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Tax Fraud Blotter: Down the drain

Very inventive; that’s Sick; sweet charity; and other highlights of recent tax cases.

Washington, D.C.: Texas attorney and former member of the Idaho legislature John O. Green and his client, Texas inventor Thomas Selgas, have been sentenced for conspiracy to defraud the U.S. and for tax evasion.

Selgas was sentenced to 18 months in prison and Green to six months.

Selgas conspired with Green, an attorney licensed to practice in Texas, to obstruct IRS efforts to assess and collect Selgas’s taxes. Selgas and his wife owed approximately $1.1 million in taxes that Selgas refused to pay.

Selgas concealed, with the assistance of Green, substantial funds by using Green’s Interest on Lawyers Trust Account, rather than using financial accounts in Selgas’s name. (An IOLTA is an escrow bank account used by a lawyer to hold money in trust for clients.) From 2007 to 2017, Selgas deposited proceeds from the sale of gold coins and other income into Green’s IOLTA. At the direction of Selgas, Green would then use that escrow account to pay the personal expenses of Selgas and his wife, including their credit card bills.

Selgas and Green also filed a false return on behalf of MyMail Ltd., an intellectual property development and licensing partnership Selgas co-founded, omitting a substantial portion of the partnership’s income.

Selgas was also ordered to serve three years of supervised release and pay some $1,323,776.92 in restitution to the U.S, Green was ordered to serve three years of supervised release and pay some $679,501.50 in restitution to the United States.

New York: Business owner Sergei Denko, of Queens, has been sentenced to 20 months in prison for failing to collect and pay over to the IRS $732,462 in employment taxes.

He owned and operated Denko Mechanical and Independent Mechanical, contracting businesses that specialized in plumbing. From 2010 through 2014, Denko cashed more than $5 million in checks made out to companies he owned and operated to fund an off-the-books cash payroll. He did not report the cash wages to the IRS, filed false employment tax returns and did not pay to the IRS the employment taxes arising from the cash payroll. Denko admitted to causing a total tax loss of $732,462.

He was also ordered to serve a year of supervised release. He has already paid $366,231 in restitution.

Rockford, Illinois: A federal court has permanently enjoined tax preparer Gretchen Alvarez, a.k.a. Gretchen Trejo, from preparing returns for others and from owning, operating or franchising a tax prep business in the future.

The order requires that Alvarez, both individually and doing business as Sick Credit Repair, Tax and Legal Services, send notice of the injunction to multiple individuals and, during the filing season, advertise the injunction where she conducts business.

The civil complaint alleged that she prepared federal income tax returns for area taxpayers that significantly understated tax liabilities by fabricating business losses. It also alleged that Alvarez falsely claimed that some of her customers attended higher education institutions to fraudulently claim education credits.

Alvarez consented to entry of the injunction, which permits the government to monitor compliance.

San Diego: Retired pediatric dentist Dr. Bruce Baker has been sentenced to 15 months in custody for evading more than $644,000 in taxes as part of a decades- long tax evasion with former Chabad of Poway Rabbi Yisroel Goldstein.

Until around 2018, Rabbi Goldstein was the director and head rabbi at Chabad of Poway, a tax-exempt religious organization. Starting as far back as the mid-1990s, Dr. Baker engaged in various ploys with Rabbi Goldstein to cheat on his taxes. On most occasions, Dr. Baker purported to donate money to the Chabad of Poway, got a receipt for a charitable deduction then received back 90 percent of his “donation” from Rabbi Goldstein.

In this fashion, Dr. Baker paid for his child’s private school tuition, his son’s dental school and post-doctoral residency, and nearly three-quarters of a million dollars in renovations and supplies, all using funds he had supposedly donated to the Chabad. Rabbi Goldstein also helped Baker move tens of thousands of dollars in undeclared income to bank accounts in Israel and Switzerland.

Between 2004 and 2018, Dr. Baker donated at least $2.6 million to the Chabad, of which $2.4 million was funneled back to him.

In July 2020, Rabbi Goldstein pleaded guilty to fraud, his plea agreement outlining the scheme with Baker.

Separately, Dr. Baker agreed with another San Diego religious leader to make a sham donation of an ancient Iranian Torah, supposedly valued at $1.2 million, to that leader’s charity. Dr. Baker secured a tax deduction of $1.2 million but in reality, the Torah did not exist and no $1.2 million donation was ever made.

Windham, New Hampshire: Roofing contractor Ronald McPhail has pleaded guilty in connection with failing to report income from his roofing and siding business to the IRS.

McPhail owed more than $700,000 in income taxes to the IRS after he failed to report more than $7.1 million in revenue and approximately $2.43 million in income from his business on his federal returns for tax years 2014 through 2019. To conceal his scheme, McPhail cashed customer checks without first depositing them and withheld information concerning these checks and other business revenues from his tax preparers.

Filing a false tax return provides for up to three years in prison, a year of supervised release and a fine of $250,000. Sentencing is Oct. 7.

Hillsboro, Oregon: Bookkeeper Melodie Ann Eckland has pleaded guilty to wire fraud, aggravated ID theft, filing a false return and willfully failing to collect or pay payroll taxes.

From at least 2011 and until April 2018, Eckland was a bookkeeper for a local adoption and surrogacy agency. She used her position to steal by making unauthorized wire transfers and writing unauthorized checks to herself. She also transferred agency funds in the form of bonuses to her personal bank account.

Eckland maintained two sets of financial records, one for the board of directors and the other showing the true payments she made to herself. Eckland applied for loans from at least five lending agencies on behalf of the adoption agency, using the names of the agency’s owners without their permission and altering financial records to make it appear as though she owned the agency.

Beginning in 2016, Eckland stopped making the agency’s quarterly employment tax payments to the IRS and stopped filing employment tax returns. As a result, the agency owed more than $94,000 in past due employment taxes.

She also stole from a bank account opened on behalf of her deceased brother-in-law’s estate, of which her husband was executor. Eckland forged her husband’s signature on unauthorized estate checks and made unauthorized wire transfers of estate funds to herself. She sent a portion of more than $123,000 stolen from the estate to the adoption agency’s bank account to conceal her theft of agency funds.

She reported none of the embezzled funds on her federal returns for 2013, 2014 and 2017. In 2015 and 2016, she reported more than $550,000 as “other income” but failed to pay the taxes due. Between 2013 and 2017, Eckland failed to report more than $675,000 in income, resulting in a tax loss of more than $345,000.

Eckland’s victims — including the adoption agency and its owners, her brother-in-law’s estate and the IRS — lost a total of more than $1.5 million.

She faces a maximum of 30 years in prison, a $750,000 fine and three years of supervised release. Sentencing is Nov. 8. Eckland has agreed to pay restitution of up to $2.5 million and forfeit more than $1.5 million in stolen proceeds.

Aberdeen, Maryland: A federal jury in the District of Columbia has convicted tax preparer Charese Johnson of preparing three false returns for D.C. residents that claimed more than $1.1 million in fraudulent refunds.

Johnson operated Prodigy Accounting Services and prepared false amended income tax returns in 2014 for three taxpayers. Those returns fraudulently claimed large refunds based on phony refundable credits and withholdings.

Sentencing is Sept. 17, when she faces a maximum of three years in prison on each count.

Source: on 2021-07-08 13:59:46

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