A Very Good Example of a Stolen Identity Refund Fraud Scheme

NJ.com recently published an article which has a very good example of an alleged tax return related identity theft scheme involving at least 14 gang members. (All these individuals are innocent until proven guilty, of course.) As I’ve discussed in my presentation for the 2014 Annual Meeting of the California State Bar Association and in my article published shortly after, these crimes are essentially street level crimes, conducted by people who are not ordinarily prone to white collar crime.  Often, because it helps to insulate people at the top, it is done by organized gangs.

The NJ.com article, titled “14 Elizabeth Gang Members Indicted in Identity Fraud Scams,” which you can read by clicking on here, is a great example of this.  Pay particular attention to the first picture in the slide show, and you’ll see multi-tiered heirarchy and different roles for each alleged participant.

Identity theft schemes can be conducted by individuals.  But they often involve many role players, including the source of the IDs, runners, ringleaders, and preparers.  Sometimes the low level players just cash checks or withdraw money from cash cards and don’t really know about the rest of the scheme.  To truly make a difference, many investigations need to find the source and the ringleader.  However, often these end with finding low level actors who can’t, or won’t, tell who is really in charge.

This case is also a good example of a local police effort and local prosecution of a federal crime.  Instead of the false claim charges and aggravated ID theft charges that would be typically be brought by the federal prosecutors, this case involves racketeering and other charges after an investigation by the county prosecutor’s office and the city police department.

This post was authored by Daniel Layton, the principal of Tax Attorney OC. He is a former federal prosecutor.