Cleveland women sentenced to prison for stealing identities and filing false tax returns

Two Cleveland women were sentenced to prison for a conspiracy in which they stole other people’s identities and collected more than $326,000 in false tax returns, law enforcement officials said.

Michelle D. Pugh, a/k/a Michelle Morman, 39, was sentenced to four years in prison. Joi C. Tate, 38, was sentenced to two years and eight months in prison. They were ordered to pay $326,265 in restitution.

They were previously found guilty of conspiracy to defraud the government, making false, fictitious and fraudulent claims for income tax refunds, theft of public funds and aggravated identity theft.

“This duo is stole money from the government and identifying information from customers,” said Steven M. Dettelbach, U.S. Attorney for the Northern District of Ohio.

“These unscrupulous defendants thought they had figured out a clever scheme to thwart the IRS and steal from American taxpayers by posing as legitimate income tax preparers,” said Guy A. Ficco, Acting Special Agent in Charge, IRS Criminal Investigation, Cincinnati Field Office.  “Today they are being held accountable for their criminal actions.”

Pugh and Tate, acting together and with others, engaged in a false tax refund scheme in which they prepared at least 25 false income tax returns for the years 2010 and 2011, for approximately 20 people including Pugh, which claimed income tax refunds that were greater than the actual refunds, if any, to which the taxpayers were entitled, according to court documents.  

Pugh, Tate and others gathered personal identification information used in filing the returns either by posing as legitimate tax preparers working through Pugh’s company, MP Tax Services, or through a network of associates.  In some cases, Pugh and Tate obtained and used personal identification information of individuals without their knowledge of consent.  Pugh and Tate did not list themselves as the actual tax preparer on any of the tax returns they filed in others’ names.

On each return, Pugh, Tate and their cohorts generated false refund claims, at least in part, by reporting a falsely inflated or fictitious wage income and a resulting false earned income credit.  On some returns, Pugh, Tate and their confederates also claimed false dependents and/or reported false education and child tax credits, as reflected on fictitious Forms 8863 and 8812 filed with the IRS.

Pugh and Tate filed the returns electronically on behalf of taxpayers, through private and public internet connections.  Generally, they did not provide a copy of the return to the taxpayer, and the taxpayer did not know the amount of the refund claimed or was told an incorrect amount.    In the case of those individuals whose identities were used without their knowledge or permission, Pugh and Tate did not inform them that they received funds from the IRS and instead kept the proceeds for themselves, according to court documents.

The electronic filings included requests that the IRS direct-deposit refunds into bank accounts owned or controlled by Pugh.  After receiving the refunds, Pugh, Tate and their co-conspirators paid only a portion of the refund, if any, to the taxpayer.       

Pugh’s, Tate’s and their co-conspirators’ falsely inflated refund claims on the returns filed in the scheme resulted in the delivery of approximately $326,265 in illicit refunds to the conspirators, according to court documents. 

This case is being prosecuted by Assistant U.S. Attorney Om Kakani, following an investigation by the IRS – Criminal Investigations.