Repair thyself; this beauty’s a steal; oh mama; and other highlights of recent tax cases.
Philadelphia: Two New Jersey owners of a South Philadelphia cheesesteak restaurant have been sentenced for a decade-long conspiracy to defraud the IRS.
Nicholas Lucidonio, 57, and Anthony Lucidonio Sr., 84, were each sentenced to 20 months in prison.
They owned and operated the restaurant Tony Luke’s and from 2006 to 2016 hid from the IRS more than $8 million in cash receipts by, among other things, depositing only a portion of the cash they received into business bank accounts and providing incomplete information to their accountant. This caused their accountant to file returns that substantially underreported business receipts and income.
The Lucidonios also committed employment tax fraud by paying employees in cash. To evade detection, they paid most employees a portion of their wages on the books then paid the remainder of their wages in cash without withholding federal income tax, Social Security and Medicare taxes or paying those to the IRS. They also did not report these cash wages to their accountant.
When a dispute over Tony Luke’s franchising rights arose between the Lucidonios and another individual in 2015, the former became concerned that their tax fraud scheme would be revealed; they directed that the prior year’s tax returns be amended to increase reported sales. The Lucidonios did continue to hide their ongoing payroll tax scheme.
They caused a loss of $1,321,042 to the United States.
Both were also ordered to serve three years of supervised release.
Jacksonville, Florida: Kevin Edward Hargrave, a.k.a. Kevin Edward Wade, of Locust Grove, Georgia, has been sentenced to five years in prison for conspiring to commit wire fraud and to defraud the U.S. for the purpose of impeding the IRS.
Hargrave controlled companies, including WSA Optimization Firm, that purported to offer credit repair services to the public. He promoted these services through multiple company-specific websites, radio advertising, emails, text messages and posts on YouTube and other social media sites. These marketing campaigns promised to “erase bad credit” information from consumers’ credit reports within 90 days, “guaranteed.” Multiple customers reported to federal investigators that they paid for credit repair services, saw no such results and were denied refunds.
When an undercover federal agent called to inquire about these services, he was told that WSA Optimization used “federal laws to remove all negative derogatory items off your credit” and that “we are able to remove those items off your credit without you paying [creditors] back.”
A company representative also claimed that WSA employed five attorneys and 23 paralegals who worked to remove negative credit information from credit reports. Hargrave did not employ a team of attorneys or paralegals.
Instead, to supposedly improve customers’ credit scores company representatives would send form letters to each credit reporting agency and falsely claim that all negative credit information on the customers’ credit reports was the product of ID theft or fraud. These letters, which did not disclose that they were mass-produced by WSA Optimization, were sent in envelopes listing a fictional return address.
Analysis of bank records established that more than $8 million in deposits were made into the business bank accounts controlled by Hargrave and a family member and that significant funds were diverted from those accounts to pay for luxury vehicles, mortgage payments, personal credit cards, jewelry, items at retail stores, utilities, restaurants and other living expenses.
Analysis of Hargrave’s real and personal property, certain business records, credit card statements and the bank records collectively demonstrate that his joint tax returns for tax years 2016 through 2019 underreported taxable income and improperly claimed certain business expenses. An IRS investigator estimated that since 2015, by underreporting his and a family member’s tax liability, Hargrave has caused the U.S. to lose some $418,115 in tax revenue.
Hargrave, who
South Barrington, Illinois: CPA Imran Mahmood has pleaded guilty to a federal tax offense for willfully evading more than $3.4 million in federal and state income taxes.
Mahmood provided accounting services for an Illinois not-for-profit and a related company. From 2011 to 2014, he obtained from the two entities some $9,084,984 — mostly from the nonprofit’s payroll accounts — and directed the money be deposited with an entity Mahmood controlled. He then used the money for personal expenditures.
He tried to conceal the scheme by mischaracterizing payments in the books and records of the entities from which he obtained the money. Although he hired a tax professional to assist in filing his own income tax returns, he failed to disclose to the professional all the funds that he received and his ownership of the entity into which he deposited those funds. This caused the filing of false tax returns for the years 2011 to 2014.
Mahmood admitted that his conduct resulted in a total federal and state tax loss of some $3,468,523.
He faces up to five years in prison. Sentencing is June 11.
Dayton, Ohio: Businessman Rajesh Vaish has pleaded guilty to two counts of filing a false return.
During 2019 and 2020, Vaish operated MS Auto Sales, d.b.a. Select Auto, a local used car business. On his 2019 and 2020 returns filed from the Dayton area, he willfully failed to report significant portions of his actual income from Select Auto, keeping a fictitious set of business records that misrepresented the sales.
The U.S. sustained a tax loss of at least $200,000.
Filing a false return carries a maximum of three years in prison.
Charlotte, North Carolina: Tijan Mboob, a.k.a. “TJ,” “Teejay McBoob” and “Sheikhtijan,” 59, has been sentenced to two years in prison to be followed by a year of supervised release for tax fraud.
From 2014 to 2021, Mboob prepared or caused to be prepared hundreds of fraudulent federal returns for clients. The returns included fabricated and fraudulent items, including false filing status, false American Opportunity Tax Credits and education credits, false itemized deductions and false reforestation credits, among others. His inclusion of these items resulted in the reduction of his clients’ tax liabilities and inflated refunds totaling more than $4.7 million.
After Mboob prepared the fraudulent returns, he refused to assist clients who received correspondence from the IRS questioning items on their returns that Mboob had prepared and filed. He operated as a ghost preparer.
Mboob also failed to report any of the tax prep fees he earned as income for tax years 2017 and 2020 and did not file any tax returns for tax years 2018 and 2019.
He pleaded guilty in September.
Thomson, Georgia: Tax preparers Annie Bailey, 67, and her son Tremarcus Bailey, 43, have been sentenced to prison for filing dozens of fraudulent returns to obtain hundreds of thousands of dollars in excess federal refunds for clients.
Annie Bailey was sentenced to 21 months in prison and Tremarcus Bailey to 30 months after pleading guilty.
Annie Bailey owned Bailey’s Tax Service, where her son Tremarcus was an employee. The company had prepared income tax returns for customers since 2000. The business came to the attention of IRS investigators in 2017, and a subsequent investigation determined the Baileys used fraudulent and fabricated information when filing returns for individual customers to illegally inflate refunds.
Investigation determined that from 2014 to 2018, the fraudulent returns prepared by the Baileys resulted in $683,046 in criminal tax losses to the IRS.
The Baileys were also ordered to pay $683,046 in restitution and to each serve three years of supervised release after completion of their prison terms.
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