Over the Topps; a thirst for fraud; the sky is limited; and other highlights of recent tax cases.
Grand Prairie, Texas: A federal court has permanently enjoined preparers Smart Ajayi and JoAnn Villarreal from owning or operating a tax prep business and preparing returns for others.
The complaint against Ajayi (d.b.a. Harplett Marketing, Topps Tax Services and Smart Tax Services) and Villarreal alleges that the two repeatedly understated clients’ tax liabilities by fabricating non-cash charitable deductions and creating false Schedules C with inflated or fraudulent business losses to generate refunds. For example, the government alleges that Ajayi prepared a return on which he falsely reported that a client with AGI of $34,027 made $19,759 in noncash charitable contributions.
The complaint alleges that over the course of 2016 through 2018 Ajayi and Villarreal each filed hundreds of returns and cost the federal government substantial tax revenue by repeatedly understating clients’ tax liabilities.
Tampa, Florida: Derraka Reed has been sentenced to 42 months in prison for theft of government funds and access device fraud in connection with filing fraudulent returns.
Between 2012 and 2014, Reed filed more than 100 fraudulent federal returns using dozens of stolen identities. Her returns claimed more than $580,000 in refunds; she obtained $128,740. Reed, who pleaded guilty in 2018, was also ordered to pay $128,740 in restitution to the IRS.
Opa Locka, Florida: Eldrick Wendell Wooding, Sr., 64, has been sentenced to 46 months in prison to be followed by three years of supervised release, and was ordered to pay $107,421 in restitution to the IRS in connection with a tax refund fraud.
The scheme involved the filing of fraudulent income tax returns containing false W-2Gs, claiming false gambling winnings, withholdings and losses, and seeking large-dollar tax refunds. From October 2011 through April 2013, Wooding conspired with Freddie Howard to prepare and submit false and fraudulent federal returns and other tax-related documents for undeserved refunds.
In October, a jury convicted Wooding of conspiracy to defraud the U.S. Six others were previously sentenced.
Honolulu: Steve Edwards, 73, and Melanie Edwards, 61, of St. George, Utah, have been sentenced for conspiracy to defraud the IRS and conspiracy to commit money laundering.
Steve Edwards was sentenced to three years in prison and three years of supervised release. Melanie Edwards was sentenced to 30 months in prison and three years of supervised release.
The couple defrauded Koyo USA Corporation, manufacturer of bottled water on Hawaii Island, for more than 10 years. They created sham pass-through companies and held those companies out to Koyo as if they were legitimate when the companies were only resellers with no employees and that only existed to take money from Koyo. The couple used fictitious names to communicate with employees of Koyo, lied about various departments that the sham companies purportedly had and concealed from Koyo that one of its senior managers was an owner of the sham pass-through companies.
Steve and Melanie Edwards laundered $3.7 million in fraudulent proceeds. They also filed false federal returns, submitted false books and records to their CPAs and improperly classified millions of dollars in distributions to the owners of the pass-through companies as consulting fees. The couple evaded $1,471,113 in taxes.
They were also ordered to pay $3,752,155.69 in restitution to Koyo USA and $1,471,113 in restitution to the IRS.
Bridgeport, Connecticut: Preparer Veronica Huitzil, 39, has pleaded guilty to preparing false returns for clients.
Huitzil assisted in the preparation and filing of more than 3,700 federal returns for the 2014 through 2018 tax years. Many of the returns claimed phony dependents, deducted thousands of dollars in business losses for fictitious businesses and included inflated or fabricated medical expenses, charitable contributions and employee business expenses.
She pleaded guilty to one count of aiding and assisting in the filing of a false return, which carries a maximum term of imprisonment of three years. She also agreed that losses by the IRS totaled $898,665. Many of her clients’ filed returns will need to be amended; her restitution may be reduced as her clients resolve their own tax liability. Sentencing is May 6.
Worcester, Massachusetts: Former preparer Sebastian Adzadi, 45, has been sentenced to time served and a year of supervised release and been ordered to pay $131,077 in restitution for filing false income tax returns.
Adzadi, who pleaded guilty in October, operated Skylimits Tax Service and Consulting. For tax years 2013 through 2016, Adzadi prepared hundreds of returns for clients that included false Schedule A deductions including medical expenses, charitable contributions and unreimbursed business expenses.
The IRS estimates that Adzadi’s fraud caused a total loss of some $829,000.
San Anselmo, California: Parnian Djafarzadeh, a.k.a. Parnian Clark, a.k.a. Saundra Djafarzadeh, has pleaded guilty to possessing stolen mail, filing a false claim and committing wire fraud in connection with a multi-year tax fraud.
Djafarzadeh, 42, admitted she devised and executed a scheme to file false federal income tax returns from 2010 through 2012. She further admitted she wrongfully obtained personal ID information, including names and Social Security numbers, of local residents. She used that information to prepare and e-file false returns in their names without their knowledge. The federal returns claimed $219,635.89 in refunds, of which the IRS paid at least $90,822.30. She also admitted that she obtained and possessed stolen mail from one of her neighbors.
Djafarzadeh pleaded guilty to one count of possession of stolen mail, one count of filing a false claim and one count of wire fraud. If she complies with the plea agreement, the remaining counts will be dismissed at sentencing, which is on April 29. Djafarzadeh has agreed to pay restitution of at least $90,952.48.
The maximum for possession of stolen mail and for false claims is five years in prison and a fine of $250,000 for each. The maximum for wire fraud is 20 years in prison and a fine of $250,000.
Tampa, Florida: A federal court has found that preparer Jasen Harvey and Harveys Tax Service violated preliminary and permanent injunctions that barred them from preparing, filing or assisting in the preparation or filing of federal returns for others.
The court has held Harvey and Harveys Tax Service in contempt and ordered them to pay $19,550 to the U.S., representing the fees they received for 92 returns they prepared or filed in violation of the court’s injunctions. The court also ordered those defendants to reimburse the government for $631.04 in travel costs the U.S. incurred to attend the contempt hearing.
The federal government filed a complaint against Catharine Harvey, Jasen Harvey and Harveys Tax Service in January. According to the complaint, the defendants prepared returns for clients seeking millions of dollars in refunds of tax purportedly withheld on fictitious income reported on fabricated 1099-MISCs and on bank deposits reported on fabricated 1099-As.
Philadelphia: Dr. James E. Moylan, 57, a chiropractor and the former chair of the Philadelphia Zoning Board of Adjustments, has been sentenced to 15 months in prison and three years of supervised release for stealing civic funds and filing false federal income tax returns.
Moylan, who pleaded guilty in October, admitting that he defrauded both a local union and a related nonprofit of more than $50,000 in funds which he claimed he would use for community support and education but which he actually used to pay his personal mortgage and business expenses. Moylan also filed federal income tax returns for the years 2012 through 2015 on which he underreported more than $200,000 in income and claimed false business expenses.
He was also ordered to pay $52,898 in restitution to the International Brotherhood of Electrical Workers Union Local 98, and $77,885 in restitution plus penalties and interest to the IRS.