Four Convicted in $160 Million Nationwide Tax Fraud Scheme
Wifredo A. Ferrer, U.S. Attorney for the Southern District of Florida, Kathryn Keneally, Assistant Attorney General of the Justice Department’s Tax Division, and Jose A. Gonzalez, Special Agent in Charge, IRS-Criminal Investigation (IRS-CI), Miami Office, announced that, after a four week trial, a federal jury today convicted four men of tax crimes relating to a nationwide scheme to obtain fraudulent tax refunds. Michael Beiter, formerly of Coral Springs, Fla., David Clum, of Whites Creek, Tenn., Dale Peters, of San Mateo, Calif., and Christopher Marrero, of Davie, Fla., were each convicted of one count of conspiracy to defraud the United States with respect to claims. Each was also convicted of filing false claims for tax refunds (Beiter and Clum on forty-one counts; Peters on thirty-one counts; Marrero on six counts). Sentencing has been scheduled before U.S. District Judge William Dimitrouleas for January 7, 2012.
U.S. Attorney Wifredo A. Ferrer stated, “For a $750 fee, complicit clients across the United States expected the defendants to submit false returns to the IRS on their behalf, claiming exorbitant fraudulent refunds, to be shared with the defendants. Instead of receiving enormous refunds, however, the clients received substantial civil penalties and were subject to aggressive collection efforts by the IRS. The defendants now face substantial jail time.”
“This is one of many recent prosecutions of individuals who have attempted to steal by filing false claims for tax refunds,” said Assistant Attorney General Kathryn Keneally. “Committing and helping others to commit tax fraud is a pretty good plan if your goal is to go to jail. As this case shows, the wealth it creates is temporary.”
“These verdicts send a strong message to those who file fraudulent tax returns or assist others when filing false tax returns that they will be brought to justice,” stated Jose A. Gonzalez, Special Agent in Charge, IRS Criminal Investigation Division. “Filing a false tax return or creating a false tax document is a crime. Those who violate the tax laws will be held accountable for their actions.”
The evidence at trial showed that the defendants operated the false return scheme under the name PMDD Services LLC, and, later, Forever Grace LLC. The false return scheme was nationwide, causing the filing of tax returns for at least 180 clients from 30 different states, requesting more than $160 million in fraudulent tax refunds. 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. The tax returns falsely reported the amount of their personal debt obligations as both income and as federal tax withholding. The fictitious income and withholding was reported to the IRS on Forms 1099-OID.
According to the evidence at trial, the tax returns prepared as part of the scheme claimed substantial tax refunds to which the clients were not entitled. The refunds requested were in amounts specifically intended to allow the clients to pay off their mortgages, credit cards, student loans, and other personal debts. Clients paid $750 to have the defendants prepare a tax return reporting this fictitious “OID” income, and clients agreed to share 10 percent of their tax refund with defendants. The trial evidence also showed that defendant Beiter and Clum held seminars in Florida and Tennessee, respectively, in which they recruited potential clients.
The evidence at trial showed that most clients of the scheme did not receive the enormous refunds requested, but instead received substantial civil penalties. Those who did receive refunds were typically subject to aggressive collection efforts by the IRS.
In addition, the evidence showed that defendants Beiter, Clum, and Marrero recruited clients for the scheme. Clum also filed false “OID” tax returns himself. Peters was PMDD Services’ information technology specialist, writing software and implementing computerized procedures to automate the process of preparing the fraudulent tax returns.
Separate from the 1099-OID scheme, Marrero was charged with filing three false tax returns at three separate IRS offices on the same day. Each return requested a refund in excess of $80,000 based on non-existing gambling income and associated tax withholding.
Three other defendants charged in the case, Penny Jones, Laura Barel, and John Michael Smith Jr., previously pled guilty. Jones pled guilty without the benefit of a plea agreement to one count of conspiracy to defraud the United States with respect to claims and forty one counts of filing false claims for tax refunds. Jones was also previously civilly enjoined by a federal court from preparing tax returns. Barel and Smith each pled guilty to one count of filing a false claim for a tax refund.
Previously, in a related case, a client of the scheme, Philip Butcher, formerly of Rogers, Ark., pled guilty to filing a false claim for a tax refund. 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, Beiter, and Clum each face up to 215 years in prison. Peters faces up to 165 years. Marrero faces up to 40 years. Smith and Barel face up to 5 years each. All of the defendants are also subject to fines and mandatory restitution to the IRS.
These cases were investigated by Special Agents of the IRS-CI. Trial Attorneys Jonathan Marx and Jed Silversmith of the U.S. Department of Justice, Tax Division and Assistant U.S. Attorney Bertha Mitrani prosecuted the case.
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.