Childcare shuffle; engineering a scam; one cent for tribute; and other highlights of recent tax cases.
Fresno, California: Former IRS employee Deena Vang Lee, 41, has been found guilty of three counts of wire fraud, two counts of aggravated ID theft, five counts of preparing and presenting false and fraudulent returns and three counts of making and subscribing a false and fraudulent return.
From 2012 through 2016, Lee prepared and filed returns for others that contained materially false and fraudulent statements; she also underreported taxable income on her personal returns. Lee would put false information on a client’s return without their knowledge or consent and submit the returns to the IRS. She obtained the IDs of multiple individuals and falsely listed these individuals as child care providers on multiple clients’ returns without their knowledge or consent.
Lee also underreported her own income (related to her tax preparation services) on her personal returns for tax years 2013, 2014 and 2015.
Sentencing is May 8. Lee faces a maximum of 20 years in prison for each of the wire fraud counts; three years for each of the preparing and presenting false returns counts; and three years for each of the counts of making and subscribing a false tax return. Each count also carries a $250,000 fine. She also faces a two-year consecutive minimum sentence for the aggravated ID-theft counts.
Miami: A federal court has permanently enjoined tax preparer Arnold Zio from preparing returns for others and from owning, managing or working at any tax prep business in the future.
The court entered judgment against Zio after he failed to respond to the government’s suit. The terms of the order require that Zio, individually and doing business as Platinum Citizens Financial LLC and FTP Tax Services, send notices of the injunction to each person for whom he prepared federal returns after Jan. 1, 2016, and post the injunction in places where he conducts business, including social media accounts and websites. The order also provides that the U.S. may monitor Zio’s compliance.
The civil complaint against Zio alleged that he prepared returns claiming fabricated business income and expenses, as well as claiming various false deductions, including charitable contributions. It also alleged that Zio, without authorization, diverted client refunds into his own bank account and failed to return COVID-19 stimulus funds improperly deposited into his account.
According to the civil complaint, Zio claimed more than $850,000 in falsified or inflated deductions on clients’ returns, claimed at least $545,000 in falsified or inflated business losses and diverted at least $188,000 from his clients’ refunds into his own accounts.
San Francisco: Engineer Rodrigo Santos has pleaded guilty to bank fraud, honest services fraud, evading taxes on more than $1.6 million of unreported income, and falsifying records in a federal investigation.
Santos, a licensed civil and structural engineer, was co-founder and a principal of Santos & Urrutia Structural Engineers Inc., which provided engineering services and managed the process of obtaining building permits from municipal authorities for his clients. Santos was appointed in 2000 as a member of the San Francisco Building Inspection Commission by then-Mayor Willie Brown and promoted in 2004 to be the commission’s president by Mayor Gavin Newsom. Mayor Ed Lee appointed Santos in 2012 to the San Francisco City College Board of Trustees.
Santos pleaded guilty to 10 counts of bank fraud involving fraud against his clients and business. He said that from 2012 to 2019 he collected numerous checks from his clients that they made payable to San Francisco’s municipal agencies, including the Department of Building Inspection and the Department of Public Works, to private companies and to individuals. Santos led clients to believe these checks would be used to pay the fees or costs of their building projects; instead he deposited the checks into his personal bank account. Santos admitted that from 2012 to 2019 he deposited some 445 client checks into his personal bank account and stole more than $775,000 of his clients’ money.
Santos admitted that from 2012 to 2018 he fraudulently deposited into his personal bank account some 378 checks written as “pay to the order” of S&U, his engineering firm. He admitted that he caused a loss to S&U of more than $718,000.
Santos further pleaded guilty to falsifying records in a federal investigation. In March 2020, two FBI agents served him with a grand jury subpoena requesting documents related to six client checks connected to the schemes. Santos altered S&U invoices to make it falsely appear that his clients had been credited for the checks, though Santos had fraudulently deposited them into his own bank account and had never credited his clients for those checks.
Santos admitted he engaged in a scheme to defraud the public of the honest services of his co-defendant Bernard Curran, a senior building inspector at DBI. Santos knew Curran supported a local nonprofit athletic organization. Santos, intending to influence Curran in the performance of his official duties, arranged for his clients to make charitable contributions to the organization. In total, from 2017 to 2020 Santos arranged for 13 of his clients to make a total of $9,600 in donations to the association.
Santos pleaded guilty to five counts of tax evasion, admitting that from 2012 to 2019 he deposited more than $1.6 million into his personal account and that he deliberately omitted this income on his returns for 2012 to 2019. The tax avoidance exceeded $564,000.
Sentencing is June 23. Each count of tax evasion carries a maximum of five years. Each count of bank fraud carries a maximum of 30 years in prison; the count of honest services wire fraud carries up to 20 years; the count of falsifying records in a federal investigation carries a maximum of 20 years. Santos agreed to pay more than $1 million in restitution to victims.
Los Angeles: Howard Dixon Slingerland, of Studio City, California, the former president and CEO of an anti-poverty nonprofit, has agreed to plead guilty to embezzling from the nonprofit for his personal benefit and intentionally misapplying more than $600,000 in grant money to pay for unauthorized expenses and to lying on his tax returns.
From 1996 until he was fired in September 2019, Slingerland was the president and CEO of Youth Policy Institute, a Hollywood-based nonprofit that worked to eradicate poverty in Los Angeles by addressing education, youth development, safety, job training, and health and wellness. Slingerland had check-signing authority over YPI’s accounts and was personal guarantor of YPI’s credit card.
From January 2015 to February 2019, he caused at least $71,533 of YPI funds to be spent on unauthorized expenditures, including Slingerland’s personal property tax bill of more than $14,000, more than $6,000 for a dinner at a New York City restaurant, nearly $11,000 for a family member’s tutoring and nearly $2,000 on a home computer and software.
In July 2019, Slingerland caused some $401,561 in funds YPI had received from a federal grant to be used for the unauthorized payment of YPI payroll. That same month, he also caused some $201,466 in federal grant money to be illegally used to pay off YPI’s credit card bill, including for expenses Slingerland had incurred.
On his individual federal income tax returns, he underreported more than $100,000 in income each year for 2015 through 2018 by not reporting money he obtained from YPI, including through the embezzlement. Slingerland admitted to owing the Treasury some $147,398 in unpaid taxes (not including penalties and interest) for these years.
He faces up to 10 years in prison on the conversion count and three years in prison on the tax count.
Bow Mar, Colorado: Businessman Frank Stevens has pleaded guilty to trying to evade the payment of more than $700,000 in federal employment taxes.
Stevens co-owned restaurants and an oil production business and withheld income taxes and Social Security and Medicare taxes from employees’ paychecks. From at least 2002 and continuing for years, Stevens did not pay over the withheld payroll taxes to the IRS or file the required payroll tax returns for his businesses.
To prevent the IRS from collecting through bank levies, Stevens kept the balances of his personal and business bank accounts low, often leaving them with only one cent. Stevens, or an employee acting at his direction, transferred just enough funds to cover expenses and then transferred any remaining money to a bank account not subject to IRS levy.
The tax loss totaled some $737,128.
Sentencing is June 13. Stevens will face a maximum of five years in prison, as well as a period of supervised release, restitution and monetary penalties.