Seven People Charged In $2 Million Tax Refund Check Scam

NEWARK, N.J. – Seven people allegedly involved in an extensive scheme to obtain millions of dollars through fraudulently obtained refund checks issued by the U.S. Treasury were charged today with conspiring to steal government funds, U.S. Attorney Paul J. Fishman announced.

Fausto Bernard, 48, of Newark, N.J., was arrested this morning by special agents of IRS-Criminal Investigation, postal inspectors from the U.S. Postal Inspection Service, and special agents of the U.S. Secret Service. Gloria Rivera, 39, of Bronx, N.Y.; and Lourdes Ortiz, 40, of Ridgewood, N.Y. surrendered to special agents of the USPS-OIG. Luis Pena, 43, of Yonkers, N.Y., was arrested Tuesday night by special agents of the U.S. Postal Service, Office of the Inspector General. They will make their initial appearances before U.S. Magistrate Judge Madeline Cox Arleo this afternoon.

Defendant Raymundo Hernandez, 34, of Bronx, N.Y., is incarcerated in the Southern District of New York on other charges and is scheduled to make his initial court appearance on Friday.

Defendants Wellington Feliz, 30, of Bronx, N.Y., and Isaias Hernandez, 38, of Bronx, N.Y., remain at large. All seven defendants are charged by criminal Complaint with one count of conspiring to steal U.S. Treasury checks.

According to the criminal Complaint unsealed today:

Background on Stolen Identity Refund Fraud

Stolen Identity Refund Fraud (SIRF) is a common type of fraud committed against the United States government that results in more than $2 billion a year in losses to the treasury.  SIRF schemes generally share a number of hallmarks:

• SIRF perpetrators obtain personal identifying information, including Social Security numbers and dates of birth, from unwitting individuals, who often reside in the Commonwealth of Puerto Rico.

• SIRF participants complete 1040 tax return forms using the fraudulently-obtained information and falsifying wages earned, taxes withheld and other data, always ensuring that fraudulent tax return generates a refund.

• They direct the U.S. Treasury Department to mail the refund checks to locations that the perpetrators control or can access. In some cases, SIRF perpetrators bribe mail carriers to remove the refund checks from their mail routes.

• With the fraudulently obtained refund checks in hand, SIRF perpetrators generate cash proceeds by depositing the checks into bank accounts that they control.

The Investigation

From December 2011 through April 2013, the defendants allegedly engaged in a SIRF scheme that resulted in more than $2 million in losses to the U.S. Treasury. The conspirators directed fraudulent treasury checks to addresses along a mail route they controlled. Once the checks had been intercepted, they were passed along to others and deposited into bank accounts controlled by the conspirators. The resulting proceeds were quickly withdrawn from the bank accounts and used for various personal expenses, including gambling in Atlantic City casinos and purchasing cars. 

Rivera and Ortiz were U.S. Postal Service mail carriers who were allegedly bribed to divert checks from their mail route in Queens. After intercepting the checks, Rivera delivered them to Pena for approximately $400 per check. The fraudulently obtained checks ultimately were deposited into straw bank accounts controlled by Feliz, Isaias Hernandez, Raymundo Hernandez, and Bernard.

Feliz, Isaias Hernandez, Raymundo Hernandez, and Bernard incorporated businesses in New York or New Jersey. Within a few days of incorporating each business, they opened up a straw bank account at a Sovereign Bank branch in the business’ name. For the next few months, they deposited hundreds of thousands of dollars in fraudulently obtained checks into the straw bank accounts and quickly withdrew significant sums of cash.

Isaias Hernandez, Feliz, and Raymundo Hernandez used the proceeds of the scheme to purchase vehicles at auction. Raymundo Hernandez spent thousands of dollars at Atlantic City casinos.

The conspiracy charge is punishable by a maximum potential penalty of 10 years in prison and a fine of up to $250,000, or twice the gain or loss caused by the offense.

U.S. Attorney Fishman credited special agents of IRS-Criminal Investigation, under the direction of Special Agent in Charge Shantelle P. Kitchen; postal inspectors of the U.S. Postal Inspection Service, under the direction of Inspector in Charge Maria L. Kelokates; special agents of the U.S. Secret Service, under the direction of Special Agent in Charge James Mottola; and special agents of the U.S. Postal Service-Office of the Inspector General, under the direction of Special Agent in Charge Rafael A. Medina, with the investigation leading to today’s charges.

The government is represented by Assistant U.S. Attorney Rahul Agarwal of the U.S. Attorney’s Office General Crimes Unit in Newark.

The charge and allegations contained in the Complaint are merely accusations, and the defendants are considered innocent unless and until proven guilty.

13-216                                                       

Pena, Luis et al. Complaint