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middlesex county, n.J., man sentenced to four years in prison in $65 million stolen identity income tax refund fraud scheme



FOR IMMEDIATE RELEASE

November 15, 2013


 

NEWARK, N.J. – A Middlesex County, N.J., man was sentenced today to 48 months in prison for his role in one of the nation’s largest and longest running stolen identity refund fraud schemes ever identified, U.S. Attorney Paul J. Fishman.

The scheme caused more than 8,000 fraudulent U.S. income tax returns to be filed, which sought more than $65 million in tax refunds, and which resulted in losses to the United States of more than $12 million.

Manuel Rodriguez, 50, of New Brunswick, N.J., previously pleaded guilty before U.S. District Judge Claire C. Cecchi to an information charging him with conspiracy to defraud the United States, theft of government property and aggravated identity theft. Judge Cecchi imposed the sentence today in Newark federal court.

According to documents filed in this case and statements made in court:

Stolen Identity Refund Fraud

Stolen Identity Refund Fraud (“SIRF”) is a common type of fraud committed against the United States government that results in more than $2 billion in losses annually to the United States Treasury. SIRF schemes generally share a number of hallmarks: 

    • SIRF perpetrators obtain personal identifying information, including Social Security numbers and dates of birth, from unwitting individuals, who often reside in the Commonwealth of Puerto Rico. 

    • SIRF perpetrators complete Individual Income Tax Return Form 1040s (“Form 1040”) using the fraudulently-obtained information, and falsifying wages earned, taxes withheld and other data. Perpetrators use data to make it appear that the “taxpayers” listed on the fraudulent 1040 forms are entitled to tax refunds – when in fact, the various tax withholdings indicated on the fraudulent 1040s have not been paid by the listed “taxpayers,” and no refunds are due. 
    • Perpetrators direct the U.S.Treasury Department to issue the refunds through checks (“Tax Refund Treasury Checks”) generated by the fraudulent 1049 forms to locations they control or can access, in various ways.
    • With Tax Refund Treasury Checks now in hand, SIRF perpetrators generate cash proceeds. Certain SIRF perpetrators sell Tax Refund Treasury Checks at a discount to face value. In turn, the buyers then cash the Tax Refund Treasury Checks, either themselves or using straw account holders, by cashing checks at banks or check cashing businesses, or by depositing checks into bank accounts. When cashing or depositing Tax Refund Treasury Checks, SIRF perpetrators often present false or fraudulent identification documents in the names of the “taxpayers” to whom the checks are payable.

The Investigation

Federal law enforcement agencies created a multi-agency task force in New Jersey composed of investigators from the IRS and the U.S. Postal Inspection Service, along with the U.S. Secret Service, and with assistance from the Drug Enforcement Administration (the “New Jersey Task Force”).  

An investigation led by the New Jersey Task Force, with assistance from U.S. Immigration and Customs Enforcement, Homeland Security Investigations, revealed that from at least 2007, dozens of individuals in the New Jersey and New York area have been engaged in a large-scale, long running SIRF scheme that caused more than 8,000 fraudulent 1040 forms to be filed, seeking more than $65 million in tax refunds, with more than $12 million in losses to the U.S. Treasury.

Rodriguez and others obtained personal identifiers, such as dates of birth and Social Security numbers, belonging to Puerto Rican citizens. They used those identifiers to create fraudulent 1040 forms, which falsely reported wages purportedly earned by the “taxpayers” and taxes purportedly withheld, to create the appearance that the “taxpayers” were entitled to tax refunds. The returns were filed electronically. By tracing the specific IP addresses that submitted the electronically-filed 1040s, law enforcement officers learned that just a handful of IP addresses created many of the fraudulent 1040 forms that led to the issuance of tax refund checks.

During the course of the investigation, members of the task force identified certain “hot spots” of activity and intercepted more than $22 million in refund checks – that had been applied for fraudulently – before they were delivered to members of the conspiracy.

In addition to the prison term, Judge Cecchi sentenced Rodriguez to three years of supervised release and ordered to pay restitution of $5.2 million.

U.S. Attorney Fishman praised special agents of IRS-Criminal Investigation, under the direction of Special Agent in Charge Shantelle P. Kitchen; the U.S. Postal Inspection Service, under the direction of Inspector in Charge Marie L. Kelokates; the U.S. Secret Service, under the direction of Special Agent In Charge James Mottola; and the Drug Enforcement Administration, under the direction of Special Agent in Charge Carl Kotowski, for the investigation leading to today’s sentencing.

The government is represented by Assistant U.S. Attorneys Mala Ahuja Harker, Lakshmi Srinavasan Herman, Zach Intrater, and Danielle Walsman of the U.S. Attorney’s Office Criminal Division in Newark.

13-438                                                  

Defense Counsel: Mark A. Berman, River Edge, N.J.

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