Shell of a way to work; RICO rip-off; fun with refunds; and other highlights of recent tax cases.
Roseau, Minnesota: Former medical doctor Joseph David Meyer, 62, has been sentenced to four months in prison, six months of home confinement and two years of supervised release following an extensive tax-evasion scheme.
From at least 2000 until 2018, Meyer earned significant taxable income as a licensed medical doctor as well as income and interest from his ownership of rental properties. He repeatedly challenged his tax obligations in court, concealed his taxable income and even sued his rental tenants for complying with legitimate IRS levies.
The tax loss totaled $484,164. Meyer, who pleaded guilty in June, was also ordered to pay full restitution.
Las Vegas: Real estate exec Scott Lawrence has been sentenced to a year and a day in prison for evading payment of his federal income taxes.
From around 2009 through 2019, Lawrence owned and operated Turn Two Inc., a real estate company. In March 2010, the IRS levied Lawrence’s personal bank account for an outstanding tax debt. Lawrence began taking steps to thwart IRS collection efforts by, among other things, cashing large portions of his wife’s paycheck to keep the funds out of a bank account the IRS could levy. Beginning in 2011, he began depositing his wife’s entire paycheck and other earnings into a corporate bank account not subject to levy and held by Turn Two, and used that account to pay most of his family’s personal living expenses.
He then had his wife create a new interior design business, D Lawrence Hospitality, and to open a business bank account for DLH. Lawrence funneled much of his and his wife’s personal income through that company to impede IRS collection of the couple’s unpaid taxes. For years, Lawrence concealed the existence and personal use of DLH’s bank account from the IRS and caused his attorney to send a materially misleading letter to the IRS and to pay his taxes using an intentionally overdrawn bank account.
Lawrence, who prevented the IRS from collecting more than $1.9 million in federal income taxes and who pleaded guilty in July, was also ordered to serve two years of supervised release and to pay some $1,905,325 in restitution to the United States.
Jacksonville, Florida: Omar Wilkin Santos-Calix and Oscar Rene Santos-Santos, both Honduran nationals and both illegally in the United States, have been sentenced to two years in prison for conspiracy to commit wire fraud and conspiracy to commit tax fraud.
They established a shell company that purported to be involved in the construction industry. The pair obtained a workers’ compensation insurance policy in the name of the shell company to cover a minimal payroll for a few purported employees, then “rented” the workers’ comp to work crews who had obtained subcontracts with construction contractors on projects in various Florida counties, as well as contractors in other states. They rented the certificates to dozens of work crews, defrauding the insurance carrier.
As part of the scheme, the contractors issued payroll checks for the workers’ wages to the shell companies and Santos-Calix and Santos-Santos cashed these checks and then distributed the cash to the work crews after deducting their fee, which was typically about 6% of the payroll, totaling more than $1 million.
Neither the shell company nor the contractors reported to the government the wages that were paid to the workers, nor did they pay either the employees’ or the employer’s portion of payroll taxes. According to the IRS, the amount of payroll taxes due on wages collected by Santos-Calix and Santos-Santos totaled $5,018,590.
The court also ordered Santos-Calix to pay restitution to the IRS of $3,245,161 and entered a money judgment against Santos-Calix for $897,870, representing the proceeds of the wire fraud. The court ordered Santos-Santos to pay restitution to the IRS of $1,773,429 and entered a money judgment against Santos-Santos for $490,634, representing the proceeds of the wire fraud.
Clearwater, Florida: Dickenson Elan, 40, has been found guilty of a racketeer-influenced and corrupt organizations conspiracy.
Between January 2016 and April 2017, Elan participated in the scam with three conspirators, where he helped create and operate at least six fraudulent tax businesses to file false returns in the names of thousands of victims. He also helped register PTINs using the names and information of ID-theft victims to make it appear that those victims were filing false returns in bulk.
Some of the personal information used to file these returns was stolen from victims who had come into the tax businesses to file their taxes. Other information was obtained by using a dark web marketplace to purchase server credentials for the computer servers of CPA and tax prep firms across the country. The server credentials were then used to commit computer intrusions and exfiltrate the returns of thousands of taxpayers who were clients of those CPA and tax prep firms. The information from those taxpayers was traced back to returns filed through the false businesses that Elan helped create.
The conspirators directed the refunds to debit cards and bank accounts that they controlled. During the 2016 and 2017 tax seasons, they tried to obtain more than $16 million in false returns and preparers’ fees from the IRS.
Elan faces up to 20 years in prison. Sentencing is Feb. 7.
Downey, California: Tax preparer Raudel Sandoval, 48, of Placentia, California, has been sentenced to 30 months in prison for knowingly preparing nearly 400 fraudulent federal income tax returns that caused a tax loss of more than $750,000.
Sandoval owns the tax prep company RSE Sandoval España Inc. He prepared hundreds of false federal and state income tax returns for clients for the tax years 2015 through 2018, claiming false or inflated amounts of the Child Tax Credit, business losses, short-term capital losses and other undeserved items.
When he finished preparing a return, Sandoval gave his clients copies of their returns that were true and correct but falsely told them that he would file copies with the IRS on their behalf. He then inflated his clients’ returns with false and fraudulent deductions and credits and filed those with the IRS.
Sandoval directed the inflated refunds to himself by changing the account and routing numbers on the filed returns to a bank account he controlled. Sandoval controlled more than 100 bank accounts with several different banks and opened many of the accounts in his clients’ names, but he was the accounts’ only authorized signer. Several of the Sandoval-owned bank accounts had the name “Federal Tax Refund Processing.”
He directed the IRS to send the inflated refunds through a third-party refund processor to be deposited into an account he controlled. Other times, Sandoval caused the IRS to mail a check of the inflated refund to his business address.
After receiving the inflated refund, Sandoval transferred a portion of it — the amount his clients were expecting to receive based on the true-and-correct tax return copies — to one of his “Federal Tax Refund Processing” accounts. Sandoval then transferred that money to his clients’ bank accounts, causing them to believe their refunds were from a legitimate government source. He kept the difference between the true refund and the inflated refund.
For the tax years 2015 through 2018, Sandoval willfully understated his clients’ tax liabilities and caused a loss of $758,550 to the IRS, caused by the filing of at least 389 fraudulent income tax returns.
Sandoval, who pleaded guilty in March, was also ordered to pay $758,550 in restitution.
New Paltz, New York: Restaurateur Susan Salanitri, 60, has been sentenced to two years of probation for filing false returns.
Salanitri, owner of two local restaurants, previously pleaded guilty to five counts of filing false returns. She admitted that during each of the tax years 2015 through 2019 she deliberately under-reported her restaurants’ revenues on her individual federal return, resulting in a total underpayment of taxes in the amount of $307,665.
She was also ordered to repay that amount in restitution.