WASHINGTON – Fe S. Garrett, a resident of National City, Calif., was convicted today of filing false individual tax returns, failure to pay taxes, and multiple counts of aiding and assisting in the preparation of false tax returns, the Justice Department and Internal Revenue Service (IRS) announced. A federal jury convicted Garrett of 28 counts of the superseding indictment following a nine-day trial before U.S. Judge M. James Lorenz in San Diego.
According to the evidence presented at trial, for tax years 2001 and 2002, Garrett prepared at least 18 federal income tax returns for her clients that were false as to material matters in that the tax returns claimed fraudulent itemized deductions, child care expenses and Schedule E real estate rental expenses in amounts that she knew her clients were not entitled to claim.
Additionally, according to the evidence presented at trial, Garrett was a licensed tax return preparer and licensed real estate broker who operated a tax return preparation and bookkeeping business and a real estate financing business. These businesses operated under multiple names, including Fe's Tax Service, Garrett's Tax Service and Garrett's Realty and Mortgage. Garrett failed to report over $300,000 of her business gross receipts from those businesses on her federal income tax returns for tax years 2001, 2002, 2004 and 2005.
Additionally, the evidence at trial showed that Garrett willfully failed to pay approximately $279,000 in federal income taxes that she owed for tax years 2001 through 2006. Despite filing tax returns for 2001 and 2006 on which she admitted owing tax each year, Garrett spent hundreds of thousands of dollars at local casinos, wired over $100,000 to the Philippines, and did not respond to numerous attempts by the IRS to contact her.
According to the evidence presented at trial, Garrett prepared a false tax return for an undercover IRS agent that included false items similar to those on her client’s returns. In a recording presented at trial, Garrett was heard describing her "style" of preparing tax returns using "loopholes" for claiming deductions on income tax returns.
Judge Lorenz remanded Garrett to the custody of the U.S. Marshals pending sentencing, which is scheduled for Nov 9, 2009. Garrett faces a maximum sentence of 72 years in prison and a maximum fine of $6.1 million.
"While the majority of return preparers provide excellent service to their clients, a few unscrupulous tax preparers file false and fraudulent returns to defraud the government and the tax-paying public, including their own clients," said Ronald A. Cimino, Acting Deputy Assistant Attorney General of the Justice Department's Tax Division. "We are committed to prosecuting those illegal return preparers who betray their clients' trust and their duty to correctly prepare tax returns."
"Today’s guilty verdict sends a clear message to the public that individuals who hold trusted positions in our community and use those positions to abuse our tax system for their personal financial benefit will be prosecuted," said Special Agent in Charge Leslie P. DeMarco. "IRS Criminal Investigation will continue to diligently work tax preparer fraud investigations and ensure the public that our tax system works."
Acting Deputy Assistant Attorney General Cimino commended the IRS-Criminal Investigation special agents who investigated the case, as well as Tax Division trial attorneys Christopher S. Strauss and Elizabeth C. Hadden, who prosecuted the case. Acting Assistant Attorney General DiCicco also thanked the U.S. Attorney’s Office in San Diego for their assistance in successfully prosecuting this matter.