Government Files Seven Lawsuits Nationwide to Block Alleged Scheme Involving Fraudulent Tax-Refund Claims

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, Oct. 28 /PRNewswire-USNewswire/ -- 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:

Case Fraudulent "Refunds" Requested

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.

SOURCE U.S. Department of Justice

U.S. Department of Justice Office of Public Affairs, +1-202-514-2007,
+1-202-514-1888 (TDD)