Union County Man Sentenced to 42 Months in Prison for Disaster Benefits Fraud, Business Impersonation Fraud, COVID-19 Loan Fraud, and Treasury Check Fraud
NEWARK N.J. – A New Jersey tax preparer was arrested today for fraudulently seeking more than $124 million from the IRS by filing over 1,000 false tax forms claiming COVID-19-related employment tax credits, U.S. Attorney Philip R. Sellinger and Acting Deputy Assistant Attorney General Stuart M. Goldberg announced today.
Leon Haynes, 49, of Teaneck, New Jersey, is charged by complaint with eight counts of aiding and assisting the filing of false tax returns and one count of mail fraud. He is scheduled to have his initial appearances this afternoon before U.S. Magistrate Judge Leda Dunn Wettre in Newark federal court.
“While our country was fighting the spread of the virus and its profound economic impact, Haynes allegedly scammed the system in a massive scheme to line his own pockets,” U.S. Attorney Philip R. Sellinger said. “As described in the complaint, Haynes abused his position as a tax preparer to steal millions of dollars by submitting over 1,000 false applications for funds set aside to help legitimately struggling businesses. My office and our partners will continue to find and prosecute fraudsters who exploited the pandemic for personal gain.”
“Today’s arrest demonstrates IRS Criminal Investigation and our law enforcement partners commitment to holding accountable those who exploited the pandemic for personal gain,” Tammy Tomlins, Special Agent in Charge of the Newark Field Office, said. “We are committed to rooting out pandemic-related fraud and holding accountable anyone seeking to profit from the public health emergency.”
“This arrest demonstrates our commitment to pursue those who attempt to defraud pandemic-related assistance programs through SSN misuse,” Gail S. Ennis, Inspector General for the Social Security Administration, said. “These programs provided aid to businesses and employees during a crisis; we will continue to collaborate with other law enforcement agencies to investigate those who allegedly misused them for personal and selfish gain,” said “I thank the IRS – Criminal Investigation, and the U.S. Postal Service for their investigative efforts and the U.S. Attorney’s Office for working this case.”
“As many of us suffered through the pandemic, Leon Haynes found a way to line his pockets at our expense,” Christopher Nielsen, Postal Inspector in Charge of the Philadelphia Division, said. “He allegedly filed over $100 million worth of fraudulent tax returns, stealing money from programs designed to support suffering businesses. Working with our colleagues at the IRS Criminal Investigative Division and the United States Attorney’s Office, we have begun the process of holding him accountable for his frauds.”
According to documents filed in this case and statements made in court:
In response to the COVID-19 pandemic and its economic impact, Congress authorized an employee retention tax credit (ERC) that a small business could use to reduce the employment tax it owed to the IRS.
To qualify, the business had to have been in operation in 2020 and to have experienced at least a partial suspension of its operations because of a government order related to COVID-19 (for example, an order limiting commerce, group meetings or travel) or a significant decline in profits. The credit was an amount equal to a set percentage of the wages that the business paid to its employees during the relevant time period, subject to a maximum amount.
Congress also authorized the IRS to give a credit against employment taxes to reimburse businesses for the wages paid to employees who were on sick or family leave and could not work because of COVID-19. This “paid sick and family leave credit” was equal to the wages the business paid the employees during the sick or family leave, also subject to a maximum amount.
From November 2020 to May 2023, Haynes, acting as a tax preparer, repeatedly exploited these programs by preparing and submitting 1,387 false forms to the IRS claiming COVID-related tax credits on behalf of himself and clients. Haynes falsely told his clients that the government was giving out COVID-relief money for businesses and that they were eligible for the money simply because they had a business. Without consulting with his clients, Haynes then submitted forms to the IRS on behalf of their businesses that grossly overstated the number of employees and amount of paid wages. Haynes submitted similarly false forms for three of his own companies. Based on these and other misrepresentations, Haynes fraudulently sought $124.8 million in tax refunds on behalf of his companies and numerous other businesses in his clients’ names.
Based on Haynes’ false claims about his own companies, the U.S. Treasury mailed him multiple tax refund checks totaling more than $1 million. The U.S. Treasury also disbursed at least $31.6 million in tax refunds to Haynes’ clients based on the false tax forms that Haynes submitted. Haynes charged each client up to a 15 percent fee based on the tax refunds the client received from the U.S. Treasury. At Haynes’ request, many clients paid him those fees in cash.
Each count of aiding and assisting in the preparation of false returns carries a maximum penalty of three years in prison and a $250,000 fine. The mail fraud charge carries a maximum penalty of 20 years in prison and a $250,000 fine or twice the gross gain to the defendant or gross loss to the victim, whichever is greatest.
U.S. Attorney Sellinger credited special agents IRS – Criminal Investigation, under the direction of Special Agent in Charge Tammy Tomlins; special agents of the Social Security Administration, Office of the Inspector General, under the direction of Special Agent in Charge Sharon MacDermott, and postal inspectors from the U.S. Postal Service, under the direction of Inspector in Charge Christopher Nielsen, Philadelphia Division, with the investigation leading to today’s arrest.
The government is represented by Assistant U.S. Attorney Fatime Meka Cano of the Economic Crimes Unit in Newark and Trial Attorney Samuel B. Bean of the U.S. Department of Justice, Tax Division.
Anyone with information about allegations of attempted fraud involving COVID-19 can report it by calling the Department of Justice’s National Center for Disaster Fraud Hotline at 866-720-5721 or via the NCDF Web Complaint Form at: https://www.justice.gov/disaster-fraud/ncdf-disaster-complaint-form.
The charges and allegations contained in the complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.