San Gabriel Valley Man Sentenced to Federal Prison in Stolen Identity Tax Refund Scheme which Fraudulently Sought $2.6 Million
LOS ANGELES – A Hacienda Heights man already serving a 27-month prison term for fraudulently seeking tax refunds has been sentenced in a second case to an additional two years in federal prison for his role in another scheme that used stolen identities to seek more than $2.6 million in false tax returns from the Internal Revenue Service.
Adel Cotton, 63, was sentenced to 51 months in federal prison by United States District Court Judge Michael W. Fitzgerald, who ordered that 27 months be served concurrently with the prior case.
In addition to the prison term, Judge Fitzgerald ordered Adel Cotton to pay $725,294 in restitution to the IRS.
Adel Cotton pleaded guilty in January to one count of conspiracy to defraud the United States by obtaining the payment of false claims, namely tax refunds.
Adel Cotton’s son and co-defendant – Heber Cotton, 39, of Los Angeles – pleaded guilty in November to one count of conspiracy to defraud the United States. Heber Cotton is scheduled to be sentenced by Judge Fitzgerald on June 6, at which time he will face a statutory maximum sentence of 10 years in federal prison.
According to Adel Cotton’s plea agreement, beginning in December 2008 and continuing through March 2010, the Cottons caused at least 275 fraudulent income tax returns to be filed with the IRS. Those fraudulent returns sought income tax refunds totaling more than $2.6 million.
As part of the scheme, Adel Cotton obtained names and Social Security numbers of individuals without their knowledge and consent. Adel Cotton, with the help of others, prepared false Forms W-2 (IRS Wage and Tax Statements) in the names of the identity theft victims that reported false employment and income information, as well as false tax withholding amounts. Using the falsified information reported on the Forms W-2, Adel Cotton and others prepared fraudulent individual income tax returns claiming false tax refunds. The tax returns were filed without the knowledge or consent of the identity theft victims.
“This case is the latest involving stolen identity refund fraud, which victimizes both the United States and the individuals who have had their identities stolen,” said United States Attorney Eileen M. Decker. “Individual victims of this type of fraud typically have to devote significant time and resources recovering their tax refund and protecting their identities from future fraud.”
In his plea agreement, Adel Cotton admitted that he and his son directed the IRS to mail the fraudulent refunds to addresses they controlled. The defendants then worked with two unidentified co-conspirators to deposit the refund checks using bank accounts opened in the names of the identity theft victims.
In the prior case, Adel Cotton was one of 53 people convicted in relation to the “Old Quest” tax refund scheme that fraudulently sought more than $250 million in tax refunds (see: http://go.usa.gov/ceGNJ).
The investigation into Adel and Heber Cotton was conducted by IRS Criminal Investigation and the Federal Bureau of Investigation.