Finding New Ways to Fraud


The fraud business is not always an easy one. To state the obvious: the practice of fraud is illegal, and federal, state and local government officials make continuous efforts to end such activities. But we must ask ourselves, how does fraud continue to exist? If the government is catching on to the ways of fraudsters, why are we not able to end fraud altogether? The answer is simple? novelty. Fraudsters work hard to stay one step ahead of the government, one novel scheme at a time. Today’s Fraud of the Day, courtesy of a news release from the U.S. Department of Justice, focuses on a couple’s novel approach to collecting their fake tax refunds.

The release announces that a ”couple charged with tax refund conspiracy pleaded guilty” in federal court. The basic scam was simple? from 2009 to 2012, the couple used tax preparation software and the personally identifiable information of others to file fraudulent state and federal tax refunds. (And, they got this information where?)<em? The release notes that ”the defendants used fictitious information pertaining to the filer’s income and amount of federal tax withheld, and, in doing so, were careful to use figures that would maximize the amount of the refund and minimize the risk of detection.’? (Evidently, they were not careful enough.)

So, where is the novelty in this scheme? We’ve seen identity fraud and tax refund fraud go hand-in-hand for some time. The novelty is in the way these fraudsters collected the tax refunds. Investigators found that the couple rented a home on a lake in a neighborhood of vacation homes. Knowing the vacation homes were not regularly occupied, the couple monitored those mailboxes to obtain the tax refund checks and debit cards as they were mailed to those directed addresses. In addition, the accused used addresses in neighboring state South Carolina, where the husband owned a business. Once obtained, the returns were deposited in the couple’s bank account.

How lucrative was this scam? The couple filed over 1,000 tax returns, making claims in excess of $5 million, while actually receiving around $3.5 million. (Not bad – they averaged $3,500 per fraud.)

The couple is currently awaiting sentencing.

While fraudsters are trying to stay one step ahead of the game, government officials are close behind. This was a case of cooperation amongst multiple law enforcement agencies, including the Internal Revenue Service, the U.S. Postal Inspection Service and the Polk County Sheriff’s Office. As fraudsters continue to develop novel approaches to defrauding the government, agencies will need to be just as creative to catch them. (Say it with me people? leverage public records and data analytics to find the fraud!)

Source: Today’s ”Fraud of the Day” is based on a news release titled, ”Polk. Co. Couple Pleads Guilty to Tax Refund Conspiracy,” issued by the U.S. Department of Justice’s Office of the U.S. Attorney for the Western District of North Carolina on October 29, 2012.

ASHEVILLE, N.C. – A Polk Co. couple charged with tax refund conspiracy pleaded guilty today in U.S. District Court in Asheville, announced Anne M. Tompkins, U.S. Attorney for the Western District of North Carolina.

U.S. Attorney Tompkins is joined in making today’s announcement by Jeannine A. Hammett, Special Agent in Charge of the Internal Revenue Service, Criminal Investigation Division (IRS-CI) and Keith Fixel, Inspector in Charge of the Charlotte Division of the U.S. Postal Inspection Service.


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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.