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IRS Criminal Investigations for 2015

  • IRS Criminal Investigations for 2015 still above 90%

    The IRS Criminal Investigations unit published its annual report for 2015. Below is our Infographic highlighting key statistics. Here are some surprising statistics:

    • IRS criminal Investigations staffing level has declined each year from 1995 to 2015. Over the twenty year span there has been a 45.3% decrease in IRS CI staffing.
    • Staffing is at its lowest since the 1970s
    • Between 2010 and 2015 the number of cases initiated peaked in 2013 at 5,314 cases
    • The number of cases prosecuted peaked in 2013 at 4,364 and decreased by 24.6% between 2013 and 2015
    • The Conviction rate in 2015 was 93.2%
    • If an investigation is initiated against you it is likely you will serve prison time. 80% of the cases resulted in a prison sentence.

    In its annual report, Richard Weber, Chief at the IRS CI unit, laid out the units priorities for 2016. These include:

    • Identity Theft Fraud
    • Abusive Return Preparer Fraud & Questionable Refund Fraud
    • International Tax Fraud
    • Fraud Referral program
    • Political/Public Corruption
    • Organized Crime Drug Enforcement Task Force (OCDETF)
    • Bank Secrecy Act and Suspicious Activity Report (SAR) Review teams
    • Voluntary Disclosure Program
    • Counterterrorism and Sovereign Citizens

    In his annual report letter he notes the importance of identity theft fraud: “IRS CI is now beginning to focus our efforts on even more complex identity theft investigations involving organized criminal networks with cyber and global connections that victimize American citizens and businesses.” He went on to highlight the unit’s success prosecuting identity theft cases. “Through all these challenges, we have continued to produce quality cases and sent close to 2,000 people to jail over the past three years for identity theft related crimes.”

    IRS Criminal Investigations 2015 Statistic Infographic

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    Ten Successfully Prosecuted IRS Criminal Investigations Cases

    1. Tax Fraud – Philadelphia, PA

    The accountant for Nifty Fifty’s organization, located in Philadelphia, PA, failed to properly account for more than $15 million in gross receipts. He conspired with the owners and principals of the organization to use skimmed cash to pay themselves and people and businesses who supplied goods and services. Dating back to 1986 the accountant conspired to commit tax evasion filed false tax returns, committed loan fraud and aggravated structuring of financial transactions. His pay-off is a 6o month prison sentence and he is ordered to pay 1.7 million in restitution.

    2. Income Tax Evasion – Winston-Salem, NC

    A millionaire business man, starting in 1993 and continuing through at least 2010, sent the IRS fraudulent financial instruments in an attempt to have his tax debt discharged. He used nominee and sham trusts to purchase and sell real estate to conceal assets and placed false liens on properties to impede the IRS’ collection of debt. In addition he failed to file federal and state income tax returns for tax years 1994 through 2013 despite earning substantial income. The IRS Criminal Investigations unit successfully obtained a conviction. He was sentenced to 32 months in prison and ordered to pay more than $7.6 million in restitution.

    3. Payroll Tax Fraud – Miami FL

    Payroll Supervisor for Promise Healthcare, Inc. and Success Healthcare, Inc. The payroll supervisor oversaw the bi-weekly payment of over 4,000 employees. He setup PayServ Tax, Inc. and represented to Officers that he would use PayServ Tax, Inc. to process payroll and handle the transfer of local, state and federal taxes to the appropriate agencies. The payroll supervisor stole and embezzled funds that resulted in $21 million underpayment. This caused hospitals to lay off employees and adversely impacted the maintenance and operation of 17 acute care hospitals, jeopardized services provided to patients, challenged investors’ security and reduced the amount of money taxing authorities collected. For his actions he received a 240 month prison sentence, 3 year supervised release and ordered to pay over $21 million in restitution.

    4. Identity Theft Ring – Alabama and Georgia

    Nine people in Alabama and Georgia, between 2011 and 2013 stole identities to file fraudulent tax returns. This identity theft ring stole identities from various sources including the US Army, various Alabama state agencies, a Georgia call center and employee records from a Georgia company. The criminal group filed more than 9,000 false individual tax returns that claimed more than $24 million in fraudulent claims for tax refunds. The 9 individuals received prison sentences totaling 380 months with more than $6.1 million in forfeiture.

    5. Tax Preparer Fraud – Fort Worth, TX

    The couple, that owned and operated Jacqueline Morrison & Associates (JMA), were convicted, each on one count of conspiracy to aid and assist in the preparation and presentation of false and fraudulent tax returns. The couple used false losses to offset income, thereby increasing clients’ refund. They built a large client list to leverage into a franchise agreement with Express Tax Services. After having their Electronic Filing Identification Numbers revoked they used a business associate’s EFIN to file. Finally they misled buyers by entering into parallel agreements to sell JMA. They each received a prison sentence of 187 months and the couple was ordered to pay restitution totaling $18 million as a result of the IRS Criminal Investigations unit work.

    6. Tax Evasion – Las Vegas, NV

    Leon Benzer from August 2003 through February 2009 conspired with an attorney to gain control of Home Owner Association Boards. He then paid members on HOA boards to take actions favorable to his interest. This included hiring his co-conspirator’s law firm to handle construction related litigation, and awarding remedial construction contracts to Benzer’s company. This scheme led to the conviction of 42 additional individuals. He owed over $459 thousand in taxes for years 2001 through 2006 and about September, 2007 owed over $705 thousand in employment taxes. He was sentenced to 188 months in prison and ordered to pay more than $13 million in restitution.

    7. $33 Million Ponzi Scheme – San Diego, Ca

    Robert Holloway, CEO of US Ventures, LLC between May, 2005 and April 2007, recruited investors by making false representations, including that US Ventures used proprietary software that was consistently profitable, generated returns of 0.8% per trading day and US Ventures would retain a 30% share of investors’ profits as a management fee. He generated and distributed reports showing false daily returns. Holloway also misappropriated investors’ funds for personal expenses. His Ponzi scheme lost investors $15.2 million. As a result of The IRS criminal unit’s investigation he received a 225 month prison sentence and was ordered to pay $15.2 million in restitutions.

    8. Tax Evasion – Spokane, WA

    Michael Peter Spitzauer, CEO and President of Green Power, Inc., defrauded investors by representing their investment deposits would be held by an attorney and not be used without the parties’ written agreement. In fact, Spitzauer controlled the bank accounts and used the money to pay for luxury items and repaying prior investors who sought return of their funds. Between 2007 and 2013 Spitzauer stole more than $10.3 Million from various victims. He also filed false tax returns in 2007 and 2009. He evaded approximately $2.5 million in taxes in 2008 by not filing a tax rerun. His return on investment was a 48 month prison sentence and ordered to pay $10.4 million in restitution to the victims and over $2.5 million in restitution to the IRS

    9. Public Corruption Probe – Great Falls, MT

    The IRS Criminal Investigation Unit was able to obtain convictions totaling 154 months for four individuals resulting from the Rocky Boy’s Corruption Probe. The four individuals were ordered to pay over $1.5 million in restitutions. Charges included bribery, embezzlement, federal student financial aid fraud, obstruction of justice, tax evasion and bankruptcy fraud.

    10 Tax Fraud – Detroit, MI

    Gross sales and payroll amounts were substantially underreported for 60 Happy’s Pizza franchises. From 2008 through 2010, owners and certain employees of Happy’s Pizza franchise diverted, for personal use, more than $3.84 million in gross sales receipts and 2.39 million in payroll taxes. The owner was sentenced to 50 months in prison and ordered to pay 2.5 million in restitution to the IRS. Three other individuals were sentenced to terms ranging from three years to 24 months supervised release and ordered to pay $1.1 million in restitution.

    This is just a small cross-section of successfully prosecuted IRS Criminal Investigations cases. If you believe you are the victim identity theft, tax fraud or one of the other areas the IRS CI team covers, contact the ISR Criminal Investigations unit office