Tax Fraud Blotter: No free lunch

Accounting

Everybody’s All-American thief; getting a new kind of number; out of a job; and other highlights of recent tax cases.

Metairie, Louisiana: A state court has permanently barred tax preparer Brischea Bowman Johnson from preparing, filing or assisting with the preparation or filing of any Louisiana returns but her own.

Johnson was arrested in 2020 after investigation determined that she had submitted false returns for several of her clients, including fraudulent claims for deductions for charitable contributions and business expenses.

Cleveland: City Councilman Kenneth Johnson has been found guilty of all 15 counts charged in an indictment related to two federal program theft schemes Johnson organized and executed while serving as councilman. Garnell Jamison was also convicted for his role in one of the schemes.

Johnson was convicted of two counts of conspiracy to commit federal program theft; six counts of federal program theft; five counts of aiding and assisting in the preparation of false tax returns; one count of tampering with a witness and one count of falsification of records in a federal investigation.

Jamison was convicted of 11 counts, including federal program theft, aiding and assisting in the preparation of false returns, tampering with a witness and falsification of records in a federal investigation.

Jamison worked for the City of Cleveland as Johnson’s executive assistant for more than 20 years. From 2010 through October 2018, the pair schemed to induce the city of Cleveland to issue reimbursement checks to Johnson for services that were never performed. The city issued $1,200 monthly expense reimbursement checks to Johnson totaling approximately $127,200.

Johnson was also convicted of benefiting from federal development funds distributed through the city of Cleveland.

For 2014 to 2018, Johnson and Jamison submitted phony federal individual income tax returns. Each return understated Johnson’s total income by failing to report additional income and by inflating the value of Johnson’s itemized deductions.

Finally, Johnson and Jamison were convicted of attempting to persuade and influence the testimony of a grand jury witness by providing that person with false and fraudulent information and records purporting to document charitable donations made by Johnson.

Sentencing is Oct. 8.

Hot Springs, Arkansas: Business owner Donald Lee Owen has pleaded guilty to one count of willfully failing to pay over employment taxes and one count of failing to file a return.

Owen owned and operated National Golf Classics, a.k.a. All American Classics, which produced sports memorabilia for charity auctions and conducted charity auctions. From 2010 through 2018, Owen’s company paid wages to employees and withheld employment taxes from those wages. Owen hired an accounting firm to calculate the taxes due and to prepare the 941s.

From 2010 through 2018, Owen failed to file the 941s and failed to pay at least $818,158 in employment taxes to the IRS. Owen chose to pay millions of dollars to his company’s creditors, $800 per month for a tract of real estate having nothing to do with the company and $1,000 per month to a family member for a share of a recreation cabin.

Owen failed to pay $430,000 of the employer portions of the employment taxes and Federal Unemployment Tax Act taxes. Owen also failed to pay $169,883 to the state of Arkansas that were withheld from his employees’ wages. He instead used the money to support a lavish lifestyle, including purchasing and improving a luxury home and buying land, an SUV and a recreational vehicle.

When audited by the Arkansas Department of Finance on two occasions, Owen told auditors that he didn’t have regular employees but instead used family and friends to help him during the busy season. But when approached by employees who had not received credit with the Social Security Administration for wages earned and employment taxes withheld, Owen admitted he had not reported or paid over the employment taxes to the IRS.

Owen’s second charge relates to his failure to file returns: He failed to file and pay $301,544 of his federal and $69,405 of his Arkansas state personal income taxes for 2008 through 2018; he also failed to file his company’s federal corporate income taxes for 2014 through 2018.

He faces up to six years in prison.

Las Vegas: Tax preparer Martha L. Williams, 43, has been sentenced to two years in prison for filing fraudulent returns for her clients, causing a federal tax loss of $529,782.

Williams, who pleaded guilty last year, owned and operated the prep businesses MJW and Associates, formerly Across the Board Management Company. Between 2009 and 2014, she prepared more than 1,000 returns for clients.

She admitted to preparing 750 false returns that inflated clients’ refunds by claiming fictitious deductions related to businesses. Williams used the IRS website to apply for and receive EINs for the phony businesses.

She was also sentenced to a year of supervised release and ordered to pay $529,782 in restitution to the IRS.

Sparta, Missouri: Businessman Jeffrey Scott Allen has been sentenced to two years in prison for failing to pay more than $600,000 in federal taxes.

Allen, who pleaded guilty a year ago to one count of tax evasion, admitted that he evaded, and failed to pay, $606,338 in federal taxes and $96,478 in state taxes from 2012 through 2017.

Allen, who operates his own business, has worked as an installer for satellite-based internet and television for the past 21 years. He uses contract labor with five separate contractors, claims a gross annual profit of $2.1 million and takes a $6,000 draw each month from the business.

Allen substantially underreported net income from his business and paid most of his and his family’s personal expenses from his business accounts. By underreporting income, he was able to illegally receive federal benefits, including $15,856 in Medicaid benefits for three of his children, $4,392 in free and reduced school lunches for his children and $35,453 in federal student aid under the Pell Grant program.

He must now repay federal and state agencies for those benefits, as well as $758,517 in restitution.

Worcester, Massachusetts: Employment agency exec Tam Vuong has pleaded guilty to federal tax and fraud charges.

Vuong oversaw the employment agencies Prime Labor and UT Services. Each paid a few employees by check but paid most employees in cash. Each agency also failed to report or pay taxes on the wages paid in cash, which Vuong fraudulently concealed in connection with tax filings and insurance audits.

He concealed millions in cash wages paid to Prime Labor workers and additional cash wages paid by UT Services. Between 2012 and 2017, more than $30 million in Prime Labor client company checks were cashed at a local check-cashing business; Prime Labor paid millions of these dollars in cash wages and then failed to report these wages to the IRS or to its insurer.

Vuong also told UT’s insurance carrier that the company had only one employee and an annual payroll of only $50,000, when actually UT had dozens of employees and a significantly higher payroll. UT disseminated forged certificates of insurance to several clients and failed to inform clients when its workers’ compensation policy was cancelled. Vuong also shifted operations from Prime Labor to UT Services after search warrants were executed in 2017.

Two former employees with the agencies pleaded guilty to related charges early this year.

The charges of wire fraud against Vuong each provide for a sentence of up to 20 years in prison, up to three years of supervised release and a fine of up to $250,000. The charges of failing to pay taxes each provide for a sentence of up to five years in prison, up to three years of supervised release and a fine of up to $10,000. Sentencing is Dec. 1.

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