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Justice News

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

Monday, June 1, 2015

Local Tax Return Preparer Heads to Federal Prison

HOUSTON - Diane Caldwell Larry has been ordered to prison following her conviction of falsifying client tax returns, announced U.S. Attorney Kenneth Magidson along with Lucy Cruz, special agent in charge of Internal Revenue Service-Criminal Investigation (IRS-CI).  Larry pleaded guilty July 7, 2014.

Today, U.S. District Judge Vanessa Gilmore, who accepted the guilty plea, handed Larry a total sentence of 12 months and one day in federal prison to be immediately followed by one year of supervised release. She was further ordered to pay $168,792 in restitution. During today’s sentencing hearing, Larry promised never again to involve herself in the preparation of tax returns other than her own.

During her plea hearing in July 2014, Larry admitted that while operating a tax return preparation service under the name Paradise South Tax Services, she prepared 33 materially false client tax returns for tax years 2007 through 2010. Those returns generated excessive refunds and caused aggregate losses to the IRS totaling approximately $168,792. Larry acknowledged she had included in these client tax returns fraudulent “side business” losses and false and excessive itemized deductions and credits in order to generate excessive refunds. When some of these tax returns were audited, Larry made up false documents to create an illusion of legitimacy for some of the false and excessive itemized deductions and credits.

Specifically, Larry admitted she knowingly and willfully included a false $84,215 business loss deduction for a non-existent “side business” as well as false deductions for uniforms upkeep, toll bridge fees, job-related tools and employee business expenses totaling $10,644 in a client’s 2009 tax return. This tax return alone caused a loss to the U.S. Treasury of approximately $18,382.

Previously released on bond, Larry was permitted to remain on bond and voluntarily surrender to a U.S. Bureau of Prisons facility to be determined in the near future.

The case, investigated by IRS-CI, is being prosecuted by Assistant United States Attorney Jimmy Sledge Jr.

Updated July 7, 2015