SEVEN CHARGED IN $120 MILLION NATIONAL TAX FRAUD SCHEME
U.S. Attorney Wifredo A. Ferrer, United States Attorney for the Southern District of Florida, Tax Division Principal Deputy Assistant Attorney General John A. DiCicco, and Jose A. Gonzalez, Special Agent in Charge, Internal Revenue Service, Criminal Investigation Division (IRS-CID), Miami Office, announce today’s arraignment of defendants Penny Jones, a resident of Rigby, Idaho, and Christopher Marrero, a resident of Davie, Florida, on an indictment charging them for their participation in a $120 million tax fraud scheme. The case has been assigned to U.S. District Judge William P. Dimitrouleas. Both defendants entered not guilty pleas this morning at their arraignments before U.S. Magistrate Judge Lurana S. Snow.
The indictment, recently unsealed, charges seven individuals - Jones, Marrero, Michael D. Beiter, Jr., formerly a resident of Coral Springs, Fla., David Clum, Jr., a resident of Whites Creek, Tenn., Dale Peters, a resident of San Mateo, Cal., Laura Barel, a resident of Lauderhill, Fla., and John Michael Smith, Jr., a resident of Hidden Hills, Cal. - with participating in a scheme to file false tax returns. Barel had been previously charged by a criminal complaint in May 2011. Arraignments are pending for Beiter, Clum, Peters, and Smith.
According to the indictment, the false return scheme was national in scope, causing the filing of tax returns for at least 180 clients from 30 different states, requesting more than $120,000,000 worth of fraudulent tax refunds. The indictment alleges that the defendants and clients of the scheme collectively filed more than 380 tax returns, mostly from tax year 2008 but also for other tax years, reporting the amount of their personal debt obligations as both income and as federal tax withholding.
The indictment alleges that the scheme was premised upon the fraudulent “redemption theory” argument that individuals are not responsible for their common, personal debt obligations such as home mortgages, unpaid credit card bills, and lines of credit, and may instead seek money from the IRS to repay these outstanding obligations. As part of the scheme, defendants prepared and caused to be prepared false IRS Forms 1099-OID, Original Issue Discount, and 1099-A, Abandoned Property, on behalf of the scheme’s clients.
According to the indictment, defendants held seminars in Florida and Tennessee in which they recruited potential clients. The indictment and other publicly filed documents allege that clients paid $750 to have defendants prepare a tax return reporting this type of “OID” income, and that clients agreed to share 10% of their tax refund with defendants.
Previously, in a separate case in Fayetteville, Ark., a client of the scheme, Philip Butcher, formerly of Rogers, Ark., was charged with filing false claims for tax refunds. According to the indictment in that case, Butcher filed two tax returns reporting his loans as OID income and tax withholding, claiming tax refunds totaling $1,456,696. The IRS paid Butcher $672,781.
Jones was previously enjoined by a federal court from preparing tax returns.
An indictment is only an accusation and a defendant is presumed innocent until proven guilty beyond a reasonable doubt.
If convicted, Jones, Beiter, Clum, and Peters each face 215 years in prison, Barel faces 25 years, Marrero faces 30 years, and Smith faces 75 years. All of the defendants are also subject to fines and mandatory restitution if convicted.
These cases were investigated by Special Agents of the IRS - Criminal Investigation. Trial attorneys Jed Silversmith and Jonathan Marx of the Justice Department’s Tax Division, and Assistant U.S. Attorney Bertha Mitrani are prosecuting the case.
More information about the Tax Division and its enforcement efforts can be found at www.justice.gov/tax.
A copy of this press release may be found on the website of the United States Attorney's Office for the Southern District of Florida at http://www.usdoj.gov/usao/fls. Related court documents and information may be found on the website of the District Court for the Southern District of Florida at http://www.flsd.uscourts.gov or on http://pacer.flsd.uscourts.gov.