] Id.

[9] D. Mass. Criminal Docket filed Sep. 23, 2015.

Former IRS Employee Sentenced for Involvement in a Stolen Identity Refund Scheme

On February 22, 2016, in the Western District of Missouri, Central Division, former Internal Revenue Service (IRS) employee Demetria Brown was sentenced for her role in a stolen identity tax refund scheme. [1] Brown pled guilty to charges of wire fraud and aggravated identity theft related to the scheme in June 2015. [2]

According to the court documents, Brown knowingly and willfully devised a scheme to defraud and obtain money from the IRS and the Missouri Department of Revenue (MDOR) by means of materially fraudulent representations. Brown worked for the IRS in St. Louis, Missouri, and lived in Fairview Heights, Illinois, at all times relevant to the charges. [3]

As part of her scheme, Brown obtained the personal identifiers (including names, Social Security Numbers, and dates of birth) of individuals without their consent or knowledge and completed fraudulent U.S. Individual Tax Returns and Missouri State Tax Returns using the identifiers. Brown added false information to the returns, such as addresses, place of employment, wages earned, and taxes withheld, and claimed refunds that were, in fact, not due. [4]

Using a false identity, Brown established an account with an Internet service provider and an e-mail address in order to submit these false returns to the IRS and MDOR. In furtherance of her scheme, Brown opened nominee bank accounts with at least six financial institutions in five different States, and used the bank information to direct the fraudulent refund payments to accounts which she controlled. [5] Over a four-year period, 29 fraudulent State income tax refunds were deposited into accounts opened by Brown in the names of her three children. Brown was listed as the custodian on each account. [6]

Brown admitted that she had been preparing and electronically filing fraudulent Federal and State returns using the e-mail address she had established and her home computer. The IRS determined that Brown filed in excess of 120 fraudulent Federal tax returns. [7] Through her scheme, Brown unlawfully acquired approximately $326,000. [8]

Brown was sentenced to 30 months in prison, followed by three years of supervised release. Additionally, she was ordered to pay a total of $326,000 in restitution; $211,000 to the IRS, and $115,000 to MDOR. Brown is scheduled to begin her sentence on June 1, 2016. [9]

[1] W.D. Mo. C.D. Judgment filed Feb. 24, 2016.

[2] W.D. Mo. C.D. Plea Agr. filed June 1, 2015.

[3] W.D. Mo. C.D. Indict. filed Oct. 2, 2013.

[4] Id.

[5] Id.

[6] W.D. Mo. C.D. Plea Agr. filed June 1, 2015.

[7] Id.

[8] W.D. Mo. C.D. Indict. filed Oct. 2, 2013.

[9] W.D. Mo. C.D. Judgment filed Feb 24, 2016.


Three to Seven Years in Prison for IRS Employee and Coconspirators

An Internal Revenue Service (IRS) employee and two of her coconspirators were sentenced in the Eastern District of California [1] for their roles in a $1.4 million identity theft conspiracy. [2] IRS employee Viririana Hernandez was sentenced on November 2, 2015. [3] Coconspirators Daniel Miranda, Jr. and Roberto Martinez, Jr. were each sentenced on December 7, 2015. [4] A fourth conspirator, Lilliana Gonzales, is scheduled to be sentenced on February 8, 2016. [5] Hernandez and her three coconspirators were charged in a 23- count indictment in July 2014 with various Federal offenses, including conspiracy to commit wire fraud, bank fraud, and mail fraud, as well as aggravated identity theft. [6] All four pled guilty between August 2015 and September 2015. [7]

According to the court documents, Hernandez, Miranda, Martinez, and Gonzales knowingly engaged in an identity theft conspiracy using the personal information of victims obtained through various methods, including IRS personnel records. Hernandez had been employed by the IRS in Fresno, California since 2006. During her employment, she had worked in a variety of administrative positions, some allowing her access to human resources files on other IRS employees. [8]

>From at least June 2012 through at least January 2014, the four conspired to defraud retail merchants, cardholders, and banks to obtain money, services, and property under fraudulent pretenses. As part of the conspiracy, Hernandez mined IRS databases for personal information, such as dates of birth and Social Security Numbers, belonging to current and former IRS workers, and made such information available for use by the other conspirators. By October 2012, Miranda possessed the personal information of approximately 288 current and former IRS employees. The conspirators also obtained personal information through a number of employment applications for a franchise restaurant. [9]

Once in possession of some initial personal information, the conspirators sought to obtain additional information, including details of credit cards and other financial accounts. They then used this personal information to fraudulently open new financial accounts in the victims’ names or to fraudulently gain access to the victims’ existing financial accounts, often by adding themselves as authorized users. The conspirators made a myriad of fraudulent purchases using this method of access to their victims’ bank and store credit accounts. They also used their wrongful access to get cash advances from ATMs and in-person bank transactions. On at least two occasions, the victim’s personal data, including name, date of birth, address, and specific store credit account information was sent via text to IRS employee Hernandez. On one such occasion, the same day that she received the victim’s account information by text, Hernandez subsequently used it to purchase three Gucci watches at Macy’s, totaling $3,348.89. [10]

To avoid detection and maximize the amount of money, goods, and services they could obtain, the conspirators often made numerous purchases on the accounts in a short amount of time before their fraud was discovered and the accounts were suspended. They also used the victims’ accounts to purchase gift cards or merchandise that was later returned for store credit. This allowed them to continue to use gift cards or store credit even if a victim had cancelled access to the credit card. [11]

In total, the conspirators used the means of identification of more than 250 people without lawful authority and sought to obtain at least $1.4 million in money, services, and property from merchants, cardholders, and financial institutions. [12]

Hernandez was sentenced to 54 months in prison. Miranda was sentenced to 94 months of imprisonment and Martinez to 36 months. Each will be on supervised release for three years following their imprisonment and are jointly and severally liable for restitution in the amount of $125,884. [13]

[1] E.D. Cal. Criminal Docket USA v. Miranda et al filed July 17, 2014.

[2] E.D. Cal. Plea Agr. Miranda filed June 5, 2015.

[3] E.D. Cal. Judgment Hernandez filed Nov. 4, 2015.

[4] E.D. Cal. Judgment Miranda filed Dec. 11, 2015; E.D. Cal. Judgment Martinez filed Dec. 11, 2015.

[5] E.D. Cal. Criminal Docket Gonzales filed July 17, 2014.

[6] E.D. Cal. Indict. filed July 17, 2014.

[7] E.D. Cal. Criminal Docket USA v. Miranda et al filed July 17, 2014.

[8] E.D. Cal. Indict. filed July 17, 2014.

[9] Id.

[10] Id.

[11] Id.

[12] E.D. Cal. Plea Agr. Miranda filed June 5, 2015.

[13] E.D. Cal. Judgment Hernandez filed Nov. 4, 2015; E.D. Cal. Judgment Miranda filed Dec. 11, 2015; E.D. Cal. Judgment Martinez filed Dec. 11, 2015.

IRS Employee Pleads Guilty to Aiding and Assisting Fraud and False Statements

On January 7, 2016, Internal Revenue Service (IRS) employee Yolanda Castro pled guilty to aiding and assisting fraud and false statements. [1] She was arrested on February 27, 2015, [2] and indicted in the Eastern District of California the previous day, February 26, 2015, on charges of making a fraudulent tax return by an employee of the United States, aiding and assisting fraud and false statements, and false statements to a Government agency. [3]

According to court documents, Castro has been employed by the IRS in Fresno, California, for approximately 20 years as a tax examiner and, most recently, as a contact representative responsible for responding to taxpayers’ inquiries and making adjustments to taxpayers’ accounts. Between 2007 and 2013, Castro prepared and filed, or caused to be filed, numerous fraudulent Federal income tax returns for herself, her family members, and others, in which she knowingly placed false information for purported child care services, education expenses, business expenses, and casualty losses. As a result of her fraudulent conduct, Castro defrauded the United States of approximately $37,387. [4]

Specifically, as part of her fraudulent return scheme, Castro claimed on her own Federal tax returns education expenses and child care expenses that she knew she did not incur. Further, in connection with an audit of one of these false returns, Castro knowingly provided the IRS auditor with fabricated receipts for college textbooks and child care services, and made false statements to the auditor about the textbook purchases. She did so to deceive the auditor and to conceal the fact that she had fraudulently claimed the education and child care credits. [5]

Additionally, Castro willfully aided and assisted in the preparation of six Federal returns for others, in which she falsely identified purported child care providers and fraudulently claimed $17,800 in child care services. The fraudulent information Castro included in these tax returns yielded fraudulent tax deductions and credits for which Castro and the taxpayers whose returns she prepared were not eligible.” In some cases, Castro had access to the personal identifying information of the purported child care providers because she had prepared those taxpayers’ returns in the past. However, on at least one occasion, Castro illicitly accessed IRS databases to review the purported provider’s personal identifying information. [6]

[1] E.D. Cal. Plea Agreement filed Jan. 7, 2016.

[2] E.D. Cal. Executed Arrest Warrant filed Feb. 27, 2015.

[3] E.D. Cal. Indict. filed Feb. 26, 2015.

[4] Id.

[5] Id.

[6] Id.

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