Tanked; lobby hobby; you’re not undercover, are you?; and other highlights of recent tax cases.
Evansville, Indiana: Former CPA Mark A. Harmon has been sentenced to two years in prison on multiple counts of tax evasion.
Harmon owned and operated Mark Harmon and Co., CPAs and Consultants, and was an accountant for more than 25 years and a CPA until his license expired in June 2015. His largest accounting client from 2012 through 2015 was a group of three related companies in the Pittsburgh Tank and Tower Group: Pittsburgh Tank and Tower Co., Pittsburgh Tank and Tower Maintenance and Allstate Tower Inc. Harmon had been working with those companies for more than 25 years, performing accounting and financial auditing.
During an IRS examination, Harmon said he made some $75,000 per year in accounting fees from the group and that he sent it an invoice for services rendered, which the group always promptly paid. He also said the group did not issue him a 1099 for the tax years at issue because it treated payments to Harmon as expense deductions for professional services.
Further examination of Harmon's accounting books showed some $435,000 in purported loans to Harmon from the group. He said the company would confirm the loans, and he produced invoices, some of which reflected a “Loan request.” Agents also requested documents from the Pittsburgh Group, whose CFO informed the agents that in the process of gathering the hard-copy invoices from files, he observed that several invoices labeled “Loan request” appeared to have been altered.
Company officials said that the group never lent Harmon money. Harmon had access to the company’s files and they suspected that he physically removed the original invoices from their files and altered the invoice description. The company also located the original invoices in another format which did not include this description. After the discrepancy was discovered, Harmon admitted that he replaced the invoices. The $435,000 that was falsely classified as loans to Harmon was professional services income.
His unpaid federal taxes for 2012 through 2015 totaled more than $208,000.
Harmon must also pay $208,160 in restitution and serve a year of supervised release following his imprisonment.
Arcadia, California: Venture capitalist and political fundraiser Imaad Shah Zuberi, 50, has been sentenced to 12 years in prison for falsifying records to conceal his work as a foreign agent while lobbying high-level U.S. government officials, evading the payment of millions in taxes, making illegal campaign contributions and obstructing a federal investigation into the source of donations to a presidential inauguration committee.
Zuberi operated Avenue Ventures LLC, a San Francisco-based venture capital firm, and solicited foreign nationals and representatives of foreign governments with claims he could use his contacts in Washington to change U.S. foreign policy and create business opportunities for his clients and himself. Clients gave Zuberi money for consulting fees, to make investments or to fund campaign contributions. While Zuberi had a limited degree of success with some U.S. officials, most of his business efforts failed and his clients suffered significant financial losses.
He failed to report on his 2014 return millions of dollars in income he received from a foreign government. While his 2014 federal income tax return claimed income of $558,233, for example, Zuberi failed to report more than $5.65 million he received in relation to one lobbying effort. His tax evasion from 2012 through 2015 caused tax losses ranging from $3.5 million to as much as $9.5 million; he also violated the Federal Election Campaign Act in 2015.
Zuberi, who previously pleaded guilty, was also ordered to pay $15,705,080 in restitution and a criminal fine of $1.75 million.
Missoula, Montana: CPA Daniel Brian Burke, 64, who was convicted of filing false tax returns for a couple’s businesses, has been sentenced to two years in prison to be followed by one year of supervised release and fined $10,000.
Burke signed false tax returns along with co-defendants and clients Traci and Joseph Baumgardner, owners of AJB Inc. and JZ Contracting Inc., for 2011 to 2013. In total, the Baumgardners reported gross receipts of $5,001,374 and paid federal taxes totaling $10,066 for the time.
Through AJB and JZ Contracting Inc., the Baumgardners operated two businesses, Splash Car Wash and Pro Sweeps Plus, an industrial maintenance service. Burke owned and operated Burke and Co. PC, and prepared corporate and individual tax returns for the Baumgardners.
An undercover IRS investigation showed that Burke instructed the Baumgardners not to deposit cash in the bank or report it as income as required, to deduct personal expenses as business expenses and to improperly depreciate assets. An undercover agent met with Burke, and in a recorded interview Burke agreed to file false returns for the agent. At one point, Burke asked the agent, “You’re not an undercover agent from the IRS or anything?”
The Baumgardners also each pleaded guilty to a conspiracy count and were sentenced to three years of probation and ordered to pay $89,918 in restitution.
Greenbelt, Maryland: Preparer Anita Fortune, age 56, of Alexandria, Virginia, has pleaded guilty to conspiracy to defraud the United States and to assisting in the preparation and filing of false returns.
Fortune was convicted of wire fraud in 2007, resulting in her federal e-filing privileges being revoked. Following her release from prison, a conspirator agreed to allow Fortune to use their e-filing identifiers in exchange for a fee of $29 per tax return. Beginning in 2012, Fortune and this conspirator agreed to operate a business that would allow Fortune to misrepresent her identity on clients’ federal returns.
In August 2015, the IRS expelled the conspirator from its electronic tax return filing program due to a criminal investigation into fraudulent returns filed with the conspirator’s identifiers. A second conspirator who was also participating in the e-filing program agreed to allow Fortune to use their identifiers in exchange for use of office space in Maryland.
Fortune and the two conspirators then continued to file false returns and falsely claim refunds. They used improper deductions on Schedules A and phony business expenses to lower taxes and inflate refunds and continued to file fake returns even after investigation forced them to use, and eventually mislead, a third-party electronic return originator. The federal tax loss for the tax years 2012 through 2018 totaled $189,748.
Fortune faces a maximum of five years in prison for the conspiracy and three years in prison for aiding and assisting in the preparation and filing of false tax returns. She will also be required to pay restitution in the full amount of the loss. Sentencing is June 4.
Tenafly, New Jersey: Emmanuel A. Barrientos-Fermin has pleaded guilty to filing 18 fraudulent returns to obtain undeserved refunds.
Early last year, Barrientos-Fermin conspired to use stolen personal ID information to submit fraudulent returns. His conspirator obtained Social Security cards, driver’s licenses, birth certificates and W-2s bearing the victims’ stolen IDs. The conspirator provided the documents to Barrientos-Fermin and others who used the information to file returns at various branches of a tax prep company, posing as the victims. Barrientos-Fermin made about $200 per return.
Barrientos-Fermin pleaded guilty to one count each of conspiracy to commit wire fraud, access device fraud and aggravated ID theft. The count of conspiracy to commit wire fraud carries a maximum sentence of 20 years in prison, and the count of access device fraud carries a maximum of 10 years. The count of aggravated ID theft carries a minimum term of two years in prison, which must run consecutively to any other term of imprisonment imposed. All three counts are also punishable by a fine of $250,000, or twice the gain or loss caused by the offense, whichever is greater.
Richland, Washington: Preparer Jonathon F. Schumann has been sentenced to six months in prison, to run concurrent to a one-year term of court supervision, and been ordered to pay $195,202 in restitution to the IRS over three counts of aiding and assisting in the preparation and filing of false income tax returns.
Schumann, who pleaded guilty in November, operated a tax prep business under the name J’s Income Tax out of his residence. He prepared false returns for clients in Washington and Las Vegas, claiming fraudulent and inflated itemized deductions, including charitable contributions, personal property taxes and unreimbursed employee business expenses.
The fraudulent claims resulted in a loss of $195,202 to the IRS.
