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New york man pleads guilty in huge stolen identity refund fraud case



FOR IMMEDIATE RELEASE

November 12, 2013


 

Admits He was Personally Involved in $9.9 Million in Phony Transactions

NEWARK, N.J. – A New York man today admitted his role as a leader of one of the nation's largest and longest running stolen identity refund fraud schemes ever identified, U.S. Attorney Paul J. Fishman announced.

Jose Torres, a/k/a “Jose Quilestorres,” a/k/a “Carlos Jose Luis,” 47, of Bronx, N.Y., pleaded guilty before U.S. District Judge Claire C. Cecchi in Newark federal court to an information charging him with conspiracy to defraud the United States, theft of government property and aggravated identity theft.

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 resulted in losses to the United States of more than $12 million. Torres admitted the fraudulently obtained tax refund checks in which he was personally involved totaled $9.9 million.

​​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. The schemes generally share a number of hallmarks:  

• The 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.  

• They complete individual income tax returns (Form 1040) using the fraudulently obtained information and falsifying wages, taxes withheld and other data. They use the 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 generated by the fraudulent 1040 forms to locations they control or can access.

• With the checks in hand, SIRF perpetrators generate cash proceeds. Some sell the checks at a discount to face value, and the buyers cash them, either themselves or using straw account holders, at banks or check cashing businesses or deposit them into bank accounts. They often use fraudulent identification documents to do this.

The Investigation

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

​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 2008, 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.

​ Torres and others obtained personal identifiers, such as dates of birth and Social Security numbers, belonging to Puerto Rican citizens.  Torres then directed others to use those identifiers to create fraudulent 1040 forms to create the appearance they were entitled to tax refunds. The fraudulent 1040 forms were created and filed electronically. By tracing the specific IP addresses that submitted the electronically filed 1040s, law enforcement officers learned that only a handful of IP addresses created many of the fraudulent 1040 forms, which, in turn, led to the issuance of refund checks that the conspirators obtained, sold, cashed, and spent.

​Torres and others gained control of the refund checks by bribing mail carriers to intercept checks and deliver them to other conspirators. In exchange for cash payments, the carriers gave checks to conspirators, who sold the checks to other conspirators. 

​Torres and others also purchased “mail routes,” lists of addresses covered by a single mail carrier. Conspirators applied for refunds, inserted addresses along the mail route as the purported home addresses of the taxpayers, and obtained the refund checks sent to the addresses. In other instances, the conspirators applied for checks using addresses otherwise controlled by, or accessible to, certain conspirators, and collected the checks after they were delivered to those addresses. During the course of the scheme, hundreds of tax refund checks were mailed to just a few different addresses in a few different towns, including Nutley, Somerset and Newark, N.J., and Shirley, N.Y.

​​The New Jersey task force identified certain “hot spots” of activity; millions of dollars of tax refund checks were being directed to just a few towns and cities in and around New Jersey. Task force members then interacted with U.S. Postal Service employees in these hot spots and identified the characteristics of refund checks connected to the scheme. As a result of these efforts, more than $22 million in refund checks, applied for fraudulently, that had been issued by the U.S. Treasury were not delivered to the conspirators or others, but were interdicted by law enforcement officers.

​ The conspiracy count is punishable by a maximum potential penalty of five years in prison and up to a $250,000 fine. The substantive count of theft of government property is punishable by a maximum potential penalty of 10 years in prison and up to a $250,000 fine. The aggravated identity theft count is punishable by a statutory mandatory minimum sentence of two years in prison, which must run consecutively to any other sentence.

Torres previously pleaded guilty in the Southern District of New York to charges arising out of the same scheme. He will be sentenced in the Southern District of New York on the charges from both states at a date to be determined. 

​U.S. Attorney Fishman praised special agents of IRS-Criminal Investigation, under the direction of Special Agent in Charge Shantelle P. Kitchen; and inspectors of the U.S. Postal Inspection Service, under the direction of Maria L. Kelokates, with the investigation leading to today’s guilty pleas. He also thanked the special agents of the U.S. Secret Service, under the direction of Special Agent in Charge James Mottola; the Drug Enforcement Administration, under the direction of Special Agent in Charge Carl J. Kotowski; and HSI-ICE, under the direction of Special Agent in Charge Andrew M. McLees, for their roles.

​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-​​​​​​433                                               

Defense Counsel: Joseph Bondy Esq., New York, and Paul Warburgh Esq., Huntington, N.Y.

Torres, Jose Information

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