Everything must go; have con, will travel; gold rush; and other highlights of recent tax cases.
Deltona, Florida: Business owner David Albert Fletcher has pleaded guilty to evading payment of more than $1.7 million he owed for tax years 2004 through 2014.
Fletcher owned and operated several furniture liquidation businesses and for 2004 through 2013 did not timely file his federal income tax returns or pay taxes. After an audit, the IRS assessed $1.7 million in taxes, interest and penalties.
To evade collection, Fletcher concealed his income and assets from the IRS, including by using nominees to hide his purchases of luxury vehicles. He also filed returns that understated his income, and when interviewed by an IRS special agent lied about how much he earned.
Fletcher faces up to five years in prison.
Chatham, New Jersey: John Goggins, former senior vice president and general counsel for a large public corporation, has been sentenced to eight months in prison for willfully failing to file federal income tax returns.
Goggins, who previously pleaded guilty to a four-count information charging him with willfully failing to file federal income tax returns for 2018 through 2021, earned total gross income in those years of $54 million from wages, restricted stock awards, the exercise of annual nonqualified stock options, interest, dividends and gains from stock sales.
Goggins was also sentenced to a year of supervised release and was ordered to pay $3.11 million in restitution to the IRS (which has already been paid) and was fined $40,000.
Indianapolis: A U.S. district court has permanently enjoined tax preparer Juan Santiago and his company from preparing federal returns for others and from owning or operating tax prep businesses in the future.
Santiago failed to respond to the civil complaint filed against him, so the court entered the permanent injunction by default.
Santiago resides in Lakeland, Florida, but travels to Indianapolis for tax season to operate Madison Solutions LLC. The complaint alleges that he and Madison Solutions used a variety of schemes to improperly reduce clients' tax liabilities or to obtain undeserved refunds, including by repeatedly placing false or incorrect items, deductions, exemptions or statuses on clients' returns without their knowledge.
For example, the complaint alleges that Santiago routinely elected head of household status and Child Tax Credits for clients when they were otherwise not qualified for such status or credits. The complaint also alleges that Santiago reported fictitious businesses on returns and fabricated business expenses and income to fraudulently reduce taxable income.
Wilmington, Delaware: Business owner Robert Higgins, of West Chester, Pennsylvania, has been convicted on charges of mail, wire and tax fraud.
He owned and operated First State Depository, a precious metals depository that held more than $100 million in customer assets, primarily in the form of gold and silver bars and coins. Higgins diverted customer assets to pay debts and finance his personal life, including two timeshares in Hawaii and luxury vacations. First State's records indicated that at least $58 million worth of customer assets had been misappropriated; industry sources generally agree that this is the largest theft from a precious metals depository in U.S. history.
Higgins faces up to 20 years on the wire and mail fraud charges and five years on each tax fraud charge.
Ft. Worth, Texas: John Anthony Castro, 40, owner of the virtual tax prep business Castro & Co. who falsely inflated dozens of client returns, has been sentenced to more than 15 years (188 months) in prison for tax fraud.
Castro — who had graduated law school but repeatedly failed the bar exam — held himself out as an "international tax expert" and "federal practitioner" and falsely claimed to be a graduate of West Point.
He successfully marketed to clients around the world, claiming to be an expert on certain tax issues related to Australian expats, among other things. Between 2017 and 2019, he filed more than 1,900 returns on behalf of individuals worldwide. Castro promised his clients a significantly higher refund than they would receive from other preparers, claiming he knew how to identify and claim deductions that others did not. He added that there was no risk, as he split the additional refund amount with clients for his fee.
He did not share the return with clients before filing but instead informed them of the amount of the anticipated refund. On many occasions, Castro filed returns on behalf of clients without their permission or knowledge.
In other instances, he claimed deductions that had no basis in fact. Castro claimed deductions based on extreme and unsupported legal theories, including saying that deductions for any expense related to preventing an illness qualified as an "impairment related work expense;" expenses related to commuting to and from work; and the full value of one's mortgage and utilities as long as the taxpayer had some Schedule C business to claim, among others.
When the victim-taxpayers learned what Castro had done, many demanded copies of their returns. Castro refused to engage in conversation and even delayed providing returns for months; he often acted in a highly vindictive manner when questioned or challenged by clients or others, berating individuals in emails, threatening legal actions or by filing amended returns, without clients' permission or knowledge, that removed all deductions. Many of the victims have since been audited or filed amended returns.
Castro was also ordered to pay $277,243 in restitution.
Thornton, Colorado: Tax preparer Lance McCuistion, 56, has been sentenced to 52 months in prison after pleading guilty to preparing false returns for clients.
In July 2014, McCuistion pleaded guilty to preparing false returns in a prior investigation and was sentenced to probation. As a result of that offense, McCuistion was unable to obtain a PTIN. From around April 2018 through April 2022, McCuistion used PTINs in the names of three associates to prepare returns for clients.
These returns claimed items for which McCuistion knew the taxpayers were not eligible, with the aim of increasing refunds or reducing taxes.
Independence, Missouri: Business owner Richard Dean Schiele Jr., 51, has pleaded guilty to filing a false claim as part of a scheme to fraudulently receive nearly $1.4 million in federal COVID-19 relief money.
Schiele admitted he filed nine employer's quarterly returns with the IRS on April 22, 2023, for a company he formed the same month called Schiele Family Own Distribution. The returns made a total of $1,392,716 in claims for pandemic-era credits against the company's ostensible employment taxes. Schiele later admitted that the company had no employees in 2020 through 2022.
The IRS issued checks totaling $478,890 to Schiele; the Treasury recovered $348,764.91 from Schiele's bank account.
He must pay $130,125 in restitution to the IRS.
