Tax Fraud Blotter: Contemptible

Accounting

Two-buck chuck; easement does it; mismanagement; and other highlights of recent tax cases.

Swampscott, Massachusetts: Tax preparer Boris Shadari, 46, has been sentenced to 30 months in prison and two years of supervised release in connection with a scheme to inflate federal refunds and divert a portion to accounts that he and conspirators controlled. 

In March, Shadari pleaded guilty to one count of conspiracy to defraud the U.S., three counts of filing a false return, three counts of aiding or assisting in filing a false return, two counts of theft of government funds, five counts of aggravated ID theft and one count of witness tampering. Conspirator Christian Zynga previously pleaded guilty; he was scheduled to be sentenced in August.

From 2012 to 2018, Shadari and Zynga held Shadari out as a tax professional, targeting the Congolese community of greater Boston. Until 2017, they took their clients’ information to a tax prep company and provided a tax professional there with false information concerning their clients’ dependents, dependent and child care expenses and business income and losses to inflate the federal income tax refunds. They then caused the refunds to be split between the clients’ bank accounts and accounts they and their conspirators controlled.

After 2017, Shadari prepared clients’ returns himself and added false information to inflate refunds. He also failed to report the income he received from this scheme on his own returns.

After Shadari became aware of the investigation, he told a taxpayer to lie to investigators about the information in the returns he had prepared for her. He suggested she would owe thousands of dollars back to the IRS and that her immigration status in the U.S. could be compromised if she did not do as he said. 

Shadari was also ordered to pay $496,082 in restitution.

Cincinnati: Businessman John Franklin Brock has pleaded guilty to one count of tax evasion and one count of money laundering.

Brock operated multiple businesses including UT Service, UTS Inc. and Wolverine Wireless Inc., which perform cellular tower construction and decommissioning services; Impact LLC d.b.a. Pac-Telephone, a prison inmate communications business; and 6 Bayview Blvd. LLC, which performed money transmission for his inmate communications business.

From January 2016 through at least January 2020, Brock attempted to evade business taxes. He created these entities by registering them as corporations or single-member LLCs through which related companies were obligated to report their separate income and losses, in some cases concealing his ownership and using names of others or aliases. 

He failed to file corporate returns for UT Service and UTS and instead filed corporate returns for Wolverine reporting minimal to no income: For 2016, he reported $2 and for 2017 he reported no income for Wolverine. When applying for a small business loan, Brock submitted returns for UTS that showed net income of more than a million dollars in 2016 and more than $420,000 in 2017.

Brock also transmitted an application for a money transmission terminal using the alias Alan Coleman. Brock did not disclose his involvement in the business, instead falsely listing himself as the “landlord.” Brock used the money transmission terminal to send and receive interstate money transfers of more than $225,000 associated with his prison communication business.

Tax evasion carries a maximum of five years in prison and a fine of up to $250,000. Money laundering carries a maximum of 20 years in prison and a fine not to exceed $500,000.

Boca Raton, Florida: Marketer and licensed CPA and attorney Randall Lenz has pleaded guilty to filing a false return.

From about 2015 through 2019, Lenz, who had more than 30 years of experience handling tax matters, marketed illegal tax shelters developed and promoted by others. In return, he received a 12% commission on the money his clients paid for their shelters. In all, Lenz received more than $700,000 in such commissions.

The tax shelters enabled high-income taxpayers to claim inflated charitable contribution deductions in connection with the purported donation of a conservation easement over land. The shelters’ operators created an LLC and then acquired land, or an entity that owned land. The promoters then sold units in funds operated by the LLCs to high-income clients. In exchange for those purchases, those clients were supplied with documentation and tax forms purporting to justify deductions in amounts as much as 4.5 times the amount the clients paid for their units.

Lenz admitted that he knew the tax shelters did not entitle him to a deduction but nonetheless purchased units for himself for tax years 2018 and 2019. He claimed false charitable deductions of some $100,000 for each of those years.

He faces a maximum of three years in prison for filing a false return, as well as supervised release, restitution and monetary penalties.

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Las Vegas: Restaurateur Raul Gil, 63, has pleaded guilty to tax evasion.

He owned and operated three Casa Don Juan restaurants and from 2014 through 2018 directed his bookkeeper to prepare books and records that underreported cash sales at the restaurants by some $5.1 million. Gil then provided the false records to his tax preparer, who annually prepared the Casa Don Juan corporate returns and Gil’s individual returns. As a result, the corporate returns were false for each of these years.

Because the restaurant profits flowed through to Gil personally, his individual income tax returns for these years were false as well. Finally, because Gil directed the three restaurants to underreport their total sales, the Nevada sales tax returns for the restaurants also were false during these years.

In July 2018, the IRS initiated an audit of Gil. During the audit, he instructed his accountant to provide to the IRS false P&Ls that matched the figures reported on the returns. He also told his bookkeeper to provide to the IRS false daily cash and sales reports purportedly printed from the restaurants’ point-of-sale systems. Gil falsely stated to the revenue agent conducting the audit and later to IRS agents that the cash reports and point-of-sale records were accurate.

He caused a federal tax loss totaling some $1.6 million.

Sentencing is Nov. 10, when he will face a maximum of five years in prison for tax evasion; he also faces supervised release, restitution and monetary penalties. 

Fort Lauderdale, Florida: Tax preparer Guy Telfort has been sentenced to a year and a day in prison for criminal contempt for continuing to prepare and file federal returns in violation of a court order.

Telfort previously owned and operated the prep business Tax Houses and Accounting Services. From about January 2015 through April 2019, he and his employees prepared and filed returns for clients. To inflate federal refunds for clients, some of these returns reported false items, including fictitious business income and losses and mileage deductions.

In April 2019, a federal court entered an injunction against Telfort, permanently barring him from preparing federal tax returns for others.

In 2020 and 2021, he continued to prepare and file returns for clients, working out of an Oakland Park, Florida, pawn shop. Telfort charged clients as much as $1,000 for each return filed with the IRS. Some of these returns reported false medical and dental expenses and charitable contributions, as well as fictitious businesses. Telfort also used PTINs belonging to other tax preparers.

Telfort, who previously pleaded guilty, prepared nearly 1,200 returns in violation of the injunction.

He was also sentenced to three years of supervised release and ordered to pay $762,338.88 in restitution to the United States.

San Antonio: Office manager and bookkeeper Alicia Henderson has been sentenced to 33 months in prison for financial and tax fraud.

She worked for a nonprofit corporation that provided services for the San Antonio Downtown Public Improvement District. Between July 2014 and November 2017, Henderson forged or wrote to herself 118 checks drawn on the nonprofit’s bank account and deposited the funds into her personal bank account. She used the stolen money, totaling $291,385.23, for her own benefit but did not report the embezzled funds on her federal tax forms. Henderson owed $64,719 in taxes for 2014 to 2016.

Henderson, who pleaded guilty in 2020, was also ordered to pay $356,104.23 in restitution.

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