No relief in sight; just plane crooked; no fool like a gold fool; and other highlights of recent tax cases.
Washington, D.C.: Jerri Evans, owner of a juice bar chain, has pleaded guilty to failure to pay sales tax.
Evans, owner of Turning Natural, a juice bar chain with three locations in the District of Columbia and several in Maryland, collected sales tax from customers but failed to remit those funds over to the district (where restaurant meals are taxed at 10%).
Investigation revealed that Evans had avoided paying monthly sales taxes for three juice bar locations during tax years 2017 to 2020, charging customers a lower rate of 5.75% but failing to pay any of the funds to the district.
After an audit in 2018, Evans was notified of the incorrect sales tax rate and provided with a final past-due tax assessment in 2019. Evans failed to pay the past due amount and did not pay sales tax in 2019 or through April 2020.
Evans entered a payment plan to pay $452,522.07 — the full amount owed — over the next five years and will serve a suspended sentence with a period of supervised probation to complete community service and pay restitution.
Bloomingdale, Illinois: Businessman Joseph J. Cipolla Jr. has been sentenced to nine years in prison for evading nearly half a million dollars in taxes and engaging in a variety of frauds.
Cipolla failed to file individual income tax returns from 2015 to 2020, causing losses of $415,043 to the IRS and $75,045 to the State of Illinois. He concealed his receipt of income by engaging in tax evasion, including listing a relative's Social Security number on casino tax forms, using family members as nominee owners of vehicles and using a nominee to rent airplane hangars at a local airport.
Among other offenses, in 2020 Cipolla fraudulently procured four loans under the Paycheck Protection Program and the EIDL program, obtaining more than $1.18 million by manufacturing and submitting false tax documents.
Cipolla, who pleaded guilty last year, was also ordered to pay $2,096,285 in restitution to the IRS, Illinois, the U.S. Small Business Administration and other entities and individuals.
San Francisco: Six defendants from California, including a former IRS revenue officer and his brother, have been sentenced to prison terms of 12 to 30 months following their convictions on charges that they fraudulently obtained millions of dollars in COVID-19 pandemic relief money.
Frank Mosley, of Oakland; his brother Reginald Mosley, of Sacramento; Marcus Wilborn, of Elk Grove; Aaron Boren, of Roseville; and Scott Conway, of Rocklin, pleaded guilty to one count of conspiracy to commit bank fraud.
The Mosley brothers, both of whom were sentenced to 30 months in prison, also pleaded guilty to one count of aiding and advising in the filing of false returns. Wilborn was sentenced to 18 months in prison and Boren and Conway were each sentenced to a year and a day. The sixth defendant — Kenya Ellis, of Los Angeles — pleaded guilty to one count of bank fraud and was sentenced to a year in prison.
Frank Mosley was a tax enforcement officer for the City of Oakland and a former IRS revenue officer. He conspired with others between July 2020 and September 2021 to submit fraudulent PPP loan applications.
The Mosley brothers, Wilborn, Boren and Conway each admitted their involvement to obtain millions of dollars in PPP loans by submitting fraudulent documents for companies that the defendants falsely certified had dozens of employees and hundreds of thousands of dollars in monthly payroll. These shell companies had no legitimate employees and no payroll expenses.
The defendants also admitted they used the loans for personal expenses and investments, to pay their credit card bills and to transfer money to family members.
Frank and Reginald Mosley submitted a fraudulent loan application for Forward Thinking Investors Inc., which they controlled, in August 2020. They received more than $1 million in PPP funds, and Reginald Mosley then recruited acquaintances (including Wilborn, Boren and Conway) who owned companies that existed before February 2020 to submit additional fraudulent loan applications.
Frank and Reginald Mosley helped prepare fraudulent loan applications for Wilborn, Boren, and Conway, who kicked back some of the PPP funds to the Mosley brothers. Frank and Reginald Mosley also admitted filing fraudulent federal payroll returns to cover up the scheme.
Ellis aided and advised the Mosley brothers and others in connection with their fraudulent applications. She also admitted that in 2020 and 2021 she fraudulently obtained almost $300,000 in PPP loans and other pandemic-relief aid in connection with an entity she falsely claimed to own and about which she made other false statements, including regarding its number of employees and monthly payroll expenses.
Each defendant was also ordered to serve three years of supervised release to begin after their prison terms and to pay restitution to be set later.
Hartford, Connecticut: A federal court has issued a permanent injunction against Connecticut tax preparer Juan Carols Frias and his businesses USA Tax LLC, Multi Latin Services LLC and Connecticut Tax and Services Inc., permanently barring them from preparing federal returns for others.
From 2017 through 2021, Frias and his companies prepared more than 10,000 returns for clients. The complaint alleges that during those years Frias and his companies displayed a pattern of filing returns that understated clients' liabilities and inflated refunds by falsifying business expenses; reporting false filing statuses and qualifying children or dependents; claiming false education and residential energy credits; and fabricating erroneous itemized deductions, including medical and dental expenses, charitable deductions and impairment-related work expenses. The U.S. also alleges that Frias acted as a ghost preparer.
Frias and his businesses consented to entry of the injunction, which permits the U.S. to conduct post-judgment discovery to monitor compliance. The order requires that they send notice of the injunction to each person for whom Frias and his companies prepared federal returns, amended returns or claims for refund between Jan. 1, 2018, and the present, and that they post a paper copy of the injunction at all physical locations where they conducted business and an electronic copy of the injunction on any business website, social media site or social media profile they maintain and create over the next five years.
Plano, Texas: Business owner Kenneth Edward Jackson, formerly of Decatur, Texas, and now living in California, has been sentenced to three years in prison for tax fraud.
Jackson was the president and owner of Employer Tools and Solutions, a payroll service provider. The company filed 940s and 941s for clients and made payroll and payroll tax payments using funds provided by clients; the company also held and remitted federal employment tax.
From 2017 to 2019, Jackson embezzled hundreds of thousands of dollars from his small-business clients, taking funds provided by various clients for employment taxes and failing to pay the money over to the IRS. He used the money to pay bills and to fund his lifestyle, including a European vacation. He also failed to report the client funds he embezzled as income on his federal income tax return.
Jackson was also ordered to pay $484,187.57 in restitution to the IRS and to several of his small-business clients.
Boston: Claudio Poles, 78, of Dorchester, Massachusetts, co-owner of a plumbing and heating supply company, has pleaded guilty to filing false returns in connection with a scheme to use millions of dollars of unreported business receipts to buy gold bars.
Poles failed to accurately disclose the company's gross business receipts to its tax preparer, then used some of the unreported gross receipts to purchase more than $10 million of gold and silver bars. To conceal his purchases from the company's bank accounts, he described the purchases as being for boilers, materials and plumbing and heating supplies.
Between 2019 and 2022, Poles falsely and fraudulently reported losses on his individual returns and omitted personal income that he received from the business by purchasing the gold and silver bars.
The charge of filing false returns provides for up to three years in prison, up to a year of supervised release and a fine of $250,000. Poles pleaded guilty to four counts of filing false returns and will be sentenced on Aug. 9.
