Lies, Lies and More Lies

14

Lies are pretty hard to stop once one is told. Almost always, another one is needed to cover up the first one. According to a press release from the Department of Justice, today’s ”Fraud of the Day” details the lies a Virginia woman told that enabled her to obtain nearly $1 million in fraudulent tax returns from the Internal Revenue Service and the State of Virginia.

The 43-year-old woman accomplished her scam by preparing and electronically filing tax returns from either her work or home computer for clients including coworkers, family members and friends. (That sounds all well and good except for the fact that she fabricated businesses with fictitious income and expenses, added in a few false dependents and fake child care providers to claim undeserved tax credits.) Further research revealed that if filing a claim for a married couple, she had a habit of submitting separate false returns with different addresses and claims that each spouse was the ”head of household,” instead of filing a joint married return or separate married return.

The press release states that the fraudster cost the U.S. Treasury approximately $949,000 by filing 222 federal income tax returns with the stolen identities of her clients. She charged $150 per tax return for her services, asking clients for payment in cash so she would not have to report the income. (If you do the math, she got about $33,300 for her fraudulent efforts, not counting the illegally obtained refunds.) Clients probably became suspicious when they did not receive a copy of their tax return. (The criminal funneled the returns into a bank account where she kept some of the money and paid some of the refund to the taxpayers in cash.)

The woman pleaded guilty to aggravated identity theft and preparing false tax returns. She will serve five years in prison with one year of supervised release. She also will pay restitution of $949,273.

The woman had to lie quite a bit on paper and in person to accomplish this scheme. She stole the identities of her clients and lied about their personal financial information. She probably had to tell a few lies to convince family members to help her funnel the refunds into a bank account where she received deposits from the government. The fraudster also asked her clients to lie for her when questioned by investigators to state that their returns were prepared by someone else. Hopefully, this lady has learned the lesson that lies usually catch up with you if you tell too many.

Source: Today’s ”Fraud of the Day” is based on a press release titled, ”Former Virginia Department of Social Services Employee Sentenced for Preparing False Tax Returns and Stealing Identities,” released by the Department of Justice on May 12, 2014.

Sybil Marshall Coles, 45, of Pamplin, Virginia, was sentenced today to serve five years in prison for aggravated identity theft and preparing a false tax return, announced Assistant Attorney General Kathryn Keneally for the Tax Division, U.S. Attorney Dana J. Boente for the Eastern District of Virginia and Attorney General of Virginia Mark R. Herring. On Jan. 28, 2014, Coles pleaded guilty to a two count criminal information. Coles was also ordered to one year of supervised release and to pay $949,273 in restitution.

According to court documents and evidence from her sentencing, Coles was an employee at the Virginia Department of Social Services in Nottoway County. From both her work and personal computers, Coles prepared and filed at least 222 false federal income tax returns claiming false refunds based on fictitious itemized deduction expenses and fictitious Schedule C businesses that reported losses, among other items, which resulted in a tax loss to the U.S. Treasury of at least $949,000. Coles also prepared and filed false Commonwealth of Virginia tax returns.

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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.