Penny Jones of Rigby, Idaho, pleaded guilty before U.S. District Judge William Dimitrouleas in Fort Lauderdale, Fla., to forty-one counts of causing the filing of false claims for income tax refunds and one count of conspiracy to file false claims for tax refunds income tax returns, the Justice Department and the Internal Revenue Service (IRS) announced. Jones entered her guilty plea without the benefit of a plea agreement with the government. Jones faces a maximum potential sentence of 215 years in prison and a fine of up to $10.5 million plus restitution to the IRS.
Jones’s co-defendant, John Michael Smith Jr., also pleaded guilty yesterday before U.S. District Judge William P. Dimitrouleas in Fort Lauderdale to one count of filing a false claim for a tax refund. Smith faces a maximum potential sentence of 5 years in prison and a $250,000 fine plus restitution to the IRS .
According to the indictment, which was returned Nov. 10, 2011, and which Ms. Jones does not contest, she was part of a false tax refund scheme that was national in scope, causing the filing of tax returns for at least 180 clients from 30 different states, requesting more than $120 million worth of fraudulent tax refunds. Clients of the scheme collectively filed more than 380 tax returns, mostly from tax year 2008 but also for other tax years, falsely reporting the amount of their personal debt obligations as both income and as federal tax withholding. They falsely reported this information on IRS Forms 1099-OID, which were filed by Jones based on information provided by the clients. Jones operated her tax return preparation business under the names PMDD Services LLC and Forever Grace LLC.
Smith, a resident of Hidden Hills, Calif., and a former resident of Cincinnati, has admitted that he filed a false 2007 individual income tax return prepared by Jones. He sought a fraudulent tax refund of $208,312, which the IRS mistakenly paid. Previously, another PMDD Services client, Philip Butcher, formerly of Rogers, Ark., pleaded guilty to one count of filing a false claim for a refund. According to court documents in that case, Butcher filed two tax returns reporting his loans as OID income and tax withholding, claiming tax refunds totaling $1,456,696.
The case was investigated by special agents of IRS-Criminal Investigation and is being prosecuted by Trial Attorneys Jonathan Marx and Jed Silversmith of the Justice Department's Tax Division and by Assistant U.S. Attorney Bertha Mitrani of the Southern District of Florida.