Five Individuals Arrested and Charged in Connection with a Fraudulent Multi-Million Dollar Income Tax Refund Scheme

Federal authorities have arrested five individuals, including three sisters, indicted on federal charges in connection with a scheme that involved over 3,200 fraudulent income tax returns that claimed refunds totaling more than $9 million announced United States Attorney Richard L. Durbin, Jr., and Internal Revenue Service-Criminal Investigation (IRS-CI) Special Agent in Charge William Cotter.

A federal grand jury indictment returned in Austin and unsealed this week, charges the following defendants with one count of conspiracy to commit mail fraud:

• Natividad Mercado Medina, a 38–year-old Mexican national who formerly lived in Conroe, TX, and now resides in Atlanta, GA;

• Elizabeth Mercado Medina, a 39–year-old Mexican national who now resides in Atlanta, GA;

• Sofia Mercado Medina, a 36-year-old Mexican national, who now resides in Atlanta, GA;

• Bertin Sanchez Garcia, a 28–year-old Mexican national who resides in Georgetown, TX; and,

• Yajaira Limon Lopez, a 36-year-old Mexican national who resides in Houston.

According to the indictment, in 1996, the Internal Revenue Service began issuing Individual Taxpayer Identification Numbers, or “ITINs”.  By obtaining an ITIN, an individual who is already disregarding federal law by living in the United States illegally is given the opportunity to comply with federal law by filing taxes.  If the applicant can furnish sufficient proof (i.e. foreign birth certificate, national identification card, passport, etc.) that he or she is living in the United States illegally, the IRS will issue that person an ITIN.

The indictment alleges that beginning in 2014 and under the direction of Natividad Medina, the defendants conspired to steal money from the U.S. Treasury and U.S. taxpayers by exploiting the ITIN system.  The Medina sisters began by collecting Mexican identification documents from unknown people in Mexico and used those to fraudulently obtain ITINs.  The Medina sisters then used those ITINs to submit false and fraudulent income tax returns to the Internal Revenue Service Center in Austin.  They requested that the IRS mail refund checks to residences or to one of more than 200 post office boxes in and around the Houston area which Flores and Lopez had rented and maintained on behalf of the Medina sisters.  The indictment alleges that since January 2014, more than 3,200 tax returns associated with the relevant post office boxes and residences controlled by the Medina sisters were filed with the IRS.  The claimed refunds from the fraudulent ITIN returns amounted to more than $9 million.

Upon conviction, the defendants face up to 20 years in federal prison. 

All of the defendants were arrested on Tuesday.  The three Medina sisters remain in federal custody following their arrest in Atlanta.  Garcia remains in federal custody following his arrest in Georgetown.  Lopez remains in federal custody following her arrest in Houston.  Detention hearings are expected to be held tomorrow for the Medina sisters in Atlanta and Lopez in Houston.  Garcia’s detention hearing is scheduled for 9:00am on February 16, 2016, before United States Magistrate Judge Mark Lane in Austin.

This case was investigated by the Internal Revenue Service-Criminal Investigation together with the U.S. Postal Inspection Service.  Assistant United States Attorney Dan Guess is prosecuting this case on behalf of the Government.

An indictment is merely a charge and should not be considered as evidence of guilt.  The defendants are presumed innocent until proven guilty in a court of law.