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Panama City Business Owner Named in Tax Scam Suit
10/28/09 - 12:47 PM
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Heather Kretzer - bio
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click for larger image Bay County, Fla:

The Department of Justice is filing a civil suit against 7 people accused of promoting a tax return scheme.  This includes a Panama City business owner.

According to U.S. District Court records a complaint for permanent injunction was filed Tuesday against Evelyn Johnston of Marianna.

Her business is listed as Abaco Executive Services, Inc. in Panama City.

The court filing says the scheme involves the tax filer producing fraudulent return claims with supporting IRS documents that result in refunds as large as $1m in exchange for compensation.

Court records state that Johnston requested $17.5m in fraudulent refunds, including refunds in excess of $800,000 for herself and her husband.

Choosing a Tax Preparer

The IRS says to follow these tips when hiring a tax preparer.

Avoid those who claim they can obtain larger refunds than others.

Beware of preparers who guarantee results or base fees on a percentage of the refund.

And finally check www.irs.gov for information about tax schemes and scams.

Department of Justice News Release

GOVERNMENT FILES SEVEN LAWSUITS NATIONWIDE TO BLOCK ALLEGED SCHEME INVOLVING FRAUDULENT TAX-REFUND CLAIMS

Promoters Allegedly Claim Massive Tax “Refunds”

Based on Phony Claims of Large Tax Withholding

WASHINGTON - The United States this week has filed civil injunction lawsuits across the country against seven individuals, the Justice Department announced today. The federal suits – filed in Los Angeles; Panama City, Fla.; Salt Lake City; Nashville, Tenn.; and Pocatello, Idaho – allege that the defendants promote a tax fraud scheme designed to siphon hundreds of millions of dollars from the U.S. Treasury through fraudulent tax refund claims.

Papers filed in the cases say the defendants prepared tax returns requesting a total of $562.4 million in bogus refunds. One defendant – Dick Jenkins, of Heber City, Utah – allegedly holds himself out as a CPA and requested a $210 million fraudulent refund for one customer. The Internal Revenue Service (IRS) catches the vast majority of the bogus tax returns and blocks the claimed refunds.

Under the tax fraud scheme, known as the “redemption” or “OID redemption” scheme, participants file a series of false IRS forms, including tax returns, amended returns, and Forms 1099 (including Form 1099-OID) or Forms W-2, to request fraudulent tax refunds based on phony claims of large income tax withholding. According to papers filed in these cases and earlier cases against other alleged scheme promoters, redemption scheme promoters are tax defiers who falsely tell customers that the federal government maintains “secret” accounts of money for its citizens. Promoters claim to be able to help customers access the secret funds by filing the false IRS forms.

Altogether, according to the IRS, redemption scheme participants (including customers of the defendants in the seven lawsuits filed this week) have requested a total of $3.3 trillion in fraudulent refunds.

“The scope of the misconduct alleged in these lawsuits is staggering,” said John A. DiCicco, Acting Assistant Attorney General for the Justice Department’s Tax Division. “The IRS and Justice Department are working together closely to ensure that those who promote or participate in this large-scale attempted raid on the Treasury face all appropriate civil and criminal sanctions. Anyone who participates in this scheme can expect to not get the claimed refund, face very large civil penalties (up to 20 percent of the false claim), and where appropriate, face criminal prosecution with possible substantial prison sentences if convicted.”

The Justice Department has previously brought other injunction suits to shut down redemption scheme promoters. A federal court in Sacramento found that tax preparer Teresa Marty had been using the same scheme to claim bogus refunds for her customers, and preliminarily barred her from preparing tax returns for others. The Government sued Nyla McIntyre and her Los Angeles-based company, Approved Financial Services Inc., to permanently bar them from preparing tax returns for others.

Listed below are details of the seven lawsuits, filed in U.S. District Courts in the cities indicated:

United States v. Dick Jenkins
Salt Lake City, Utah
$393 million
United States v. Susan Guan, et al.
Los Angeles, California
$4.5 million
United States v. Jacqueline Cornejo
Los Angeles, California
$12.1 million
United States v. Evelyn Johnston, et al.
Panama City, Florida
$17.5 million
United States v. Thanh Cao
Los Angeles, California
$34 million
United States v. Penny Jones
Pocatello, Idaho
$93 million
United States v. Karen Miller
Nashville, Tennessee
$8.3 million

TOTAL:
$562.4 million
The Tax Division also prosecutes criminal cases involving the redemption scheme and other schemes involving fraudulent uses of IRS forms, including Forms 1099. These prosecutions often result in significant prison sentences. In May 2009 in the Southern District of Florida, Willie Bernard Cameron was sentenced to 60 months in prison for filing a false $2.9 million refund claim based on a fictitious Form 1099-OID. At the sentencing hearing, Cameron espoused tax-defier positions, including sovereignty and redemption. Other successful prosecutions have involved the use of fraudulent Forms 1099 to harass federal and state officials. In May 2009 in the Northern District of Ohio, Jeanne Herrington was sentenced to 96 months in prison for conspiracy to defraud the IRS and for retaliating against federal prosecutors by filing false Forms 1099 in their names. In May 2009 in the Central District of California, Giancarlo Pertile was sentenced to 60 months incarceration and fined $75,000. Evidence at sentencing showed that, after his indictment for tax evasion, Pertile filed Forms 1099-OID against the judge and others.

In the past decade, the Justice Department’s Tax Division has obtained more than 430 injunctions against tax fraud promoters and dishonest tax return preparers. Information about these cases is available on the Justice Department’s Web site.

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Click Here to read the official complaint (.pdf)

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