Debt deceit; up in Michigan; game of chicken; and other highlights of recent tax cases.
Vero Beach, Florida: Jocelyn Antonia Lynch, 40, who purported to be able to help clients settle outstanding tax debt owed to the Internal Revenue Service and who instead stole from clients, has been sentenced to 63 months in prison, to be followed by three years of supervised release, and been ordered to pay $867,593.11 in restitution to her victims.
Between 2013 and 2020 Lynch, after claiming she negotiated agreements with the IRS, instructed client taxpayers to deposit payments into her personal bank account and said that she would forward the money to the IRS. Bank records showed that numerous deposits from the clients were used to pay her personal expenses.
Lynch, who pleaded guilty in April, also lied to clients about having made payments, and provided multiple clients with fraudulent payment receipts. Sixteen victims were defrauded.
White Plains, New York: CPA John Savignano has pleaded guilty to conspiring with a small-business owner to defraud the IRS.
He conspired with co-defendant Rocco Manzione, who owned and operated several companies that sold concrete, to evade assessment of individual income taxes.
For the tax years 2012 through 2014, Manzione received income from his concrete companies but did not file individual returns with the IRS or pay the taxes due.
From 2014 to 2017, Manzione, of Queens, New York, withheld federal employment taxes from his employees’ wages but did not timely file his companies’ employment tax returns, nor did he pay the required taxes to the IRS. For the third quarter of 2016 alone, Manzione failed to pay more than $85,000 in payroll taxes that he withheld from wages of employees.
For tax years 2015 through 2017, Manzione also did not file federal income tax returns, though he earned almost $2 million in income. He also transferred funds from his companies to a bank account in the name of a nominee corporation. He used some of the money for personal expenses and did not report that income to the IRS. In total, Manzione caused a tax loss to the IRS of more than $1.5 million.
In 2015, Manzione sought to borrow in connection with the purchase of a condominium in Miami and required three years of filed returns. He contacted Savignano, who helped him prepare and file false individual tax returns with the IRS that substantially underreported Manzione’s income. This conspiracy caused a tax loss to the IRS of more than $400,000.
Manzione, who pleaded guilty in September, faces a maximum of five years in prison for each count of tax evasion and employment tax fraud.
Savignano will be sentenced on Jan. 27. He faces a maximum of five years in prison. Both men also face supervised release, restitution and monetary penalties.
Lansing, Michigan: Robert Nakfoor, owner of a home health care business, has been sentenced to a year and a day in prison for filing a false return.
Nakfoor, who previously pleaded guilty, claimed fraudulent expenses for his business, Jessi Kay Home Care, on his 2011 through 2015 returns. He deducted expenses for insurance, legal and professional services, wages and contract labor that he knew his business did not incur. On just his 2015 return, Nakfoor claimed more than $1 million in bogus contract labor and legal and professional services expenditures.
He caused a total federal tax loss of $481,465.
Nakfoor was also ordered to serve a year of supervised release and pay $481,465 in restitution to the IRS.
Holt, Michigan: A federal court has permanently enjoined a married couple from preparing returns for others and from owning, operating or franchising a prep business.
The complaint alleged that Rosa Linda Meyer, a.k.a. Rosa Linda Hernandez and doing business as Su Casa Income Tax Service, prepared federal income tax returns containing false and fraudulent claims. It further alleges that Rosa Linda Meyer’s spouse Stanley Meyer, doing business as I-Tax Services, prepared fraudulent returns in concert with Rosa Linda Meyer after she was investigated by the IRS. In addition, the complaint alleges that Rosa Linda Meyer prepared and filed returns using Stanley Meyer’s name.
According to the complaint, the claims made on returns included false or inflated dependency exemptions and related Child Tax Credits; false head of household filing status; and fictitious or inflated earned income to allow the taxpayer to falsely claim the Earned Income Tax Credit or claim an inflated EITC.
The Meyers and their businesses must send notice of the injunction to each person for whom they prepared federal returns or claims for refunds beginning in 2016.
West Branch, Michgian: Christopher Fratine, owner and operator of home health care businesses, has been sentenced to 30 months in prison for filing false returns and aiding and abetting the filing of false returns.
Fratine pleaded guilty in 2019 to five counts of making a false return and four counts of aiding and abetting the filing of false returns. He made and subscribed false and fraudulent individual income tax returns for calendar years 2012 through 2015, and a Form 1120 for calendar 2013. He also reviewed the returns prepared by his CPA based on information he provided to her and aided and assisted in the preparation and presentation of fraudulent 1120s for calendar 2012 through 2015.
IRS records showed that between 2012 and 2015, his two companies earned some $9.4 million in combined gross receipts from a combination of Medicare and private insurers. Fratine deposited all of the revenue from private insurers and a portion of the Medicare revenue into business bank accounts. He provided bank statements from these accounts to a CPA, who prepared the 1120s for the companies and individual returns for Fratine based on this information.
He deposited the rest of the Medicare revenue in accounts with other financial institutions but failed to disclose this and failed to provide statements to his CPA. Between 2012 and 2015, he also diverted more than $2,147,537 of business gross receipts into bank accounts hidden from his CPA.
Fratine wrote several business checks in 2012 through 2015, with a total of approximately $114,000, payable to Medicare and Humana, from the business bank accounts known to the CPA, claiming they were overpayments by the insurance companies and deductible from gross receipts as returns and allowances; he then deposited those checks into the concealed business accounts. The CPA received carbons of these business checks, causing her to incorrectly report the checks payable to Medicare and Humana as returns and deduct the checks from the gross receipts. Fratine transferred the funds from these undisclosed accounts into his personal accounts and used the money for gambling and other personal purposes.
He was also ordered to pay $844,945 in restitution to the IRS.
Wilkes-Barre, Pennsylvania: Restaurateur John T. Stuchkus has been sentenced to 18 months in prison for failing to pay federal income and payroll taxes.
Stuchkus owns and operates The Chicken Coop, which had several employees during tax years 2013 through 2017. Although Stuchkus deducted and collected FICA and other taxes from employees’ payroll checks, he failed to pay the collected taxes to the U.S.
He was also ordered to pay $397,406.91 in restitution.
Brighton, Massachusetts: Businessman Richard Karski has pleaded guilty to tax evasion, admitting that for tax years 2015 through 2018, he failed to report $1,917,658.96 in business and personal income and failed to pay $192,814 in federal taxes.
IRS investigators determined that from 2015 through 2018, Karski operated KCO Builders in Quincy, Massachusetts. During that time, he traveled to Rhode Island and used a check-cashing business to cash checks he’d received from his customers. He failed to declare any of the income or pay any taxes to the IRS.
Sentencing is January 18. He has agreed to pay full restitution to the IRS.
