Federal Jury Convicts Tarrant County Tax Preparers On Conspiracy, Tax And Wire Fraud Charges
Couple Operated Jacqueline Morrison & Associates In Arlington And Fort Worth
FORT WORTH, Texas — A federal jury in Fort Worth, Texas, has convicted a husband and wife on multiple felony offenses stemming from their operation of a tax return preparation business in Tarrant County, announced U.S. Attorney Sarah R. Saldaña of the Northern District of Texas. The trial began Monday morning before U.S. District Judge John McBryde.
Jacqueline Morrison and Gladstone Morrison, who operated Jacqueline Morrison & Associates (JMA) on North Collins in Arlington, Texas, and on James Street in Fort Worth, Texas, were convicted on all 18 counts of conspiracy, tax offenses and wire fraud as charged in a second superseding indictment returned by a federal grand jury in September 2014. Following the verdict late yesterday, Judge McBryde remanded them into federal custody.
The government presented evidence that Jacqueline, who is a Certified Public Accountant, and Gladstone Morrison conspired to willfully aid and assist in and advise the preparation and presentation to the Internal Revenue Service (IRS) of false and fraudulent individual income tax returns.
Many of the tax returns were false and fraudulent because to increase client refunds, the returns claimed Schedule C business losses from income for which the Morrisons knew the taxpayers were not entitled. The Morrisons and JMA tax return preparers, who the Morrisons trained, would use the substantial losses reported on the false Schedules C to offset wage income, resulting in clients recovering all or most of their tax withholding. The Morrisons benefitted from this practice by charging higher fees for additional schedules, creating client loyalty and increasing their business through client referrals.
As part of the conspiracy, the Morrisons, according to evidence presented, developed a series of forms for the client to sign at the time the return was prepared. These forms were intended to protect the Morrisons by placing all the responsibility for any false information on the client, no matter how transparently implausible or unsubstantiated the information on the return.
During the time of the conspiracy, the Morrisons collected more than $2 million in fees from clients. They also attempted to profit by using JMA’s fraud to build a large client list, which they then leveraged into a lucrative franchise agreement with Express Tax Services, a subsidiary of H&R Block. However, after they entered the franchise agreement, the IRS terminated the Morrisons’ Electronic Filing Identification Numbers (EFINs) because of their fraudulent activities. To conceal that fact and perpetuate the continuation of the franchise agreement, the Morrisons provided Express Tax Services EFINs that belonged to a business associate.
Regarding the wire fraud offenses that occurred during the time of the conspiracy, the government presented evidence that the franchise agreement provided for the payment of $750,000 from Express Tax to the Morrisons. To secure the agreement, the Morrisons falsely represented to Express Tax that JMA was not under investigation, when in fact, they well knew JMA was the subject of a federal criminal investigation by IRS-Criminal Investigation.
Unbeknownst to Express Tax, the Morrisons entered into a separate agreement to sell JMA to an individual named V.H. Gladstone Morrison misled V.H. about the true nature of JMA’s relationship with Express Tax by telling V.H. that the arrangement was nothing more than a “co-branding” or “co-marketing” agreement.” Gladstone Morrison also tried to prevent Express Tax from learning they had executed an agreement to sell JMA to V.H. by falsely telling Express Tax that V.H. was only the Morrison’ office manager. By entering into parallel agreements with separate entities — Express Tax and V.H., the Morrisons received payments from both entities for the same asset.
When the Morrison’s agreements with both Express Tax and V.H. fell apart, they again tried to profit by selling JMA to RealTex Ventures LLC, owned by “D.A.” for $425,000. Again, the Morrisons represented that JMA was not under investigation, when it was.
Specifically, Jacqueline and Gladstone Morrison were each convicted on one count of conspiracy to aid and assist in the preparation and presentation of false and fraudulent tax returns. Jacqueline Gladstone was also convicted on 13 counts, and Gladstone Morrison on 12 counts, of aiding and assisting in the preparation and presentation of false and fraudulent tax returns. Jacqueline was convicted on three counts, and Gladstone on four counts, of wire fraud.
The conspiracy count carries a maximum statutory penalty of five years in federal prison and a $250,000 fine. Each count of aiding and assisting in the preparation and presentation of a false and fraudulent return carries a maximum statutory penalty of three years in federal prison and a $250,000 fine. Each count of wire fraud carries a maximum statutory penalty of 20 years in federal prison and a $250,000 fine. Restitution could also be ordered. Sentencing is set for February 6, 2015, before Judge McBryde.
The case was investigated by IRS Criminal Investigation. Assistant U.S. Attorneys Douglas Allen and Chris Wolfe are prosecuting.