Shell game shellacking; one tequila, two tequila; cryptocurrency con; and other highlights of recent tax cases.
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Wilmington, Delaware: Wendell Smallwood Jr., 31, a former Philadelphia Eagles running back and Super Bowl champion, was sentenced to 18 months in prison for wire fraud, conspiracy to commit wire fraud and conspiracy to defraud the IRS. Smallwood was ordered to repay the government $645,000. He pleaded guilty in December 2024 to orchestrating schemes that defrauded COVID-19 relief programs and the IRS.
Smallwood earned about $500,000 in NFL paychecks in 2020 and 2021 — after he began carrying out the fraud. His conviction marks a steep fall for the former athlete, who rose from Wilmington’s tough streets to making $3 million over six seasons with the NFL.
Scranton, Pennsylvania: William Freeman IV of Tobyhanna, Pennsylvania, was sentenced to 30 months in prison for one count of wire fraud and one count of making and subscribing a false tax return. Freeman was also ordered to pay restitution in the amount of $352,155.00.
Between 2020 and 2021, Freeman submitted at least 10 applications seeking pandemic stimulus funds through both the Economic Injury and Disaster Loan Program and the Paycheck Protection Program on behalf of several entities under his control. The applications submitted by Freeman were filed on behalf of corporate entities that did not, in fact, have actual business operations, and that bore false employee headcount information, and fabricated gross revenues and costs of goods sold.
Freeman additionally made material misrepresentations on these applications about his criminal history, representing that he had none when, in fact, he did. Freeman obtained over $300,000 dollars in stimulus funds through filing the fraudulent applications, which he spent on unapproved personal expenses and which were never repaid.
Additionally, and in support of that fraud, Freeman filed a falsified Form 1040 and a falsified W-3 in 2020 for the 2019 tax year claiming that thousands of dollars in taxes had been withheld and paid over to the IRS that had not, actually, been withheld or paid over. In addition to his failure to pay over those taxes, he also attempted to obtain thousands of dollars of tax refund money. Freeman did this for the purpose of creating a filed tax return in an attempt to obtain additional stimulus funds.
Austin, Texas: Justin Ryan Schmidt, a former Austin resident, pleaded guilty to evading payment of $1.5 million in taxes.
Schmidt managed the cryptocurrency hedge fund Translunar Fund. Over a three-year period, he made $6 million but reported false earnings to the IRS and hid millions of dollars in foreign bank accounts.
Schmidt falsely reported earnings of $5,000 or less on tax returns from his company each of those years: 2020, 2021 and 2022.
Schmidt played a shell game with the company’s incorporation — moving it from the Cayman Islands to the British Virgin Islands. He then did the same with his own citizenship, renouncing his U.S. citizenship after becoming a British citizen and moving to the Cayman Islands.
When he expatriated, Schmidt claimed his net worth was less than $25,000.
Schmidt was indicted under seal in February with three counts of filing a false tax return, one count of filing a false form, one count of tax evasion and three counts of failing to file a report on holdings in foreign banks.
Schmidt has petitioned the court to be released pending sentencing, which will take place on another date. He faces a maximum penalty of five years in prison, restitution and fines.
Knoxville, Tennessee: Kathea Gissele Andrade Argueta pleaded guilty to theft over $60,000 and 12 counts of tax evasion.
These charges stem from Argueta’s failure to remit collected sales tax on behalf of Fiesta Garibaldi Mexican Restaurant and Tequila Bar and Anafres Grill & Market Mexican and Latin Cuisine.
Argueta was sentenced to 10 years of confinement and suspended to supervised probation with credit for time served. She was ordered to pay $187, 543.70 in restitution.
Austin, Texas: The owner of a Texas construction company pleaded guilty to obstructing the IRS’s efforts to collect unpaid employment taxes.
David Stone willfully failed to pay over employment taxes he had collected on behalf of the employees of Engineered Metals Company, a roofing, siding and sheet metal business that he owned and operated. As a result of his willful failure to pay over these employment taxes, the IRS began collection proceedings against him. Knowing the IRS was attempting to collect this tax delinquency, Stone stopped filing individual income tax returns and used business accounts to pay personal expenses, such as child support and alimony, to keep funds out of his own hands and conceal his income from the IRS. Stone’s obstructive actions persisted from 2013 through 2024 and caused a tax loss to the United States of approximately $1.4 million.
Stone pleaded guilty to corruptly endeavoring to obstruct the due administration of the internal revenue laws. He faces a maximum penalty of three years in prison.
Tuscaloosa, Alabama: A Tuscaloosa tax preparer has been convicted of felony tax charges.
Keisha McBride, 35, was sentenced to two years in prison after pleading guilty to felony charges of willfully aiding or assisting in the preparation of false tax returns and willfully attempting to evade paying taxes.
As part of her plea agreement, McBride was sentenced to 24 months in prison and ordered to pay $63,314.58 in restitution to the Alabama Department of Revenue. She is also permanently barred from providing tax preparation services to any individual or entity.
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