According to a recent JSOnline.com story, a woman who was denied a license to run a day care based on her status as a convicted felon (this is already a good story), took matters into her own hands and obtained licenses to run two child care facilities in the name of her son and daughter.  Between 2008 and 2010, the woman and her day care staff continuously billed the state for the attendance of children who were not present at either day care center.  (Maybe they were just all absent?)

But according to the complaint, the fraud didn’t stop there.  The woman has been accused of owning a cleaning service.  She allegedly used the cleaning service to provide false employment records to people trying to enter Wisconsin Works – a program that provides employment preparation services, case management and cash assistance to eligible families – so they could qualify for childcare at her centers.

While in court, her attorney provided background on her situation explaining that she attended Marquette University for two years, worked in both the mortgage industry and child care industry, and was studying to become a medical assistant.  (So does this mean that it’s ok to just give her a slap on the wrist even though she stole $134k? Back to the Big House for her!)  When the day care owner was asked by the judge why she fraudulently reported the fake attendance of various children, she claimed it was not a selfish act; instead, she said it was done with the best interests of her staff in mind because she wanted to continue paying them.  (“Just looking out for my employees.”)  She wanted to make it clear that her actions were not based on greed.  (Of course not, that’s what you’d expect from a good fraudster and felon!)  The court disagreed and revoked her license, informing her that the sole creation of the centers in the first place was illegal based on her criminal status. (Tell her again! Can you spell CRIMINAL?) 

Wisconsin has come a long way since 2009 when lawmakers initiated a state-wide reform to help correct widespread fraud within the $350 million state program that subsidizes day care for the poor.  Since this time, the article notes that “more than two dozen people have been charged in state and federal court in cases alleging nearly $2 million in fraud.”  In this case, the woman was sentenced to 18 months in prison (including some time served) and four and a half years of supervised release.  Plus, she has 10 years to pay back the $134,000.  The court sent a clear message here:  there are consequences to defrauding taxpayers in Wisconsin, and it’s not child’s play. (Yeah baby!)

The GateHouse News Service recently reported that a Weston, Mass. couple has been indicted for allegedly obtaining tens of thousands of dollars in Section 8 public housing subsidies, as well as defrauding mortgage lenders of more than $250,000.  The requirements for Section 8 eligibility are based on a number of factors, such as income, family composition, criminal background and assets.  Authorities allege that the two – individually and collectively “misrepresented” their status in a number of areas to receive the low rental rates on housing.  (My interpretation: “misrepresented” = “lied.”)  For example, authorities indicate that the wife falsely “reported that she was unmarried.”  In addition, authorities allege that the wife made false claims about her income to qualify for the Section 8 program, and at the same time the couple claimed to earn at least $12,000 a month to obtain hundreds of thousands of dollars in mortgage loans – money they used to purchase properties in Somerville and Medford.  (A mortgage lender to check income? That’s old school.)

Resulting from their alleged fraud, authorities claim that the couple received greatly reduced rental rates for a three bedroom house in Cambridge.  Ironically, the couple did not even reside in the home; instead they rented it, opting to live in an $860,000 home they purchased in Weston. (Think they were renting it and declaring the income?  I think not.  Bonus points in the fraud game if they add in tax evasion.)  The couple also allegedly made minimal mortgage payments on one property, while letting the others fall into foreclosure. (No way?!)

While the dream of owning multiple homes resides in the heads of many, this case serves as a cautionary tale for those who seek to fraud in order to live the dream:  one house, two houses…please, no more – if you don’t want to sit behind a jail cell door.

It’s like a “rags to riches” story – except substitute beans for rags and skip the happy ending.  According to TPMMuckeracker.com, one New York inmate has discovered that it does not pay to file false tax refunds from prison.  Here’s the basic story:  in 2007, he filed a false tax return, claiming he had earned $500k during 2006 – except he was incarcerated at that time and couldn’t have been gainfully employed.  (Oops.)  The IRS then sent the inmate a refund check in the amount of $327,456 – c/o the Camp Gabriels Correction Facility in Upstate New York.  (Apparently they were playing Jail House Rock that day!)  Employees of the State Department of Corrections intercepted the mail, and reported the suspicious refund as fraud to the IRS, claiming him a “Frivolous Filer.”  But the inmate wasn’t done yet.  He went on to file 11 more false returns, even claiming refunds as high as $2 million.  His fame spread through the jail, and he assisted other inmates with filing false refund claims.  (That’s Professor to you!)  It was even recorded that he assisted one fellow inmate in filing a tax refund claiming $60 million; he was paid in stamps and canned food for his services.  (What an awesome ROI on that deal)

So how did a bean thief become a billion-dollar idea man?  His attorney’s claim he borrowed the idea from an article on the website, “The America’s Bulletin,” a sovereign citizen website that offers “Prison Packets” – instructions for prisoners to free themselves from jail.  (Obviously this packet is not working so well for our inmate.)  His sentencing is scheduled for May, where he faces up to five years in prison and fines of up to $250k per each count.

An article by The Chicago Tribune recently documented the problem.  According to the piece, the government took steps last year to help prevent identity theft by issuing random Social Security Numbers.  This was a change in the past practices, which involved issuing Social Security Numbers based on a specific pattern related to the birth dates of children.  Fraudsters had caught onto the pattern and were able to use the predictable Social Security Numbers to perpetrate tax refund fraud.  (This is exactly what Andy has been saying – without the children filing tax forms, this type of fraud goes undetected for years.)   This leaves all kids open to being victims.  (Can you imagine having five to 10 years of bad financial history before you became an adult?  It could take years to rectify.)  

In addition to identifying the pattern of kids’ Social Security Numbers, thieves also have been caught hacking computers and stealing Social Security cards.  And, they have the upper hand in the situation because the age of the applicant cannot be verified by the credit issuers based solely on the Social Security Number.  Imagine being a 16-year old unable to get a job because your credit report incorrectly indicates that you have bad credit and a criminal history.  (This is a red flag.)

The article cited comments from an executive in the credit reporting industry, who noted that his company – and many like it – offer services to monitor children’s identities so they are not subject to this crime.  While companies are trying to assist parents in protecting their children, it is ultimately up to the parents to keep track of their children’s Social Security cards, so they don’t get lost.  (Dah! Wake up parents!)  Also, parents should refuse to give out their children’s Social Security Number when asked.  (In many cases the requester may fuss, but will usually work without it.)

It’s interesting to think that we raise our children to be polite, show manners and play fair.  Often, adult fraudsters seem to have forgotten those life lessons and take advantage of children.  Perhaps we could all use a lesson in playing fair – I’m sure jail can teach identity fraudsters the ground rules.

The article reports that the three women have been charged with conspiracy to defraud the United States through the filing of false tax returns, using a commercial income tax preparation software and service.  They allegedly “executed a mail fraud scheme” to obtain debit cards used by the commercial tax preparation service for facilitating taxpayers refunds.  Instead, the trio allegedly pocketed the cash for themselves.  All combined, the three women are accused of filing $1,366,427 in false tax refunds.  Of the total they allegedly filed for, the IRS paid them $962,079.  (Wow!  They got 70 percent of what they filed.  They should go into the tax preparation business!)

Charges for the women include filing false tax returns, mail fraud, and aggravated identity theft. Two of the three women made appearances in court recently, where it was revealed that both women were previously on probation for unrelated state crimes.  (What? Already criminals?)  One was denied bail and remanded into federal custody.  (I like this!)  Since one of the other women was wanted on a California warrant on unrelated state charges, she was remanded to the state. (Love them in the lock up!)

The case resulted from an investigation led by the IRS, Criminal Investigation; the Department of the Treasury, Office of the Inspector General for Tax Administration and the United States Postal Inspection Service, all in cooperation with the San Diego Police Department and Sacramento County Sheriff’s Office.  It’s great to see the results when different law enforcement agencies work together.

Although the women showed promise for future fraudulent entrepreneurship, it’s only fair to see them behind bars.  Gather round folks – grab your popcorn and sodas as we enter the final inning of tax fraud vs. the state ofCalifornia!  Well it’s one, two, three strikes you’re out, at the old fraud game!

His tax return fraud scam was simple:  he used Social Security Numbers and birth dates of prison inmates to file fraudulent tax returns.  (Crooks defrauding other crooks.  What is this world coming to?)  The scheme was discovered as part of an investigation into a bank robbery case.  Investigators from the IRS and the Federal Bureau of Investigation worked for over a year to identify the phony tax returns.  (Wouldn’t it be great if there was a solution to help find fraud in the tax refund process?  Wait…there is!)

Like many good fraudsters, the man had a partner in crime – a woman who pleaded guilty to conspiracy to defraud the IRS, mail fraud and conspiracy to commit mail fraud.  She helped to obtain post office boxes, where refunds for the false tax returns she filed were mailed.  She received jail time – one year and one day – and was ordered to pay $148,685 in restitution.  (You’d be surprised how often fraud happens at those P.O. boxes.)

Well, the crook who stole from crooks will be joining them soon.  In addition to receiving 70 months in prison for the tax refund fraud scam, he also faces up to 25 years in prison and a fine of up to $250,000 on the bank robbery charge.  He also could face an additional seven years for using a weapon during the robbery.  (Dah!  For tax refund fraud, you just need a pen or a laptop as the weapon of choice.) 

According to the FayObserver.com, a man recently pleaded guilty to a series of charges (including conspiracy to make false statements, making false statements, committing mail fraud and wire fraud, and aiding and abetting the making of false statements in connection with the crop insurance program) in a case involving activities to defraud the Federal Crop Insurance Program.  If convicted, he could receive up to 35 years in prison.  (For 35 years, you would think this was really big money.)  Sentencing is scheduled for April 16.

A press release issued by the U.S. Attorney’s Office provided more detail, noting that an “unnamed farmer devised the scheme to defraud the government and recruited” the man at the center of the story and others to “obtain crop insurance policies in their own names for certain crops, even though they did not engage in any farming.”  The U.S. Attorney’s Office said they ran the scam from September 2006 to June 2010, putting together applications for crop insurance for tobacco and other crops, and “falsely declaring the crop to be their own.”  They used “stolen names and identifying information” (Identity Fraud!) to execute contracts with tobacco companies.  The “unnamed farmer sold his tobacco and other crops on contracts written in the names of other co-conspirators or unknowing victims” and he profited “by being paid twice for each pound of tobacco.”  The man facing 35 years in prison, profited because he was paid for the use of his name on the contracts for crops he never grew.  (Oops)

This is yet another example of how fraud occurs not just at the state and local level, but across all federal agencies and departments that try to support citizens.  And it’s yet another reason why agencies – even those that dole out federal crop insurance – need strict investigative and preventive measures to not only catch fraud, but prevent it before it happens.

A recent story from the Chicago Tribune highlighted the problem of school lunch fraud, reporting on findings of the Chicago Public Schools (CPS) Inspector General who discovered “more than a dozen instances of falsified lunch applications among city and school employees” at one local high school.  The report raised the question of whether this type of fraud could be occurring throughout the rest of the district.

How is the fraud perpetrated?  According to the article, the problem is lack of verification.  “Paper-based applications to the program are based on self-reported income figures, but by federal mandate CPS is not allowed to check more than a fraction of the qualifying applications.”  (No checks and balances.  I bet there is plenty of fraud here!)  CPS is trying to put a stop to school lunch fraud and is on record asking the government for assistance with verification efforts.

And now the issue has reached Capitol Hill.  Senator Richard Durbin of Illinois recently sent a letter to Agriculture Secretary Tom Vilsack asking how the department will “’bolster eligibility verification measures’” in the school lunch program.  But while officials involved continue to push for assistance, there is the fear of pushing to point of deletion of the program.  The article quoted Durbin as saying:  “I don’t want to push so hard that people say, ‘Oh, let’s forget that program.’ It’s a critically important program for kids from poor families.”

So how do we stop this type of fraud if the push for assistance in verifying eligibility keeps hitting a dead end?  (This sure cries out for a public records solution.)  That is the question officials are trying to answer – as for now, the program allows undeserving individuals to falsify information and order a slice of pizza, with a side of fraud.

According to the WPBF.com, a Florida man was indicted on charges of filing false income tax returns for himself and his clients.  The federal indictment detailed sets forth the facts involved in this case, alleging that the man falsely claimed the First-Time Home Buyer Credit (FTHBC) and other tax credits and deductions.  Through his tax return preparation business, he prepared an electronically filed phony tax returns using fake information to claim he and his clients were entitled to the FTHBC.  (Apparently, they thought they were entitled to other people’s tax money.)  Prosecutors estimate that the alleged fraud resulted in a total loss of between $400,000 and $1 million to the U.S. government.  (Now that’s a lot of houses claimed fraudulently.)

The article describes how the FTHBC program works:  “The Housing and Economic Recovery Act of 2008 established a refundable tax credit for first time home buyers equal to 10 percent of the purchase price, up to $7,500, for home purchases completed in 2008.”  This allows a taxpayer to repay the credit interest free for 15 years.

If convicted, he faces a maximum sentence of up to three years in prison and a fine up to $250,000.  So, here’s the question for the day:  how easy would it be for anyone to pull this scam off?

The Alabama Department of Industrial Relations estimates that more than 12,000 people in 2011 illegally received unemployment compensation benefits totaling more than $15 million.  (Keep in mind, Alabama accounts for only 1.5 percent of the US population.)  Outraged, one State Rep was quoted saying:  “The idea that over $15 million has basically been stolen from hard-working taxpayers, especially during these tough economic times, is just intolerable to me.  We have a duty to make sure those who would defraud the system like this are held accountable for their actions and are deterred from doing it again.”  (I like this guy.)

Now Alabama has turned up the heat on the fraudsters with new penalties.  In addition to the existing deterrents, such as fines and jail sentences, the new legislation would include a 52-week disqualification period for anyone found guilty of committing unemployment fraud, complete with the requirement of payment in full for funds illegally received. (How about mandatory jail time for those deliberately defrauding the system?  For each day of unemployment stolen, you serve one day in jail AND provide full repayment.  Finally, you are disqualified from receiving unemployment for life.  This would be a real deterrent.)

But the state can’t do it alone – it needs help from the business community because it relies on businesses to report new hires within seven days.  Then, the state uses the information to conduct quarterly cross-checks for unemployment benefit recipients and new hires.  Without prompt notice, the thieves will only have more time steal from taxpaying citizens. (It might not be bad idea to make non-reporting a crime, as well.)