LOS ANGELES– A San Gabriel Valley man has been sentenced to 30 months in federal prison for his role in a scheme that used stolen identities to file fraudulent tax returns with the Internal Revenue Service that sought more than $2.6 million in false tax refunds.
Heber Cotton, 40, of Hacienda Heights, received the prison sentenced Monday, and he was further ordered by United States District Judge Michael W. Fitzgerald to pay $725,294 in restitution to the IRS.
Heber Cotton pleaded guilty in November to one count of conspiracy to defraud the United States by obtaining the payment of false claims, namely tax refunds.
Heber Cotton's father and co-defendant – Adel Cotton, 64, also of Hacienda Heights – is currentlyserving a prison termof 51 months for his role in the scheme.
According to court documents, beginning in December 2008 and continuing through March 2010, the Cottons caused at least 275 fraudulent income tax returns to be filed with the IRS. Those fraudulent returns sought income tax refunds totaling more than $2.6 million.
“Stolen identity refund fraud continues to be a significant problem that harms both the IRS and taxpayers whose identities are fraudulently used without their knowledge,” said United States Attorney Eileen M. Decker. “This father and son pair prolifically defrauded the government and hundreds of taxpayers, earning them the significant sentences imposed by the court.”
As part of the scheme, Adel Cotton obtained the names and Social Security numbers of individuals without their knowledge and consent. Adel Cotton, with the help of others, prepared false Forms W-2 (IRS Wage and Tax Statements) in the names of the identity theft victims that reported false employment and income information, as well as false tax withholding amounts. Using the falsified information reported on the Forms W-2, Adel Cotton and others prepared fraudulent individual income tax returns claiming false tax refunds. The tax returns were filed without the knowledge or consent of the identity theft victims.
In his plea agreement, Heber Cotton admitted that the fraudulent tax returns filed as part of the scheme directed the IRS to mail the refund checks to addresses the that he and Adel Cotton controlled. Heber Cotton also admitted that he gave personal information associated with the identity theft victims to a co-conspirator who managed a bank, which the co-conspirator used to open bank accounts and cash the fraudulent refunds. Herber Cotton further admitted that, toward the end of the conspiracy, he paid the co-conspirator bank manager approximately 20 percent of each tax refund check that the bank manager cashed.
“These unscrupulous defendants, a father and son team, thought they had figured out a clever scheme to thwart the IRS and steal from American taxpayers,” stated IRS Criminal Investigation's Acting Special Agent in Charge Anthony J. Orlando. “IRS CI has made investigating refund fraud and identity theft a top priority and we will vigorously pursue those who undermine the integrity of the U.S. tax system.”
The investigation into Heber Cotton and Adel Cotton was conducted by IRS Criminal Investigation and the Federal Bureau of Investigation.
Topic: Financial FraudIdentity TheftTaxUpdated June 8, 2016
Central District of California DOJ / 16-128 / June 08, 2016