Tennessee Federal Criminal Lawyer Blog

The Internal Revenue Service and the Department of Justice have made it clear that they are turning up the heat on tax return preparers who submit fraudulent or false tax returns. Tax return preparer fraud has consistently been listed on the IRS' list of "Dirty Dozen Tax Scams." The IRS states that "tax return preparer fraud generally involves the preparation and filing of false income tax returns by preparers who claim inflated personal or business expenses, false deductions, unallowable credits or excessive exemptions on returns prepared for their clients. This includes inflated requests for the special one-time refund of the long-distance telephone tax. Preparers may also manipulate income figures to obtain tax credits, such as the Earned Income Tax Credit, fraudulently."

The Government can typically pursue civil penalties and injunctions against such tax preparers, such as the recent case of Chicago tax return preparer Rita Augustus, who was permanently banned yesterday from preparing tax returns for others. According to a Dept. of Justice press release, Augustus included fabricated charitable donations, employee business expenses and other deductions on tax returns that she prepared. The press release further claims that for tax years 2005 through 2009, Augustus prepared more than 4,000 federal income tax returns for customers with an unusually high refund rate. The Internal Revenue Service estimates that her return preparation for those years could have resulted in as much as $20 million or more in lost tax revenue.

The Government can also pursue criminal penalties, including incarceration and fines for those who prepare fraudulent tax returns, such as the case of Arkansas couple James Bruce Morris and Karen Sue Morris, were convicted yesterday of 44 counts related to tax evasion and theft of Social Security funds in U.S. District Court in Little Rock. After a two-week trial, the jury found the couple guilty on all counts. The couple were accused of defrauding the Social Security Administration out of disability benefits, underreporting their own taxable income and then using false documents to apply for Pell grants, and filing false tax returns to allow clients to claim the Earned Income Tax Credit.

If you are a tax return preparer and have concerns about returns that you have prepared, you should immediately contact an attorney who is capable of handling both the civil and criminal aspects of a tax return preparer fraud case.

Food Stamp Fraud, which is now known as fraud related to the Supplemental Nutrition Assistance Program (SNAP), is an economic crime that is increasing rapidly in regards to the number of federal prosecutions. SNAP is administered by the U.S. Department of Agriculture and often violations of SNAP regulations result in civil penalties, such as monetary fines and/or suspension from the SNAP program.

Criminal prosecutions can occur though, as illustrated by these two recent cases:

1. Earlier this month, an Oregon grocery store owner was indicted for with fraud under the Supplemental Nutrition Assistance Program. Prosecutors allege that the defendant was purchasing Electronic Benefit Transfer (EBT) cards from participants in the food stamp program, and paying them approximately half the value of the cards in cash. Both federal and Oregon state law prohibit exchanging or redeeming food stamp benefits for cash.

2. Last month, 13 people were indicted in Kansas for various charges, including conspiracy to defraud the government, wire fraud, and food stamp fraud. Prosecutors claim that defendants at two grocery stores were responsible for 2,600 fraudulent transactions, which resulted in almost $600,000 in stolen benefits.

Food stamp fraud is primarily addressed at 7 U.S.C. § 2024 and is covered in the United States Sentencing Guidelines under the Theft and Fraud crimes of USSG § 2B1.1. Per the statute, if the amount of loss is greater than $5,000, the crime is a felony, punishable by up to 20 years.

Each year as the filing deadline for filing personal tax returns approaches, the Internal Revenue Service and the Department of Justice seem to increase the number of publicized cases in which they are involved. As one U.S. Attorney bluntly states, "As taxpayers prepare to file their returns, they should know that the Department of Justice and the IRS are actively investigating and prosecuting those who attempt to shirk their civic duty to pay their fair share."

Let's take a quick look at a few of the tax-related indictments which have arisen in the past week:

* A Virginia pharmacist was indicted after he allegedly told his employer to stop withholding state and federal income taxes from his paychecks. The indictment also accused the pharmacist of failing to file federal tax returns from 2001 until at least 2007, and for allegedly setting up multiple limited liability companies to disguise and conceal assets and transactions.

* An Ohio man is charged with tax evasion for allegedly failing to report portions of his income earned in 2005 through a skilled-gaming business he owns in a purported attempt to evade tax liability, and he is also accused of paying no taxes in 2006 and 2007, despite the Government's claim that he had a combined taxable income of $329,420 and owes a total of $80,916 in back taxes for those two years.

* A California man is facing tax evasion charges for allegedly failing to file income tax returns for calendar years 2004, 2005 and 2006, despite having income in those years of $870,000 (2004), $838,000 (2005), and $206,000 (2006). The Government claims that the taxes owed added up to approximately $622,000. The indictment also asserts that the defendant falsely denied to IRS agents that he had received personal income from his business and falsely accused a corporate officer of embezzling from the company.

* A Florida man is accused of evading taxes by failing to report a $102,000 broker's commission on his tax return. The Government claims that the defendant and his wife listed their taxable income for 2005 as $121,826 when it was nearly double that -- $237,468. The couple owed $58,956 in taxes but paid less than half that, according to federal officials.

If you receive a summons and/or a search and seizure warrant from the IRS or FBI, you should immediately contact an experienced federal criminal defense attorney. As these latest rash of tax evasion charges show, the Government is committed to pursuing and ultimately prosecuting those whom they view as tax criminals.

While most non-lawyers are aware that a person's prior criminal history can impact their sentencing for future crimes, few people are aware of how drastic the sentences can be for convicted felons who continue to possess firearms. One such example of an enhanced punishment due to one's past deeds is contained in the Armed Career Criminal laws found at 18 U.S.C. § 924(e) and in the United States Sentencing Guidelines § 4B1.4.

Earlier today, Tennessee resident Bradlee Thomas was sentenced to a 15-year sentence for being an armed career criminal. According to a press release from the U.S. Attorney's Office for the Eastern District of Tennessee, Thomas pleaded guilty to being a convicted felon in possession of a firearm, in violation of 18 U.S.C. § 922(g). Due to Thomas' prior criminal history, which included convictions for burglary, he was exposed to enhanced punishment as an armed career offender.

18 U.S.C. § 924(e) provides:

In the case of a person who violates section 922 (g) of this title and has three previous convictions by any court referred to in section 922 (g)(1) of this title for a violent felony or a serious drug offense, or both, committed on occasions different from one another, such person shall be fined under this title and imprisoned not less than fifteen years...

Further, the Sentencing Guidelines § 4B1.4 will typically provide a beginning base level of 33 or 34. Based on a person's criminal history, the Sentencing Guidelines range will be anywhere from 188-327 months. Of course, a defendant may be able to lower his/her guideline level through such avenues as Acceptance of Responsibility and providing "substantial assistance" to the Government. Regardless of these potential sentencing reductions, a defendant with certain classes of prior felonies who is found in possession of a firearm is looking at a potential lengthy prison sentence.

As another example of the Government's crackdown on those persons involved in illegally distributing prescription pain medicine, last week in federal court in Greeneville, Tennessee,
U.S. District Court Judge Ronnie Greer sentenced Robert Velez, 26, of Florida, to 444 months in prison for his leadership role in an oxycodone conspiracy stretching from south Florida to northeast Tennessee and his involvement in a shooting incident in Morristown, Tenn., related to an oxycodone debt owed to Velez by a co-conspirator, according to a press release by the U.S. Attorney's Office for the Eastern District of Tennessee.

Velez decided to go to trial and was ultimately convicted at trial of:
1. conspiracy to distribute and possess with the intent to distribute oxycodone;
2. the use, carry, and discharge of a firearm during and in relation to a drug trafficking crime;
3. four counts of using a communication facility in committing, causing, and facilitating the commission of a drug trafficking crime; and
4. possession of a firearm by a convicted felon.

The prosecution argued at trial that Velez was supplying thousands of oxycodone pills to co-conspirators to transport and distribute in Tennessee. Evidence was also presented at trial that Velez "put a hit out" on one of his co-conspirators when the co-conspirator failed to deliver money to Velez after the co-conspirator was arrested by local police and a large number of oxycodone pills were seized from him. The money from the sale of these pills was allegedly owed to Velez. Velez allegedly also told said co-conspirator and his girlfriend that it was "game over" for both of them for not paying his drug debt.

Tennessee federal drug and firearm lawyers will often see enormous sentences result from a defendant's combined use of firearms while distributing narcotics. Further, this case shows how long law enforcement may be involved with a case prior to a defendant even being aware of government action. In Velez's case, the government's investigation began in May, 2008, almost 3 years before Velez was ever sentenced. A simple word of advice for potential defendants in any type of federal case would be to secure legal counsel and let your attorney's team begin its investigation immediately. A defendant could lose precious time and negotiating power by waiting until a formal indictment is issued.