Message from the Chief & Deputy (2018)

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IRS:CRIMINAL

INVESTIGATION

ANNUAL REPORT 2018

TABLE OF CONTENTS

Message from the Chief & Deputy

2018 Snapshot

Tax Crimes

34 Communications & Education

40 Field Office Map

41 Atlanta

45 Boston

49 Charlotte

55 Chicago

60 Cincinnati

64 Dallas

67 Denver

71 Detroit

75 Houston

79 Las Vegas

82 Los Angeles

85 Miami

89 Newark

93 New York

97 Oakland

100 Philadelphia

104 Phoenix

107 Seattle

112 St. Louis

116 Tampa

120 Washington D.C.

35 Outreach/Community Engagement

124 Appendix

12 Non–Tax Crimes

16 Electronic Crimes

17 International Operations

19 Narcotics, Counterterrorism, &

Transnational Organized Crime

20 Specialized Units

22 Nationally Coordinated

Investigations Unit

24 Undercover Operations

25 Scheme Development Center

26 Asset Forfeiture

27 National Forensic Laboratory

29 National CI Training Academy

31 Professional Staff

32 Equity, Diversity & Inclusion

IRS: Criminal Investigation Annual Report 2018

MESSAGE FROM THE CHIEF & DEPUTY

I am excited to

is the backbone of the U.S. tax system. According to

us more effective and allow us to maintain our reputation

share the FY

studies released this summer, the United States is

as the world’s finest financial investigators.

2018 IRS Criminal

on pace to record the fewest number of white-collar

Investigation Annual

crime prosecutions on record. This statistic is espe-

While we are in the early stages of using data analytics,

Report. This report

cially troubling because financial crime has proliferated

we are already seeing success. One particularly notewor-

is a chance for us

over the past few years. In recent years, CI has used

thy success is the launching of the Nationally Coordinat-

to highlight our

its expertise gained from combating cyber-crime in

ed Investigations Unit (NCIU). This unit relies heavily on

successes as an

cases like Silk Road, Liberty Reserve, Alpha Bay, and

data analytics to help drive future case selection. In 2019,

agency during the

BTC-e to investigate white-collar crimes. We now

the NCIU will move from “proof of concept” to an official

past year. It also

require all CI employees—not just special agents—to

CI section. The NCIU has already referred more than 50

gives us an impor-

complete cyber training. Moving forward, it is hard

leads to CI field offices, and we expect that number to

tant opportunity

to imagine future cases that will not have a cyber

grow substantially this year.

to take stock of the larger financial crime environment

component to them.

in which we operate and to ensure we are using our

As we begin our 100th year of criminal investigations,

resources in a manner that will have the greatest impact.

We have also prioritized the use of data in our inves-

I could not be prouder to lead this exceptional group of

First and foremost, we are a tax agency, but we are also

tigations. Future criminal investigations must make

men and women. We have never been more capable,

the only federal agency authorized to investigate and

use of data to help drive case selection and efficiency

well-trained, or relevant to the financial crime landscape

recommend prosecution on federal income tax cases.

in the critical work we do. That means using models,

than we are today. While challenges always lie ahead,

We take this responsibility seriously and most of our

algorithms, and the millions of records and evidence

I know we will meet them with the same energy and

cases ultimately end in convictions and jail time. Publiciz-

we have at hand to help identify areas of tax non-

expertise that has made us successful over the last 99

ing these convictions helps to reinforce the voluntary

compliance. Data analytics and other technologies

years. I am extremely optimistic about our future – from

compliance aspect of our nation’s tax system. It shows

like “predictive policing” help give law enforcement a

our ability to hire more employees to the outstanding

law-abiding taxpayers that we take violations of the tax

clearer picture and are quickly becoming an everyday

quality of work we do every day in the field and in

laws seriously and will pursue those who take advantage

tool for CI. Although these tools will never replace

headquarters. Our best years are still ahead of us!

of the system. Voluntary compliance does not work

good, old-fashioned investigative work, they will make

–Chief, Don Fort

without a strong and fair enforcement presence which

IRS: Criminal Investigation Annual Report 2018

MESSAGE FROM THE CHIEF & DEPUTY

After reviewing the

cated street level crime to a sophisticated international

criminal tax cases developed from all international leads

FY 2018 Annual

organized crime operation. We have made a conscious

sources.

Report, it is hard

effort to reduce our investigative time on identity theft.

to believe all that

We ended the year spending about 10 percent of our

In addition to our international group, IRS CI recently

we accomplished

investigative time in this area compared to 18 percent

formalized the creation of the Joint Chiefs of Global Tax

in this last year. I

at our high-water mark. We reinvested this time in our

Enforcement, or the J5. This group includes the heads

am proud, yet not

traditional tax work, bringing the most sophisticated

of tax enforcement from the United States, the United

surprised, that our

tax cases to DOJ for prosecution.

Kingdom, Canada, Australia, and the Netherlands. These

countries’ leaders recognize the increasing trends in

well-earned reputation as premier fi-

Another area of emphasis continues to be our role

sophisticated tax evasion and other financial crimes that

nancial investigators

in international tax compliance and enforcement.

cross international borders, and they are already sharing

speaks for itself.

Although we have fewer staff, we are spending more

information and collaborating on investigations.

investigative time in this area. We have been very sucIn the past year, we continued to make difficult decisions

cessful for the past 10 years with international tax en-

While we have had many successes in these areas, we

when it comes to resources. With a workforce hovering

forcement cases involving many financial institutions,

cannot rest on our laurels. We still have much work to

around 3,000 people—fewer than 2,100 of which

individuals, enablers, and our successful partnership

do to combat offshore tax crimes. This annual report

are special agents—we have a large mission area to

with the DOJ-Tax Office on the Swiss Bank Program.

proudly reflects the tremendous work the Criminal

Investigation Division has done during FY 2018. The case

cover through the allocation of those resources. We do

amazing work with very few resources, and I am confi-

This year, we established a new international tax and

summaries in this report touch every field office, every

dent we will continue to excel regardless of our numbers.

financial crime group in our Washington, DC, field

state, and nearly every region of the world. I look forward

While we may have fewer agents, we are working bigger

office. This dedicated group of elite special agents

to continuing to accomplish great things in FY 2019.

cases and we are working smarter.

works to identify, investigate, and recommend pros-

–Deputy Chief, Eric Hylton

ecution of international offshore tax evasion schemes.

We survived what we like to call a perfect storm when

The group looks at U.S. citizen account holders who

looking at the number of agents lost due to retirement,

move their money offshore to avoid detection, and at

the lack of hiring over the past five years, and the prolif-

foreign banks, financial institutions, their employees,

eration of identity theft cases. In just a couple of years,

and facilitators who help U.S. citizens hide their funds

we have seen identity theft morph from an unsophisti-

offshore. This operational unit has the ability to work

IRS: Criminal Investigation Annual Report 2018

2018 SNAPSHOT

TAX FRAUD IDENTIFIED

OTHER

FINANCIAL CRIMES

CONVICTION RATE

$9.69B $10.4B 91.7% 1399

PROCEEDS IDENTIFIED

WARRANTS EXECUTED

1.76

DIGITAL DATA SEIZED

PETABYTES

IRS: Criminal Investigation Annual Report 2018

2018 SNAPSHOT

INTERNATIONAL

CYBER CRIMES

GENERAL TAX FRAUD

PUBLIC CORRUPTION

ABUSIVE TAX SCHEMES

CORPORATE FRAUD

EMPLOYMENT TAX

IDENTITY THEFT

GENERAL FRAUD

73.2

TAX

REFUND FRAUD

13.7

NON-TAX

MONEY LAUNDERING

NARCOTICS

11.8

OCDETF

Organized Crime Drug

Enforcement Task Force

DIRECT INVESTIGATIVE TIME SPENT*

PERCENTAGES

*1.4% Uncategorized

IRS: Criminal Investigation Annual Report 2018

2018 SNAPSHOT

U.S. ATTORNEY'S OFFICE

IRS:CRIMINAL INVESTIGATION

26%

14%

2,019

SPECIAL AGENTS

2018

6.4%

FINCEN

13%

2017

789

PROFESSIONAL STAFF

IRS:CIVIL

2018

PUBLIC

29%

STATE/LOCAL GOV'T

OTHER FEDERAL AGENCIES

INVESTIGATION SOURCES

2,159

6.1%

2017

840

IRS:CI STAFFING

IRS: Criminal Investigation Annual Report 2018

TAX CRIMES

CRIMINAL INVESTIGATION’S (CI) primary resource commitment is to develop

and investigate tax crimes, both legal and illegal source. Prosecution of these

GENERAL TAX FRAUD

cases supports the overall IRS compliance goals and enhances voluntary compliance with the tax laws. CI works some of these investigations with our federal,

General tax fraud investigations are at the core of CI’s law enforcement efforts and

state and local law enforcement partners; and also coordinates with foreign tax

directly influence the American public’s confidence and compliance with the tax

and law enforecement agencies.

laws. The integrity of our tax system depends heavily on taxpayers’ willingness

to self-assess taxes owed and voluntary file tax returns. CI investigations help

The Illegal Source Financial Crimes Program encompasses tax and tax-related,

assure law-abiding taxpayers that individuals who deliberately under-report or

money laundering and currency violations. These investigations focus on individu-

omit income from their tax returns are held accountable for their actions. Common

als deriving income from illegal sources, such as money obtained through embez-

practices involved in general tax fraud investigations include keeping two sets of

zlement, bribery, and frauds. The individuals can be legitimate business owners

books, making false entries in books and records, claiming personal expenses as

but obtain their income through illegal means. These investigations focused on

business expenses, claiming false deductions or credits against taxes owed, and

methods through which individuals seek to “launder” their ill-gotten income by

hiding or transferring assets. CI special agents use their financial investigative

making it appear the income is from a legitimate source. Frequent money laun-

expertise to uncover and quantify the seriousness of these schemes. They also

dering techniques include the manipulation of currency reporting requirements,

work closely with DOJ prosecutors to gather the necessary evidence to bring

layering of transactions and international movement of funds. In these types of in-

these cases to a successful conclusion.

vestigations, CI Special Agents work together with our federal, state and local law

enforcement partners, as well as with foreign tax and law enforcement agencies.

IRS: Criminal Investigation Annual Report 2018

TAX CRIMES

1714

INVESTIGATIONS INITIATED

1050

PROSECUTIONS RECOMMENDED

ABUSIVE TAX SCHEMES

1052

SENTENCED

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 focuses on the investigation of promoters and clients who willfully participate in

The QRP identifies fraudulent claims for tax refunds. Generally, these schemes involve

domestic and offshore tax schemes in violation of the tax laws. Participants in these

individuals filing multiple fraudulent tax returns using the personally identifiable infor-

abusive schemes create structures such as trusts, foreign corporations, and partner-

mation of individuals who knowingly or unknowingly are used to facilitate the scheme.

ships to make it appear a trustee, nominee, non-resident alien, or other foreign entity

A significant number of QRP investigations include cases also considered identity theft

is the owner of the assets and income, when in fact the true ownership and control

investigations (stolen identity refund fraud-SIRF).

remains with a U.S. taxpayer.

In contrast, RPP investigations involve the orchestrated preparation and filing of false

REFUND FRAUD PROGRAM

income tax returns by corrupt return preparers. 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

The Refund Fraud Program consists of three parts–identity theft investigations, the

were falsified.

Questionable Refund Program (QRP), and the Abusive Return Preparer Program (RPP).

These programs cover criminals who file fraudulent tax returns to steal government

funds. This type of theft erodes voluntary compliance and taxpayer confidence in the

IRS: Criminal Investigation Annual Report 2018

TAX CRIMES

EMPLOYMENT TAX FRAUD

Employment tax fraud takes many forms. Some of the

SSN and other personally identifiable information (PII)

facilitate the transfer of cyber investigative expertise.

to file a fraudulent tax return and attempt to get a

refund early in the filing season before the legitimate

CCU investigations involve the internet and internet-

taxpayer, files their tax return.

based technologies that enable criminals to engage in

most common forms include employee leasing, paying

illegal activity with anonymity and without a defined

employees in cash, filing false payroll tax returns, and

physical presence. The unit focuses its efforts on multi-

failing to file payroll tax returns (“pyramiding”). Pyra-

CYBER CRIMES

miding is when a business withholds taxes from its

jurisdictional investigations posing the most significant

threats to the tax, financial, and economic systems of

employees, but intentionally fails to forward them to the

Since 2015, CI has been building a Cyber Crimes

the United States. CI also began establishing a nation-

IRS. After a liability accrues, the individual starts a new

Program to address the exponential growth of cy-

wide footprint by creating an Office of Cyber Crimes

business and begins to accrue a new liability. Some em-

bercrime impacting the tax, financial, and economic

within its headquarters structure and adding cybercrimes

ployers withhold taxes from their employees’ paychecks

systems of the United States.

and use the funds for their personal expenses. Employ-

A Cyber Crime Unit (CCU)

ment taxes include federal income tax withholding,

with locations in Los Angeles

Social Security taxes, and federal unemployment taxes.

and Washington, D.C., was

part of the initial launch of the

IDENTITY THEFT

program. The CCU consists

of two operational groups of

special agents, professional

Identity theft refund fraud occurs when someone uses

staff, computer engineers,

the personally identifiable information (PII) of another

and supervisory special

individual–for example name, Social Security number,

agents (SSA). The respective

address–without permission, to commit fraud or other

SSAs report through the

crimes. These cases are commonly referred to as stolen

special agents in charge in

identify refund fraud (SIRF) investigations. The scam

Los Angeles and Washington,

usually occurs when an identity thief uses a legitimate

D.C., field offices. CI has also

taxpayer’s identity to file a fraudulent tax return and claim

begun placing CCU special

a refund. Generally, the identity thief will use a stolen

agents in other field offices to

IRS: Criminal Investigation Annual Report 2018

TAX CRIMES

coordinator positions within each of its 21 field offices.

The IRS also uses this information to develop internal

As with all types of crimes within CI’s area of responsibil-

Field office special agents and professional staff working

defenses that help identify and prevent further losses

ity, special agents working cybercrimes investigations

cybercrime investigations are focused primarily on cyber-

associated with fraudulent claims.

use the same “follow the money” strategy that made

CI’s involvement in complex investigations a mainstay

enabled investigations that involve theft and fraud and

are increased in scale by the use of computers, computer

CI has jurisdiction over these types of investigations:

since the creation of the agency. CI’s involvement in

this area includes investigations involving the IRS “Get

networks, or other forms of technology.

• Data intrusion, business email compromise, phishing

Transcripts” web application and IRS Data Retrieval

Over the past few years, CI has seen an increasing

schemes, bank account takeovers and data loss

Tool the Department of Education uses to help students

growth in the number of criminals using the cyber

incidents)

complete their federal student aid application. CI efforts

environment to facilitate SIRF and other refund fraud

• Selling, buying, and compromise of PII through the

have also been crucial in various Dark web marketplace

schemes. During this same period, data loss incidents

internet

and facilitator investigations, including Silk Road, Mt.

reported to the IRS have drastically increased. These

• Virtual currency-based tax and money laundering

Gox, Alphabay, BTCe, and Backpage.com. t

data loss incidents include data intrusions, business

schemes

email compromise, phishing schemes, and bank account

• Dark web marketplace owners, administrators, and

takeovers victimizing private sector entities involved in

large vendors

the tax eco-system and the IRS. These thefts target

• Terrorist financing including the use of virtual

detailed financial data, prior year tax returns, and payroll

currency, mesh networking, and other online means to

records that criminals use to generate SIRF claims that

raise funds, launder illegal proceeds, and funnel money

mirror a victim’s actual tax return.

for terrorist organizations

During these types of cybercrime investigations, special

CI will continue to focus on tax, tax related, and other

agents use their close working partnerships with other

financial crimes, while expanding its presence into the

law enforcement agencies and their capabilities as law

cyber environment. The CI definition of cybercrime is

enforcement officers to gather valuable information

a criminal investigation in which CI has investigative

about SIRF, refund fraud crimes, and information that

authority and believes the subject is using the internet as

affects the integrity of IRS online systems. They share

an essential means to commit the crime, remain anony-

criminal intelligence in real-time with their IRS civil coun-

mous, elude law enforcement, and conceal financial

terparts to aid taxpayer and revenue protection efforts.

transactions, ownership of assets, or other evidence.

IRS: Criminal Investigation Annual Report 2018

NON–TAX CRIMES

THE IRS CI Illegal Source Financial Crimes Program encompasses tax and tax-

The common image of money laundering involves the washing of drug money

related crimes, money laundering, and currency violations. These investigations

off city streets through transactions that turn it into bank deposits and other

focus on individuals getting income from illegal sources, such as embezzlement,

assets. However, money laundering today involves the large-scale movement of

bribery, and fraud. They also focus on methods individuals use to “launder” their

criminal funds into or through U.S. or foreign financial institutions at the touch of a

ill-gotten gains by making them appear as if they are from a legitimate source.

computer button. Criminals can launder money through a wide variety of enter-

Frequent money laundering techniques include the manipulation of currency

prises, from banks and money transmitters to stock brokerage houses, casinos,

reporting requirements, layering of transactions, Black Market Peso, and inter-

and Bitcoin exchanges. The flow of illegal funds around the world is estimated to

national movement of funds. The law enforcement community recognizes CI’s

be hundreds of billions of dollars .

special agents as the premier experts in money laundering investigations.

The movement of money through the financial system leaves a trail. Uncovered

MONEY LAUNDERING

trails identify those who willingly facilitate and finance crime whether due to willful

blindness, negligence, or otherwise. The trail can also lead back to the criminals

whose crimes generated the money. CI special agents are experts in following the

Money laundering, as defined in the National Money Laundering Strategy, is

money trail and participate in a wide variety of investigations, financial task forces,

criminal finance. When criminals or criminal organizations seek to disguise

and narcotics task forces including Organized Crime Drug Enforcement Task Force

the illicit nature of their money by introducing it into the stream of legitimate

(OCDETF) and the High Intensity Drug Trafficking Area (HIDTA).

commerce and finance, they are laundering money.

IRS: Criminal Investigation Annual Report 2018

NON–TAX CRIMES

1172

INVESTIGATIONS INITIATED

1080

PROSECUTIONS RECOMMENDED

BANK SECRECY ACT PROGRAM

1059

SENTENCED

collaboration between CI and federal, state, and local law enforcement agencies for

identifying and investigating financial crimes, including BSA violations, money laundering, narcotics trafficking, and terrorist financing.

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

CI strengthens the BSA program area by maintaining excellent working relationships

reporting of the transportation of currency across United States borders. Through the

with anti-money laundering officials within the financial industry. During the past year,

analysis of BSA data, CI has identified significant, complex money laundering schemes

CI participated in numerous local, regional, national, and international anti-money

and other financial crimes. CI is one of the largest law enforcement consumers of BSA

laundering forums and conferences presenting on various topics including CI’s role

data.

in investigating financial crimes, case studies, and typologies. CI also continues to

partner with the Financial Crimes Enforcement Network (FinCEN) and other federal law

The CI BSA program has grown substantially since its start in early 2000. The primary

enforcement agencies to provide feedback and outreach to the financial industry.

objective of the program is to examine BSA information to identify significant financial

criminal activity and develop financial investigations within IRS–CI’s jurisdiction.

The CI BSA program has partnerships in 94 judicial districts led by the respective

U.S. Attorney Office. The program also manages the Financial Crimes Task Forces

(FCTF) and Suspicious Activity Report–Review Teams (SAR-RT) located throughout

the country. The FCTF and SAR-RT focus on specific geographic areas and involve

IRS: Criminal Investigation Annual Report 2018

NON–TAX CRIMES

PUBLIC CORRUPTION

or investors. It also includes executives who entitle

themselves to unauthorized compensation, using

GENERAL FRAUD

unapproved payments, bonuses, corporate funds, or

CI investigates elected and appointed individuals who

violate the public’s trust. These individuals are from all

bogus loans to pay for personal expenses.

CI special agents also investigate healthcare and

financial institution fraud. CI’s ability to bring income tax

levels of government including local, county, state, federal,

and foreign officials. Public corruption investigations

include criminal offenses such as bribery, extortion, embezzlement, kickbacks, tax fraud, and money laundering.

Corruption by public officials results in the loss of many

taxpayer dollars. Public officials that violate the public

trust are often prosecuted to the full extent of the law,

with large fines and increased jail time for offenders. In

addition, the United States is often a desirable destination for the proceeds of corrupt foreign officials. This

type of corruption undermines democratic institutions

and threatens national security.

CORPORATE FRAUD

The Corporate Fraud program concentrates on violations

committed by publicly traded or private corporations

and their senior executives. Some specific criminal acts

within a corporate fraud include falsifying, fabricating,

or destroying company records to falsify tax returns,

financial statements, or reports to regulatory agencies

IRS: Criminal Investigation Annual Report 2018

NON–TAX CRIMES

and money laundering charges enhances prosecutors’

According to court records filed by the U.S. Attorney's

effectiveness in combating these and other types of

office, Leonard paid Caraway the $450,000 between

frauds. In these investigations, CI special agents work

2011 and 2017. The council member admits to hiding

with federal, state, and local law enforcement partners,

close to $100,000 from the IRS in 2014, and to asking

as well as with foreign tax and law enforcement agencies

Leonard for money on numerous occasions — cashing

in following the money trail to uncover ill-gotten gains.

those checks at liquor stores and pawn shops. Federal

prosecutors say he also received "luxury suits" and fully

On August 9, 2018, Dallas Mayor Pro Tem Dwaine

funded trips to New Orleans, Las Vegas, and Austin.

Caraway pleaded guilty to accepting more than $450,000

in kickbacks and bribes, in part through a phony consult-

U.S. attorney Erin Nealy Cox said that Leonard, aided

ing agreement, gambling money, and trips to Las Vegas

by his associate, paid a total of more than $3.5 million

and elsewhere. Caraway, the second highest-ranking

to Caraway and Rick

elected official in Dallas, pleaded guilty to two federal

Sorrells, former superin-

charges in the public corruption case and resigned from

tendent for Dallas County

the Dallas City Council.

Schools. Leonard made the

payment in return for favor-

According to court documents, Caraway received about

able action related to Force

$390,000 from Robert Leonard for real estate consult-

Multiplier Solutions. The

ing and knew a portion of the funds were to secure his

effort helped the company

political influence to further Leonard’s business interests.

and Leonard secure more

Leonard owned Force Multiplier Solutions, a technology

than $70 million in con-

company that puts cameras on school buses. In one

tracts and agreements with

instance in 2012, Caraway voted in favor of a city ordi-

Dallas County Schools,

nance creating a civil fine and offense for “passing a raised

the troubled agency that

stop-arm camera on a school bus,” the document said.

residents last year voted

to dissolve. t

IRS: Criminal Investigation Annual Report 2018

ELECTRONIC CRIMES

EVERY INVESTIGATION CRIMINAL Investigation conducts involves digital

and multimedia evidence of some type. Digital and multimedia evidence comes

Types of forensic analysis the SA-CISs and CIFAs perform include:

from many sources, such as witnesses, subpoenas, personal computers, mobile

• Dark web activity

• Internet activity and history analysis

devices (phones, tablets, etc.), small and large business computers/servers, server

• Encryption and password recovery

• Data conversion from proprietary

formats

• Website preservations

farms, cloud storage or even the Dark net. The proper collection and review of

digital evidence requires specialized skills to be admissible in court proceedings.

IRS–CI Electronic Crimes’ primary function is the forensic acquisition, analysis and

testimony of the digital and multimedia evidence related to ongoing criminal investigations. Electronic Crimes has a presence in 60 posts-of-duty across the United

States and consists of five computer investigative forensic analysts, six senior

analyst computer investigative forensic analysts (CIFA), 80 special agent – computer

• Targeted searches

• Deduplication of large data sets

(such as email)

• Recovery of hidden and deleted data

• Taint reviews and segregation

• Recovery & repair of damaged disk

drives

• Extraction of data from proprietary

financial software (tax preparation,

accounting, payroll, point of sale

systems, custom database, etc.)

Investigative specialists (SA-CIS), four forensic assistant contractors, and one

administrative support employee. The SA-CISs and CIFAs receive advanced training

In FY 2018, Electronic Crimes personnel participated on 327 search warrants,

in the proper procedures of collecting, acquiring, analyzing and testifying on digital

performed at 553 locations; seized 1.76 petabytes of data from 1,918 comput-

and multimedia evidence. Additionally, they provide assistance in drafting search

ers/laptops/external devices and 1,845 mobile devices; and testified in 16 trials.

warrants, court orders and subpoenas. They travel across the country to participate

Electronic Crimes is the premier source for digital and multimedia evidence

on search warrants and conduct the digital and multimedia evidence seizures.

in IRS–CI. t

IRS: Criminal Investigation Annual Report 2018

INTERNATIONAL OPERATIONS

IRS CI INTERNATIONAL Operations (IO) educates foreign governments and

Internationally, IRS CI has special agent attachés strategically stationed in 10

agencies on crime detection, investigative techniques, case studies, emerging

foreign countries (Canada, Mexico, Colombia, Panama, Barbados, The Netherlands

trends, and best practices. CI trains foreign governments through collaborative

– Europol, England, Germany, China, and Australia). Attachés continuously build

efforts with the International Law Enforcement Academies (ILEA) in Budapest,

and maintain strong alliances with foreign governmental, law enforcement, and

Bangkok, San Salvador, and Gaborone, Botswana. CI IO also presents training for

industry partners. These strong strategic alliances provide CI with the ability to

foreign law enforcement and governments around the world sponsored by the

develop international investigative leads and support domestic investigations that

Bureau of International Narcotics and Law Enforcement Affairs (INL), Overseas

have an international connection. Special agent attachés are vigilant in uncovering

Prosecutorial Development, Assistance and Training (OPDAT), and the State

emerging schemes that promoters and financial institutions perpetrate to help U.S.

Department. This included training for judges, prosecutors, and investigators in

taxpayers evade their federal tax obligations. t

Nepal; International Financial Investigations courses in Colombia, Mexico, and

Argentina; and cybercrime and virtual currency training sessions in Australia and

New Zealand.

IRS: Criminal Investigation Annual Report 2018

INTERNATIONAL ATTACHÉ LOCATIONS

EUROPOL

LONDON

FRANKFURT

OTTAWA

WASHINGTON, D.C.

MEXICO CITY

PANAMA CITY

BOGOTA

HONG KONG

BARBADOS

SYDNEY

IRS: Criminal Investigation Annual Report 2018

NARCOTICS, COUNTERTERRORISM, &

TRANSNATIONAL ORGANIZED CRIME

OVER THE LAST two decades, Transnational Organized Crime (TOC) expanded

violations of the Internal Revenue Code, Bank Secrecy Act and Federal Money

dramatically in size, scope and impact—becoming more organized and posing

Laundering statutes. IRS CI Special Agents use their unique financial investigative

a significant threat to public safety and national security in the United States.

expertise to trace profits from an illegal activity back to an individual or criminal

Combating TOC continues to be a priority for the United States and our domestic

organization with the intent to dismantle, disrupt, and prosecute the criminal.

and foreign law enforcement partners. The February 9, 2017 Presidential Executive Order on Enforcing Federal Law with Respect to Transnational Criminal

NCT supports the National Drug Control Strategy and the National Money

Organizations and Preventing International Trafficking directs federal law enforce-

Laundering Strategy through the assignment of CI personnel to the White House

ment agencies to give “high priority and devote sufficient resources to efforts to

Office of National Drug Control Policy as well as the assignment of personnel

identify, interdict, disrupt, and dismantle Transnational

to multi-agency task forces, including Organized Crime Drug Enforcement Task

Criminal Organizations.”

Force (OCDETF), OCDETF Fusion Center (OFC), High Intensity Drug Trafficking

Area (HIDTA), High Intensity Financial Crimes Area (HIFCA), Drug Enforcement

IRS CI Narcotics and Counterterrorism (NCT) program supports the goals of the

Administration Special Operations Division, (SOD), and the El Paso Intelligence

President’s Strategy to TOC, the U.S. National Drug Control Strategy, the National

Center (EPIC). IRS CI focuses its narcotics investigations on high-priority OCDETF

Money Laundering Strategy, and the U.S. Government’s National Counterterrorism

investigations where its contributions have the greatest impact of dismantling

Strategy. IRS CI contributes to the strategies by seeking to reduce or eliminate

large criminal organizations.

the profits and financial gains of individuals, entities, and Transnational Criminal

Organizations involved in the financing of terrorism, narcotics trafficking, and

In 2017, IRS CI implemented a “jump team” to enable CI to respond when a terror-

money laundering. IRS Criminal Investigation is an integral partner in combating

ist incident occurs. Agents will immediately work financial leads relating to the

the trafficking of narcotics and the financing of terrorism by investigating criminal

incident under direction and in coordination with the local field office. t

IRS: Criminal Investigation Annual Report 2018

SPECIALIZED UNITS

GLOBAL ILLICIT FINANCIAL TEAM (GIFT)

GIFT investigations include:

• Illegal money transfer businesses

GIFT is a task force IRS CI leads to investigate organizations that illicitly move

• International real estate fraud

money used to support international crime organizations. These investigations are

• Financial institutions concealing and disguising illegal transactions

conducted with various partner agencies, including Homeland Security Investiga-

• Identity theft

tions (HSI) and the Defense Criminal Investigative Service (DCIS). An IRS CI

• Public corruption and extortion

supervisory special agent (SSA) oversees the task force, which includes special

• Government contract fraud

agents and professional staff from CI and partner agencies. The SSA reports to

• Sale of contraband goods

the special agent-in-charge in the Washington, D.C., field office.

The GIFT’s recent cases include U.S.-based financial advisor Jose Larrea’s guilty

The GIFT is a major conduit of IRS–CI’s money laundering strategy and a focal

plea to money laundering charges as a part of Operation Miami Advice. Larrea

point for the newly formed CI money laundering cadre. The cadre consists of

admitted to laundering more than $1 million in foreign bribery proceeds paid to

special agents from all 21 field offices who coordinate activities and allocate

officials of Ecuador’s state-owned and state-controlled energy company, Empresa

resources to effectively execute CI’s money laundering strategy.

Pública de Hidrocarburos del Ecuador (PetroEcuador). Larrea was the fourth

individual to plead guilty in this case.

IRS: Criminal Investigation Annual Report 2018

SPECIALIZED UNITS

ALCOHOL AND TOBACCO TAX AND

TRADE BUREAU (TTB)

Most recently Charanjit Singh (Singh), a Virginia

business owner, was sentenced in August to over 2

INTERNATIONAL TAX GROUP (ITG)

½ years in federal prison and ordered to forfeit $14.2

million for unlawful cigarette smuggling. Singh admitted

As the Swiss Bank Program winded down in 2017, CI

Reminiscent of Eliot Ness and Elmer Irey’s “T-Men,”

in his plea agreement that the tax loss in the case

ramped up an International Tax Group (ITG) in 2018. An

the IRS-Criminal Investigation Division (CI) continues its

was $40,153,463. He admitted to transporting large

SSA leads this group of special agents, investigative

partnership with the Alcohol and Tobacco Tax and Trade

amounts of cigarettes across state lines for redistribu-

analysts, and professional staff, which report to a special

Bureau (TTB) to combat illicit tobacco and alcohol trade.

tion and sale. The cigarettes were acquired in Virginia,

agent-in-charge in the Washington, D.C., field office.

The TTB was created in January 2003, when the Bureau

where the tax rate for cigarettes is one of the lowest in

The ITG will focus on investigating the largest and most

of Alcohol, Tobacco, Firearms and Explosives or ATF,

the nation, and sold in other states, including New York,

serious international tax schemes that threaten the

was extensively reorganized under the provisions of the

which has one of the nation’s highest tax rates.

integrity and fairness of the tax system. Investigations

Homeland Security Act of 2002 and realigned to the De-

this group initiates are long-term and will require agents

partment of Justice. The act called for the tax collection

Other significant cases include the sentencing in May

to use all tools at the Criminal Investigation Division’s

functions to remain with the Department of the Treasury,

of a Korean national, Un Hag Baeg, to almost 4 years

disposal. Look for significant results from this group in

thereby creating TTB. TTB regulates and collects taxes

in federal prison for his role in a conspiracy that sold

future CI annual reports. t

on trade and imports of alcohol, tobacco, firearms, and

cigarettes domestically, but did not pay excise taxes.

ammunition within the United States.

Baeg falsely claimed the cigarettes were leaving the

United States on cargo ships sailing out of the ports

In 2009, TTB entered into an inter-agency agreement with

of Los Angeles and Long Beach. Baeg and others

CI to provide special agents to enforce TTB’s criminal pro-

conspired to divert approximately 143 million export-

visions. These special agents are strategically dispersed

only cigarettes from an export warehouse near the

across the country and overseen by an SSA. This group’s

Port of Los Angeles. Baeg purchased the cigarettes

sole focus is combating the illicit tobacco and alcohol

under the pretext that they would be provided to

trade. The TTB reports to the special agent-in-charge in

various ships sailing out of the United States. In fact,

the Washington, D.C., field office. Since the agreement

the cigarettes were sold in the United States, which

began, the group has initiated over 180 investigations with

resulted in the evasion of $7,260,203 in federal excise

great success. The average jail sentence in these types of

taxes and$5,986,458 in California excise taxes.

cases ranges from 6 months to 4 years.

IRS: Criminal Investigation Annual Report 2018

NATIONALLY COORDINATED

INVESTIGATIONS UNIT

SINCE ITS FORMATION on May 1, 2017, the IRS–CI Nationally Coordinated

veloped successful data models for multiple initiatives and is applying the same

Investigations Unit (NCIU) has focused on developing an investigative strategy

methodology to the other initiatives.

that impacts and proactively addresses nationwide key non-compliance areas and

Ensuring maximum geographic coverage in case development and referrals, the

emerging threats.

NICU referred 55 cases to all 25 CI field offices for criminal investigation. The

The NCIU employs an innovative data driven approach and partners with internal

following list is a breakdown of cases by initiative:

and external stakeholders to accomplish its mission. In addition to developing

investigations with national significance, the NCIU continually supports, in terms

• Employment tax, 36

• International tax, 5

of investigative and technical guidance, CI’s field offices and case agents. The unit

• Microcap stock, 12

• Biofuels credit, 1

also provides training and oversight for these large, complex investigations.

Thirty-two of the 55 referrals were elevated to Subject Criminal Investigations

The NCIU’s investigative efforts are focused on the following initiatives CI’s Senior

(SCI) as follows:

Executive Leadership identified as areas of high priority:

• Employment tax, 22

• Employment tax

• Microcap stock, 8 • International tax, 2

• International tax and significant money laundering

• Virtual currency

Of the 32 elevated cases, the estimated average amount of criminal tax deficiency

was $2.4 million; the estimated total amount of criminal tax deficiency was

The NCIU, working with Research, Applied Analytics & Statistics (RAAS), de-

$68 million.

IRS: Criminal Investigation Annual Report 2018

NATIONALLY COORDINATED INVESTIGATIONS UNIT

In addition to case development and referrals, the NCIU

The NCIU also worked with multiple internal and

In addition, the NCIU formed strategic alliances with law

dedicated significant resources to offer initiative-specific

external stakeholders to advance its data-driven case

enforcement and regulatory agencies, such as the Com-

training for the field. In June 2018, the NCIU delivered

development mission. Internally, the NCIU collaborated

modity and Futures Trading Commission, Department of

employment tax training to 42 special agents and profes-

with multiple headquarters offices, such as Opera-

Labor, Environmental Protection Agency, Federal Bureau

sional staff from around the country.

tions, Policy and Support (OPS); International Opera-

of Investigation, Homeland Security Investigations,

tions (IO); Strategy, and Refund and Cyber Crimes

Security Exchange Commission, and the Social Security

In September 2018, the NCIU delivered biofuels credit

(RCC), to incorporate various datasets and to offer

Administration, to make use of their expertise and data

training to 40 special agents and professional staff from

more comprehensive investigative support for

and to involve CI in financial investigations that have the

different field offices. These trainings allowed the NCIU

the field.

most impact.

practices with the attendees and provided a networking

Within the agency, the NCIU formed strong partner-

Going forward, the NCIU plans to increase its footprint

opportunity for agents and professional staff to build a

ships with LB&I to analyze the Coinbase John Doe

and impact by hiring additional personnel and launching

collaborative community.

summons data and with SBSE to receive and refer

initiatives that enhance CI’s ability to effectively enforce

investigative leads.

the nation’s criminal tax law and related financial crimes. t

to share specific investigative knowledge and best

IRS: Criminal Investigation Annual Report 2018

UNDERCOVER OPERATIONS

THE CRIMINAL INVESTIGATION Division (CI) has used undercover techniques

Undercover agents encounter many challenging situations in their roles. From

throughout its history. Undercover techniques play a well-documented, signifi-

shopping unscrupulous tax return preparers to targeting offshore tax money

cant role in bringing criminals to justice; the case of Al Capone being one of the

laundering and Dark web marketplace operators, CI undercover operations handle

most famous examples. Since then, CI has used these techniques in numerous

the full spectrum of activities that seek to conceal the movement of money for

investigations involving organized crime, illegal gambling operations, tax shelter

illegal purposes.

schemes, illicit money movers, and investment scams.

In 2018, Keesha Fry of Durham, North Carolina, the owner of KEF Professional

The Special Investigative Techniques (SIT) unit oversees CI's undercover activi-

Tax Services, was found guilty of preparing fraudulent federal returns resulting

ties. This unit reviews, approves, funds, and trains personnel that carry out these

in a tax loss of approximately $1.7 million. Ms. Frye and her employees falsely

activities. Special agents and the field office leadership team handle the initiation

added income, such as in-home services (for example, house cleaning) on clients’

and day-to-day management of the operations in their respective areas.

returns, so they would qualify for the Earned Income Tax Credit. In 2014, an

undercover CI special agent had KEF prepare a tax return, which turned out to be

CI has a cadre of active undercover agents and has trained additional agents for

fraudulent. A subsequent search warrant of the business found “cheat sheets”

undercover “shopping” of return preparer schemes. In FY 2018, agents conducted

that employees used to support the tax fraud. t

approximately 450 undercover operations and shopped over 140 return preparers.

IRS: Criminal Investigation Annual Report 2018

SCHEME DEVELOPMENT CENTER

SINCE 1977, THE Criminal Investigation Division (CI) has been screening for

suspected fraudulent tax returns. The CI Scheme Development Centers (SDCs) do

this at each of eight IRS campuses: Fresno, Ogden, Kansas City, Austin, Cincinnati, Memphis, Atlanta, and Andover. These SDCs work closely with all other

IRS operating units. The purpose of the SDC is to detect refund fraud including

identity theft and return preparer schemes and refer them to the CI field offices

for investigation. SDC analysts also provide continued investigative support for

special agents working refund fraud investigations in each of the 21 field offices.

Each SDC is managed by an experienced CI Special Agent known as the Resident

Agent in Charge. t

IRS: Criminal Investigation Annual Report 2018

ASSET FORFEITURE

IRS CRIMINAL INVESTIGATION Asset Forfeiture program uses seizure and

On July 11, 2018, the federal government auctioned nine San Antonio-area proper-

forfeiture authority as an investigative tool to disrupt and dismantle criminal en-

ties including four former barber shops and a barber college that it seized from a

terprises. The program seeks to deprive criminals of property used in, or acquired

heroin-smuggling ring that brought in approximately $8 million in 2014 and 2015.

through, illegal activities by directing CI’s financial expertise and resources

The properties, which sold for more than $1.4 million, were among more than

towards investigations in which CI can take a leading role.

20 targeted for seizure during a joint investigation by the U.S. Drug Enforcement

Administration and the IRS’s Criminal Investigation division into the operators of

IRS CI is one of the largest contributors to the Treasury Forfeiture Fund (TFF),

Acapulco Barber Shops in 2015. Salvador Gonzalez and Adrian Gonzalez owned

which the Treasury Executive Office for Asset Forfeiture manages. These funds

the Acapulco chain and a barber college. They were sent to federal prison after

are used to reimburse victims of criminal activity and to pay for law enforcement-

pleading guilty to heroin-trafficking conspiracy and money laundering-related

related expenses, such as training, equipment, and the cost of conducting

charges. Authorities said the ring brought in so much heroin between 2014 and

significant investigations. In addition, CI shares a portion of forfeited funds with

2015 that it was a go-to supplier for the prison-based Texas Mexican Mafia. t

federal, state and local law enforcement agencies.

IRS: Criminal Investigation Annual Report 2018

NATIONAL FORENSIC LABORATORY

FOR MORE THAN 40 years, the IRS National Forensic Laboratory (NFL) has

number of cases decreased from FY 2017 to FY 2018, the number of work

supported IRS investigations by offering forensic testing and technical services in

requests remained consistent between this and the previous fiscal year (309

electronics, latent prints, polygraph, questioned documents, ink chemistry, and

requests).

trial graphics and design. NFL examiners report the results of forensic testing

and technical services to investigators for use in exploring potential criminal

violations of the Internal Revenue Code and related financial crimes. In addition,

Criminal Investigation submitted approximately 94 percent of the cases the NFL

NFL personnel provide support for expert testimony in judicial proceedings. For

received in FY 2018. The NFL received the other 6 percent of cases from the civil

instance, visual information specialists provide graphics or illustrations that help

side of the IRS or an agency other than the IRS. Also, two NFL scientists testified

tell the story of the investigation. In addition, when called upon to do so, forensic

at trial to the results of forensic examinations they conducted. Furthermore, the

scientists testify to NFL examiners’ findings in judicial proceedings.

laboratory has participated in the IRS CI Student Volunteer Program by hosting

eight volunteers over the last three years. This fiscal year, one of the student

Although the NFL is a small branch of CI, its work is critical in ensuring the

volunteers completed research and a method validation on software used for

efficient processing of crucial evidence in our investigations. In FY 2018, the NFL

document reconstruction. t

received 197 cases, which resulted in 305 work requests. Although the overall

IRS: Criminal Investigation Annual Report 2018

NATIONAL FORENSIC LABORATORY REQUESTS

LATENT PRINTS

ELECTRONICS

TRIAL ILLUSTRATION

POLYGRAPH

QD/CHEMISTRY

38 CASES

9 CASES

138 CASES

4 CASES

42 CASES

150

IRS: Criminal Investigation Annual Report 2018

NATIONAL CI TRAINING ACADEMY

IRS CI SPECIAL Agents are the finest financial investigators in the world. Their

criminal law, courtroom procedures, enforcement operations, interviewing and

training begins at the National Criminal Investigation Training Academy (NCITA) at

firearms training common to all federal law enforcement agents.

the Federal Law Enforcement Academy (FLETC) in Brunswick, Georgia. NCITA is

dedicated to fostering the highest levels of professionalism and ethical behavior

Following CITP, new special agent trainees attend the NCITA Special Agent

throughout the Criminal Investigation workforce. NCITA’s primary focus is training

Investigative Techniques (SAIT) course. SAIT provides training in tax law, evidence

new special agents in the fundamentals of financial investigations, including

gathering, interviewing, report writing, methods of proving unreported income,

elements of tax offenses, methods of proof unique to federal tax investigations,

money laundering violations, as well as physical fitness conditioning and use of

and all the requisite knowledge, skills, and abilities to be federal law enforcement's

force training.

finest financial investigators.

In addition to SAIT, NCITA provides advance training to special agents in use of

New special agents attend approximately six months of training including the

force, firearms instruction, building entry and defense tactics. NCITA also provides

Criminal Investigator Training Program (CITP), which is an 11-week program run

leadership development programs from pre-management through senior manager

by FLETC. CITP covers basic criminal investigation techniques including federal

to ensure the identification and development of future leaders. NCITA develops

IRS: Criminal Investigation Annual Report 2018

TRAINING AND NCITA

continuing professional education courses for special

FY 2018 HIGHLIGHTS:

agents and professional staff each year with an emphasis

• Special Agent Investigative Techniques (SAIT) Task

• Coordinated the development of the FY18 Investigative

on emerging trends such as cybercrime and

Force developed and implemented recommendations to

Techniques Emerging Forfeiture Training material which

crypto currencies.

enhance/update course curriculum.

was provided to the CI field offices for delivery.

• Four Supervisory Special Agent Strategic Training

• The first Management and Program Analyst (M&PA)

NCITA provides training to foreign governments and

classes were developed and conducted for CI’s front

training was developed and conducted. t

agencies on crime detection, investigative techniques,

line managers.

case studies, developing trends and best practices. CI

trains foreign governments through collaborative efforts

with the International Law Enforcement Academies.

These academies are in Budapest, Hungary; Bangkok,

Thailand; San Salvador, El Salvador; and Gaborone,

Botswana and at the International Academy for Tax Crime

Investigation at Guardia di Finanza Economic and Financial

Police School in Ostia, Italy sponsored by the Organization

for Economic Cooperation and Development (OECD), as

well as State Department sponsored training.

IRS CI special agents attend quarterly firearms, defensive

tactics and semi-annual building entry training. Through

frequent use of force training, they maintain their skills

and abilities so they always use good judgement and the

appropriate degree of force necessary to safely carry out

enforcement activities. These activities include search

warrants, arrests, surveillance, armed escorts, dignitary

protection, undercover activities and seizures.

IRS: Criminal Investigation Annual Report 2018

PROFESSIONAL STAFF

IRS CI EMPLOYS 789 professional staff serving in many administrative and

Department of Defense (DoD) and Veteran’s Affairs (VA) in FY 2018. Interns were

investigative capacities. Our budget analysts, management and program analysts,

provided challenging assignments to include extracting and analyzing critical infor-

administrative officers, executive secretaries and computer support professionals

mation from investigative databases. Through the use of this program, CI provided

all work tirelessly behind the scenes to support the mission of IRS CI.

training and work experience to those who served our country and have now

returned to the civilian workforce. Additionally, through Veteran Recruitment Act

CI professional staff are also active participants in the Chief’s Advisory Council,

Hiring Authority, CI hired 4 veterans into Professional Staff positions in FY 2018

providing crucial insight to CI leadership on relevant issues around the country.

placed within the Field Offices and TOIS. This veteran hiring accounted for 25% of

CI’s overall hiring, which exceeded CI’s FY 2018 veteran hiring goal of 14%.

Our 315 investigative professional staff have a tremendous impact with case

development and support. These compliance support assistants (CSA), tax fraud

Professional Staff positions are critical to advancing the law enforcement efforts

investigative analysts (TFIA) and investigative analysts (IA) assist special agents

of CI. Professional Staff are assigned to the field offices, Nationally Coordinated

with public records research, interviews, bank record scheduling and analysis, and

Investigative Unit (NCIU), Refund Crimes, and International Operations. They use

specialized tax and law enforcement database research.

sophisticated analytical software to develop leads and support complex cases for

the special agents in the field. Analysts attend training alongside special agents to

During 2018, 460 professional staff in multiple CI job series received comprehen-

keep abreast of the emerging trends related to employment tax, internet investiga-

sive training at the Federal Law Enforcement Training Center (FLETC) in Glynco,

tions, virtual currency and interviewing techniques. Investigative Analysts support

Georgia regarding multiple investigative databases and case development tools.

investigations relating to national threats, the opioid crisis, terrorist financing,

identity theft and other emerging threats through work with the High Intensity

Various field offices throughout the country and TOIS (Technology Operations

Drug Trafficking Areas (HIDTA), Joint Terrorism Task Force (JTTF) and other

& Investigative Services) leveraged Operation Warfighter, an umbrella program

federal law enforcement taskforces. t

that enabled CI to recruit six disabled veteran interns as volunteers from the

IRS: Criminal Investigation Annual Report 2018

EQUITY, DIVERSITY & INCLUSION

THE MISSION OF the Criminal Investigation (CI) Equity, Diversity, and Inclusion

their differences and unique perspectives to create an environment that engages

Office (EDI) office is to identify, examine, and address the organization’s employ-

and supports all employees.

ment practices, policies, guidelines, and procedures to ensure that all employees

and applicants for employment achieve equal opportunity in every facet of the

Additionally, the EDI staff prepares CI’s Management Directive 715 (MD 715)

CI’s programs, activities, and services. EDI’s goal is to provide exceptional quality

report, and monitors and evaluates the organization's compliance with the

customer service, advice, and education to management, employees, and stake-

directive and other policies established by the Equal Employment Opportunity

holders to ensure compliance with appropriate federal EEO laws and regulations

Commission (EEOC). The directive helps to identify program weaknesses and

that prohibit discrimination on the basis of age, color, disability, equal pay, national

uncover evidence of potential hidden barriers that would hinder proactive preven-

origin, pregnancy, race, religion, retaliation, sex (gender), and sexual harassment.

tion of discrimination to equal opportunities for all employees. It also provides

the framework for identifying EEO plans that are tailored to remove barriers and

EDI is responsible for identifying, examining, and addressing the organization's

respond to problems.

employment policies, practices, guidelines and procedures in an effort to direct

the organization to an effective affirmative program. They work to ensure that

The EDI staff develops action plans to eliminate barriers and correct program

employment practices and decisions are made with the highest level of integrity

deficiencies to ensure compliance with the following six essential elements of a

and fairness to every employee. EDI also advises CI’s senior leadership on strate-

model EEO program as defined by MD 715:

gies for effectively capitalizing on the strengths of all employees while embracing

IRS: Criminal Investigation Annual Report 2018

EQUITY, DIVERSITY & INCLUSION

• Demonstrated commitment from agency leadership

of choice with our ongoing commitment to workplace

• Integration of EEO into the agency’s strategic mission

equality, encouragement of work-life balance and

• Management and program accountability

flexibility in the workplace, and support of employees

• Proactive prevention of unlawful discrimination

at all levels of the organization as they progress into

• Efficiency in dispute resolution and complaint

more senior positions. We recognize the importance of

processing

creating a diverse and inclusive workforce where our

• Responsiveness and legal compliance

employees, at any grade level or occupational series,

• Other responsibilities include monitoring the

can thrive. t

organization's effort to enhance diversity initiatives

and analyzing trends in the following areas:

• EEO complaints

• Disciplinary actions

• Promotions

• Awards

• Separations

• Employee development and training

• Recruitment and hiring initiatives and practices

• Retention

When it comes to supporting female talent, CI has a

strong track record with women filling nearly 28 percent

of our senior management roles across the organization. CI is also a leader among law enforcement entities

with women comprising 28 percent of our special

agent population, compared to 21 percent of our civilian

counterparts (based on labor statistics from the U.S.

Census Bureau). CI continues to strive to be an employer

IRS: Criminal Investigation Annual Report 2018

COMMUNICATIONS & EDUCATION (C&E)

CRIMINAL INVESTIGATION (CI) serves the American public by investigating

special agents who are also trained to carry out media outreach efforts for cases

potential criminal violations of the Internal Revenue Code and related financial

their field offices work. Headquarters communicators manage websites, write

crimes in a way that encourages compliance with the law and confidence in the

speeches and talking points and support the field in their outreach activities. All

tax system. One of the most effective ways to encourage compliance is publiciz-

CI communicators work to balance media outreach with training and education

ing CI activities that enforce the laws within its jurisdiction.

opportunities to ensure they can react swiftly to unplanned communication needs.

The Communications and Education Office (C&E) directly supports CI’s mission by

CI communicators face unique challenges when engaging external audiences

raising the level of awareness of all stakeholders—internally and externally—about

due to the sensitive nature of CI’s work with grand juries, taxpayer information,

the important work that CI does to protect the financial interests of the United

law enforcement material and relationships with U.S. Attorneys’ Offices around

States.

the country. C&E works through these challenges to support CI’s mission. Their

work directly contributes to the deterrent effect on financial crimes and promotes

Public information officers (PIOs) in each field office and communication special-

voluntary compliance and confidence in our tax system. t

ists at headquarters support CI’s communication functions. PIOs are case-working

IRS: Criminal Investigation Annual Report 2018

OUTREACH/COMMUNITY ENGAGEMENT

WHEN IT COMES to the social needs of the communities where we live and work,

bling this team, CI has assisted with the hurricane disasters along the southeast

CI special agents and professional staff stand ready to lend a helping hand. They roll

coast. During this fiscal year, CI deployed 24 special agents to the commonwealth

up their sleeves to paint, build, repair, clean, plant, teach, and more. They give gener-

of Virginia to assist with Hurricane Florence.

ously of their time, talents, and funds, helping to meet needs next door and across

the nation. Notable examples of our FY 2018 community engagement include:

FEMA– EMERGENCY SUPPORT FUNCTION

OTHER OUTREACH

DETROIT FIELD OFFICE

On April 16, 2018, the Detroit field office completed an “Adrian Project” in partner-

A presidential declaration enables access to disaster relief assistance and funds

ship with the University of Michigan-Dearborn. The Adrian Project concept was

as appropriated by Congress. This declaration triggers financial and physical

created to allow students the opportunity to learn about IRS-CI with a memorable,

assistance through the Federal Emergency Management Agency (FEMA). CI has

hands-on approach. The students become agents for the day and work together

formally joined our other federal law enforcement partners as members of FEMA

to solve a case from start to finish. They experience what it is like to interview

Emergency Support Function (ESF). CI and its law enforcement partners are

witnesses, conduct surveillance, swear out affidavits, and execute search and

part of the Public Safety and Security ESF 13. This initiative assists FEMA with

arrest warrants. The project’s goal is to give students an opportunity to apply their

recovery efforts in protecting public health, safety, and property, or supplementing

accounting skills and consider a career in law enforcement. Many students did not

state and local law enforcement efforts during disaster situations. CI has readied

know IRS-CI existed before participating in an Adrian Project and now, many work

48 special agents and 4 supervisory special agents for deployment and 2 special

for the agency! Each year, multiple CI field offices partner with local educational

agent coordinators to assist with deployment control and logistics. Since assem-

institutions to coordinate these events.

IRS: Criminal Investigation Annual Report 2018

OUTREACH/COMMUNITY ENGAGEMENT

NEWARK FIELD OFFICE

On January 17, 2018, Newark field office Special Agent

in Charge Jonathan Larsen and Special Agent Timothy

Greene visited the Woodland Elementary School in

New Jersey to donate digital cameras and tablets to

the school. Each class in the school received a camera

to take pictures of class functions, and cameras will be

provided to a newly formed photography club. . The

tablets and cameras were donated under the GSA's

Computers for Learning (CFL) program.

PHOENIX FIELD OFFICE

On September 28, 2018, employees with the Phoenix

field office spent the morning packing emergency food

boxes at St. Mary's Food Bank in Phoenix. Together

with volunteers from corporate America, CI employees

packed 2,700 food boxes. St. Mary's Food Bank recently

sent two trailers full of emergency food boxes to the

victims of Hurricane Florence. This activity was at least

the fifth time the Phoenix field office has served at

St. Mary's.

MIAMI FIELD OFFICE

On February 26th, the Miami Field Office handed out

donated backpacks and books to approximately 400

students in pre-kindergarten through 5th grade at an

elementary school in Fort Lauderdale, Florida. The

backpacks (some even containing school supplies) were

IRS: Criminal Investigation Annual Report 2018

OUTREACH/COMMUNITY ENGAGEMENT

donated by a non-profit agency since students' backpacks are not in the best condition at the mid-point of

the school year and they have used most of their school

supplies. This event was part of the USAO’s Violence

Reduction Partnership (VRP) Reading Program. The VRP

was established in 2011 to address violent crime, gang

activity and firearms offenses plaguing high crime areas

in the District. The objective of the reading program is to

increase children’s appetite for reading before entering

kindergarten, thus reducing early academic failure. On a

monthly basis for the past two school years, members

of the Miami FO Management Team and the public

information officer have been reading and distributing

books to the pre-kindergarten classes at the school

which is in a high-crime community. IRS-CI was asked to

participate in handing out backpacks and books because

of our partnership with the USAO in this important crime

prevention program. t

IRS: Criminal Investigation Annual Report 2018

OUTREACH/COMMUNITY ENGAGEMENT

IRS: Criminal Investigation Annual Report 2018

OUTREACH/COMMUNITY ENGAGEMENT

IRS: Criminal Investigation Annual Report 2018

FIELD OFFICE MAP

Click on a location to go to that Field Office section.

SEATTLE

DETROIT

BOSTON

CHICAGO

NEW YORK

PHILADELPHIA

DENVER

NEWARK

CINCINNATI

WASHINGTON, D.C.

ST. LOUIS

OAKLAND

LAS

VEGAS

CHARLOTTE

LOS ANGELES

PHOENIX

ATLANTA

DALLAS

HOUSTON

PUERTO RICO

U.S. VIRGIN ISLANDS

TAMPA

MIAMI

MARIANA

ISLANDS

GUAM

IRS: Criminal Investigation Annual Report 2018

ATLANTA FIELD OFFICE

401 W. PEACHTREE STREET NW, ATLANTA, GA 30308 | 470.639.2228

GEORGIA

ALABAMA

AUGUSTA, GA

BATON ROUGE, LA

BIRMINGHAM, GA

COLUMBUS, GA

DECATUR, GA

GULFPORT, MS

HATTIESBURG, MS

HUNTSVILLE, AL

JACKSON, MS

LAFAYETTE, LA

MACON, GA

MOBILE, AL

MONTGOMERY, AL

NEW ORLEANS, LA

OXFORD, MS

SAVANNAH, GA

SHREVEPORT, LA

THE ATLANTA FIELD covers the states of Georgia, Alabama,

newly constituted and expanded Atlanta Field Office has a diverse

Mississippi and Louisiana and consists of eleven judicial districts.

mix of employees with different backgrounds who are finding

We work a wide variety of criminal investigations across the four

creative ways to investigate our cases. The Atlanta Field Office is

state region which includes, legal and illegal source income tax

continually building and strengthening its relationships with our law

fraud, payroll tax fraud, stolen identity theft / tax refund fraud,

enforcement partners, the United States Attorney’s Office and the

public corruption, terrorism, general fraud, money laundering and

public in an effort to identify, investigate and refer quality cases for

narcotics cases. With the recent merger of two field officers (the

prosecution that will encourage compliance with and confidence in

Atlanta Field Office with the former New Orleans Field Office), the

the internal revenue laws.

MISSISSIPPI

LOUISIANA

IRS: Criminal Investigation Annual Report 2018

ATLANTA FIELD OFFICE CASE FILES

SIGNIFICANT CASES

Nevers pleaded guilty to filing false tax

returns in 2014, Nevers continued to file

supervised release. He was also ordered

returns. Shawanda Nevers, also known

fraudulent returns.

to pay $4,311,247 in restitution to the

as Shawanda Hawkins, Shawanda

Louisiana Return Preparer Sentenced

to Seven Years in Prison for Filing

Fraudulent Tax Returns

On December 13, 2017, in New Orleans,

Department of Agriculture and the Farm

Bryant, and Shawanda Johnson,

https://www.justice.gov/opa/pr/louisi-

Service Agency and forfeit $1.6 million

operated a series of businesses in the

ana-return-preparer-sentenced-seven-

for mail fraud and money laundering.

LaPlace area, including 3LJ’s Café

years-prison-filing-fraudulent-tax-returns

Services & Sports Bar LLC and 3LJ’s

McIntyre, a fourth-generation farmer

Industrial Service Solutions LLC.

and the owner of Delta Agriculture and

Shawanda Nevers of LaPlace, Louisiana,

Company, avoided the Farm Service

Louisiana Man Sentenced to Prison

for Defrauding USDA Over Fake Farm

Benefit Scheme

tion of $40,000 per year per farm

which her clients were not entitled.

On December 19, 2017, in Monroe, Lou-

From August 2009 until February 2013,

Despite a federal judge permanently

isiana, Brad McIntyre was sentenced

McIntyre conspired to create ficti-

barring her from preparing federal tax

to 9 years in prison and 3 years of

tious farm operations. When applying

was sentenced to 7 years in prison and 1

Between 2011 and 2016, Nevers filed

year of supervised release. She was also

fraudulent income tax returns that

ordered to pay $6,934,764 in restitution

included false business losses, deduc-

to the IRS, $128,900 to the Deepwater

tions, and tax credits and sought refunds

Horizon Oil Spill Trust, and $964 to the

Social Security Administration.

Agency direct program payment limitaentity member.

“During my tenure as the Special Agent in Charge of the Atlanta Field Office, I have continuously worked to rebrand the image of the field office

by seeking to support and develop the valued employees while focusing their efforts on the CI mission. Through our 120+ valued employees, we

will continue to investigate and recommend prosecution for those criminals who think they can evade paying their fair share in taxes and erode

confidence in the tax system. In an effort to drive compliance, we will vigorously seek to highlight these criminal investigations in the media in an

effort to inform the public that compliance with the tax laws applies to all. Equipped with the finest financial investigators in law enforcement, an

enhanced investigative support team and a committed leadership team, the Atlanta Field Office will continue to be the difference maker in the

southern area when it comes to tax enforcement and significant white collar fraud investigations.”

– Thomas J. Holloman, Special Agent in Charge

IRS: Criminal Investigation Annual Report 2018

ATLANTA FIELD OFFICE CASE FILES

for FSA’s direct program payments,

McIntyre listed the names of his relatives

Mississippi Man Sentenced to Prison

for Tax Evasion

company, Super again transferred all

losses on tax returns to inflate the amount

assets and clients to a third company.

of the tax refund clients received. Green

and employees as the owners of these

admitted that her crimes involved actual

entities when in fact he controlled and

On May 17, 2018, Michael Super, of Hat-

The IRS collected some of the

or intended losses of $1.5 million to

managed all these farming entities.

tiesburg, Mississippi, was sentenced to

employee trust fund taxes due, but

$3.5 million.

2 years in prison, 3 years of supervised

Super evaded paying $165,075. As part

The Farm Service Agency’s Supplemen-

release, and ordered to pay $165,076

of his sentence, he is now required to

https://www.justice.gov/usao-ndal/

tal Revenue Assistant (SURE) and Crop

in restitution to the IRS for federal tax

repay this amount in restitution.

pr/tax-preparer-sentenced-five-years-

Assistance Program (CAP) payments

evasion. On February 18, 2018, Super

were each limited to $100,000 per

pleaded guilty to tax evasion for failing

https://www.justice.gov/usao-sdms/pr/

person who experienced a qualifying

to pay federal employee trust fund taxes

hattiesburg-man-sentenced-two-years-

crop loss because of disaster. These fake

due on behalf of the employees of his

prison-tax-evasion

farms also fraudulently received disaster

company, Eagle Eye Security Services

program payments from FSA. When the

of Hattiesburg. Super entered into an

FSA mailed agricultural subsidy checks

agreement with the government to pay

to the entities, they went to U.S. Post

these taxes over time, but failed to make

Office boxes in Mer Rouge, Louisiana

any payments.

prison-filing-fraudulent-returns

Montgomery “Pill Mill” Doctor

Receives Prison Sentence for Drug

Distribution, Health Care Fraud, and

Money Laundering Offenses

Tax Preparer Sentenced to 5 Years in

Prison for Filing Fraudulent Returns

On August 23, 2018, Gilberto Sanchez,

that McIntyre controlled. He unlawfully

received more than $5.4 million from the

The IRS issued levies against the

On May 31, 2018, in Birmingham,

of Montgomery, Alabama, was sen-

scheme.

company, but Super still failed to make

Alabama, Sandra Lenora Green, of York,

tenced to 12 years in prison and 3

any payments. To avoid the IRS levies,

Alabama, was sentenced to 5 years in

years of supervised release. She was

https://www.justice.gov/usao-wdla/pr/

Super opened another security business

prison, 1 year of supervised release, and

also ordered to pay a $50,000 fine for

bastrop-man-sentenced-9-years-prison-

and transferred all the assets and clients

ordered to pay $247,174 in restitution

prescribing unnecessary controlled

defrauding-usda-over-fake-farm-benefit-

of his previous company. When the

to the IRS for filing false tax returns.

substances to his patients, committing

scheme

IRS pursued the assets of the second

According to her plea agreement, Green

healthcare fraud and money laundering.

prepared and falsely claimed credits and

IRS: Criminal Investigation Annual Report 2018

ATLANTA FIELD OFFICE CASE FILES

For years, Dr. Sanchez operated a

https://www.justice.gov/usao-mdal/pr/

forums, mediating sales disputes among

On August 15, 2018, in Valdosta, Georgia,

medical practice that gave patients

montgomery-pill-mill-doctor-receives-

AlphaBay users, promoting AlphaBay on

Tony Cherenfant, of Miami, was sentenced

prescriptions for controlled substances

145-month-sentence-drug-distribution-

the internet, and providing non-technical

to 5 years in prison, 3 years supervised

knowing that the patients did not need

health-care

assistance to AlphaBay users.

release, and ordered to pay $582,751 in

restitution to the IRS for his involvement

the medicine and abused the drugs.

Among the drugs Dr. Sanchez unneces-

Throughout his participation in the

in a conspiracy to steal government funds

sarily prescribed were dangerous opioids

conspiracy, Wheeler advised the public

through a fraudulent tax refund scheme.

on how to access AlphaBay and encour-

Cherenfant admitted that while he was

aged the public to use the website. In

stopped on Interstate 75 for a traffic

return for his work, Wheeler received a

violation, deputies found the personally

including oxycodone, hydrocodone, and

fentanyl. He also gave out illegitimate

AlphaBay Spokesperson Sentenced to

Federal Prison

prescriptions for amphetamines, including Adderall, and benzodiazepines,

On July 21, 2018, Ronald Wheeler III, also

salary in Bitcoin. Wheeler’s work with

identifiable information of approximately

including Xanax.

known as Trappy, of Streamwood, Illinois,

AlphaBay continued until early July

1500 individuals, including names, birth

was sentenced to almost 4 years in

2017, when the FBI and its international

dates, and Social Security numbers, as

To ensure a profitable scheme, Dr.

prison and 3 years supervised release. He

law enforcement partners shut down

well as tax refund documents.

Sanchez required his patients to return

was also ordered to forfeit approximately

the website.

to his office each month and undergo

$140,000 in cash and Bitcoin for conspir-

physical examinations before receiving

acy to commit access device fraud while

https://www.justice.gov/usao-ndga/

involvement in a conspiracy resulting in

prescription refills. These office visits

working as a public relations specialist for

pr/alphabay-spokesperson-sentenced-

the filing of approximately 400 fraudulent

were unnecessary, as their only purpose

the dark web marketplace, AlphaBay.

federal-prison

federal tax returns claiming refunds

Cherenfant subsequently admitted his

of $1,285,729. Refunds paid on these

was to facilitate Dr. Sanchez in giving the

patients illegitimate prescriptions. Dr.

On or around May 25, 2015, Wheeler

Sanchez performed these unnecessary

began working as a public relations

examinations to get money from the

specialist for AlphaBay. Wheeler’s duties

insurance companies. This scheme led

included moderating the AlphaBay sub-

to Dr. Sanchez’s health care

reddit on the internet website reddit.com,

fraud conviction.

moderating the AlphaBay message board

claims totaled $582,751.

Florida Man Sentenced to 5 Years

in Federal Prison for Fraudulent Tax

Refund Scheme

https://www.justice.gov/usao-mdga/pr/

florida-man-sentenced-sixty-months-federal-prison-fraudulent-tax-refund-scheme

IRS: Criminal Investigation Annual Report 2018

MASSACHUSETTS

BOSTON FIELD OFFICE

15 NEW SUDBURY STREET, BOSTON MA, 02203 | 617.316.2080

BRIDGEPORT, CT

BURLINGTON, VT

HARTFORD,CT

MANCHESTER, NH

MAINE

NEW HAVEN, CT

NORWALK, CT

PORTSMOUTH, NH

SOUTH PORTLAND, ME

THE BOSTON FIELD Office covers the six New England states,

each with one judicial district: Massachusetts, Connecticut, Rhode

SPRINGFIELD, MA

STONEHAM, MA

WARWICK, RI

WORCESTER, MA

SIGNIFICANT CASES

Island, New Hampshire, Vermont and Maine. The field office's relationship with the U.S. Attorney’s Office and our law enforcement

partners is one of the best in the country. IRS CI special agents

are vital members of several task forces including Organized Crime

VERMONT

Former Police Sergeant Sentenced for Embezzling Funds from

Disabled Veterans and Operating Fraudulent Tax Preparation

Business

Drug Enforcement Task Force (OCDETF), JTTF, cybercrimes,

securities fraud and health care fraud.

On November 14, 2017, in Boston, Glenn P. Pearson, of Whitman,

Massachusetts, was sentenced to 4 years in prison and 3 years

NEW HAMPSHIRE

CONNECTICUT

RHODE ISLAND

IRS: Criminal Investigation Annual Report 2018

BOSTON FIELD OFFICE CASE FILES

of supervised release. He was also

Pearson obstructed the IRS by making

According to court documents, Khan

Khan and his co-conspirators also

ordered to pay $252,992 in restitution

false statements and preparing false

was the partial owner of 11 fried

failed to withhold payroll taxes and pay

to the Department of Veterans Affairs

documents for his clients to submit

chicken takeout restaurants in the

them over to the IRS, resulting in ap-

(VA), and $826,865 in restitution to the

during the audits. Pearson also filed his

greater Boston area. As part of a tax

proximately $2.3 million in unpaid federal

IRS. Pearson previously pleaded guilty to

own false income tax returns that under-

fraud scheme that ran for years, Khan

payroll and income taxes over a 5-year

wire fraud, misappropriation by a federal

reported his income.

and his co-conspirators, generally the

period. Khan also underreported payroll

managers of these restaurants, defraud-

to the workers’ compensation insur-

https://www.justice.gov/usao-ma/

ed the government and avoided paying

ance providers for the 11 restaurants

pr/former-whitman-police-sergeant-

payroll and income taxes owed by the

he and his co-conspirators controlled,

According to court documents, from

sentenced-prison-embezzling-funds-

stores. They paid their employees in

thereby defrauding insurers. Lastly, Khan

2007 to 2012, Pearson was appointed as

disabled-veterans

cash and provided tax preparers with

repeatedly made false statements to get

a VA fiduciary for eight disabled veterans.

false information about the restaurants’

immigration benefits.

Pearson embezzled VA-issued benefit

payroll and income, thereby causing the

money from the accounts of several of

tax preparers to file false tax returns.

fiduciary, preparation of fraudulent tax

returns, and obstruction of the IRS.

these veterans. He used the embezzled

funds for, among other things, paying

Restaurant Owner Sentenced for

Multiple Fraud Schemes

down the mortgage on his house.

https://www.justice.gov/usao-ma/pr/

restaurant-owner-sentenced-multiple-

To avoid paying taxes, Khan and several

fraud-schemes

co-conspirators falsely reported to the

On November 1, 2017, in Boston,

IRS the number of employees at their

Additionally, beginning in 2012, Pearson

Hazrat Khalid Khan, a Pakistani national

stores, some of whom were undocu-

operated a tax preparation business

residing in Middletown, New York, was

mented workers, and the wages they

called FTS Tax Services. From 2012

sentenced to 30 months in prison, 1

paid them. They also failed to file W-2s

to 2016, Pearson prepared numerous

year of supervised release, and will

showing wages paid to employees and

returns that included false credits and de-

be subject to deportation proceedings

falsely described on tax returns their

ductions to get his clients larger refunds

upon completion of his sentence. Khan

sales, total income, compensation

On January 9, 2018, in Boston, Souleang

than they were entitled to receive. When

was also ordered to pay restitution of

of officers, salaries and wages, and

Kane, of Providence, Rhode Island, was

the IRS audited his clients’ returns,

$2,343,155 to the IRS and $27,863 to

taxable income.

sentenced to 2 years in prison, 3 years

Operator of Temporary Employment

Agency Sentenced for Tax Crimes and

Insurance Fraud

two insurance companies he defrauded.

IRS: Criminal Investigation Annual Report 2018

BOSTON FIELD OFFICE CASE FILES

of supervised release, and ordered to

https://www.justice.gov/usao-ma/pr/

employee elective deferrals intended

pay interest and penalties that accrued on

pay restitution. In October 2018, Kane

operator-temporary-employment-agency-

for 401(k) pension funds.

outstanding amounts. In addition, for tax

pleaded guilty to 18 counts of willful

sentenced-tax-crimes-and-insurance-fraud

failure to collect and pay taxes to the IRS

and 5 counts of

mail fraud. According to court

documents, from 2010 to 2015, Kane

Financial Management Consultant

Sentenced for Embezzling Medical

Firm and Employee Pension Funds

years 2012 through 2014, McCarthy did

https://www.justice.gov/usao-ri/pr/

not file personal income tax returns and

financial-management-consultant-

failed to pay taxes owed including interest

sentenced-embezzling-medical-firm-

and penalties on outstanding amounts.

employee-pension-funds

McCarthy tried to evade the payment of

operated a series of temporary employment agencies under the names Expert

On January 29, 2018, in Providence,

income taxes by depositing his payroll

Staffing, Affordable Staffing, and M&K

Rhode Island, John M. Hairabet, Jr.,

checks into his personal bank account

Temp Inc., providing labor for Mas-

was sentenced to over 3 years in prison

sachusetts companies in agricultural

and 3 years of supervised release. On

industries. During that time, Kane failed

July 20, 2017, Hairabet pleaded guilty

to report to the IRS approximately

to six counts of wire fraud, one count of

On December 4, 2017, in Hartford,

he learned of the criminal investigation

$4.3 million that her agencies paid in

pension fund theft, and two counts of

Connecticut, Donald J. McCarthy, of

the IRS was conducting, McCarthy owed

employee wages.

money laundering.

East Hartford, was sentenced to 2

$1,437,037 in back taxes, interest, and

years in prison and 3 years of super-

penalties. McCarthy’s restitution to the

IRS now totals $1,522,734.

Attorney Sentenced to Two Years in

Prison for Tax Evasion

and shortly thereafter, withdrawing a

substantial portion of the monies in cash

and bank checks. By June 2015, when

Although she withheld federal taxes

According to court documents, Hairabet

vised release. On September 11, 2017,

from the wages of her employees,

was a former office manager of New

McCarthy pleaded guilty to tax evasion.

Kane failed to report the wages to the

England Anesthesiologists, Inc. and

IRS. She thereby avoided collecting and

president of Anesthesia Management

According to court documents, for tax

attorney-sentenced-2-years-prison-tax-

paying both the taxes required to be

Consultants, LLC. Between October

years 1997 through 1999, 2001, 2003,

evasion

withheld from employee wages and the

2007 and August 12, 2013, Hairabet

and 2008 through 2011, McCarthy,

matching employer taxes. As a result,

embezzled $587,218 from bank accounts

an attorney, filed federal personal

Kane evaded payment of more than $1.3

belonging to New England Anesthesiolo-

income tax returns, but failed to pay the

million in federal taxes.

gists. He also embezzled $120,313 in

balances due for those years, or failed to

https://www.justice.gov/usao-ct/pr/

IRS: Criminal Investigation Annual Report 2018

BOSTON FIELD OFFICE CASE FILES

Long-Running Securities Fraud Ring

Responsible for Investor Losses of $20

Million Dismantled

Denver, signed misleading opinion

years in prison. Christian Meissenn

letters claiming that attorneys reviewed

awaits sentencing.

the corporate records and filings for the

issuing companies, and the companies’

https://www.justice.gov/usao-ct/pr/

On July 13, 2018, in New Haven, Connecti-

public disclosures were satisfactory.

florida-man-sentenced-7-years-prison-

cut, William Lieberman, of Boca Raton,

The co-conspirators conducted trades

role-stock-pump-and-dump-scheme

Florida, was sentenced to 7 years in prison

amongst themselves to artificially boost

and 3 years of supervised release.

the trading volume of the securities,

create the appearance of liquidity, and

According to court documents, between

falsely drive up the share price. After

2011 and 2015, Lieberman earned

selling their own shares at a profit, they

nearly $1.2 million through a securities

allowed the price of the securities to fall,

fraud scheme and, by failing to report

leaving investors with worthless stock.

this income to the IRS, he evaded

As a result, more than 12,000 victim

$436,235 in federal income taxes. From

investors collectively lost approximately

approximately 2010 through July 2016,

$20 million.

Lieberman and others conspired to

defraud investors through a stock “pump

Co-conspirators sentenced to date

and dump” scheme. The co-conspirators

include attorneys Brinson and Dalmy,

convinced investors to purchase securi-

who were each sentenced to 3 years in

ties by making false and misleading rep-

prison. Damian Delgado, also known as

resentations, causing the price of those

Michael Neumann, of Orlando, Florida,

securities to become falsely inflated.

was sentenced to 7 years in prison.

Brian Ferraioli, of Sayville, New York, and

Attorneys Corey Brinson, of Hartford,

Thomas Heaphy, Jr., of East Moriches,

Connecticut, and Diane Dalmy, of

New York, were each sentenced to 6

IRS: Criminal Investigation Annual Report 2018

CHARLOTTE FIELD OFFICE

10715 DAVID TAYLOR DRIVE, CHARLOTTE NC, 28262 | 704.548.4241

NORTH CAROLINA

SOUTH CAROLINA

CHARLESTON, SC

CHATTANOOGA, TN

COLUMBIA, SC

GREENSBORO, NC

GREENVILLE, SC

JACKSON, TN

JOHNSON CITY, TN

KNOXVILLE, TN

MEMPHIS, TN

MYRTLE BEACH, SC

NASHVILLE, TN

RALEIGH, NC

WILMINGTON, NC

THE CHARLOTTE FIELD Office covers the states of North

(OCDETF) and employment tax fraud. The field office has excel-

Carolina, which has three judicial districts, South Carolina, which

lent partnerships both internally and externally. Charlotte is the

has a single judicial district, and Tennessee, which has three

second largest banking center in the United States after New York

districts. We work a diverse mix of cases throughout the two

City. Our office works closely with the respective U.S. Attorney’s

states, including general tax fraud, refund fraud, terrorist financing,

priority task forces, including the Joint Terrorism Task Force

public corruption, Organized Crime Drug Enforcement Task Force

(JTTF), Financial Crimes Task Force, and OCEDTF.

TENNESSEE

IRS: Criminal Investigation Annual Report 2018

CHARLOTTE FIELD OFFICE CASE FILES

SIGNIFICANT CASES

losses. Frye’s scheme caused a tax loss

of the firm Reynolds worked for. During

of more than $1.7 million.

the audit, Reynolds admitted that over a

5-year period she embezzled $439,459

North Carolina Return Preparer

Sentenced for Filing Fraudulent Returns

https://www.justice.gov/usao-mdnc/pr/

North Carolina Tax Return Preparer

Sentenced for Tax and Bankruptcy

Fraud

from her employer.

On November 16, 2017, Hassie Demond

north-carolina-return-preparer-convictedReynolds further admitted she falsi-

Nowlin, of Greensboro, North Carolina,

On April 11, 2018, Keesha Frye, was

fied the books, showing that she paid

was sentenced to over 3 years in prison,

sentenced to over 10 years in prison and

company bills when she hadn’t. The

3 years supervised release, and ordered

3 years supervised release. She was also

unpaid bills included the company’s

to pay $188,001 in restitution to the

missing tax payments. In addition,

IRS for filing a fraudulent tax return and

Reynolds did not file personal tax

bankruptcy fraud.

filing-fraudulent-returns

ordered to pay $1,742,823 in restitution

to the IRS for conspiring to defraud the

Mooresboro, North Carolina, Woman

Sentenced to Prison for Tax Evasion

United States and preparing fraudulent

tax returns for herself and her clients.

returns during the years she embezzled

On April 12, 2018, in Columbia, South

funds. She owed the IRS $117,300 in

During 2008 and 2009, Nowlin filed

Carolina, Kelly Sue Reynolds was

personal income taxes.

several fraudulent tax returns that

According to court documents, Frye

sentenced to 2 years in prison, 3 years

owned and operated KEF Professional

supervised release, and ordered to pay

https://www.justice.gov/usao-sc/pr/

taxes and sought more than $750,000

Tax Services. From 2012 through 2014,

$556,760 in restitution.

mooresboro-north-carolina-woman-

in fraudulent refunds. Nowlin also filed

sentenced-prison-tax-evasion

documents with the Guilford County

Frye and other KEF employees falsified

included fake income and withholding

their clients’ tax returns by including fake

Evidence presented at the guilty plea

and inflated sources of income to qualify

hearing established that Reynolds

States citizenship and proclaiming to be a

for and maximize the earned income tax

performed bookkeeping services for a

sovereign citizen.

credit and increase the refunds claimed

firm located in Cherokee County, South

on the returns. Frye also filed false

Carolina. As part of her duties, Reynolds

Between 2008 and 2010, the IRS

personal income tax returns that claimed

paid bills for the firm, including the

assessed taxes, penalties, and interest

bogus childcare expenses and business

payment of federal taxes. In 2014, the

against Nowlin for the fraudulent returns.

IRS conducted an audit for unpaid taxes

After being notified of the assessments,

IRS: Criminal Investigation Annual Report 2018

CHARLOTTE FIELD OFFICE CASE FILES

Nowlin concealed his assets and placed

https://www.justice.gov/usao-mdnc/pr/

to commit money laundering; posses-

receiving large quantities of powder

them in the names of nominee entities.

north-carolina-tax-return-preparer-sen-

sion of a firearm in furtherance of a drug

cocaine provided by cartel members in

tenced-prison-tax-and-bankruptcy-fraud

trafficking crime; and distribution and

Los Angeles. This powder cocaine was

Nowlin admitted that between 2011 and

possession with intent to distribute a

further broken down and distributed to

2017, he earned hundreds of thousands

quantity of marijuana.

mid-level and street-level dealers in the

Durham, North Carolina, and surrounding

of dollars operating a tax preparation

business. Nowlin filed hundreds of tax

returns for clients that claimed phony

business and education expenses and

Violent Drug Trafficking Organization

Dismantled, Sentenced to Total of 119

Years in Prison

sought refunds to which the clients were

Mark Anthony Daye was sentenced to

areas. Members of the Omega Line of the

over 30 years in prison for conspiracy

United Blood Nation supported and pro-

to distribute and possess with intent

tected Mitchell DTO. The members of the

to distribute five kilograms or more of

DTO were primarily supplied by Mitchell,

not entitled. In addition, the returns did

On December 14, 2017, in Raleigh, North

cocaine, one kilogram or more of heroin

who, along with Daye, had the connection

not identify him as the paid preparer.

Carolina, three remaining members of

and a quantity of marijuana; and conspir-

to the Los Angeles cartel members.

Nowlin deposited the fees he earned into

the Maurio Mitchell Drug Trafficking

acy to launder monetary instruments.

nominee bank accounts that

Organization (DTO) responsible for

he controlled.

shipping and distributing large quantities

Sandy Darnell Ledbetter, Jr., received

violent-drug-trafficking-organization-

https://www.justice.gov/usao-ednc/pr/

of cocaine, heroin, and marijuana within

20 years in prison after being found

dismantled-sentenced-total-119-years-

Nowlin further admitted he made false

the Eastern District of North Carolina

guilty of conspiracy to distribute and

imprisonment

statements to IRS agents, including that

were sentenced.

possess with the intent to distribute

he did not prepare tax returns for clients.

cocaine, and possession of a firearm in

In addition to the tax-related charges,

Maurio Tajara Mitchell was sentenced

furtherance of a drug trafficking crime.

Nowlin admitted to attempting to cheat

to 35 years in prison for conspiracy to

Six other members previously sen-

his creditors by filing fraudulent personal

distribute and possess with the intent

tenced received prison terms ranging

bankruptcy petitions. Along with these

to distribute five kilograms or more of

from 16 years to 5 months in prison.

petitions, Nowlin also submitted false

cocaine, one kilogram or more of heroin

financial statements on which he did not

and a quantity of marijuana; conspiracy

fully disclose his income and assets.

The investigation revealed the Mitchell

DTO was responsible for shipping and

IRS: Criminal Investigation Annual Report 2018

CHARLOTTE FIELD OFFICE CASE FILES

Charlotte Investment Fund Operator

Sentenced to 7½ Years for Securities

Fraud and Tax Evasion

own name and in the names of Richard

5 years of supervised release, and

by stealing the identities of bank employ-

Davis Enterprises and Davis Financial,

ordered to pay $1,570,561 in restitution.

ees and using fictitious notaries. Creating

Inc. Davis used some of these funds,

He also forfeited a stash of gold bullion,

Delaware holding companies to conceal

as well as funds directly out of other

cash, and studio equipment previously

his activities, Earquhart then sold the

On June 25, 2018, Richard Wyatt Davis,

accounts of Davis’s businesses, on

seized by law enforcement.

properties to unknowing third parties.

Jr. was sentenced to 7½ years in prison

personal expenditures totaling over $2

and two years of supervised release for

million. Davis filed false tax returns for

Earquhart was convicted on charges of

homeowners lost the funds they had

securities fraud and tax evasion.

2009 and 2011, which reflected negative

bank fraud, aggravated identity theft,

invested into their properties, and others

total income and failed to file individual

aiding and abetting, and engaging

were left uncertain as to whether they

income tax returns for 2010 and 2012.

in monetary transactions involving

could remain in their homes due to their

criminally derived property.

clouded title.

According to court documents, between

2010 and February 2015, Davis defrauded

Because of his actions, some affected

75 victims of approximately $9.3 million,

https://www.justice.gov/usao-wdnc/

by encouraging them to invest in invest-

pr/charlotte-investment-fund-operator-

Trial evidence showed that in one bank

https://www.justice.gov/usao-ednc/pr/

ment funds he controlled. Davis used

sentenced-75-years-securities-fraud-

fraud scheme Earquhart forged a deed

greensboro-man-sentenced-32-years-

investor funds to pay for administrative

and-tax-evasio-0

on a property owned by an out of state

prison-extensive-bank-lien-theft-scheme-

and overhead expenses and to repay

landowner and then channeled the

money

other investors. He also used some of

property ownership through fictitious

the money to make direct and indirect

individuals and a holding company

before personally taking title to the

information to make these claims.

Greensboro Man Sentenced to Prison

for Extensive Bank Lien Theft Scheme,

Money Laundering, and Aggravated

Identity Theft

During tax years 2009—2012, Davis

On July 9, 2018, Xavier Milton Earquhart,

In another scheme, Earquhart forged

transferred more than $5 million of

was sentenced to 32 years in prison,

bank lien releases on eight properties

payments to himself. Davis assured

victims that their assets were growing in

value despite lacking sufficient financial

investor funds into bank accounts in his

property. He then secured $495,000 in

home equity loans using the property

as collateral.

Nashville Area Tax Preparation

Business Owners Sentenced for

Obtaining Nearly $6 Million in Bogus

Refunds

On January 3, 2018, in Nashville, Tennessee, Victor Oliva, of Hendersonville,

IRS: Criminal Investigation Annual Report 2018

CHARLOTTE FIELD OFFICE CASE FILES

Tennessee State Inmate Sentenced

for Conspiracy to Defraud the Internal

Revenue Service

Tennessee, was sentenced to 1½ years

Byron Fernandez-Virula Jr., of Madison,

years in prison followed by 2 years of

in prison, followed by 3 years of super-

Tennessee, was sentenced to 2 years in

supervised release and ordered to pay

vised release. Oliva was also ordered to

prison followed by 2 years of supervised

restitution of $730,707 to the IRS. He

pay restitution of $1,308,422 to the IRS.

release and ordered to pay restitution of

prepared and filed at least 170 false

He was the sole owner and operator of a

$1,444,957 to the IRS. He prepared and

federal income tax returns claiming

On April 2, 2018, in Knoxville, Tennes-

tax return preparation business known as

filed 236 false federal income tax returns,

fraudulent refunds of at least $730,707.

see, Larry Steven Covington, Jr. was

S Income Tax Preparation.

claiming fraudulent refunds of at least

sentenced to almost 4 years in prison

$1,444,957, and cashed at least $351,000

Julio Soto, of Goodlettsville, Tennessee,

and ordered to pay $163,777 in restitu-

According to court documents, Oliva

in fraudulently obtained tax refund checks

was sentenced to 3 years in prison

tion to the IRS. In May 2017, Covington

prepared and filed 166 false federal

at a check cashing business.

followed by 3 years of supervised

pleaded guilty to conspiracy to defraud

release, and ordered to pay restitution

the U.S. government.

income tax returns with the IRS claiming

fraudulent refunds of $1,308,422. His

Byron Fernandez-Virula Sr., of Madison,

of $737,531 to the IRS. He prepared

business was one of the tax return

Tennessee, was sentenced to over 3

and filed at least 130 false federal

According to court documents, Cov-

businesses subject to a federal search

years in prison, followed by 3 years of

income tax returns claiming fraudulent

ington learned how to prepare and file

warrant in April 2015.

supervised release and ordered to pay

refunds of at least $737,788.

fraudulent income tax returns from

another inmate while he was serving

restitution of $1,444,957 to the IRS. He

As part of a tax fraud scheme dating

prepared and filed at least 1,064 false

https://www.justice.gov/usao-mdtn/pr/

time in a Tennessee state correc-

back to 2011, more than 40 people were

federal income tax returns claiming

final-defendant-sentenced-tax-fraud-

tional facility. Covington illegally obtained

ultimately charged and convicted of

fraudulent refunds of at least $5,894,827.

scheme

personally identifiable information (PII),

federal offenses. More than $1 million

He also cashed at least $817,000 in

including Social Security numbers, from

in cash, luxury automobiles, and 11

fraudulently obtained refund checks at a

mostly other inmates. He used this

Nashville-area residential properties was

check cashing business.

information to either create false tax

returns, which he mailed to his mother,

seized. Other defendants who played a

significant role in the scheme include:

Wilmar Soto-Virula, of Madison, Ten-

or provided the information to his mother

nessee, was sentenced to over 2

over the phone so she could prepare the

IRS: Criminal Investigation Annual Report 2018

CHARLOTTE FIELD OFFICE CASE FILES

Knoxville residence.

Memphis Man Sentenced for

Obstructing the IRS

The IRS deposited some of the refunds

On October 20, 2017, in Memphis,

into two bank accounts Covington

Tennessee, Cedric Zimbalist Chism was

created. He instructed his mother

sentenced to 1½ years in prison and 1

to withdraw the money from these

year of supervised release. Chism was

accounts, keep some for herself, and

convicted of obstructing the IRS.

forms and mail them to the IRS from her

purchase Green Dot cards for Covington

with the remainder. In some cases, the

According to court documents, Chism

IRS mailed checks directly to Covington’s

was the former owner and operator

mother, which she cashed and put the

of a security guard service, Memphis

funds on a Green Dot card for Covington.

Security of Tennessee, Inc. (MSOFT).

MSOFT had contracts for services

Between tax years 2009—2015, Cov-

with various businesses throughout

ington filed over 550 fraudulent returns

the Western District of Tennessee in

using multiple addresses. The refunds

Memphis. Chism attempted to evade

totaled $905,213. The actual amount of

payment and reporting of employ-

loss was approximately $163,777.

ment taxes to the IRS. From 1999 to

2011, Chism, as owner and operator of

https://www.justice.gov/usao-edtn/pr/

MSOFT, owed $1,688,473 with a tax

tennessee-state-inmate-sentenced-

loss to the IRS of $854,144.

serve-46-months-federal-prison-conspiracy-defraud

https://www.justice.gov/usao-wdtn/pr/

memphis-man-sentenced-18-monthsfederal-prison-obstructing-irs

IRS: Criminal Investigation Annual Report 2018

CHICAGO FIELD OFFICE

230 S DEARBORN STREET, CHICAGO IL, 60604 | 312.292.4502

ILLINOIS

INDIANA

CARMEL, IN

DOWNERS GROVE, IL

DULUTH, MN

EAU CLAIRE, WI

EVANSVILLE, IN

FORT WAYNE, IN

GREEN BAY, WI

INDIANAPOLIS, IN

MADISON, WI

MATTESON, IL

MERRILLVILLE, IN

MILWAUKEE,WI

MINNEAPOLIS, MN

ORLAND PARK, IL

PEORIA, IL

ROCHESTER, MN

ROCKFORD, IL

SCHILLER PARK, IL

SOUTH BEND, IN

SPRINGFIELD, IL

THE CHICAGO FIELD Office covers the states of Illinois, Indiana,

participate in numerous task forces and work complex cases in

Minnesota, and Wisconsin. We work a wide variety of cases

many diverse areas such as public corruption, cybercrimes, drug

and have great relationships with the U.S. Attorney’s Offices in

trafficking, and corporate fraud.

the eight judicial districts covered by the field office. Our agents

MINNESOTA

WISCONSIN

IRS: Criminal Investigation Annual Report 2018

CHICAGO FIELD OFFICE CASE FILES

SIGNIFICANT CASES

Chicago Scrap Iron Refining Company

and Its President Sentenced for

Criminal Tax Violations

seized from Acme Refining Company

willfully failed to withhold the required

pay 85 separate scrap metal suppliers

would be applied to pay an outstanding

amounts for FICA taxes and Medicare.

to assist them in underreporting their

restitution judgment of $4,545,243 and a

Additionally, Baron directed Acme

income and taxes. Further, Acme, at the

fine of $500,000.

employees to issue multiple vouchers

direction of Baron, spent at least $1.6

for cash payments due to suppliers that

million to fund construction of a personal

According to court documents, from

exceeded $10,000, using nominee or

residence in Wisconsin. This expenditure

2009 to 2013, Acme Refining, a Chica-

fictitious payees as the purported seller.

was falsely recorded as “cost of goods

On October 18, 2017, Laurence C. Baron

go-based scrap iron refining business

was sentenced to 1 year in prison, 1 year

and its president concealed from the IRS

Between 2009 and 2013, the company

conceal the payment on behalf of its

of supervised release, and ordered to pay

more than $11.6 million in cash wages

and Baron obtained approximately

corporate officers. Baron also filed false

$1,333,084 in restitution. On the same

paid to at least 50 employees. Acme

$152 million in cash from two currency

individual income tax returns for tax

date, a judgement ordered that funds

and Baron also acknowledged they

exchanges. They used that money to

years 2011 and 2012, which resulted

sold” to reduce Acme’s tax liability and

IRS: Criminal Investigation Annual Report 2018

CHICAGO FIELD OFFICE CASE FILES

earned for the year.

in a total federal and state tax loss of

collected checks and cash payments

was sentenced to 3½ years in prison.

approximately $208,875.

from William Szarmach (owner and

She was also ordered to pay restitution

operator of CSA Towing in Lake Station,

of $1,145,428 to her former employer,

Cozart also used a dormant business

Indiana) and Scott Jurgensen (a former

$346,299 to the IRS, and $25,000 to an

bank account to deposit customer

Merrillville police officer and owner of

insurance company.

payments. She then used the funds to

Former Lake County Sheriff Sentenced

to Over 15 Years in Prison

pay the unauthorized personal purchases

Sampson Relocation and Towing). The

payments were exchanged for Buncich

On June 16, 2017, Cozart pleaded

she charged using the business’s credit

awarding them county towing business

guilty to one count each of wire fraud

card. In addition, Cozart filed a false

On January 16, 2018, in Hammond,

and towing in the city of Gary for

and filing a false income tax return

federal income tax return for tax year

Indiana, John Buncich, of Crown Point,

ordinance violations.

in defrauding her former employer, a

2013 by not reporting the $333,378 in

Bloomington landscaping business,

additional funds she received because of

of more than $1 million. She used her

her fraud scheme.

Indiana, was sentenced to over 15 years

in prison, 2 years of supervised release,

and ordered to pay $800 in restitution

along with a $250,000 fine.

Former Office Manager Sentenced for

Defrauding Employer of More Than $1

Million

According to court documents, from

position as office manager for the

company to use the business’s credit

cards and bank accounts to make

unauthorized purchases for herself, her

February 2014 through October 2016,

On December 12, 2017, in Peoria, Illinois,

family, and others. Cozart charged more

Buncich, as the Lake County Sheriff,

Tina Cozart, formerly of Carlock, Illinois,

to the business’s credit cards than she

Health Care Business Owners

Sentenced for Multi-Million Dollar

Fraud and Tax Conspiracy

devised a scheme to deprive the citizens

On February 8, 2018, in Minneapolis,

of Lake County of their right to the

honest services of the sheriff’s office.

The scheme was designed to enrich

Buncich personally and his campaign

committee, known as Buncich Boosters.

Timothy Downs (formerly the chief in the

Lake County Sheriff’s Department) often

“The quality of case work accomplished in the Chicago Field Office continues to impress me. This year, our office merged with the St. Paul office

and together we will continue to aggressively combat financial crimes in

the Midwest area. I am extremely proud of our agents and professional

staff as they fight hard every day for the American taxpayer.” –Gabriel

Grchan, Special Agent In Charge

Thurlee Belfrey, Roylee Belfrey, and

Lanore Belfrey, were sentenced to over 7

years, 5 years, and over 1 year in prison,

respectively, for their roles in a years-long,

multi-million dollar heath care fraud and

tax conspiracy. In addition, Thurlee was

IRS: Criminal Investigation Annual Report 2018

CHICAGO FIELD OFFICE CASE FILES

ordered to pay $8,944,036 in restitution;

this, Lanore was named the owner of

conspiracy, was sentenced to 1 year in

government by filing false federal income

Roylee was ordered to pay $4,592,593 in

Model and intentionally failed to disclose

prison, and ordered to pay more than $2

tax returns claiming fraudulent refunds

restitution; and Lanore was ordered to pay

Thurlee’s involvement in managing the

million in restitution.

on behalf of fellow clients of the MSOP

$402,158 in restitution.

business. Under this scheme, Model

Brothers Thurlee and Roylee ran multiple

(“the filers”). As part of the scheme,

received more than $18 million from

https://www.justice.gov/usao-mn/

Senty-Haugen prepared and filed the false

Medicaid.

pr/health-care-business-owners-

tax returns using the filers’ names and

sentenced-prison-multi-million-dollar-

Social Security numbers, as well as false

fraud-and-tax

wage and federal income tax withholding

health care businesses that received

funds from the Medicaid and Medicare

In addition, Roylee operated several

programs funded by the federal govern-

other health care businesses during this

ment and the state of Minnesota. In

time and between 2007 and 2013, the

2003, following an investigation by the

brothers deducted and collected money

Minnesota Attorney General’s Office

from their employees’ wages, suppos-

into Royal Health Care, a business the

edly for the payment of federal payroll

brothers started in the 1990s, Thurlee

taxes and Federal Insurance Contribution

was convicted of felony theft by false

Act (FICA) taxes.

information.

Senty-Haugen enlisted the help of other

Repeat Tax Fraud Offender Sentenced

to 10 Years for Tax Fraud Scheme

individuals not confined at MSOP to

help him and the filers prepare and file

fraudulent returns as well as collect

On July 31, 2018, in Minneapolis, Arthur

and transfer the illicit proceeds. Senty-

Dale Senty-Haugen, was sentenced

Haugen admitted to filing 92 fraudulent

Department of Health and Human

However, they intentionally failed to pay

to 10 years in prison for orchestrat-

income tax returns for tax years 2011

Services excluded Thurlee indefinitely

the withheld taxes to the IRS, instead,

ing a years-long tax fraud conspiracy

through 2016, seeking more than

from participating in state and federal

using the money for personal purchases.

while confined to the Minnesota Sex

$550,000 in refunds.

health care programs, with no right to

The brothers admitted to unlawfully

Offender Program (MSOP). Senty-Hau-

seek reinstatement for up to 20 years.

using for their own benefit more than

gen has been confined to the MSOP in

In 2000 and 2013, Senty-Haugen was

$3,960,000 in withheld taxes between

Moose Lake, Minnesota, since 1994.

prosecuted in state court on fraud-

representation. In addition, the U.S.

related offenses. Additionally, in 2004,

Despite this ban, Thurlee conspired with

2007 and 2014. The accountant who

his wife, Lanore, to incorporate a new

prepared the business tax returns,

From early 2012 through late 2017,

while confined at MSOP, Senty-Haugen

health care company, Model Health

Kenneth Harycki, former mayor of

Senty-Haugen devised and participated

was indicted in federal court for tax fraud

Care, to continue the business opera-

Stillwater, pleaded guilty to one count of

in a scheme to get money from the U.S.

conspiracy and was sentenced to over 4

tions and conceal his involvement. To do

IRS: Criminal Investigation Annual Report 2018

CHICAGO FIELD OFFICE CASE FILES

West Salem Women Sentenced for

Wire Fraud and Filing False Tax Return

her gross income by failing to report the

On November 9, 2017, in Madison, Wis-

https://www.justice.gov/usao-wdwi/pr/

consin, Barbara Snyder, of West Salem,

west-salem-woman-sentenced-4-years-

Gamboa cashed approximately $5.1

Wisconsin, was sentenced to 4 years

wire-fraud-tax-evasion

million in tax refund checks at a local

in federal prison for engaging in a wire

check cashing business. CI conducted

fraud scheme and filing a false income

over 15 search and seizure warrants

tax return for the theft of $832,000

resulting in the seizure of approximately

from a church.

years in prison and 3 years of supervised

using the ITINs. Gamboa falsely claimed

release. Senty-Haugen began his new

dependents in the tax returns that she

fraud scheme just two days after his

filed to fraudulently receive the additional

term of supervised release expired.

child tax credit.

Woman Sentenced for Multi-Million

Dollar Tax Refund Scheme

On March 14, 2018, in Milwaukee,

$1.5 million in cash and $1 million in U.S.

Amalia Gamboa, of Milwaukee, was

Treasury checks related to this ITIN fraud

Snyder served as the secretary and

sentenced to 5 years in prison and

scheme. Gamboa agreed to be volun-

accounting clerk for St. Patrick’s Church

ordered to pay $4,681,690 in restitution

tarily deported to Mexico after her prison

in Onalaska, Wisconsin. Between 2006

to the IRS.

sentence due to her lack of legal status

and 2015, she embezzled approximately

in the United States. Judge Pepper, who

$832,210 of church collections. Although

From November 2010 through March

oversaw the case, said she's “never

entrusted to deposit all the church collec-

2017, Gamboa committed her theft

seen a single person responsible for this

tions, Snyder took a portion of the funds

by fraudulently obtaining individual tax

much loss in my time as a judge” and

for herself and used them for gambling.

identification numbers (ITINs) from the

hopes that Gamboa's sentence "sends

IRS. The IRS issues an ITIN to individu-

a message."

als who cannot get a Social Security

To avoid detection, Snyder discarded

records of church collections, created

number. Gamboa used personal identify-

https://www.justice.gov/usao-edwi/pr/

false entries in accounting records, and

ing documents from citizens of Mexico,

woman-sentenced-five-years-prison-

lied to church auditors. During the same

fraudulently applied for ITINs in their

multi-million-dollar-tax-return-scheme

period, Snyder filed a false tax return

names, and then filed false tax returns

proceeds of her embezzlement.

for 2015, in which she underreported

IRS: Criminal Investigation Annual Report 2018

CINCINNATI FIELD OFFICE

550 MAIN STREET, CINCINNATI OH, 45202 | 513.975.6343

OHIO

KENTUCKY

AKRON, OH

BOWLING GREEN, KY

CANTON, OH

CLEVELAND, OH

COLUMBUS, OH

DAYTON, OH

FLORENCE, KY

INDEPENDENCE, OH

LEXINGTON, KY

LOUISVILLE, KY

TOLEDO, OH

THE CINCINNATI FIELD office covers the states of Ohio and

expertise to lead investigations of the most egregious white-collar

Kentucky, which includes two federal judicial districts in each state.

criminals. We work in concert with the United States Attorney’s

We work closely with our federal, state, and local law enforcement

office as well as our civil and law enforcement partners to signifi-

partners to investigate and prosecute tax, money laundering, Bank

cantly impact regional and national priorities that include: income

Secrecy Act, and related financial crimes that affect the southern

tax evasion, questionable tax refund/return preparer fraud, ID theft,

and northern judicial districts of the “Buckeye State” as well as the

cybercrimes, counterterrorism and narcotics related crimes, includ-

eastern and western judicial districts of the “Bluegrass State.” Our

ing opioid-related drug investigations.

special agents and professional staff provide unparalleled financial

IRS: Criminal Investigation Annual Report 2018

CINCINNATI FIELD OFFICE CASE FILES

nesses, including Connectivity Systems

an adjusted gross income of nearly

Lopez previously pleaded guilty to

Inc., a mainframe software company that

$27,000, when his actual gross income

conspiracy to possess with intent to dis-

provides internet protocol development

was nearly $1.6 million. In addition,

tribute methamphetamine and cocaine,

and servicing. Rankin Enterprises, LLC

Rankin filed false corporate tax returns

distribution of methamphetamine, and

was a shell corporation that included

with the IRS for Connectivity Systems

conspiracy to launder money. He will be

the Circleville Movie House, Screening

Inc. for the 2008, 2009, and 2010 tax

deported upon completion of his prison

On April 3, 2018, in Columbus, Ohio,

Room, J.R. Hooks Café, and Tootles

years. These returns claimed a fraudu-

sentence. Lopez has previously been

John Rankin, of Circleville, Ohio, was

Pumpkin Inn. Rankin also owned the

lent accelerated research and develop-

deported at least seven times. He is one

sentenced to 5 years in prison and

Tuscan Table, an Italian restaurant in

ment credit of $1.7 million against the

of nine people who have been sentenced

ordered to pay $7.1 million in restitu-

downtown Circleville.

corporate taxes due of Connectivity

to prison for their roles in

Systems Inc.

the conspiracy.

SIGNIFICANT CASES

Circleville Businessman Sentenced for

Tax Fraud

tion to the IRS, which consisted of

approximately $2 million in prejudgment

Between June 2008 and April 2011,

interest. Rankin was convicted of 17 tax-

Rankin, conducting business as Rankin

Between January 2005 and July 2015,

Rogelio Cervantes owned Si Senor

related charges including the following:

Enterprises and Tuscan Table, failed to

Rankin made false and misleading state-

restaurant and Fiesta Los Jalapenos.

account for and pay all federal income

ments to IRS agents and concealed

Cervantes agreed to introduce a person

• Seven counts of failing to account for

and FICA taxes. Rankin also filed false

information from them.

cooperating with law enforcement (iden-

and pay employment taxes to the IRS

amended individual income tax returns

tified as Source 1) to Lopez, who Cer-

• Six counts of willfully filing false

with the IRS for the 2005 through

vantes identified as his Mexican-based

federal individual income tax returns

2009 tax years. He claimed a corrected

drug supplier. Cervantes and Source 1

• Three counts of willfully filing false

adjusted gross income of negative $1.7

federal corporate income tax returns

million, when his corrected adjusted

• One count of obstructing and impeding

gross income was more than

On July 24, 2018, in Cleveland, Jesus

to the Cleveland area for distribution, ac-

the due administration of the IRS

$8.9 million.

Caro Lopez was sentenced to 24 years

cording to court documents. Cervantes

Leader of Drug Conspiracy Sentenced

discussed the potential and logistics of

Lopez transporting kilograms of cocaine

in prison for leading a conspiracy that

told Source 1 that Lopez intended to

According to court documents, Rankin

In 2010, Rankin filed a false indi-

brought 20 pounds of methamphet-

sneak into the United States to set up a

operated several Circleville-based busi-

vidual income tax return that reported

amine into northeast Ohio.

drug distribution hub in Cleveland.

IRS: Criminal Investigation Annual Report 2018

CINCINNATI FIELD OFFICE CASE FILES

Cervantes said he and Lopez then planned

Cervantes has pleaded guilty and is

sales to purchase property which he

Conn received this sentence on convic-

to launder their drug profits by buying

awaiting sentencing.

used to house an additional business,

tions of paying illegal gratuities to a

Hometown Pharmacy of Cynthiana.

Social Security administrative law judge

properties, shopping centers, and res-

and theft of more than $550 million in

taurants. Lopez talked to an undercover

agent in November 2016 and stated he

was sending one kilogram of cocaine

and five pounds of methamphetamine to

Cleveland. The undercover agent spoke

Central Kentucky Pharmacist

Sentenced for Conspiracy to Distribute

Oxycodone and Money Laundering

https://www.justice.gov/usao-edky/

what is the largest fraud scheme in the

pr/central-kentucky-pharmacist-sen-

history of the Social Security program.

tenced-conspiracy-distribute-oxycodo-

He was also ordered to pay $72,574,609

ne-and-money

in restitution.

with Lopez in December 2016 and then

with Jose DeJesus Rocha Garcia about

On October 27, 2017, in Lexington,

From October 2004 to December 2017,

meeting to pick up a delivery of metham-

Kentucky, Michael Allen Ingram was

Conn participated in a scheme with

phetamine. They met and the undercover

sentenced to 8 years in prison and 2

agent gave Roche Garcia $14,000 for more

years of home incarceration as a term

than 10 pounds of methamphetamine.

of his supervised release. Ingram also

forfeited more than $450,000.

Fugitive Lawyer Involved in Largest

Social Security Fraud Scheme

Sentenced to 15 Years in Prison for His

Escape and Related Crimes

continued discussions with Lopez about

According to court documents, Ingram,

On September 7, 2018, Eric Conn, a

lently obtained disability benefits totaling

purchasing drugs. Lopez arranged for

while operating Hometown Pharmacy

former fugitive and Social Security

more than $550 million for thousands

Melchor Lopez Lopez to meet at a

of Georgetown, illegally distributed and

disability lawyer, was sentenced to

of individuals. A former SSA employee

Walmart, where undercover agents

dispensed oxycodone by filling forged

15 years in prison on conspiracy to

discovered the scheme and provided

gave Melchor Lopez Lopez $20,000 in

prescriptions. Ingram knew the distribu-

defraud the United States, conspiracy to

information about it to federal agents.

exchange for 10 pounds of methamphet-

tion and dispensation of these pills was

escape, conspiracy to retaliate against

Conn and former SSA administrative law

amine. Others sentenced to prison in

outside the scope of his pharmaceutical

an informant, and fleeing from the

judge Charlie Paul Andrus conspired to

the case already include Rocha Garcia

professional practice and was not for a

United States. The sentence is to run

have the former SSA employee termi-

(over 11 years), Leopolda Rocha (over

legitimate medical purpose. Ingram used

consecutive to the 12 years in prison

nated to discredit the employee.

10 years), and Jose Lopez (6 years).

the proceeds of the illegal oxycodone

Conn previously received in July 2017.

former SSA administrative law judge

David Black Daugherty, clinical psychologist Alfred Bradley Adkins, and others

to submit thousands of falsified medical

documents to the SSA. They fraudu-

In May 2017, the undercover agent

IRS: Criminal Investigation Annual Report 2018

CINCINNATI FIELD OFFICE CASE FILES

Conn fled the country before his original

https://www.justice.gov/opa/pr/

Royal received only three refund checks

business under a variety of different

sentencing date with the help of Curtis

fugitive-lawyer-involved-largest-social-

in the amounts of $98,489, $98,713,

names. The business engaged in illegal

Lee Wyatt by severing the electronic

security-fraud-scheme-sentenced-15-

and $150,431 totaling $347,633.

collection practices, including making

monitoring device from his ankle and

years-prison-his

threatening and harassing phone calls,

fleeing across the Mexican border. After

On each of the Forms 1041, Royal

and collecting on debt that did not exist

fleeing, Conn was sentenced in absentia

listed JSL Royal Estates as a trust with

or that the collection companies did not

Jacques Royal El being the fiduciary.

have title to. To conceal his involvement

However, this trust did not exist. Royal

in the business, Wills directed two

made up all the numbers on the forms

individuals to incorporate companies in

in July 2017 to 12 years in prison on

those charges. In December 2017, Conn

Veteran Sentenced for False Income

Tax Returns

was returned to the United States from

Honduras after Honduran authorities

On July 23, 2018, in Paducah, Kentucky,

and claimed he paid withholding taxes

their names in Georgia and Ohio, and

apprehended him.

Jacques P. Royal, also known as Jacques

on average of $101,000 a year so that

to open bank accounts in the names of

Royal EL, was sentenced to one year in

he could get a sizeable refund. But,

those companies. Wills then used these

Andrus pleaded guilty to an information

prison, one year of supervised release

Royal never paid any withholding taxes

corporate entities to operate his debt

charging him with conspiracy to retaliate

and ordered to pay $347,633 to the IRS.

and knew that the returns were false.

collection business.

against an informant and was sentenced

Royal previously pleaded guilty to filing

to 6 months in prison. Daugherty

false returns.

pleaded guilty to an information charging

During 2011 through 2013, Wills earned

Buffalo Man Sentenced to Prison for

Tax Evasion

significant income from his debt collec-

him with receiving illegal gratuities and

According to court documents, between

was sentenced to 4 years in prison.

February 2011 and May 10, 2013, Royal

Adkins was found guilty following a

was a soldier in the U.S. Army and was

On September 13, 2018, Dorian Wills,

tax liabilities by using nominees to hide

6-day trial of mail fraud, wire fraud, con-

stationed at Ft. Campbell, Kentucky.

who was convicted of tax evasion,

his ownership of his businesses and filing

spiracy to commit mail and wire fraud,

During a 22-month period, Royal willfully

sentenced to 3 years in prison, and

false tax returns. In addition, Wills did not

and making false statements. He was

prepared and filed seven false Forms

ordered to pay $1,466,330 in restitution

file tax returns at all for 2011 and 2013.

sentenced to 25 years in prison. Wyatt

1041, Tax Returns for Estates and Trusts.

to the IRS.

was sentenced to 7 months in prison for

The seven tax returns claimed false

his role in helping Conn flee the country.

refunds totaling $1,644,199. However,

tion activities. However, he sought to

hide his income and evade his income

https://www.justice.gov/opa/pr/buffaloFrom April 2010 through October

man-sentenced-prison-tax-evasion

2013, Wills operated a debt collection

IRS: Criminal Investigation Annual Report 2018

DALLAS FIELD OFFICE

1100 COMMERCE, DALLAS TX, 75242 | 214.413.5929 | DALLASFIELDOFFICE@CI.IRS.GOV

AMARILLO, TX

BEAUMONT, TX

FARMERS BRANCH, TX

FAYETTEVILLE, AR

FORT SMITH, AR

TEXAS

FORT WORTH, TX

IRVING, TX

LITTLE ROCK, AR

LUBBOCK, TX

MUSKOGEE, OK

OKLAHOMA CITY, OK

TULSA, OK

TYLER, TX

THE DALLAS FIELD Office covers the Northern and Eastern Dis-

Office priority task forces, including the Organized Crime and Drug

tricts of Texas, Oklahoma and Arkansas. Our agents work a diverse

Enforcement Task Force (OCDETF), the High Intensity Drug Traf-

mix of criminal investigations, which include tax fraud, identity

ficking Area Task Force (HIDTA), the Financial Crimes Task Force

theft, public corruption, narcotics, and terrorism investigations.

and the Joint Terrorism Task Force (JTTF).

Our agents hold pivotal roles on the respective U.S. Attorney’s

OKLAHOMA

ARKANSAS

IRS: Criminal Investigation Annual Report 2018

DALLAS FIELD OFFICE CASE FILES

SIGNIFICANT CASES

Former Tulsan Sentenced For $2 Million

Wire Fraud Scheme and $500,000 Tax

Evasion Case

used their funds to make Ponzi-type

ganidze was sentenced to almost

ment. Rosie Diggles and Anita Diggles

payments to them, creating the illusion

5 years in prison, one month of su-

were each sentenced to 4½ years in

the ventures were operating according to

pervised release, and ordered to pay

prison and ordered to pay restitution of

his representations.

$1,167,535 in restitution for transmitting

$971,143 to the government.

false returns using stolen identities.

Except for those funds he paid to

According to information presented in

investors as purported “returns,” Gorrell

From about June 12, 2012, to March 4,

court, the defendants devised a scheme

On April 23, 2018, in Tulsa, Oklahoma,

spent all the victims’ invested moneys.

2014, Mawunganidze devised a scheme

to obtain and use federal block grant

Shawn Christopher Gorrell was sen-

In addition, the jury determined Gorrell

to obtain personally identifiable informa-

funds intended for victims of Hurricanes

tenced to over 5 years in prison and 3

evaded the payment of taxes on the

tion and use it to file bogus tax returns

Rita, Katrina, Ike, and Dolly. These funds

years supervised release for tax evasion

funds he fraudulently obtained from

with the IRS. Mawunganidze then

were made available to the state of

and wire fraud. As a condition of his

investors. He should have reported the

directed the refunds to bank and debit

Texas, which contracted with councils

supervised release, the court ordered

funds for tax years 2009, 2011, and

card accounts under her control.

of governments within the state to help

Gorrell to pay $509,256 in restitution to

2012, but he willfully avoided doing so.

administer and distribute the funds.

the IRS and entered a money forfeiture

judgment against Gorrell for $2,006,908.

https://www.justice.gov/usao-ndok/pr/

former-tulsan-sentenced-2000000-wire-

Between 2007 and 2012, Gorrell induced

fraud-scheme-and-500000-tax-evasion-

victims to entrust him with over $2

case

Walter Diggles was the Executive

Jasper Family Sentenced in DETCOG

Conspiracy

Director of the Deep East Texas Council

of Governments during this time. He

used his position to approve inflated

million for investing on their behalf in

On May 22, 2018, in Lufkin, Texas,

billing rates and requests for reimburse-

various ventures he touted. Gorrell used

Walter Diggles, his wife Rosie Diggles,

ment of federal block grant funds

the funds to pay personal expenses, to

and their daughter Anita Diggles were

while Rosie Diggles and Anita Diggles

sentenced to prison for conspiracy viola-

prepared many of the requests. Addition-

tions. Walter Diggles was sentenced

ally, Walter Diggles engaged in activities

to 9 years in prison and ordered to pay

and approved requests for fraudulent

$1,326,049 in restitution to the govern-

block grant funds. All the defendants

gamble, and to day-trade in his personal

trading account. In addition to providing

North Texas Woman Sentenced for

Wire Fraud Related to ID Theft Returns

the investors with reassuring statements of venture performance, Gorrell

On February 12, 2018, Nancy Mawun-

IRS: Criminal Investigation Annual Report 2018

DALLAS FIELD OFFICE CASE FILES

spent significant amounts of the excess

2015, Woods used his official position

ing company controlled by Randell G.

29 years in prison and 5 years supervised

funds on personal expenses.

to direct government money, known as

Shelton Jr. Shelton then kept a portion

release. Richard Joseph Coker was

general improvement funds (GIF), to two

of the money and paid the other portion

sentenced on December 5 to 30 years in

https://www.justice.gov/usao-edtx/

non-profit entities. He also advised other

to Woods and Neal. Paris also bribed

prison and 6 years supervised release.

pr/jasper-family-sentenced-detcog-

Arkansas legislators, including former

Woods by hiring Woods’s friend to an

conspiracy

State Representative Micah Neal, to

administrative position at the college.

Hudson and Coker were two of nineteen

other defendants charged on July 14,

contribute GIF to the non-profits.

Former Arkansas State Senator

Sentenced to Prison for Bribery

Scheme

https://www.justice.gov/opa/pr/former-

2017, after a 16-month joint investiga-

Woods and Neal authorized and directed

arkansas-state-senator-sentenced-

tion by several federal agencies. Gang

the Northwest Arkansas Economic

more-18-years-prison-bribery-scheme

leaders used contraband cell phones

Development District, which was

within prison to work with individuals

responsible for disbursing the GIF, to

outside of prison to operate an extensive

award approximately $600,000 to the

drug-trafficking operation in Oklahoma

On September 5, 2018, in Fayetteville,

two non-profit entities. The evidence

Arkansas, Jonathon E. Woods was

further showed that Woods and Neal

sentenced to over 18 years in prison and

received bribes from officials at both

ordered to pay $1,621,500 in restitution.

non-profits, including Oren Paris III who

‘Irish Mob’ Gang Members Sentenced

in Methamphetamine and Heroin

Conspiracy

City and elsewhere. Over 100 pounds of

methamphetamine, firearms, and large

amounts of currency were seized during

the investigation.

was a college president. Woods initially

On December 4 and 5, 2017, in

On May 3, 2018, a jury found Woods

facilitated $200,000 of GIF money to

Oklahoma City, two ‘Irish Mob’ gang

guilty of 15 counts, including con-

the college and later, with Neal, directed

members, who were inmates incarcer-

spiracy, wire and mail fraud, and money

another $200,000 to the college, in

ated in the Oklahoma State Penitentiary,

laundering. According to the evidence

exchange for kickbacks.

were sentenced for money laundering

and conspiracy to distribute metham-

presented at trial, Woods served as an

Arkansas state senator from 2013 to

To pay and conceal the kickbacks, Paris

phetamine and heroin. On December 4,

2017. Between approximately 2013 and

paid a portion of the GIF to a consult-

Chad Nathan Hudson was sentenced to

IRS: Criminal Investigation Annual Report 2018

DENVER FIELD OFFICE

1999 BROADWAY, DENVER CO, 80202 | DENVER.FINCRIMES@CI.IRS.GOV

COLORADO

WYOMING

BILLINGS, MT

BOISE, ID

CHEYENNE, WY

COEUR D'ALENE, ID

COLORADO SPRINGS, CO

DURANGO, CO

FORT COLLINS, CO

GRAND JUNCTION, CO

HELENA, MT

MISSOULA, MT

WESTMINSTER, CO

THE DENVER FIELD Office covers a large geographic area

laundering and other federal frauds with a financial nexus. We

(approximately 432,500 square miles) that includes the states

hold pivotal roles on the U.S Attorney’s Office priority task forces,

of Colorado, Montana, Idaho and Wyoming and their respective

including the OCDETF Strikeforce, Suspicious Activity Task Force,

judicial districts. The Denver Field Office works a diverse mix of

Guardians Project Strikeforce, and the Virtual Currency Task Force.

criminal investigations including all manners of tax fraud, money

MONTANA

IDAHO

IRS: Criminal Investigation Annual Report 2018

DENVER FIELD OFFICE CASE FILES

The Yureks owed taxes of $624,127 for

personal expenses for them, including

3 years of supervised release for tax

1999 and $53,978 for 2004. In 2006,

mortgage payments on a $1.3 million

fraud and conspiracy to deal in firearms

the Yureks submitted an offer in com-

loft they purchased in the name of one

without a license. As part of the sentenc-

promise to the IRS to settle their tax

of their sons in downtown Denver.

ing, 490 firearms were ordered forfeited.

obligation for $75,000. With the offer

The companies also paid mortgage

Restitution to the IRS will be determined

in compromise, they indicated a "doubt

expenses on vacation homes the

at a future hearing.

On March 22 and 23, 2018, in Denver,

as to collectability” and that they had

Yureks used.

Daryl Yurek and Wendy M. Yurek were

insufficient assets and income to pay the

sentenced to 4 years and 2 years in

full amount.

SIGNIFICANT CASES

Stapleton Couple Sentenced for Income

Tax Evasion and Bankruptcy Fraud

prison respectively. Mr. Yurek also

Wyatt operated Gunsmoke, a store that

https://www.justice.gov/usao-co/pr/

displayed and sold firearms, firearm

stapleton-couple-sentenced-income-

accessories, and gunsmithing services.

tax-evasion-and-bankruptcy-fraud

Wyatt aggressively publicized his

received 3 years of supervised release

Later, in September 2010, the Yureks

and an asset forfeiture judgment of

filed a voluntary Chapter 7 bankruptcy

business by posting videos on YouTube

$132,991.61 Mrs. Yurek also received 3

petition with the U.S. Bankruptcy Court

and by appearing in a reality television

years of supervised release. The Yureks

in the District of Colorado. During the

series that aired from 2011 through 2012.

were also ordered to pay $1,614,536 in

bankruptcy proceeding, Daryl Yurek testi-

restitution to the IRS.

fied that the primary reason for pursuing

bankruptcy was "the $1.2 million that the

Gunsmoke Gun Shop Owner

Sentenced to 6½ Years for Tax Fraud

and Conspiracy

In April 2012, Wyatt surrendered

Gunsmoke’s federal firearms license

A Denver jury convicted the Yureks of tax

IRS wants." However, during the period

evasion and bankruptcy fraud on July 27,

the Yureks claimed to be unable to pay

On March 8, 2018, in Denver, Richard

regulations. However, after Gunsmoke

2017. The jury also convicted Daryl Yurek

their taxes, they caused companies

Wyatt, of Evergreen, Colorado, was

surrendered its federal firearms license,

of three additional related offenses.

they were associated with to pay their

sentenced to 6½ years in prison and

Gunsmoke changed the address of the

due to violations of federal laws and

“The employees of the Denver Field Office are proud to represent IRS-Criminal Investigation throughout the beautiful Rocky Mountain Region.

IRS–CI agents continue to be the financial fraud experts in this four state area ensuring that the integrity of our nation’s financial systems is not

compromised. This is only accomplished through the dedication and hard work of the professionals in the Denver Field Office.”

IRS: Criminal Investigation Annual Report 2018

DENVER FIELD OFFICE CASE FILES

federal firearms license of another store

firearms license, where the custom-

actually made at least $350,000 that he

methamphetamine from Washington into

known as Triggers Firearms LLC’s to the

ers filled out the background check

failed to disclose.

Montana for distribution.

Gunsmoke address.

paperwork and took possession of the

firearms they had purchased

https://www.justice.gov/usao-co/pr/

Agents identified Juan Ramon

at Gunsmoke.

gunsmoke-gun-shop-owner-sentenced-

Delgadillo-Meza as one of the indi-

78-months-conspiracy-and-tax-fraud

viduals responsible and in August

Wyatt continued to operate Gunsmoke

as a retail firearms store that also offered

gunsmithing services, but Wyatt never

Customers who wanted gunsmith-

2015, conducted surveillance and saw

held an ownership interest in Triggers

ing services left their firearms with

Delgadillo-Meza meet with an individual

or assumed management of Triggers.

Gunsmoke. After the gunsmiths at

in Montana. Investigators later identified

Wyatt and other co-conspirators submit-

Gunsmoke completed their work, they

ted false paperwork to the ATF to hide

returned the firearms to the custom-

that Triggers was acting as a straw

ers. The customers paid Gunsmoke

licensee for Gunsmoke. Wyatt ran his

directly for this service. Wyatt, without

business by directing Gunsmoke employ-

the federal firearms license, continued

On December 20, 2017, in Billings,

ees to enter firearm sales in Gunsmoke’s

to order new guns for sale to keep the

Montana, Juan Ramon Delgadillo-Meza,

computer point of sales software system

business going.

of Ephrata, Washington, was sentenced

On November 15, 2015, a Montana

to 12½ years in prison, 5 years of super-

Highway Patrol Trooper stopped Delga-

A jury convicted Wyatt of two counts of

vised release, a $200 special assess-

dillo-Meza for a traffic violation. A search

conspiracy dealing in firearms without

ment, and a money judgment of $1.3

of the vehicle revealed approximately

Customers shopping at Gunsmoke

a license, filing a false tax return, and

million. Delgadillo-Meza was convicted

886 grams of pure methamphetamine,

purchased firearms from Gunsmoke and

multiple counts of failure to file. Wyatt

of conspiracy to possess with intent to

which was seized. In January 2016, law

had gunsmithing services performed

failed to pay over $500,000 in income

distribute methamphetamine and con-

enforcement agents searched the resi-

on Gunsmoke premises. After receiving

tax for 2009 through 2012, and did not

spiracy to commit money laundering.

dences of Delgadillo-Meza’s distributors

payment for firearms, Gunsmoke em-

file tax returns for those years. For 2011,

In June 2015, law enforcement agents

in Billings and Belgrade. Agents seized

ployees directed customers to another

Wyatt willfully filed a false tax return

began investigating a drug trafficking

pure methamphetamine from a storage

firearms store which had a valid federal

for 2011 stating he lost money, but he

organization responsible for transporting

facility in Billings. Delgadillo-Meza’s

as “miscellaneous” sales rather than

firearm sales.

Washington Man Sentenced for

Trafficking Methamphetamine into

Montana

the individual as one of Delgadillo-Meza’s

distributors. The investigation uncovered

that Delgadillo-Meza continued to travel

to Montana from September through

November 2015.

IRS: Criminal Investigation Annual Report 2018

DENVER FIELD OFFICE CASE FILES

Montana distributors were previously

Stubbs owned National Rebate Fund Inc.

https://www.justice.gov/opa/pr/

convicted and sentenced for narcotics

Despite earning more than $7 million

colorado-man-who-fled-costa-rica-after-

and money laundering offenses.

between 2005 and 2007, he did not file

trial-sentenced-more-7-years-prison-

corporate income tax returns. Stubbs

tax-crimes

https://www.justice.gov/usao-mt/

also earned more than $2 million in

pr/washington-man-sentenced-over-

income taxable to him personally during

12-years-prison-trafficking-over-

those same years and did not file indi-

60-pounds-methamphetamine

vidual tax returns. To conceal his income,

Stubbs paid more than $700,000 in

personal expenses from the business

and acquired more than $370,000 in gold

Colorado Man Who Fled to Costa Rica

After Trial Sentenced to More Than 7

Years in Prison for Tax Crimes

and silver in 2007.

Also during those three years, Stubbs

purchased real estate costing more than

On October 13, 2017, in Denver, Timothy

$2.9 million. In December 2015, two

Stubbs, of Grand Junction, Colorado,

weeks before his scheduled sentenc-

was sentenced to more than 7 years in

ing hearing, Stubbs fled to Costa Rica,

prison, 3 years of supervised release,

where he had been living in 2014 before

and ordered to pay $639,114 in restitu-

being arrested for the indictment.

tion to the IRS and a fine of $50,000.

Stubbs was convicted in September

Stubbs lied to immigration officials in

2015 for tax evasion and failing to file

Costa Rica in an attempt to renew his

personal and corporate income

residency in Costa Rica and stay there

tax returns.

permanently. In April 2017, Costa Rica

deported Stubbs.

IRS: Criminal Investigation Annual Report 2018

DETROIT FIELD OFFICE

985 MICHIGAN AVENUE, DETROIT MI, 48226 | IRS–CI.MICHIGAN@CI.IRS.GOV

ANN ARBOR, MI

CLINTON TOWNSHIP, MI

EAST LANSING, MI

FLINT, MI

GRAND RAPIDS, MI

PONTIAC, MI

TRAVERSE CITY, MI

MICHIGAN

THE DETROIT FIELD Office area of responsibility encompasses

the state of Michigan and its two judicial districts. With Michigan’s

diverse cultures and proximity to the Canadian international border,

Detroit CI special agents are involved in a variety of criminal

investigations including traditional tax, corporate fraud and money

laundering. To address the various priorities affecting the Michigan,

agents are embedded on a variety of task forces such as the Joint

Terrorism Task Force (JTTF), Public Corruption, Organized Crime

Drug Enforcement Task Force (OCDETF), Border Enforcement

Security Task Force, Southeast Michigan Trafficking and Exploitation Crimes Task Force, Cybercrimes Task Force, and the Healthcare Fraud Strike Force.

IRS: Criminal Investigation Annual Report 2018

DETROIT FIELD OFFICE CASE FILES

According to court documents, the

deposited into the bank accounts,

in prison for writing illegal prescriptions

defendants participated in a scheme

followed shortly thereafter by large cash

for pain killers and for laundering the

to defraud the federal government.

withdrawals, or cashed at local check-

proceeds of his crimes. As part of his

It centered on the filing of over 20

cashing stores. In addition, the scheme

sentence, Zigmond was ordered to

fraudulent Forms 1041, U.S. Income

used the names and identification

forfeit $2,221,000 in cash seized during

Tax Returns for Estates and Trusts. The

information of individuals whose purses

the investigation.

On February 6, 2018, Durand Micheau,

returns requested over $1.4 million in

or wallets had been lost or stolen.

of Ferndale, Michigan, was sentenced to

refunds based on false withholdings.

SIGNIFICANT CASES

Michigan Resident Sentenced for

Defrauding the IRS

9½ years in prison, 3 years of supervised

According to court records, Zigmond

https://www.justice.gov/usao-edmi/pr/

operated a clinic, which was a front for a

release, and ordered to pay restitution of

The returns resulted in the IRS mailing

ferndale-resident-sentenced-defrauding-

scheme to distribute medically unneces-

$360,500 to the U.S. Treasury.

14 income tax refund checks to the

irs

sary prescriptions for the most powerful

defendants that were payable to the

pain killers. Zigmond received $500

Micheau’s wife, Sharon Gandy-Micheau

trusts and totaled $940,000. To facilitate

from people seeking these prescriptions

was previously sentenced to 6 years

the scheme, the defendants obtained

between 2013 and 2015.

in prison. Two of Sharon’s brothers,

employer identification numbers (EINs)

Anthony Gandy and Christopher Gandy,

for trusts from the IRS, opened post

were also previously sentenced to 6

office boxes, and opened bank accounts

years 8 months in prison and 6 years in

in the names of trusts. The trusts did

On April 10, 2018, in Detroit, Boris

Eight other individuals, including two

prison respectively.

not exist. The refund checks were either

Zigmond was sentenced to 15 years

physicians, Jennifer Franklin and Carlos

Florida Man Sentenced to 15 Years in

Prison for Operating Oak Park Pill Mill

He also attempted to conceal more than

$375,000 in cash from law enforcement.

“The special agents and professional staff of the Detroit field office work day in and day out to protect the citizens of Michigan. Each team member is

a dedicated professional bringing a unique skillset to combating criminal tax fraud and other financial crimes. I am incredibly honored and humbled to

lead the men and women of the IRS-CI Detroit field office. Through our partnership with federal, state, local law enforcement and the private sector,

we direct field office resources and expertise to a variety of vital national priorities. Some of these special emphasis areas include counterterrorism and

related national security investigations as well as cyber crimes and illegal narcotics organizations. CI’s primary purpose in these types of investigations is

to identify, disrupt and dismantle national and transnational organized criminal organizations.” –Manny Muriel, Special Agent in Charge

IRS: Criminal Investigation Annual Report 2018

DETROIT FIELD OFFICE CASE FILES

Godoy, already received sentences for

According to court documents, Rogers

sentenced to 5½ years in prison and

https://www.justice.gov/usao-edmi/

prescribing the unnecessary medicine in

defrauded the U.S. Department of Edu-

ordered to pay $4 million in forfeiture.

pr/trash-titan-charles-b-chuck-rizzo-

exchange for $100 per patient.

cation by using stolen identity informa-

A ninth individual, Rodney Knight, awaits

sentenced-66-months-prison-bribery-

tion to apply online for student loans and

According to court documents, Rizzo,

Pell Grants in their names.

the former CEO of garbage hauler Rizzo

sentencing following his guilty plea for

and-fraud

Environmental Services (RES), con-

participating in the drug conspiracy and

He also enrolled online in local com-

spired to pay bribes to Clinton Township

for illegally possessing an AK-47 after

munity colleges, including Grand Rapids

Trustee Dean Reynolds and Macomb

having been convicted of a felony.

Community College and Kalamazoo

Township Trustee Clifford Freitas to

Valley Community College, using the

secure and maintain favorable municipal

https://www.justice.gov/usao-edmi/pr/

stolen identities. Rogers used the loans

garbage contracts for RES.

florida-man-sentenced-180-months-

and grants for his own purposes without

prison-operating-oak-park-pill-mill

attending the classes as required. He

Rizzo also embezzled over $900,000

President for Employee Relations at

also used the stolen identities to receive

from RES while he served as the CEO

Fiat Chrysler (FCA), was sentenced to

fraudulent income tax refunds.

of the company. Rizzo used a fake

5½ years in prison and ordered to pay

Grand Rapids Man Sentenced in

Student Loan and Tax Fraud Scam

Former Executive of Fiat Chrysler and

Wife of Former UAW Official Sentenced

to Prison for Criminal Tax Fraud

Alphons Iacobelli, the former Vice

legal settlement agreement, fraudulent

restitution of $835,523 for tax evasion

https://www.justice.gov/usao-wdmi/

consulting deals, cash kickbacks, shell

and conspiring to bribe senior United

pr/2018_0417_Rogers

companies, and other methods to

Auto Worker (UAW) officials.

defraud the other owners of RES. As

On April 17, 2018, in Grand Rapids,

Michigan, Brandon Kenon Rogers was

sentenced to 4 years in prison and

ordered to pay $128,746 in restitution for

Trash Titan Charles B. "Chuck" Rizzo

Sentenced to 5½ Years in Prison for

Bribery and Fraud

committing student loan, grant, and

tax fraud.

one part of the embezzlement scheme,

Iacobelli served as the lead negotiator

Rizzo received weekly envelopes

and administrator of collective bargain-

containing thousands of dollars in cash

ing agreements. Iacobelli made the

kickbacks from a company that submit-

illegal payments to obtain benefits,

ted fraudulently inflated invoices to

concessions, and advantages for FCA

On April 23, 2018, Charles B. “Chuck”

RES. Through this scheme alone, Rizzo

in the negotiation, implementation, and

Rizzo, of Bloomfield Hills, Michigan, was

stole over $500,000 in cash.

administration of the collective bargain-

IRS: Criminal Investigation Annual Report 2018

DETROIT FIELD OFFICE CASE FILES

ing agreements. The illegal payments

included paying off a home mortgage,

Man who is Victim of his Own Greed

Sentenced for Defrauding the IRS

first-class airline travel, designer

Subsequent search warrants executed

at Pricop’s home and pole barn revealed

additional stolen merchandise. Pricop’s

clothing, furniture, jewelry, custom-made

On June 28, 2018, in Detroit, Viorel

wife, Mihaela, was previously indicted

watches, “ultra-premium” liquors, cigars,

Pricop, of Milford, Michigan, was

and has since fled to Romania.

and wine.

sentenced to over 2 years in prison and

Previously, Monica Morgan was sen-

ordered to pay $501,956 in restitution to

In 2012, when Pricop claimed net

the IRS.

income of $57,308 on his federal

tenced to 1½ half years in prison and

income tax return, his wife deposited

ordered to pay $190,747 in restitution

According to court records, from 2010

$113,153 into a Ferrari dealership’s bank

for her tax fraud in connection with

through 2014, Pricop defrauded the IRS

account for the purchase of a Ferrari. In

the receipt of illegal payments by her

by generating substantial income that he

2013, when Pricop claimed net income

husband, the now deceased General

did not report on his tax returns. Through

of $51,187, he and his wife deposited

Holiefield, who had served as the Vice

his false or unfiled tax returns, Pricop

$200,000 cash into their personal bank

President of the UAW in command of the

caused a total tax loss of $501,956,

account and purchased a $197,000

Chrysler Department.

which he earned while owning and

cashier’s check to buy real property

operating Twin Twisters Trucking and

located near their home in Milford. In

Good Time, LLC, from his residence.

2014, Mihaela used cash to purchase a

https://www.justice.gov/usao-edmi/

pr/wife-former-uaw-vice-presidentsentenced-prison-criminal-tax-fraud

Mercedes-Benz.

The businesses engaged in the interstate

transportation of freight. In February

2015, Pricop knowingly transported

stolen Bose stereo equipment from New

Mexico to Michigan.

IRS: Criminal Investigation Annual Report 2018

HOUSTON FIELD OFFICE

8701 S. GESSNER, HOUSTON TX, 77074 | 281.721.8390

AUSTIN, TX

BROWNSVILLE, TX

CORPUS CHRISTI, TX

TEXAS

EL PASO, TX

LAREDO, TX

MCALLEN, TX

SAN ANTONIO, TX

WACO, TX

THE HOUSTON FIELD Office area of responsibility encompasses

employment tax, corporate fraud, identity theft, unscrupulous

the Southern and Western judicial Districts of Texas. Due to the

return preparers and general fraud. The Houston Field Office also

proximity to the Mexican international border and having some of

provides crucial support to their respective U.S. Attorney’s priority

the fastest-growing cities and counties in the United States within

task forces involving counterterrorism, public corruption, human

its jurisdiction, Houston special agents are able to work a variety

trafficking, drugs and complex money laundering violations.

of cases with emphasis in traditional tax-related crimes such as

IRS: Criminal Investigation Annual Report 2018

HOUSTON FIELD OFFICE CASE FILES

SIGNIFICANT CASES

Owner of Home Health Agency

Sentenced in Absentia to 80 Years in

Prison for Involvement in $13 Million

Medicare Fraud Conspiracy and Filing

Fraudulent Tax Returns

From February 2006 through June 2015,

Tilong also attempted to destroy

Tilong and others conspired to defraud

evidence, blackmail a witness, and

Medicare by submitting over $10 million

induce perjury from witnesses while in

in fraudulent claims for home health

the federal courthouse.

Woman Sent to Prison for Preparing

False Income Tax Return

On May 24, 2018, in Houston, Crystal

T. Kemp was sentenced to 2½ years in

services to Medicare through Fiango

Home Healthcare Inc., owned by Tilong

With his guilty plea, Tilong admitted

federal prison following her conviction

and his wife, Marie Neba.

that to maximize his gains from the

of willfully aiding and assisting in the

Medicare fraud scheme, he created a

preparation of a false return for a client.

Tilong paid kickbacks to patient recruit-

shell company called Quality Therapy

Kemp’s conduct spanned four years and

On December 8, 2017, in Houston,

ers for referring Medicare beneficiaries

Services (QTS) to limit the amount of

included preparing multiple false tax

Ebong Tilong, the owner of a Houston

to Fiango for home health services.

tax on the proceeds he and his co-

returns for the same clients.

home health agency, was sentenced to

Tilong also paid kickbacks to Medicare

conspirators stole from Medicare. On

80 years in prison for his role in a $13

beneficiaries for allowing Fiango to bill

August 11, 2018, Neba was sentenced

According to the plea agreement, Kemp

million Medicare fraud scheme and for

Medicare using their Medicare informa-

to 75 years in prison.

admitted she prepared 41 false income

filing false tax returns. Tilong pleaded

tion for home health services not medi-

guilty to conspiracy to commit healthcare

cally necessary or not provided. Tilong

https://www.justice.gov/opa/pr/

tax loss to the United States of $429,131.

fraud, healthcare fraud, conspiracy to

falsified medical records and directed

owner-home-health-agency-sentenced-

Kemp also prepared a false 2015 income

pay and receive healthcare kickbacks,

others to falsify them to make it appear

absentia-80-years-prison-involvement-

tax return for an undercover IRS agent

payment and receipt of healthcare kick-

that the Medicare beneficiaries qualified

13-million-medicare

posing as a taxpayer, claiming a false

backs, conspiracy to launder monetary

for and received home health services.

tax returns for clients with a combined

income tax refund of $5,546.

instruments, and filing fraudulent

tax returns.

Tilong failed to appear for his

original sentencing scheduled for

October 13, 2017.

Kemp further admitted

"Houston Field Office special agents were key participants in investigating a racketeering

and fraud scheme that involved the attempted capital murder of State District Court Judge

Julie Kocurek and the prosecution of former Texas State Senator, Carlos Uresti. On both

investigations, the defendants went to trial and were convicted by a jury."

in the plea agreement

that she claimed a false

income tax refund on her

2013 and 2014 personal

IRS: Criminal Investigation Annual Report 2018

HOUSTON FIELD OFFICE CASE FILES

income tax returns that resulted in a

more than $1.8 million from family

• One count of conspiracy to commit

Uresti also recruited investors under

combined tax loss to the United States

members’ by writing checks on their

wire fraud

false pretenses by lying about investing

of $96,608.

bank accounts to pay her personal bills.

• One count of conspiracy to commit

his own money in FourWinds and failing

money laundering,

to disclose his receipt of a commission

https://www.justice.gov/usao-sdtx/pr/

Berry also pleaded guilty to filing false

• Five substantive counts of wire fraud

and a percentage of the profits resulting

woman-sent-

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