Ex-UBS Client Sentenced For Tax Crimes

In 2009 Zurich-based UBS avoided federal prosecution by paying $780 million, admitting it helped thousands of United States citizens evade federal taxes and turned over the names of 250 clients to U.S. authorities. U.S. prosecutors have since charged about 50 Americans with tax crimes

One such former client, Luis Quintero, from Florida, was recently sentenced to four months in federal prison for failing to disclose $4 million in Swiss bank accounts. Quintero, a 64-year-old wholesale perfume importer, pleaded guilty in April and agreed to pay a $2 million fine for failing to file a Report of Foreign Bank and Financial Accounts for the calendar year 2006, according to court records. Read the full article by Susannah Nesmith here.


The IRS "Bad Seeds"

Why is it so fun to hear about IRS employees cheating the system from the inside?  Every warm-blooded taxpayer gets some kind of morbid satisfaction from the irony of these stories: the tax man, charged with the responsibility of enforcing the tax laws to a tee and collecting every last dime from others, bends and/or ignores the rules when it comes to his own tax obligations.  The same person who issues a wage garnishment on Christmas Eve lacks the integrity to pay his own fair share.

This week we have been treated to two such stories.

One is the story of Domeen Flowers, a 48-year-old former IRS mail clerk who allegedly abused her access to taxpayer records, stealing several identities which she used to apply for credit cards.  Good luck cracking down on identity theft, TIGTA and Commissioner Doug, if you can’t even keep good tabs on your own.

The other story involves Jacynthia Quinn, an IRS veteran of 30 years, who appears to have doctored receipts and bills in an attempt to substantiate her $95,000 in deductions (of which only $215 was allowed).  Her response: she didn’t know she would be required to provide proof of her deductions!  And Quinn was no mail clerk; she knew the rules and wilfully violated them.

One of the big barriers to voluntary compliance in other countries is corruption and distrust of the system.  It’s nowhere near as rampant here as it is in countries like Italy or Greece, but these tax crimes by IRS insiders can’t be good for the IRS’ image.


San Diego Couple Busted for Alleged Tax Fraud

Dr. James Francis Murphy, 51, and his wife Denine Christine Murphy, 49, from the San Diego area, ran a successful medical practice.  But while Dr. Murphy was providing pain relief to his patients, he must have been sneaking toxic doses of tax relief for himself.  According to the indictment, their crimes were “corrupt interference with the administration of IRS laws and presenting false claims to the United States for fraudulent income tax refunds” over a period of about 10 years.

This story illustrates the fact that there is no one demographic for those who would cheat the system by either failing to pay their fair share or by scamming the government out of money by way of false refund claims (or both).  Many of the criminals as of late tend to be trafficking in stolen identities straight off the streets of Tampa, FL.  But there are plenty of sophisticated “professionals” who are scam artists too.

One would expect that the more sophisticated tax criminals would engage in elaborate, complicated transactions to suppress their tax problems and make a buck, but Mr. and Mrs. Murphy preferred to keep it simple.  Their master plan included the following basic components:

  • hide income
  • claim huge unjustifiable refunds
  • pay taxes with checks that bounce
  • threaten IRS employees

See full story here.

DEA and IRS Team up in Medical Pot Asset Seizure

image via thinkprogress.org

It was not your average bank levy. The Drug Enforcement Administration and the Internal Revenue Service collaborated to seize the bank account of El Camino Wellness Center this week. The government was after more than $800,000 that had been deposited over a period of a few months by El Camino, Sacramento’s largest medical marijuana dispensary. However, according to the Sacramento Bee, the government will only retrieve a fraction of that amount because the money is just not there.

The government raided the pot shop as well as the homes of the owners. They are being investigated for money-laundering and conspiracy to distribute a controlled substance.

Just how does the IRS become involved in the highly controversial medical marijuana industry? Although California has “legalized” marijuana for medical purposes, it is still illegal and considered a controlled substance under federal law. This particular pot shop was set up as a nonprofit organization, but the feds believe that this designation is a sham and the shop is in the business of making boat-loads of money off marijuana sales and then hiding the profits. And failure to report profits usually means failure to pay taxes; that’s how the tax problems emerge.

El Camino is just another casualty in the ongoing tensions between the federal and local governments on the issue of medial marijuana. The feds almost always win.

I Guess You Don’t Get to be The Most Successful R&B Artist of the Past 25 Years by Paying Your Taxes

photo via guardian.co.uk

Most celebrity tax debt stories are pretty boring.  They’re boring because we have no details.  Usually we are limited to the information in the notice of federal tax lien (FTL), which includes little more than the years and the dollar amounts that are owed.  It’s not until after the tax debt is made public that juicier details begin to emerge.  Sometimes in the aftermath the celebrity taxpayer makes comments publicly about the tax debt, and we learn something about why/how the celebrity got into trouble.

Of course, most of the time if there is any public comment, it is something that has been carefully written by the star’s attorney; something like what R. Kelly’s spokesperson said:

R. Kelly is in the process of working everything out with the government and is confident that all his obligations will be satisfied.

Most of the time we are left to read between the lines and make our own (unreasonable) assumptions.  One of the assumptions I have made on ocassion is that the reason why celebrities incur big tax debts is they are on a downward spiral in popularity, marketability, . . . star power.  They have a hard time accepting this and modifying their lifestyle accordingly.

Oh, did I mention that R. Kelly owes about $4.8 million in back taxes?  It’s true; except my theory falls apart in this case because R. Kelly seems to be doing fine career-wise.  It’s impossible to tell for sure how he is doing financially, but his star power seems to be intact and he is keeping busy.  Maybe the “most successful R&B artist of the last 25 years” just has other priorities besides the IRS.


Idaho Legislator Owes $500k to IRS

photo via boiseweekly.com

Here’s one that TMZ missed.  Not enough star power.

Idaho legislator Phil Hart is not giving politicians a very good name.  He is a tax protestor (one of those eccentric believers in unfettered freedom to do what they please which often includes taking the position that the federal income tax is unconstitutional).  Many tax protestors believe that payment of income tax is optional, and Phil Hart has definitely exercised the option to NOT pay.  Now his federal and state tax debt stretches back to the mid 1990s.

Hart’s tax problems have been public for some time now, but new details emerged when he filed bankruptcy last month.  The bankruptcy filings reveal that his total debt is over $600,000 and over $500,000 of that represents money owed for delinquent federal income taxes.

We also learn that (according to Mr. Hart) 100% of his income was subject to wage garnishment during the past seven years.  I wonder if this is accurate because the IRS isn’t supposed to take 100% of w-2 income.  Maybe the feds were taking their share, then the state was taking the rest.

And finally, we see that Rep. Hart was basically hiding assets to steer clear of the IRS.  He put his property into a sham trust to try to keep it out of the hands of the government.  But the Dept of Justice sees right through this; the IRS will undoubtedly get at least some of what is owed from the sale of this property.  See full story here.


IRS Shuts Down Granny’s Suicide Kit Sales

Going back in history, the government has always used the Internal Revenue Service to shut down underground businesses that are illegal or immoral.  If the law does not support the government’s case, or if the facts and evidence are not in its favor on other charges, the government often has “tax evasion” in its back pocket.  Al Capone is the prime example.

This week’s Al Capone is a 92-year-old lady from Southern California named Sharlotte Hydorn.  She was convicted and sentenced to 5 years supervised probation for failing to file and pay taxes on the income she earned from suicide kits she sold from her home.  She was also ordered to work out a way to pay off her IRS tax debt.  As you probably guessed, there is no federal law addressing assisted suicide.

My question is “where was her family?”  I know her husband is deceased — it was his death that sparked Hydorn’s interest in benevolent killings.  But she needed somebody by her side to tell her things like:

  • Maybe you should be a little more careful about who you’re selling these kits to; like maybe find out their age and circumstances first.
  • Maybe you should be paying taxes on this income
  • Maybe when grandpa whispered “home, home” on his deathbed he wasn’t asking to die in the comfort of his home.  Maybe he was trying to communicate to you that he was now going “home” to his maker.

I realize that last point is pure speculation.  But hey, if it were true then Hydorn certainly never would have started selling suicide kits in the first place.

What’s with Floridians and their Penchant for Tax Crimes?

I recently blogged about how Florida is becoming a hotbed of tax crimes.  The US Department of Justice issued a press release this week about a Floridian who appears to be engaging in illegal tax activities right from his prison cell.  I say “appears to be” because, procedurally, this is still just a grand jury indictment, not a conviction.

David Marrero has been charged with corruptly endeavoring to obstruct the Internal Revenue Service (IRS) and filing false claims.  He filed false tax returns in hopes of getting a refund from the government.  He even went so far as to prepare bogus income docs to support his fraudulent refund claims.  Marrero also used other peoples’ financial information as part of his scheme — a common technique in the underground business of false return filing.  If you have tax problems, hopefully this story makes them seem small in comparison.

The IRS has promised to scrutinize return preparer certifications that are issued to inmates, perhaps they should also be taking a careful look at any and all returns filed from prisons.  I’m sure they already are, and that is probably why David Marrero’s strategy failed.  So much for getting out early for good behavior…

Tax Crimes in the Sunshine State

For whatever reason, sunny Florida is a hotbed of criminal tax activities.  Refund fraud is particularly rampant in Tampa, as described in a very interesting article appearing in the Tampa Bay Times over the weekend.  According to the author, Patty Ryan, the new generation of tax criminals either do not fear the IRS or do not believe what they are doing is all that bad when compared to other crimes like drug dealing.

“Frequently, when police find probable cause to search for drugs on a traffic stop, they find trappings of the tax refund trade.

A Nissan Xterra searched in a March 30 drug bust … in East Tampa turned up 48.7 grams of powder and rock cocaine, 100 grams of marijuana, digital scales, $14,957 in cash, four fraudulent tax return checks worth $32,165, and 67 TurboTax debit cards, along with ledgers of personal information for hundreds of people, police said.

The IRS has identified Tampa as an ideal location for a pilot program that would enlist the cooperation of local law enforcement in cracking down on tax cheats.  It’s easy to see why they chose Tampa.

Two Milwaukee Women Sentenced in Refund Fraud Scheme

Who? – Roshunda Smith, 34, and Linda Fay Townsend, 46

What? – Filed more than 170 fraudulent returns for family and friends seeking approximately $1.5 million in federal income tax refunds.

How? – The filings listed false employment, income, dependents, tax withholding and estimated tax payments.

The Sentences? – Smith got 46 moths and $450,000 restitution charge; Townsend got 24 months / $70,000.

It is unbelievable to me that these schemes are still cropping up so much this tax season. For somebody who pays attention to IRS press releases and IRS news, I see that they are hot on the trail of any who would dare to perpetrate tax fraud, especially when the criminal is preying on the elderly and uneducated.  But maybe that’s the problem.  Maybe the average person does not see how the IRS has turned things up a notch.  The IRS should probably do a better job of publicizing each time they nail somebody, not only when that somebody is a celebrity.