LOS ANGELES– A Los Angeles man pleaded guilty late yesterday afternoon to conspiring to use 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, 39, of Los Angeles, pleaded guilty to one count of conspiracy to defraud the United States by obtaining the payment of false claims, namely tax refunds.
According to a plea agreement filed in the case, beginning in December 2008 and continuing through March 2010, Heber Cotton and his co-defendant caused at least 275 fraudulent income tax returns to be filed with the IRS, which sought income tax refunds of over $2.6 million.
The co-defendant – Adel Cotton, 63, a Hacienda Heights resident who is currently in federal prison after pleading guilty in another case involving fraudulent tax refunds – is pending trial.
In relation to the tax fraud scheme, the indictment in the case alleges that Adel Cotton obtained the names and Social Security numbers of individuals without their knowledge and consent. Adel Cotton and others not named in the indictment allegedly 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 allegedly prepared fraudulent individual income tax returns claiming false tax refunds that were filed without the knowledge or consent of the identity theft victims.
In his plea agreement, Heber Cotton admitted that he and Adel Cotton directed the Internal Revenue Service to mail the fraudulent refunds to addresses that he and Adel Cotton controlled. Heber Cotton also admitted that he gave personal information associated with 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. Heber 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 he bank manager cashed.
Heber Cotton pleaded guilty before United States District Court Judge Michael W. Fitzgerald, who is scheduled to sentence the defendant on March 7, 2016. At that time, Heber Cotton will face a statutory maximum sentence of 10 years in federal prison and a fine of $250,000.
Adel Cotton was indicted along with Heber Cotton in September 2015 and is charged with one count of conspiracy to defraud the United States with respect to claims. Adel Cotton is scheduled to go on trial before Judge Fitzgerald on March 8, 2016.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty in court.
The investigation into Heber Cotton and Adel Cotton was conducted by IRS Criminal Investigation and the Federal Bureau of Investigation.
USAO – California, Central Updated November 25, 2015
Central District of California DOJ / 15-138 / November 24, 2015