Terrible trio; bogus preparers; storm in a port; and other highlights of recent tax cases.
Seattle: Charles St. George Kirkland of Paradise Valley, Arizona, has been sentenced to nine years in prison and a $1 million fine for an eight-year tax fraud that resulted in more than $50 million in illegal refunds.
Kirkland, who pleaded guilty in January, falsely claimed in tax filings that he had lost more than $135 million by investing in solar equipment. Kirkland then "sold" those made-up losses to taxpayers through a network of tax preparers, telling the preparers that their clients could use Kirkland's losses to claim refunds on their own returns. Taxpayers would file amended returns claiming that, because of the losses transferred from Kirkland, they were entitled to a refund of all the tax payments they had made in a prior tax year. After receiving the fraudulent refunds, taxpayers paid 90% of the proceeds to Kirkland.
Taxpayers participating in Kirkland's program filed nearly 3,200 fraudulent returns. In all, the scheme resulted in a loss to the U.S. Treasury of more than $50 million; Kirkland collected $45 million.
He used a web of limited liability entities he controlled to claim both net operating losses and investment tax credits based on fake investments in solar equipment. From 2012 to 2018, Kirkland's companies claimed to have lost more than $135 million on investments in solar equipment. The companies spent less than $6 million on solar equipment over that period.
Some of the taxpayers who participated in the program were Washington residents. One couple claimed to be partners in Kirkland's Solar Farm entity and amended their 2015 return to claim a net operating loss of $347,893; the couple got a refund of $17,759. In 2018, a Seattle couple claimed a 2017 tax loss from Solar Farm of $22,870 so that they could claim a refund of $28,180. In 2019, another Washington resident claimed a 2018 solar energy credit of $10,341 so she could claim a refund of $10,704.
Kirkland owes $51,615,484 in restitution in addition to the $1 million fine.
Two days after agreeing to plead guilty, Kirkland and his wife began divorce proceedings and agreed that the wife would take ownership of approximately 100 parcels of real estate, five Tesla automobiles and the couple's 10,000-square-foot home in Arizona. The government will continue to pursue the assets to satisfy the restitution obligation. The federal judge also rejected the defense request for a sentence of home confinement.
Houston: Tamara Turner (a.k.a. Tamara Owens), Brittany Richardson and Terra White have pleaded guilty and received sentences following their convictions of conspiracy to aid and assist in the preparation of false returns.
Turner was sentenced to 41 months in prison to be followed by three years' supervised release. Richardson and White must serve two years on probation. All three were also ordered to pay $308,537 in restitution.
From 2014 to 2018, Turner owned and operated AJW Taxes and More Tax Preparation Service in Houston. White and Richardson were employed as tax preparers at various times during tax season. Turner admitted to submitting fraudulent Schedules C and W-2s, inflating her clients' personal and business losses to generate larger tax refunds. Turner also routinely submitted altered or fake W-2s certifying employment for her clients and qualifying them for the Earned Income Tax Credit. She also charged excessive preparer fees.
White and Richardson claimed Turner trained them to submit fraudulent forms to create larger tax refunds for clients and admitted to using a unique IRS filing number assigned to others.
Matthews, North Carolina: Darren Lee Joy has been sentenced to three years in prison, to be followed by two years of supervised release, for tax evasion.
From 1987 through 1990, 1993, 1996 through 2008 and 2010 through 2021, Joy filed no individual income tax returns despite earning more income than the minimum filing requirement. He submitted W-4s and state tax forms that falsely claimed he was exempt from federal and state income tax withholding.
Joy, who pleaded guilty last year, earned more than $1.8 million in income and owed the IRS and California more than $380,000 in taxes.
His original sentencing date was April 26, but he failed to appear; a bench warrant was issued for his arrest. The judge also found that Joy obstructed justice by filing numerous frivolous documents with the court and the IRS.
The court also ordered Joy to pay $359,859 in restitution to the IRS and $23,058 in restitution to the state of California.
Ottumwa, Iowa: A pair of false tax preparers have been convicted of conspiring to defraud the IRS by filing hundreds of fraudulent returns and of defrauding applicants out of unemployment insurance benefits, and the Iowa Workforce Development agency out of benefits payments.
Thein Maung has pleaded guilty to 49 fraud and tax charges; Phyo Mi has been convicted of 16 fraud charges.
Maung and Mi ran a fraudulent tax prep business out of their family's home, working for cash fees. They catered primarily to immigrants and refugees who worked at meat-packing facilities in Iowa and who had little or no ability to read, write or speak English.
Without customers' knowledge or approval, Maung and Mi included on customers' federal returns, schedules and forms such fraudulent items as false claims for residential energy credits, business-expense deductions or moving-expense deductions for members of the U.S. military. This increased the refunds and increased the pair's customer base.
From 2018 to 2022, Maung and Mi caused more than 1,600 returns to be filed from their residence, claiming more than $3.5 million in residential energy credits.
From 2018 to 2022, Maung and Mi received some $200,000 in cash fees from customers; the two sometimes directed portions of the fraudulent refunds to financial institution accounts that they had access to.
They also offered to help customers apply for unemployment benefits from Iowa Workforce Development. Again without customers' knowledge or approval, Maung and Mi submitted materials directing that the benefits payments be sent to financial institution accounts they had access to. From October 2020 through March 2021, they directed nearly $100,000 in fraudulent unemployment payments to their accounts.
Sentencings are Sept. 27.
Aloha, Oregon: Construction company operator Melesio Gomez-Rivera has been sentenced to 30 months in prison for his role in a multiyear scheme to evade payment of payroll and income taxes on the wages of workers.
Gomez-Rivera owned and operated the residential construction company Novatos Construction. From January 2014 until December 2017, he and several other construction company owners conspired with a local check-cashing business to defraud the U.S. by facilitating under-the-table cash wages to construction workers.
Gomez-Rivera and the other owners cashed or had other individuals cash millions of dollars in payroll checks at various locations of the check-cashing business, used the cash to pay construction workers under the table, and filed false business and payroll returns. In total, the group cashed some $192 million in payroll checks, causing a combined employment and individual income tax loss of $68 million.
He was also sentenced to three years of supervised release and ordered to pay $29.9 million in restitution to the IRS.
Springfield, New Jersey: Port mechanic Jonathan D. Michael has been convicted of tax evasion and failing to file personal income tax returns.
Michael worked as a mechanic in the crane shop at the Port Newark Container Terminal and for 2014 through 2018 provided his employer with a W-4 that falsely claimed he was exempt from any federal income tax withholding. During the same period, he filed no personal income tax returns even though he earned some $1.5 million in wages, resulting in a tax loss to the IRS of over $375,000.
Sentencing is Oct. 23. Michael faces a maximum of five years in prison for tax evasion and a year in prison for each count of willful failure to file a return. He also faces a period of supervised release, restitution and monetary penalties.
