Click to navigate to a specific section (2017)

Agency decision

Ask Donna

What actually matters in this document.

Text

2017 ANNUAL REPORT

TABLE OF CONTENTS

Click to navigate to a specific section

Message from the Chief

2017 Snapshot

Tax Crimes

Non–Tax Crimes

Cyber Crimes

International Operations

International Attaché Locations

Narcotics, Counterterrorism, &

Transnational Organized Crime (NCT)

Specialized Units

Nationally Coordinated

Investigations Unit

Undercover Operations

Asset Forfeiture

National Forensic Laboratory

Electronic Crimes

Professional Staff

National CI Training Academy

Communications & Education (C&E)

Equity, Diversity and Inclusion (EDI)

Community Outreach

Field Office Map

101

104

107

110

114

Seattle

Oakland

Los Angeles

Las Vegas

Phoenix

Denver

Dallas

San Antonio

Houston

St. Paul

St. Louis

New Orleans

Chicago

Nashville

Detroit

New York

Cincinnati

Newark

Philadelphia

Boston

Charlotte

Tampa

Atlanta

Miami

Washington D.C.

Appendix

Click this menu for navigation shortcuts

IRS: Criminal Investigation Annual Report 2017

MESSAGE FROM THE CHIEF

I am excited to share the FY 2017 IRS Criminal Investigation Annual Report. The

report gives us an opportunity to reflect on the many successes we have had as

an agency throughout the past year. As the premier financial investigators in the

world, and the only federal agency authorized to investigate federal income tax

crimes, we have strategically used our resources to bring the most impactful cases

to the Department of Justice for prosecution. In addition to fulfilling our criminal tax

enforcement mission, we also continue to play a critical role in the broader federal

law enforcement community.

IRS Criminal Investigation fills a unique niche in federal law enforcement due to our

broad jurisdiction on Title 18 and Title 31 crimes, in addition to our primary traditional

tax enforcement mission. As a result, we routinely get involved in large, complex

investigations that require our financial expertise. Simply put, when there is a sophisticated financial component to an investigation, the first phone call prosecutors make

is usually to IRS CI.

I am proud of our well-earned reputation as a law enforcement agency; however,

resource issues make it impossible to be involved in every investigation in which

we are asked to participate. We have the same number of special agents—around

2,200—as we did 50 years ago. Financial crime has not diminished during that time–

in fact, it has proliferated in the age of the internet, international financial crimes

and virtual currency. Despite these challenges, we continue to do amazing work,

investigating some of the most complicated cases in the agency’s history. Criminals

would be foolish to mistake declining resources for a lack of commitment in this

area. While the size of our organization directly affects the number of cases we open

each year, the quality and the complexity of those cases continues to remain at a

high level. Publicizing the results of those cases and making better use of the troves

DON FORT

CHIEF, IRS CRIMINAL INVESTIGATION

IRS: Criminal Investigation Annual Report 2017

CHIEF'S MESSAGE CONTINUED

of data that we have access to are ways we

tracing their proceeds around the world

attempt to make the best use of our limited

and helping to arrest the sites’ owners.

resources.

•

Our participation in a national healthcare

This annual report reflects the important

fraud takedown with our law enforce-

cases the Criminal Investigation Division has

ment partners at the FBI, DEA and

worked during FY 2017. The case sum-

ATF, which resulted in charges for 412

maries in this report touch every field office,

individuals and accounted for more than

every state and nearly every region of the

$1.3 billion in fraud losses.

world. Despite focusing most of our time on

traditional tax cases, we have also managed

These are just a few examples of cases in

to maintain a formidable presence in the

which CI participated in 2017; many more are

areas of tax-related identity theft, money

detailed within The field office pages of

laundering, public corruption, cybercrime

this report.

and terrorist financing. A few examples of

our successes in FY 2017 include:

Since taking over as the Chief of CI this

summer, I could not be prouder to lead the

•

The complex financial investigation and

men and women of this organization. As

undercover operations we conducted

financial crimes—and the way we investigate

that helped bring the “Codfather,” a

them—continue to evolve, CI continues to

commercial fisherman in Massachu-

set the standard for financial investigations

setts, to justice.

worldwide. I am very optimistic about the

future of our organization and the innovative

•

Our major role in taking down several

initiatives we have underway to help us

of the largest Dark web marketplaces

continue to stay one step ahead of

selling illegal goods and services,

the criminals. t

IRS: Criminal Investigation Annual Report 2017

IRS:CI 2017

SNAPSHOT

2,159

835

SUPPORT STAFF

SPECIAL AGENTS

3,019

INVESTIGATIONS

2,294

2,549

SENTENCED

INDICTMENTS

IRS: Criminal Investigation Annual Report 2017

IRS:CI 2017 SNAPSHOT

CLICK A SECTION TO LEARN MORE

INTERNATIONAL

CYBER CRIMES

GENERAL TAX FRAUD

PUBLIC CORRUPTION

ABUSIVE TAX SCHEMES

CORPORATE FRAUD

EMPLOYMENT TAX

IDENTITY THEFT

GENERAL FRAUD

72.5

TAX

REFUND FRAUD

14.7

NON-TAX

MONEY LAUNDERING

NARCOTICS

11.6

OCDETF

Organized Crime Drug

Enforcement Task Force

DIRECT INVESTIGATIVE TIME SPENT*

PERCENTAGES

*1.2% Uncategorized

IRS: Criminal Investigation Annual Report 2017

IRS:CI 2017 SNAPSHOT

OTHER

FINANCIAL CRIMES

$2.5B $1.1B 91.5% 1,642 2.19

TAX FRAUD IDENTIFIED

PROCEEDS IDENTIFIED

CONVICTION RATE

WARRANTS EXECUTED

DIGITAL DATA SEIZED

PETABYTES

IRS: Criminal Investigation Annual Report 2017

TAX CRIMES

CRIMINAL INVESTIGATION’S (CI) primary resource

These investigations focused on methods through

requirements, layering of transactions and international

commitment is to develop and investigate tax crimes,

which individuals seek to “launder” their ill-gotten

movement of funds. In these types of investigations,

both legal and illegal source. Prosecution of these

income by making it appear the income is from a

CI Special Agents work together with our federal, state

cases supports the overall IRS compliance goals and

legitimate source. Frequent money laundering tech-

and local law enforcement partners, as well as with

enhances voluntary compliance with the tax laws. CI

niques include the manipulation of currency reporting

foreign tax and law enforcement agencies.

works some of these investigations with our federal,

state and local law enforement partners; and also

coordinates with foreign tax and law

enforecement agencies.

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

currency violations. These investigations focus on

individuals deriving income from illegal sources, such

as money obtained through embezzlement, bribery,

and frauds. The individuals can be legitimate business

owners but obtain their income through illegal means.

IRS: Criminal Investigation Annual Report 2017

TAX CRIMES

also result in the loss of vital funds needed to support

GENERAL TAX FRAUD

ABUSIVE TAX SCHEMES

General tax fraud investigations are the backbone

CI focuses on the investigation of promoters and clients

the Questionable Refund Program (QRP) and the

of CI’s enforcement program and have a direct influ-

who willfully participate in domestic and/or offshore tax

Abusive Return Preparer Program (RPP).

ence on the taxpaying public’s compliance with the

schemes to violate the tax laws. Participants in these

Internal Revenue Code. Compliance with the tax laws

abusive schemes create structures such as trusts,

The QRP identifies fraudulent claims for tax refunds.

in the United States depends heavily on taxpayer

foreign corporations and partnerships to make it appear

Generally, these schemes involve individuals filing

self-assessment of the amount of tax, voluntary filing

a trustee, nominee, non-resident alien or other foreign

multiple false tax returns supported by false informa-

of tax returns and remittance of any tax owed; this is

entity is the owner of the assets and income, when in

tion or using the identifiers of other individuals know-

frequently termed “voluntary compliance.” Criminal

fact the true ownership and control remains with a

ingly or unknowingly.

Investigation special agents use their financial investi-

U.S. taxpayer.

government programs. The Refund Fraud Program

consists of three parts---Identity Theft Investigations,

gative expertise to uncover and quantify many different

RPP investigations involve the orchestrated preparation

schemes, including deliberately under-reporting or

and filing of false income tax returns by corrupt return

omitting income (“skimming”), keeping two sets of

REFUND FRAUD PROGRAM

books or making false entries in books and records,

preparers who often claim inflated personal or business

expenses, false deductions, excessive exemptions,

claiming personal expenses as business expenses,

Criminals who attempt to steal government funds by

and/or unallowable tax credits. The preparers’ clients

claiming false deductions or credits against taxes, or

filing fraudulent tax returns affect taxpayer confidence

may or may not have knowledge of the falsity of

hiding or transferring assets to avoid payment.

in the system and voluntary compliance. These crimes

the returns.

IRS: Criminal Investigation Annual Report 2017

TAX CRIMES

1811

INVESTIGATIONS INITIATED

1196

INDICTMENTS

1303

SENTENCED

EMPLOYMENT TAX FRAUD

IDENTITY THEFT

DATA COMPROMISES

Employment tax fraud consists of several forms. Some

Identity theft-related tax refund fraud occurs when

CI continues to investigate data compromises as tax-

of the more prevalent methods include employee

someone uses the personal information of another

related identity theft. Also referred to as data breaches,

leasing, paying employees in cash, filing false payroll

individual--for example, using the name, Social Security

these are linked to compromises targeting detailed

tax returns and failing to file payroll tax returns or

number or other identifying information (personally

financial records that tax professionals and payroll

“pyramiding.” Pyramiding is when a business with-

identifiable information -PII), without permission, to

administrators maintain. There has been a substantial

holds taxes from its employees, but intentionally fails to

commit fraud or other crimes. The scam usually occurs

increase in phishing attempts to acquire payroll records

remit payment to the IRS. After a liability accrues, the

when an identity thief uses a legitimate taxpayer’s

or PII for use in filing false returns or for selling on the

individual starts a new business and begins to accrue

identity to file a fraudulent tax return and claim a

Dark web. t

a new liability. Some employers withhold taxes from

refund. Generally, the identity thief will use a stolen

their employees’ paychecks, but intentionally fail to

SSN to file a fraudulent tax return and attempt to get a

remit those taxes to the IRS and use the funds for their

refund early in the filing season. By filing the fraudulent

own personal use. Employment taxes include federal

tax return before the legitimate taxpayer, the identity

income tax withholding, Social Security taxes and

thief usually receives the refund before the victim

federal unemployment taxes.

sends his or her tax return, and the IRS processes it.

IRS: Criminal Investigation Annual Report 2017

NON–TAX CRIMES

THE IRS CI Illegal Source Financial Crimes Program

encompasses tax and tax-related crimes, money

MONEY LAUNDERING

laundering and currency violations. These investiga-

banks and money transmitters to stock brokerage

houses, casinos and Bitcoin exchanges. The flow

of illegal funds around the world is estimated to be

tions focus on individuals deriving income from illegal

Money laundering, as defined in the National Money

sources, such as embezzlement, bribery, and frauds.

Laundering Strategy, is criminal finance. When crimi-

These investigations also focus on methods individuals

nals or criminal organizations seek to disguise the illicit

The movement of money through the financial system

use to “launder” their ill-gotten gains by making them

nature of their money by introducing it into the stream

leaves a trail. If a trail can be uncovered, it identifies

appear as if they are from a legitimate source. Frequent

of legitimate commerce and finance, they are launder-

those who willingly facilitate and finance crime whether

money laundering techniques include the manipulation

ing money. The common image of money laundering

due to willful blindness, negligence or otherwise. The

of currency reporting requirements, layering of transac-

involves the washing of drug money off the streets

trail can also lead back to the criminals whose crimes

tions, Black Market Peso and international movement

of our cities through transactions that turn it into bank

generated the money. IRS CI Special Agents are

of funds. The law enforcement community recognizes

deposits and other assets. Today, money laundering

experts in following the money trail and participate in

CI’s special agents as the premier experts in money

involves the large-scale movement of criminal funds

a wide variety of investigations, financial task forces,

laundering investigations.

into or through U.S. or foreign financial institutions at

narcotics task forces including OCDETF and High

the touch of a computer button. Criminals can launder

Intensity Drug Trafficking Area (HIDTA).

hundreds of billions of dollars.

money through a wide variety of enterprises, from

IRS: Criminal Investigation Annual Report 2017

NON-TAX CRIMES

1208

INVESTIGATIONS INITIATED

1098

INDICTMENTS

1246

SENTENCED

PUBLIC CORRUPTION

CORPORATE FRAUD

GENERAL FRAUDS

Criminal Investigation investigates both elected and ap-

The Corporate Fraud program concentrates on viola-

IRS CI special agents investigate a variety of other

pointed individuals who violate the public’s trust. These

tions committed by publicly traded or private corpora-

frauds including bankruptcy fraud, healthcare and

individuals are from all levels of government including

tions, and/or their senior executives. Some specific

financial institution fraud. Criminal Investigation’s ability

local, county, state, federal and foreign officials. Public

criminal acts within a corporate fraud include falsifying

to bring income tax and money laundering charges

corruption investigations encompass a wide variety

and fabricating or destroying company records to falsify

enhances prosecutors’ effectiveness in combating

of criminal offenses including bribery, extortion,

tax returns, financial statements or reports to regula-

these and other types of frauds. In these types of

embezzlement, illegal kickbacks, tax fraud and money

tory agencies or investors. It also includes executives

investigations, CI special agents work together with

laundering. Corruption by public officials results in the

who entitle themselves to unauthorized compensation,

federal, state, and local law enforcement partners, as

loss or waste of many taxpayer dollars.

using unapproved payments, bonuses, corporate funds

well as with foreign tax and law enforcement agencies

or bogus loans to pay for personal expenses.

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

In addition, the United States is often a desirable

destination for the proceeds of corrupt foreign officials.

This undermines democratic institutions and threatens

national security.

IRS: Criminal Investigation Annual Report 2017

CYBER CRIMES

IN 2015, CI initiated a Cyber Crimes Program by estab-

Below are the types of investigations within

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

lishing a Cyber Crime Unit (CCU) with locations in Los

CI’s purview:

bility, special agents working cybercrimes investigations

Angeles and Washington D.C. The CCU consists of two

operational groups of special agents, professional staff,

• Selling/buying and compromise of PII (personally

deploy the same “follow the money” methodology

identifiable information) data through the internet

that made CI’s involvement in complex investigations

computer engineers and supervisory special agents

• Data intrusion/exfiltration

a mainstay since the creation of the agency. Examples

(SSA). The respective SSAs report through the Special

• Dark web marketplace owners/administrators/

of CI’s involvement in this area include investigations

Agents in Charge in Los Angeles and Washington D.C.

large vendors

stemming from an incident involving the IRS “Get

Field Offices. The CCU engages in investigations that

• Business email compromise & Phishing schemes

Transcripts” web application and various significant Dark

involve the Internet and Internet based technologies/

• Bank account takeovers

web marketplace investigations. For example, CI and its

methodologies that enable criminals to engage in illegal

• Terrorist financing including use of virtual currency,

law enforcement partners were successful in investigat-

activity with anonymity and without a defined physical

mesh networking and other online means to raise

ing and arresting the individuals behind Silk Road and

presence. Their investigative efforts are focused on

funds, launder and funnel funds for

Mt. Gox, two infamous Dark web marketplaces. As of

multi-jurisdictional investigations posing the most

terrorist organizations.

recent, CI proved instrumental in the investigation and

significant threats to the United States tax, financial

and economic systems.

• Virtual currency based tax & money

laundering schemes

In 2016, CI began moving towards establishing a

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

nationwide footprint by creating an office of Cyber

nancial crimes, while expanding their presence into the

Crimes within their Headquarters structure and adding

cyber environment. The CI definition of cybercrime is

Cyber Crimes Coordinator positions within each of their

a criminal investigation in which CI has investigative

25 field offices. Field office special agents and profes-

authority and the subject is believed to be commit-

sional staff working cybercrimes investigations are

ting a tax or other financial crime while using the

focused primarily on cyber-enabled investigations that

Internet as an essential means to commit the

involve theft and fraud and are increased in size and

crime, remain anonymous, elude law enforce-

scale by the use of computers, computer networks or

ment and/or to conceal financial transactions,

other forms of technology.

ownership of assets, or other evidence.

take down of AlphaBay and Btc-e, two additional Dark

web facilitators. t

IRS: Criminal Investigation Annual Report 2017

INTERNATIONAL OPERATIONS

THE GLOBAL FIGHT against tax and economic

Mexico, Colombia, Panama, Barbados, The Nether-

the International Law Enforcement Academies (ILEA) in

crimes transcends borders and requires innovative

lands – Europol, England, Germany, China and Austra-

Budapest, Hungary; Bangkok, Thailand; San Salvador,

approaches. CI’s Office of International Operations (IO)

lia). Attachés continuously build and maintain strong

El Salvador; and Gaborone, Botswana. CI IO also

works collaboratively in support of agency goals, objec-

alliances with foreign governmental, law enforcement

conducts training at the International Academy for Tax

tives, and activities. IO enhances IRS’s international

and industry partners. These strong strategic alliances

Crime Investigation at Guardia di Finanza Economic and

strategy by combating offshore tax, money laundering,

provide CI with the ability to develop international

Financial Police School in Ostia, Italy, sponsored by the

transnational organized crime, terrorism financing and

investigative leads and support domestic investigations

Organization for Economic Cooperation and Develop-

other financial crimes. IO approaches this global effort

that have an international nexus. IRS CI special agent

ment (OECD) as well as State Department

by uniting with our domestic partners as well as our

attachés are vigilant in uncovering emerging schemes

sponsored training.

escorts, dignitary protection, undercover activities

with the International Law Enforcement Academies.

and seizures. t

These academies are in Budapest, Hungary; Bangkok,

IRS CI special agents attend quarterly firearms, defen-

Thailand; San Salvador, El Salvador; and Gaborone,

sive tactics and semi-annual building entry training.

Botswana and at the International Academy for Tax

Through frequent use of force training, they maintain

Crime Investigation at Guardia di Finanza Economic and

their skills and abilities so they always use good judge-

IRS: Criminal Investigation Annual Report 2017

COMMUNICATIONS & EDUCATION (C&E)

CRIMINAL INVESTIGATION (CI) serves the American

outreach efforts for cases their field offices work.

public by investigating potential criminal violations of

Headquarters communicators manage websites, write

the Internal Revenue Code and related financial crimes

speeches and talking points and support the field in

in a way that encourages compliance with the law and

their outreach activities. All CI communicators work

confidence in the tax system. One of the most effec-

to balance media outreach with training and educa-

tive ways to encourage compliance is publicizing CI

tion opportunities to ensure they can react swiftly to

activities that enforce the laws within its jurisdiction.

unplanned communication needs.

The Communications and Education Office (C&E)

CI communicators face unique challenges when

directly supports CI’s mission by raising the level of

engaging external audiences due to the sensitive

awareness of all stakeholders—internally and exter-

nature of CI’s work with grand juries, taxpayer informa-

nally—about the important work that CI does to protect

tion, law enforcement material and relationships with

the financial interests of the United States.

U.S. Attorneys’ Offices around the country. C&E works

through these challenges to support CI’s mission. Their

Public information officers (PIOs) in each field office

work directly contributes to the deterrent effect on

and communication specialists at headquarters support

financial crimes and promotes voluntary compliance

CI’s communication functions. PIOs are case-working

and confidence in our tax system. t

special agents who are also trained to carry out media

IRS: Criminal Investigation Annual Report 2017

EQUITY, DIVERSITY AND INCLUSION (EDI)

THE MISSION OF the Criminal Investigation (CI)

ates the organization's compliance with the directive

ing trends in EEO complaints, disciplinary actions,

Equity, Diversity, and Inclusion Office (EDI) office is

and other policies the Equal Employment Opportunity

promotions, awards, separations, retention, employee

to identify, examine and address the organization’s

Commission (EEOC) establishes. The directive’s

development and training, recruitment and hiring initia-

employment practices and policies to ensure that all

purpose is to identify program weaknesses or deficien-

tives and practices. t

employees and applicants for employment receive

cies and uncover evidence of hidden barriers that

equal opportunity in every facet of CI’s programs,

would cause discrimination or hinder equal opportuni-

activities and services. EDI’s goal is to provide ex-

ties for all employees, at every grade level, and in every

ceptional customer service, advice and education to

occupational series to reach their full potential. It also

management, employees and stakeholders to ensure

provides the framework for identifying EEO plans that

compliance with federal EEO laws and regulations that

are tailored to remove barriers and detect problems.

prohibit discrimination based on age, color, disability,

equal pay, national origin, pregnancy, race, religion,

The EDI staff develops action plans to comply with

retaliation, sex (gender) and sexual harassment.

the six essential elements of a model EEO program as

defined by MD 715:

EDI is responsible for identifying, examining and

addressing the organization's employment policies and

• Demonstrated commitment from agency leadership

practices to create an effective EEO program. EDI staff

• Integration of EEO into the agency’s strategic mission

work to ensure that employment practices and deci-

• Management and program accountability

sions are made with the highest integrity and fairness

• Proactive prevention of unlawful discrimination

to every employee. EDI also advises CI’s senior leader-

• Efficiency in dispute resolution and complaint

ship on strategies for capitalizing on the strengths of its

employees and embracing their differences and unique

processing

• Responsiveness and legal compliance

viewpoints to create a fully engaged workforce.

Additionally, the EDI staff prepares CI’s Management

Other responsibilities include monitoring the organiza-

Directive 715 (MD 715) report, and monitors and evalu-

tion's effort to enhance diversity initiatives and analyz-

IRS: Criminal Investigation Annual Report 2017

COMMUNITY OUTREACH

WHEN IT COMES to the social needs of the communi-

people. Many CI employees spent countless hours

officer read and distributed books to 3-and-4-year

ties where we live and work, CI special agents and

providing relief to the victims of Hurricane Harvey.

old students at an elementary school in a high-crime

professional staff stand ready to lend a helping hand.

community. This activity is part of the U.S. Attorney’s

They roll up their sleeves to paint, build, repair, clean,

In Puerto Rico, 10 special agents were chosen from

Office Violence Reduction Partnership (VRP) Reading

plant, teach and more. They give generously of their

more than 200 volunteers to fly to Puerto Rico to help

Program. The VRP was established in 2011 to address

time, talents and funds, helping to meet needs next

victims of Hurricane Maria. They searched for missing

violent crime, gang activity and firearms offenses

door and across the nation. Notable examples of our FY

IRS employees and provided basic assistance with

plaguing high crime areas in Miami. The objective of

2017 community engagement include:

food, water, clothing and first aid supplies. The special

the reading program is to increase children’s appetite

agents also visited hard-to-reach communities to help

for reading before entering kindergarten, thus reducing

Hurricane Harvey devastated the state of Texas over

feed hundreds of people and allow them to use a CI

early academic failure. Children who read at grade level

a four-day period causing catastrophic flooding in the

satellite phone to contact loved ones.

by the fourth grade are four times more likely to stay in

southern and eastern parts. Rainfall topped 50 inches

school. The VRP Reading Program has expanded to 20

in some areas. The resulting floods damaged hundreds

On a monthly basis, members of the Miami field

schools throughout the Southern District of Florida, and

of thousands of homes and displaced thousands of

office management team and the public information

area students have received over 11,000 books. t

IRS: Criminal Investigation Annual Report 2017

COMMUNITY OUTREACH

IRS: Criminal Investigation Annual Report 2017

FIELD OFFICE LOCATIONS

CLICK A FIELD OFFICE TO LEARN MORE

SEATTLE

ST. PAUL

DETROIT

BOSTON

CHICAGO

NEW YORK

NEWARK

PHILADELPHIA

CINCINNATI

DENVER

ST. LOUIS

OAKLAND

WASHINGTON, D.C.

LAS

VEGAS

CHARLOTTE

NASHVILLE

LOS ANGELES

PHOENIX

ATLANTA

DALLAS

SAN ANTONIO

HOUSTON

PUERTO RICO

NEW ORLEANS

U.S. VIRGIN ISLANDS

TAMPA

MIAMI

MARIANA

ISLANDS

GUAM

IRS: Criminal Investigation Annual Report 2017

SEATTLE FIELD OFFICE

915 SECOND AVE, SEATTLE WA, 98174

WASHINGTON

THE SEATTLE FIELD Office covers the states of

• Bend, OR

• Honolulu, HI

Alaska, Hawaii, Oregon, and Washington, the U.S Terri-

• Saipan, MP

• Vancouver, WA

tory of Guam and the Commonwealth of the Northern

Marianas Islands. Planning and collaboration take on

Significant cases worked by Seattle CI Special

added importance when faced with the geographic

Agents include:

challenges of seven judicial districts and four time

zones. Specific regions within the field office provide

opportunities for a diverse case load. Our investigations

Hawaii Couple Sentenced for Tax Violations

Resulting in Non-Payment of Over $4 Million in Taxes

include domestic and international tax crimes, public

OREGON

corruption, identity theft fraud, cyber‐crime and drug

On November 18, 2016, in Honolulu, Hawaii, Calvin

related financial crimes. The Seattle Field Office (with

Kim, and Chun Cha Kim, were sentenced to 36 and

our respective U.S. Attorney’s Offices) plays a pivotal

12 months in prison, respectively, for violations of

role in combating financial crime in the Western states.

federal tax laws. Calvin Kim and Chun Cha Kim were

also ordered to pay restitution of $1,969,463 and

The Seattle Field Office has additional locations in the

$1,937,267, respectively, which represent all back

following areas:

taxes and penalties. Criminal fines of $250,000 and

$100,000 were also imposed on Calvin Kim and Chun

ALASKA

HAWAII

• Agana, GU

• Eugene, OR

Cha Kim, respectively. In addition, both defendants

• Medford, OR

• Spokane, WA

agreed to the imposition of a fraud assessment by the

• Anchorage, AK

• Everett, WA

IRS, which may amount to an additional civil penalty

• Portland, OR

• Tacoma, WA

of $3 million. According to court documents, Mr. and

"I began my career as a trial attorney in the Tax Division at the Department of Justice, and have been an Assistant

United States Attorney for many years. It has been a great privilege to work with so many outstanding IRS CI Special

Agents. Their skill in conducting financial investigations is unmatched, and their dedication to justice is unwavering.

IRS CI Special Agents are very valuable assets to every fraud prosecution team." — CLAIRE M. FAY, ASSISTANT UNITED

STATES ATTORNEY, DISTRICT OF OREGON

MARIANA

ISLANDS

GUAM

IRS: Criminal Investigation Annual Report 2017

SEATTLE FIELD OFFICE CASE FILES

Mrs. Kim operated two companies that sold

heating pads and other products. In October

Washington Man Sentenced for Conspiracy

to Commit Money Laundering

2000, they became followers of so-called

or re-processed multiple times. In total, over

sion of a firearm in furtherance of the drug

$39,000,000 of proceeds of the scheme

conspiracy. According to court documents,

was laundered through accounts owned or

Holloway previously pleaded guilty to

controlled by Estes.

conspiring with others to distribute drugs

"tax protestors" and decided not to file a valid

On January 31, 2017 in Spokane, Washing-

tax return until May 2014. The court docu-

ton, Richard Estes was sentenced to 105

ments reflect that from 2005 to 2012 alone,

months in prison, three years of supervised

Press Release – https://www.justice.gov/

guilty plea, Holloway admitted that he sold

the tax returns of the Kims’ businesses, of

released and ordered to pay restitution of

usao-edwa/pr/renton-washington-man-sen-

drugs on multiple occasions with other co-

which they were then the sole shareholders,

$4,360,724 to the taxpayers of the United

tenced-105-months-prison-conspiracy-com-

conspirators, and that he traveled with other

showed payments ranging from $418,238 to

States. Estes previously pleaded guilty to

mit-money-laundering

members of the conspiracy who carried drug

$971,983 for Calvin Kim for each year, and

conspiracy to commit money laundering.

proceeds and firearms to protect themselves

$271,564 to $1,000,562 for Chun Cha Kim,

According to court documents, Estes was

and those proceeds. Holloway and several

resulting in taxes owed for each of those

a member of a conspiracy involving Gen-X

years ranging from $133,009 to $325,375 for

Energy Group, Inc. (Gen-X), a renewable

him and $83,828 to $335,378 for her.

energy company formerly located in Pasco

and Moses Lake, Washington. Between

and to launder the proceeds. As part of his

other conspirators maintained a “stash

Twelfth Alleged Fairview Gang Members

Sentenced for Drugs, Weapons and Money

Laundering Offenses

house” in the Government Hill neighborhood,

where law enforcement officers found large

amounts of drugs and money. Several defen-

Press Release – https://www.justice.gov/

March 2013 and May 2014, Estes and his

usao-hi/pr/hawaii-couple-sentenced-tax-

co-conspirators laundered the proceeds of

On December 29, 2016, in Anchorage,

users could call to reach available members

violations-resulting-non-payment-over-

schemes to falsely claim the production of

Alaska, Isaiah Holloway was sentenced

to arrange for drug sales. During the time of

4-million-taxes

marketable renewable energy credits and file

to 144 months in prison, followed by five

this conspiracy, the members were involved

false claims for refunds of excise credits with

years of supervised release for his role in a

in numerous crimes in Anchorage involving

the IRS. Throughout this period, much of the

conspiracy to distribute heroin, cocaine, and

the use or possession of firearms, for which

renewable fuel claimed to be produced at

crack in Anchorage, to launder thousands

several face sentencings or have recently

the Gen-X facilities was either not produced

of dollars in drug proceeds, and for posses-

been sentenced in state court.

dants also shared a “dope phone” that drug

IRS: Criminal Investigation Annual Report 2017

SEATTLE FIELD OFFICE CASE FILES

Press Release – https://www.justice.gov/

California. This heroin was received and

Press Release – https://www.justice.

possession of 118 grams of heroin, 59 grams

usao-ak/pr/12-alleged-fairview-gang-mem-

distributed in Alaska by Hakim Giddins and

gov/usao-ak/pr/alaska-man-sentenced-

of powder cocaine and 35 grams of crack

bers-sentenced-drugs-weapons-and-money-

his co-conspirators. Johnson himself pos-

90-months-role-drug-conspiracy-and-money-

cocaine. White’s residence was searched,

laundering-offenses

sessed heroin for distribution. He and others

laundering

and law enforcement officers found 786

Alaska Man Sentenced for Role in Drug

Conspiracy and Money Laundering

also entered into an agreement to launder

grams of methamphetamine, 1318 grams of

the proceeds obtained from the distribu-

heroin, 176 grams of cocaine and 837 grams

tion of drugs brought into Alaska by the

of marijuana. In addition, the officers found

conspiracy. The cash proceeds from the sale

of these drugs were laundered by making

deposits into bank accounts located in Alaska

Anchorage Man Sentenced for Drug

Trafficking, Money Laundering and

Firearms Offenses

11 firearms, including rifles, semi-automatic

pistols and shotguns. White is a felon and

prohibited from possession of firearms

On July 24, 2017, in Anchorage, Alaska,

in other people’s names. This money was

Brandon Johnson was sentenced to 90

then withdrawn in California. Cash was also

On July 25, 2017, in Anchorage, Alaska,

felonies. At White’s sentencing hearing, a

months in prison, followed by three years

shipped in bulk from Alaska to California.

Bernard Yamura White was sentenced to 216

former neighbor of White’s asked to speak

of supervised release, for his role in a drug

Hakim Giddins directed Johnson and others

months in prison, for drug trafficking, money

with the court, and expressed concern for

trafficking conspiracy that brought controlled

to make bank deposits on his behalf with

laundering, firearms offenses and violating

the community that White had been con-

substances, including heroin and metham-

money that he knew had come from drug

his prior terms of supervised release. Accord-

victed of three drug trafficking offenses and

phetamine, into Alaska. According to court

trafficking. Hakim Giddins believed that by

ing to court documents, on August 22, 2016,

after significant time in prison continued to

documents, Johnson was indicted with

having the deposits made that way, it would

and January 12, 2017, White attempted to

engage in the same dangerous conduct.

multiple co-conspirators including Hakim

conceal his connection to the money as well

ship two parcels containing $59,610 and

Giddins, Shakin Giddins, Markin Giddins,

as to the true source of the money. Multiple

$30,980 in drug proceeds from Anchorage to

Press Release – https://www.justice.gov/

Tara McNutt, Kourtney Davis, and Briana

co-conspirators were indicted and sentenced

California. On February 8, 2017, White was

usao-ak/pr/anchorage-man-sentenced-

Herndon. From 2014 to 2016, McNutt, Davis,

for the criminal conduct related to this

contacted at a traffic stop by law enforce-

combined-18-years-drug-trafficking-money-

and Herndon opened various mailboxes with

drug conspiracy.

ment officers in Anchorage and was found in

laundering-and-firearms

due to his two prior federal drug trafficking

Alaska addresses to receive heroin from

IRS: Criminal Investigation Annual Report 2017

OAKLAND FIELD OFFICE

1301 CLAY ST, OAKLAND CA, 94612 | 510.907.5249

THE OAKLAND FIELD Office is responsible for

Significant cases worked by Oakland CI Special

covering the Northern and Eastern Judicial Districts

Agents include:

of California, which is more than half of the state of

California. The judicial districts run from the Sierra’s to

the west coastline and from Bakersfield to the Oregon

California Man Sentenced for Filing False

Tax Returns

border. The field office’s top law enforcement priori-

CALIFORNIA

ties are designed to promote tax compliance, address

On August 25, 2017, in Sacramento, California, Omar

emerging areas of fraud (for example, cybercrimes),

Kabiljagic was sentenced to 51 months in prison for

and meet the needs of the law enforcement commu-

filing fraudulent tax returns. According to court docu-

nity by supporting national crime initiatives. Criminal

ments, Kabiljagic submitted a series of fraudulent tax

Investigation assists in the prosecution of significant

returns to the IRS falsely reporting that in 2008 and

financial investigations to generate the maximum

2009, he earned interest from “original issue discount”

deterrent effect, enhance voluntary compliance, and

(OID) bonds. He falsely reported that various financial

promote public confidence in the tax system.

institutions withheld this interest income and claimed

that this entitled him to hundreds of thousands of

The Oakland Field Office has additional locations in the

dollars in tax refunds. The IRS repeatedly warned

following areas:

Kabiljagic that his filings were frivolous and that he

risked criminal charges if he persisted. Nevertheless,

• Fresno, CA

• San Jose, CA

on June 25, 2009, Kabiljagic filed two more tax returns

• Modesto, CA

• San Rafael, CA

that falsely claimed refunds totaling $863,520. On April

• Redding, CA

• Santa Rosa, CA

4, 2017, a jury found Kabiljagic guilty of two counts of

• Sacramento, CA

• Walnut Creek, CA

filing fraudulent tax returns.

• San Francisco, CA

"The U.S. Attorney's Office of the Eastern District of California has a long history of partnering with IRS Criminal

Investigations to investigate and prosecute a variety of tax and white collar offenses. CI agents consistently bring their

special expertise to complex financial cases and have repeatedly proven themselves to be invaluable partners in our

mission of protecting the public and pursuing justice." — PHILLIP A. TALBERT, U.S. ATTORNEY, EASTERN DISTRICT OF CALIFORNIA

IRS: Criminal Investigation Annual Report 2017

OAKLAND FIELD OFFICE CASE FILES

Press Release – https://www.justice.gov/

could legally receive large refunds by filing

usao-edca/pr/sacramento-man-sentenced-

tax returns using IRS Forms 1099-OID.

over-four-years-prison-filing-false-tax-returns

AFS prepared false Forms 1099-OID that

Former Bakersfield Police Department

Detective Sentenced for Bribery, Drug

Trafficking, and Filing False Tax Returns

reported the clients’ debts as income and

enforcement activities as well as protection

from investigation and arrest. Diaz also filed

a joint income tax return for the calendar

year 2012 that falsely reported total income

the same amount as income tax withheld.

On October 3, 2017, in Fresno, California,

of $168,485 and did not include additional

This resulted in significant claims for refunds

Damacio Diaz, formerly a detective with

income of at least $97,900.

the clients were not entitled to receive. The

the Bakersfield Police Department was

scheme included clients from 26 states

sentenced 60 months in prison for bribery,

Press Release – https://www.justice.gov/

and caused the IRS to pay out over 40 tax

possession and attempted possession with

usao-edca/pr/former-bakersfield-police-

On April 26, 2017, in Sacramento, California,

refunds, totaling more than $9 million. Clients

the intent to distribute methamphetamine,

department-detective-sentenced-5-years-

Teresa Marty was sentenced to 120 months

of AFS have been prosecuted in Arizona,

and making and subscribing a false income

prison-bribery-drug

in prison, two years of supervised release

Colorado, Florida, Georgia, Missouri, Oregon

tax return. According to court documents,

and ordered to pay restitution in the amount

and Washington for filing false claims that

between April 2012 and February 2015,

of $9,500,492 to the IRS. According to

Marty and AFS prepared.

while employed as a police officer with the

Tax Preparation Business Owner

Sentenced for Filing False Tax Returns

court documents, Marty was the owner of

Bakersfield Police Department, Diaz handled

California Bay Area Doctor Sentenced for

Tax Evasion

Advanced Financial Services (AFS), a tax

Press Release – https://www.justice.gov/

a criminal informant who was involved in the

return preparation business. Marty conspired

usao-edca/pr/tax-preparation-business-

large-scale sale and distribution of metham-

with her office managers, Pamela Harris and

owner-sentenced-10-years-prison

phetamine. Diaz continued to operate the

On April 11, 2017, in San Francisco, Califor-

Rebecca Bandera-Marty to file fraudulent

informant even though he was fully aware

nia, Dr. John Compagno was sentenced to

federal tax returns claiming more than $60

of the informant’s ongoing criminal activity.

37 months in prison, three years of super-

million in refunds. Marty and Harris recruited

During this time, Diaz received bribes from

vised release, a $75,000 fine, and ordered

clients by falsely representing that the clients

the informant in return for intelligence on law

to pay $5,426,239 in restitution. Compagno

IRS: Criminal Investigation Annual Report 2017

OAKLAND FIELD OFFICE CASE FILES

pleaded guilty on December 14, 2016, to

Press Release – https://www.justice.gov/

2013, through April 27, 2015, the defendants

income tax evasion. According to his plea

usao-ndca/pr/bay-area-doctor-sentenced-

conspired to commit the offenses against

agreement, Compagno is a medical physi-

more-three-years-prison-tax-evasion

the United States which included theft of

California Resident Sentenced for Role in

$37 Million Cisco Fraud and Related Crimes

cian specializing in pathology. He is also the

government money. The scheme involved

On August 31, 2017, in San Jose, California,

owner and operator of three corporations.

using the names of deceased individuals,

Cuong Cao “Calvin” Dang was sentenced to

In his plea agreement, Compagno admitted

filing false tax returns in the names of those

90 months in prison, followed by three years

individuals, obtaining false identifications,

of supervised release for his role in a scheme

and illegally cashing U.S. Treasury checks.

to sell products stolen from Cisco Systems

Robinson, with the help of others, got names

by its employees. According to court docu-

of deceased individuals for use in filing false

ments, Dang owned and operated Network

he submitted both corporate and individual

tax returns that understated his liability to

the IRS. For the tax years 2005 through

California Resident Sentenced for Filing

Fraudulent Tax Returns and Appropriating

Fraudulent and Stolen Treasury Checks

2011, Compagno caused a corporate tax

return preparer to overstate the amount of

On February 8, 2017, in Oakland, California,

tax returns. The returns falsely represented

Genesis, based in San Jose, from approxi-

expenses on his corporate tax return by

Hugh Robinson was sentenced to 144

that the individuals earned wages or other

mately January 2006 until January 23, 2013.

including $10,679,080 in non-deductible

months in prison for his role in a conspiracy

income and that the individuals listed on

Dang admitted to having a small network of

expenses. As a result, the amount of income

to commit theft of government property.

the tax returns were entitled to tax refunds.

Cisco employees who delivered stolen Cisco

taxes due was understated. This resulted in

Robinson was charged along with ten

A search of the location where Robinson

merchandise to Network Genesis for resale

additional tax due of $3,859,060. Compagno

co-defendants on November 5, 2015, with

resided yielded $237,394 worth of uncashed

to customers both in and outside California.

also omitted $10,505,091 in constructive

conspiracy to commit theft of public money,

U.S. Treasury checks.

Dang admitted that, to cover his tracks, he

dividends from his 2006 through 2011

theft of public money, wire fraud, and ag-

individual income tax returns. This resulted in

gravated identity theft. On October 31, 2016,

Press Release – https://www.justice.gov/

merchandise and created fraudulent “test

additional tax due of $1,567,179. Ultimately,

a jury convicted Robinson of all charges

usao-ndca/pr/richmond-resident-sentenced-

sheets” to give to customers. Dang also

Compagno acknowledged in his plea agree-

against him in the indictment. According to

12-years-imprisonment-filing-fraudulent-tax-

admitted using nominees to launder the

ment he owed more than $5.4 million in

court documents, from at least August 21,

returns-and

illicit proceeds, enabling him to obtain large

changed the serial numbers on the stolen

unpaid taxes.

IRS: Criminal Investigation Annual Report 2017

OAKLAND FIELD OFFICE CASE FILES

amounts of cash without having the money

and admitting this criminal conduct, Dang did

go through bank accounts associated with

not stop all of his criminal activity.

him or his businesses. On October 30, 2013,

a federal grand jury returned a superseding

Press Release – https://www.justice.gov/

indictment in which Dang and seven other

usao-ndca/pr/cuong-cao-calvin-dang-sen-

defendants were charged with various

tenced-7-years-prison-role-37m-cisco-fraud-

offenses related to Dang’s scheme. Dang

and-related-crimes

was charged with conspiracy to commit mail

fraud and money laundering. On December

11, 2015, Dang entered into the first of two

plea agreements. In this plea agreement,

Dang pleaded guilty to conspiracy to commit

mail fraud, money laundering, and money

laundering of criminally derived proceeds.

Dang admitted Network Genesis’s business

was “overwhelmingly that of buying and

selling merchandise stolen from Cisco”.

Dang also admitted that from January 2006

until federal law enforcement officers raided

Network Genesis in January 2013, sales

revenues totaled approximately $37,000,000.

Despite entering into this plea agreement

IRS: Criminal Investigation Annual Report 2017

LOS ANGELES FIELD OFFICE

300 N. LOS ANGELES ST, LOS ANGELES CA, 90012 | 213.372.4129

AS THE NATION’S second largest field office, the

Significant cases worked by Los Angeles CI Special

Los Angeles Field Office serves a population of

Agents include:

approximately 22 million people, stretching over nine

counties from San Luis Obispo to the United StatesMexican border. We work a diverse mix of financial

California Tax Return Preparer Who Stole Over $1.2

Million in Refunds Owed to His Clients Sentenced

investigations across this large geographic area. Our

investigations include cybercrimes, international tax

On June 12, 2017, in Los Angeles, California, Michael

fraud, and identity theft. We play crucial roles on the

Joseph Calalang Cabuhat was sentenced to 46 months

U.S. Attorney’s priority task forces, to include the Joint

in prison and ordered to pay restitution in the amount

Terrorism Task Force and the Organized Crime Drug

of $1,496,416 to his victims and the IRS. According to

Enforcement Task Forces.

court documents, Cabuhat pleaded guilty in June 2016

CALIFORNIA

to wire fraud and subscription to a false federal income

The Los Angeles Field Office has additional locations in

tax return. Cabuhat is a half-owner of VisionQwest

the following areas:

Resource Group, Inc., which operates VisionQwest Accountancy Group and Icon Tax Group, Inc., in Glendale.

• Camarillo, CA

• San Diego, CA

Cabuhat admitted that, from 2010 through 2016, he

• EL Monte, CA

• San Marcos, CA

defrauded his clients in two ways. In some instances,

• El Segundo, CA

• Santa Ana, CA

the client was given a copy of a tax return that showed

• Glendale, CA

• Santa Maria, CA

a much smaller refund amount than on the tax return

• Laguna Niguel, CA

• Van Nuys, CA

that Cabuhat filed with the IRS. Without the taxpayer’s

• Long Beach, CA

• Woodland Hills, CA

knowledge, Cabuhat filed paperwork that directed

• San Bernadino, CA

the IRS to deposit the small amount reflected on the

“I always say that IRS agents are worth their weight in gold, because if you have an IRS agent on your case, your

investigation is going to be 10 times better than without them. It doesn’t matter what type of case – financial fraud,

drug cartels, public corruption – their level of expertise is always a huge bonus and their work is second to none. We

wish there were more IRS agents to go around.” — ALANA W. ROBINSON, ACTING U.S. ATTORNEY

IRS: Criminal Investigation Annual Report 2017

LOS ANGELES FIELD OFFICE CASE FILES

taxpayer’s copy of the tax return into the

taxpayer’s bank account, and to deposit the

remainder into a bank account that Cabuhat

California Woman Sentenced for Using

Stolen IDs to File Fraudulent Returns

Seeking More than $2 Million in Refunds

controlled. In other instances, Cabuhat gave

was awaiting sentencing, she was subsequently charged in a second indictment for

filing false claims to the IRS, wire and mail

California Man Sentenced for Role in

Scheme to Launder Money for Drug Rings,

Including the Sinaloa Cartel

fraud, and aggravated identity theft. Lozano

the client a copy of a tax return that falsely

On July 12, 2017, in San Diego, California,

took the names and Social Security numbers

On November 30, 2016, in Los Angeles, Cali-

showed a tax due, but Cabuhat would

Cynthia Lozano was sentenced to 175

from her Section 8 tenants, and others who

fornia, Bradley John Martin was sentenced to

file with the IRS a tax return that sought

months in prison and ordered to pay restitu-

submitted rental applications to her. She

63 months in prison and three years super-

a refund. Using these fraudulent means,

tion of $1,479,134 to the IRS and Department

used their names and numbers to submit ad-

vised release for his part in an international

Cabuhat stole more than $1.2 million that

of Housing and Urban Development (HUD)

ditional false federal tax returns. Lozano then

money laundering organization that conspired

belonged to over 150 of his clients. Cabuhat

for mail and wire fraud, false claims and

directed the IRS to deposit the tax refunds

to move more than $15 million in drug money

also admitted that he failed to report this

aggravated identity theft. According to court

into new bank accounts she opened with the

for organizations that included the Sinaloa

money on his own tax returns, which allowed

documents, on February 13, 2015, Lozano

assistance of two co-conspirators.

Cartel. Martin pleaded guilty in May to

him to evade the payment of approximately

pleaded guilty to aggravated identity theft

$268,000 that he owed to the IRS.

and participation in her fraudulent scheme.

Press Release – https://www.justice.

an unlicensed money remitting business.

In total, Lozano used the identities of over

gov/usao-sdca/pr/lemon-grove-woman-

The illegal scheme spanned the world and

Press Release – https://www.justice.gov/

200 victims to file over 400 federal tax

sentenced-14-years-prison-using-stolen-ids-

involved operatives in Canada, India, the

usao-cdca/pr/glendale-tax-return-preparer-

returns, resulting in her receipt of over $1.5

file-fraudulent-returns

United States and Mexico. These operatives

who-stole-over-12-million-refunds-owed-his-

million in fraudulently-obtained tax refunds

laundered drug trafficking proceeds gener-

clients

between 2008 and 2013. Lozano used most

ated from multi-kilogram and multi-pound

of the funds obtained from her initial scheme

sales of narcotics in Canada and the United

to purchase 20 properties in and around

States for and on behalf of the Sinaloa

Phoenix, Arizona. In June 2015, while Lozano

Cartel and their affiliated drug trafficking

conspiracy to launder money and operating

IRS: Criminal Investigation Annual Report 2017

LOS ANGELES FIELD OFFICE CASE FILES

organizations. The laundered money was to

federal-prison-role-scheme-launder-money-

clients. Schwartz admitted that between

statements. In addition to the nearly $5

have either been transported to the Sinaloa

drug-rings-including

May 2010 and January 2014, he withdrew

million stolen from Ms. Morissette, Schwartz

Cartel as profits or reinvested in additional

approximately $4.8 million belonging to

admitted that he embezzled more than $1

narcotics to be sold and distributed in the

Alanis Morissette without her knowledge or

million from another client and attempted

United States and Canada. Martin admitted

authorization. Because of his position as a

to conceal the theft by claiming the cash

business manager, Schwartz had access to

withdrawals were used for renovations to

his clients’ bank accounts so he could pay

the client’s home. Schwartz further admitted

their bills and get cash for them. As part of

that he embezzled $737,500 from another

an embezzlement scheme, Schwartz submit-

client and forged that client’s signature on

that he was a repeat money courier in an

international “hawala” ring that transferred

narcotics proceeds for the Sinaloa drug cartel

CPA Sentenced to Prison for Embezzling

$7.2 Million from Alanis Morissette and

Other Celebrities

and other drug trafficking organizations.

Specifically, Martin admitted to personally

On May 3, 2017, in Los Angeles, California,

ted cash-withdrawal requests to banks that

at least two cash receipts. Because of the

transporting over $1,800,000 in cash, which

Jonathan Todd Schwartz, a certified public

were not authorized by his clients, and he

entire scheme, Schwartz acknowledged that

he knew was drug trafficking proceeds.

accountant and business manager for

either had the cash delivered to him or he

he owes the IRS more than $1.7 million in

During a four-year federal wiretap investiga-

singer-songwriter Alanis Morissette, as well

picked up the money himself. Schwartz con-

federal income taxes.

tion by IRS-Criminal Investigation and DEA,

as other well-known entertainment and

cealed the embezzlements because the bank

authorities seized a total of $15,467,293

sports figures, was sentenced to 72 months

statements were sent to GSO, and not to the

Press Release – https://www.justice.gov/

in bulk U.S. currency, 321 kilograms of

in prison, three years of supervised release,

clients. GSO prepared monthly statements

usao-cdca/pr/cpa-sentenced-6-years-

cocaine, 98 pounds of methamphetamine,

and ordered to pay $8,657,268 in restitution.

for the clients based on a ledger of expenses

federal-prison-embezzling-72-million-alanis-

11 kilograms of MDMA (“ecstasy”) and nine

Schwartz pleaded guilty in February to wire

that GSO bookkeepers maintained. However,

morissette-and-other

kilograms of heroin.

fraud and tax fraud charges. Schwartz was

those statements were false because

a member of GSO Business Management,

Schwartz had provided false information to

Press Release – https://www.justice.gov/

LLC, a business management firm that

the bookkeepers and caused other pertinent

usao-cdca/pr/carlsbad-man-sentenced-

provides financial guidance to high-net worth

information to be deleted from the monthly

IRS: Criminal Investigation Annual Report 2017

LAS VEGAS FIELD OFFICE

110 N. CITY PARKWAY, LAS VEGAS NV, 89106 | 702.868.5091

The Las Vegas Field Office covers the Districts of

Significant cases worked by Las Vegas CI Special

Nevada, as well as the District of Utah, comprising

Agents include:

two judicial districts. We work a diverse mix of cases

across the geographic area to include: criminal tax

fraud, money laundering and cyber crimes. We also

Kaysville CPA Sentenced to Prison after Pleading

Guilty to Tax Evasion

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

NEVADA

priority task forces, including the Joint Terrorism Task

On January 26, 2017, in Salt Lake City, Utah, David

Force, Organized Crime Drug Enforcement Task Force

Brian Bybee was sentenced to 12 months and one

(OCDETF), and the Financial Crimes Task Force. In

day, three years of supervised release and ordered to

addition, we cover a large part of the casino industry

pay $469,381 in restitution for attempting to evade

for the United States and an outstanding narcotics

payment of U.S. taxes. According to court documents,

program in Utah, which recently funded an additional

Bybee managed and controlled several companies

SAUSA (Special Assistant United States Attorney).

that offered various services, including membership in

various business professional associations and groups,

The Las Vegas Field Office has additional locations in

along with bookkeeping, accounting, and tax manage-

the following areas:

ment training and services. Bybee admitted that he and

• Ogden, UT

• Reno, NV

• Salt Lake City, UT

his business partner filed a Form 1040 joint personal

return with the IRS for tax years 2000 through 2002

and 2005 through 2009, for which the IRS assessed

$153,569. Bybee admitted he willfully failed to pay the

UTAH

“The Las Vegas Field Office of IRS-Criminal Investigation epitomizes professionalism and reliability. Special Agents

and staff members are tried and true partners in our combined work to hold accountable those who would harm the

Treasury, and those who would victimize others to feed their own greed. Prosecutors in my office consistently offer

glowing reviews of the work product from IRS-Criminal Investigation. Moreover, when times get tough in a challenging investigation or prosecution, we count ourselves fortunate to have partnered with IRS-Criminal Investigation.

Big picture people who are motivated and thorough. This is how I view the professionals at IRS-Criminal Investigation.” — JOHN W. HUBER, UNITED STATES ATTORNEY, DISTRICT OF UTAH

IRS: Criminal Investigation Annual Report 2017

LAS VEGAS FIELD OFFICE CASE FILES

taxes due the U.S. government. From 2008

in prison and three years of supervised

United States and was sentenced to serve 12

laundering relating to a real estate fraud

to 2011, substantial revenues from credit

release for conspiring to defraud the United

months in prison, three years of supervised

scheme. According to court documents,

card sales were deposited into the America

States and tax evasion. According to court

release and ordered to pay $428,003 in

Wilson ran a real estate investment scheme

First Credit Union account. Bybee admitted

documents, Nowak, and Ramzi Suliman

restitution to the IRS.

from approximately 2005 until 2012. His

that despite not being an authorized signer

jointly owned and operated liquor stores in

on the account, he controlled electronic

Las Vegas. At their first liquor store, Super

Press Release – https://www.justice.gov/

were in desperate need for financing, and

funds transfers out of the account for, among

Liquor Store South Strip, Nowak and Suliman

opa/pr/nevada-liquor-store-owner-sentenced-

the economic collapse made such loans

other things, various personal expenditures.

skimmed cash receipts and maintained a

prison-conspiring-defraud-united-states-and-

more difficult to obtain through traditional

The expenditures included a mortgage, cars,

double set of books to underreport income

tax-evasion

means. Wilson sought individuals all over

jet skis and a boat.

to the IRS. One set of books accurately

the country who were developing real estate

reflected the store’s sales, while a second

projects, such as shopping malls or resorts.

Press Release – https://www.justice.gov/

set of books fraudulently omitted nearly

usao-ut/pr/kaysville-cpa-pleads-guilty-tax-

$4 million in cash receipts the business

evasion-and-sentenced-prison

received.. Nowak and Suliman provided

the phony set of books to their accountant,

fraud accelerated in 2009 when businesses

Wilson represented to investors that his

St. George Man Sentenced to 108 Months

in Federal Prison after Convictions for

Fraud, Money Laundering

causing him to create corporate tax returns

Nevada Liquor Store Owner Sentenced for

Conspiring to Defraud the United States

and Tax Evasion

company could provide financing for real

estate development projects for an advance

fee of either $80,000 or $150,000 through a

“substitution of collateral program.” Through

that did not fully report the liquor store’s

On October 7, 2016, in Salt Lake City, Utah,

this program, individuals would provide the

gross receipts and taxable income. Nowak

Edmund Edward Wilson was sentenced to

fee, obtain financing for their projects within

and Suliman also caused their true personal

108 months in federal prison, three years

30-60 days (in some cases hundreds of

income to be concealed on their individual

of supervised release and ordered to pay

millions of dollars), and not have to repay

On March 6, 2017, in Las Vegas, Nevada,

income tax returns. Suliman pleaded guilty

$12,227,920 in restitution to victims. Wilson

the loan. In return, these individuals Wilson

Jeffrey Nowak was sentenced to 41 months

to conspiring with Nowak to defraud the

pleaded guilty to wire fraud and money

called “investors” would give him a 30

IRS: Criminal Investigation Annual Report 2017

LAS VEGAS FIELD OFFICE CASE FILES

percent stake in the development project.

When investors called Wilson to ask why

Peila Sentenced for Conspiracy to

Distribute Oxycodone, Money Laundering

they had not received funding for their

pick up the oxycodone pills for distribution in

Utah. Several co-conspirators involved in the

case have pleaded guilty and are serving sen-

projects within the time promised, Wilson

On December 3, 2016, in Salt Lake City,

tences ranging from 72 months to probation.

falsely represented that he needed additional

Utah, Aaron Peila, was sentenced to 144

Sentencing is pending for three individuals.

money to cover various unforeseen fees and

months in federal prison after pleading guilty

expenses, and that once these costs were

to a conspiracy to distribute oxycodone and

Press Release – https://www.justice.gov/

paid, funds would be released for the devel-

conspiracy to commit money laundering.

usao-ut/pr/peila-sentenced-144-months-fed-

opment projects. Wilson failed to disclose to

According to court documents that, federal

eral-prison-conspiracy-distribute-oxycodone-

investors that he never provided any funding

prosecutors wrote in a sentencing memoran-

money

for any development project through his

dum filed with the court, from approximately

substitution of collateral program and that he

2007 through 2012, Peila engaged with other

used a significant portion of the advanced

co-conspirators in a large-scale effort to

fees for his personal benefit.

distribute oxycodone in Utah and surrounding

areas.. Through a significant investigation,

Press Release – https://www.justice.gov/

agents believe Peila and his co-conspirators

usao-ut/pr/st-george-man-sentenced-

distributed approximately 89,000 oxycodone

108-months-federal-prison-after-convictions-

80 mg tablets and 22,000 oxycodone 30

fraud-money

mg tablets. They also laundered about $3.8

million in drug proceeds. As a part of his plea

agreement with federal prosecutors, Peila

admitted traveling from Utah to Las Vegas to

IRS: Criminal Investigation Annual Report 2017

PHOENIX FIELD OFFICE

4041 N. CENTRAL AVE, PHOENIX AZ, 85012 | 602.636.9721

THE PHOENIX FIELD Office covers the southwestern

states of Arizona and New Mexico. The office’s special

Former Santa Fe Engineer Sentenced for Obstructing

IRS and Filing False Tax Returns

agents investigate both legal and illegal source tax

ARIZONA

crimes, including cases with an international nexus.

On September 19, 2017, in Albuquerque, New Mexico,

The office operates a financial crimes task force named

Darryl J. Gutierrez was sentenced to 33 months in

DeTECT that identifies and investigates a wide variety

prison, one year of supervised release and ordered

of complex financial crimes. Located on the U.S. /

to pay $174,196 in restitution to IRS, a $15,000 fine

Mexico border, the office provides significant participa-

and a $1,100 special penalty assessment for violating

tion in the high level Organized Crime Drug

the federal tax laws by obstructing and impeding the

Enforcement Task Force (OCDETF).

administration of the internal revenue laws and filing

false tax returns. Gutierrez was an electrical engineer

NEW MEXICO

The Phoenix Field Office has additional locations in the

who worked at Los Alamos National Laboratory for

following areas:

almost 30 years, earning an annual salary ranging from

• Albuquerque, NM

• Mesa, AZ

$80,000 to $115,000 in tax years 2000 to 2009. After

• Glendale, AZ

• Santa Fe, NM

years of regularly filing timely income tax returns with

• Las Cruces, NM

• Tucson, AZ

the IRS, Gutierrez stopped complying with the federal

tax laws and began engaging in a pattern of obstruc-

Significant cases investigated by Phoenix CI Special

tive conduct to prevent the IRS from assessing and

Agents include:

collecting his taxes. This included sending frivolous correspondence to the IRS, and, submitting under penalty

of perjury, false tax information to his employer and to

“IRS Criminal Investigation is our ‘go-to’ agency for financial expertise. Whether pursuing money launderers in tandem

with other investigative agencies, or proving willful violations of the tax code, IRS Criminal Investigation

agents provide critically important support to our office.” — JAMES D. TIERNEY , ACTING U.S. ATTORNEY, DISTRICT OF NEW MEXICO

IRS: Criminal Investigation Annual Report 2017

PHOENIX FIELD OFFICE CASE FILES

the IRS. The evidence further showed that

was an anesthesiologist and a founding

guilty to wire fraud. As a registered tax return

was found guilty following trial on multiple

between November 2010 and January 2011,

member of Forest Country Anesthesia, an

preparer, Puerta owned and operated Taxes

counts, including conspiracy, mail fraud and

Gutierrez filed 10 false federal income tax

anesthesiology practice in Flagstaff. Chris-

Y Mas in Glendale, Arizona. Beginning in

aggravated identity theft. Anthony was a

returns for tax years 2000 to 2009 seeking a

tensen was indicted in 2014 for concealing

2011, Puerta submitted fraudulent tax returns

key participant in the scheme, in which the

refund when in fact Gutierrez owed the IRS

approximately $2,100,163 in income from

by using the names and identities of indi-

conspirators stole the identities of dozens of

approximately $125,000.

the IRS and failing to pay approximately

viduals in Mexico who were unaware their

taxpayers and filed false income tax returns

$562,083 in federal income taxes. In May,

identities were being used this way. Puerta

to obtain hundreds of thousands of dollars in

Press Release – https://www.justice.gov/

a jury in Phoenix convicted him on seven

filed the fraudulent returns using a substitute

tax refunds in the victims’ names. Anthony

usao-nm/pr/former-santa-fe-engineer-

counts of willful evasion of tax assessment

identification number, called an individual tax

and others obtained the fraudulent refunds

sentenced-federal-prison-obstructing-irs-

for 2004 through 2010, as well as two counts

identification number, issued in the name of

through online accounts set up with prepaid

and-filing-false-tax

of willful failure to file a tax return for 2009

the identity-theft victims.

debit cards and used multiple bank accounts

to convert the refund money into cash. Once

and 2010.

Anthony obtained the cash, she, or people

she recruited, laundered the money out

Flagstaff Anesthesiologist Sentenced for

Tax Evasion

Tax Preparer Sentenced to Prison for Using

Stolen Identities to Obtain Over $250,000 in

False Tax Refunds

On October 25, 2016, in Phoenix, Arizona,

Tax Preparer Sentenced for Stolen Identity,

International Money Laundering Scheme

of the United States by wiring most of the

On July 31, 2017, in Phoenix, Arizona, Paula

Press Release – https://www.justice.

funds to Nigeria.

Dr. Gary Christensen was sentenced to 42

On August 7, 2017, in Phoenix, Arizona,

Anthony was sentenced to 36 months

gov/usao-az/pr/tax-preparer-sentenced-

months in prison, three years supervised

Karina Puerta was sentenced to 21 months

in prison for her role in a stolen identity

prison-stolen-identity-international-money-

release and ordered to pay $1,603,533 in res-

in prison and ordered to pay over $250,000

and money laundering scheme. Anthony,

laundering-scheme

titution to the U.S. government. Christensen

in restitution. Puerta previously pleaded

formerly a registered tax return preparer,

IRS: Criminal Investigation Annual Report 2017

PHOENIX FIELD OFFICE CASE FILES

Tucson Man Sentenced on Narcotics and

Money Laundering Charges

is pending for other individuals related to

Johnson gave a fictitious reference and other

the operation.

false information during the hiring process

to prevent her new employer from contact-

On June 15, 2017, in Tucson, Arizona, David

Galvan-Haro was sentenced to 84 months

Former Phoenix Resident Sentenced for

Embezzlement

in prison, four years supervised release

ing the Phoenix employer and discovering

her fraud. Upon being hired in early 2015,

Johnson proceeded to steal almost

and ordered to forfeit $143,540 in cash.

On September 11, 2017, in Phoenix, Arizona,

$500,000 from her new, Atlanta-based

Haro pleaded guilty to possession with

Shana Raelisa Johnson was sentenced to

employer. Johnson concealed her embezzle-

intent to distribute cocaine and conspiracy

44 months in prison and ordered to pay

ment from both companies by falsifying bank

to commit money laundering. According to

more than $2 million in restitution. Johnson

statements and other financial records.

court documents Haro coordinated ship-

had previously pleaded guilty to wire fraud.

ments of cocaine via the United States

From 2008 through 2014, Johnson worked

Press Release – https://www.justice.

Postal Service along with others. After the

as an accountant at a property management

gov/usao-az/pr/former-phoenix-resident-

narcotics were shipped via the mail, Haro

company based in Phoenix. During that time,

sentenced-44-months-embezzlement

provided bank account numbers for individu-

she stole more than $2.4 million from her

als to deposit what Haro knew to be drug

employer by issuing fraudulent checks and

trafficking proceeds into his bank account

making unauthorized electronic transfers

in order to conceal and disguise the nature,

from her employer’s bank accounts. After

location source ownership and control of the

the Phoenix-based company discovered her

proceeds of the narcotics shipments. Haro

theft, Johnson moved to Atlanta, Georgia,

would withdraw the money and transport the

and applied for a similar accountant position

money to other co-conspirators. Sentencing

at another property management company.

IRS: Criminal Investigation Annual Report 2017

DENVER FIELD OFFICE

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

COLORADO

THE DENVER FIELD Office covers a large geo-

Significant cases worked by Denver CI Special

graphic area (approximately 432,500 square miles) that

Agents include:

includes the states of Colorado, Montana, Idaho and

Wyoming and their respective judicial districts. The

Denver Field Office works a diverse mix of criminal

Colorado Man Sentenced to Prison for Conspiring to

File Fraudulent Tax Refund Claims

investigations including all manners of tax fraud, money

laundering and other federal frauds with a financial

On July 14, 2017, in Denver, Colorado, Daryl Brent

nexus. We hold pivotal roles on the U.S Attorney’s

Giesking was sentenced to 24 months in prison,

Office priority task forces, including the OCDETF

three years of supervised release and ordered to pay

Strikeforce, Suspicious Activity Task Force, Guardians

$310,261 in restitution to the IRS. Giesking conspired

Project Strikeforce, and the Virtual Currency Task Force.

with his return preparer to claim fraudulent refunds

by filing three individual tax returns claiming more

IDAHO

MONTANA

The Denver Field Office has additional locations in the

than $1 million in refunds based on falsely reported

following areas:

income tax withholdings. As a result, the IRS paid

• Billings, MT

• Fort Collins, CO

out a $350,765 fraudulent refund to Giesking. Within

• Boise, ID

• Grand Junction, CO

months of receiving the refund, Giesking spent the

• Cheyenne, WY

• Helena, MT

funds on precious metals and coins, a truck, jewelry,

• Coeur d'Alene, ID

• Missoula, MT

luxury travel and sporting equipment. After discovering

• Colorado Springs, CO

• Washington, DC

the refund should not have been paid, the IRS levied

• Durango, CO

• Westminster, CO

Giesking’s bank accounts and recovered approximately

$40,503. Following the IRS’s levies, Giesking liquidated

"Special agents for IRS CI are the best of the best when it comes to work ethic, team mentality, and financial

investigation sophistication. We rely on their ability to solve complex financial crimes, and break them down in an

understandable way, across almost every criminal case type in our office." — BOB TROYER, UNITED STATES ATTORNEY,

DISTRICT OF COLORADO

WYOMING

IRS: Criminal Investigation Annual Report 2017

DENVER FIELD OFFICE CASE FILES

a number of his assets to include selling the

of false tax returns. From January 2009 until

to a bank account controlled by I&A. Iley

to being the leader of a drug trafficking

truck he bought with the fraudulent proceeds

December 2015, Iley was the owner and

kept the money that was intended for payroll

organization (DTO) involving her children and

and withdrawing all the funds in his retire-

operator of Iley and Associates (I&A), an

taxes and used it for his own purposes.

friends. The DTO sold oxycodone, heroin and

ment account. He then relocated to Ecuador,

accounting and tax preparation firm providing

where he was arrested in June 2016, on a

payroll and payroll tax services to more than

Press Release – https://www.justice.gov/

Montana and North Dakota. In total, federal

warrant issued in this case.

140 businesses. The payroll tax services

usao-co/pr/parker-cpa-sentenced-125-years-

agents arrested 11 individuals in February

included the preparation of Forms 941, Em-

prison-wire-fraud-and-aiding-and-assisting-

2016. All have pleaded guilty and

Press Release – https://www.justice.gov/

ployer’s Quarterly Federal Tax Returns, and

preparation

been sentenced.

usao-co/pr/colorado-man-sentenced-prison-

an ACH Deduction Report listing the amount

conspiring-file-fraudulent-tax-refund-claims

of payroll taxes to be withdrawn from the

Leader of DTO Loren “Mama” Toelle

Sentenced to Prison

Press Release – https://www.justice.gov/

client’s bank account and paid to the IRS. Iley

methamphetamine in Idaho, Washington,

usao-id/pr/leader-drug-trafficking-organization-loren-mama-toelle-sentenced-prison

caused the Form 941 tax return to be mailed

to the client with a cover letter stating the

On May 2, 2017, in Coeur d’Alene, Idaho,

enclosed tax return is a copy for their records

Loren Michelle Toelle was sentenced to 212

and that Iley pays the taxes for the client.

months in prison followed by five years of

Iley then prepared and submitted payroll

supervised release for conspiracy to distrib-

tax returns to the IRS on behalf of clients

ute controlled substances and conspiracy

On July 25, 2017, in Denver, Colorado, Don

showing no payroll taxes due for a given tax

to launder money. Toelle also forfeited her

R. Iley was sentenced to 151 months in

period. Iley knew when he submitted these

interest in more than $2million of various

On May 19, 2017, in Missola, Montana,

prison, three years of supervised release and

payroll tax returns that the clients did in

assets, which were the profits of the criminal

former Vann’s CEO George Manlove was

ordered to pay $9.7 million in restitution. Iley

fact owe payroll taxes. Then Iley initiated or

actions or were intended to be used to

sentenced to 63 months in prison after being

pleaded guilty on April 18, 2017, to wire fraud

caused others to initiate an ACH electronic

promote the criminal actions. Toelle admitted

convicted at trial in February of wire fraud,

and aiding and assisting in the preparation

fund transfer from the client’s bank account

CPA Sentenced to Prison for Wire Fraud

and Aiding and Assisting in the Preparation

of False Tax Returns

‘The Wolf of Brooks Street:’ Former Vann’s

CEO Sentenced to Prison

IRS: Criminal Investigation Annual Report 2017

DENVER FIELD OFFICE CASE FILES

bank fraud, money laundering and conspiracy

for defrauding Vann’s. Manlove was accused

Colorado Man Sentenced for Conspiracy to

Defraud the United States

of creating holding companies, buying

filed federal income tax returns for the 2010

through 2013 tax years, knowing these

returns did not reflect all his income for t

buildings and leasing them to Vann’s without

On September 19, 2017, in Denver, Colorado,

board approval, as well as causing Vann’s to

Jerald Williams was sentenced to 60 months

pay for his executive MBA degree without

in prison, three years of supervised release

Press Release – https://www.justice.gov/

board approval, and using company money

and ordered to pay $427,581 to the IRS for

usao-co/pr/longmont-man-sentenced-

on personal and family expenditures. The

conspiracy to defraud the United States.

conspiracy-defraud-united-states

jury also decided Manlove must forfeit $2.4

Williams generated substantial income from

million in property deemed ill-gotten gains of

the interstate transportation and distribution

his fraud conviction. A separate hearing will

of controlled substances, specifically mari-

be held to determine the amount Manlove

juana and cocaine. Williams tried to conceal

will owe for restitution.

this income by structuring cash deposits into

hose years.

an account titled to his business Colorado

Press Release – https://www.justice.

Fire Services. Between 2010 and 2014,

gov/usao-mt/pr/former-ceo-vann-s-inc-

Williams and his co-conspirator structured

sentenced-5-years-prison-0

approximately $858,495 into various bank

accounts. Williams and his co-conspirator

used the proceeds to purchase assets with

cashier’s checks including a house in Tucson,

along with a pool and other improvements,

and a recreational vehicle and trailer. Williams

IRS: Criminal Investigation Annual Report 2017

DALLAS FIELD OFFICE

1100 COMMERCE, DALLAS TX, 75242 | 214.413.5929

THE DALLAS FIELD Office covers the Northern and

Significant cases worked by Dallas CI Special

Eastern Districts of Texas and Oklahoma. Our agents

Agents include:

work a diverse mix of criminal investigations, which

include tax fraud, identity theft, public corruption,

narcotics, and terrorism investigations. Our agents hold

Owner of Oklahoma City Employer Organization

Sentenced for $22.8 Million Tax Scheme

pivotal roles on the respective U.S. Attorney’s Office

TEXAS

priority task forces, including the Organized Crime and

On May 30, 2017, in Oklahoma City, Oklahoma, Janis

Drug Enforcement Task Force (OCDETF), the High

Ann Edwards was sentenced to 36 months in prison,

Intensity Drug Trafficking Area Task Force (HIDTA), the

followed by three years of supervised release and

Financial Crimes Task Force and the Joint Terrorism

ordered to pay $22,720,242 in restitution to the IRS.

Task Force (JTTF).

According to court documents, Edwards was the sole

owner of Corporate Resource Management(CRM)

OKLAHOMA

The Dallas Field Office has additional locations in the

Inc., and several related companies with their principal

following areas:

place of business in Oklahoma City. These companies

• Amarillo, TX

• Lubbock, TX

operated as "professional employer organizations," or

• Beaumont, TX

• Muskogee, OK

"PEOs." The employees of small businesses became

• Farmers Branch, TX

• Oklahoma City, OK

employees of one of Edwards’s entities, and their

• Fort Worth, TX

• Tulsa, OK

payroll taxes were to be paid under the tax identi-

• Irving, TX

• Tyler, TX

fication number of one of those entities. However,

Edwards failed to pay substantial amounts of payroll

taxes collected from small businesses that had

“Special Agents with IRS Criminal Investigation are indispensable partners in fully investigating and prosecuting our

most complex prosecutions in the Northern District of Texas,” said U.S. Attorney John Parker. “They are uniquely

skilled at helping us unravel the most sophisticated financial schemes designed to facilitate and hide many other

types of criminal activity, particularly fraud. The analytical and forensic capabilities of these agents have a direct and

undeniable impact on the success of our cases and the reduction of crime in our communities.” — JOHN R. PARKER,

U.S. ATTORNEY, NORTHERN DISTRICT OF TEXAS

IRS: Criminal Investigation Annual Report 2017

DALLAS FIELD OFFICE CASE FILES

contracted with one of the CRM-related

entities. The 23 counts related to quar-

San Angelo Restaurant Owner Sentenced

for False Tax Returns

terly payroll tax returns filed by Oklahoma

Press Release – https://www.justice.gov/

false statements and representations in the

usao-ndtx/pr/san-angelo-man-sentenced-

tax returns that he submitted to increase the

36-months-federal-prison-filing-false-

amount of tax refunds to which the taxpayer

income-tax-returns

would be entitled. Kincade could intercept

Corporate Resource, Inc.; Missouri Corpo-

On April 21, 2017, in Dallas, Texas, Ai Shu

rate Resource, Inc.; and Texas Corporate

Cheng was sentenced to 36 months in

the government tax refunds for his own

Resource, Inc., for various quarters in 2010

prison, one year of supervised release and

benefit by printing the refund checks, not

and 2011. Edwards regularly and intentionally

ordered to pay $1,767,566 in restitution to

giving them to his clients, and then cashing

directed her own employees to alter these

the IRS. Cheng pleaded guilty to two counts

quarterly tax returns to reflect less payroll

of failure to file and pay personal and employ-

tax liability than what was actually owed. On

ment taxes. According to court documents,

January 6, 2017, Edwards pleaded guilty to

Anderson County Man Sentenced for Tax

Fraud/Identity Theft Scheme

them with the assistance of two individuals

Cheng filed his 2010 Form 1040, under-

On January 26, 2017, in Tyler, Texas, Jef-

Press Release – https://www.justice.gov/

tax evasion, including causing the filing of a

reporting his total income. Cheng reported

ferson Kincade was sentenced to 102

usao-edtx/pr/anderson-county-man-sen-

federal payroll tax return she knew was false.

a total income of $208,652 when his actual

months in prison for filing fraudulent or false

tenced-tax-fraudidentity-theft-scheme

In a plea agreement, she agreed she would

income was approximately $696,148, result-

statements in a tax return, theft or conver-

be held responsible in this criminal case for

ing in a tax loss to the IRS of approximately

sion of money, and aggravated identity theft.

failing to pay between $3.5 million and $25

$165,108. Cheng filed his 2012 tax return and

Kincade also agreed to a cash forfeiture of

million in payroll taxes.

again underreported his total income. Cheng

$110,919. According to court documents,

reported total income of $186,486 when his

Kincade prepared tax returns for individuals

Press Release – https://www.justice.gov/

actual income was approximately $600,976,

at a tax preparation business, EZ Tax, in

usao-wdok/pr/owner-oklahoma-city-em-

resulting in a tax loss to the IRS of approxi-

Palestine, and devised a scheme to prepare

On August 17, 2017, in Dallas, Texas, Latonya

ployer-organization-sentenced-three-years-

mately $145,072.

false tax returns, steal clients' refunds, and

Lanette Carson and Smith Olsola Akin were

use the clients' and other individuals' identi-

sentenced to 135 and 120 months in prison,

federal-prison-228

who were not associated with EZ Tax.

Two Sentenced in Stolen Identity Theft and

Money Laundering Scheme

ties to accomplish the theft. Kincade made

IRS: Criminal Investigation Annual Report 2017

DALLAS FIELD OFFICE CASE FILES

respectively, for their role in a scheme to

tors paid $1,184,950 from these accounts to

ing. Rivas-Estrada admitted to conspiring

steal personally identifiable information, use

purchase used cars from wholesale dealer

to commit money laundering as part of

it to fraudulently obtain income tax refunds,

auctions in Dallas County. Between January

a methamphetamine drug operation. He

and then launder those funds. According to

2012 and January 2015, the defendants and

also admitted to providing others with U.S.

court documents, in October 2016 Carson

their conspirators exported approximately

currency and wiring money, through a money

was convicted for conspiracy to commit theft

279 used cars to Nigeria.

remitter business, to Mexico, knowing it was

from drug proceeds. This sentence is related

of public funds, access device fraud and wire

fraud, aggravated identity theft, conspiracy to

Press Release – https://www.justice.gov/

to the multi-defendant OCDETF Investigation

commit money laundering, money laundering

usao-ndtx/pr/two-sentenced-stolen-identity-

Operation Siquiendo El Dinero.

and wire fraud. Akin pleaded guilty to one

theft-and-money-laundering-scheme

count of conspiracy to commit money laundering. Carson and Akin, along with other

conspirators, were involved in a scheme in

which they filed false tax returns using stolen

identities, some of which belonged to prison-

Texas Man Sentenced for Conspiring to

Commit Money Laundering

ers. The co-conspirators converted the tax

refunds from debit/Green Dot cards into cash

On January 3, 2017, in Sherman, Texas,

and cashier's checks using phony company

Jonathan Rivas-Estrada was sentenced to

bank accounts. They used the illegal

420 months in prison and returned to the

proceeds to purchase vehicles that they then

custody of the U.S. Marshal. In August

shipped to Nigeria. Between May 2013 and

2016, Rivas-Estrada entered a guilty plea

May 2014, the defendants and their conspira-

to charges that included money launder-

IRS: Criminal Investigation Annual Report 2017

SAN ANTONIO FIELD OFFICE

601 NW LOOP 410, STE 290, SAN ANTONIO TX, 78216 | 210.841.8522

THE SAN ANTONIO Field Office covers over 93,000

square miles and consists of the Western Judicial

San Antonio Businessman Sentenced to Prison for

Estimated $5.3 Million Tax and Wire Fraud Scheme

District of Texas. It covers the largest border area in the

TEXAS

country for one state and is home to the El Paso Intel-

On November 17, 2016, in San Antonio, Texas, Robert

ligence Center (EPIC). Each corner of The field office

Warren Scully, former owner of San Antonio-based

is home to several military institutions, which results in

Gourmet Express, LLC, was sentenced to 180 months

various investigations involving Military Contract Fraud.

in prison, three years of supervised release and ordered

We are home to one of the busiest Organized Crime

to pay $1,206,539 restitution to the IRS, plus a $5,000

Drug Enforcement Task Force (OCDETF) regions in the

fine for his role in an estimated $5.3 million tax and

country that has resulted in us pioneering innovative

wire fraud scheme. From April 2001 until July 2009,

investigative and seizure techniques in cases involving

Scully and others conspired to defraud the IRS by

kleptocracy and the forfeiture of quarter horses used

hiding earned taxable income generated by his frozen

to launder narcotic proceeds. Because Austin is also

food business. Scully and others used intermediary

home to the IRS Service Center where international tax

companies in Thailand to provide shrimp and other

returns are filed, we have a special venue for interna-

ingredients at an inflated cost to Gourmet Express,

tional tax crimes. In addition, we work a diverse mix of

thereby also defrauding his co-owners. Scully and

criminal investigations including tax, OCDETF, money

others used the proceeds generated from the inflated

laundering and public corruption.

costs for personal expenses and failed to disclose that

income to the IRS.

The San Antonio Field Office has additional locations in

Press Release – https://www.justice.gov/usao-wdtx/pr/

the following areas:

• Austin, TX

• Waco, TX

• El Paso, TX

san-antonio-businessman-sentenced-prison-estimated53-million-tax-and-wire-fraud-scheme

Significant cases worked by San Antonio CI Special

Agents include:

IRS: Criminal Investigation Annual Report 2017

SAN ANTONIO FIELD OFFICE CASE FILES

Texas Businessman Sentenced for

Defrauding Personal Injury Clients, Tax

Evasion and Bankruptcy Fraud

money from the personal injury clients by

failing to pay monies owed to clients under

settlement agreements or to pay obligations

Texas Man Sentenced for Filing False

Tax Returns and Corruptly Endeavoring to

Impede the Internal Revenue Laws

for medical treatment and physical therapy

IRS. On these fraudulent returns, he underreported his income for tax years 2004, 2007

and 2008. In addition, between 1998 and

2014, Antolik attempted to obstruct the ad-

On April 4, 2017, in San Antonio, Texas,

after committing to do so. To carry out this

On October 28, 2016, in Austin, Texas, Victor

ministration of the Internal Revenue laws by

Elpidio Gongora (also known as Pete

scheme, Gongora collected the proceeds of

Antolik was sentenced to 72 months in

attaching altered Forms W-2 and 1099 to his

Gongora) was sentenced to 48 months in

fraudulently endorsed personal injury settle-

prison following his conviction for filing false

tax returns, providing false information to his

prison, three years of supervised release

ment checks and hid from the attorneys his

tax returns and attempting to impede the

accountant that was used to prepare corpo-

and ordered to pay $3,490,000 restitution

failure to pay clients entitled to settlement

administration of the Internal Revenue laws.

rate and individual income tax returns on his

for a scheme to defraud personal injury

proceeds. In 2013, Gongora and his wife filed

Antolik owned and operated a commercial

behalf, using nominees to conceal income

clients, evading payment of more than

for Chapter 7 Bankruptcy but Gongora failed

janitorial business with locations in Austin,

and assets, as well as committing other

$1.6 million in taxes and attempting to hide

to disclose he owned personal assets that

San Antonio and Houston, Texas, under a

fraudulent acts. In addition to the prison term

assets from the bankruptcy trustee. On

included a vehicle, boats and real property. In

variety of business names, including Diversi-

imposed, Antolik was also ordered to serve

July 28, 2016, Gongora pleaded guilty to

addition, Gongora also admitted he willfully

fied Building Services Inc., DBS Services

one year of supervised release and to pay

conspiracy to commit mail fraud, bankruptcy

attempted to evade paying over $1.6 million

Inc., Partners in Cleaning, PIC Building

restitution to the IRS of $916,358.

fraud and tax evasion. Gongora, aided by

in taxes, penalties and interest owed to the

Services and BSI Industries. Antolik also

his co-defendants, Rosa Ramirez, Juan

IRS for calendar years 2003 through 2005

earned income as a real estate agent, real

Press Release – https://www.justice.gov/

Rodriguez and Ronald Higgins, operated

and 2007 through 2013.

estate broker and property manager. Antolik

opa/pr/texas-man-sentenced-prison-filing-

earned a portion of his real estate income

false-tax-returns-and-corruptly-endeavoringimpede-internal

the law offices of several personal injury

attorneys in the city of San Antonio and

Press Release – https://www.justice.gov/

through his companies SGN Realty Inc. and

elsewhere in Texas, Arkansas and New

usao-wdtx/pr/san-antonio-businessman-sen-

Signature Realty Services. Antolik submitted

Mexico. Gongora admitted that he stole

tenced-federal-prison-defrauding-personal-

false individual income tax returns to the

injury-clients-tax

IRS: Criminal Investigation Annual Report 2017

SAN ANTONIO FIELD OFFICE CASE FILES

Seven Members of South Texas Family

Sentenced for Money Laundering for Drug

Cartels in Mexico

regarding a drug trafficking and money laundering conspiracy occurring in south Texas,

central Texas and Oklahoma. According to

the indictment, since January 2000, the

On May 24, 2017, in San Antonio, Texas,

defendants conspired to engage in financial

seven members of the Villarreal Arelis family

transactions using proceeds derived from

in south Texas were sentenced from 18

importing, receiving, concealing, buying and/

months to eight years in federal prison for

or selling cocaine; and transporting monetary

their role in laundering drug money through

instruments to locations outside of the

real estate, commercial fronts and horse

United States to conceal the source, owner-

breeding for the Gulf Cartel and Los Zetas

ship and control of proceeds derived from

Cartel in Mexico. Norma Leticia Villar-

unlawful activity.

real Garcia was sentenced to eight years in

prison, Gilberto Villarreal Villarreal and Juan

Antonio Villarreal were sentenced to five

years in prison, Iza Corina Flores Alanis and

Raymundo Villarreal Jr were sentenced to

three years in prison, and Jose Luis Villarreal Arelis and Gilberto Villarreal Arelis were

sentenced to 18 months in prison. In April

2016, sixteen members were charged in

a nine-count federal grand jury indictment

IRS: Criminal Investigation Annual Report 2017

HOUSTON FIELD OFFICE

8701 S. GESSNER, HOUSTON TX, 77074 | 281.721.8390

THE HOUSTON FIELD Office covers the southeast

region of Texas. The special agents work a variety of

cases with emphasis in tax-related crimes such as

Texas Man Hammered with 600-Month Prison

Sentence for Sexual Exploitation of Children and

Tax Fraud

employment tax, identity theft, unscrupulous return

TEXAS

preparers and general fraud cases. The Houston Field

On June 14, 2017, in Galveston, Texas, Benjamin

Office also provides crucial support to their respective

Douglas Guidry was sentenced to 600 months in

U.S. Attorney’s priority task forces involving counterter-

prison following his conviction of sexual exploitation of

rorism, narcotics, human trafficking, money laundering

children and for knowingly making a false claim during

violations and the newly formed Hurricane Harvey

the preparation and filing of a false tax return. Guidry

Fraud Working Group.

received 270 months for each count of production of

child pornography in addition to another 60 months

The Houston Field Office has additional locations in the

for the tax fraud. Guidry was further ordered to pay

following areas:

$201,454 in restitution to the IRS. He will be on super-

• Brownsville, TX

• Laredo, TX

vised release for the rest of his life following comple-

• Corpus Christi, TX

• McAllen, TX

tion of the prison term and will have to comply with

• Houston, TX

many restrictions that limit his access to children and

the Internet. He must also register as a sex offender.

Significant cases worked by Houston CI Special

According to court documents, in May 2015, authori-

Agents include:

ties executed a search warrant at Guidry’s place of

business, Financial Precision Group, at which time they

seized several computers and boxes of documents.

“Through the years, I have worked with many CI Special Agents both as Acting United States Attorney and as an

Assistant United States Attorney. Their financial investigatory abilities are of the highest caliber. The attention to detail

and superior investigative skills are a must, especially in complex financial fraud matters.” — ABE MARTINEZ, ACTING US

ATTORNEY, SOUTHERN DISTRICT OF TEXAS

IRS: Criminal Investigation Annual Report 2017

HOUSTON FIELD OFFICE CASE FILES

Agents noticed, among other things, that

Press Release – https://www.justice.

to January 2012, they engaged in a scheme

several files on Guidry’s external hard drive

gov/usao-sdtx/pr/local-man-hammered-

involving the filing of hundreds of fraudulent

had titles that led the IRS to believe they may

600-month-prison-sentence-sexual-exploi-

tax returns, commonly referred to as stolen

contain child pornography. Authorities also

tation-children-and-tax-fraud

Texas Local Tax Preparer Sentenced to

Federal Prison, Again

identity refund fraud (SIRF). The Houston

On March 24, 2017, in Houston, Texas,

noticed text messages on his cell phone that

couple used stolen personally identifiable

Cedric Keith Oliphant, a local tax return

appeared to be inappropriate communica-

information, including the names and Social

preparer, was sentenced for a second time to

Security numbers to prepare fraudulent U.S.

28 months in prison, one year of supervised

income tax returns. Nazario and Camareno

release and ordered to pay $400,457 in res-

mailed the fraudulent tax returns through the

titution. Oliphant pleaded guilty December

tions with a minor and a video of a minor. A

search warrant executed at Guidry’s resi-

Texas Man Sentenced in Stolen Identity

Refund Fraud Scheme

dence found items present in the video on

Guidry’s cell phone, including clothes worn

On December 5, 2016, in Houston, Texas,

U.S. Postal Service to generate tax refunds

6, 2016, for preparing false tax returns and

by one of the minor victims who appeared

Antolin Julio Nazario, also known as

from the IRS. They directed the fraudulently

obstructing the IRS in the enforcement of

in the video. Authorities also seized a cell

Robinson Gomez Churon, was sentenced to

obtained tax refunds be disbursed as U.S.

federal income tax laws. According to court

phone and multiple computers. On two of

92 months in prison, three years of super-

Treasury checks. The refunds were then

documents, Oliphant was previously charged

Guidry’s external hard drives, authorities ul-

vised release and ordered to pay $807,096 in

used to obtain cash and goods for their own

and convicted of preparing dozens of false

timately discovered at least 164 images and

restitution for his role in a sophisticated tax

benefit. The current fraudulent tax refund

2006 through 2008 client tax returns though

28 videos of child pornography. Additionally,

fraud/identity theft scheme involving more

filings attributed to this couple resulted in a

Oliphant Tax Services in Huntsville. He

a cell phone contained at least three videos

than 800 victims. According to court docu-

$4,095,959 potential loss and an excess of

was released on bond in that case under a

of child pornography. As to the tax offense,

ments, Nazario’s wife, Thalia Diaz Camareno,

$800,000 paid out by the IRS.

condition that he not be involved in preparing

Guidry agreed the intended income tax loss

also known as Irene Carrero Echevarria, was

was between $250,000 and $550,000.

also convicted for her role in the scheme and

Press Release – https://www.justice.gov/

Oliphant resumed tax return preparation and

received 12 months and 1 day in prison. Both

usao-sdtx/pr/houston-man-sentenced-

continued to claim the same false deduc-

admitted that, from approximately June 2010

stolen-identity-refund-fraud-scheme

tions for unsuspecting clients while awaiting

tax returns other than his own. However,

IRS: Criminal Investigation Annual Report 2017

HOUSTON FIELD OFFICE CASE FILES

Texas Business Owner Sentenced to Prison

for Not Paying Approximately $18 Million in

Employment Taxes

sentencing in the earlier case. As part of the

million in fees and a total loss to the IRS of

and filed AMI’s employment tax returns.

scheme, Oliphant changed the name of his

another $400,457. Oliphant's plea agreement

business to "Tax Services" to make it appear

requires that he surrender approximately

he had stopped preparing client tax returns

$205,000 in bank accounts linked to the

and that someone else was the owner of his

scheme, his personal residence and three

On July 6, 2017, in Houston, Texas, business

delinquent returns for the quarters ending

tax preparation business. Oliphant allegedly

automobiles valued at $32,600 as restitution

owner Richard Floyd Tatum Jr. was sen-

in March 2010 through December 2012, but

attributed the fees to the nominal owner

to the IRS in both cases.

tenced to 36 months in prison, three years

made no payments of the taxes owed. Tatum

From March 2008 through December 2009,

Tatum filed false and delinquent employment

tax returns for AMI. In May 2013, Tatum filed

of supervised release and ordered to pay

withheld from his employees approximately

returns to make it appear the tax office had

Press Release – https://www.justice.gov/

restitution of $18,298,604 to the IRS. Ac-

$12 million in payroll taxes from March 2008

produced almost no taxable income. Oliphant

usao-sdtx/pr/local-tax-preparer-sentenced-

cording to court documents, Tatum owned

through December 2012, but did not pay

established a series of bank accounts in

federal-prison-again

Associated Marine & Industrial Staffing Inc.

any of this money to the IRS. Tatum also

others' names --including minors with

(AMI), an industrial staffing company that

failed to pay $6 million of AMI’s required

custodians other than himself, This way,

provided temporary labor to businesses in

share of Social Security and Medicare taxes

fees could first be deposited to accounts in

Texas and other states. Tatum employed

during the same quarters. Instead, he used

the names of the nominal owner of his tax

approximately 1,000 people and was

the money for his personal benefit. Tatum

office and others. He then transferred the

responsible for collecting, accounting and

admitted he caused a tax loss of more than

fees through these intermediate accounts

paying the IRS the payroll taxes withheld

$18 million.

into accounts in his own name. According

from AMI employees’ wages. Tatum had

to the plea agreement, Oliphant used this

significant control over AMI’s finances,

Press Release – https://www.justice.gov/

scheme to conceal his personal use of the

entered into contracts on behalf of AMI,

opa/pr/texas-business-owner-sentenced-

fees the business generated during the

signed checks including payroll and decided

prison-not-paying-approximately-18-million-

first prosecution . Oliphant generated $2

which creditors to pay. Tatum also signed

employment-taxes

of his tax office but manipulated those tax

IRS: Criminal Investigation Annual Report 2017

HOUSTON FIELD OFFICE CASE FILES

Texas Drug Ringleader, 10 Others

Sentenced for Money Laundering, Drug

Trafficking

the Dallas area for himself and others. The

Press Release – https://www.justice.gov/

organization used various stash houses and

usao-sdtx/pr/operation-trena-sin-trono-

business fronts in the Laredo area to receive

sends-leader-and-final-defendants-prison

and prepare the marijuana for transportation

On September 20, 2017, in Laredo, Texas,

by personal vehicles to a local warehouse

Erasmo Trejo-Nava, a Mexican national who

where it was unloaded and reloaded onto

resided in Laredo, was sentenced to 187

tractor trailers for transportation to the Dallas

months in prison and ordered to pay a money

area. Following delivery of marijuana loads

judgement of $5 million. His wife, Raquel

in the Dallas area, the Trejo Nava Organiza-

Margarita Ramos Jimenez, who also facili-

tion collected drug proceeds and arranged

tated money laundering, was sentenced to

to have them transported by couriers using

time served of 31 months in prison. Addition-

personal vehicles or tractor trailers to Laredo

ally, the couple will forfeit three residential

and on to Nuevo Laredo, Mexico. Over the

properties, a commercial property and drug

course of the conspiracy, which spanned

proceeds totaling $173,240. Trejo-Nava’s

from June 10, 2011, through June 4, 2013,

brother, Victor, of Mexico, and Jose Angel

Drug Enforcement Administration (DEA)

Trejo, of Laredo, received sentences of 130

agents made multiple seizures of marijuana

and 121 months in prison, respectively. Ac-

that total more than 10,000 kilograms. Seven

cording to court documents, Trejo-Nava was

other co-conspirators received sentences

the head of a drug trafficking organization

ranging from 50 to 151 months in prison. A

that received marijuana loads from Mexico

total of 26 defendants have been sentenced

and arranged to transport the marijuana to

in this case.

IRS: Criminal Investigation Annual Report 2017

ST. PAUL FIELD OFFICE

30 E 7TH ST, ST. PAUL MN, 55101 | 651.361.1531

THE ST. PAUL Field Office covers the states of Min-

Significant cases worked by St. Paul CI Special

nesota, Wisconsin, North and South Dakota and covers

Agents include:

five judicial districts. We work a variety of investigations including tax fraud, return preparer fraud, stolen

identity refund fraud, healthcare fraud, bankruptcy fraud

MINNESOTA

NORTH DAKOTA

Minnesota Couple Sentenced for Multi-MillionDollar Income Tax Refund Fraud Scheme

and Organized Crime Drug Enforcement Task Force

(OCDETF) cases. The St. Paul Field Office maintains

On November 17, 2016, in Minneapolis, Minnesota,

an outstanding relationship with the U.S. Attorney's

Mark Hammerschmidt was sentenced to 135 months

Office and works with federal, state and local law

in prison and ordered to pay $1.8 million in restitution.

enforcement agencies on various task forces, including

His wife, Ornella Hammerschmidt was sentenced to

OCDETF, High Intensity Drug Trafficking Area (HIDTA),

48 months in prison and ordered to pay $45,000 in

Joint Terrorism Task Force (JTTF), public corruption,

restitution. Mark Hammerschmidt pleaded guilty to two

bankruptcy fraud and healthcare fraud.

separate counts of conspiracy to defraud the United

States. Ornella pleaded guilty to aiding and abetting

SOUTH DAKOTA

The St. Paul Field Office has additional locations in the

false claims for refunds. From January 2011 through

following areas:

February 2013, Mark and Ornella Hammerschmidt

• Bismarck, ND

• Milwaukee, WI

operated an immigration and tax preparation business,

• Duluth, MN

• Minneapolis, MN

American Group, located in the states of Minnesota

• Eau Claire, WI

• Rapid City, SD

and Florida. They prepared and filed more than 1,000

• Fargo, ND

• Rochester, MN

fraudulent federal income tax returns. The defendants

• Green Bay, WI

• Sioux Falls, SD

attracted customers to American Group by misrepre-

• Madison, WI

WISCONSIN

senting their professional credentials and certifications.

“As the Acting United States Attorney for the District of Minnesota, I know, first hand, the value IRS CI agents bring

to our white collar and financial fraud criminal cases. The agents with whom we have worked in this office have been

invaluable and are an indispensable part of the criminal prosecution team. They know how to conduct sophisticated

financial investigations in some of our most complicated criminal cases.” — GREGORY G. BROOKER, ACTING US ATTORNEY,

DISTRICT OF MINNESOTA

IRS: Criminal Investigation Annual Report 2017

ST. PAUL FIELD OFFICE CASE FILES

Most notably, Ornella Hammerschmidt

to the clients, including problems with the

States. Kroupa was a former judge appointed

expenses. Fackler also caused Grassroots

falsely represented herself as a licensed

IRS and with their immigration status. Mark

to the U.S. Tax Court on June 13, 2003, for

Consulting business receipts to be under-

immigration attorney. The Hammerschmidts

Hammerschmidts sought approximately $1.8

a term of 15 years. During the same period,

stated by approximately $450,000 because

filed hundreds of federal and state tax

million in tax refunds based on the fraudulent

Kroupa was married to Robert Fackler, a

he fraudulently deducted business expenses

returns reporting incorrect filing statuses,

tax returns he filed.

self-employed lobbyist and political consul-

which had previously been reimbursed. As a

tant, who owned and operated a business

result, the defendants caused the amount of

false income for household help, fictitious

businesses and business losses, fraudulent

Press Release – https://www.justice.gov/

known as Grassroots Consulting. From

adjusted gross income, taxable income and

child care credits and education credits, to

usao-mn/pr/minnesota-couple-sentenced-

2004 to 2013, the couple owned a home in

total tax shown on their income tax returns

obtain unwarranted income tax refunds. The

multi-million-dollar-income-tax-refund-fraud-

Plymouth, Minnesota. From 2007 to 2013,

to be understated. In addition, Kroupa and

defendants concealed their involvement as

scheme

they also leased a second residence in

Fackler made a series of other false claims

fraudulent return preparers by intentionally

Easton, Maryland, where Kroupa lived while

on their tax returns, including failing to report

not signing the tax returns on the designated

fulfilling her duties as a tax court judge in

approximately $44,520 that she received

signature line for paid preparers. They also

Washington, D.C. Between 2002 and 2012,

from a 2010 land sale in South Dakota. The

Kroupa and Fackler conspired to obstruct the

defendants also falsely claimed financial

IRS from accurately determining their joint

insolvency to avoid paying tax on $33,031for

income taxes. As part of the conspiracy, the

cancellation of indebtedness income. Finally,

couple worked together each year to compile

Kroupa and Fackler deliberately concealed

falsely reported their business addresses

and bank accounts and used the addresses

and bank accounts of their taxpayer clients

Former U.S. Tax Court Judge and Husband

Sentenced for Multi-Year Tax Fraud

Conspiracy

instead. Many of the defendants’ clients

were non-or-limited English speakers, who

On June 22, 2017, in Minneapolis, Min-

numerous personal expenses for inclusion

documents from their tax preparer and an

relied on the defendants to properly and

nesota, Diane L. Kroupa and her husband,

as “business expenses” for Grassroots

IRS tax compliance officer during an audit

legally prepare their taxes. The false returns

Robert E. Fackler, were sentenced to 34

Consulting in their joint tax return. In total,

for their 2004 and 2005 tax returns. During

the Hammerschmidts filed on behalf of the

months and 24 months in prison, respec-

from 2004 through 2010, the defendants

a second audit in 2012, the couple caused

taxpayer clients caused substantial harm

tively, for conspiring to defraud the United

fraudulently deducted at least $500,000 of

false and misleading documents to be

personal expenses as Schedule C business

IRS: Criminal Investigation Annual Report 2017

ST. PAUL FIELD OFFICE CASE FILES

delivered to an IRS employee to convince

the employee that certain personal expenses

Franklin Family Sentenced in Tax

Conspiracy

were actually business expenses of Grass-

false federal return based on his failure to

the IRS to cover penalties and interest on the

report cash he was paid under the table as

taxes the defendants attempted to evade.

a general manager of one of the Bouraxis’

Finally, Paul Bouraxis will assist in transfer-

roots Consulting. After the IRS requested

On November 18, 2016, in Milwaukee,

restaurants. Paul Bouraxis was sentenced

ring funds to the IRS from a bank account

documents relating to their tax returns,

Wisconsin, Paul Bouraxis, his wife, Freida

to two years in federal prison, and Andreas

held in Greece. Separately, Awadallah paid

Kroupa and Fackler removed certain items

Bouraxis, son, Andreas Bouraxis, and son-in-

Bouraxis was sentenced to one year and one

approximately $40,000 to the IRS for the

from their personal tax files before giving

law, Reiad “Ray” Awadallah, were sentenced

day in prison. Freida Bouraxis and Awadal-

taxes he underpaid, as well as penalties and

them to their tax preparer. They did this

for federal tax offenses. Paul, Freida and

lah were each sentenced to three years of

interest.

because the documents could reveal they

Andreas Bouraxis pleaded guilty to conspir-

probation, during which they will spend six

had illegally deducted numerous personal

ing to defraud the IRS, by skimming cash

months in home confinement. Paul, Freida

Press Release – https://www.justice.gov/

expenses. Between 2004 and 2010, Kroupa

from various restaurants they operated in the

and Andreas Bouraxis were also ordered to

usao-edwi/pr/franklin-family-sentenced-tax-

and Fackler deliberately understated their

Milwaukee area, failing to report substantial

pay jointly $1.4 million in restitution, which

conspiracy

taxable income by approximately $1,000,000

income on their personal income tax returns,

will be collected from funds the IRS seized

and understated the amount of tax they

paying employees under the table in cash,

from the defendants’ businesses and safe

owed by at least $450,000.

and failing to pay federal payroll taxes on

deposit boxes. The defendants agreed to

Embezzler Received Prison Term for Wire

Fraud and Income Tax Evasion

those cash wages. The defendants skimmed

forfeit an additional $442,000 of the seized

Press Release – https://www.justice.gov/

more than $3 million from their businesses

funds to the United States to settle a related

usao-mn/pr/former-united-states-tax-court-

and underreported and underpaid federal

civil forfeiture action. Federal agents also

judge-and-husband-sentenced-multi-year-

income and payroll taxes by approximately

seized gold and silver coins and bars, as well

On November 3, 2016, in Madison, Wis-

tax-fraud

$1.4 million. Paul Bouraxis also pleaded

as jewelry, from the defendants’ business

consin, Lisa Buchholz was sentenced to 36

guilty to one count of tax evasion. Awadal-

and Paul and Freida’s residence. All items

months in prison, three years supervised

lah pleaded guilty to one count of filing a

will be sold and the proceeds will be paid to

release, and ordered to pay $193,909 in

IRS: Criminal Investigation Annual Report 2017

ST. PAUL FIELD OFFICE CASE FILES

restitution to the victim of her fraud scheme.

Buchholz pleaded guilty to wire fraud and

PureChoice Founder Gets 22 Years in

Bankruptcy and Wire Fraud Scheme

income tax evasion on July 28, 2016. Ac-

numerous items of personal property and

thousands of dollars in personal accounts.

Reichel told investors for years that the

cording to court documents, while employed

On June 28, 2017, in St. Paul, Minnesota,

company was on the verge of success when

as a bookkeeper for Four Seasons Wood

Bryan Reichel was sentenced to 264 months

it was actually accumulating tens of millions

Products (FSWP) in Frederic, Wisconsin,

in prison, three years supervised release

of dollars in debt and new investments were

from May 2008 until June 2012, Buchholz

and ordered to pay $22.3 million in restitu-

being used to pay previous investors and

devised a scheme to defraud the company.

tion to victims and a $7.6 million forfeiture

to enrich Reichel. Between 1992 and 2011,

The indictment further alleged that Buchholz

judgement. In November 2016, Reichel was

investors lost approximately $25 million.

failed to file income tax returns for 2008,

convicted of wire fraud, bankruptcy fraud and

2009, 2010 and 2011, and that she commit-

making false statements for lying to investors

Press Release – https://www.justice.gov/

ted income tax evasion in 2011 by making

to get them to invest in his start-up company,

usao-mn/pr/purechoice-founder-sentenced-

false statements to an IRS criminal investiga-

PureChoice. Several of Reichel’s victims had

22-years-prison-28-million-dollar-investment-

tor during an interview in 2013. Buchholz

demanded immediate payment of millions of

fraud-scheme

caused a fraud loss of $172,176 to FSWP,

dollars they had “invested.” To avoid repay-

and a tax loss of $111,553 to the IRS. FSWP

ment and protect his assets, in April 2011,

also incurred more than $21,000 in investiga-

Reichel filed for bankruptcy in the District of

tive costs due to Buchholz’s misconduct.

Minnesota, giving rise to an automatic stay

and thereby preventing lawsuits and judg-

Press Release – https://www.justice.gov/

ments from being entered by the victims.

usao-wdwi/pr/embezzler-sentenced-3-years-

As part of the scheme, Reichel made false

fraud-tax-evasion

statements in his bankruptcy case to conceal

IRS: Criminal Investigation Annual Report 2017

ST. LOUIS FIELD OFFICE

1222 SPRUCE ST, ST. LOUIS MO, 63103 | 314.339.1400

THE ST. LOUIS Field Office covers the states of

Missouri, Iowa, Kansas and Nebraska and six judicial

Kansas Man Sentenced to Prison for Federal Tax

Evasion

districts. We work a diverse mix of criminal investigaMISSOURI

NEBRASKA

KANSAS

tions across this large geographic area that includes

On May 26, 2017, in Topeka, Kansas, David G. Pflum

tax evasion, failure to pay employment taxes, return

was sentenced to five years in federal prison for tax

preparer fraud and narcotics. We also hold pivotal roles

evasion and ordered to pay more than $8.4 million in

on the respective U.S Attorney’s priority task forces,

restitution. Pflum, owner of Coil Springs Specialties,

including cybercrime, financial fraud, Organized Crime

was found guilty in a jury trial in January on one count

Drug Enforcement Task Force (OCDETF), and joint

of tax evasion and one count of obstructing the IRS.

terrorism task forces.

During the trial, the prosecutor presented evidence

that Pflum submitted false documents claiming he had

The St. Louis Field Office has additional locations in the

less than $475 in assets and his income was $470 a

following areas:

month. In fact, he owned more than $2 million worth

• Cedar Rapids, IA

• Omaha, NE

of real estate and his income was more than $16,000 a

• Chesterfield, MO

• Overland Park, KS

month. Pflum urged renters, buyers and other people

• Des Moines, IA

• Springfield, MO

indebted to him to ignore IRS collection efforts.

• Jefferson City, MO

• Wichita, KS

• Lee's Summit, MO

Press Release – https://www.justice.gov/usao-ks/pr/

st-marys-man-sentenced-tax-evasion

Significant cases worked by St. Louis CI Special

Agents include:

IOWA

IRS: Criminal Investigation Annual Report 2017

ST. LOUIS FIELD OFFICE CASE FILES

Pastor Sentenced to Fraud and Filing False

Tax Return

actual loss to victims of approximately $1.08

She must also serve a three-year term of

years-imprisonment-tax-fraud-identity-theft-

million.

supervised release after her prison term.

and-making-false

Robinson admitted that, from May 2011 to

On July 11, 2017, in St. Louis, Missouri, Mark

Press Release – https://www.justice.gov/

February 2013, she filed numerous false and

Q. Stafford was sentenced to 51 months

usao-edmo/pr/pastor-sentenced-fraud-and-

fraudulent tax returns. She further admitted

in prison after pleading guilty in March to

filing-false-tax-return

that she filed these returns in her name

California Man Sentenced for $460,000

Fraud Scheme

charges of mail fraud and filing a false tax

and the names of some victims who were

return relating to a large-scale investment

unaware Robinson was using their identi-

fraud arising out of his company, the Stafford

ties to file fraudulent returns. Robinson also

On August 24, 2017, in Kansas City,

admitted that because of these fraudulent

Missouri, Michael Keefe White was sen-

returns, she received tax refunds from the

tenced to 111 months in prison and ordered

Financial Firm. Stafford, who was also a

minister at New Birth Powerplex Ministries in

Iowa Woman Sentenced for Tax Fraud,

Identity Theft

IRS for which she was not entitled and

to pay $288,769 in restitution. White

of the Stafford Financial Firm that their

On December 28, 2016, in Cedar Rapids,

stole money from the government. Finally,

previously pleaded guilty to bank fraud,

funds would be placed with Quest Financial

Iowa, Kaeisha Robinson was sentenced to

Robinson admitted that, from October 2011

aggravated identity theft and money launder-

Holdings or Gain Capital Group. However,,

84 months in prison after pleading guilty to

through July 2013, she lied on forms she

ing. White admitted he obtained checks

Stafford did not open any accounts with

one count of aggravated identity theft, one

completed to receive Section 8 housing

stolen from the mail, then used counterfeit

either Quest Financial Holdings or Gain

count of theft of government property and

assistance by failing to report all her income.

identification (such as driver’s licenses with

Capital Group. Instead, he deposited the

one count of making false statements to a

As a result, Robinson received $12,143 in

his photo and the name of a victim) to open

clients' funds into his own accounts at Gain

government agency. In addition, a special

housing assistance that she was not

bank accounts in Missouri and other states

Capital Group where he then used them for

assessment of $300 was imposed, and she

entitled to.

in which to deposit the stolen checks and

his own personal benefit. Stafford obtained

was ordered to make $336,380 in restitution

approximately $1.26 million in proceeds from

to the IRS and $12,143 in restitution to the

Press Release – https://www.justice.gov/

were modeled from the stolen checks for an

approximately 31 victims and caused an

Eastern Iowa Regional Housing Authority.

usao-ndia/pr/woman-sentenced-seven-

attempted fraud amount of at least $977,441.

North St. Louis, falsely represented to clients

counterfeit checks. The counterfeit checks

IRS: Criminal Investigation Annual Report 2017

ST. LOUIS FIELD OFFICE CASE FILES

White then withdrew or wire transferred the

the Internal Revenue Code. Womack failed

money out of the account. White laundered

to report her offshore holdings as required by

his bank fraud proceeds through gold coin

law to hide income of more than $6 million

companies in California.

from the IRS. Womack orchestrated an

intricate web of offshore accounts, trusts,

Press Release – https://www.justice.gov/

nominees and shell companies to conceal

usao-wdmo/pr/california-man-sentenced-

millions of dollars in unreported income.

460000-fraud-scheme

She hid her ownership of shell companies

and trusts in the Cayman Islands to conceal

income earned in the United States, and

transferred it to the Cayman Islands to grow

Mission Hills Woman Sentenced for Lying

About Cayman Islands Businesses

tax-free until she chose to repatriate it to the

United States. This resulted in a criminal tax

loss of $1,704,421.

On July 17, 2017, in Kansas City, Missouri,

Verna Cheryl Womack, of Mission Hills, was

Press Release – https://www.justice.

sentenced to 18 months in prison without

gov/usao-wdmo/pr/mission-hills-woman-

parole and ordered to pay $1,704,421 in

sentenced-lying-about-cayman-islands-busi-

restitution to the IRS, which she paid. On

nesses

April 5, 2016, Womack pleaded guilty to

testifying falsely while under oath with the

intent to impede the due administration of

IRS: Criminal Investigation Annual Report 2017

NEW ORLEANS FIELD OFFICE

600 S. MAESTRI PLACE, NEW ORLEANS LA, 70003

THE NEW ORLEANS Field Office covers the states

Significant cases worked by New Orleans CI Special

of Louisiana and Mississippi, where the special agents

Agents include:

service five judicial districts. The field office works a

variety of casework, to include public corruption tax

LOUISIANA

crimes, Organized Crime Drug Enforcement Task Force

(OCDETF) investigations, and has an acute focus on

Former Commissioner of Mississippi Department of

Corrections Sentenced to Over 19 Years in Federal

Prison

return preparer fraud and Stolen Identity Refund Fraud

(SIRF) investigations, which are relevant to the needs

On May 24, 2017, in Jackson, Mississippi, Christopher

and priorities of our local law enforcement partner-

B. Epps, former Commissioner for the Mississippi

ships. Special agents of the New Orleans Field Office

Department of Corrections was sentenced to 235

are represented on all area task forces and enjoy an

months in prison and ordered to pay a $100,000

excellent working relationship with our local, state and

fine. Epps previously pleaded guilty to one count of

federal counterparts.

money laundering conspiracy and one count of filing a

false tax return. Epps accepted bribes and kickbacks

MISSISSIPPI

The New Orleans Field Office has additional locations

in exchange for awarding or directing the award of

in the following areas:

MDOC contracts, leases or work to Cecil McCrory’s

• Baton Rouge, LA

• Lafayette, LA

companies or to companies employing McCrory as a

• Gulfport, MS

• Oxford, MS

consultant. McCrory secretly paid Epps either in cash,

• Hattiesburg, MS

• Shreveport, LA

through checks paying off Epps’s home mortgage,

• Jackson, MS

through wire transfers paying the loan on Epps’s beach

“Our district has prosecuted many criminal tax cases such as abusive tax return preparers, financial institution fraud,

healthcare fraud, identity theft, money laundering, narcotics-related investigations, public corruption crimes and non-filer

enforcement. The U. S. Attorney’s Office and the IRS Criminal Investigation Special Agents that we work with every

day are committed to vigorously investigating and prosecuting these crimes in order to maintain the public trust and the

integrity of our tax laws.” — ALEXANDER VAN HOOK , ACTING U.S. ATTORNEY, WESTERN DISTRICT OF LOUISIANA

IRS: Criminal Investigation Annual Report 2017

NEW ORLEANS FIELD OFFICE CASE FILES

condominium or through wire transfers to

investment accounts owned by Epps. Epps

illegally structured the deposits of cash

Louisiana Check Cashers Sentenced for

Conspiracy and Filing False Income

Tax Return

received from McCrory into Epps’s various

ordered to forfeit $4.1 million. The Wije-

million in 2013. Despite this large volume of

tunges owned VJ Discount Inc., a Louisiana

business, the Wijentunges’ individual income

corporation that operated a convenience

tax returns reported total income of less than

store and check cashing business in Kenner.

$100,000 per year.

bank accounts, or used the cash to purchase

On November 17, 2016, in New Orleans,

Susantha Wijetunge, VJ Discount Inc. and

cashier’s checks, all in amounts less than

Louisiana, Susantha Wijetunge, (also known

others cashed, for an inflated fee, fraudu-

Press Release – https://www.justice.gov/

$10,000. This structuring alone reached

as VJ) was sentenced to 44 months in prison.

lently obtained tax refund checks for multiple

opa/pr/louisiana-check-cashers-sentenced-

almost $1 million from January 2008 through

His wife, Manula Wijetunge, (also known

co-conspirators. These transactions often

conspiracy-and-filing-false-income-tax-return

June 2014. Epps further concealed these

as Manu), was sentenced to three years of

involved multiple checks and tens of thou-

crimes by filing false tax returns from 2008

probation for crimes related to the operation

sands of dollars. In an attempt toTo conceal

through 2013, whereby he failed to report

of their check cashing business, VJ Discount

this illegal activity, Susantha Wijetunge and

the income on his tax returns.

Inc. In addition to the prison term, Susantha

others failed to file, or filed false, currency

Wijetunge was ordered to serve three years

transaction reports with the government.

Press Release – https://www.justice.gov/

of supervised release, pay a fine of $750,000

Susantha Wijetunge also filed multiple false

usao-sdms/pr/former-commissioner-missis-

and pay $562,500 in restitution to the IRS.

individual and corporate income tax returns

sippi-department-corrections-sentenced-

Manula Wijetunge was ordered to pay a fine

that underreported income. The Wijetunges

On May 1, 2017, Shreveport, Louisiana,

over-19-years-federal

of $250,000 and $208,125 in restitution to

admitted that VJ Discount Inc. had third-

Shannon A. Brumfield, was sentenced to 94

the IRS for her role in the business and for

party check deposits totaling more than $59

months in prison, three years of supervised

filing a false tax return. The Wijetunges were

million in 2011, $47 million in 2012, and $66

release and ordered to pay $386,141. Brum-

Mississippi Sheriff’s Office Employee

Sentenced for Using Stolen Identities to

File Fraudulent Tax Returns

“The U.S. Attorney’s Office for the Eastern District of Louisiana salutes the Internal Revenue Service-Criminal Investigation. The Criminal Investigation’s agents are important team members in our fight against violations of the U.S. Income

Tax Code. The public benefits whenever an CI agent assists with investigations related to financial crimes whose

impact are extensive and far-reaching,” — DUANE A. EVANS, ACTING US ATTORNEY, EASTERN DISTRICT OF LOUISIANA

IRS: Criminal Investigation Annual Report 2017

NEW ORLEANS FIELD OFFICE CASE FILES

field was part of a scheme to file fraudulent

income tax returns using stolen identities

and causing the refunds to be mailed to post

Former District Attorney and Son

Sentenced for Wire Fraud, Money

Laundering

office boxes in Louisiana. Brumfield used

Reed Campaign. They did this by using

Baton Rouge. According to court documents,

donations to Walter P. Reed’s campaign to

the defendants were convicted of conspiring

pay for goods and services unrelated to the

to distribute significant amounts of heroin

campaign or to the holding of public office, in

that had been pressed to resemble oxyco-

her position as a lieutenant at Hinds County

On April 5, 2017, in New Orleans, Louisiana,

amounts that grossly exceeded the value of

done pills. The heroin had been pressed into

Detention Center to access the Hinds County

Walter P. Reed, and his son Steven P. Reed,

the services provided.

pills while in California and then shipped into

Jail Management System and steal names

both of Covington, were sentenced to 48

and Social Security numbers of inmates

months in prison and five years of probation,

Press Release – https://www.justice.gov/

disguising heroin as oxycodone, the traffick-

and other individuals. Brumfield and other

respectively. Walter Reed was also ordered

usao-edla/pr/former-district-attorney-walter-

ers sought the higher street price paid for

members of the conspiracy not named in the

to pay $572,000 in restitution, $40,000 to

p-reed-and-his-son-steven-p-reed-sentenced

oxycodone. This heroin-trafficking operation

indictment used the stolen identities to file

the IRS, and a $15,000 fine and ordered

was identified as part of a substantial heroin-

fictitious federal tax returns from May 2011

to forfeit $609,217. Additionally, Walter

trafficking and money laundering conspiracy.

until December 2012. Based on the fraudu-

and Steven Reed are jointly and severally

Six other defendants were previously sen-

lent returns, the IRS issued tax refunds and

responsible for $46,200 in forfeiture. Walter

mailed them to U.S. post office boxes

Reed was convicted of conspiracy to commit

in Tallulah.

wire fraud and money laundering, wire

the Baton Rouge area for distribution. By

Heroin Traffickers Sentenced to Federal

Prison for Roles in Multi-State Conspiracy

tenced in this matter.

Press Release – https://www.justice.gov/

fraud, money laundering, false statements

On September 15, 2017, in Baton Rouge,

usao-mdla/pr/heroin-traffickers-sentenced-

Press Release – https://www.justice.gov/

on income tax return and mail fraud. Steven

Louisiana, Logan Brannon, Aaron Lambert,

federal-prison-roles-multi-state-conspiracy

usao-wdla/pr/mississippi-sheriff-s-office-

Reed was convicted of conspiracy to commit

Justin Scott, and Efrain Barajas were sen-

employee-sentenced-using-stolen-identities-

wire fraud and money laundering, wire fraud

tenced to 318 months, respectively for their

file-fraudulent

and money laundering. The Reeds devised

roles in a drug-trafficking conspiracy involv-

a scheme to defraud the Walter Reed

ing shipments of heroin from California to

Campaign and contributors to the Walter

IRS: Criminal Investigation Annual Report 2017

CHICAGO FIELD OFFICE

230 S DEARBORN STREET, CHICAGO IL, 60604 | 312.292.4502

THE CHICAGO FIELD Office covers the entire states

of Illinois and Indiana, as well as the Davenport, Iowa,

Indiana Tax Preparer Sentenced in Scheme to File

Over 2,300 Fraudulent Returns

post-of-duty. We work a wide variety of cases and have

great relationships with the U.S. Attorney’s Offices.

On June 22, 2017, in Indianapolis, Indiana, David R.

Our agents sit on various task forces and work complex

Franklin wa

This text is long and has been trimmed here. Open the source document for the complete record.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.