No temporary solution; cooking some books; French connection; and other highlights of recent tax cases.
Jersey City, New Jersey: Attorney James R. Lisa has admitted to defrauding his clients of more than $2 million and to tax crimes.
Lisa pleaded guilty to charges of one count each of wire fraud, aggravated identity theft, obstructing the IRS, failing to file an individual income tax return and wire fraud while on pretrial release.
Lisa used his law license to execute a multimillion-dollar fraud against clients. After being charged for that fraud, he committed another when, posing as his own lawyer, he sent a bogus letter to a lender that described the status of his criminal case.
In 2014, Lisa was retained by a family to help repatriate millions of dollars that had been transferred by other family members to offshore bank accounts decades earlier. Lisa was also retained to help resolve the tax issues related to the repatriation of the funds.
In 2015, he successfully repatriated more than $6 million of the family’s funds but told the family that the funds remained offshore. In 2017, Lisa provided $4 million of the repatriated funds to the family but continued to falsely represent that the remaining $2 million remained beyond his control.
He also lied to the family that he’d resolved the tax implications of repatriating the funds. In 2016, Lisa sent the family a fraudulent IRS “closing agreement” reflecting an agreement for the family to pay $3 million in taxes and penalties for the repatriated funds. In 2018, Lisa sent the family another fraudulent closing agreement reflecting an agreement with the IRS for the family to pay $2 million in taxes and penalties because only $4 million was purportedly repatriated. The IRS had never entered into these agreements and the IRS employees who purportedly signed the documents had never done so.
When one member of the family was audited, the IRS issued Lisa a summons for records related to the family’s assets. In response, Lisa produced false documents suggesting that the IRS had agreed to closing agreements with the family.
In January, Lisa was arrested after being charged with this fraud and placed on pretrial release, one condition of which was that he commit no other crime. In April, Lisa committed wire fraud when he applied for a $22,000 loan, causing the creation and submission to the lender of a fraudulent document that purported to be a letter from the attorney then representing him in his criminal prosecution. Lisa caused the letter to be sent to defraud the lender about the status of the criminal prosecution so that the lender would approve the loan.
Lisa also admitted that he failed to file individual income tax returns for tax years 2015 through 2022, and, as a result, caused a tax loss to the IRS of at least $550,000.
Sentencing is Jan. 25. The count of obstructing the IRS carries a maximum of three years in prison and a fine of up to $250,000; the count of failure to file a tax return carries up to a year in prison and a fine of up to $100,000.
The count of wire fraud carries a maximum of 20 years in prison. The count of aggravated ID theft carries a mandatory two years, which must run consecutively to any other term of imprisonment. The count of wire fraud while on pretrial release carries a maximum of 10 years, which must run consecutively to any other term. All three of these charges also carry a fine of $250,000 or twice the gross loss to the victim or gain to the defendant, whichever is greater.
Dorchester, Massachusetts: Business owner Dam Ngoc Luong has been sentenced to a year and a day in prison and three years of supervised release for tax and fraud offenses in connection with her operation of a temporary employment agency.
From at least 2015 through 2019, Luong owned and operated Four Seasons Temp, an agency providing temporary workers for client businesses. When collecting payments from business clients of her agency, she cashed most checks rather than deposit the funds into her business account. On annual corporate tax returns, Luong reported to the IRS only the amounts deposited to the business account and failed to pay federal taxes on more than $14 million of the company’s income.
Because Luong created Four Seasons as an S corporation, the net business income and expenses flowed through to her 1040. As a result, Luong failed to report more than $3 million in pass-through income and to pay $885,000 in personal income taxes.
She also paid more than $12 million of employee wages in cash, failing to withhold taxes from the wages and failing to pay more than $3 million in federal employment taxes.
Finally, Luong defrauded the insurance carrier she engaged to provide workers’ compensation insurance coverage for employees. By concealing the wages she paid, Luong paid lower workers’ compensation insurance premiums and defrauded the insurance carrier of $155,000 in premiums.
Luong, who pleaded guilty in April, was also ordered to pay $3,993,169 in restitution to the IRS and $155,870 in restitution to Travelers Insurance Co.
Hornell, New York: Business owner Theodore LaFrance has pleaded guilty to aiding or assisting in the preparation of a false or fraudulent return.
LaFrance, who owned and operated T&J Country Kitchen Inc., hired Staff Leasing Inc. to provide payroll services for his business. Between 2014 and 2018, LaFrance provided false information to Staff Leasing regarding the wages T&J paid to its cooking and cleaning personnel; LaFrance also did not report the wages that were paid in cash. Staff Leasing used this information to complete and file 941s for the company.
Between 2014 and 2018, T&J’s 941s did not include a total of $235,560.42 in wages, which resulted in a tax loss of some $36,040.74.
The charge to which LaFrance pleaded guilty carries a maximum of three years in prison and a fine of $100,000.
Martinsburg, West Virginia: Ayodele Arasokun, of Paris, has been sentenced to 34 years in prison for orchestrating an international tax scheme.
Convicted a year ago of wire fraud and aggravated ID theft, Arasokun coordinated a scheme to file 1,701 false returns and claim $9.1 million in refunds, with West Virginia residents among the victims.
He had the money transferred to prepaid debit cards and some 700 U.S.-based accounts containing more than $50 million that he tracked.
A total of $2.2 million in fraudulent refunds were paid by the IRS.
Boston: Tax preparer Joseph Rodriguez, 73, has been sentenced to 15 months in prison and a year of supervised release for preparing false returns for clients.
On numerous occasions between 2014 and 2017, he prepared and filed federal income tax returns for clients in which he included inflated and ineligible expenses for medical and dental expenses, charitable contributions and unreimbursed employee business expenses.
He caused more than $2 million in tax loss to the IRS.
Rodriguez, who pleaded guilty in February, was also ordered to pay $110,462 in restitution.
Houston: Tax preparer Lynettia Profit has admitted to willfully preparing a false 2018 joint income tax return.
Profit admitted that from 2016 to 2019 she often placed false education credits and Schedule C items on the returns she prepared. She charged prep fees that were deducted from clients’ refunds. She admitted to placing two false American Opportunity Tax Credits in the amount of $2,500 each on the joint return as well as $70,743 in false expenses on a Schedule C.
This resulted in a tax loss of approximately $22,101.
Profit took responsibility of $336,847 in losses to the IRS and has agreed to pay that amount in restitution. Sentencing is Jan. 24, when Profit will face up to three years in prison and a possible $250,000 fine.