Tax Fraud Blotter: A jab well done

Past tax problems, too; blaming the law; on pins and needles; and other highlights of recent tax cases.

Massapequa Park, New York: Rex Heuermann, the architect accused of killing sex workers on Long Island’s Gilgo Beach in 2010, has been years late in paying hundreds of thousands of dollars in taxes, according to news reports.

CNN reported that Heuermann “appears to have had issues paying his taxes going back more than a decade.” Local records reportedly show that he was subject to six IRS tax liens between 2010 and 2021. Heuermann owed more than $425,000 for taxes he had failed to pay going back to 2005, news reports said.

The IRS later reportedly filed tax lien releases showing that Heuermann repaid or no longer owed about $215,078 of that debt, with the most recent documents from last October.

Citing the New York State Department of Taxation and Finance, CNN added that Heuermann and his wife owe more than $81,500 in personal income tax to the state, with the tax bills having accrued since November 2020.

Houston: Tax preparer Cheryl Christin Kissentaner has been sentenced to 12 years in prison, to be followed by one year of supervised release, after being convicted of aiding and assisting in preparing false returns.

At the hearing, the court heard additional evidence describing her history of failing to pay her own personal taxes, civil fraud penalties associated with them and penalties for failing to use due diligence in preparing returns. The total Kissentaner owes to the U.S. from her criminal and civil cases exceeds $1.9 million.

She used some of the money from the scheme to purchase a Bentley and Maserati, as well as for cosmetic surgery. The court also heard about Kissentaner’s violation of her conditions of release and her failure to cooperate with pre-trial services.

Individuals paid her to prepare returns from 2016 through 2019 through her company First Financial Tax Services. She was not legally allowed to do so, however, due to previous tax problems of her own.

From 2016 through 2019, Kissentaner prepared at least nine returns on which she created fake businesses that allegedly operated at losses. They also claimed false fuel tax credits, state income tax deductions for Texas residents (who did not pay a state income tax), false medical expenses, unemployed reimbursement expenses, false contributions to charity and other false expenses for businesses; the returns also failed to report IRA distributions.

Kissentaner also claimed that, pursuant to an engagement letter she prepared for her clients, she owed no duty to examine their returns for fake claims. She filed numerous certificates under oath with the IRS, however, in which she promised the government she would exercise due diligence in examining the returns she prepared and filed. She also charged preparer fees well exceeding those of other firms that provided the same services and asked potential clients to identify a referral and offered them a fee if they referred individuals themselves.

Ninety-eight percent of her clients obtained a refund even though several owed as much as $25,000 and did not pay any income taxes throughout the year. One such client had been obtaining refunds of more than $8,000 each year. After Kissentaner became aware she was under investigation, that client was informed she owed over $10,000. When she inquired as to the change, Kissentaner lied that it was due to a change in the tax law and due to the client’s son now attending college full time.

A large percentage of Kissentaner’s clients claimed fuel tax credits, which only a small percentage of taxpayers qualify for.

She was also ordered to pay restitution of $71,180.

Miami: A federal court has found Rose M. Chazulle in contempt for violating a permanent injunction prohibiting her from preparing or filing federal tax returns or other tax-related documents and forms for any person or entity.

The court ordered her to surrender more than $48,000 in fees.

In 2016, the court permanently enjoined Chazulle from preparing returns for others. She still prepared returns using the PTINs assigned to her daughter and brother-in-law and using the EFINs associated with their businesses. Chazulle further received at least $48,100 in fees for preparing returns in violation of the injunction.

New York: Acupuncturist Alice Bixuan Zhang of Queens, New York, has pleaded guilty to aiding and assisting the preparation of a false return.

Zhang co-owned and operated Wellife Physical Therapy and Acupuncture and Welling Physical Therapy and Acupuncture, both of which had locations throughout New York City. Zhang, along with Nikki B. Yu, who pleaded guilty in 2020, established purported management companies to conceal acupuncture business income from taxation.

Zhang and Yu diverted funds from Welling and Wellife and did not report those funds to the IRS. Rather, the two cashed checks, drawn on Welling and Wellife accounts and made payable to the purported management companies, at a check-cashing business and then provided false and incomplete information to their tax preparers. 

This scheme resulted in a tax loss to the IRS of more than $784,000.

Sentencing is Dec. 14. Zhang faces up to three years in prison, as well as a period of supervised release, restitution and monetary penalties.

Grand Rapids, Michigan: John Figg, a former United Bank of Michigan senior vice president, has been sentenced to 41 months in prison to be followed by three years of supervised release for embezzlement and tax evasion.

This case stems from the discovery of Figg’s embezzlement of more than $870,000 from the bank between 2014 and 2021. He used his access to bank records to obtain funds in various ways: He identified accounts held by depositors who did not scrutinize their accounts and used his access to them to steal funds; he obtained phony loans in customer names; and he funneled to his own use fees normally collected by the bank in connection with loan closing costs.

He concealed this income from his tax preparer and each year underreported his taxable income.

Figg, who pleaded guilty in March, was also ordered to pay restitution of $870,000 to United Bank of Michigan and $146,300 to the IRS.

Worcester, Massachusetts: Two construction execs have pleaded guilty in connection with their involvement in tax and mail fraud and other offenses.

Juliano Fernandes, of Clinton, Massachusetts, pleaded guilty to 11 counts of employment tax fraud, two counts of mail fraud and two counts of making false statements to a federal agency. Anderson Dos Santos, of Leominster, Massachusetts, pleaded guilty to four counts of filing a false return. 

Fernandes had financial control over Force Corp. and AB Construction, both local companies. Between 2015 and 2017, he failed to account for and pay over employment taxes for these companies; from around April 2013 through January 2017, he also defrauded workers’ compensation insurers by misrepresenting the number of employees at the companies and the amount of wages paid to the employees. In August 2017, he lied to the U.S. Department of Labor regarding the value of property he owned in Lunenburg, Massachusetts, and that he never had responsibility or control over the payroll of Force Corp.

Dos Santos, who worked for AB Construction, signed and filed individual tax returns for tax years 2013, 2014, 2016 and 2017 in which he materially under-reported his income.

Sentencings are in October. Mail fraud provides for up to 20 years in prison, three years of supervised release and a fine of $250,000. The charges of failure to pay over employment taxes and making a false statement each provide for up to five years in prison, three years of supervised release and a fine of $250,000. Filing a false return provides for up to three years in prison, three years of supervised release and a fine of $100,000.