Bug in the system, again; the category is fraudster; pit stop; and other highlights of recent tax fraud cases.
Rocky Mount, North Carolina: Preparer Bertha Battle, a.k.a. “Bug,” 40, has pleaded guilty to conspiracy to prepare and file false returns.
Battle conspired to file false returns for the 2013 through 2016 tax years for clients of Community Tax Services. She and her co-conspirators filed returns that claimed false education credits, among other illegitimate items, to fraudulently generate refunds. The loss to the IRS totaled $2.2 million.
Battle, who pled guilty to similar federal tax charges in 2009, faces up to five years in prison.
Denver: Stephen Yobst, 64, has been sentenced to 27 months in prison followed by three years of supervised release for wire fraud, conspiracy to defraud the U.S., filing false returns and theft of government funds.
In 2005, Yobst was employed by Xcel Energy as a purchasing manager. His co-conspirator, James Brittain, incorporated a company called Pacific Exchange Group Inc. in Colorado in March 2005. On March 18, 2005, Yobst opened a bank account representing himself as the “president” of Pacific Exchange. Brittain was added as an authorized signatory that November.
In December 2006, Pacific Exchange entered into a master exchange agreement contract with Xcel designed to allow Xcel to postpone paying taxes on gains from the sale of certain assets if the sales were reinvested in similar property as permitted by the IRC.
Yobst participated in the MEA contract negotiations as an officer on behalf of Xcel while Brittain represented Pacific Exchange. From 2005 and through approximately May 2015, Yobst and Brittain worked together to divert, use and convert funds for their personal benefit without Xcel’s authorization. The diversion included withdrawals from the Pacific Exchange account to a Scottrade Account for $400,000, which were used by Yobst and Brittain for stock transactions and other investment activities; $363,966 in payments to American Express for Yobst’s personal expenditures; and Yobst wiring $42,250 to an car dealer to purchase a 2011 Honda Pilot.
Yobst and Brittain concealed Yobst’s involvement in Pacific Exchange and failed to provide Xcel with a detailed accounting of the exchange funds deposited or copies of PEG’s Vectra Bank account statements. Xcel filed a civil suit in September 2014 seeking an accounting of all exchange funds in the PEG bank account and the return of unspent funds. Brittain and Yobst provided false and misleading information in connection with the litigation.
Additionally, between March 2011 and October 2014, acting as Pacific Exchange’s accountant, Yobst transferred $10,500 monthly from the company’s bank account to one he controlled, calling the transfers “ACH Offsets” to an entity labelled “Havfund.” Also during this time, he used a Pacific Exchange American Express credit card for personal expenditures, including golf supplies, leisure travel, cigars and other items. In 2015, Yobst obtained accumulated disbursements totaling $1,324,644 and filed personal federal income tax returns that did not reflect the income or taxes due.
Brittain was sentenced last June to a year and a day in prison followed by three years of supervised release for wire fraud, aiding and abetting and conspiracy to defraud the U.S. Brittain was also ordered to pay more than $1 million in restitution.
Yobst, who pleaded guilty in September, was also ordered to pay $361,057.42 in restitution to the IRS and $806,216 to Xcel.
Miami: A federal court has issued an order holding Vilbrun Simon and Simon Accounting Tax in contempt for violating a permanent injunction that bars them from preparing or filing federal tax returns for others.
The United States filed a complaint on Nov. 28, 2017, alleging that Vilbrun Simon and Simon Accounting Tax along with co-defendants Saintanise Agenord and Wilcienne Pierre prepared returns that understated clients’ tax due and overstated refunds. The court issued a judgment and permanent injunction on March 26, 2019, that barred the defendants from preparing returns for clients.
Following a hearing on June 15, the court found that Vilbrun Simon and Simon Accounting Tax violated the injunction by failing to post signs outside their storefront informing their customers of the ban and by continuing to prepare returns for others.
For these violations, the court held Vilbrun Simon and Simon Accounting Tax LLC in civil contempt and found that compensatory sanctions were warranted, with the amount of the sanctions to be determined.
Middletown, Ohio: Businessman David Keith Fraley has pleaded guilty to income tax evasion.
Fraley attempted to evade his federal income taxes associated with his 2009 through 2012 returns by halting deposits of his income in his bank accounts once the IRS started levying his accounts.
Fraley did not file his 2009 income tax return timely and a substitute for returns was posted; later, the IRS issued an intent to levy him for that tax year. The SFRs were assessed for 2007, 2008 and 2009 for a total of $1,071,382 in tax due, excluding penalties and interest. Fraley asked for an extension to file the 2009 return.
To evade payment, Fraley transferred ownership of income to his business and brother. Initially, he told his contractor to issue no income in his name and Social Security number but to issue the income in his business name and employer identification number. Fraley later stopped making deposits into his business bank account and started making deposits into his brother’s bank account. He also asked the contractor to not issue any more income in his business name and EIN and to issue the income in his brother’s name and Social Security number.
The total tax loss for the 2009 though 2102 income tax years was $337,213.
Income tax evasion carries a maximum of five years in prison and a $250,000 fine.
Oklahoma City: Construction exec Mickey Alvin Young, of Chico, Texas, has been sentenced to five years of probation for evading personal federal income taxes for the 2013 tax year.
Young operated Mickey Young Construction, a sole proprietorship that built concrete pits for oil and gas drilling sites. The business had gross receipts of more than $9 million in 2012 and more than $6 million in 2013. Young was charged with under-reporting his income in both 2012 and 2013 by treating money that he used for personal purposes as deductible business expenses.
A trial in July resulted in a mistrial after a jury was unable to reach a unanimous verdict on either count. The court set the case for re-trial but on Jan. 30 Young pleaded guilty to the felony of tax evasion for the 2013 tax year. The government moved to dismiss the charge for 2012.
He will spend the first six months in home confinement and must pay $1,197,616.46 in restitution to the IRS. The judge explained that this sentence is partially based on the dangers that COVID-19 could pose to Young if he were incarcerated.