Hermosa Beach Couple Arrested on Federal Charges Related to Tax Scam and Passing False ‘Checks’ and ‘Bonds’ to Pay Off Debts
LOS ANGELES – Two Hermosa Beach residents were taken into custody yesterday after being indicted by a federal grand jury on a host of charges related to a scheme to defraud the Internal Revenue Service, which included passing bogus checks and bonds as a way to pay off debt for themselves and others.
Sean David Morton, 58, and his wife, Melissa Ann Morton, 50, are expected to be arraigned this afternoon in federal court in Los Angeles on a 56-count superseding indictment that was returned by a grand jury on January 27. The couple was arrested by special agents with IRS - Criminal Investigation in San Pedro Sunday morning after disembarking from a “Conspira-Sea Cruise.”
According to the superseding indictment, Sean David Morton filed a series of false income tax returns for the years 2005 and 2010 that sought millions of dollars in refunds. Melissa Morton allegedly filed several false tax returns for the year 2007. The couple “caused multiple copies and multiple versions of their income tax returns to be submitted to various IRS service centers throughout the United States in 2009 and 2010,” according to the indictment, which alleges they attached false Forms 1099-OID to support their claims for refunds.
The indictment specifically alleges that Sean David Morton filed a false 2006 income tax return 2010 that requested a refund of $2,809,921, and that in 2012 he filed a document that sought a tax refund of $1,560,634 for 2006.
In relation to the scheme, the indictment alleges that Sean David Morton on multiple occasions submitted to the IRS documents he called “Coupon for Setoff, Settlement, and Closure” in the amounts of $5,286,867 and $8,429,763. “These fictitious financial instruments were a purported bond in exchange for the refunds they sought from the IRS,” according to the indictment.
“Those who try to defraud the tax system often try to use complicated ‘legal’ filings to hide their true goal – stealing money paid by other taxpayers,” said United States Attorney Eileen M. Decker. “IRS agents and federal prosecutors have the tools to investigate and prosecute these sophisticated schemes, which undermine the entire tax system and ultimately victimize law-abiding taxpayers.”
Melissa Morton allegedly presented to the IRS in 2010 a “Coupon for Setoff, Settlement, and Closure” in the amount of $44,450 as a purported bond in exchange for a $14,450 refund that she sought. And, in 2013, both defendants allegedly presented to the IRS two “Non-Negotiable Discharging Bond and Indemnity” in the amounts of $10 million for Sean David Morton and $600,000 for Melissa Morton.
In relation to the tax returns and other documents submitted to the IRS, the Mortons are each charged with one count of conspiracy to defraud the United States and two counts of making false claims to the United States.
The indictment also charges Sean David Morton and Melissa Morton each with 24 counts of presenting false and fictitious instruments and documents – specifically items called “Non-Negotiable Discharging Bond and Indemnity” – which purported to be actual securities and financial instruments issued under the authority of the United States. These documents were submitted to the IRS, the California Franchise Tax Board, banks, mortgage companies, student loan companies, and county tax collectors, supposedly as a means to pay off debt. Melissa Ann Morton was charged with 25 counts of presenting or passing these documents. The Mortons allegedly also assisted others in presenting these false and fictitious instruments in amounts as high as $1.5 million.
“Driven by insatiable greed and a blatant disregard for the tax code, Mr. and Mrs. Morton have a long history of allegedly filing bogus tax returns and fictitious instruments claiming fraudulent refunds,” stated Erick Martinez, Special Agent in Charge of the IRS - Criminal Investigation. “People who create elaborate schemes that have no purpose other than to defraud the IRS run the very high risk of prosecution.”
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty in court.
If they are convicted of the charges in the superseding indictment, Sean David Morton would face a statutory maximum sentence of 650 years in federal prison, and Melissa Morton would face a statutory maximum sentence of 625 years.
The investigation into the Mortons was conducted by IRS - Criminal Investigation.