# Message from the Chief & Deputy (2018) > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/agency%3Airs%3A75fb38936239c1bc ## Record - **Collection:** Agency decision - **Document type:** Agency decision ## Text IRS:CRIMINAL INVESTIGATION ANNUAL REPORT 2018 TABLE OF CONTENTS 3 Message from the Chief & Deputy 5 2018 Snapshot 8 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 2 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 3 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 4 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 5 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 6 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 7% 2018 PUBLIC 29% 6% STATE/LOCAL GOV'T OTHER FEDERAL AGENCIES 5% INVESTIGATION SOURCES 2,159 6.1% 2017 840 IRS:CI STAFFING IRS: Criminal Investigation Annual Report 2018 7 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 8 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 9 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 10 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 11 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 12 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 13 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 14 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 15 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 16 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 17 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 18 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 19 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 20 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 21 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 22 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 23 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 24 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 25 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 26 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 27 NATIONAL FORENSIC LABORATORY REQUESTS LATENT PRINTS ELECTRONICS TRIAL ILLUSTRATION POLYGRAPH QD/CHEMISTRY 38 CASES 9 CASES 138 CASES 4 CASES 42 CASES 47 9 150 18 81 IRS: Criminal Investigation Annual Report 2018 28 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 29 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 30 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 31 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 32 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 33 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 34 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 35 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 36 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 37 OUTREACH/COMMUNITY ENGAGEMENT IRS: Criminal Investigation Annual Report 2018 38 OUTREACH/COMMUNITY ENGAGEMENT IRS: Criminal Investigation Annual Report 2018 39 FIELD OFFICE MAP Click on a location to go to that Field Office section. SEATTLE DETROIT BOSTON CHICAGO NEW YORK PHILADELPHIA IL DENVER NEWARK CINCINNATI WASHINGTON, D.C. ST. LOUIS OAKLAND LAS VEGAS CHARLOTTE LOS ANGELES PHOENIX ATLANTA TX DALLAS AL GA FL HOUSTON PUERTO RICO U.S. VIRGIN ISLANDS TAMPA MIAMI MARIANA ISLANDS GUAM IRS: Criminal Investigation Annual Report 2018 40 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 41 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 42 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 43 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 44 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 45 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 46 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 47 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 48 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 49 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 Register of Deeds renouncing his United 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 50 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 51 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 52 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 53 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 54 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 55 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 56 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 57 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 58 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 59 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 60 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 me [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Airs%3A75fb38936239c1bc. Public record. Not legal advice.