Pennsylvania Man Sentenced To 33 Months In Prison For Role In $65 Million Stolen Identity Income Tax Refund Fraud Scheme
NEWARK, N.J. – A Moscow, Pennsylvania, man was sentenced today to 33 months in prison for his role in one of the nation’s largest and longest running stolen identity refund fraud schemes ever identified, U.S. Attorney Paul J. Fishman announced today.
The scheme caused more than 8,000 fraudulent U.S. income tax returns to be filed, which sought more than $65 million in tax refunds and which resulted in losses to the United States of more than $12 million.
Michael Senatore, 44, previously pleaded guilty before U.S. District Judge Claire C. Cecchi to an information charging him with conspiracy to defraud the United States and theft of government property. Judge Cecchi imposed the sentence today in Newark federal court.
According to documents filed in this case and statements made in court:
Stolen Identity Refund Fraud
Stolen Identity Refund Fraud (SIRF) is a common type of fraud committed against the United States government that results in more than $2 billion in losses annually to the United States Treasury. SIRF schemes generally share a number of hallmarks:
- SIRF perpetrators obtain personal identifying information, including Social Security numbers and dates of birth, from unwitting individuals, who often reside in the Commonwealth of Puerto Rico.
- SIRF perpetrators complete Form 1040 Individual Income Tax Returns using the fraudulently obtained information and falsifying wages earned, taxes withheld and other data. Perpetrators use data to make it appear that the “taxpayers” listed on the fraudulent 1040 forms are entitled to tax refunds – when in fact, the various tax withholdings indicated on the fraudulent 1040s have not been paid by the listed “taxpayers,” and no refunds are due.
- Perpetrators direct the U.S. Treasury Department to issue the refunds through checks generated by the fraudulent 1040 forms to locations they control or can access.
- With checks now in hand, SIRF perpetrators generate cash proceeds. Certain SIRF perpetrators sell refund checks at a discount to face value. In turn, the buyers then cash the checks, either themselves or using straw account holders, by cashing checks at banks or check cashing businesses or by depositing checks into bank accounts. When cashing or depositing checks, SIRF perpetrators often present false or fraudulent identification documents in the names of the “taxpayers” to whom the checks are payable.
Federal law enforcement agencies created a multi-agency task force in New Jersey composed of investigators from the IRS and the U.S. Postal Inspection Service, along with the U.S. Secret Service and with assistance from the Drug Enforcement Administration (New Jersey Task Force).
An investigation led by the New Jersey Task Force, with assistance from U.S. Immigration and Customs Enforcement, Homeland Security Investigations, revealed that from at least 2007, dozens of individuals in the New Jersey and New York area have been engaged in a large-scale, long-running SIRF scheme that caused more than 8,000 fraudulent 1040 forms to be filed, seeking more than $65 million in tax refunds, with more than $12 million in losses to the U.S. Treasury.
Senatore and others obtained personal identifiers, such as dates of birth and Social Security numbers, belonging to Puerto Rican citizens. They used those identifiers to create fraudulent 1040 forms, which falsely reported wages purportedly earned by the “taxpayers” and taxes purportedly withheld, to create the appearance that the “taxpayers” were entitled to tax refunds. The returns were filed electronically. By tracing the specific IP addresses that submitted the electronically-filed 1040s, law enforcement officers learned that just a handful of IP addresses created many of the fraudulent 1040 forms that lead to the issuance of tax refund checks.
Conspirators purchased mail routes, that is, lists of addresses covered by a single mail carrier. Conspirators applied for refunds, inserted addresses along the mail route as the purported home addresses of the “taxpayers,” and obtained the refund checks sent to the addresses. They also applied for checks using addresses otherwise controlled by, or accessible by, certain conspirators and collected the checks after they were delivered to those addresses. During the course of the scheme, hundreds of refund checks were mailed to just a few different addresses in a few different towns, including Nutley, Somerset and Newark, New Jersey, and Shirley, New York.
After receiving the refund checks, Senatore and others caused the checks to be cashed at check cashing institutions, and then causing the proceeds to be divided among the conspirators.
During the course of the investigation, members of the task force identified certain “hot spots” of activity and intercepted more than $22 million in refund checks – that had been applied for fraudulently – before they were delivered to members of the conspiracy.
In addition to the prison term, Judge Cecchi sentenced Senatore to three years of supervised release and fined him $6,000.
U.S. Attorney Fishman praised special agents of IRS-Criminal Investigation, under the direction of Acting Special Agent in Charge Jonathan D. Larsen; the U.S. Postal Inspection Service, under the direction of Inspector in Charge Maria L. Kelokates; the U.S. Secret Service, under the direction of Special Agent in Charge James Mottola; and the Drug Enforcement Administration, under the direction of Special Agent in Charge Carl Kotowski, for the investigation.
The government is represented by Assistant U.S. Attorneys Mala Ahuja Harker, Lakshmi Srinivasan Herman, Zach Intrater and Danielle Walsman of the U.S. Attorney’s Office Criminal Division in Newark.