Tax Court Judge Kroupa Indicted
$14 Million In Refunds Issued by IRS in Stolen Identity Refund Fraud Scheme Indicted
The San Gabriel Valley Tribune reported earlier this month on yet another tax return-related identity theft sentencing in California. This time with was a 63 year old man, Adel Cotton, who was sentenced to Federal time. The SGV Tribune article can be found by clicking here. In this case, although he requested more than $2.6 million from at least 275 false returns using stolen IDs, he ended up actually receiving $725,249 of it. His son pleaded guilty as a co-conspirator.
The DOJ press release for the son’s guilty plea can be found here. According to that press release:
In relation to the tax fraud scheme, the indictment in the case alleges that Adel Cotton obtained the names and Social Security numbers of individuals without their knowledge and consent. Adel Cotton and others not named in the indictment allegedly prepared false Forms W-2 (IRS Wage and Tax Statements) in the names of the identity theft victims that reported false employment and income information, as well as false tax withholding amounts. Using the falsified information reported on the Forms W-2, Adel Cotton and others allegedly prepared fraudulent individual income tax returns claiming false tax refunds that were filed without the knowledge or consent of the identity theft victims.
In his plea agreement, Heber Cotton admitted that he and Adel Cotton directed the Internal Revenue Service to mail the fraudulent refunds to addresses that he and Adel Cotton controlled. Heber Cotton also admitted that he gave personal information associated with identity theft victims to a co-conspirator who managed a bank, which the co-conspirator used to open bank accounts and cash the fraudulent refunds. Heber Cotton further admitted that, toward the end of the conspiracy, he paid the co-conspirator bank manager approximately 20 percent of each tax refund check that he bank manager cashed.
The DOJ press release for Adel Cotton adds his part of the story:
According to Adel Cotton’s plea agreement, beginning in December 2008 and continuing through March 2010, the Cottons caused at least 275 fraudulent income tax returns to be filed with the IRS. Those fraudulent returns sought income tax refunds totaling more than $2.6 million.
As part of the scheme, Adel Cotton obtained names and Social Security numbers of individuals without their knowledge and consent. Adel Cotton, with the help of others, prepared false Forms W-2 (IRS Wage and Tax Statements) in the names of the identity theft victims that reported false employment and income information, as well as false tax withholding amounts. Using the falsified information reported on the Forms W-2, Adel Cotton and others prepared fraudulent individual income tax returns claiming false tax refunds. The tax returns were filed without the knowledge or consent of the identity theft victims.
This case covers through 2010, so I am optimistic that the IRS has tightened their practices to catch the bad refunds before they send them out a little sooner. This is not the first time I have noted how much money the defendants in these cases were able to actually receive before the IRS caught on. See here, here, and here.
Daniel Layton, the author of this post, is the principal of Tax Attorney OC.