Message To Potential Tax Cheats From Federal Prosecutors: Tax Crimes Result In Criminal Prosecution, Prison Sentences And Fines

CHARLOTTE, N.C. - With the deadline for filing income tax returns approaching next month, Jill Westmoreland Rose, Acting U.S. Attorney for the Western District of North Carolina, and Thomas J. Holloman, III, Special Agent in Charge of the Internal Revenue Service, Criminal Investigation Division (IRS-CI), jointly announce recent tax fraud prosecutions and deliver a powerful warning to potential tax cheats.

“As tax filing season reaches its peak, would-be tax fraudsters are warned that our office will prosecute those who try to cheat the tax system,” said Acting U.S. Attorney Rose.  Rose noted the importance of deterring others from committing tax crimes and stated, “Our tax system is built on voluntary compliance and tax criminals who do not pay their fair share increase the tax burden on honest taxpayers.” 

“Filing a truthful, accurate tax return is a responsibility that tax preparers should take very seriously, said Thomas J. Holloman, III, Special Agent in Charge, IRS Criminal Investigation. “Let the message to unscrupulous tax return preparers be clear, that criminal activity and greed carry severe consequences. I encourage citizens to avoid being taken advantage of, by seeking out credentialed, reputable tax preparers during the current filing season, also to take the appropriate measures to safeguard their personal information, so as not to fall victim to identity theft.”    

On Wednesday, March 18, 2015, Fitzroy Lawrence, a Charlotte tax return preparer, was indicted on federal charges for preparing false tax returns by making false claims for refund from the IRS.  According to the indictment, for tax years 2008 through 2011, Lawrence aided and assisted in the preparation of hundreds of tax returns that were filed with the IRS, seeking fraudulent tax refunds totaling millions of dollars.  Many of the fraudulent tax returns included false wages and false dependent information.  Lawrence was charged with 15 counts of making false claims for refund and faces a maximum sentence of five years in prison and a $250,000 fine per count.  The charges against Lawrence are allegations and he is presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.

Prosecutions of Tax Evasion and Filing False Tax Returns

Over the last year, the U.S. Attorney’s Office has prosecuted and convicted a number of individuals for omitting income from their individual tax returns.  For example, Mark Tuan Le (3:14-cr-00110), an internal medicine physician, pleaded guilty to tax evasion for hiding millions of dollars in personal income from the IRS by claiming fraudulent business expenses for funds that were used to purchase and construct a $2.4 million, 8000-square foot residence on Lake Norman in Cornelius.  Plea documents indicate that Le omitted to report approximately $1.2 million of income per year for 2009 and 2010.  Le, who also pleaded guilty to healthcare fraud charges, is awaiting sentencing.

During the past year, defendants have received substantial sentences for tax charges, ranging from home confinement to several years in prison.  The following individuals were among the defendants sentenced for lying to the IRS about their taxable income:

• Denise Swanson (5:13-cr-00061), of Lenoir, N.C., owned and operated a tax preparation and bookkeeping business and failed to report more than $800,000 of income she received from embezzling client funds during years 2006 through 2011.
• Nghia Ly (3:13-cr-00235), of Waxhaw, N.C., and the fifty-percent owner of Kim Sen Jewelry, Inc., d.b.a. KS Nail Supply (KSJ) in Charlotte, concealed gross receipts and taxable income of over $800,000 from the IRS for 2007 through 2011.
• Kenneth Sumner (3:13-cr-00257), of Charlotte, and owner of Ken B. Sumner and Associates, a Charlotte-based sales company, failed to file timely tax returns for 2006 through 2008 with the IRS.  Sumner subsequently filed a delinquent 2006 federal income tax return that omitted gross receipts from Sumner’s business totaling approx. $106,808.  For tax years 2007 and 2008, Sumner failed to file timely income tax returns despite having income of approx. $318,433 and $337,090, respectively.
• Jonathan Davey (3:12-cr-00068), of Newark, Ohio, failed to report income that he received from a $21 million Ponzi scheme on his federal tax returns.  Davey was also convicted of securities fraud conspiracy, wire fraud conspiracy, and money laundering conspiracy.

Prosecutions of Fraudulent Tax Return Preparers

In 2014, the U.S. Attorney’s Office also prosecuted unscrupulous tax return preparers.  The following defendants are among those prosecuted federally for tax return preparer fraud:

• Nkhenge Shropshire (3:13-cr-00248), of Charlotte, and owner of Tax Connections, was sentenced to 33 months in prison following her guilty plea to conspiracy to defraud the IRS and making a false statement on a loan application.  For tax years 2009 through 2011, N. Shropshire aided and assisted in the preparation of more than 600 fraudulent tax returns filed with the IRS, resulting in tax losses of more than $580,000.
• Jessica Ordonez (3:14-cr-00071), a resident of Gaston County, N.C. and owner of Tax Pros, (a/k/a Ordonez Tax Services), located in Gastonia and Morganton, pleaded guilty to preparing fraudulent tax returns falsely claiming more than $200,000 in Additional Child Tax Credits.  Ordonez also pleaded guilty to filing false tax returns in her own name.  Ordonez is scheduled to be sentenced on March 25, 2015.
• Malik Shropshire (3:15-cr-00025), of Charlotte, was indicted in February 2015 on multiple charges, including conspiring with others to prepare hundreds of false tax returns with the IRS that included, among other things, false Schedule C businesses, false dependents, and false refundable education credits.

Prosecutions of Stolen Identity Refund Fraud

In addition to prosecuting tax evaders and fraudulent tax return preparers, the U.S. Attorney’s Office prosecuted individuals for stealing the identities of taxpayers and filing fraudulent tax returns.  Jacquline Juarez (3:13-cr-00157), was sentenced to 18 months in prison and ordered to pay restitution of more than $1 million for her role in a fraudulent tax refund scheme involving the use of fraudulent IRS Individual Taxpayer Identification Numbers (ITIN) to obtain false tax refunds.

Federal penalties for each count of conviction of tax crimes range from a maximum of one year in prison and a $100,000 fine for failure to file a tax return, false withholding exemptions, and delivering or disclosing false tax documents, to a maximum of 10 years in prison and a $250,000 fine for conspiracy to defraud with respect to false refund claims.  Other penalties include a mandatory term of two years in prison and a $250,000 fine for aggravated identity theft charges, three years in prison and a $250,000 fine for obstructing or impeding an investigation and filing or preparing a false tax return, and a maximum of five years in prison and a $250,000 fine for tax evasion, failure to pay taxes, conspiracy to commit a tax offense or conspiracy to defraud.

The U.S. Attorney’s Office and the IRS remind tax payers to exercise caution during tax season to protect themselves against a wide range of tax schemes ranging from identity theft to return preparer fraud.  The IRS has issued its annual “Dirty Dozen” which lists common tax scams that taxpayers may encounter, particularly during filing season.  Taxpayers are urged look out for, and to avoid, the following common schemes:

• Phone Scams
• Phishing
• Identity Theft
• Return Preparer Fraud
• Offshore Tax Avoidance
• Inflated Refund Claims
• Fake Charities
• Hiding Income with Fake Documents
• Abusive Tax Shelters
• Falsifying Income to Claim Credits
• Excessive Claims for Fuel Tax Credits
• Frivolous Tax Arguments

Education is the best way to avoid these common schemes.To learn more about the Dirty Dozen scams and for help with recognizing and avoiding abusive tax schemes, the IRS offers educational material at www.irs.gov.  Suspected tax fraud can be reported to the IRS using Form 3949-A found on the IRS.gov website.