Frugal Fraud

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26835495 - side view of hacker using multiple computers to steal data at table

Usually, people who commit fraud do so to fund a lavish lifestyle. They purchase designer name items, luxury cars and expensive real estate so they can live in a posh manner. The Washington Times reports on a California man who appears to have committed tax fraud mainly for the thrill of the act and perhaps the chase from law enforcement.

The story states that a 34-year-old man, dubbed the ‘Hacker’ by law enforcement, ran a fraud scheme using the identities of both the living and the dead to file more than 2,400 fraudulent tax returns requesting $5 million in refunds. Court records state that he actually received $1.9 million in bogus returns by concealing his part of the scheme through encrypted emails sent to conspirators.

One example given in the article explained that the ‘Hacker’ gave detailed instructions on how to mail $68,000. The conspirator was directed by the unknown ring leader to dip the money in oil to hide the smell from drug-sniffing dogs. The scam participant was then ordered to put the cash in a stuffed animal and include a note to a dying child. (Sounds like a great idea for a crime novel.)

Investigators had a difficult time tracking down the fraudster and only after using a ”Stingray,” a device that acts like a cell tower, were they able to pinpoint the ring leader’s Internet air card used to make the fraudulent tax filings. With the help of phone company records, the air card was traced to the fraudster’s apartment in Santa Clara.

The story states that prosecutors considered this case to be unusual because white-collar criminals do not usually live frugally as this ringleader did. The man who had a high school education, fired five lawyers and represented himself in court over four years. The fraudster, who was jailed after being arrested approximately five years ago, pleaded guilty to conspiracy, wire fraud and mail fraud.

Even though he received $1.9 million from the fraudulent tax returns, the article states that he only pocketed $400,000. (Only $400,000? Sounds like a lot to me.) It turns out that he already repaid the $400,000 and the federal government controlled the remaining $1.5 million. (This is monumental. The government actually got its money back!)

Court records show that the man made an apology to everyone he had impacted in a negative way. The Judge was evidently impressed by the man’s confession and opted not to give him up to 12 years in jail. He was sentenced to time served, three years of supervised release and 100 hours of community service. (Let’s just hope that community service doesn’t involve any exchange of currency.)

Source: Today’s ”Fraud of the Day” is based on an article titled, ”Man Sentenced to Time Served in Tax Fraud Scheme,” written by Jacques Billeaud and published by The Washington Times on April 7, 2014.

PHOENIX (AP) – A California man who admitted receiving $1.9 million in fraudulent electronic tax returns from a sophisticated scheme that federal authorities found difficult to crack was soon expected to walk out of jail after being sentenced Monday in a federal court in Phoenix to the five years he’s spent in custody.

Daniel David Rigmaiden, 34, of Santa Clara, Calif., who was sporting a long beard, shaggy hair and an orange prison suit in court, pleaded guilty to one count of conspiracy, two counts of wire fraud and one count of mail fraud. He has been in jail since his August 2008 arrest in California.

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Larry Benson
Larry Benson is currently the Director of Strategic Alliances for Revenue Discovery and Recovery at LexisNexis Risk Solutions. In this role, Benson is responsible for developing partnerships for the tax and revenue and child support enforcement verticals. He focuses on embedded companies that have a need for third-party analytics to enhance their current offerings.