Tax Fraud Blotter: Treated like royalty

Go Pats; on the hook; two down; and other highlights of recent tax cases.

Buxton, Maine: Christine Bangs has been sentenced to a year and a day in prison to be followed by three years of supervised release for wire fraud and for making and subscribing a false return.

From March 2014 to June 2021, Bangs used her position as operations manager and access to her employer’s credit card, bank accounts and payroll for her own gain. She used the credit card to make some $197,936 in personal purchases, including $12,414.96 for tickets to a New England Patriots game; she stole an additional $255,645 by making approximately 213 wire transfers over more than seven years.

Bangs also omitted $183,386 in income when filing a personal tax return in 2020.

She was ordered to pay $536,352.33 in restitution to her victim and $70,323 to the Internal Revenue Service for taxes on the unreported income from the fraud that she failed to report. She was also ordered to forfeit any property from the proceeds of her crime, including $105,009.53 seized from a bank account.

New Port Richey, Florida: Christopher Garraty, formerly of Newport and East Greenwich, Rhode Island, has pleaded guilty to evading income taxes.

He worked as a commercial fisherman and deckhand for fishing companies operating out of New Bedford, Massachusetts. Despite earning substantial income, Garraty did not file until 2012 any federal income tax returns for 2002 through 2011. When he filed the delinquent returns, he reported that he owed some $234,497 in taxes for those nine years. But even after reporting that he owed taxes, Garraty made no payments to the IRS.

Garraty also filed no returns for 2015 through 2018 despite earning some $600,000 in fishing income across those years and owing some $179,382 in taxes.

He regularly cashed paychecks at the issuing bank to conceal the source and disposition of his income and did not deposit a significant portion of his cashed paychecks into his bank accounts. When his paycheck exceeded $10,000, Garraty frequently cashed the paycheck at the issuing bank and then immediately made multiple cash deposits of less than $10,000 into his bank account to avoid triggering the bank’s reporting requirements.

In total, Garraty caused a tax loss to the IRS of some $413,879.

Sentencing is Sept. 17. He faces up to five years in prison, a period of supervised release, restitution and monetary penalties.

Miami: Two tax preparers have been sentenced for their involvement in a scheme to file false returns.

Napoleon Tabot, 60, of Chandler, Arizona, was sentenced to 18 months in prison; co-defendant Lovet Ayuk-Ako, 40, of Silver Spring, Maryland, was sentenced to 30 months.

Tabot recruited individual tax return clients (co-workers at an employer in Hollywood, Florida) for Ayuk-Ako’s tax prep business, Money Back Tax, in Maryland. Money Back had clients in Florida, Maryland and Washington, D.C.

After Tabot had collected personal ID and tax information from his client victims, he would provide it to conspirators Ayuk-Ako and Arnold Zio for prep at Money Back. Ayuk-Ako and Zio filed and caused to be filed false returns that claimed inflated refunds and directed all or part of the refunds into bank accounts under their control, without taxpayers’ knowledge or consent.

The United States suffered a tax loss of more than $500,000.

Tabot and Ayuk-Ako must also serve three years of supervised release and pay $397,818.00 in restitution to the U.S. government. Zio remains a fugitive.

Scranton, Pennsylvania: Danny Sing, 61, of Philadelphia, has been sentenced to 27 months in prison and Mark Holmes, 67, of Muskogee, Oklahoma, has been sentenced to 18 months in prison for commercial bribery and tax fraud.

Sing pleaded guilty to conspiring with other individuals to failing to withhold and remit some $1.36 million in employment taxes to the IRS.

Global Staffing Services Inc. leased temporary employees to companies in Pennsylvania and New York. Sing and his conspirators paid Global employees in cash, paid themselves in cash and cashed all checks received from Global clients to conceal the income and wages from the IRS. Sing also pleaded guilty to providing more than some $400,000 in bribes and kickbacks to managers and supervisors at Global clients.

In total, Sing and his conspirators obtained for their staffing companies more than $16.5 million from a Pennsylvania food services company between 2013 and 2020.

Sing further failed to file personal returns and pay federal income tax for 2014 through 2020, despite spending more than $1 million at local casinos during that time. This resulted in more than $390,000 in tax losses to the IRS.

Mark Holmes pleaded guilty to accepting, as the GM of a Pennsylvania food services company, some $400,000 in bribes and kickbacks from the owners and operators of Global and Penns Independent Staffing, another staffing company, in exchange for hiring their employees. The two staffing companies, in turn, received some $7.8 million from Holmes’s employer.

Holmes also pleaded guilty to failing to remit some $135,000 in employment taxes to the IRS that were owed by Encore Staffing Solutions, another temporary staffing company that he owned and operated. The criminal activities occurred between 2014 and 2020.

Five others were previously prosecuted in this investigation, including Madeline Nieves, 49, of Plains, Pennsylvania, who pleaded guilty to a tax fraud conspiracy; Nari Lam, 31, of Wilmington, Delaware, who pleaded guilty to failing to remit employment taxes to the IRS; and two others who pleaded guilty to accepting bribes.

Indianapolis: CPA Jason L. Crace has pleaded guilty to assisting in the preparation of false returns for clients who participated in an illegal tax shelter. 

Between 2013 and 2022, he prepared income tax returns for clients that claimed millions in false deductions for “royalty payments.” As Crace knew, these payments were circular flows of money to give the appearance of genuine business expenses. Participants sent their money to bank accounts controlled by scheme promoters, who then sent the money back to different bank accounts that the participants controlled. Participants retained control of the money they transferred while falsely deducting the transfers as business expenses, with the amount of “royalties” driven by the amount of income participants wanted to shelter from the IRS.

Crace’s preparation of false returns claiming fraudulent deductions caused a loss to the IRS of at least $2,532,936.

Sentencing is Jan. 14. He faces a maximum of three years in prison, as well as a period of supervised release, restitution and monetary penalties. 

Dumfries, Virginia: Exec Gail Jones, 57, has been sentenced to 15 months in prison and ordered to pay $950,100.18 in restitution for not paying employment taxes to the IRS.

Jones was a co-owner and director, vice president and president of S&G Property Management, a parcel delivery service. Between 2013 and 2018, Jones caused income, Social Security and Medicare taxes to be withheld from S&G employees but she did not pay those withholdings to the IRS.

To thwart potential IRS levies and other collection activities, she opened new bank accounts using other individuals’ Social Security numbers and EINs and variations on the name of her business. Between December 2016 and December 2018, she withdrew more than $450,000 in cash from business bank accounts in lieu of paying the taxes owed.

She caused a federal tax loss of some $950,000. 

Additionally, Jones applied for two Paycheck Protection Program loans even though S&G was no longer operating. She fraudulently received $20,800 in loans.