Paid Tax Preparer Earns Prison Time – Don’t Mess With The IRS! Comments by Ethics Speaker Chuck Gallagher

Lubbock, Texas is known for many things. Now, one of its citizens, Martin Fungai Mandegu brings attention to Lubbock – but in a different way. Martin, it seems, along with Paul Ntahonkiriye and Carl Riley, Jr. were named in September 2007 in a 29 count indictment alleging false claims and conspiracy to defraud the government.

Mandengu was just sentenced to 16 months in federal prison and ordered to pay $100,725 in restitution. Ouch…an active prison sentence and restitution – all for 57 fraudulent returns.

According to the US Attorney’s news release here’s the story:

From October 2004 through April 2005, Paul Emile Ntahonkiriye began operating an income tax return preparation business in Abilene, Texas, by the name of PNT Tax Service (PNT). Beginning in January 2005, Mandengu, Ntahonkiriye and Riley began preparing tax returns through PNT. For the 2005 tax filing season, PNT prepared approximately 100 income tax returns. Approximately 57 of those returns were fraudulent and claimed false income tax refunds.

In preparing the fraudulent returns, Mandengu, Ntahonkiriye, and Riley would tell their clients that in order to get a larger refund, one or two false dependents could be listed on the return as either a nephew or niece, and in some instances the wages earned were increased to increase the earned income tax credit. Using fraudulent dependents and inflated wages created a fraudulent income tax refund to which Mandengu knew that the client was not entitled. Ntahonkiriye would add the names of the false dependants from a list he obtained from Burundi.

Mandengu would not have the clients sign any documents and often would not furnish them with copies of the return or any documents or forms he used in the preparation and filing of theft tax return. Mandengu would prepare the returns and then Ntahonkiriye would electronically file the client’s return with the Internal Revenue Service. The preparation fee for each return varied from approximately $20 to more than $900 and was electronically deposited by HSBC Taxpayer Financial Services, located at New Castle, Delaware, into Mandengu’s savings account at the First Financial Bank, in Abilene, Texas. When the refund was received, an additional fee was requested from some of the clients; often clients did not know about the first fee being deducted.

The total amount of the fraudulent income tax refunds claimed by Mandengu, Ntahonkiriye, and Riley on the false returns was $100,725.

As the 2008 tax season gets well underway, it’s interesting to watch the flurry of tax related cases either come to trial or folks found guilty get sentenced. We operate under a system of voluntary compliance and so this punishment and public notice is designed, not only to punish for violation of the law, but to also alert those who might make unwise choices to consider their choices carefully.

As a business ethics speaker, I know first hand the effect of poor choices and the consequences that follow. While I am not proud of my past, I, too spent time in federal prison for a tax related crime. I learned my lesson. Federal prison is not fun and Mandengu will not find his experience pleasant. Not only is his career in the tax related field over, but he will face issues with being a convicted felon the rest of his life.

Rick Martinez, Special Agent in Charge of Internal Revenue Service, Criminal Investigation for the Dallas Field Office, said, “While most return preparers provide excellent service to their clients, a few unscrupulous tax preparers file false and fraudulent returns to defraud the government, the tax paying public and their own clients. Internal Revenue Service, Criminal Investigation always strives to ensure that attorneys, accountants and other tax practitioners adhere to professional standards and follow the law.”

Every choice has a consequence. Think first about the choices you make. You do reap what you sow. Sow, with your choices wisely and reap a harvest that you can be proud of.

Business ethics speaker, Chuck Gallagher, off for now…

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