# Click on a section to go to that page. (2022) > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/agency%3Airs%3A090eb75ebce14149 ## Record - **Collection:** Agency decision - **Document type:** Agency decision ## Text 20 22 ANNUAL REPORT TABLE OF CONTENTS Click on a section to go to that page. 03 Message from the Chief 23 Field Office Map 04 2022 Snapshot 24 Atlanta 05 Tax Crimes 25 Boston 06 Non-Tax Crimes 26 Charlotte 07 Cybercrimes 27 Chicago 08 Sanctions Related Investigations 28 Cincinnati 09 Narcotics and National Security 29 Dallas 10 Specialized Units 30 Denver 11 Commissioner’s Protection Detail 31 Detroit 12 International Operations 32 Houston 13 Undercover Operations 33 Los Angeles 14 Digital Forensics 34 Miami 15 Center for Science and Design 35 Newark 16 Advanced Analytics & Innovation 36 New York 17 National Criminal Investigation Training Academy 37 Oakland 18 Asset Recovery and Investigative Services 38 Philadelphia 39 Phoenix 19 Office of Communication 40 Seattle 20 Professional Staff and Workforce Development 41 St. Louis 42 Tampa 43 Washington D.C. 44 Appendix 21 Equity, Diversity, and Inclusion 22 Outreach and Community Engagement Navigation Menu Table of Contents 2022 Snapshot Data Field Office Map Appendix: Investigation Data IRS:CI Annual Report 2022 02 MESSAGE FROM THE CHIEF IRS Criminal Investigation (CI) accomplished a list of successes in fiscal year (FY) 2022, which rivals any year that I can remember in my nearly 30 years with the agency. CI remains the sixth largest federal law enforcement agency, and we are the only federal law enforcement agency that spends 100% of its time on financial investigations. In FY 2022, we investigated some of the largest and most sophisticated tax crimes, and we identified more than $31 billion in tax fraud and other financial crimes. Our bread and butter remains tax, as no other agency has the authority to investigate criminal violations of the Internal Revenue Code. While navigating our way through the backend of a global pandemic, we seized record amounts of data and cryptocurrency, led some of the largest tax cases on record and spearheaded first-of-its-kind national and international initiatives aimed at developing and strengthening partnerships in the public and private sectors. Our work has a global impact. CI is a key player in international cyber investigations and sanctions-related enforcement efforts, including through Task Force KleptoCapture, which targets Russian oligarchs and other would-be sanctions evaders. Through our increasing use of social media, we reached millions of taxpayers around the world, educating them about the important role we play in the stability of the financial system by investigating tax and other financial crimes. Perhaps the statistic I continue to be most proud of is our conviction rate, which again tops 90%. We are thorough and good at what we do. As I tell crowds around the country, if a CI special agent has you in their crosshairs, there is a good chance you are going to jail. In FY 2022, CI operated with the agency’s guiding principles in mind. Our agents honor the badge every day by working with urgency, integrity, and professionalism, even when confronted with misguided media reports fueled by those who just do not know who we are or what we do. Our work protects the American public from cyber criminals, Ponzi schemes, and bad actors posing as legitimate tax preparers. There are real victims to the crimes we investigate, and we keep those victims in mind as we bring criminals to justice. We preserve CI’s legacy as the world’s finest financial investigators – not by calling ourselves the best, but by writing our own chapter each year in the storied history books of this great agency. This past year, we took down the world’s largest darknet marketplace and separately led the single largest financial seizure in the history of our government. We remain masters of our craft, and we continually provide trainings to foreign law enforcement agencies around the world. In FY 2022, we conducted in-person trainings in locations ranging from Germany to Palau, which covered financial investigative techniques and cyber topics like cryptocurrency. By sharing our expertise with countries across the globe and strengthening these partnerships, we made the world a smaller place for criminals to operate. We continue to inspire the future through recruiting and educational and outreach programs. We conducted dozens of CI Citizen Academies around the country to portray what it is like to be a special agent in our organization. It is easy to look back on a year like 2022 and be happy with our success, but we are already laying the groundwork to do more in 2023. I could not be prouder of our agency, and I look forward to continued success in the future. –Jim Lee, Chief 03 2022 SNAPSHOT $5.7B DIRECT INVESTIGATIVE TIME SPENT Public Corruption TAX FRAUD IDENTIFIED Cybercrimes STAFFING $26.9B Professional Staff 4,017 2.97 PETABYTES OF DIGITAL DATA 71.7% 2,935 3,015 11.6% 938 889 INVESTIGATION SOURCES 6% 2,077 2,046 1,600 Financial Crimes Enforcement Network 3% FY2021 FY2022 CI’s staffing levels are by fiscal year and reflect an actual count of employees based on the Employee Master Database as of PP19. State/Local Government 6% 27% U.S. Attorney’s Office 16% 16% FY2020 OCDETF Organized Crime Drug Enforcement Task Force 1.5% Uncategorized IRS:Civil FY2010 NARCOTICS Money Laundering Identity Theft Public 800 15.2% Refund Fraud 2,030 CONVICTIONS 2,400 2,761 1564 2,858 828 1,256 1837 CONVICTION RATE TAX Employment Tax 3,200 90.6% NON-TAX Abusive Tax Schemes 4,000 WARRANTS EXECUTED REFERRED FOR PROSECUTION General Fraud General Tax Fraud Special Agents OTHER IDENTIFIED FINANCIAL CRIMES 1210 Corporate Fraud International 27% Other Federal Agencies IRS:CI Annual Report 2022 04 TAX CRIMES IRS: Criminal Investigation (CI) is the criminal investigative arm of the IRS. As such, investigating tax crimes continues to be a primary focus for the agency. CI works closely on tax-related investigations with a host of federal, state, and local law enforcement partners, as well as foreign tax and law enforcement agencies, and Prosecution of these cases supports overall IRS compliance goals and enhances voluntary compliance with U.S. tax laws. Click the links below to read Case Highlights: Tampa Field Office Philadelphia Field Office GENERAL TAX FRAUD REFUND FRAUD PROGRAM ABUSIVE TAX SCHEMES General tax fraud investigations are at the core of CI’s law enforcement efforts and directly influence the American public’s confidence and compliance with our country’s tax laws. The integrity of our tax system depends heavily on the taxpayers’ willingness to self-assess taxes owed and voluntarily file tax returns. CI investigations help show law-abiding taxpayers that individuals who deliberately underreport or omit income from their tax returns will be held accountable for their actions. CI looks at high-income taxpayers who have a filing requirement, but deliberately choose not to file returns and pay taxes owed, and targets criminals who use two sets of financial records, make false entries in books and records, claim personal expenses as business expenses, claim false deductions or credits against taxes owed, and hide or transfer assets. CI special agents use their financial investigative expertise to uncover and quantify the seriousness of these schemes. They also work closely with Department of Justice (DOJ) prosecutors to gather the necessary evidence to bring cases to a successful conclusion. The Refund Fraud Program consists of three parts: Questionable Refund Program (QRP), Stolen Identity Refund Fraud (SIRF) investigations, and the Return Preparer Program (RPP) for both individuals and businesses. These programs investigate individuals who file fraudulent tax returns to steal government funds. This type of theft erodes voluntary compliance and taxpayer confidence in the integrity of the tax system. It also results in the loss of vital funds needed to support government programs, many of which impact the most vulnerable Americans. CI investigates promoters and clients, who willfully violate tax laws by participating in domestic and offshore tax schemes. The schemes are usually complex and involve multiple layers of transactions to conceal the true nature and ownership of the income and/or assets. Participants create structures, such as trusts, foreign corporations, and partnerships, to make it appear that a trustee, nominee, non-resident alien, or other foreign entity is the owner of the assets and income, when in fact, a U.S. taxpayer maintains true ownership and control. The QRP identifies fraudulent claims for tax refunds. Generally, these schemes involve individuals filing multiple fraudulent tax returns using the personally identifiable information (PII) of taxpayers to facilitate the scheme. A significant number of these investigations are also considered identity theft investigations. Identity theft refund fraud occurs when someone uses the PII of another individual, without the person’s permission. The PII could include another person’s name, Social Security number or address. These cases are commonly referred to as SIRF investigations. The crime usually occurs when an identity thief uses a legitimate taxpayer’s identity to file a fraudulent tax return and claim a refund. Generally, the identity thief will use a stolen Social Security number and other PII to file a fraudulent tax return and attempt to get a refund early in the filing season before the legitimate taxpayer files their tax return. In contrast, RPP investigations involve corrupt return preparers who orchestrate the preparation and filing of false income tax returns for taxpayers. These preparers often claim inflated personal or business expenses, false deductions, excessive exemptions, and unallowable tax credits. The preparers’ clients may or may not know their returns were falsified. 699 SENTENCED EMPLOYMENT TAX FRAUD Employment tax fraud includes cases involving employee leasing, paying employees in cash, filing false payroll tax returns, failing to file payroll tax returns, and “pyramiding.” Pyramiding occurs when a business withholds taxes from its employees, but then intentionally fails to forward the tax payments to the IRS. After a liability accrues, the individual starts a new business and begins to accrue a new liability under the new entity. Employment taxes include federal income tax withholding, Social Security taxes, and federal unemployment taxes. Some employers withhold taxes from their employees’ paychecks and use the funds for their personal expenses. Employment tax fraud can have serious ramifications for both employers and employees. 789 PROSECUTIONS RECOMMENDED 1388 INVESTIGATIONS INITIATED 05 NON-TAX CRIMES CI also uses its financial expertise to investigate a multitude of non-tax-related crimes that range from public corruption to fraud. Special agents focus on complex money-laundering schemes, where individuals launder their ill-gotten gains by making the money appear as if it came from legitimate sources. Sometimes an individual will employ a third party or a professional third-party money launderer. Frequent money laundering techniques include manipulating currency reporting requirements, layering transactions, the use of cryptocurrency or Black-Market Pesos, or the international movement of funds. Click the links below to read Case Highlights: Oakland Field Office Miami Field Office MONEY LAUNDERING CORPORATE FRAUD BANK SECRECY ACT PROGRAM Money laundering occurs when criminals or criminal organizations try to disguise the illicit nature of their money by introducing it into the stream of legitimate commerce and finance. In today’s global economy, criminals can use a computer, tablet, or smart phone to quickly move large amounts of criminally derived funds into or through the United States and foreign financial institutions. Criminals launder money through a wide variety of enterprises like banks, money transmitters, stock brokerage houses, casinos, and virtual currency exchanges. The flow of illegal funds around the world is estimated to be in the hundreds of billions of dollars. The corporate fraud program concentrates on violations committed by publicly traded or private corporations and their senior executives. Some specific criminal acts involving corporate fraud include falsifying, fabricating, or destroying company records. Fraudsters then use false information to complete tax returns, financial statements, and reports for regulatory agencies or investors. Corporate fraud can also include executives who receive unauthorized compensation, unapproved payments and bonuses, corporate funds, or fraudulent loans used to pay personal expenses. The Bank Secrecy Act (BSA) mandates the disclosure of foreign bank accounts, the reporting of certain currency transactions conducted with a financial institution, and the reporting of the transportation of currency across U.S. borders. The Financial Crimes Enforcement Network (FinCEN) is tasked with administering the BSA, but FinCEN does not have criminal enforcement authority. The U.S. Treasury Secretary delegated all criminal enforcement of the BSA to CI. Other federal agencies can investigate criminal violations of the BSA, but CI is the only federal agency that actively reviews all BSA data for leads and possible criminal violations. Through the analysis of BSA data, CI has identified significant, complex money laundering schemes and other financial crimes. CI special agents are experts at uncovering money trails through traditional and virtual financial banking systems. They take part in a variety of investigations, as well as financial and narcotics task forces like Organized Crime Drug Enforcement Task Force (OCDETF) and the High Intensity Drug Trafficking Area (HIDTA). PUBLIC CORRUPTION CI investigates elected and appointed individuals who violate the public’s trust. These individuals are from all levels of government including local, county, state, and federal, as well as foreign officials. Public corruption investigations include such criminal offenses as bribery, extortion, embezzlement, kickbacks, tax fraud, and money laundering. Corruption by public officials results in the loss of taxpayer dollars. In addition, the United States is often a desirable destination for the monies of corrupt foreign officials. This type of corruption undermines democratic institutions and threatens national security. Public officials who violate the public trust are often prosecuted to the fullest extent of the law, with large fines and jail time for offenders. GENERAL FRAUD CI special agents also investigate healthcare, financial institution, and COVID-19-related fraud. COVID-19-related fraud includes schemes targeting the Paycheck Protection Program (PPP), Economic Injury Disaster Loan (EIDL) program, and Unemployment Insurance (UI) programs. Special agents often work with federal, state, and local law enforcement partners, as well as with foreign tax and law enforcement agencies, to bring income tax and money laundering charges to criminal cases, which enhance the prosecutors’ effectiveness to combat these and other types of fraud. CI’s BSA program has grown substantially since its start in early 2000. CI now uses various data analytics tools to actively analyze BSA data and identify leads for possible investigation. CI-led SAR Review Teams (SAR RTs) and Financial Crimes Task Forces (FCTFs) exist in all 94 judicial districts across the country, and CI currently has upwards of 200 special agents and investigative analysts working on SAR RTs and FCTFs. The SAR RTs and FCTFs focus on specific geographic areas and involve collaboration between CI and federal, state, and local law enforcement agencies for identifying and investigating financial crimes, including BSA violations, money laundering, narcotics, and more. 792 699 SENTENCED 1048 789 PROSECUTIONS RECOMMENDED 1388 1170 INVESTIGATIONS INITIATED 06 CYBERCRIMES Recognizing that many aspects of our lives are increasingly dependent on technology and the internet, CI continues to focus investigative efforts on holding accountable those who exploit technology for nefarious purposes. Digital assets provide opportunities for responsible financial innovation, expanding access to safe and affordable financial services, and reducing the cost of domestic and cross-border funds transfers and payments, including the continued modernization of public payments systems. Despite the many promising opportunities digital assets present, CI must mitigate the illicit finance and national security risks posed by the misuse of digital assets. Digital assets pose a significant risk of facilitating money laundering, cybercrime and ransomware, narcotics and human trafficking, terrorism, and proliferation financing. Digital assets may also be used as a mechanism to circumvent U.S. tax law and financial sanctions. In FY 2022, the CI cybercrimes program began to reap the benefits of a strategic realignment to mitigate many of these risks. The Office of Cyber and Forensic Services (CFS) was created in FY 2021 to bring together our digital asset investigation, cybercrime investigation, digital forensics, and physical forensics support efforts under the same roof. Among its priorities, CFS supports criminal investigations agency-wide regarding the illicit uses of digital assets and how they can be used to exploit the U.S. tax and financial system. Specifically, CFS supports the Eastern (Washington D.C.) and Western (Los Angeles) based Cyber Crimes Units (CCUs) CI’s flagship digital asset investigations units. The units are charged with investigating the highest impact cases of theft, fraud, facilitation, and tax crimes, where digital assets are used to facilitate a crime or are proceeds of a crime. From a traditional but massive scale pyramid scheme made possible by leveraging the speed and reach of the internet to the most cutting-edge and complex exploitation of decentralized finance protocols, the CCUs are always ready to lead or assist high-impact investigations with domestic and foreign partners. In FY 2023, CI will establish the Advanced Collaboration and Data Center (ACDC) to modernize its investigative practices. The ACDC will provide centralized access to data and resources to effectively support CI’s mission of deterring tax and financial crime. The concept is a support-focused, task force model approach, which combines skillsets of subject matter experts, cybercrime special agents, computer scientists, and analysts to tackle the most prolific and sophisticated crimes. The ACDC will also facilitate collaboration with law enforcement and partners in the government and private sector to ensure CI field offices have the necessary resources to pursue highly technical and digital payment-facilitated crimes. The ACDC will enhance CI and our partners’ abilities to access, investigate, and analyze information and evidence in challenging areas such as: ► Dark web (research, monitoring, investigating illicit actors/marketplaces) ► Cryptocurrency (tracing, monitoring, tax basis calculating) ► Social media and other open-source intelligence As new and innovative digital technologies are developed, the CFS continues to evolve to meet the challenges of those attempting to exploit them for personal gain. In FY 2022, CI special agents were instrumental in bringing charges related to two individuals who developed a “rug pull” scheme to defraud Non-fungible Token (NFT) investors. The two subjects allegedly generated approximately $1.5 million in crypto­ currency from the sale of an NFT, then abruptly abandoned the project and retained the investors’ funds. It is also alleged that the subjects were preparing to launch another NFT investment opportunity and execute a similar scheme. The CFS’s investigative efforts and law enforcement actions helped mitigate risks presented by digital assets and held bad actors accountable for many years. The CFS is constantly taking additional steps to evolve, especially as threats evolve in areas such as decentralized finance, peer-to-peer payments, and anonymity-enhanced cryptocurrencies. Due to relatively limited resources, the CFS focuses on cases where they can have the most significant impact. Cybercrime special agents surrounded by server infrastructure. CASE HIGHLIGHTS Founders of Crypto ICO Sentenced to Combined 8 Years in Prison In March 2022, Bitqyck founders Bruce Bise and Samuel Mendez were sentenced to federal prison for defrauding more than 13,000 investors through a cryptocurrency-related scheme raising approximately $24 million. Instead of fulfilling their promises to their investors, Bise and Mendez used the funds on personal expenses, including casino trips, cars, luxury home furnishings, art, and rent. In 2016, the pair promoted the company’s cryptocurrency, Bitqy, as a way for “those individuals who missed out on bitcoin” to get rich. In an effort to legitimize its operation, the company charac­ terized the cryptocurrency as an “earned gift” that rewarded consumers for certain internet purchases. The Bitqyck website also promised each Bitqy token was worth 1/10th of Bitqyck common stock; however, the only shares of common stock Bitqyck issued were to Bize and Mendez. Nine months after launching Bitqyck, Bise and Mendez began marketing another token claiming the token allowed investors to join “bitcoin mining operations” that never existed. Both defendants pleaded guilty to underreporting their income to the IRS and failing to file corporate tax returns, which resulted in a tax loss totaling more than $1.6 million. The defendants also agreed to pay an $8.3 million penalty related to a civil settlement with the U.S. Securities and Exchange Commission. Joint Federal Investigation Leads to Shutdown of Largest Online Darknet Marketplace In April 2022, a joint federal investigation led to the seizure of the world’s largest and longest running darknet market. Hydra accounted for an estimated 80 percent of all darknet market-related cryptocurrency transactions. Since 2015, Hydra received approximately $5.2 billion in cryptocurrency. Hydra was an online criminal marketplace that enabled users in mainly Russian-speaking countries to buy and sell illicit goods and services, including illegal drugs, stolen financial information, and fraudulent identification documents. Hydra users could search for vendors selling identification documen­ tation, such as U.S. passports or driver’s licenses, and filter or sort by the item’s price. Vendors of false identification documents also offered to customize the documents based on photographs or other information provided by the buyers. Transactions on Hydra were conducted using cryptocurrency, and Hydra’s operators charged a commission for every transaction on their platform. In addition to the shutdown of Hydra, the Justice Department filed criminal charges against Dmitry Olegovich Pavlov, a resident of Russia, for conspiracy to distribute narcotics and conspiracy to commit money laundering in connection with Hydra. As an administrator, Pavlov allegedly conspired to further the site’s success by providing the infrastructure to operate in the Dark web environment. Largest Single Financial Seizure In Government History In February 8, 2022, the Department of Justice announced the arrest of Ilya Lichtenstein and his wife, Heather Morgan, for an alleged conspiracy to launder cryptocurrency that was stolen during the 2016 hack of Bitfinex, a virtual currency exchange. Approximately 119,754 bitcoin (BTC) was stolen from the exchange and was valued at approximately $4.5 billion at the time of the arrest. The CI Cyber Crime Unit, with the assistance of other U.S. authorities traced the stolen funds on the BTC blockchain to various destinations, including accounts at the darknet market AlphaBay, seven interconnected accounts at U.S.-based virtual currency exchanges, various unhosted BTC wallets, accounts owned by the defendants at six virtual currency exchanges, and to an unhosted BTC wallet containing a majority of the stolen bitcoin. Law enforcement was able to access the wallet by decrypting a file saved to Lichtenstein’s cloud storage account (obtained pursuant to a search warrant) that contained a list of 2,000 virtual currency addresses, along with corresponding private keys. CI special agents lawfully seized and recovered more than 94,000 stolen bitcoin, valued at over $3.6 billion at the time of seizure, which was the largest of its kind. A cybercrime special agent uses specialized crypto tracing tools and software. IRS:CI Annual Report 2022 07 SANCTIONS-RELATED INVESTIGATIONS CI collaborated with the U.S. law enforcement community to track down Russian financial criminals through a multi-agency task force, Task Force KleptoCapture. On March 2, 2022, the task force was established to locate sanctioned Russians and their assets and to bring them to justice. Between March and May, CI identified and tracked 19 sanctions-related individuals, targets, and entities. This number grew to nearly 50 by September 2022. CI works with the Treasury Office of Foreign Asset Control and the Financial Crime Enforcement Network to identify, develop, and add new individuals and entities to the Special Designated Nationals list as part of the Treasury Department’s Russian Elites, Proxies, and Oligarchs Task Force efforts. Much of the international success of CI special agents stems from a robust and aggressive international program that includes 11 foreign posts and memberships in multiple international taskforces. CI special agents are assigned within the Drug Enforcement Administration Special Operations Division, International Organized Crime Intelligence and Operations Center, the Organized Crime Drug Enforcement Task Force’s (OCDETF) Fusion Center, and the Joint Criminal Opioid Darknet Enforcement taskforce. CI also spearheads the Joint Chiefs of Global Tax Enforcement (J5), an alliance between the criminal tax authorities of Australia, Canada, the Netherlands, the United States, and the United Kingdom. J5 efforts focus on combatting international tax and financial crimes through proactive collaboration using each country’s collective resources. The J5 is working to identify potential sanctionsevaders or sanctioned assets, and to develop a global strategy to deter Russia’s aggression. In addition to the Russian sanctions, CI remains committed to stopping international organized crime syndicates, as well as other foreign nationals violating U.S. sanctions. CI prioritized training and the deployment of cryptocurrency, blockchain, and open-source intelligence technologies to unravel complex cyber-financial criminal schemes. When a foreign corrupt government official receives bribes, they often use a third-party to move or launder those illegal proceeds to buy properties, cryptocurrencies, and many other assets. If any of the funds move into or through U.S. financial system, CI can trace the money. Recent examples of CI’s global efforts involving sanctions enforcement and other international crimes include: Alleged Leader of Eastern European Organized Crime Syndicate Extradited On September 9, 2022, Viktor Zelinger, the alleged leader of an Eastern European organized crime syndicate that operated in the Brighton Beach, Sheepshead Bay, and Coney Island neighborhoods of Brooklyn was extradited from Switzerland on a nine-count superseding indictment. Zelinger was linked to high-level Russian mafia members known as “Thieves in Law” or “Thieves.” Zelinger is charged with racketeering, racketeering conspiracy, arson, arson conspiracy, illegal gambling, illegal gambling conspiracy, extortionate collection of credit, and two counts of extortionate collection of credit conspiracy. Zelinger is a naturalized U.S. citizen with dual Ukrainian citizenship. CI investigated this case as part of an OCDETF Strike Force Initiative. Alleged Russian $4 Billion Cryptocurrency Money Launderer Extradited On August 4, 2022, Alexander Vinnik, a Russian citizen and an alleged operator of the illicit cryptocurrency exchange BTC-e, was extradited from Greece to face charges in the Northern District of California. Vinnik was charged in a 21-count superseding indictment in January 2017, based on evidence obtained in a joint investigation between CI and other federal law enforcement. Vinnik was taken into custody in Greece at the request of the United States. According to the indictment, Vinnik and his co-conspirators allegedly owned, operated, and administrated BTC-e, a significant cybercrime and online money laundering entity that allowed its users to trade in bitcoin with high levels of anonymity. They developed a customer base heavily reliant on criminal activity. The exchange is alleged to have laundered more than $4 billion of criminal proceeds. Special agents train German and Swiss officials on human trafficking investigative techniques. Special Agents Train German, Swiss Officials on Human Trafficking Investigative Techniques On July 28, 2022, CI special agents teamed up with other agencies in Frankfurt, Germany, to train German law enforcement counterparts on the latest investigative techniques to combat human trafficking. U.S. Mission Germany hosted approximately 20 prosecutors and law enforcement officials from the State Criminal Police Offices of Berlin, Saxony, and Hesse; the German Federal Police; the German Federal Criminal Police, and the Financial Intelligence Unit. Traffickers continue to exploit domestic and foreign victims in Germany, and global crises place already vulnerable persons at increased risk. Of note, Ukrainian refugees, predominantly women and children, fleeing Russia’s war on Ukraine have become vulnerable to trafficking. Special agents in Frankfurt, Germany. IRS:CI Annual Report 2022 08 NARCOTICS AND NATIONAL SECURITY CI contributes to the success of U.S. national security programs by investigating the finances of transnational criminal organizations involved in narcotics trafficking, human trafficking, terrorism financing, economic espionage, and money laundering. CI special agents are known for their expertise in following the money trail, and they use this expertise to investigate criminal violations of the Internal Revenue Code, Bank Secrecy Act, federal money laundering statutes, and the International Emergency Economic Powers Act. They trace financial transactions between individuals, businesses, and criminal organizations to identify sophisticated schemes designed to disguise illegal transactions. Beginning in FY 2021, N2S2 established the Cyber-OCDETF initiative. This pilot program was created to work with field offices, contractors, and law enforcement partners on cyber-related narcotics investigations. During FY 2022, N2S2 finalized the initiative and expanded the investigative resources available to all field offices. This resulted in better use of available resources, and correspondingly, a greater number of cyber-related narcotics investigations. N2S2 continues partnering with the FBI-led Joint Criminal Opioid and Darknet Enforcement (JCODE) task force, where the CI liaison officer aids in deconfliction, coordination, and development of investigations. The Narcotics and National Security Section (N2S2) has senior liaison officers who provide interagency coordination, deconfliction, advice, strategy, financial analysis, network exploitation, and coordination of field office resources, in support of a whole of government approach to our national security threats. CI continues its successful counterintelligence program by serving as an integral member of the National Counterintelligence Task Force (NCITF). The NCITF aims to protect the U.S. government research through education and awareness. The threat of foreign government infiltration and diversion or theft of sensitive and critical infrastructure materials remains extremely high. All threats against U.S. interests and critical infrastructure have a real cost to our nation, and, in almost all cases, involve financial crimes. During FY 2022, CI increased investigative resources at the NCITF, resulting in public indictments and prosecutions. Criminal tax charges and Foreign Bank and Financial Accounts (FBAR) violations for underreported or unreported income have been critical tools in the effort to address egregious violators. CI focuses heavily on narcotics and financial investigations related to high-priority targets identified by OCDETF. These cases often involve the convergence of program areas, and these prosecutions have a greater effect on dismantling large transnational criminal organizations. Case Example In December 2021, Charles Lieber, the former chair of Harvard University’s Chemistry and Chemical Biology Department, was convicted by a federal jury for lying to federal authorities about his affiliation with People’s Republic of China’s Thousand Talents Program and the Wuhan University of Technology (WUT) in Wuhan, China. He also failed to report income he received from WUT. China’s Thousand Talents Plan is one of the most prominent Chinese talent recruitment plans designed to attract, recruit, and cultivate high-level scientific talent in furtherance of China’s scientific development, economic prosperity, and national security. Unbeknownst to his employer, Harvard University, Lieber became a “Strategic Scientist” at WUT and, later, a contractual participant in China’s Thousand Talents Plan from 2012 through 2015. Under the terms of Lieber’s Thousand Talents contract, WUT paid Lieber a salary of up to $50,000 per month and living expenses of up to $150,000 and awarded him more than $1.5 million to establish a research lab at WUT. Lieber lied to federal authorities about his involvement in the Thousand Talents Plan and his affiliation with WUT. Furthermore, Lieber failed to report the income earned from the Thousand Talents contract and failed to file FBARs for the foreign accounts used to receive his payments. MULTI-AGENCY TASK FORCES WITH CI PRESENCE AND PARTICIPATION INCLUDE: ► Organized Crime Drug Enforcement Task Force (OCDETF) - Executive Office ► OCDETF Regional Coordinators ► Drug Enforcement Administration Special Operations Division (SOD) ► OCDETF Fusion Center (OFC) ► International Organized Crime Intelligence and Operations Center (IOC2) ► Joint Criminal Opioid Darknet Enforcement (J-CODE) ► National Joint Counterterrorism Task Force (NJTTF) ► National Counterintelligence Task Force (NCITF) ► High Intensity Drug Trafficking Area (HIDTA) Global Operations Director with N2S2 special agents. IRS:CI Annual Report 2022 09 SPECIALIZED UNITS INTERNATIONAL TAX AND FINANCIAL CRIMES The International Tax and Financial Crimes group (ITFC) was created in late 2017 and is the nation’s foremost investigative authority on offshore tax evasion. Since its inception, the ITFC increased compliance and reduced the tax gap through several well-publicized programs and investigations, including the Swiss Bank Program and the UBS, Credit Suisse, and HSBC investigations. As a specialty group within the Washington, D.C. Field Office, the ITFC is made up of special agents from across the United States who are experts in international tax investigations and use their skills to identify and pursue international evasion schemes. Internally, ITFC works with CI’s investigative analysts, foreign-based attachés, personnel from Special Investigative Techniques and International Operations, while creating a network of resources that assist in identifying leads, analyzing data, and performing investigative tasks. The ITFC leverages strategic partnerships with external agencies, including the U.S. Attorney’s offices throughout the country, the Department of Justice Tax Division, and other law enforcement agencies. The ITFC is also a major contributor to the Joint Chiefs of Global Tax Enforcement (J5) and collaborates with the other J5 countries (United Kingdom, Canada, Australia, and Netherlands) to further CI’s international mission to combat offshore tax evasion. The ITFC identifies and investigates enablers, financial institutions, third-party asset managers, promotors, referral agents, and expatriated U.S. citizens who use international jurisdictions for tax fraud. The group also ensures compliance with the Bank Secrecy Act by identifying and investigating U.S. taxpayers who fail to report their foreign accounts. SIGNIFICANT CASE Founder of Russian Bank Sentenced for Felony Tax Conviction Arising from Scheme to Evade Exit Tax while Renouncing his U.S. Citizenship Oleg Tinkov, the founder of a Russian Bank, was sentenced October 2021 for tax fraud after he renounced his U.S. citizenship to avoid paying his share of taxes. Tinkov also paid more than half a billion dollars in the largest personal tax judgment known. Tinkov was a naturalized U.S. citizen when he founded Tinkoff Credit Services (TCS) in late 2005 or 2006. TCS is a Russian-based branchless bank that provides its customers with online financial and banking services. Through a foreign entity, Tinkov indirectly held the majority of TCS shares. In October 2013, TCS held an initial public offering (IPO) on the London Stock Exchange and became a multi-billion dollar, publicly traded company. As part of going public, Tinkov sold a small portion of his majority shareholder stake for more than $192 million, and his assets following the IPO had a fair market value of more than $1.1 billion. Three days after the successful IPO, Tinkov went to the U.S. Embassy in Moscow, Russia to relinquish his U.S. citizenship. As part of his expatriation, Tinkov was required to file a U.S. Initial and Annual Expatriation Statement. The form requires anyone with a net worth of $2 million or more to report the constructive sale of their assets worldwide to the IRS as if those assets were sold on the day before expatriation. Tinkov filled out the expatriation form himself falsely reporting that his net worth was only $300,000, and he filed a 2013 tax return that falsely reported his income as only $205,317. In addition, Tinkov did not report any of the gain from the constructive sale of his property worth more than $1.1 billion, nor did he pay the applicable taxes as required by law. In total, Tinkov caused a tax loss of $248,525,339, which he paid in full, along with substantial penalties and interest, as part of his plea. Together with tax liabilities for other years, Tinkov paid $508,936,184, which is the largest individual payment tracked by the IRS. GLOBAL ILLICIT FINANCIAL TEAM Global Illicit Financial Team (GIFT) is a national task force led by CI with the focus of investigating organizations illicitly moving money, which is used to support international crime organizations. As a major conduit of CI’s money laundering strategy and a focal point for the CI Money Laundering Cadre, GIFT’s talented special agents are hand-picked from field offices for their extensive experiences in investigating complex cases and for their abilities to lead multi-agency teams. Under the leadership of a supervisory special agent in the Washington, D.C. Field Office, GIFT brings a powerhouse of international money laundering expertise to partnerships with other federal law enforcement agencies. contract fraud, the sale of contraband goods, terror financing, and sanctions violations. With previous large-scale sanctions case experience involving financial institutions, GIFT became a key partner in the Department of Justice KleptoCapture Task Force. Since its inception in 2010, GIFT investigations resulted in seizures and forfeitures of $5.2 billion, fines and penalties on settlements of over $15 billion, and a conviction rate of over 90%. ALCOHOL AND TOBACCO TAX AND TRADE BUREAU Reminiscent of Eliot Ness and Elmer Irey’s “T-Men,” CI continues its partnership with the Alcohol and Tobacco Tax and Trade Bureau (TTB) to combat illicit alcohol, tobacco, and ammunition trade. The TTB was created in January 2003, when the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) was extensively reorganized under the provisions of the Homeland Security Act of 2002. The act realigned ATF to the Department of Justice but called for their tax collection functions to remain with the Department of the Treasury, thereby creating TTB. In 2009, TTB entered into an inter-agency agreement with CI to provide special agents to enforce TTB’s criminal provisions. Moonshine, counterfeit cigarettes, and export only goods diverted back into U.S. commerce are all in a day’s work for this group whose sole focus is combating illicit trade of tobacco, ammunition, and alcohol. TTB’s special agents are strategically dispersed across the country. The group is supervised by a supervisory special agent, who reports to the Special Agent in Charge of the Washington D.C. Field Office. GIFT investigations are inherently complex and are cases that will make the most impact on international third-party money laundering. The cases include investigations of illegal money transfer businesses, professional enablers of money laundering, money laundering through real estate or investment products, financial institutions concealing and disguising illegal transactions, laundering of business email compromise or other cyber intrusions, public corruption and extortion, government 10 COMMISSIONER’S PROTECTION DETAIL The Commissioner’s Protection Detail (CPD) is a specially trained cadre of CI special agents, who provide personal security and protection to the IRS Commissioner. Since 1999, this dedicated team is charged with protecting the Commissioner during official business operations. CPD provides protection of the Commissioner within the National Capital Region and while in travel status, foreign and domestic. As the leader of the IRS, the Commissioner frequently attends meetings, conferences, publicized hearings, and speaking engagements in locations, such as the White House, U.S. Capitol, U.S. Treasury, and other venues in Washington, D.C., as well as around the globe. In a typical year, the CPD protects the Commissioner on approxi­ mately 500 protective movements, 20 domestic trips, and two to three international visits. CPD special agents are trained in protective service operations with an emphasis on operational planning, motorcade operations, protective intelligence, and preventing and responding to attacks. Protective operations are a team effort and require detailed advanced preparations aimed at identifying and mitigating potential risks, threats, and vulnerabilities. Commissioner Charles Rettig and CPD boarding a plane. The Commissioner’s Protection Detail provides a secure escort into the Pentagon. Members of the Commissioner’s Protection Detail. Commissioner Charles Rettig escorted by CPD. IRS:CI Annual Report 2022 11 INTERNATIONAL OPERATIONS CI has 12 attaché posts strategically stationed in 11 foreign countries, including Mexico, Canada, Colombia, Panama, Barbados, China, Germany, the Netherlands, England, Australia, and the United Arab Emirates. Attachés work with foreign governments to build partnerships, train law enforcement counterparts, and investigate financial crimes. Operations conducts training at the International Academy for Tax Crime Investigation at the Guardia di Finanza Economic and Financial Police School in Ostia, Italy. In some cases, host nations fund the training, but the majority of the time, funding is sponsored by the Organization for Economic Cooperation and Development and the U.S. Department of State. These partnerships give CI the ability to develop leads for domestic and international investigations with an international nexus. In addition, attachés provide support and direction for investigations with international issues, foreign witnesses, foreign evidence, or execution of sensitive investigative activities in collaboration with our international partners. Attachés also help uncover emerging schemes perpetrated by promoters, professional enablers, and financial institutions. These entities facilitate tax evasion of federal tax obligations by U.S. taxpayers, as well as other financial crimes. Attachés also partner with CI’s International Training Team (ITT) to deliver trainings to representatives from multiple countries across the globe. After delivering mostly virtual trainings in FY 2021 due to the COVID-19 pandemic, the team was back in action in FY 2022, delivering 20 in-person trainings in Africa, Asia, the Caribbean, Europe, South America, Central America, and the Indo-Pacific. In addition to the in-person events, the team also delivered 10 trainings virtually. These trainings generated more than 900 international contacts to leverage support for investigations, and they serve as a powerful means to amplify the reach of CI attachés and promote the IRS mission. Training is a key part of CI’s presence abroad and helps provide the foreign governments in developing nations with necessary tools to combat financial crimes. Training foreign counterparts also serves as a way to build strong relationships abroad, which results in successful international investigations. Special agents train foreign governments through collaborative efforts with the International Law Enforcement Academies (ILEA) in Budapest, Hungary; Bangkok, Thailand; San Salvador, El Salvador; and Gaborone, Botswana. In addition, Global SIGNIFICANT ACCOMPLISHMENTS Mexico City locates 70 fugitives During FY 2022, CI’s Mexico City post located 79 fugitives wanted for financial crimes in the United States. For example, in January 2022, Thomas Johnson was located in Belize and extradited to the United States to face court proceedings for aiding in the preparation and filing of false tax returns. Johnson prepared and filed false tax returns on behalf of his clients, and they, in turn, split the large refunds they were not entitled to with Johnson. Frankfurt Helps Take Down Dark Web Marketplace CI’s Frankfurt post coordinated with the Bundeskriminalamt (BKA) and CI’s Cyber Crimes Unit special agents to seize Hydra Market (Hydra), the world’s largest and longest running darknet marketplace. In April 2022, the attaché helped obtain a Mutual Legal Assistance Treaty with German authorities to obtain information on internet protocol (IP) addresses linked to the marketplace. This resulted in a supplemental request for assistance to gather information about two additional IP addresses, and the attaché also ensured that U.S. law enforcement received a copy of the imaged Hydra server once the site was seized. The information CI obtained helped build the criminal case against the main defendant in this investigation. Global Operations Establishes International Liasion and Strategy Unit Global Operations also established the International Liaison and Strategy Unit in FY 2022 to ensure a strategic approach to training and international initiatives. CI developed public-private partnerships with domestic and international organizations in the financial compliance industry, financial institutions, and the Fintech industry to facilitate cooperation, deterrence, identification, and enforcement of international tax evasion and related financial crimes. LONDON For more information and stay updated on J5. OTTAWA THE HAGUE FRANKFURT Joint Chiefs of Global Tax Enforcement J5 Website MEXICO CITY PANAMA CITY DUBAI HONG KONG BRIDGETOWN BOGOTA CANBERRA SYDNEY ATTACHÉ ATTACHÉ (J5) IRS:CI Annual Report 2022 12 UNDERCOVER OPERATIONS CI has a long history of using undercover techniques to investigate crimes. These techniques are well-documented, and they play a significant role to bring criminals to justice. Special Investigative Techniques (SIT) oversees CI’s undercover activities and reviews, approves, funds, and trains personnel to carry out undercover operations. Special agents and leadership teams initiate and manage day-to-day operations in their respective field offices. CI has a cadre of active undercover agents that use sophisticated means to initiate contact with individuals perpetrating tax crimes and to gain evidence needed to prosecute their crimes. In FY 2022, agents conducted approximately 401 undercover operations. SIGINIFICANT CASES 12 Individuals Sentenced for Tax Fraud, Other Crimes In May 2022, 12 individuals were sentenced in South Carolina for employment tax fraud and other crimes related to hiring unauthorized aliens at seven construction-related companies. The construction companies used unlicensed check cashers to facilitate under-the-table payments to employees, many of whom were unauthorized aliens. The check cashers also provided certificates of insurance falsely stating that the employees were covered under workers’ compensation insurance. The defendants cashed at least $15 million in checks resulting in millions of dollars in losses to the U.S. government. During the investigation, multiple CI undercover agents posed as individuals that provided unlicensed check cashing services for a fee. The defendants provided the undercover agents with contractor business checks, and in return, the agents gave the defendants cash, minus a transaction fee. Various undercover agents embedded themselves in the Myrtle Beach area and recorded multiple transactions with the defendants. Pizza Restaurant Owners Plead Guilty to Evading Payroll Taxes In June and July 2022, Ernesto and Giuseppe Cannuscio, brothers and owners of Mario’s Pizza in Ocean City, New Jersey, pleaded guilty to conspiracy to evade more than $200,000 in payroll, personal, and corporate income tax. They face up to 5 years in prison and/or a fine up to $250,000 for their crimes. From 2013 to 2018, the Cannuscio brothers failed to deposit cash receipts into the business bank accounts and paid employees cash wages off the books to avoid payroll taxes. They then failed to tell their accountant about the undeposited cash receipts they did not deposit into their bank account, which resulted in the underreporting of gross receipts on their tax returns. In addition, they failed to tell the accountant about the cash payroll, which resulted in the Cannuscio brothers evading employment taxes. During the investigation, CI undercover agents posed as potential buyers interested in purchasing Mario’s Pizza. During the undercover operation, the agents determined that the Cannuscio brothers kept a second set of books and were significantly underreporting sales. The books also showed that the unreported cash was being split between the brothers. The information obtained during the operation resulted in search warrants at Mario’s Pizza and both of the brothers’ residences. from these shelters was about $120 billion by 1985. With the advent of money laundering laws, undercover agents became proficient at conducting investigations into the laundered illegal proceeds of narcotics traffickers. Today, CI uses undercover operations in investigations of unscrupulous tax return preparers, offshore tax schemes, money launderers, Dark web marketplace operators, and those who seek to conceal the movement of money for illegal purposes, including tax evasion. HISTORY: In 1929, Michael Malone successfully infiltrated Al Capone’s Chicago gang for nearly two years. Because of his work, the government successfully prosecuted Capone and his top enforcer, Frank Nitti, for tax crimes. In 1963, the Undercover Operation (UCO) was centralized into the National Office. UCO focused on illegal gambling and organized crime, and most operations lasted longer than one year. In the late 1960s, CI initiated the Courier Project to corroborate persistent allegations concerning the movement of casino receipts by couriers to offshore tax havens. UCO infiltrated organized crime organizations that used fall guys to operate casinos. In the late 1970s, the UCO was decentralized. The National Office retained review, approval, funding, and training authority, and districts were responsible for the initiation and daily management of the operations. This organization continues today. In the 1980s, UCO focused on offshore banking schemes and illegal tax shelters. The estimated revenue loss 401 Undercover Operations Special agents conduct surveillance on suspected illegal activities. IRS:CI Annual Report 2022 13 DIGITAL FORENSICS Woman Sentenced for PPP Fraud Digital Forensics is a function of CI’s Cyber and Forensic Services section and is the premier digital forensics unit in federal law enforcement. The Digital Forensics mission is to support special agents in the collection and analysis of digital evidence. Since computer, mobile, and digital devices are found on nearly every enforcement action, the reliance on Digital Forensics personnel to secure and analyze digital data has grown. During the last year, CI Special AgentComputer Investigative Specialists (CISs) assisted with over 619 operations, seized 2.97 petabytes of data, and imaged 3,901 computers and other devices. CISs and Forensic Specialists are certified in forensic examinations and the use of top-level forensic software, thus establishing proficiency. They provide valuable testimony in criminal proceedings and are the voice of the digital evidence. With the increased use of digital currency in illegal transactions, the need for seizing digital currencies in investigations has also increased, and Digital Forensics has risen to the challenge. During FY 2022 Digital Forensic lab and field staff took possession of approximately $4 billion of digital currency pursuant to seizure orders. Today’s sophisticated schemes to defraud the American taxpayers demand the analytical ability of financial investigators to decipher complex financial records. Records of transactions have moved from paper ledgers to computers to off-site, online storage. As a result, CI is developing tools and techniques to follow and find those transactions, wherever they may lead. Digital Forensics possesses the expertise in computer and network forensics to forensically seize digital evidence, using specialized equipment and techniques to preserve digital evidence and to recover relevant evidence, including data that may have been encrypted, password protected, or hidden by other electronic means. Digital Forensics is beginning the transition to a regional lab model with 18 sites selected as major hubs for forensic work. The lab layout will provide a large workspace, storage rooms, a manager’s office, and a conference room, all with the latest technology to provide a superior work experience. The first regional lab opened in the Boston area this year, and the opening of several more of these regional labs is anticipated in the coming year. Digital Forensics current staffing includes seven groups of CISs who sit in labs located throughout the country. Digital Forensics also maintains an 11,000-square foot lab and training center in Northern Virginia. The lab specialists are skilled in various digital forensic disciplines, such as data recovery, mobile support, hardware and software testing and deployment, Key Figures from FY2022 and the planning and delivery of the advanced training needed to keep the CISs highly skilled and current on technology and processes. Digital Forensics is positioned to continue providing world class digital forensic services to special agents and other law enforcement stakeholders, while combining CI’s respective electronic, cyber and technical expertise and talents. SIGNIFICANT CASES Florida Man Convicted for Wire, Mail Fraud In May 2022, Michael DaCorta of Sarasota, Florida was convicted at trial for conspiracy to commit wire fraud and mail fraud, money laundering, and filing a false income tax return. DaCorta faces a penalty of 33 years in prison. DaCorta worked as the CEO of multiple domestic and international businesses, where he enticed investors into a foreign exchange trading opportunity and then used the proceeds to fund his lavish personal lifestyle. CI and the FBI worked jointly on the investigation. In April 2019, the FBI executed federal search warrants at five locations and seized 42 TB of data from 39 images of phones and computers. When preparing for trial, CI did not receive any digital evidence from the seized data. Two months before trial, a CIS was assigned to search for email and files documenting the subject’s extravagant lifestyle. In approximately one month, the CIS processed 11 images, consisting of approximately 8 TB of data and triaged the files into a manageable dataset for the case agent. The most incriminating files were then used by the prosecution team during the multi-week trial. Digital Forensics Key to Lawyer’s Guilty Plea In June 2022, Mykhaylo Chugay was convicted of conspiracy to harbor non-resident aliens and induce them to remain in the country, conspiracy to commit money laundering, and conspiracy to defraud the IRS. Chugay operated labor-staffing companies in southern Florida between 2007 and 2021. Chugay hired illegal employees to provide workforce to the hospitality industry in the Florida Keys. Chugay did not withhold employment taxes, did not issue Forms W-2 to the employees, and did not file quarterly employment tax returns. CI and HSI worked jointly in the investigation. Digital Forensics participated in a search warrant and a consent search, and a CIS was assigned to review the QuickBooks files obtained from the searches. The CIS used software to crack the passcode for the files, and the files were ultimately presented at trial to prove the existence of the employment tax violations. A retired CIS testified about the records at trial. In December 2021, Jericca Rosado was sentenced for her scheme to fraudulently obtain Paycheck Protection Program (PPP) Small Business Association loans in exchange for a kickback payment from the PPP loan proceeds. A search warrant for a cell phone was conducted during the investi­ gation. The CIS coordinated the cell phone/computer extraction with the prosecution team, which consisted of Assistant United States Attorneys in the Southern District of Florida, trial attorneys at the Department of Justice, and the special agents. The CIS also worked directly with Rosado to obtain Telegram, Whatsapp, and Gmail extracts to assist the prosecution team in identifying an additional target related to the scheme. The CIS was praised by the prosecution team for his involvement in the case. CIS special agents adapt and use what is available as a work space. Attorney Plead Guilty to Obstruction and Wire Fraud In June 2022, Michael Avenatti pleaded guilty to wire fraud and endeavoring to obstruct the administration of the Internal Revenue Code. During the investigation, multiple CISs worked with the investigative team to image digital devices and extract data from cell phones provided by witnesses. The CISs also assisted with the execution of search warrants at two residences, a law firm, and a data center that housed the servers for Avenatti’s law firm. Multiple digital devices were imaged, including computers, servers, and mobile phones. A CIS assisted DOJ’s Cyber Lab to process the forensic images and to load them to Relativity E-Discovery software for special agents and attorneys to conduct a privilege review of the digital evidence. The CIS then rebuilt Avenatti’s law firm’s server network in a virtual environment to access the specialized database software containing the client data. The CIS used the program TABS, which is a software specialized to attorneys’ offices. Avenatti’s case originally went to trial in July 2021. The CIS testified for the prosecution and was later called to testify for the defense. During and after the trial, the CIS assisted with locating additional digital evidence to address discovery concerns raised by Avenatti. The trial was declared a mistrial, and the case was scheduled for a new trial in July 2022. Avenatti claimed that files on his computer would prove his innocence. The CIS obtained a copy of a special billing software to be able to review Avenatti’s billing records. After teaching himself how to use the program, the CIS accessed Avenatti’s records in a meeting with the prosecution and defense attorneys. The CIS showed the defense team that Avenatti’s defense would not hold up at trial. Avenatti subsequently entered a guilty plea before the new trial date. A CIS special agent prepares to image a server. A CIS special agent prepares to pull a hard drive for imaging. A CIS special agent prepares to document steps included in imaging. Map of Digital Forensics Regional Lab Locations IRS:CI Annual Report 2022 14 CENTER FOR SCIENCE AND DESIGN Since the early 1970s, scientists and technical experts at the Center for Science and Design (CSD), formerly known as the National Forensic Laboratory, have reported the results of forensic testing and technical services to investigators exploring potential criminal violations and for adjudication of the Internal Revenue Code and related financial crimes. Results of the CSD’s work are used by CI special agents or other customers of the laboratory to analyze elements to provide pivotal direction in their investigations. The CSD’s work remains essential to ensuring the efficient processing of crucial evidence in CI investigations. Often support provided by the CSD does not end with the delivery of a scientific report or product. This important work continues with support in judicial proceedings when required. The CSD consists of three sections, each offering specific scientific or technical services. The Trial and Design Services (TDS) section simplifies complicated cases into succinct, effective visuals that help show, rather than tell, all the elements of extremely complex investigations. Although the services are primarily for special agents preparing for trial, TDS also creates high-level presentations, investigation summaries, and other special projects, such as CI branding and marketing outreach. In 2022, TDS assisted in the creation and launch of the new CI logo. The Scientific Services section offers forensic disciplines that include latent prints (finger and palm print development and comparison), questioned documents, ink chemistry, and DNA collection. Due to advances in technology, the CSD has also offered services for DNA. This section can collect samples from evidence to be used in identifying subjects related to the investigation. The CSD has a working relationship with the FBI’s DNA Unit to assist the lab in extracting a profile from the samples. Meanwhile, the newly formed Multimedia and Deception Detection section provides services such as electronic (audio, video, and image enhancement), polygraph examination, and soon-to-be established facial recognition. The Facial Recognition Unit is in development and when established will be able to assist special agents with facial images collected from ATMs, pole-cams, and undercover operations. A scientist listens for sound cues and adjusts levels to clarify audio for a training case. When the experts at the CSD are not working on evidence, they are providing tours and virtual presentations to special agents and various CI stakeholders at their building in downtown Chicago. One of the most effective ways to educate others about the CSD’s capabilities is by demonstrating their state-of­ the-art equipment and sharing stories. Thanks to the talented men and women of the CSD and their dedication to science and their technical services, as well as the mission of CI, the customers of the laboratory have come to know and expect their high-quality work. The successes of their cases speak for themselves, and nothing is more gratifying to the CSD than seeing the cases get fully adjudicated. However, it is equally important to help investigators know when to consider closing a case. Regardless of the outcome, the CSD scientists and technical experts continue to strive in their role as servants of the criminal justice system. 65 Scientific Services 191 Trial & Design Services 37 Multimedia & Deception Detection A scientist identifies similarities and identification markers on various fingerprints. IRS:CI Annual Report 2022 15 ADVANCED ANALYTICS & INNOVATION Our newest HQ Division, Advanced Analytics & Innovation (AAI), is moving CI into the future of case selection through the utilization of data analytics, creation of investigative data management and governance, and solving employee challenges through innovative solutions. AAI, through strategic partnerships with internal IRS business units, such as Large Business & International, Small Business/Self Employed, Research Applied Analytics & Statistics, and the Office of Fraud Enforcement, is streamlining processes and implementing automation to protect revenue. AAI collaborates with a diverse group of internal and external professionals, including experts in academia, government, and industry to improve functions and processes. AAI’s dedicated team is united in the goal of “One IRS” and is comprised of special agents and professional staff with dynamic skills, including data scientists, mathematicians, program analysts, investigative analysts, systems experts, and leaders in process change management. AAI is comprised of six sections: Applied Analytics (AA), Data Management and Governance (DMG), Innovation, National Coordinated Investigations Unit (NCIU), Refund Fraud and Investigative Support (RFIS), and Systems and Operational Support (SOS). AAI identifies egregious promoters of criminal activity, including refund fraud, identity theft, and other abusive schemes, and isolates significant cases of federal tax evasion, including employment tax, COVID fraud, and international and domestic tax evasion. During FY 2022, RFIS provided field office support in the Questionable Refund Program (QRP), the Return Preparer Program (RPP), and the Identity Theft (IDT) Program. RFIS also supported other national programs, such as the Court Witness Program, Controls and Unpostables Program, and Electronic Filing (ELF) Suitability Program. AAI also digitizes records through the Data Processing Center and supports CI investigations utilizing data analytics. To improve efficiencies and ensure impartiality, AAI’s talented staff leverages technology and develops algorithms to filter large data sets. Using analytics increases CI’s ability to identify fraud and dedicate resources to the most impactful investi­ gations that result in criminal prosecution. AAI has experts who analyze business statistics to support data-driven decisions made by CI leaders. The experts validate data to ensure integrity and proper system functionality. AAI partners with Return Integrity and Compliance Services to improve IRS filters that detect and stop refund and identity theft early in the filing process. AAI further supports the tax enforcement effort by sharing knowledge of increased data analytic capabilities through training sessions and collaboration across CI. AAI is guiding CI into the future of investigative data management and governance which will ensure tax information is both usable and safeguarded. This is essential to reduce the tax gap as criminals continue to evolve in sophistication, and the criminals’ use of social media allows for rapid advertising of fraud schemes and criminal collaboration. CI assures the American public that criminals are held accountable, citizens are paying their fair share of taxes, and resources are dedicated to the most impactful criminal investi­ gations. This serves the public interest and deters would-be criminals. AAI strives to make CI the most innovative law enforcement agency in the world while fulfilling our mission to foster compliance and confidence in the tax system. 2022 AAI HIGHLIGHTS ► In FY 2022, the Data Processing Center processed approximately 2,101,762 documents despite challenges related to COVID. ► In FY 2022, RFIS supported 525 QRP and 862 RPP schemes, with 254 of the schemes having an IDT element. ► AAI’s Innovation section supported at least 105 support requests for efficiency challenges in FY 2022. For example, in one case, the use of automation reduced an expected 6-month process to 2 weeks. ► RFIS also provided support to 138 trials, placed 96,744 controls, addressed 33,471 unpostables on individual and business tax modules, and received and researched 3,913 Electronic Filing Identification Number applications to assist IRS in determining the suitability of an individual into the program. ► In FY 2022, NCIU made 172 investigative referrals to CI field offices. A special agent presents the organizational structure and function of Advanced Analytics and Innovation. IRS:CI Annual Report 2022 16 NATIONAL CRIMINAL INVESTIGATION TRAINING ACADEMY CI special agents are sworn federal law enforcement officers throughout all 50 states and U.S. territories, including special agent attachés located in 11 countries. Special agents begin their training at the National Criminal Investigation Training Academy (NCITA), which is located at the Federal Law Enforcement Training Center (FLETC) in Brunswick, Georgia. New special agents first attend and complete FLETC’s Criminal Investigator Training Program (CITP), which provides, on an interagency basis, a program of instruction that fulfills all the basic criminal investigative training requirements necessary for responsible and competent job performance. Rather than being agency-specific, the program addresses common knowledge, skills, and abilities that are expected of all investigators. In today’s changing world, criminal investigators are faced with a variety of situations that, in addition to traditional law enforcement skills, require an awareness of and expertise in human behavior, modern technology, cultural sensitivity, law, and other interdisciplinary approaches to effective law enforcement. Special Agent Investigative Techniques (SAIT) is CI specific training, which begins immediately after students graduate from CITP. During SAIT, the students work together to investigate three cases and to complete investigative steps just as they would in the field. These steps include interviewing, gathering evidence, writing of interviews and reports, applying various methods of proof, and making recommendations for prosecution. NCITA also plays a vital role in assisting and providing advanced training to special agents in areas such as use of force, firearms instruction, defensive tactics, and building entry. NCITA assists in developing continuing professional education courses for special agents and professional staff, which focus on emerging trends and issues within the law enforcement environment. A comprehensive and progressive formal training program is essential to effective performance as a criminal investigator and provides assurance that new practitioners are fully equipped to meet the rigorous demands of the environment in which they will operate. NCITA is committed to continual improvement of new agent training through modernization and building a student curriculum that is updated on a real time basis. CI continues to revamp its case study videos, to automate its case activity documents, and to create tax lessons that assure new special agents will meet and exceed all the complex and challenging tasks of contemporary law enforcement. A day in class Commissioner Charles Rettig was the keynote speaker at the graduation for SABT 2204 on April 25, 2022. Commis­ sioner Rettig had the opportunity to tour FLETC Glynco’s facilities, including the driving range, Danis City, the Physical Techniques Division, and the firearms training facilities. During his visit, Commissioner Rettig addressed the CI special agents currently in training and attended a social with the students after the training day concluded. Matroom NCITA Training Cycle Firearms training 17 ASSET RECOVERY AND INVESTIGATIVE SERVICES Asset Recovery and Investigative Services uses forfeiture authority as an investigative tool to disrupt and dismantle criminal enterprises. The program deprives criminals of property used in, or acquired through, illegal activities. Seized assets are routed to the Treasury Forfeiture Fund (TFF), which the Treasury Executive Office for Asset Forfeiture manages. Forfeited funds are returned to identified victims of criminal activity and are also used to reimburse law enforcement agencies for expenses like enhanced training, equipment, and costs associated with conducting significant investigations. In addition, the TFF shares a portion of forfeited funds with federal, state, and local law enforcement agencies. As of September 30, 2022, CI seized assets valued at approximately $7.1 billion and forfeited approximately $1.1 billion in ill-gotten proceeds. In addition, approximately $32.5 million were refunded as part of CI’s asset recovery efforts. $7.1B Seized Assets $1.1B SIGNIFICANT FORFEITURES ► Three San Diego money managers – Richard M. Owen, Jeffrey Morrow and James Warren – laundered money from a number of illicit sources, including a Mexican cartel, and fraudulently documented the activity as gold transactions through their business, Global Gold Exchange LLC. Owen, Morrow, and Warren admitted that the company operated as an informal money transmitter that facilitated money transfers both domestically and internationally and outside conventional financial institutions. They directed their clients to lie to law enforcement and tax officials and asked their clients to mail packages filled with heavy substances to mirror the weight of gold. The trio agreed to forfeit approximately $2 million in assets, including currency and financial accounts, as well as various gold bars, nuggets, and coins they acquired by laundering money and conducting unlicensed money transmitting services through Global Gold Exchange LLC. ► The March 2020 Coronavirus Aid, Relief, and Economic Security (CARES) Act was designed to provide emergency financial assistance to businesses suffering as a result of the COVID-19 pandemic. Unfortunately, fraudsters like Don Cisternino tried to capitalize on CARES Act funds for personal gain. In May 2020, Cisternino obtained a $7.2 million loan for a non-existent movie production company he claimed had 441 employees and a payroll of more than $2.8 million. Instead, he used approximately $3.5 million to purchase a luxury home with seven bedrooms, 11 bathrooms, a four-car garage, a theater room, a resort-style pool and spa, tennis courts, and a horse barn. The home was located on more than 12 acres of land. In FY 2022, the lavish residence was civilly forfeited and sold for $4 million. ► The Black Market Bolivar Exchange (BMBE), with its genesis in Venezuela, is a money laundering system that parallels the Black Market Peso Exchange (BMPE). Operation Seaducks exposed a BMBE in southern Florida and throughout the United States, whereby many Venezuelan nationals with ties to the Venezuelan government and drug trafficking organizations (DTOs) were able to access an unlimited supply of U.S. dollars (USD) at favorable, albeit grossly inflated, currency exchange rates. One of the primary “clients” of these currency speculators benefiting from the BMBE were DTOs based in Colombia, Venezuela, and elsewhere. Mohannad Ilbih Ilbih, who had numerous companies registered with CADIVI, the Venezuelan government entity delegated with the administration of the country’s legal currency exchange, was a leader in a south Florida DTO. Ilbih Ilbih directed co-conspirators’ to use nominee accounts and entities to arrange multiple cash pick-ups throughout the U.S. and to send approximately $6 million in wire transfers of illegal, narcotics-derived cash proceeds throughout the world. Significant proceeds from Ilbih Ilbih money laundering fraud scheme were utilized to purchase two homes, one in Davie, Florida and one in Sunrise, Florida. Both homes were forfeited and sold for $2,365,000 and $500,500, respectively. Ill-Gotten Proceeds Forfeited $32.5M Refunded  Seizure and forfeitures figures are based on values at date of asset seizure. 18 OFFICE OF COMMUNICATION The Office of Communication is charged with building awareness about CI and the work the agency does. The office uses a variety of tools to communicate to both internal and external audiences and oversees the agency’s participation in outreach events. The office strives to weave deterrence messaging into its products and events, signaling to criminals that they will be held accountable for their actions. Doing so builds confidence in our nation’s tax system and helps foster compliance with the Internal Revenue Code and related financial laws. In FY 2022, the Office of Communication continued growing its social media accounts on Twitter and LinkedIn, nearly tripling its number of followers from the previous fiscal year. More than 16,000 accounts follow CI on social media, resulting in more than one million views per quarter. Hot topics from FY 2022 included special agent hiring, cryptocurrency, and national security. Additionally, CI also manages the LinkedIn account for the Joint Chiefs of Global Tax Enforcement (J5) who work together to combat global financial crimes. The Office of Communication houses two legislative liaisons who serve as conduits for communicating information to and from Capitol Hill. These special agents assist with hearing preparation for senior-level officials and provide Congressional briefings. Congressional liaisons provide data and trend information on criminal investigations and formulate official responses to requests from House and Senate members and their staff, as well as oversight committees. The office has implemented a powerful communi­ cations strategy that includes outreach to the public, federal and legislative communities, the financial sector, IRS employees, and CI’s global partners. Education and awareness serve as foundations to many organizations, and the Office of Communication’s efforts serve as a central part of CI. In FY 2023, the agency plans to add additional social media accounts for field offices. This will enable field offices to highlight significant cases and communicate key information directly to the communities they serve. Follow us for more information and to stay updated on IRS: Criminal Investigation. @IRS_CI IRS Criminal Investigation Joint Chiefs of Global Tax Enforcement IRS:CI 19 PROFESSIONAL STAFF AND WORKFORCE DEVELOPMENT During FY 2022, CI continued its commitment to the growing numbers of its professional staff with the creation and instal­ lation of Professional Staff Advocates (PSAs). Located within Strategy and part of its Workforce Development arm, the PSAs were hired to bring advocacy and voice to all professional staff across CI. This effort was integral to promote unity, opportunity, and cohesiveness to the professional staff during the ongoing COVID-19 pandemic. CI currently employs a robust workforce that works alongside the special agents. With more than 900 professional staff employees, nearly one-third of CI’s workforce exists to provide support, guidance, and aid in accomplishing CI’s mission of deterrence and compliance. Generally, these roles fall into three separate categories: investigative, administrative, and technical staff. Professional Staff are on the front lines of case work and behind the scenes of every CI activity. These dedicated employees continued to provide excellent case, administrative, and technical support in uncertain times and less than ideal situations. CI employed innovative remote hiring techniques, which involved bringing people onboard in a completely virtual environment. The newly hired profes­ sional staff did not have the opportunity for immediate face to face training. CI addressed the remote training obstacle by successfully developing virtual and peer-led training initiatives. The PSAs and the professional staff community have provided interactive on-line instruction related to specific investi­ gative, technical, and administrative job functions. Workforce Development (WD) seeks to develop employees over the long term to providing them with the skills necessary to meet the challenges of the future. WD continues to support skills development at all stages of an employee’s career lifecycle to enhance engagement and opportunity for special agents and professional staff. WD partners with HR and EDI to recruit and retain a talented and diverse workforce. During FY 2022, WD created and published a Retention Plan so that employees can easily access resources meant to keep them balanced, engaged, and satisfied in their careers. Career pathing helps employees consider future opportunities within the agency. CI furthered its commitments to its workforce by having professional staff participate in Frontline Leadership Training Programs and Frontline Leadership Readiness Programs. CI created, developed, and deployed innovative techniques to provide resources for professional staff to identify career opportunities and tools necessary to help them thrive as they advance in their careers. WD facilitates an ongoing series on leadership, management, and self-development. Hundreds of employees utilized Zoom sessions facilitated by experts in career and personal development. Leadership aims to keep these programs running well into the future as they are key to ensuring mental health, professional growth, and job satisfaction. Furthermore, these sessions foster an environment of inclusion and the sharing of best practices amongst all personnel. Investigative Support Major investments in professional staff have positively impacted CI’s ability to accomplish its law enforcement mission and will continue to do so for many years to come. Administrative Support 938 Professional Staff support Investigative, Administrative, and Technical roles Technical Support 20 EQUITY, DIVERSITY,AND INCLUSION OFFICE The mission of the Equity, Diversity, and Inclusion Office (EDI) is to identify, examine, and address the organization’s employment practices, policies, and procedures to ensure that all employees achieve equal opportunity. Equity is the main element that is needed to ensure that processes and programs are impartial, fair and provide equal possible outcomes for every individual. EDI’s goal is to create and sustain a diverse, equitable, and inclusive environment that respects and accommodates every employees’ background including race/ethnicity, sexual orientation, gender identity, and other protected statuses that make us all unique. Achieving an inclusive environment creates an equitable workplace and promotes a positive employee experience. Therefore, in FY 2022, EDI reinstated EEO’s Special Emphasis Program that raised more awareness of national observances and other significant programs that encouraged broad awareness and engagement of underrepresented populations. Information sessions designed to address and promote diversity and work-life balance included Understanding Depression; LGBTQ Awareness for Managers; Coping with Unexpected Grief; Managing Stress. Multiple mental and physical health awareness sessions were conducted through EAP. This year, EDI facilitated the development of a new course, entitled Inclusive Leadership. The training was designed for the Senior Leadership Training Program participants and senior managers within field offices. The curriculum focuses on the areas of cultural competency, emotional intelligence, diversity, inclusion, and engagement throughout all management levels. EDI is collaborating with the newly formed Mental Health Awareness Program team. The goal is to increase awareness around mental health wellness and to provide options for support throughout the CI community. EDI also delivered multiple training and work-life sessions, covering topics such as managing workplace conflict, disability awareness and reasonable accommodation, emotional intelligence, prevention of harassment; mental health awareness,managing stress during the pandemic, and provided agency guidance pertaining to religious accommodation procedures for vaccination exemptions. 21 OUTREACH AND COMMUNITY ENGAGEMENT CI offices throughout the country participate in community events such as National Night Out and the Law Enforcement Torch Run for Special Olympics. National Night Out is an annual community-building event that promotes law enforcement-community partnerships and neighborhood camaraderie to make our neighborhoods safer and more caring places to live. National Night Out also enhances the relationship between neighbors and law enforcement, while bringing back a true sense of community. The Law Enforcement Torch Run for Special Olympics is a campaign to benefit the Special Olympics. It began in 1981, in Wichita, Kansas, and is the largest grass-roots fundraising movement for the Special Olympics. Since inception, the Law Enforcement Torch Run has raised more than half a billion dollars and changed millions of attitudes by engaging law enforcement officers worldwide to be champions of acceptance and inclusion. Special agents from the Newark Field Office participated in an elementary school 2022 career day. The agents shared their personal journeys, which led them on the path to choosing a career as a special agent with CI. The agents’ enthusiasm and passion for their careers encouraged the students to strive and thrive as future leaders of their community and inspired them to keep working on their education through the pandemic. Through the help of Native American Community Services of Erie and Niagara Counties, Inc. (NACS), special agents and support staff of the Buffalo, New York POD adopted and provided gifts for five deserving families in the Western New York community, in an effort to spread holiday cheer. The group participated in gift-wrapping festivities prior to attending their holiday luncheon. Special agents of the Miami Field Office engaged more than 250 middle school students at a middle school in Davie, Florida. The focus of their presentation was on what it is like to be a special agent in CI. The students were very engaged with the presentation and asked lots of questions. Perhaps around 2030, we will see some new special agents joining our ranks. The daughter of one of CI’s special agents attended the presentation and is pictured with her classmates. CI SPECIAL AGENTS DEPLOY TO ASSIST WITH DISASTER RECOVERY EFFORTS CI Special Agents not only investigate a multitude of financial crimes, but they also provide assistance to state and local agencies during or after catastrophic events. The Federal Emergency Management Agency (FEMA) designated 14 Emergency Management Functions (EMFs) to assist in disaster recovery efforts which range from transportation to external affairs. CI helps maintain ESF #13 by providing public safety and security assistance. In July 2022, 15 CI special agents supporting ESF #13 deployed to Hazard, Kentucky, for 12 days to provide security for first responders, the operations base and the FEMA staffing center after catastrophic flooding there. The team worked 15+ hour days on protection details, ensuring the safe completion of recovery efforts. About 140 CI special agents, supervisory special agents and analysts have volunteered to support ESF #13. Whenever, there’s a federally declared disaster, EMF participants can volunteer to deploy for the mission. Previous deployments include: hurricane recovery efforts after hurricanes Dorian, Ira, and Florence; perimeter security and relocation of sick guests after a COVID-19 outbreak on a cruise ship; and security for search and rescue efforts following the Oregon wildfires. Special agents from the Oakland Field Office spent their evening at San Francisco State Univer­ sity’s Meet the Firms hosted by Beta Alpha Psi (Beta Chi Chapter). It was an astonishing turnout and a refreshing experience to attend an in-person career fair again. Agents were able to engage in more personable conversations with students about CI and their own our career paths. 22 FIELD OFFICE MAP Click on a location to go to that Field Office section. NORTHERN AREA WESTERN AREA SEATTLE CHICAGO BOSTON DETROIT NEWARK Guam CINCINNATI DENVER NEW YORK PHILADELPHIA ST. LOUIS OAKLAND WASHINGTON DC LOS ANGELES PHOENIX CHARLOTTE DALLAS ATLANTA Puerto Rico HOUSTON TAMPA U.S. Virgin Islands MIAMI SOUTHERN AREA IRS:CI Annual Report 2022 23 ATLANTA 401 W. Peachtree St. NW Atlanta, GA 30308 (470) 639-2228 AtlantaFieldOffice@ci.irs.gov ALABAMA Huntsville | Mobile | Montgomery | Birmingham GEORGIA Atlanta | Augusta | Columbus | Decatur Macon | Savannah LOUISIANA Baton Rouge | Lafayette New Orleans | Shreveport MISSISSIPPI Gulfport | Hattiesburg | Jackson | Oxford The ATLANTA FIELD OFFICE encompasses four states: Georgia, Louisiana, Mississippi, and Alabama. The territory includes Atlanta and New Orleans, two of the most popular destinations in the southeast, which are known for their vibrant culture, outstanding cuisine, and world-renowned chefs. The field office is also home to some of the best beaches along the Gulf Coast in Mississippi and Alabama. The Atlanta Field Office offers meaningful investigative work in many areas, such as corporate fraud, political corruption, OCEDTF, counterintelligence and terrorism funding, and QRP/RPP. The field office is continually building and strengthening its relationships with our law enforcement partners, the U.S. Attorney’s Office, and the public in an effort to identify, investigate, and refer quality cases for prosecution. Former City of Atlanta Director of Human Services Sentenced to 14 Years in Prison for Bribery Scheme September 8, 2022—former City of Atlanta Director of Human Services, Mitzi Bickers, was sentenced to 14 years in prison and 3 years of supervised release. Bickers was also ordered to pay restitution of nearly $3 million to the City of Atlanta. Bickers was previously found guilty of conspiracy to commit bribery, wire fraud, money laundering, and filing a false tax return. Bickers utilized the illegally obtain bribery funds to purchase a lake home, a GMC Acadia Denali, and jet skis, which Bickers ultimately forfeited to the government. Special agents participated in the Atlanta “Tough Mudder”, which raises money for the Wounded Warrior Project. A special agent and supervisory special agent participated in the inaugural FBI Atlanta Counterintelligence Task Force. Former Georgia Insurance Commissioner Sentenced to 7 Years in Prison for Tax Fraud October 13, 2021—Jim Beck, the former General Manager of the Georgia Underwriting Association, was sentenced to over 7 years in prison and 3 years of supervised release and was ordered to pay restitution of $2,619,000 and forfeiture of over $426,000, two pieces of real property, and a $2,064,781.85 personal forfeiture money judgment. Beck was previously found guilty of four counts of tax fraud for filing false federal income tax returns for 2014 through 2018. Beck devised a scheme to steal more than $2.5 million from the state-created insurance company, Georgia Underwriting Association. Beck managed the company prior to taking office as the insurance commissioner. Former Muscogee County Deputy Clerk of Court Sentenced to 12 Years in Prison for Historic Multi-Million Dollar Fraud Case June 2, 2022— Willie Demps, was sentenced to over 12 years in prison and 5 years of supervised release and was ordered to pay $1,323,045 in restitution to Muscogee County Clerk of Court’s and $359,604 in restitution to the IRS. Demps the former deputy clerk for Muscogee County Clerk’s Office, was the ringleader of a massive lengthy scheme to drain the Muscogee County Clerk of Courts’ coffers of millions of dollars. Willie Demps, worked for the Muscogee County clerk’s office for about 30 years, where he supervised monetary deposits received by the clerk’s office. While in this role, Demps wrote checks from the clerk’s office payable to various codefendants in the case. The codefendants would then cash the checks and return the money to Demps, who allegedly gave the participants in the scheme a portion of the money. A special agent meets with students at an Alabama A&M career fair. Georgia Man Sentenced to More Than 19 Years in Prison for Filing False Returns July 14, 2022—Marquet Mattox, was sentenced to over 19 years in prison and 3 years of supervised release. Mattox was also ordered to pay restitution of $3.2 million to the IRS. Mattox was previously convicted by a federal grand jury on August 18, 2022, of wire fraud, false claims, and theft of government funds. From 2016 to 2018, Mattox filed more than 30 fraudulent federal income tax returns with the IRS in the names of 12 different trusts. On those returns, Mattox falsely reported that the trusts had withheld large amounts of taxes on purported interest income, thereby entitling the trust to refunds. In total, Mattox claimed approximately $165 million in refunds on behalf of the purported trusts. The IRS paid $5 million of the requested refunds. Mattox used those funds to purchase a new house, a luxury automobile, and other personal expenses. Computer Consultant Sentenced to More Than 6 Years in Prison for Access Device Fraud March 14, 2022— Kevin Kirton, was sentenced to over 6 ½ years in prison and 3 years of supervised release. Kirton was also ordered to pay restitution of $629,551 to the IRS. Kirton previously pleaded guilty to access device fraud and aggravated identity theft. Kevin Kirton created a computer program to file fraudulent federal income tax returns with the IRS. The computer program stored stolen identities and could be used to submit fraudulent tax returns in the names of stolen identities to the IRS, effectively automating stolen identity tax refund fraud. The computer program could be accessed remotely via Special agents volunteered a day of service to the Community Food Bank of Central Alabama. the internet to prepare fraudulent tax returns. The resulting fraudulent tax refunds were deposited onto prepaid debit cards in the names of identity theft victims. To help conceal the fraud activity, Kirton developed techniques to hide Internet Protocol addresses so the IRS could not trace a fraudulent tax return back to one particular origination point. Kirton also set up a bootleg phone system that he believed would not be susceptible to wiretaps to communicate with other criminals. ER Doctor Sentenced to More Than Two Years in Prison for Tax Evasion June 7, 2022—Dr. Kevin L. Crandell was sentenced to almost 3 years in prison and ordered to pay restitution to the IRS totaling $972,493, resulting from a conviction involving a scheme to evade the payment of his personal income taxes. Crandell was an emergency room doctor from Golden, Mississippi, who earned approximately $30,000 to $40,000 per month. He ceased paying personal income taxes in 2007. Crandell committed multiple affirmative acts of evasion, which included making false statements to an IRS revenue officer, creating a nominee entity that he utilized to collect and conceal his income from the IRS, and filing a false Collection Information Statement, Form 433-A, which omitted his receipt of income and ownership of significant assets. During the trial, the IRS special agent and revenue officer testified and introduced evidence to ensure that Crandell was held accountable for the full extent of his criminal conduct. IRS:CI Annual Report 2022 24 BOSTON 15 New Sudbury Street Boston, MA 02203 (617) 316-2080 BostonFieldOffice@ci.irs.gov CONNECTICUT Bridgeport | Hartford | New Haven | Norwalk MAINE South Portland MASSACHUSETTS Boston | Springfield | Woburn | Worcester NEW HAMPSHIRE Manchester | Portsmouth RHODE ISLAND Warwick VERMONT Burlington The BOSTON FIELD OFFICE covers the six New England states: Massachusetts, Connecticut, Rhode Island, New Hampshire, Vermont, and Maine; each with their own judicial districts. New England is home to some of the greatest sports franchises, a long coastline of beautiful beaches, and several of the oldest and most renowned colleges and universities in the country. Boston Field Office’s relationship with the U.S. Attorney’s Office and our law enforcement partners is one of the best in the country. Boston Field Office special agents are vital members of several task forces, including Organized Crime Drug Enforcement Task Force (OCDETF), Joint Terrorism Task Force (JTTF), cybercrimes, securities fraud, and health care fraud. Former CFO of Boston Grand Prix Sentenced to 4 Years in Prison for Fraud and Tax Schemes That Netted Almost $2 Million February 15, 2022—John F. Casey was sentenced to 4 years in prison and 3 years of supervised release. Casey was also ordered to pay $1,998,097 in restitution and ordered to forfeit $1,570,399. Casey became the CFO of the Boston Grand Prix in January 2015. The Boston Grand Prix organization made payments to, or on behalf of, Casey totaling approximately $308,292 in 2015 and $601,073 in 2016, which Casey failed to include in the gross income he claimed on his personal tax returns for those years. In addition, between March 2020 and May 2021, Casey orchestrated a scheme to fraudulently obtain Economic Injury Disaster Loans and Paycheck Protection Program loans. Casey subsequently used the fraudulently obtained funds to pay personal expenses, including the purchase of a three-carat diamond ring, an online dating membership, private school tuition, and luxury hotel stays. Third Strike for Rhode Island Businessman Sentenced to Prison for Employment Tax Fraud Scheme April 28, 2022—Steven M. Allard, owner and operator of BR Steel Corporation in Burrillville, RI and Greystone Iron Corporation in Smithfield, RI, was sentenced to almost 3 years in prison and 3 years of supervised release. He was also ordered to pay $625,186 in restitution to the IRS. Allard previously admitted in court that from at least 2017 through 2018, he failed to turn over to the IRS more than $570,000 in federal employment taxes and FICA payments withheld from his employees. Instead, Allard used the money to pay for personal expenditures, including the purchase of more than $216,000 in “credits” to an online dating website, RussianBrides.com, and $93,000 in rent payments for a luxury home in Scituate. This case marks the third federal conviction and sentencing of Allard in U.S. District Court in Rhode Island. Australian Tech Entrepreneur Sentenced to More Than 8 Years in Prison for Defrauding Mobile Phone Users of More Than $40 Million June 28, 2022—Eugeni Tsvetnenko, of Australia, was sentenced to over 8 years in prison and was ordered to pay $15.4 million dollars in forfeiture, which he repaid. Tsvetnenko pleaded guilty for his role in a consumer fraud scheme to charge mobile phone customers millions of dollars in monthly fees for unsolicited, recurring text messages about such topics as horoscopes, celebrity gossip, and trivia facts, without the customers’ knowledge or consent, a practice referred to as “auto-sub­ scribing.” The consumers who received the unsolicited text messages typically ignored or deleted the messages, often A brand - new special agent is sworn in by a senior special agent and his on -the -job instructor. Special agents provide security at the Annual Boston Marathon Road Race. Special Agent in Charge participates in a press conference announcing the indictments of several individuals involved in a large drug trafficking and money laundering operation. believing them to be spam. Tsvetnenko and his co-conspirators distributed the proceeds of the fraud scheme among them­ selves, and others involved in the scheme by causing funds to be transferred through the bank accounts of a series of shell companies and companies held in the names of third parties. Vermont Business Owner Sentenced to Prison for Executing a Multi-Step Plan to Evade Employment Taxes August 1, 2022—Blakely H. Jenkins, Sr., was sentenced to one year and one day in prison for evading taxes and committing identity theft while running his St. Johnsbury-based painting business, Blake Jenkins Painting, Inc. In total, Jenkins’ company failed to report over $1.3 million in employee wages, resulting in over $340,000 in unpaid federal taxes. Jenkins evaded employment taxes from the middle of 2015 to the middle of 2020 by paying his employees “off the books” wages, either in cash or in checks falsely denoted as being for non-wage purposes. Jenkins took a number of steps to execute this plan, including falsifying records, creating bogus documents, and signing another person’s name without permission. Massachusetts Tax Return Preparer Sentenced to 5 Years in Prison for COVID-19 and Tax Fraud Schemes Gearing up for an enforcement operation. May 12, 2022—Roosevelt Fernandez, was sentenced to 5 years in prison and 3 years of supervised release. Fernandez was also ordered to pay $198,402 in restitution and forfeiture. In as early as 2018, Fernandez, a tax preparer, operated a Salem-based tax preparation business called, Soluciones Multi Service. Through his business, Fernandez used personal identifying information of certain taxpayers to prepare and file fraudulent federal and state tax returns on their behalf without their knowledge. A number of these returns included fraudulent Forms W-2 purportedly issued by employers for whom the named taxpayer did not work. In addition, Fernandez applied for and received multiple fraudulent payments authorized under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) Connecticut Attorney Sentenced to 2 Years in Prison for Tax Offenses July 28, 2022—Deron Freeman, of Glastonbury, was sentenced to 2 years in prison, followed by one year of supervised release, for tax fraud offenses. Freeman was also ordered to pay $357,062 in restitution to the IRS and fined $15,000. Freeman, an attorney specializing in the areas of personal injury and criminal law, owned and operated The Law Offices of Deron Freeman in Hartford. Between 2006 and 2010, Freeman failed to pay his overdue tax balance, despite multiple notices of delinquent taxes and the imposition of payment and interest by the IRS. In 2011, soon after Freeman entered into a payment plan with the IRS, he began using a bank account in the name of a third party to hold hundreds of thousands of dollars in an attempt to protect the funds from IRS scrutiny. The evidence at trial revealed that between 2012 and 2016, Freeman spent lavishly on cars, watercraft, and approximately $1.5 million in expenses related to the construction of a new home. IRS:CI Annual Report 2022 25 CHARLOTTE 10715 David Taylor Drive Charlotte, NC 28262 (705) 548-4241 CharlotteFieldOffice@ci.irs.gov NORTH CAROLINA Charlotte | Greensboro | Raleigh | Wilmington SOUTH CAROLINA Charleston | Columbia Greenville | Myrtle Beach TENNESSEE Chattanooga | Johnson City Knoxville | Nashville The CHARLOTTE FIELD OFFICE covers three states, spanning from the Great Smoky Mountains of North Carolina and the music filled state of Tennessee to the beaches of South Carolina. The field office covers seven judicial districts and has excellent partnerships both internally and externally. The field office works a diverse mix of cases throughout the three states, including general tax fraud, employment tax fraud, healthcare fraud, refund fraud, terrorist financing, public corruption, and Organized Crime Drug Enforcement Task Force (OCDETF). North Carolina Surgeon and Wife Sentenced to Prison for Tax Crimes January 28, 2022–Dr. James and Susan Rice were both sentenced to 5 years in prison and 3 years of probation and were ordered to pay $2.4 million in restitution. Rice was an orthopedic surgeon and sole owner of Sandhills Orthopedic & Spine Clinic, and his wife had authority over the business’s Special agents volunteer to help build a house. administrative operations. Between 2007 and 2016, the Rices withheld employment taxes from their employees but failed to pay over $580,000 in withheld taxes to the IRS. Instead, over $1 million of business funds were used to pay for their personal luxuries, transferred into their personal accounts and business bank accounts of other entities under their control, and used to support Susan Rice’s truffle cultivation business. The Rices also directed employees to deposit patient co-payments directly into their personal bank accounts. Finally, the Rices failed to file individual income tax returns and corporate income tax returns from 2014 to 2016. Bookkeeper sentenced to prison for $1.5M theft from Charleston real estate company April 4, 2022–Karen Rhett, of Charleston, South Carolina was sentenced to 3 years in prison and 2 years of supervised release and was ordered to pay $1.5 Million in restitution. Rhett was a longtime bookkeeper for a Charleston based real estate company. While working as the bookkeeper Rhett stole at least $1.5 Million dollars from the family-run business. The 59-year-old woman committed the thefts using secret, password-protected ledgers and fabricated invoices, federal authorities said. She stole company checks, padded her own salary and moved ill-gotten money through the bank accounts of affiliated businesses to hide its origins. David Simmons, president of the company, said Rhett was stealing from the company even as his father was dying of cancer. The family’s accounting showed Rhett stole more than $2.5 million beginning in 1996, family attorney Bart Daniel said. The govern­ ment’s figure of $1.5 million only accounted for money stolen after 2012, the attorney said. Rhett pleaded guilty following an investigation by the IRS and the FBI. New Bern Woman Sentenced to More Than 13 Years After Drug and Tax Conviction Investigation February 17, 2022–Antoinette Charmane Becton of Wilmington, North Carolina, was sentenced to more than 13 ½ years in prison for conspiracy to distribute and to possess with intent to distribute 50 grams or more of a mixture and substance containing a detectable amount of methamphetamine, and conspiracy to defraud the United States. Becton was also ordered to pay $222,461 in restitution to the IRS. In addition Special agents support a suicide awareness walk. Special agents conduct training. to the drug activity, Becton owned and operated Carolina Tax Solutions, a tax return preparation business in New Bern and Kinston, North Carolina. Becton and her employees filed false tax returns with intended losses of more than $1 million. From 2014 to 2018, Becton and others knowingly prepared false tax returns for clients by falsifying W-2 income, W-2 withholdings, and credits. Becton was paid through fees deducted from the refund checks, and she received cash kickbacks of approximately $1,000 to $1,500 after the client cashed the refund check. Cocaine Trafficker and Money Launderer Operating Across the Carolinas is Sentenced to 30 Years in Federal Prison April 7, 2022–Jared Shemaiah Jones, the leader of a drug and money laundering organization operating across the Carolinas, was sentenced to 30 years in prison and 5 years of supervised release for conspiracy to distribute and to possess with intent to distribute cocaine, money laundering conspiracy, and possession with intent to distribute cocaine. Seven other co-conspirators have been sentenced to between 2 and 7 years in prison, while another is awaiting sentencing and another is a fugitive. Between 2014 and September 2020, the drug conspiracy trafficked approximately 1,000 kilograms of cocaine from California into North Carolina and South Carolina and laundered the criminal proceeds. During the investigation, law enforcement seized 30 kilograms of cocaine, one kilogram of heroin, and approximately $500,000 in cash. COVID fraud investigations make the news. Chapel Hill Man Sentenced to More Than 10 Years Imprisonment for an Elder Fraud Home Repair Scheme January 24, 2022–Jorge Alberto Garcia, of Raleigh, North Carolina, was sentenced to over 10 years in prison and 3 years of supervised release for conspiracy to commit wire fraud and willfully failing to file a tax return. Garcia was also ordered to pay $4,043,398 in restitution. From around September 2015 to April 2020, Garcia approached elderly, retired individuals at their private residences in Durham, Orange, and Chatham Counties, offering home improvement services using the business names “J&J Home Improvement” and “JH Home Improvements, Inc.” Many of these victims had physical or mental infirmities. Garcia, who never had a state general contractor’s license, offered to perform home improvement projects, and these elderly individuals paid him prior to the completion of any construction work. The victims made payments by personal checks, credit cards, or withdrawals from investment accounts. Garcia often directed these individuals to leave the “to” line of the check blank, and he later added the name of his wife to the check. Other times, Garcia directed the individuals to issue the check directly to his wife. Garcia’s wife then deposited the checks into personal accounts in her name or that of her business, La Cacerola. Garcia’s wife then withdrew the money in cash and/or issued a cashier’s check made out to Garcia. Garcia and his wife also took the checks to the elderly individual’s bank or their bank and cashed the checks without depositing the funds into their bank accounts. IRS:CI Annual Report 2022 26 CHICAGO 230 S Dearborn St. Chicago, IL 60604 (312) 292-4500 ChicagoFieldOffice@ci.irs.gov INDIANA Carmel | Evansville | Fort Wayne Indianapolis | Merrillville | South Bend ILLINOIS Chicago | Downers Grove | Matteson Orland Park | Rockford | Schiller Park Springfield MINNESOTA Duluth | St. Paul | Rochester WISCONSIN Eau Claire | Green Bay | Madison | Milwaukee Anchoring the Mid-West, the CHICAGO FIELD OFFICE covers several major cities and areas, dotting the coastline of Lakes Michigan, Superior, and the Mississippi River. The Chicago Field Office has 20 posts of duty with over 165 special agents and professional staff across an area of responsibility across Minnesota, Wisconsin, Indiana, and most of Illinois. Second to none, the Chicago Field Office tackles tax fraud as its top priority and investigates a wide array of financial crimes, including money laundering from narcotics trafficking and COVID-19 fraud. Chicago’s special agents also work with their law enforcement partners to lend their financial investigative expertise to task forces, including HIDTA, OCDETF, JTTF, cybercrimes, and political corruption. Serving over 235,000 square miles, the office is consistently building on and bolstering its relationships with other law enforcement partners, the U.S. Attorney’s Office, and the public to identify, investigate, and refer quality cases for prosecution. Former Brookfield Business Owner Sentenced to Federal Prison for Tax Offense May 27, 2022–Kimberly Zulkowski was sentenced to 15 months in prison followed by 3 years of supervised release for her willful failure to account for and pay over taxes owed to the IRS. Zulkowski was also ordered to pay $731,970 in restitution. Zulkowski founded and managed Faith Family Services, Inc., a personal care business based in Brookfield, Wisconsin. Her business was successful, with gross annual receipts exceeding $5 million and over 150 employees. Despite that success, Zulkowski refused to pay over taxes she withheld from her employees’ wages as part of her company’s payroll tax obligations. Court records reveal that although the IRS had warned Zulkowski in 2015 that she was violating the federal tax laws, she nevertheless persisted in her criminal conduct for nearly two more years. Mexican Posse Gang Members Sentenced to Federal Prison for Narcotics Trafficking August 21, 2022–Louis Perez III was sentenced to 21 years in prison and 5 years of supervised release after pleading guilty to conspiracy to distribute, possession with intent to distribute controlled substances, and possession of firearms, in furtherance of a drug trafficking crime. Perez III’s conviction and sentence stem from his leadership of a violent, nationwide drug trafficking organization that obtained multi-kilogram quantities of cocaine, heroin, and marijuana for distribution in the Milwaukee area. Perez III, also known as “Eight Ball,” often obtained controlled substances from California and shipped drug proceeds through the U.S. Postal Service to co-conspirators in California. As a result of the investigation, law enforcement officers seized approximately 45 firearms, 8.6 kilograms of cocaine, 700 grams of heroin, 4.4 kilograms of marijuana, 4,500 kilograms of marijuana oils, 21.9 kilograms of filled marijuana vape cartridges, and $170,000 in U.S. currency. Minnesota Man Sentenced to More Than 2 Years in Prison for Tax Evasion October 8, 2021–Daniel Berglund was sentenced to over 2 years in prison followed by 3 years of supervised release, and he was ordered to pay $336,040.45 in restitution for tax evasion after failing to file income tax returns since 1997. Berglund was previously convicted by a federal jury on four counts of tax evasion. Berglund was the owner and sole employee of Faith Software (FAITH), where he worked as a computer language instructor. Despite earning a substantial annual income through FAITH, Berglund did not file any individual income tax returns since 1997, and he did not file any corporate tax returns on behalf of FAITH. Berglund took numerous steps to hide his income from the IRS, including giving his clients a fabricated tax identification number to A special agent learns the proper use of a weapon during range training. Special Agent in Charge gives a statement during the joint agency news conference to announce the indictment of Former Illinois Speaker of the House Michael Madigan. Participating in the US Marshalls Fallen Heroes Honor Run in Chicago on March 11, 2022, CI was well represented by special agents. prevent their payments from being reported to the IRS as income attributable to him, depositing clients’ payments into accounts where the funds would not be traceable to him, and converting his income into silver that he stashed in concealed locations in his home. Grandparent Scammer Gets Federal Sentence August 23, 2022–Jasaun Pope was sentenced to 8 years in prison for mail fraud and money laundering related to his role in a nationwide elder fraud scheme. Pope and four co-conspirators have all signed plea agreements for their roles in the offense, and Pope is the first to be sentenced. Unidentified members of the conspiracy made scam telephone calls to elderly victims in Indiana and nationwide claiming that their grandchild or other relative had an urgent legal or medical problem and needed money immediately. The caller, who often claimed to be an attorney, police officer, or other authority figure, told the victims to send an overnight delivery of cash to help the purported relative in need—typically between $5,000 and $15,000—to a delivery address used by the conspirators. Pope’s crew traveled to cities around the country to identify unoccupied residences to use as cash delivery addresses. They relayed the delivery addresses to Pope, who provided them to other members of the conspiracy. Pope’s crew then traveled to the delivery addresses to retrieve the cash sent by the elderly victims, and the conspirators divided the criminal proceeds amongst themselves. To date, investigators have identified over 68 suspected victims of the defendants’ scheme and identified losses amounting to over $683,464. Supervisory special agents attend Chicago’s Hellenic Community Fair to support recruiting efforts. Leader of Massive Sports Gambling Ring Sentenced to 18 Months March 9, 2022–Vincent Delgiudice was sentenced to 1 ½ years in prison for conducting an illegal sports gambling business and laundering the proceeds, and he was ordered to forfeit proceeds of $3.6 million. Delgiudice pleaded guilty last year to conspiracy and gambling charges. Delgiudice, also known as “Uncle Mick,” conducted, managed, supervised, and directed a multi-million dollar illegal gambling business based in the greater Chicago area. Delgiudice accepted wagers from approx­ imately 1,000 gamblers on the outcome of sporting events, including major league baseball, college and professional basketball, college and professional football, and other profes­ sional and amateur sporting events. To maintain the illegal betting website, Delgiudice cashed at least 12 cashier’s checks totaling at least $113,625 and express mailed them via Federal Express from Orland Park, Illinois to Costa Rica. IRS:CI Annual Report 2022 27 CINCINNATI 550 Main St. Cincinnati, OH 45202 (513) 975-6343 CincinnatiFieldOffice@ci.irs.gov KENTUCKY Bowling Green | Florence Lexington | Louisville OHIO Akron | Canton | Cincinnati | Cleveland Columbus | Dayton | Independence | Toledo CINCINNATI FIELD OFFICE comprises of the states of Ohio and Kentucky, which contains two federal judicial districts in each state. The Cincinnati field office works closely with our federal, state, and local law enforcement partners to investigate and prosecute tax, money laundering, and related financial crimes that affect the southern and northern judicial districts of the “Buckeye State” and the eastern and western judicial districts of the “Bluegrass State.” Our special agents and professional staff provide unparalleled financial expertise to lead investigations against the most egregious white-collar criminals. In concert with the U.S. Attorney’s office as well as our civil and law enforcement partners, our investigations have a significant impact on regional and national enforcement priorities that include income tax evasion, questionable tax refund/return preparer fraud, COVID -19 relief fraud, public corruption, cybercrimes, and narcotics related crimes. Kentucky Man Sentenced to 35 Years in Prison on Drug and Money Laundering Conspiracy Charges July 18, 2022–William R. Hargis was sentenced to 35 years in prison for conspiracy to distribute and possession with intent to distribute 52.5 pounds of crystal meth, possession of firearms in furtherance of drug trafficking, and conspiracy to commit money laundering. Hargis was a drug supplier and was storing, packaging, and cutting narcotics in a Lexington office building. In that office, law enforcement found more than 50 pounds of metham­ phetamine, four firearms, cocaine, and additional drug trafficking items. Hargis traveled from Kentucky to casinos in Southern Indiana to place monetary bets to conceal the source of the bets, which was in whole or part drug proceeds. Two Men Sentenced in Massive COVID-19 Relief Fraud Scheme May 6, 2022–James Stote was sentenced to 10 years in prison, and Phillip Augustin was sentenced to 6 ½ years in prison related to Paycheck Protection Program (PPP) fraud. Augustin and Stote obtained fraudulent PPP loans for Augustin’s company and others using falsified documents. Augustin used his network of business contacts as a manager for professional football players to recruit loan applicants. The applications they submitted for these loans relied on fake payroll numbers, falsified IRS forms, and phony bank statements. Stote submitted or facilitated at least 79 fraudulent loan applications worth at least $35 million. Among those loans, Augustin was also held responsible for at least 34 fraudulent loan applications worth at least $15 million. Middletown Man Se [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Airs%3A090eb75ebce14149. Public record. Not legal advice.