The kite stuff; a con extinguished; wrong number; and other highlights of recent tax cases.
Fresno, California: Tax preparer and former IRS employee Deena Vang Lee, 41, has been sentenced to 54 months in prison and ordered to pay $191,597 in restitution following convictions for preparing and filing false returns for others, underreporting her taxable income on her personal returns and committing wire fraud and aggravated ID theft.
She was found guilty in January of 13 felony counts, including three counts of wire fraud, two of aggravated ID theft, five 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 put materially false information on clients’ federal returns without their knowledge or consent and submitted the returns. She obtained the IDs of multiple individuals and falsely listed them as childcare providers on clients’ returns.
On her personal returns for 2013, 2014 and 2015, Lee also underreported her own income related to the payments she received for tax prep services.
Mountain House, California: Dhirendra Prasad has been sentenced to three years in prison and ordered to pay $19,270,683 in restitution for conspiring to defraud Apple Inc. of millions of dollars and for related tax crimes.
Prasad was employed at Apple from December 2008 through December 2018, most of that time as a buyer in the company’s global service supply chain. His job was to facilitate the process through which Apple bought parts to perform repairs on older devices.
Prasad conspired with two vendors to defraud the company by taking kickbacks, stealing parts, inflating invoices and causing Apple to pay for items and services it never received, resulting in a loss to the company of more than $17 million. He also acknowledged that he evaded tax on the proceeds of his schemes.
He was also ordered to forfeit more than $5,491,713 in assets already seized by the government and to pay an additional forfeiture of $8,133,005. He must pay restitution of $17,398,104 to Apple and $1,872,579 to the IRS and serve three years of supervised release after he gets out of prison.
Avon-by-the-Sea, New Jersey: CPA James H. Benkoil has pleaded guilty to conspiring to defraud the U.S. by promoting fraudulent tax shelters.
He promoted fraudulent syndicated conservation easements. The scheme facilitated false claims of inflated charitable contribution deductions in connection with the “donation” of the conservation easement over land, allowing Benkoil’s high-income clients to buy deductions to illegally shelter their income.
Between 2009 and 2020, Benkoil and others promoted such fraudulent shelters by obtaining falsely inflated land appraisals to achieve the desired tax deductions. Benkoil admitted his conduct resulted in a tax loss to the IRS of nearly $2.5 million and has agreed to pay full restitution.
He also faces up to five years in prison, as well as a period of supervised release, restitution and monetary penalties.
Jackson, Mississippi: Former tax preparer John Wells Jr. has pleaded guilty to conspiring to defraud the United States by preparing false returns.
From 2015 through 2017, he worked at tax prep firm Sunbelt Tax Services and conspired with others there to claim fraudulently inflated refunds for clients using false education credits, itemized deductions and business profits or losses.
Sentencing is Sept. 20, when Wells will face up to five years in prison.
Stone Mountain, Georgia: Ilene Farley, CEO of a daycare business, has been sentenced to 37 months in prison and ordered to pay more than $1.3 million in restitution for conducting a check-kiting and tax scheme.
Farley, who previously pleaded guilty, was the president and CEO of Tender Years Learning Corporation, which operated several daycare centers in Georgia. The business had several bank accounts, including with Bank of America and Citizens Trust Bank.
When a customer presents a check for deposit into an account, it can take anywhere from 24 hours to seven days for the check to clear; this time is called the “float.” “Check kiting” is a form of fraud that involves taking advantage of the float to use non-existent funds in an account.
From April 2018 to July 2019, Farley executed a check-kiting scheme using the Tender Years accounts, sending more than $75 million to banks which were unfunded amounts and were the equivalent of obtaining money from banks without secured loans. All told, 19 checks bounced during the scheme in the amount of $2,202,162.41. Bank of America ended up with a loss of $514,240.89.
Between 2015 and 2019, she also failed to pay the IRS $844,091.77 of the Tender Years’ employees’ trust fund taxes withheld from paychecks.
Farley will also serve three years of supervised release and pay $514,240.89 restitution to Bank of America and $844,091.77 in restitution to the IRS.
Miami: A federal court has found Norman G. Williams Jr., a lieutenant firefighter with the City of Miami, in contempt for continuing to prepare returns in violation of injunctions.
In 2022, the court permanently enjoined Williams from preparing returns for others and ordered him to disgorge over $26,000. Despite the orders prohibiting Williams from preparing or assisting in the preparation of returns for others, the court found that Williams had continued his tax prep activities and tried to conceal them by preparing returns under his fiancée’s name and PTIN.
The court found that Williams prepared another 173 returns, including 36 for other firefighters. The court ordered him to disgorge to the U.S. more than $40,000 in fees that he had earned for returns prepared in violation of the injunctions.
Jacksonville, Florida: Telecom exec Patrick Brian Hines has been sentenced to a year and a day in prison for willful evasion of taxes.
From 2004 through 2011, Hines owned and operated a network of telecommunication entities that purchased the rights to specific 1-800 numbers and charged consumers’ telephone bills for directory assistance services. After several lawsuits against the entities and Hines, in April 2011 he dismantled most of his entities and they filed for bankruptcy.
The next year, a new telecommunication company was established in the name of Hines’ wife. Hines operated this company for his personal benefit from 2012 through 2018, during which the company generated more than $4 million in revenue.
Hines operated the company through nominees. During this time, the FCC issued a forfeiture order for the entities and ordered Hines to pay $1.6 million. In addition, in 2016, the California Public Utilities Commission filed a complaint against Hines and his companies that resulted in Hines being responsible for $9.8 million plus interest, which remains outstanding.
From 2012 through 2018, Hines used a system of nominee entities and individuals to conceal his assets and income. He paid personal expenses from the company’s business accounts and diverted company profits into accounts of other nominee entities and bank accounts that he controlled.
During these years he arranged for $2.5 million to be spent on personal expenses from these accounts, including $38,000 in personal training, dues for private clubs, $275,000 in mortgage payments for a multimillion-dollar residence, and tuition for his children’s private schooling.
As early as November 2011 the IRS had begun sending Hines collection notices of his unpaid taxes. Despite advice from his accountant to pay his taxes, Hines claimed to be “broke” and living off the proceeds from the sale of the house. In June 2016, Hines filed a 433-A in which he falsely claimed to have no income but was supported by his spouse who gave him $3,479 per month.
Hines, who pleaded guilty in November, has accrued penalties and interest resulting in an outstanding balance of $1,927,077.90. He was also ordered to pay that amount in restitution to the IRS.