Department of Justice Seal Department of Justice
(202) 514-2007
TDD (202) 514-1888


WASHINGTON, D.C. - Eileen J. O'Connor, Assistant Attorney General for the Tax Division, Gregory G. Lockhart, United States Attorney for the Southern District of Ohio and Cromwell A. Handy, Special Agent in Charge, Internal Revenue Service (IRS) Criminal Investigation, announced that Nancy L. Wallace, of Hamilton, Ohio, was sentenced today by Senior Judge Arthur Spiegel to three years and four months in prison for preparing and filing false tax returns. Her sentence will be followed by a three-year term of supervised release. Wallace was also fined $25,000 to be paid as a condition of her supervised release.

Assistant Attorney General O'Connor said, "The Department of Justice and the IRS are committed to shutting down tax scams. People who commit tax fraud and encourage others to do so will be held accountable for their crimes."

Wallace was first indicted Oct. 3, 2001, on charges of conspiracy and 12 counts of aiding in the preparation and filing of false tax returns. She was indicted again July 24, 2002, on six additional charges of aiding in the preparation and presentation of false income tax returns, which were prepared and filed after she was first indicted.

On Dec. 5, 2002, Wallace pleaded guilty to one count of conspiracy and one count of aiding and assisting in the preparation and presentation of a false income tax return. Specifically, Wallace admitted that she helped her clients to evade more than $300,000 and that her actions cost the IRS almost $950,000 in lost taxes. She further admitted that between September 1994 and July 24, 2002, she conspired with other persons to obstruct the IRS from ascertaining her clients' true income tax liabilities for 1994, 1995 and 1996. Wallace also admitted that she and her clients created false business and charitable expense deductions on income tax returns and that her clients then filed the false tax returns with the IRS. The defendant also admitted that she misappropriated and diverted her clients' funds for her personal use and failed to repay all of the funds.

Wallace also admitted at her plea hearing that she had used abusive trusts to evade the payment and assessment of income taxes due on her own income for the years 1990 to 2001.

"Taxpayers should be as careful in choosing their preparer as they would in choosing a doctor or a lawyer," said Cromwell A. Handy, Special Agent in Charge of the IRS Criminal Investigation Unit. "Remember, even if someone else prepares your return, you are ultimately responsible for all the information on the tax return. IRS Criminal Investigation will continue to investigate and recommend prosecution against return preparers who knowingly prepare false tax returns on behalf of others."

Judge Spiegel ordered Wallace to pay restitution to the IRS and her clients in the amount of $935,867. As an additional condition of her supervised release, Wallace was ordered to pay more than $5,000 as reimbursement for the cost of prosecuting her case. Wallace agreed as part of her plea to fully cooperate with IRS in the determination of her own tax liability, and to prepare and file within a reasonable time, accurate income tax returns for herself and any related entity for the years 1992 to 2001. In addition, she agreed to pay, or make arrangements to pay, to the IRS all taxes, penalties and interest owed with respect to those tax returns.

Trial attorneys Rich Rolwing and Nanette Davis of the Department of Justice, Tax Division, handled the prosecution. The case was investigated by IRS Criminal Investigation.