District of Columbia Man Sentenced to Prison for Role in Massive Identity Theft and Tax Fraud Scheme
Worked With Others to Seek More Than $1.1 Million in Fraudulent Refunds
A 32-year-old Washington, D.C., man was sentenced today to serve more than three years in prison for various crimes he committed in a far-reaching identity theft and tax fraud scheme in which he and others filed fraudulent federal income tax returns seeking more than $1.1 million in refunds, the Justice Department announced.
James Nelson is among approximately 12 people who have pleaded guilty in the U.S. District Court for the District of Columbia to charges in one of the largest prosecutions to date involving the use of stolen identifying information. The overall case involves the filing of at least 12,000 fraudulent federal income tax returns that sought refunds of at least $40 million.
The sentencing was announced by Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division, Acting U.S. Attorney Vincent H. Cohen Jr. of the District of Columbia, Special Agent in Charge Thomas J. Kelly of the Internal Revenue Service-Criminal Investigation (IRS-CI) Washington, D.C. Field Office, Acting Inspector in Charge David M. McGinnis of the U.S. Postal Inspection Service’s (USPIS) Washington, D.C. Division, Assistant Inspector General for Investigations John L. Phillips of the U.S. Department of Treasury and Acting Special Agent in Charge James M. Murray of the U.S. Secret Service’s Washington, D.C. Field Office.
Nelson pleaded guilty on Jan. 29 to conspiracy to defraud the United States with respect to claims, aiding and abetting in the making of false claims for refund and aiding and abetting in fraud and related activity involving identification information. He was sentenced to serve 41 months in prison by the Honorable U.S. District Judge Ellen S. Huvelle of the District of Columbia. Upon completion of his prison term, he will be placed on three years of supervised release. In addition, as part of his plea agreement, Nelson must pay $636,026 in restitution to the IRS.
“One of the Tax Division’s highest priorities is prosecuting individuals who use stolen identities to file fictitious income tax returns and claim fraudulent refunds,” said Acting Assistant Attorney General Ciraolo. “As in this case, this street crime often victimizes the most vulnerable members of our communities. The Tax Division is committed to working with our partners in law enforcement to identify these schemes, dismantle the criminal operations and use all available tools to prosecute these offenders to the fullest extent of the law.”
“This criminal was part of a brazen scheme to flood the IRS with thousands of fake income tax returns and steal from honest taxpayers,” said Acting U.S. Attorney Cohen. “These thieves filed bogus tax returns with the stolen identities of people in nursing homes and prisons to generate fraudulent refunds. James Nelson is now headed to a federal penitentiary where he can no longer execute scams that drive up taxes on hardworking Americans who play by the rules.”
“Nelson’s greed will have a long-term impact on his victims and cause immeasurable harm to their financial well-being,” said IRS-CI Special Agent in Charge Kelly. “The selfish acts of criminals like Nelson have far-reaching consequences, and those like him, who steal from innocent victims and the U.S. Treasury, should be on notice that the government will aggressively pursue identity thieves and tax cheaters.”
“Today’s sentencing confirms that anyone who preys on citizens’ identification for financial gain, especially when they use the U.S. Mail to further their criminal activity, will be held accountable,” said Acting Postal Inspector in McGinnis. “The Postal Inspection Service values the collaboration with its law enforcement partners in the case.”
“This sentencing reinforces the commitment of Treasury’s Office of Inspector General and its law enforcement partners to pursue criminal charges against individuals and groups that prey on the public by stealing identities and fleecing the U.S. taxpayer and Treasury Department in their criminal schemes,” said Assistant Inspector General Phillips.
“The arrest of James Nelson is yet another example of how the Secret Service continues to successfully combat identity theft and financial crimes,” said Acting Special Agent in Charge Murray. “The Secret Service utilized state-of-the-art investigative techniques to dismantle this identity theft and tax fraud scheme. Our success in this case and other similar investigations is a result of extraordinary work of our investigators and our close work with our network of law enforcement partners.”
According to the government’s evidence, Nelson was among participants in a massive and sophisticated identity theft and false tax refund scheme involving an extensive network of more than 130 people, many of whom were receiving public assistance. The scheme started in 2006, and false claims for tax refunds were sought for tax years 2005 through 2012, often in the names of people whose identities had been stolen, including the elderly, people in assisted living facilities, drug addicts and incarcerated prisoners. In other cases, the refunds were sent to people who were willing participants in the scheme. The refunds listed more than 400 “taxpayer” addresses in the District of Columbia.
From December 2007 through January 2012, according to the government’s evidence, Nelson used his residential addresses in the District of Columbia to receive some of the fraudulently obtained tax refunds. He also recruited others to receive fraudulent refunds at their addresses. For example, Nelson paid one woman about $150 per check for each refund check delivered to her residential address in the District of Columbia.
Approximately 360 fraudulent federal income tax returns listing the addresses that were under Nelson’s control were filed with the IRS. The returns sought refunds of approximately $908,500. As a result, the IRS sent out 238 checks, totaling about $524,795, and 184 of those checks, totaling $432,804, were ultimately cashed.
Nelson also recruited others to negotiate at least 86 other refund checks, totaling approximately $203,222, causing a total intended loss to the U.S. Treasury of more than $1.1 million.
In announcing the sentence, Acting Assistant Attorney General Ciraolo, Acting U.S. Attorney Cohen, Special Agent in Charge Kelly, Acting Inspector in Charge McGinnis, Assistant Inspector General Phillips and Acting Special Agent in Charge Murray commended those who investigated the case. They also acknowledged the efforts of those who worked on the case from the U.S. Attorney’s Office of the District of Columbia, including former Assistant U.S. Attorney Sherri L. Schornstein and Paralegal Specialist Donna Galindo. Finally, they expressed appreciation for the work of Assistant U.S. Attorney Ellen Chubin Epstein of the District of Columbia’s Fraud and Public Corruption Section and Trial Attorneys Jessica N. Moran and Jeffrey B. Bender of the Tax Division, who prosecuted the case.
Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.