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Justice News

Department of Justice
U.S. Attorney’s Office
Southern District of New York

FOR IMMEDIATE RELEASE
Wednesday, November 13, 2013

Leader Of Massive Tax Refund Fraud Scheme Sentenced In Manhattan Federal Court To 10 Years In Prison For Orchestrating $50 Million Tax Refund Fraud



Preet Bharara, the United States Attorney for the Southern District of New York, announced that MELVIN DUARTE was sentenced today in Manhattan federal court to 10 years in prison for his role in a scheme to fraudulently generate and then steal more than $50 million in federal tax refund checks. DUARTE was originally arrested in 2008 and subsequently fled the U.S. He was extradited from the Dominican Republic and arrived in the U.S. in January 2013. DUARTE pled guilty in June 2013 to one count of conspiracy to defraud the United States, one count of conspiracy to steal mail, and one count of mail theft, and he was sentenced today by U.S. Circuit Court Judge Denny Chin, sitting by designation.

Manhattan U.S. Attorney Preet Bharara said: “Melvin Duarte stole Puerto Rican identities and used those identities fraudulently to obtain more than $50 million in federal tax refund checks to which he was not entitled. In doing so, he contributed to the millions of dollars in losses to the IRS resulting from this case. Duarte’s integral role in one of the largest known tax refund fraud schemes has now earned him a prolonged stay in prison.”

According to the Indictment and other documents filed in Manhattan federal court:

DUARTE was charged as part of an investigation into a massive tax and mail theft scheme. As part of the scheme, co-conspirators operating out of the Dominican Republic and other places electronically filed thousands of fraudulent federal tax returns, seeking tens of millions of dollars in tax refunds. The fraudulent returns were filed using Social Security numbers and other identifying information stolen from residents of Puerto Rico. Participants in the scheme targeted Social Security numbers assigned to residents of Puerto Rico because they are generally not required to file federal tax returns with the Internal Revenue Service (“IRS”), as long as their income is derived solely from Puerto Rican sources. In so doing, the co-conspirators minimized the risk that legitimate federal tax returns were already filed by the holders of the Social Security numbers that they were using in the scheme.

Each of the tax returns at issue falsely represented that the taxpayer resided at an address in the Bronx, New York, where the refund check requested in the return was to be sent. The checks were then stolen by letter carriers assigned to the mail routes where the checks were sent who had been recruited beforehand to participate in the scheme. The letter carriers participating in the scheme were paid a kickback for each check they stole. The letter carriers passed the checks on to other co-conspirators, who cashed them at various banks and check-cashing businesses located in the U.S. and the Dominican Republic.

Over the course of the scheme, thousands of false and fraudulent federal tax returns were filed seeking more than $50 million of fraudulent tax refunds from the IRS.

DUARTE was previously convicted in 2002 for conspiracy to steal federal funds, based on substantially similar conduct, and was sentenced to three years of probation.

In addition to the prison term, Judge Chin ordered DUARTE, 38, to pay forfeiture of $15 million and to serve a term of three years of supervised release to follow his prison sentence.

Mr. Bharara praised the work of the Internal Revenue Service, Criminal Investigation, the Federal Bureau of Investigation, the United States Postal Inspection Service, and the United States Postal Service Office of Inspector General, and thanked them for their work in this case. He also thanked the Dominican National Police for their significant assistance in the investigation.

This case is being handled by the Office’s Complex Frauds Unit. Assistant U.S. Attorney Serrin Turner is in charge of the prosecution.


Press Release Number: 
13-347
Updated May 13, 2015