Five Sentenced to Federal Prison in Connection with a Fraudulent Multi-Million Dollar Income Tax Refund Scheme
In Austin today, five individuals, including three sisters, were sentenced to federal prison for their roles in 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.
United States District Judge Sam Sparks sentenced:
Natividad Mercado Medina, a 38–year-old Mexican national who formerly lived in Conroe, TX, and is residing in Atlanta, GA, to 121 months in federal prison;
Elizabeth Mercado Medina, a 39–year-old Mexican national residing in Atlanta, GA, to 108 months in federal prison;
Sofia Mercado Medina, a 37-year-old Mexican national residing in Atlanta, to 108 months in federal prison;
Bertin Sanchez Garcia, a 28–year-old Mexican national residing in Georgetown, TX, to 33 months in federal prison; and,
Yajaira Limon Lopez, a 36-year-old Mexican national residing in Houston to 51 months in federal prison.
In addition to the prison terms, Judge Sparks ordered that the defendants pay, joint and severally, $3,888,519.67 restitution to the Internal Revenue Service; and, be placed on supervised release for a period of three years after completing their prison terms. Judge Sparks also granted the Government’s request to forfeit Sophia’s and Elizabeth’s residences in Georgia and $93,000 in U.S. Currency.
According to court records, 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.
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 Lopez had rented and maintained on behalf of the Medina sisters.
All five defendants, who have remained in federal custody since their arrests in February 2016, entered guilty pleas to one count of conspiracy to commit mail fraud earlier this year.
“These unscrupulous defendants thought they had figured out a clever scheme to thwart the IRS and steal from American taxpayers,” said William J. Cotter, IRS Criminal Investigation, Special Agent in Charge, San Antonio Field Office. “The IRS has made investigating these types of crimes a top priority and we will vigorously pursue those who undermine the integrity of the U.S. tax system.”
This case was investigated by the Internal Revenue Service-Criminal Investigation together with the U.S. Postal Inspection Service. Assistant United States Attorneys Dan Guess, Matt Harding and Daniel Castillo prosecuted this case on behalf of the Government.