Two Ohio-Based Tax Return Preparation Business Executives Indicted for Nationwide Conspiracy and Other Tax-Related Crimes
Two Ohio residents were arrested today after being indicted on Aug. 25 by a federal grand jury sitting in Dayton, Ohio, for conspiracy and tax-related crimes, announced Acting Deputy Assistant Attorney General Bruce M. Salad of the Justice Department’s Tax Division.
According to the 23-count indictment, Fesum Ogbazion, of Beavercreek, Ohio, and Kyle Wade, formerly of West Chester, Ohio, were indicted on one count of impeding the administration of the Internal Revenue Code, one count of conspiracy to commit wire fraud and five counts of wire fraud. Ogbazion is also charged with six counts of money laundering, one count of evasion of payment of employment taxes, eight counts of failure to collect and pay over employment taxes and one count of bank fraud.
According to the allegations in the indictment, Ogbazion owned and controlled ITS Financial LLC, which was the national franchisor of Instant Tax Service (ITS), a tax preparation business Ogbazion founded that claimed to have more than 1,100 franchise locations throughout the United States in 2009. Wade was the vice president of financing for ITS and owned multiple ITS franchises.
From about January 2004 through November 2012, Ogbazion and Wade executed a scheme to obstruct the Internal Revenue Service (IRS), wherein numerous ITS franchises filed false federal income tax returns without valid Forms W-2 and without the permission of their taxpayer clients. The false returns included false and inflated sole proprietorship Schedule C income in an attempt to increase the Earned Income Tax Credit. Over the course of several years, Ogbazion also instructed an ITS employee to electronically file large volumes of unsigned tax returns on the first day of the “tax filing season,” then falsely backdated customer filing authorizations. In an attempt to obstruct IRS civil compliance audits, ITS maintained and filed false documents with the IRS, including fabricated Forms W-2 created by ITS employees using tax preparation software, and forged client signatures on various false IRS forms.
From about December 2009 through November 2012, Ogbazion and Wade also conspired to generate loan and tax return preparation fees for ITS and its franchises by luring low-income and unsophisticated taxpayers into ITS franchises through a nationwide advertising campaign that offered customers tax refund anticipation loans. Despite the fact that ITS did not have an independent lender that could fund the promised loans, ITS collected loan application and tax preparation fees from its customers. For the 2011 tax filing season, Ogbazion and Wade represented to ITS staff, franchises and customers that refund anticipation loans were obtained through an independent lender, even though Ogbazion owned the purported lender, which had limited lending capabilities. Ogbazion knew that the overwhelming majority of loan applications would be denied. In total, the indictment alleges that ITS generated more than $12.5 million in fees in 2010, and more than $3.1 million in fees in 2011 from this loan scheme.
The indictment also alleges that Ogbazion was responsible for ITS’ and TaxMate LLC’s federal employment payroll taxes. He failed to pay over approximately $1.26 million in payroll taxes due from these businesses during four tax quarters in 2009 and 2010. Ogbazion also evaded the IRS’ attempts to collect ITS and TaxMate federal payroll taxes by directing business revenue to nominee accounts, placing assets in the names of nominee entities and making false statements to an IRS revenue officer during the course of collection activity, among other acts of concealment.
If convicted of impeding the administration of the Internal Revenue Code, the defendants face a statutory maximum sentence of three years in prison and a fine of up to $250,000. If convicted of conspiracy to commit wire fraud and wire fraud, the defendants face a statutory maximum sentence of 30 years in prison and a fine of up to $1 million for each count. If Ogbazion is convicted of money laundering, he faces a statutory maximum sentence of 20 years in prison and a fine of up to $500,000. If convicted of tax evasion and failure to pay over employment taxes, Ogbazion faces a statutory maximum sentence of five years in prison and up to a $250,000 fine for each count. Finally, Ogbazion faces a statutory maximum sentence of 30 years in prison and up to a $1 million fine if he is convicted of bank fraud.
The Tax Division commended the special agents of IRS-Criminal Investigation, who investigated the case, and Senior Litigation Counsel Corey Smith and Trial Attorney Mark S. McDonald of the Tax Division and Assistant U.S. Attorney Jessica Knight of the Southern District of Ohio, who are prosecuting the case.
An indictment merely alleges that crimes have been committed. The defendants are presumed innocent until proven guilty beyond a reasonable doubt.