Vroom vroom; insecurities; catalytic catastrophe; and other highlights of recent tax cases.
Jefferson City, Missouri: Tax preparer Josiah Mator Jr. has been sentenced to 33 months in prison for filing false returns for himself and others.
Convicted last summer, Mator is a U.S. citizen who moved to this country from Liberia in 2001 and who prepared and e-filed returns for individuals in the Liberian community and other friends and acquaintances for 2010 through 2015. He did not have a registered tax prep business but used Express 1040 software to prepare clients’ returns from his home.
Individuals received substantial but undeserved refunds in 53 fraudulent claims related to the scheme. Mator’s conduct resulted in a tax loss of $200,292.
Mator also was found guilty of filing a false federal income tax return for two individuals; the fraudulent return reported $16,000 in unreimbursed employee business expenses in 2015 although Mator knew that these clients had no expenses related to their employment.
He was found guilty as well of filing a false federal income tax return for 2015, claiming that his adjusted gross income was $16,552 and his taxable income was $0 while knowing that he did not include the business income from his tax prep service.
The court ordered him to pay a fine of $1,000 and $200,292 in restitution to the federal government and to the state of Missouri.
Chicago: A federal jury has convicted Anthony Sabaini, of Naperville, Illinois, a former special agent with the U.S. Department of Homeland Security’s investigative arm, on tax, structuring and concealment offenses.
Sabaini was assigned to the Homeland Security Investigations office in Oakbrook Terrace, Illinois. He maintained a corrupt relationship with an HSI informant whom he tipped off to sensitive investigations and protected from other federal law enforcement investigations. In exchange, the informant paid Sabaini at least $50,000. Sabaini also stole money from HSI that was earmarked for investigative activity and stole cash from drug dealers. He deposited more than $250,000 in cash into a bank account for which he was the sole signatory, making deposits through more than 162 transactions in amounts of less than $10,000.
The tax convictions pertained to Sabaini filing federal returns that underreported his income.
New York: A federal court has permanently enjoined tax preparer Melida Portorreal and her Brooklyn-based business from preparing federal returns for others and from owning, operating or working for any prep business in the future.
The civil complaint alleged that Portorreal, through her company, International Travel Multi & Tax Corp., prepared fraudulent federal income tax returns for others. According to the complaint, she prepared and filed fraudulent federal returns that included: false filing statuses, fabricated itemized deductions pertaining to student loans, educator expenses and employee business expense deductions, fabricated business expenses and non-deductible expenses on clients’ returns to obtain entitlement to the Earned Income Tax Credit and the Child Tax Credit.
The IRS estimated that Portorreal filed returns due for the 2018, 2019 and 2020 that cost the U.S. more than $1 million in each year.
Portorreal and her company consented to the injunction, which permits the government to conduct post-judgment discovery. They must send notice of the injunction to each person for whom she and her company prepared federal returns, amended returns or claims for refund from Feb. 25, 2021, through May 31, 2022, and post an electronic copy of the injunction on any business social media profile maintained or created over the next five years.
Tukwila, Washington: Restaurant owner Keovilayvanh Rinthalukay has been sentenced to 18 months in prison for failure to pay over taxes.
Rinthalukay, who pleaded guilty in February, admitted that between 2015 and 2019 he withheld Medicare, Social Security and federal income taxes from employees’ paychecks but pocketed the money. In all, Rinthalukay failed to pay at least $926,092.
Instead, he used the money for his personal expenses including buying property and a motorcycle, and for paying private school tuition for his children. Rinthalukay owns area homes that together are valued at more than $2 million.
He has repaid a large amount of the taxes, but has also not paid his personal federal income taxes since 1998. The IRS is reviewing that matter.
Boston: Two men have been sentenced for a fraud that cost investors more than $6 million.
Thomas Renison, of South Glastonbury, Connecticut, was sentenced to four years in prison and three years of supervised release and ordered to pay forfeiture of $526,120 and restitution of $6,240,983. In 2020, Renison pleaded guilty to one count of conspiracy to commit wire fraud and two counts of filing false returns.
Timothy J. Allcott, of Peabody, Massachusetts, was sentenced to 30 months in prison and three years of supervised release. He was also ordered to pay forfeiture of $5,052,661 and $6,098,173 in restitution. Also in 2020, he pleaded guilty to one count of conspiracy to commit wire fraud.
Renison formerly owned ARO Equity, a privately held investment company that purportedly pooled money from investors and invested in various New England-based businesses. Between 2015 and 2018, Renison and Allcott fraudulently raised and solicited funds for ARO by misrepresenting to victims how their money would be invested, ARO’s investment track record and the safety of the investments. Allcott and Renison also concealed the latter’s ownership interest and affiliation with ARO because the Securities and Exchange Commission and regulators in Maine had previously barred Renison from working in the securities industry.
ARO took in more than $6 million from investors but invested only half of that amount. Of the investments that ARO made, most yielded significant losses. Allcott and Renison told the victims that the investments were doing well; ARO paid monthly payments to earlier investors using funds raised from later investors.
The two disguised commissions paid to Renison as loans to Renison’s wife, which allowed them to continue to conceal Renison’s ownership stake in the company.
Renison also failed to declare more than half a million dollars of commission income and failed to pay more than $150,000 in taxes.
Columbia, South Carolina: Tax preparer Georgina Gonzalez has pleaded guilty to conspiracy to defraud the U.S. by preparing and filing false returns.
Gonzalez, formerly of Miami, worked as a tax preparer since at least 2013. For the 2016 and 2017 seasons, she temporarily relocated from Florida to South Carolina to prepare returns and manage multiple local locations of a tax prep business. At these offices, Gonzalez conspired to inflate client refunds by preparing returns that falsely claimed, among other things, business losses, household help income and American Opportunity and Education Tax Credits. Gonzalez and her co-conspirators charged clients up to $999 for preparing each return. She caused a tax loss to the IRS of more than $420,000.
Gonzalez faces a maximum sentence of five years in prison, as well as a period of supervised release, restitution and monetary penalties.
Kernersville, North Carolina: Business owner Brandon Michalak has been sentenced to 15 months in prison and ordered to pay restitution of $956,028 to the IRS.
Michalak, who pleaded guilty in January, was part-owner of the metal recycling business Sarah’s Recycling that specialized in the collection and bulk resale of used catalytic converters.
From 2014 to 2018, he omitted $11,022,953 in sales generated by his business. Each year, Michalak reported minimal taxable income and claimed the EITC even as he led a lavish lifestyle that included home and property purchases without financing, home renovations, pool installation, jewelry purchases in cash, and at least 20 vehicle purchases for himself and family members.
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