In my experience as a federal tax prosecutor, I have previously seen cases where someone in prison (in one case on charges of return fraud already) is involved in another scheme once behind bars. A recent press release (found here) highlights a similar case. Per the press release:
According to the evidence presented at the two week trial, from June 2010 through January 2012, Howard Webber, 52, conspired with Clifford Bercovich to obtain the names and social security numbers of fellow inmates while Webber was incarcerated at various prisons and jails, including San Quentin State Prison and Santa Clara County jail in California, and the Milwaukee Secure Detention Facility in Milwaukee, Wisconsin.
Webber and Bercovich convinced inmates to give them their names and social security numbers by explaining that they could help the inmates take advantage of government stimulus programs or secret tax loopholes. Webber and Bercovich recruited certain inmates to help them solicit the identities of other inmates, and created a limited-liability company, Inmate Assets Recovery and Liquidation Services LLC, to make their scheme appear legitimate.
Webber and Bercovich then used these identities to file false federal income tax returns with the Internal Revenue Service (IRS). The returns falsely represented that the individuals earned wages or other income and fraudulently claimed refunds. Webber and Bercovich opened a post office box, which they listed as the taxpayer address on each false return and used to receive the fraudulently obtained refund checks. In some cases, they also directed that the refunds be wired to bank accounts, which they opened and controlled. According to the evidence presented at trial, Webber and Bercovich filed more than 700 false returns and received over $600,000 in fraudulently obtained income tax refunds.
Webber was convicted and is due to be sentenced in May. The fact that so much was actually received from the scheme before he was caught is notable still, as the IRS struggles to catch these in time and keeps the scheme attractive to potential perpetrators. Recently, the IRS moved W-2 and 1099 filing dates earlier to improve their matching ability. In time we will know if it is successful.
–The author of this post is Daniel W. Layton, a partner at Layton & Lopez Tax Attorneys, LLP in Orange County, CA. He is a former IRS trial attorney and ex-prosecutor from the U.S. Attorney’s Office in the Tax Division in downtown Los Angeles.