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Wednesday, October 31, 2012

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Former District Tax Office Employee Pleads Guilty to Charges
In Conspiracy to Generate Millions in Fraudulent Refunds
- Her Role Involved More Than 1,000 Fraudulent Tax Returns -

      WASHINGTON – Kimberle Y. Davis, 44, a former employee of the District of Columbia Office of Tax and Revenue (OTR), pled guilty today to taking part in a scheme involving the filing of nearly 3,700 fraudulent income tax returns that netted over $14.7 million in refunds.

      Davis pled guilty to her role in the scheme, which covered two tax filing seasons and involved the filing of more than 1,000 of the returns and more than $4 million of the refunds.

      The guilty plea was announced by U.S. Attorney Ronald C. Machen Jr., Rick A. Raven, Special Agent in Charge of the Washington Field Office of the Internal Revenue Service-Criminal Investigation, and Natwar M. Gandhi, Chief Financial Officer for the District of Columbia.

      Davis pled guilty in the U.S. District Court for the District of Columbia to charges of conspiracy and first-degree theft. She is to be sentenced by the Honorable Senior Judge Thomas F. Hogan at a date to be determined later. The conspiracy charge carries a statutory maximum of five years in prison, and first-degree theft carries up to 10 years in prison. Under federal sentencing guidelines, Davis faces a likely sentence of up to 37 to 46 months in prison and a potential fine of up to $75,000. As part of the plea agreement, Davis must make full restitution.

      According to information presented to the Court by Assistant U.S. Attorney Sherri L. Schornstein, Davis worked as a control technician at OTR, specializing in the homestead deduction, a tax benefit related to residential property ownership. From January 2009 through April 2009 and from January 2010 through April 2010, she also worked part-time for 2FT Fast Facts Tax Service, a tax return preparation business based in the District of Columbia.

      From January 2009 through April 2010, Davis and others filed approximately 973 fraudulent federal income tax returns for clients of the business, generating fraudulent income tax refunds of about $3,767,981. Additionally, she and the others filed approximately 282 fraudulent District of Columbia income tax returns, producing fraudulent income tax refunds totaling approximately $304,909. She and the others also filed fraudulent income tax returns with Maryland and Virginia, generating refunds that are still being calculated.

      Davis provided 2FT clients with false charity receipts to be used in the event the clients were audited by tax authorities. Also, while working at OTR, Davis accessed the agency’s computer records to check the audit status of certain 2FT clients.

      Among others, Davis worked at 2FT with tax preparer Ladonna Davis, no relation, who pled guilty in October 2011 to federal charges for her role in the scheme. Ladonna Davis, 29, of Washington, D.C., is awaiting sentencing. She worked from 2006 through 2011 for 2FT Fast Facts Tax Service. Over that time-frame, Ladonna Davis and others filed nearly 3,700 federal and District of Columbia tax returns for 2FT clients, producing fraudulent refunds totaling more than $14.7 million. This figure includes the refunds that Kimberle Davis helped generate.

      The fraudulent activities were uncovered by OTR. The case was investigated jointly thereafter by that agency and Internal Revenue Service-Criminal Investigation.

      “Kimberle Davis’s participation in this massive tax fraud is especially troubling because she worked for the D.C. Office of Tax and Revenue,” said U.S. Attorney Machen. “She should have been promoting the integrity of our tax system, but instead used her expertise to help more than 1,000 clients avoid paying their fair share.  Today’s conviction demonstrates our commitment to prosecuting the tax preparers who try to cheat the system.”  

      “We are pleased that the vigilance of the Office of Tax and Revenue Criminal Investigation Unit uncovered this scheme, which led to this day of reckoning,” said Chief Financial Officer Gandhi. “Once we brought this matter to the attention of federal law enforcement, we worked closely with them to bring it to a conclusion. We expect that Ms. Davis will be prosecuted to the fullest extent of the law.”

      “Today’s plea hearing is a reminder that the IRS works very hard to stop fraudulent refund schemes committed by anyone conspiring to defraud the U.S. government,” said Special Agent in Charge Raven. “Ms. Davis’s plea agreement validates the public’s faith in our nation’s tax system and assures the public that the government will hold those accountable who violate our tax system.”

      In announcing the guilty plea, U.S. Attorney Machen, Special Agent in Charge Raven and Chief Financial Officer Gandhi commended the efforts of Special Agent Abubaker Naim of IRS-Criminal Investigation and Special Agent George Batista of the D.C. Office of Tax and Revenue. They also praised the work of the staff of the U.S. Attorney’s Office, including Paralegal Specialist Donna Galindo and Assistant U.S. Attorney Sherri L. Schornstein, who is prosecuting the case.





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