White Collar Crime is Alive and Well in South Carolina - 1st Week of February Results!

From February 1st thru February 6th there were four folks who were sentenced, indicted or convicted of white collar crime in South Carolina.

Atlanta Man Sentenced: Charles Mahaffey, age 41, of Atlanta, Georgia, was sentenced to 40 months imprisonment for conspiracy to pass counterfeit traveler’s checks. Mahaffey was arrested in a drugstore parking lot after passing several counterfeit Visa $100 traveler’s checks at various Florence businesses. Recovered from his car were 11 additional counterfeit traveler’s checks, each bearing the same serial number. Federal investigators have since discovered that an additional 122 identical checks were successfully passed in 11 states just prior to Mahaffey’s arrest.

Guess here, but since other frauds have been discovered, my educated guess is that Mahaffey will be facing more time.

Florence, SC Woman Sentenced: Susan Celeste Edwards, age 33, of Florence, South Carolina, was sentenced to 31 months in federal prison for using company credit cards to steal from her employer, Carolinas Refrigeration of Florence. Now…that is bad - but not that unusual. Here’s where the story takes a twist. This wasn’t her first time in prison!
Carolinas Refrigeration hired Edwards as a bookkeeper, unaware of her recent release from federal prison for embezzling from Advance America from 2000-2002. While working in the employee benefits section of that company, Edwards stole more than $243,000.00 from that scheme in which she filed insurance claims for fictitious employees, collecting insurance
payments which she spent for herself. Edwards served 37 months on that conviction.
Edwards admitted in court that from February 2006 to August 2006, she stole company funds and used her employer’s credit cards to make purchases for her personal use. By the time her thefts were detected, she had embezzled approximately $150,000.00.

So much for a background check! While not all people who have committed white collar crime will repeat that offense, it clearly illustrates some simple truths - use internal controls to avoid the likelyhood of abuse.

Easley, SC Man Guilty: Charles E. Atwell, age 57, of Easley, was found guilty by a jury yesterday in federal court in Anderson of four counts of tax evasion and one count of making false statements in a bankruptcy petition.

Evidence presented at trial revealed that from 2000 to 2003, Atwell made
more than $2,000,000.00 in commissions as a financial planner selling insurance policies, annuities, and mutual funds. Atwell did not file tax returns or pay any income taxes during any of these years. In fact, evidence at the trial revealed that Atwell had not filed personal tax returns since 1995, and that the only tax returns attributed to Atwell during this period were bogus documents he presented when applying for loans. The evidence also showed that Atwell used bank accounts of several entities that he controlled, such as Professional Planning Inc., of Greenville, T and E Associates, and the Atwell Family Trust, to divert income for his personal use.

Evidence was also introduced that Atwell signed and filed a bankruptcy
petition claiming that his income in 2001 was only approximately $17,000.00 dollars, when in fact it was approximately $800,000.00. The petition further stated that his 2002 income was approximately $41,000.00, when in fact it was approximately $400,000.00.

Unlike the Wesley Snipes trial, Atwell could not claim he didn’t know the rules or law. Perhaps an actor could be that ignorant of the law, but a financial planner earning that amount couldn’t claim ignorance as an excuse!

Chester, SC Woman indicted: Michelle Waters Dawkins, age 37, of Chester, South Carolina, was indicted for embezzling money from First Citizens Bank. The Indictment alleges that while employed at First Citizens between January and June 2007, Dawkins stole more than $1,000 from the bank. Get this…the maximum penalty Michelle Dawkins could receive is a fine of $1 million and imprisonment for 30 years.

Comments: As a business ethics and white collar crime speaker, (www.chuckgallagher.com) I see the effects of choices that are made. Generally when frauds like those mentioned above are effected there are three components: (1) need; (2) opportunity and (3) rationalization. Regardless of what motivates white collar crime, the outcome is always a negative consequence. Every choice has a consequence.

Your comments are welcome!

Tax Fraud - Memphis Residents Indicted by A Federal Grand Jury! Comments by Business Ethics Speaker Chuck Gallagher

Many advocate Tax Avoidance, but the creation of fake documents is Fraud - Pure and Simple!

Sherry Hobson, age 43 and Betty Sisson, likewise age 43, were indicted by a federal grand jury for conspiracy to file false claims and filing false claims against the government.

Hobson was charged with one count of conspiracy to file false claims against the United States and 18 counts of filing false claims against the government. Sisson was charged with one count of conspiracy to file false claims against the United States, nine counts of filing false claims against the government, and once count of filing a false 2004 federal income tax return.

Seems that both decided they would defraud the government by obtaining false refunds by filing or causing to be filed false federal income tax returns. The fraudulent tax returns contained fake wages and withholding amounts, thus generating tax refunds that were not due.

According to the US Attorney’s office news release:

The returns named in the indictment pertain to 2003 and 2004 federal tax returns for Sisson and other individuals. The fraudulent returns claimed refunds totaling $81,851.00.

Additionally, Sisson was charged with filing a false 2004 individual income tax return in her name that represented her adjusted gross income to be $15,132.00, when she knew that her adjusted gross income was substantially greater.

Unlike the Wesley Snipes trial, Hobson and Sisson - both who pled not guilty - are charged with something specific unlike Snipes who was charged with not filing and conspiracy. While they are innocent until proven guilty, my guess is that the government has specific documentation showing the creation of fraudulent documents and a guilty verdict will follow.

As a business ethics speaker, (www.chuckgallagher.com) I understand that Every choice has a consequence. Speaking to groups at the Truth About Consequences, I understand that you reap what you sow. If, in fact, these two did create false tax returns, they will likely face time in federal prison.

This case will be followed. Meanwhile, if you have comments…they are welcome.

Health Care Fraud Earns Ibiteme Richard Bristol Prison Sentence - Comments by White Collar Crime Speaker Chuck Gallagher

One of the hot areas of white collar crime fraud is in the health care arena. The question that continues to amaze me is - do those who perpetrate such a fraud really think they will get by with it?

Reality is every choice has a consequence! This is something Richard Bristol, age 31, is finding out. Sentenced to 33 months in prison and restitution of $892,797.77, Bristol will face life changing experiences as a result of his fraudulent activities.

According to court documents, Bristol, operating as Bristol Nursing Services, provided respite care and personal care services to Medicaid recipients. From January 2006 until September 2007, Bristol submitted 574 false claims totaling $892,797.77 for payment to the Commonwealth of Virginia, Department of Medical Assistance Services (DMAS). Bristol used nursing aides who were not qualified and not supervised by a registered nurse (RN) as required. To further the scheme Bristol forged the signature of a registered nurse on patient records. Additionally, Bristol falsely claimed payment from the Department of Medical Assistance Services for hours in which the nursing aides did not work.

Now, I would assume that Bristol felt that somehow he wanted or needed the money. However, money ill gotten will result in a negative consequence. As a business ethics and white collar crime speaker, (www.chuckgallagher.com) I know first hand the effects of the choices we make. You do reap what you sow. Not that I’m proud of this, but having spent time in federal prison for unethical choices, I clearly understand what Bristol will be facing soon.

Perhaps, upon his release, Bristol will understand the reality of his choices and use his life following prison for some good.

Comments are welcome!

Philip Morris Retirement Plan Fraud - Prison Sentences Imposed - Comments by White Collar Crime Speaker Chuck Gallagher

Say you’re a participant in a retirement plan - 401(k) or Profit-Sharing plan - and you need money. ERISA rules, as amended from time to time, provide for early withdrawls if certain requirements are met. In the case of the Philip Morris plan the following was in effect as it related to their plan:

Participating employees were permitted to withdraw the accumulated funds only after the occurrence of a permissible event specified in the plan, such as a financial hardship. In the event of a qualifying hardship, a Philip Morris employee could make an early withdrawal, provided that the amount of any withdrawal not exceed the amount actually needed to satisfy the immediate and heavy financial need. Hardship withdrawals were allowed by the Philip Morris DPSP to, among other things, make payment of the costs directly related to the purchase of a principal residence for the employee. If an employee made a hardship withdrawal for the purchase of a residence, DPSP rules required the employee to submit supporting documentation detailing the proposed purchase of the primary residence necessitating the hardship withdrawal.

The rules seemed reasonable - but rules none the less. So what if you wanted money but didn’t qualify? Well - it seems if there is a need someone will find the way.

Wanda Branch, age 40, and Bernadine Doggett, age 52, were both sentenced to prison from their involvement in a mail fraud scheme resulting in a number of fraudulent withdrawls from Philip Morris USA, Inc. retirement accounts. Seems these two as well as two other defendants - Steven R. Day and William M. Cooke - found a way to make some money and “help” others at the same time.

Each defendant confessed to assisting Philip Morris employees submit false hardship withdrawal requests to fraudulently obtain money out of DPSP accounts. In connection with the charged transactions, each defendant admitted to preparing false and fictitious real estate documentation asserting that a Philip Morris employee had a contract to purchase a residence located in the Richmond area. In fact, none of the employees was purchasing a principle residence. Using the fraudulent documentation, Philip Morris employees submitted the false Hardship Withdrawal Applications to request a hardship withdrawal of a specific amount from the Philip Morris DPSP accounts. The withdrawals usually were in excess of $10,000. The employees falsely listed “for the purchase of a primary residence” as the “Hardship Reason” for the withdrawals. Based on the fraudulent documentation, each withdrawal was approved, though none would have been had the truth been known. Upon receipt of the DPSP funds by United States mail from Fidelity Investments Institutional Services Company, Inc., d/b/a Fidelity Employer Services Company, the third-party recordkeeper, located in Massachusetts, the employee would pay the defendant for preparing the fraudulent documentation submitted in support of the Hardship Withdrawal Application.

So they committed fraud. How much was that worth? People paid between $1,000 and $2,000 in order to gain the paperwork to receive the plan distributions.

Was the small amount received worth the price? As a white collar crime speaker, (www.chuckgallagher.com) I can speak from experience - there is no amount worth the life changes that come from a prison experience. Each of these four will be known for the rest of their lives as convicted felons - not a title to be proud of.

Every choice has a consequence! Perhaps if folks might consider what could happen as a result of the choices made - perhaps they might be more careful.

Comments are welcome!

Tax Fraud Avoidance! Need, Opportunity and Rationalization - IRS Eliminates the Possibility.

In order to commit a fraud there generally needs to be three things: Need - Opportunity and Rationalization. Well, the Department of Justice has taken the offense when it comes to tax fraud - and I applaud their efforts.

With the publicity surrounding the Wesley Snipes tax trial - national attention, once again, focused on tax avoidance vs. tax fraud. While Snipes was not convicted of fraud others who were tried were. The ones convicted were the tax advisors - the tax preparers.

Avoiding Fraud: On the offense - the Department of Justice is using injunctions to stop individuals from preparing what they suspect would be fraudulent returns. As reported from the White Collar Crime Blog - more than 305 tax preparers and tax-fraud promoters have been barred from tax return preparation.

Some Recent Examples:

Tennessee: A federal court today has permanently barred Montrice McGhee of Memphis, Tenn., from preparing federal income tax returns for others. Chief Judge Jon Phipps McCalla of the U.S. District Court for the Western District of Tennessee issued the permanent injunction order against McGhee, who, according to papers filed in the case, prepared returns using the business name Blessed Professional Tax Service, Inc. McGhee consented to the court order.

The government complaint in the case alleged that McGhee repeatedly engaged in fraudulent conduct by understating her customers’ federal income tax liabilities. The complaint alleged that McGhee told customers that she specialized in return preparation for ministers and other clergy members, as well as anyone involved in church activities. According to the complaint, the Internal Revenue Service estimates the harm from McGhee’s misconduct for tax years 2001 through 2004 exceeds $1 million.

Texas: The U.S. District Court for the Western District of Texas has barred Thell G. Prueitt of Kingsland, Texas, from preparing federal tax returns for others and from promoting various tax fraud schemes, the Justice Department announced today. The court found that Prueitt promoted his schemes through several companies and organizations he operates, including Grandview Prayer and Healing Retreat Center, Fresh Start Funding Group, Fresh Start Funding Group Taxpayer Education Association and Thell G. Prueitt & Friends.

The court found that Prueitt promoted a home-based business tax scheme, falsely advising customers they could claim tax deductions for non-deductible personal expenses, and claiming fraudulent deductions on tax returns he prepared. The court also found that he promoted an ATM and pay phone tax scam, falsely advising customers that they could claim tax credits and deductions based on artificially inflated purchase prices.

The court order requires Prueitt to notify his customers of the injunction and to give the Justice Department a list of his customers’ names, addresses, phone numbers and Social Security numbers.

North Carolina: A federal court in Charlotte, N.C., entered a preliminary injunction against Kodjovi Raphael Totou, a Charlotte-based tax preparer who operates Queen City Tax Services, the Justice Department announced today.

The order bars Totou from preparing or filing federal income tax returns for anyone other than himself. It is effective immediately and will remain in effect through Aug. 15, 2008.

The government complaint in the civil case alleges that Totou has claimed fraudulent fuel tax credits on customers’ returns and fabricates or inflates tax deductions.

According to the government’s complaint, Totou prepared more than 450 federal income tax returns for clients, many of whom are from Togo and have limited English-language ability. The complaint further alleges that in 2003, Totou claimed the federal fuel tax credit for all of his customers. The complaint alleged that none of his clients qualified for the tax credit as their businesses or purported businesses do not involve off-highway use of gasoline.

As a business ethics and white collar crime speaker (www.chuckgallagher.com) it is clear that the DOJ has taken the offensive. When the “opportunity” is removed, it is hard to commit the crime. Stopping criminal conduct before it occurs, likewise, the use of a civil remedy to avoid criminality is also positive.  KUDO’s to the Department of Justice and IRS!

Comments?