Two Oklahoma Residents Plead Guilty to Susanville Prison Tax Fraud Scheme
SACRAMENTO, Calif. — Edwin Forrest Ludwig III, 61, and Donald Loyde Harned, 72, both of Oklahoma, pleaded guilty today for their roles in a conspiracy to defraud the United States with false claims for federal tax refunds, U.S. Attorney Phillip A. Talbert announced.
According to court documents, beginning in 2011, Ludwig III, Harned, and five others operated a tax fraud scheme out of the California Correctional Center in Susanville. Four of the co-conspirators who were incarcerated at the correctional center obtained personal identification information of other inmates. Harned and other co‑defendants who were not incarcerated took this information and prepared and filed false income tax returns with the IRS, claiming refunds that they knew to be false and to which the inmates were not entitled. Ludwig III, not an inmate, assisted the scheme by depositing the fraudulently obtained refunds in bank accounts he opened and transferring the criminal proceeds to the prison accounts of the incarcerated co-defendants. Both Ludwig III and Harned received money in return for their participation in the scheme.
This case is the product of an investigation by the Internal Revenue Service, Criminal Investigation, the Federal Bureau of Investigation, and the Investigative Unit at the California Correctional Center. Assistant U.S. Attorney Amy Schuller Hitchcock is prosecuting the case.
Ludwig III and Harned are scheduled to be sentenced by U.S. District Judge Garland E. Burrell Jr. on June 30, 2017. Both face a maximum statutory penalty of 10 years in prison and a $250,000 fine. The actual sentence, however, will be determined at the discretion of the court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines, which take into account a number of variables.
To date, four co-conspirators have pleaded guilty and been sentenced for their participation in this scheme, including Ludwig III’s son, Ludwig IV, who was sentenced to seven years in prison for his role in the scheme. The charges against one remaining co-defendant are pending. Those charges are only allegations, and that co-defendants is presumed innocent until and unless proven guilty beyond a reasonable doubt.