LOS ANGELES –The United States Attorney's Office and IRS Criminal Investigation today announced a 10-year prison sentence against one defendant and the filing of three criminal cases against four individuals who were involved in the preparation of fraudulent income tax returns.
While the vast majority of tax professionals provide honest and high-quality services, there are some dishonest return preparers who operate each filing season and perpetrate refund fraud, identity theft and other scams that hurt taxpayers. IRS Criminal Investigation and federal prosecutors work closely to shut down tax fraud schemes and prosecute the criminals behind them.
“The majority of tax return preparers are focused on helping taxpayers comply with their obligations to file timely and honest tax returns. The IRS relies upon these professionals to file truthful and accurate returns to deter tax fraud,” said Acting United States Attorney Sandra R. Brown. “Dishonest tax return preparers who defy the tax laws, whether for their own personal financial gain or to fraudulently obtain money for their clients, will be shut down permanently and face federal prosecution, which can result in significant prison sentences.”
“With the April 18th tax deadline looming, those who might consider preparing false tax returns should be aware of the extremely negative consequences of doing so,” stated Special Agent in Charge R. Damon Rowe of IRS Criminal Investigation. “The IRS enforces the nation's tax laws, but also takes particular interest in return preparers who unjustly enrich either themselves or their clients by preparing false claims for refunds. Be assured that the IRS Criminal Investigation, together with our partners at the U.S. Attorney's Office, will hold those who engage in similar behavior fully accountable.”
Oxnard Return Preparer Sentenced to 10 Years in Federal Prison in Scheme that Filed Nearly 13,000 Returns that Sought over $56 Million in Refunds
An Oxnard-based tax return preparer was sentenced this morning to 120 months in federal prison for his participation in a conspiracy to prepare and file approximately 12,825 fraudulent income tax returns that claimed more than $56 million in refunds.
Rodrigo Pablo “Paul” Lozano, also known as “El Profe,” 61, was sentenced by United States District Judge Philip S. Gutierrez.
Before the Internal Revenue Service was able to identify and stop the scheme, it had already paid out more than $23 million in refunds to Lozano and his co-conspirators. During today's sentencing, Judge Gutierrez ordered Lozano to pay restitution of $23,094,300 to the IRS.
Lozano owned and operated an income tax preparation business – Lozano & Associates – Ayuda (“help” in Spanish) – where he hired, trained and supervised primarily Latino females in their late teens or early 20s to prepare clients' federal income tax returns. Lozano operated his business by renting space from businesses that catered to Latino clients, such as a meat market on Hueneme Road in Oxnard. Lozano, a naturalized United States citizen from Mexico, went by the name “El Profe,” as he was a teacher before he began preparing tax returns.
Following a two-week jury trial last July, Lozano was found guilty of one count of conspiracy to defraud the United States. According to the evidence presented at trial, members of the conspiracy obtained Individual Tax Identification Numbers (ITINs), which are issued in lieu of a social security number to undocumented workers in the United States to allow them to file tax returns. The evidence demonstrated that co-conspirators provided Lozano with fake identification documents, such as Mexican Consular Identification Cards – also known as Matrícula cards – and birth certificates, which Lozano used to obtain ITINs in the names shown on the fake identification documents.
Using fake wage and tax statements (Forms W-2) and fictitious dependents, Lozano used the ITINs to file income tax returns that claimed the Additional Child Tax Credit, an IRS refund program designed to assist lower-income taxpayers with children. The fraudulent tax returns typically sought $3,000 to $4,000 in refunds. Lozano submitted nearly 13,000 false tax returns in an 18-month period in 2011 and 2012 while his employees were telling him that the identity and W-2 documents looked suspicious and the IRS was sending hundreds of warning notices stating that the tax returns and W-2s were invalid. Despite the repeated warnings, Lozano continued to direct his employees to file the fraudulent tax returns.
Lozano split the tax refunds with his co-conspirators. At times, he had employees count out tens of thousands of dollars in cash in a bathroom located next to his office space.
The case against Lozano was prosecuted by Assistant United States Attorney Byron J. McLain of the Major Frauds Section.
Owner of West Covina Tax Preparation Business and Associate Face Conspiracy and Other Federal Charges for Filing Hundreds of Allegedly Fraudulent Returns
The former owner of a West Covina tax preparation business has been arrested on charges that he and a co-conspirator used stolen identities to file 341 fraudulent federal and state tax returns that caused tax authorities to issue approximately $741,099 in tax refunds.
Ashrf Mohammed Aly, 42, the former owner and operator of Speedy Tax Service in West Covina, was arrested on April 3 by special agents with IRS Criminal Investigation and U.S. Immigration and Customs Enforcement's Homeland Security Investigations.
Aly and a second defendant in the case – Arthur Bakunts, 39 – were named in a 13-count indictment returned on March 14 by a federal grand jury. The indictment charges Aly and Bakunts with conspiracy, wire fraud, unlawful possession of another person's identification, and aggravated identity theft. Bakunts was arrested in February pursuant to a criminal complaint initially filed in this case.
According to court documents, Aly and Bakunts obtained stolen identities and filed fraudulent federal and state income tax returns in the names of the identity theft victims. The fraudulent tax returns were filed electronically from locations in Mexico and Chula Vista, and the refunds were diverted to Aly and Bakunts.
Bakunts had multiple identity profiles, tax refund checks, and other trappings of identity fraud in his car when he was stopped at a sobriety checkpoint in Glendale on May 24, 2014, according to court documents.
Aly and Bakunts each have entered not guilty pleas to the charges in the indictment. Both men are in custody without bond pending trial. United States District Judge Dale S. Fischer has scheduled trials on May 9 for Bakunts and May 30 for Aly.
If convicted of the charges in the indictment, each defendant would face a maximum sentence of 145 years, plus consecutive two-year sentences for each of four counts of aggravated identity theft.
The case is being prosecuted by Assistant United States Attorney Ranee A. Katzenstein.
Carson Resident Indicted for Tax Return Preparer Fraud
Minon Miller, 52, of Carson, was indicted last week on charges that she prepared and filed fraudulent federal income tax returns for both her clients and herself. Miller will be summonsed to appear for an arraignment in United States District Court.
A federal grand jury returned a 41-count indictment last Thursday that charges Miller with 37 counts of aiding and assisting in the preparation of fraudulent income tax returns, two counts of subscribing to fraudulent tax returns that she filed on her own behalf, and two counts of failing to file an individual tax return.
The indictment alleges that, from 2011 through 2016, Miller prepared and filed 37 tax returns on behalf of her clients that falsely claimed itemized deductions, business income and expenses, education credits and residential energy credits.
The indictment also alleges that Miller filed two personal tax returns that under- reported her actual income. Miller's 2010 and 2011 tax returns claimed gross receipts, respectively, of $12,155 and $26,200, when Miller knew she received substantially more than the figures on the tax returns, according to the indictment.
In addition, Miller failed to file her 2012 and 2013 individual income tax returns.
If she is convicted, Miller would face a statutory maximum sentence of three years in federal prison for each of the 41 counts in the indictment.
The case against Miller is being prosecuted by Assistant United States Attorney Paul Rochmes of the Tax Division.
Long Beach Resident Indicted for Tax Fraud
A Long Beach man has been named by a federal grand jury in a 10-count superseding indictment that alleges he prepared and filed fraudulent federal income tax returns for both his clients and himself.
Lewis Jefferson Jr., 60, was charged last Wednesday and will be ordered to appear for an arraignment in United States District Court.
The superseding indictment charges Jefferson with eight counts of aiding and assisting in the preparation of fraudulent income tax returns and two counts of subscribing to fraudulent tax returns that he filed on his own behalf.
The superseding indictment replaces a eight-count indictment filed in January.
The superseding indictment alleges that over the course of 2011, Jefferson prepared and filed eight tax returns on behalf of seven clients that claimed false itemized deductions. The taxpayers were not entitled to claim the deductions – which ranged from $4,272 to $38,493 – on their tax returns.
The indictment also alleges that Jefferson filed two personal tax returns that under-reported his actual income. The 2010 and 2011 tax returns claimed gross receipts of $207,545 and $242,590, respectively, and Jefferson knew he received substantially more gross receipts than stated on the returns, according to the indictment.
If he is convicted of the 10 counts in the indictment, Jefferson will face a statutory maximum penalty of 30 years in federal prison.
The case against Jefferson is being prosecuted by Assistant United States Attorneys Charles Parker and James C. Hughes of the Tax Division.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until proven guilty in court.
Most tax return preparers provide professional tax service. However, a few set out to use the personal and financial information provided to them to perpetrate fraud or other scams that can hurt their customers. Earlier this year, the IRS warned taxpayers that they are legally responsible for what is on the tax return even if someone else prepared the tax return. Taxpayers should be vigilant and ensure that their chosen return preparer reports accurate information. The IRS also warned the public about various schemes deployed by dishonest return preparers in its Dirty Dozen Tax Scams.
USAO – California, Central Updated April 10, 2017
Central District of California DOJ / 17-077 / April 10, 2017