At the Intersection of Fraud and the Law

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Parallel lines run side by side, but they never intersect at any point. An article published in The Dallas Morning News tells about a husband and wife who ran a tax preparation business that served as a front for several parallel fraudulent operations.

The story states that the couple earned more than $2 million in fees for providing sizeable tax refunds to their clients. (The tax preparers claimed fake business losses on their customers’ income tax returns in exchange for higher fees.) Their customers were pleased with the large refund checks. Positive word-of-mouth advertising spread and the tax preparation business grew.

Because of their large client list, the company was able to win a $750,000 franchise agreement with a national tax preparation service. However, the Internal Revenue Service stripped the couple of their electronic tax preparation authority after a fraud investigation ensued. (The couple didn’t miss a beat. They provided the national tax prep service with an electronic filing identification number that belonged to a business associate to continue their fraudulent operation.)

It gets even more interesting. The business owners aggreed to sell their company to an individual, while hiding that fact from the national tax preparation chain. The owners were able to receive payments from the chain and the individual due to the parallel agreements. Eventually, the two agreements dissolved and the couple reacted by trying to sell their company again. (And as you can guess, they lied to the prospective buyer about the fact that they were under investigation.)

The 43-year-old husband and the 37-year-old wife were convicted of tax evasion and fraud. They will both serve more than 15 years in federal prison for submitting false tax returns. They also were ordered to pay approximately $18 million in restitution.

Prior to being caught, this couple definitely lived in a parallel universe where they believed that their fraudulent acts were acceptable. What they didn’t count on was having their ”make-believe” world intersected by the reality of the law. One thing is for sure – in this world, fraudsters are punished for their crimes.

Source: Today’s ”Fraud of the Day” is based on an article titled, ”Cedar Hill Couple Gets 15 Years for Tax Preparation Fraud,” written by Kevin Krause and published in The Dallas Morning News on February 23, 2015.

A Cedar Hill husband and wife who ran a tax preparation business will each spend 15 years in federal prison for helping to submit false tax returns that cost the government millions in revenue, authorities said.

Jacqueline and Gladstone Morrison were sentenced Friday in Fort Worth by U.S. District Judge John McBryde.

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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.