Tax Fraud Blotter: No relief in sight | #phishing | #scams

Taking care of it; inconvenient truths; lies cost extra; and other highlights of recent tax cases.

New York: Steven Whittick, of Kingston, New York, former labor union treasurer of the Law Enforcement Employees Benevolent Association and an officer with the New York City Department of Environmental Protection, has pleaded guilty to charges of conspiring to evade more than $250,000 in federal taxes, including payroll taxes owed by the union and its employees, and his own personal income taxes. He also pleaded guilty to lying to investigators.

The union represents law enforcement officers employed by New York City, including officers from the DEP, the City Department of Sanitation and the City Department of Transportation. Whittick had responsibility for the union’s financial matters and accounts, including arranging for it to pay its payroll through an outside firm starting in 2016. Whittick also held signatory authority over the union’s main bank account.

From at least about 2015 through 2019, Whittick conspired with the union president to cause it to make payments to the pair outside of the union’s payroll processor by check and in cash. He then concealed these payments from the IRS, including off-the-books payments to himself of more than $100,000 and off-the-books payments to his conspirator of more than $400,000.

Around October 2019, while serving as the union’s treasurer and after learning of an investigation into the union’s finances, Whittick repeatedly lied to agents. On at least two occasions, he withdrew $16,000 in cash from a union account and split it with his conspirator. He also lied to agents about stealing from the union and its payment for certain travel and entertainment expenses for union officers, including Whittick and his conspirator.

He pleaded guilty to one count of conspiracy to evade personal and payroll taxes for the tax years 2015 through 2018 and for the first three quarters of 2019 and one count of lying to federal investigators. Each charge carries a maximum of five years in prison, a maximum fine of $250,000 or twice the gross gain or loss from the offense and an order of restitution. Sentencing is Nov. 17.

Boston: Patricia Lindau, of Newburg, Maine, owner of a firm that provided payroll and payroll tax services to small businesses, has been sentenced to three years in prison and two years of supervised release for defrauding clients by diverting the funds her clients set aside for payroll taxes.

Between 2017 and the spring of 2020, Lindau schemed to defraud many of her clients by failing to pay over to the IRS and Massachusetts Department of Revenue the payroll taxes that she withdrew from clients’ bank accounts. Lindau used her access to these accounts to transfer funds into her firm’s business checking account. She then sent each client a weekly report falsely indicating that she had paid the funds over to the IRS and the state of Massachusetts.

When the clients received letters from tax authorities indicating that their payroll taxes had not been paid, Lindau lied to the clients that the letters were a mistake and that she would take care of it. In some instances, she then paid the taxes late.

The scheme continued into the first quarter of 2020 when most of her clients closed due to COVID-19 and then discovered that their employees’ payroll taxes had not been and were not being paid.

Lindau, who pleaded guilty in February, failed to pay over more than $2 million and caused a net loss to her clients of more than $1.1 million.

She was also ordered to pay $1,422,122 in restitution and to forfeit $1,121,292.

Philadelphia: Residents Yolonda Thompson, a.k.a. Qhama Al, and Albert Upshur, a.k.a. Kelinde Jaha, have been convicted of conspiring to defraud the U.S. and aiding and assisting in the preparation of false returns.

Between 2010 and 2013, Thompson and Upshur tried to obtain millions of dollars for themselves and other participants in a debt-relief fraud that they named the Debt Payoff Program. Participants were told that if they paid money to Upshur and filed returns and other documents that Thompson prepared for them, they could access funds from the trust to pay off mortgages and other debts. The federal returns that Thompson prepared fraudulently claimed refunds; returns used as evidence sought refunds totaling more than $300 million.

After the IRS began to investigate Debt Payoff, Thompson and Upshur tried to obtain money from the IRS by other fraudulent means, including using checks drawn on closed bank accounts and fake financial instruments. Even after the IRS assessed civil penalties against Thompson and Upshur and notified them that they were under criminal investigation, both continued to file false returns and other tax documents for themselves and others.

The pair face a maximum of five years in prison for the conspiracy count and three years in prison for each false return count.

Syracuse, New York: Tax preparer Phoenix Phan has pleaded guilty to filing a false return for herself and to aiding and abetting the filing of a false return for a client.

Phan admitted that she failed to report gross receipts on her personal income tax returns for tax years 2013 to 2017. She also admitted that she aided and assisted others in filing false federal income tax returns during the same time, including by reporting phony business income, rental losses and filing statuses.

Sentencing is Nov. 30. Phan faces up to three years in prison on each count, as well as supervised release of up to a year. She also faces a fine of up to $100,000 on each count. Phan agreed to pay at least $222,999 in restitution to the IRS.

Peoria, Illinois: Former store owner Alaa Iwaisi, 30, has been sentenced to three years in prison for filing false federal personal returns, aiding in the filing of false federal corporate returns and mail fraud for mailing false state small-business corporation returns for tax years 2015 through 2017.

Iwaisi, who formerly owned and operated the MacArthur Corner Store Food & More, pleaded guilty in March to the nine-count indictment charging him with underreporting sales from the store on both federal and state returns. The judge found that even though Iwaisi had actual receipts reflecting the store’s sales, he provided false information about the sales to his tax preparer and often paid employees and himself with cash from the register, despite being advised by the preparer to issue company paychecks.

Iwaisi used $5,000 as a down payment for the purchase of a $62,000 Range Rover, sold a 2004 BMW for $4,500, transferred title of a recreational vehicle, sold a 2015 Range Rover for $35,000 and used assets to pay for inventory at a convenience store recently purchased by his ex-wife. In seeking financing for the Range Rover, Iwaisi falsely claimed that he had monthly income of $10,000 from managing a liquor store, but he had reported to probation officials that he was unemployed and receiving unemployment compensation from Illinois.

Iwaisi’s prison term will be followed by concurrent one- and three-year terms of supervised release on the tax and mail fraud charges. He was also ordered to pay unpaid taxes of $108,125 to the IRS and $86,105 to the Illinois Department of Revenue.

Winston-Salem, North Carolina: Tax preparer Nicholas Laws has pleaded guilty to aiding and assisting in the preparation of a false return and to filing a false personal income tax return.

From 2014 to 2019, Laws managed the local branch of tax prep business Tax Mind, and during that time prepared returns for clients that reported false wages and business incomes to inflate refunds. He charged additional fees to prepare false returns, occasionally exceeding $1,000.

Laws also filed a false personal income tax return for 2014 and did not file returns reporting his income for 2015 through 2019.

He intended to cause a tax loss to the IRS of $2,934,891.

Sentencing is Oct. 20, when he faces a maximum of three years in prison for assisting in the preparation of a false return and three years for filing a false personal income tax return, as well as a period of supervised release, restitution and monetary penalties. Laws agreed to pay $184,072 in restitution to the IRS.

Philadelphia: Tax preparer Jean Coq has pleaded guilty to assisting in the preparation of false federal returns.

Coq prepared returns for clients for tax years 2013 and 2014 that claimed inflated itemized deductions and adjustments to income to claim undeserved refunds. Coq caused a federal tax loss of $83,451.

Sentencing is Nov. 10. Coq faces a maximum of three years in prison on each count, as well as a period of supervised release, restitution and monetary penalties.

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