georgia woman pleads guilty to tax fraud
nearly $100 million scheme is largest false claims case
ever prosecuted in MO
KANSAS CITY, Mo. – David M. Ketchmark, Acting United States Attorney for the Western District of Missouri, announced today that a Cumming, Ga., woman pleaded guilty in federal court today to filing a false claim for a tax refund. Three defendants have pleaded guilty to their roles in a nationwide tax fraud scheme that attempted to receive nearly $100 million in fraudulent refunds from the IRS. A federal indictment charged individuals 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.
Jennifer S. Wilson, 34, of Cumming, Ga., pleaded guilty before U.S. District Judge Ortrie D. Smith to the charge contained in a Sept. 21, 2011, federal indictment.
By pleading guilty today, Wilson admitted that she attempted to defraud the government by obtaining and attempting to obtain tax refunds based on a fraudulent tax refund scheme from December 2008 to June 2009. Wilson admitted that she assisted in the preparation of at least five false 2008 returns, including a false 2008 return filed in her name. Those tax returns falsely reported interest income and corresponding false withholding to support requests for false refunds.
Wilson filed or assisted in filing five returns for tax year 2008, which totaled $1.7 million in false claims for refunds. The IRS issued a 2008 refund to one of Wilson’s clients, resulting in a tax loss of $174,826. From that refund, Wilson received $26,223 in fees, which she split with a co-defendant. When the fraudulent refund was deposited into her client’s bank account, Wilson advised the client to split it up between two accounts. She said not to make any large transactions and to keep everything under $10,000, which is the threshold at which banks are required to report financial transactions to the federal government. She further instructed her client to divide up her 15 percent fee ($26,223) and pay it to her in three installments of less than $10,000.
On April 15, 2009, Wilson filed a fraudulent tax return in her own name, which claimed large amounts of interest income and withholding. In actuality, Wilson had neither earned any interest income nor had tax been withheld from any interest income. By claiming that income, Wilson increased her Adjusted Gross Income, thereby increasing the taxes owed to the United States. But by falsely claiming that a significant portion had been withheld for taxes, her return appeared to reflect that Wilson was due a tax refund of $449,807. Wilson received a letter from the IRS alerting her that her claim was frivolous.
In a separate but related case, Maria Haro Campos, 42, of the state of California, pleaded guilty to her role in the conspiracy on April 7, 2011. Campos admitted that two of her clients obtained a total of more than $1.2 million in fraudulent refunds as a result of the scheme, for which Campos received $50,000 as her fee from one client. Campos unsuccessfully attempted to obtain refunds in the amount of at least $21 million for other clients. Campos introduced at least 10 individuals or married couples to the conspiracy.
In another separate but related case, Marian Fine-Kennedy, 34, of Eugene, Ore., pleaded guilty on Sept. 20, 2011, to filing a false tax refund. Fine-Kennedy admitted that she received a fraudulent $61,959 tax refund as a result of the scheme.
1099-OID Tax Fraud Scheme
The tax refund scheme spread across the United States after being promoted on the Internet and at meetings in hotels and gatherings in living rooms. Prospective clients were told that they could “recoup” any debt taken out in their names. Clients submitted records of their debt – mortgages, credit cards, etc. – and conspirators filed for tax refunds based on that amount.
While about 89 percent of the fraudulent claims filed in the scheme were detected by the IRS and denied, 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.
Defendants 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 indictment 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 improperly calculated Forms 1099-OID.
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.htmlThis 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).
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