riverside woman pleads guilty to filing false tax refund claim
nationwide scheme attempted to gain nearly $100 million
in fraudulent refunds
KANSAS CITY, Mo. – David M. Ketchmark, Acting United States Attorney for the Western District of Missouri, announced that a Riverside, Mo., woman pleaded guilty in federal court today and admitted to her role in a nationwide tax fraud scheme that attempted to receive nearly $100 million in fraudulent refunds from the IRS in the largest federal false claims case that has ever been prosecuted in Missouri.
Kristi L. Jones, 39, of Riverside, pleaded guilty before U.S. District Judge Brian C. Wimes to filing a false claim for a tax refund.
Jones also admitted she participated in a tax refund scheme that was promoted across the United States from July 1, 2008, to Sept. 21, 2011. Conspirators received more than $3.5 million of the total $96 million in attempted fraudulent refunds. Jones admitted that she instructed and assisted others in preparing Forms 1099-OID. She prepared and filed numerous OIDs, making them appear to have been filed by the purported issuing institution.
1099-OID Tax Fraud Scheme
Jones and the other conspirators 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 certain investments, such as some types of bonds. Tax on certain bonds must be paid as income accrues. Such 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 in which Jones was involved utilized the 1099-OID forms in a nonsensical manner. Clients of the conspirators, working with their branch managers, 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. This debt information – rather than any actual bond income – was used to prepare and/or finalize false tax returns and fictitious Forms 1099-OID.
As part of her role in the OID fraudulent tax refund scheme, Jones looked up Employer Identification Numbers (EINs) – which are required to complete Forms 1099-OID – and she taught several others how to prepare files for download to the IRS’s Filing Information Returns Electronically (“FIRE”) system. FIRE is an electronic system for filing Forms 1099 (including Forms 1099-OID). Jones utilized a downloadable software program called 1099 FIRE, which assisted with the preparation and conversion of the client 1099-OID data into the correct format for final filing on FIRE. Jones taught others how to enter data into the 1099 FIRE software, which would eventually be filed on FIRE. Jones was the contact person for members of the conspiracy and traveled to Ohio on a couple occasions in furtherance of the conspiracy.
On April 11, 2009, Jones electronically filed her own Form 1040 for tax year 2008 using Forms 1099-OID. Due to an offset claim against Jones, the $5,160 refund was directed to another government agency for payment of her student loans, so she did not personally receive the refund, and this was later reversed by the government agency.
Seven additional co-defendants have also pleaded guilty. Shirley J. Oyer, 71, of Overland Park, Kan., pleaded guilty on Sept. 6, 2012 to filing false claims for tax refunds. Oyer is the owner of ABC Seamless Siding in Kansas City, Mo. Karen A. Olson, 41, of Wood Dale, Ill., and Mark J. Murray, 50, of Newton, Ala., pleaded guilty on Aug. 7, 2012, to their roles in the scheme. Murray also pleaded guilty to filing false claims for tax refunds. John V. Perdido, 56, of Temecula, Calif., acted as a “branch manager” and recruited clients for the scheme. Perdido received the largest single refund from the scheme – $805,749, which must be forfeited to the government. Robert E. Morris, 66, of Rocklin, Calif., and Earl Lee Davis, 53, of Monroe, La., also pleaded guilty to their roles in the conspiracy. Co-defendant Jennifer S. Wilson, 35, of Cumming, Ga., was sentenced on Aug. 2, 2012, to one year and one day in federal prison without parole after pleading guilty to filing a false claim for a tax refund. The court also ordered Wilson to pay $161,514 in restitution.
Under federal statutes, Jones is subject to a sentence of up to five years in federal prison without parole, plus a fine up to $250,000. A sentencing hearing is scheduled for March 14, 2013.
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
This case is being prosecuted by Assistant U.S. Attorneys Daniel M. Nelson and Thomas Larson. It was investigated by IRS-Criminal Investigation and the Treasury Inspector General for Tax Administration (TIGTA).