Seven Charged In Alleged Stolen Identity Tax Refund Fraud Schemes

PROVIDENCE, R.I. – Seven individuals allegedly involved in tax refund fraud schemes which used stolen and fraudulent identities to defraud the Internal Revenue Service of more than $1.6 million dollars have been charged in federal court in Providence, announced United States Attorney Peter F. Neronha. Four individuals have pleaded guilty and a fifth is expected to plead guilty next week. Two defendants are awaiting trial.

Government reports indicate that losses due to Stolen Identity Refund Fraud – commonly referred to as SIRF – totals in the billions of dollars. In the last year alone, the Department of Justice and U.S. Attorney’s offices have charged more than 880 defendants for their involvement in SIRF schemes. The IRS resolved and closed approximately 963,000 SIRF cases.

“The allegations in these cases are another stark reminder that in the digital age, it is easier than ever to commit fraud against the taxpayers both as a whole and individually.  Combatting such criminal behavior requires constant vigilance – on the part of law enforcement and private citizens alike.  Safeguarding personal information is a critical ingredient in defeating the kind of brazen schemes involved here,” commented United States Attorney Peter F. Neronha. “I want to thank HSI, the Secret Service, the IRS, and the Rhode Island State Police, who have been the leaders in the investigation of these types of sophisticated, computer related crimes, particularly in Rhode Island.  They do this kind of work incredibly well.”

According to court documents and information presented to the court, in January 2013, Homeland Security Investigations (HSI) agents in Boston conducted a routine border search of Jairo Morales, 29, of Providence, who was flying in from the Dominican Republic.  In a laptop computer agents allegedly identified evidence consistent with a tax refund fraud scheme. 

Through additional investigation by IRS-Criminal Investigation (IRS-CI), U.S. Secret Service and HSI, evidence was developed that Morales and Julianna Martins, 45, of Providence, allegedly orchestrated a stolen identity tax refund scheme which resulted in the filing of false federal income tax returns using allegedly stolen personal identity information of hundreds of individuals from Puerto Rico and fictitious W-2 forms from various companies. Fraudulently obtained tax refund checks ranging from approximately $3,000 to $10,000 were sent to multiple Providence addresses allegedly under their control. Martins, Morales, Lucia Morales, 55, of Providence, and Casmiro Santos, 36, of Providence, and others allegedly deposited United States Treasury checks totaling in excess of $596,000 into accounts allegedly controlled by the defendants. Each defendant is criminally responsible for a subset of that amount to be determined by the court. 

Additionally, it is alleged in court documents that Maria Paulino, 25, of Providence, a bank teller, assisted Martins in opening bank accounts using fraudulent identity information and negotiated checks on behalf of Morales, Martins, and their associates.

Julianna Martins and Jairo Morales have pleaded guilty to conspiracy, theft of government property and aggravated identity theft. At sentencing they face statutory penalties of up to 15 years in federal prison, with a mandatory minimum sentence of  2 years imprisonment; $500,000 in fines; 3 years supervised release; and restitution to the United States Treasury.

Lucia Morales and Maria Paulino have pleaded guilty to theft of government property. At sentencing they face statutory penalties of up to 10 years imprisonment; $250,000 fine; 3 years supervised release; and restitution to the United States Treasury.

According to a signed plea agreement filed with the court, Casmiro Santos has agreed to plead guilty to charges of theft of government property and aggravated identity theft. He is scheduled to be arraigned on April 21, 2014.

Julianna Martins, Jairo Morales, Lucia Morales and Maria Paulino are scheduled to be sentenced in U.S. District Court the week of June 23rd.

In a separate matter, according to court documents and information presented to the court, in January 2012, Richard Lara, 22, of Providence, and Julian Balbi, 22, of Providence, were arrested by Rhode Island State Police during a traffic stop. A search of their vehicle resulted in the discovery of approximately 87 United States treasury checks totaling approximately $596,000. 

According to court documents, further investigation by the IRS-CI, U.S. Secret Service, and R.I. State Police developed evidence that Lara and Balbi allegedly orchestrated a stolen identity tax refund scheme with intended losses in excess of $1,000,000 by using stolen personal identity information of approximately 1,300 individuals. 

An indictment was returned February 26, 2014, charging Lara and Balbi with conspiracy, theft of government property and aggravated identity theft. In convicted, they face statutory penalties of up to 15 years imprisonment, with a mandatory minimum sentence of  2 years imprisonment; $500,000 in fines; up to 3 years supervised release; and restitution to the United States Treasury.  They have pleaded not guilty to the charges contained in the indictment and are awaiting trial.

An indictment and information are merely allegations and are not evidence of guilt. A defendant is entitled to a fair trial in which it will be the government’s burden to prove guilt beyond a reasonable doubt.

The cases are being prosecuted by Assistant U.S. Attorneys Sandra R. Hebert and John P. McAdams.

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