Pair Pleads Guilty To $4.4 Million False Income Tax Refund Scheme

COLUMBUS, OHIO -- Jose Luis Martinez, 47, of Columbus, Ohio, and Mercedes Emelinda-Silie, 41, of Grove City, Ohio both pleaded guilty to one count of conspiracy to defraud the Internal Revenue Service (IRS) by filing false claims for federal income tax refunds.  Martinez also pleaded guilty to one count of operating an unlicensed money transmitting business. The total tax loss in this case is approximately $4,415,492.58.  Martinez and Silie each face a maximum of ten years in prison and a fine of up to $250,000

Carter M. Stewart, United States Attorney for the Southern District of Ohio; Kathy A. Enstrom, Special Agent in Charge, Internal Revenue Service (IRS), Criminal Investigation, Cincinnati Field Office; and Dugan T. Wong, Inspector in Charge, U.S. Postal Inspection Service announced the guilty pleas entered today before U.S. District Judge Gregory L. Frost.

According to court documents, during 2010 and 2011 Martinez and Silie jointly owned and operated San Isidro Cargo in Columbus. San Isidro Cargo was registered with the U.S. Treasury Department as a Money Service Business to provide services such as check-cashing, wire transfers, tax-preparation, notary services, and title services among others.

Martinez operated San Isidro Cargo without a check-casher’s license knowing that one was required by the Ohio Revised Code.  Martinez used San Isidro Cargo to assist co-conspirators, primarily located in New York and New Jersey, in carrying out the income tax refund scheme which came to be known as “Operation Mass Mail.”

This scheme involved the mass filing of hundreds of false income tax returns with Social Security Numbers and identifying information of residents of Puerto Rico. The false income tax returns contained fictitious information including employee wages and employee withholding.  The false income tax returns were accompanied by counterfeit Forms W-2 that used, without legal authority, the names and Employer Identification Numbers of legitimate U.S. businesses. The income tax refund checks were mailed to pre-arranged addresses, usually apartments in New York.  Many of the income tax refund checks shared the same street address, but different apartment numbers, making it easier for co-conspirators to collect the checks from one location.  The checks were collected by corrupt letter carriers and apartment managers or by other perpetrators who simply waited for the checks to be delivered by unknowing mail carriers.  The conspirators then used couriers to travel to other states, including Ohio, to cash the checks at various check-cashing services, including San Isidro Cargo.

Martinez and Silie knew the U.S. Treasury checks they received from persons from New York and New Jersey stemmed from fictitious income tax returns.  Martinez and Silie also knew the endorsements on the checks were forged.  Martinez allowed one individual to cash bulk quantities of sizable income tax refund checks bearing the names of others and addresses located primarily in New York.  Silie made several over the counter cash withdrawals and provided these funds to co-conspirators.  Martinez and Silie received and retained copies of hundreds of counterfeit driver’s licenses from co-conspirators in order to conceal the fraudulent nature of the scheme.

Everyone involved in the scheme, from the income tax return preparer to the check-casher, was paid a cut of the fraudulent income tax refund.  Martinez charged a fee of seven to eight percent of check’s face value.  This fee was a premium for the conversion of the ill-gotten checks, and was well above the three percent fee permitted by Ohio Revised Code for the cashing of government checks, and the two percent fee charged to legitimate customers.

After San Isidro Cargo’s bank accounts were closed by the bank, Martinez continued the scheme by recruiting others to cash the fraudulent checks on their own bank accounts.

From February 2010 through February 2011, Martinez, Silie and others assisted in the conversion and laundering of approximately 696 fraudulently obtained U.S. Treasury checks totaling $4,415,492.58.  During 2010, Martinez, Silie and others conducted bank withdrawals in excess of $4 million from San Isidro Cargo’s business accounts.

A third person, Suheidy A. Warner, 30, of Columbus, was also charged in this case in an April 2013 indictment alleging one count of conspiracy to defraud the IRS by filing false claims for federal income tax refunds, one count of conspiracy to commit money laundering, four counts of aggravated identity theft and 25 counts of converting U.S. monies to her own use.  Warner is currently a fugitive.

“The object of this refund fraud scheme was to swindle the government and the taxpaying public,” said Kathy A. Enstrom, Special Agent in Charge, IRS Criminal Investigation, Cincinnati Field Office.  “Be assured that IRS Criminal Investigation, along with our law enforcement partners and the U.S. Attorney's Office, will hold those who engage in refund fraud fully accountable."

These cases are being prosecuted by Assistant United States Attorney Daniel Brown and they were investigated by special agents of IRS-Criminal Investigation and the U.S. Postal Inspection Service.
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