December 6, 2002

OFFICE OF THE UNITED STATES ATTORNEY
SOUTHERN DISTRICT OF CALIFORNIA
San Diego, California

United States Attorney
Carol C. Lam

For Immediate Release

Two Sentenced in an $8.7 Million Tax Fraud Conspiracy

NEWS RELEASE SUMMARY

Carol C. Lam, United States Attorney for the Southern District of California, and Eileen J. O'Connor, Assistant Attorney General for the Department of Justice Tax Division, announced today that the Honorable M. James Lorenz, United States District Court Judge, sentenced Gwendolyn Jones and Deborah Hughes to serve 27 months in prison, to be followed by a three-year period of supervised release and ordered to pay a $7,500 fine, for federal criminal tax offenses to which both pled guilty earlier this year. Judge Lorenz imposed the sentence at a hearing in San Diego, California.

By previously-entered guilty pleas, Gwendolyn Jones, Deborah Hughes, and Brenice Hughes admitted that they operated a tax return preparation service under the name "Neighborhood Money Tree" in San Diego, California, from approximately October 1998 until March 1999. Gwendolyn Jones and Deborah Hughes, sisters, and Brenice Hughes, Deborah Hughes's ex-husband, pled guilty to conspiring to file more than 3,100 false tax returns with the Internal Revenue Service ("IRS") claiming refunds of $8.7 million. Judge Lorenz previously sentenced Brenice Hughes to thirty (30) months imprisonment for his involvement in the conspiracy. Due to early detection of the scheme, the IRS only issued approximately $120,000 of the fraudulently based refund checks.

Eileen J. O'Connor, Assistant Attorney General for the Justice Department's Tax Division, said, "People who suspect someone of preparing dishonest tax returns will be doing everyone a favor by reporting it to the IRS. Anyone who knowingly submits false information to the IRS can face criminal prosecution." Ms. O'Connor added, "We anticipate a significant increase in criminal tax prosecutions this year."

Carol C. Lam, United States Attorney for the Southern District of California, stated: "This office is committed to working with the Tax Division and the IRS to hold accountable those who defraud us all by corrupting the federal tax system."

Denise L. Rubin, IRS Criminal Investigation Special Agent in Charge for San Diego, stated, "The sentences handed down today send the message that there is a steep price to pay for preparing false tax returns. The Internal Revenue Service will continue to aggressively investigate unscrupulous tax return preparers who take advantage of the public, and undermine the honesty of our tax system by preparing false tax returns for personal gain."

Defendants Jones, Deborah Hughes, and Brenice Hughes admitted to soliciting recipients of Aid to Families with Dependent Children ("AFDC") and Supplemental Security Income ("SSI") by word of mouth and written flyers, by falsely claiming that such recipients may be eligible for hundreds or thousands of dollars in refunds due to the Earned Income Tax Credit ("EIC"). Jones, Deborah Hughes, and Brenice Hughes filed the false income tax returns with the IRS. The returns generally directed that refund checks be sent to the Neighborhood Money Tree's address. Jones, Deborah Hughes and Brenice Hughes often escorted clients to the bank while the clients cashed their refund checks to collect the return preparation fees, which was generally twenty-five percent of the refund or $200 per dependent claimed on the tax return.

Trial Attorneys Brett A. Sagel, John J. Kaleba, and Danny N. Roetzel, of the Justice Department's Tax Division handled the prosecutions.