Maryland U.S. Attorney’s Office Highlights Tax Enforcement Results As 2013 Filing Deadline Approaches
Prosecutions in Critical Enforcement Areas, Including Structuring, Offshore Evasion and Identity Theft Refund Fraud
Baltimore, Maryland - With the annual tax filing deadline approaching on April 15, the Maryland U.S. Attorney’s Office today announced highlights of its work during the past year to enforce the nation’s tax laws. The U.S. Attorney’s Office has worked with the Internal Revenue Service (IRS) in several critical areas, including prosecuting tax fraud and evasion, tracking down tax cheats who use offshore accounts and combating stolen identity refund fraud.
“Anyone who is tempted to evade taxes should reconsider, because the IRS agents and federal prosecutors are working to find tax cheats and send them to prison,” said U.S. Attorney Rod J. Rosenstein.
“IRS Criminal Investigation and federal prosecutors are working together to protect the American public from tax cheats and to hold them accountable for their actions,” said Thomas J. Kelly, Special Agent in Charge, IRS Criminal Investigation, Washington DC Field Office.
Here are some of the Office’s criminal tax prosecution highlights from the past year involving Maryland residents:
Failure to Report Income
April 2013 – Jonas Purisch, of Perry Hall, owner of a company that provided temporary factory workers, pleaded guilty to filing tax returns for two years that understated his income, and failing to file tax returns for another two years, resulting in a total tax loss including interest of $210,019.04.
April 2013 – Former Social Security Administration (SSA) executive Salvatore Petti, of Ellicott City, was sentenced to 15 months in prison for not reporting income he embezzled from an SSA employee association, and for evading taxes on income he legitimately received while serving as treasurer of the employee association. Petti was also ordered to forfeit $83,000, which included cash from the sale of a personal seat license for the Baltimore Ravens and three Marriott timeshares; and pay restitution totaling $570,493 to the employee association and IRS.
March 2013 – Ricardo O. Curry, of Randallstown, who worked for a company that oversaw the sale of lots in a housing development, was convicted after a three day trial of filing false tax returns and bankruptcy fraud offenses, arising from his failure to report $415,201 he received in referral fees for selling lots.
January 2013 - Alphonso Tillman, of Fort Washington, was sentenced to two years in prison and ordered to pay restitution of $2,205,991 for failing to pay over payroll taxes (federal income tax, medicare and social security taxes) he withheld from employee paychecks for four years. Tillman owned a business that provided security guards to protect commercial and residential properties in Maryland, Virginia, Pennsylvania and the District of Columbia.
November 2012 – Business owner Randy Benjamin Wells, of Reisterstown, was sentenced to 13 months in prison and ordered to pay restitution of $349,588 for failing to pay individual taxes for five years, even after he had hired a tax preparer to prepare his returns.
October 2012 – Patrick McLaughlin, who operated several concession businesses in Ocean City, was sentenced to 10 months in prison for failing to file individual income tax returns for five years or report employment tax withholdings, resulting in a total tax loss of $296,701.
“Structuring” to Hide Income
Some taxpayers attempt to evade paying taxes by regularly depositing cash in daily amounts less than $10,000 to avoid the requirement that banks must report transactions over $10,000 to the IRS, a scheme known as structuring. The following cases are examples.
November 2012 – Liquor store owner Kwang Sik Kim, of Clarksville, was sentenced to a year in prison, followed by six months of home detention as part of three years supervised release, and ordered to forfeit $104,680 (10% of structured deposits), and pay the IRS $156,220. Kim had admitted depositing $1,046,800 in amounts at or below $10,000 in just over two years; and underreporting his income.
June 2012 – Liquor store owner Chung K. Choi, of Woodbine, was sentenced to 18 months in prison, followed by six months of home detention as part of three years supervised release. He was also ordered to pay restitution of $533,208 to the IRS, and $206,045 to the State of Maryland. Choi admitted that for over a year and half he routinely deposited at least $745,000 in cash in amounts under $10,000 to avoid bank reporting to the IRS; and understated the amount of the store’s gross receipts by $1,572,162.
November 2012 – Joseph Brightman, of Baltimore, was sentenced to eight months in prison, and ordered to pay $114,226 in restitution to the IRS. Brightman, who operated a scrap metal business, did not file a personal tax return for nine years. Additionally, for three years, he withdrew a total of $1,527,000 in $9,500 or $9,000 increments from his bank account.
Shutting Down Fraudulent Tax Preparers
Tax preparers have a duty to their clients to prepare tax returns that are accurate and comply with the law.
In October 2012, tax preparer Obinna Felix Ukwu, of Perry Hall, was sentenced to 51 months in prison following a jury verdict convicting him of 12 counts of aiding in the filing of false tax returns. He was ordered to pay $429,392 in restitution. Trial evidence showed that Ukwu prepared tax returns for clients that claimed false business losses.
Investigating Offshore Evasion
The use of secret offshore accounts to evade U.S. taxes costs the Treasury billions of dollars annually. On March 23, 2009, the IRS announced the agency’s Overseas Voluntary Disclosure Program, which offered taxpayers who maintained previously undisclosed foreign bank accounts incentives to disclose those accounts and bring themselves into compliance with the law. This highly-publicized program remained open until October 15, 2009, and nearly 15,000 taxpayers took advantage of it to make voluntary disclosures about foreign bank accounts in more than 60 foreign countries.
In February 2013, Bae Soo Chon, of Beltsville, was sentenced to a year and a day for income tax evasion and ordered to pay a $15,000 fine, a civil penalty of $441,482.50 for failing to disclose his foreign bank accounts, and restitution of $412,404 to the IRS and $110,245.70 to the State of Maryland. Chon, who owned a cosmetic manufacturing company which marketed its products domestically and abroad, admitted that from 2008 to 2010, he caused $1,818,895 in business income to be diverted into foreign bank accounts in Hong Kong and Seoul, without reflecting the revenue on the company’s official records. Chon did not disclose his foreign bank accounts under the Disclosure Program.
Combating Stolen Identity Refund Fraud
In January 2013, two brothers, Ewdy and Juan Olivo, of Rockville and Hyattsville, respectively, were indicted for obtaining false tax refunds by stealing the identities of Puerto Rican residents to prepare and file false income tax returns electronically in Maryland. They allegedly requested that the IRS mail tax refund checks, ranging from $1,562 to $4,950, to addresses they controlled. An indictment is not a finding a guilt and individuals charged by indictment are presumed innocent until proven guilty.