five local residents among 16 indicted nationwide
for nearly $100 million tax fraud conspiracy
largest false claims case ever prosecuted in MO
KANSAS CITY, Mo. - Beth Phillips, United States Attorney for the Western District of Missouri, announced today that 16 defendants have been indicted, in two separate cases, for their roles in tax fraud conspiracies that attempted to receive nearly $100 million in fraudulent refunds from the IRS. Five Kansas City, Mo., area defendants are among co-conspirators from eight states who were involved in filing fraudulent tax returns in the largest federal false claims case that has ever been prosecuted in Missouri.
“Kansas City was the hub of a nationwide conspiracy that attempted to receive nearly $100 million in fraudulent tax refunds,” Phillips said. “Federal agents worked diligently to expose the largest false claims scheme ever prosecuted in Missouri. These indictments serve as a warning to anyone who might consider engaging in a similar fraud that such schemes won’t be tolerated and their perpetrators will be prosecuted.”
“Tax violations have been erroneously referred to as victimless crimes, but it’s the honest, law-abiding U.S. citizen who is harmed when someone attempts to cheat our nation’s tax system,” said Stephen Boyd, Special Agent in Charge of IRS Criminal Investigation. “Today’s indictments are a result of teamwork between IRS Criminal Investigation and the US Attorney’s Office, which identified and vigorously investigated those involved in filing false claims, thus stopping millions in bogus refunds from being issued and protecting the integrity of the U.S. Treasury.”
Gerald A. Poynter, also known as “Brother Jerry Love,” 46, of Kansas City, Mo., Shirley J. Oyer, 70, of Overland Park, Kan., Kristi L. Jones, 38, of Riverside, Mo., Earl Lee Davis, 52, of Monroe, La., Nkosi Gray, 38, of New Fairfield, Conn., Billy Ray Hall, 72, of Newton, Ala., Kimberly Johnson, 41, of Chickamauga, Ga., Darryl E. Larkins, 49, of Chicago, Ill., Robert E. Morris, 65, of Rocklin, Calif., Mark J. Murray, 49, of Newton, Ala., Jeffrey A. Olson, 40, and his wife, Karen A. Olson, 40, both of Wood Dale, Ill., John V. Perdido, 55, of Temecula, Calif., and Jennifer S. Wilson, 34, of Cumming, Ga., were charged in a 72-count federal indictment.
In a separate case, Joshua Michael Simonson, 33, and his wife, Kristen Loree Simonson, 34, both of Oak Grove, Mo., were charged in an 11-count federal indictment.
Both indictments were returned under seal by a federal grand jury in Kansas City, Mo., on Wednesday, Sept. 21, 2011. The indictments were unsealed and made public upon the arrest and initial court appearances of several defendants today.
The federal indictment alleges that Poynter was the leader of a conspiracy that promoted a tax refund scheme across the United States from July 1, 2008, to Sept. 21, 2011. Although charged separately, the Simonsons allegedly engaged in a similar strategy as part of their tax fraud scheme.
While about 89 percent of the fraudulent claims filed in the Poynter scheme were detected by the IRS and denied, the indictment says, nearly 11 percent of refunds were paid out. Conspirators allegedly received more than $3.5 million of the total $96 million in attempted fraudulent refunds with some individuals receiving hundreds of thousands of dollars in refunds.
The second indictment alleges that the Simonsons received a total of $810,218 in refunds by using the same scheme.
The Poynter Conspiracy
Poynter, the leader of the conspiracy, allegedly recruited “branch managers” – including Oyer, Hall, Wilson, Johnson, Larkins, Morris, and Perdido – and with them recruited at least 145 clients across the United States. Conspirators allegedly prepared and filed at least 284 returns under this scheme.
Oyer was a promoter and branch manager for the scheme, the indictment says, often working on tax returns from an office space at Poynter’s karate studio. Oyer recruited at least 12 clients. She allegedly helped them prepare and file at least 26 fraudulent individual tax returns, claiming $12.4 million in refunds. Of those, the indictment says, the IRS paid out $92,974 in fraudulent refunds. Oyer received at least $2,862 in fees, which she deposited into the business account of her company, ABC Seamless Siding.
In addition to assistance he received from his family, the indictment says, Poynter hired Jones to assist with data entry and electronic filing. Jones allegedly received a fraudulent refund of $5,160 as part of the scheme.
Poynter, Oyer, Hall, Larkins and others allegedly promoted their tax fraud scheme at meetings in hotels and gatherings in living rooms by telling prospective clients that they could “recoup” any debt taken out in their names. The indictment explains the scheme operated by having clients submit records of their debt – mortgages, credit cards, etc. – and conspirators would file for tax refunds based on that amount. Poynter also maintained a Web site called “luckytown” that was allegedly used to promote the scheme.
According to the indictment, Poynter received a refund of $196,348 as a result of filing a fraudulent claim in July 2008. In addition to clients recruited by the branch managers, Poynter allegedly submitted at least $25 million in fraudulent claims on 81 returns filed for his direct clients. From these returns, the IRS paid out $951,930 in refunds.
At the beginning of the scheme, the indictment says, conspirators filed by paper; for 2008 returns, Poynter used computer software to file returns electronically from his karate studio in Blue Springs.
In an attempt to mask his involvement, the indictment says, Poynter requested that conspirators refer to his fees as “love donations,” frequently directing them to write checks to “Jerry Love Ministries.” Despite the fact that multiple persons assisting in preparing each of these returns, all 284 returns in Poynter’s scheme fraudulently reflected that they were “self-prepared.”
According to the indictment, Perdido received the largest single refund from Poynter’s scheme – $805,749 on Feb. 6, 2009. More than $500,000 was quickly removed from Perdido’s bank accounts, the indictment says, with two wire transfers to the Philippines of $100,000 each that were used to purchase a car and a house in Batung. Perdido also bought an $11,000 Rolex watch, paid off his credit cards, and invested $200,000, the indictment says. Perdido allegedly paid Poynter $118,000 as payment and recruited 16 clients to the scheme.
The Simonson Conspiracy
According to a separate indictment, Joshua and Kristen Simonson engaged in a similar scheme in order to receive fraudulent tax refunds. They allegedly recruited a former tax preparer in California to aid in the preparation and electronic filing of fraudulent federal income tax returns.
In an effort to prevent the IRS from seizing the fraudulent refunds, the indictment says, the Simonsons moved from Arizona to Missouri and transferred the money into several separate accounts. The IRS sent collection letters to the Simonsons in January 2010 to recover the fraudulent returns. In response, Joshua Simonson mailed a package to the IRS which contained correspondence along with two signed, fictitious checks allegedly drawn on an account at the Federal Reserve Bank in Atlanta, Ga.
1099-OID Tax Fraud Scheme
In both cases, the defendants allegedly utilized 1099-Original Issue Discount forms as part of their scheme.
These forms are legitimately used by tax filers who must pay taxes on income they receive from the interest on their bond investments. Tax on certain bonds must be paid as income accrues. Bond holders receive annual forms, called 1099-Original Issue Discount (OID), from the debt issuers. Bond holders then file these OID forms with the IRS, along with their income tax forms.
However, the scheme described in the indictments utilized the 1099-OID forms in a nonsensical manner. Clients of the conspirators, working with their branch managers, allegedly assembled financial documents such as mortgage and loan statements, car payments, foreclosure records, bank statements, credit card statements, and other records of debt and spending. Poynter and his staff allegedly used this debt information – rather than any actual bond income – to prepare and/or finalize false tax returns and improperly calculated Forms 1099-OID.
Poynter, his branch managers, and his office staff allegedly gathered financial information from the clients and prepared and filed at least 284 tax returns. According to the indictment, these tax returns falsely claimed that the filers had received income from bond proceeds and that federal income tax had been withheld. The fraudulent returns claimed the government had over-withheld taxes from the clients’ OID bond income, making the clients appear entitled to more than $96 million in tax refunds.
In reality, the indictment says, Poynter’s clients had not earned – or paid tax on – any bond income. No bond payer had issued any 1099-OID forms. Instead, the indictment says, the bond income that was listed was calculated by what the indictment describes as an “arbitrary and capricious formula.” Conspirators simply added up the taxpayer’s debts and spending, the indictment says, and listed those creditors as “payers” of bond interest.
Poynter and the branch managers often split up-front fees from clients of up to $3,000 to prepare the returns, and further split a 15 percent back-end fee of any refunds obtained.
According to the indictment, the Simonsons’ scheme operated the same way and likewise utilized the 1099-OID forms by calculating their debt, rather than bond interest income, “according to an arbitrary and capricious formula.”
USA v. Poynter, et al
Each of the defendants is charged with participating in a conspiracy to defraud the United States from July 1, 2008, to Sept. 21, 2011, by obtaining payments of false and fraudulent claims for refunds of withheld income tax.
In addition to the conspiracy, various co-defendants are charged in 71 counts of false claims for payment of tax refunds.
USA v. Simonson, et al
Joshua and Kristen Simonson are each charged with participating in a conspiracy to defraud the United States from June 2008 to Jan. 30, 2009, by obtaining payments of false and fraudulent claims for refunds of withheld income tax.
In addition to the conspiracy, Joshua and Kristen Simonson are each charged in three counts of filing false claims for tax refunds. Joshua Simonson is also charged with two counts of presenting fictitious financial instruments and three counts of money laundering. Kristen Simonson is also charged with two counts of mail fraud.
OID Fraud Web Site
A Web site has been established to provide updated information about the status of this investigation. Updates about this investigation and related cases will be posted at www.justice.gov/usao/mow/divisions/OIDfraud.html
Phillips cautioned that the charges contained in these indictments are simply accusations, and not evidence of guilt. Evidence supporting the charges must be presented to a federal trial jury, whose duty is to determine guilt or innocence.
These cases are being prosecuted by Assistant U.S. Attorneys Daniel M. Nelson and Tom Larson. They were investigated by IRS-Criminal Investigation and the Treasury Inspector General for Tax Administration (TIGTA).