Tax Fraud Blotter: Timeshare Troubles
A roundup of our favorite recent tax fraud cases.
Greensboro, N.C.: Former IRS revenue officer Henti Lucian Baird, 60, pleaded guilty to one count of tax evasion and one count of corruptly endeavoring to impede the due administration of the internal revenue laws.
According to court documents, Baird filed returns each year but has not paid his self-assessed taxes since at least 1998. Baird was an IRS revenue officer for 12 years before he established HL Baird’s Tax Consultants, which he operated from 1989 to 2014.
Baird advertised himself to clients as specializing in “IRS problems, delinquent returns, offer-in-compromise, tax problems, delinquent employee taxes and release of liens and levies.” He used his knowledge and experience to evade payment of his own taxes, creating over 10 nominee bank accounts in the names of his children to hide hundreds of thousands of dollars, submitting a false 433-A to the investigating revenue officer that did not reveal all of his nominee bank accounts, filing, in bad faith, a Chapter 13 petition, a cash offer in compromise, a request for discharge and an application for subordination of his federal tax lien and transferring funds out of nominee accounts to avoid impending IRS levies.
During this time, Baird continued to pay the mortgage on his 4,300-square-foot home, annual fees for his timeshare in Florida and car payments on his BMW. He admitted to the revenue officer and the mortgage holder that he did not keep money in bank accounts because he feared a levy or garnishment.
Baird also used his stepson’s identity, without his knowledge, to apply for a PTIN that he then used to file more than 900 income tax returns for clients, as well as his own income tax returns. Additionally, Baird submitted at least 120 Forms 2848 on behalf of clients that falsely stated he was an Enrolled Agent even though the IRS revoked his authorization to represent taxpayers.
Penalties and interest on Baird’s taxes will continue to accrue until he pays the IRS in full. As of Sept. 20, Baird’s evasion of payment totals $477,028.80 in tax, penalties and interest for tax years 1998 through 2013.
Sentencing is Jan. 17, when Baird faces a maximum of five years in prison for his conviction on the tax evasion count and a maximum of three years in prison on the obstruction count, as well as a period of supervised release and monetary penalties. As a condition of the plea agreement, Baird agreed to pay full restitution to the IRS.
Miami: Preparers Shirley Ann Womble and Tiffany Dawn Williams are each charged with one count of conspiracy to defraud the government with respect to claims and with eight counts and two counts, respectively, of filing false claims with the IRS.
According to the indictment, Womble and Williams worked as independent preparers and solicited clients by promising large federal refunds through, among other programs, a fictitious government program called the “Black Investment Tax” that provided reparations for slavery to African-Americans.
Womble and Williams prepared and filed false federal income tax returns claiming a $40,000 tax credit. None of the clients actually provided any documentation or other information to support claiming this phony credit. Clients who received a refund from the IRS paid the pair some $10,000 as a fee.
If convicted, the defendants face a maximum of 10 years in prison for the conspiracy charge and a maximum of five years for each of the false claims charges.
Green Bay, Wis.: Preparer Moises Alcazar, 34, has pleaded guilty to assisting and advising in the preparation and filing of false income tax returns.
Alcazar ran Alcazar Tax Services from 2006 to 2012 and acknowledged that he perpetrated a pair of related tax frauds that cost the government more than $766,000. In the first scheme, he assisted clients in artificially and illegally inflating their refunds; in the second, Alcazar used documents supplied by foreign co-conspirators to file fabricated returns.
He faces a maximum of three years in prison, a maximum term of supervised release of one year, a maximum fine of $100,000 and payment of restitution.
Shawnee, Kan.: Preparer Geoffrey Rotich, owner and operator of the prep business Inventax, has been indicted for aiding and assisting in the preparation and presentation of false income tax returns, making a false bankruptcy declaration, false testimony under oath in connection with a bankruptcy matter, and unlawful procurement of citizenship or naturalization.
The indictment alleges that Rotich prepared false and fraudulent returns for other individuals, claiming false deductions for medical and dental expenses and false education expenses. The indictment further alleges that in connection with a Chapter 11 case Rotich made false declarations in his bankruptcy petition and related schedules and made false statements under oath during a meeting of creditors.
The indictment also alleges that Rotich obtained naturalization and citizenship to which he was not entitled on the basis of false representations on his application for naturalization.
If convicted, he faces a maximum of three years in prison for each of the tax counts, a maximum of five years in prison for each of the bankruptcy counts and a maximum of 10 years in prison for the naturalization count. Rotich also faces a period of supervised release and monetary penalties.
Helena, Mont.: Attorney James Tarpey and two companies he founded have been barred from promoting an allegedly abusive timeshare donation scheme that promised generous tax savings.
According to the complaint, Tarpey founded two companies: Project Philanthropy Inc., a District of Columbia corporation d.b.a. Donate for a Cause, and Timeshare Closings Inc., a Colorado corporation d.b.a. Resort Closings Inc. Both encouraged timeshare owners to donate their unwanted timeshares to Donate for a Cause, a tax-exempt entity organized and operated by Tarpey.
The complaint alleges that the customers receive an appraisal that grossly overvalues the donated timeshare rights and customers use that appraisal to claim a large charitable donation deduction, even when the true market value of the timeshare can be a small fraction of the appraised value. According to the complaint, the timeshare donation scheme was aggressively marketed via the Internet and through national and local media.
The orders permanently bar Tarpey, Donate for a Cause and Timeshare Closings from promoting or marketing any arrangement that involves charitable contribution deductions claimed on federal returns. They also bar Tarpey and the two entities from preparing, or assisting others in preparing, any property appraisal that will be used in connection with federal taxes.
The orders also require Tarpey and the entities to post a copy of the injunction on websites that they use to advertise timeshare donations, that Donate for a Cause notify all of its customers of the injunction and that Tarpey and Timeshare Closings notify their employees involved with timeshare donations of the injunction.
Tarpey and the two companies agreed to the injunction. The federal government also sued three individuals alleged to be Tarpey’s associates.