Got Reals; a wonderful world; buddy, can you spare 28 million?; and other highlights of recent tax cases.
Corpus Christi, Texas: Tax preparer Jeannette Villarreal has been sentenced to 18 months in prison and three years of supervised release and fined $15,000 following her conviction for conspiring to commit tax fraud.
Villarreal, who previously
The conspiracy included thousands of fraudulent returns prepared over six years, resulting in a significant tax loss to the United States. Villarreal was the leader of an extensive criminal activity and recruited her two daughters into the enterprise. On numerous occasions, they reported inaccurate earnings, fictitious charitable contributions and improper tax credits to inflate refunds.
Villarreal's daughters, Leannette Villarreal and Zeannette Salazar, were also convicted. The three each admitted to one count of conspiracy to defraud the U.S. by willfully aiding and assisting in the preparation of false income tax returns.
West Hartford, Connecticut: Restaurateur William Chen has been sentenced to 18 months in prison, to be followed by a year of supervised release, for operating a tax fraud spanning two states.
Chen partly owned several restaurants and was responsible for purchasing and using the point-of-sale system for restaurant orders and for training staff on the use of the system. He paid an additional fee to activate "zapper" software, a commercial computer program designed to deliberately delete transactions from the POS system to create fraudulent sales records.
From about 2013 to 2020, Chen and others deleted cash transactions to reduce the gross receipts and the amount of sales tax collected and reported by the POS. Chen intentionally suppressed the restaurants' taxable income that he disclosed to his accountant.
Chen was also responsible for the accounting and financial records at the restaurants, for collection and withholding of employment taxes for the restaurants and for signing their tax returns. For the 2013 through 2020 tax years, he failed to withhold, account for and pay federal income taxes, FICA taxes and federal unemployment taxes for multiple employees that he paid, or that he knew were paid, in cash.
The tax loss is $2,092,926.94. Chen, who previously pleaded guilty, has paid $600,000 in restitution. He was also ordered to pay a $20,000 fine.
Enumclaw, Washington: The wife of the former commissioner of a local county drainage district has been sentenced to three years in prison and three years of supervised release for multiple federal felonies connected to a scheme to steal tax dollars intended for flood control.
Joann Thomas was convicted of 15 federal felonies in May 2022: conspiracy; four counts each of wire fraud and mail fraud, two counts of aggravated ID theft and four counts of money laundering.
Allan B. Thomas served as commissioner for drainage districts in King County for more than 35 years. He was involved in estimating the costs of drainage maintenance for the district so the county auditor could set and assess appropriate taxes. The commissioners then authorized payment to service providers who were supposed to do maintenance work on the drainage system.
As early as 2012, Joann Thomas set up a joint bank account with Allan Thomas' son from a previous marriage, a business account for a company called A C Services. Over the next six years, Allan Thomas had $413,323 of local tax dollars paid to A C, claiming it was for drainage ditch maintenance. Thomas' son testified that other than two small jobs in 2012, he performed no other drainage ditch work. A current drainage district commissioner testified that he saw no work done on the ditches during that period and that when he took on the commissioner job, it was clear the ditch network had had little maintenance for many years.
Financial records showed that over 2012 to 2017, shortly after the tax dollars were deposited into A C's account, the money was transferred to other accounts belonging to the Thomases or was used to pay their expenses for such things as hay, mortgage payments or property taxes. More than $68,000 was withdrawn as cash.
Allan and Joann Thomas were both involved in submitting false documents by mail and wire, and the funds that were fraudulently obtained were then moved through various bank accounts (money laundering). Joann Thomas forged the signatures of Allan Thomas' son and a second drainage commissioner on various records and checks. Allan Thomas was convicted of participating in the forgeries, each count of which carries a two-year sentence that must run consecutive to any sentence imposed on the other counts of conviction.
In 2018, after the couple became aware of an investigation, they began funneling the tax dollars through another company: City Biz. The couple submitted warrants for City Biz to be paid for drainage maintenance work and within days of the funds arriving in City Biz accounts, nearly all of it was transferred to Allan Thomas or the Thomases' dairy farm. Their friend who agreed to help with the City Biz fraud now also has a federal felony conviction for repeatedly lying to the FBI.
In all, the couple defrauded taxpayers of $468,165. Restitution will be set in March. Sentencing for Allan Thomas will be Feb. 3.
Omaha, Nebraska: Business exec Bryan A. Erdman has been sentenced to a year and a day for failing to pay over payroll taxes.
IRS investigators found that BSJ CO, d.b.a. It's a Wonderful World Childcare, had Erdman as president and owner and he was responsible for collecting, accounting for and paying over federal payroll taxes. Throughout 2015 to 2017, BSJ CO withheld tax payments from employees' paychecks but failed to account for and pay over some $295,463.91 of the employee share; Erdman also failed to pay over some $167,181.02 of the employer share of payroll taxes.
He used at least some of the funds within the BSJ CO's bank account to pay personal expenses.
After his release from prison, Erdman will begin three years of supervised release. He was also ordered to pay $462,644.93 in restitution.
Miami: Four Florida residents, including a tax preparer, have been sentenced for a conspiracy to defraud the Paycheck Protection Program.
Tax preparer Wally Dorlus, 41, of Margate, Florida, was sentenced to four years in prison.
Marcgenson Marc, 37, of Coconut Creek, Florida, was sentenced to 15 months. Previously, Edward Moise, 45, of Coral Springs, Florida, was sentenced to 18 months in prison and Roberto Geronimo, 40, of Miami Gardens, Florida, was sentenced to 70 months, to run concurrently with his sentence for drug conspiracy.
Dorlus, in exchange for kickbacks, filed some 170 PPP loan applications that misrepresented the number of employees, payroll expenses and gross revenues to qualify for the loans seeking more than $28 million on behalf of companies he controlled and more than 100 others. Of those loans, some 33 were funded to the tune of $5.5 million. His kickbacks were up to 25% of the proceeds.
Marc was a recruiter for Dorlus who shared in and facilitated the payments of kickbacks to Dorlus. Marc in turn recruited Moise to apply for fraudulent loans run through Dorlus and to recruit additional applicants.
One of Moise's recruits was Geronimo, who at that time was on bond pending trial on federal drug conspiracy charges. Being subject to federal indictment, Geronimo was prohibited from applying for a PPP loan on behalf of any entities he controlled. He still applied for and received a fraudulent loan for some $250,000 for a liquor store business based on falsified payroll tax documentation submitted by Dorlus. Geronimo paid 25% of the loan proceeds as a kickback shared between Dorlus and Marc. Geronimo's loan on the liquor store tipped law enforcement off and led to the broader investigation into the fraud.
Dorlus will also serve two years of supervised release and must pay $5.6 million in restitution. Marc will serve two years of supervised release and must pay $886,809 in restitution; Moise will have three years of supervised release and pay some $860,000 in restitution; Geronimo will have five years of supervised release and pay some $262,000 in restitution, as well as forfeit more than $86,000 from the sale of his liquor store.
