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!