Tennessee Federal Criminal Lawyer Blog

Kingston, Tennessee resident Jessica Potter Stafford, 34, was sentenced today in the Eastern District Court by U.S. District Court Judge Thomas W. Phillips, to serve 27 months in prison and pay restitution of almost $120,000 to the Internal Revenue Service and $111,794.35 to her former employer, Robert McManus. This sentence is a result of Stafford pleading guilty on February 3, 2011, to 10 counts of wire fraud and three counts of income tax fraud.

According to a press release from the United States Attorney's Office, Stafford was employed as Director of Administration for several businesses owned by Robert McManus. In the course of her employment, she was issued credit cards to be used for the sole purpose of paying expenses relating to her employment duties. Stafford later admitted that from January of 2005, through August of 2008, she used company credit cards to charge more than $200,000 in personal charges at local retail stores. The filed plea agreement states that Stafford then paid for the unauthorized charges with McManus' funds. Stafford admitted that she incurred income that she failed to report on her federal income tax returns for 2006, 2007, and 2008.

As with many economic crimes, the underlying economic fraud (i.e., the wire fraud) was also accompanied by tax related charges. The philosophy of the Government is rather straightforward: if someone steals funds, he/she is not going to report this income on his/her tax return. Failure to report income on a tax return is tax fraud. In other words, the tax fraud charges are like shooting fish in a barrel for the Government if they can prove the non-tax related fraud charge (e.g., wire fraud). In this case with defendant Stafford, according to her plea agreement, she failed to report over $405,000 in income during these years, resulting in additional tax due to the United States of over $119,000.

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.

Immigration fraud cases are not very common in this part of the country, but a couple from Greeneville, Tennessee, recently pleaded guilty to immigration fraud, among other crimes. According to an article by Jamie Satterfield in the Knoxville News Sentinel, an East Tennessee woman and her bodyguard entered guilty pleas earlier this week to defrauding illegal immigrants in Tennessee and North Carolina of nearly $100,000 via claims of expertise in getting them legal citizenship.

On Monday, Debra Lynn Gouge and Jawad Lashin pleaded guilty before Greeneville U.S. District Judge Ronnie Greer to the following charges:

1. Wire Fraud [18 U.S.C. § 1343] 2. Concealment of Material Fact [42 U.S.C. § 408(a)(4)] 3. Fraud & False Statement Regarding a Tax Return [26 U.S.C. § 7601]

Plea documents indicate that the two defendants held themselves out to be immigration "specialists." Once unsuspecting immigrants paid for so-called immigration services, defendant Gouge would present her customers with documents to sign so that she could send the form to immigration officials to secure them legal citizenship. However, defendant Gouge failed to send in these forms.

The plea documents further indicate that "Gouge and (Lashin) never sent any immigration documents to any United States agencies. When customers questioned Gouge and (Lashin) about their status, Gouge and (Lashin) provided the customers false answers which were designed to stall their customers. In some instances, (Lashin) threatened customers with deportation."

Defendant Gouge also admitted to improperly receiving Social Security disability benefits while engaging in this immigration scam and also for failing to report her income to the IRS. Both defendants are set for a sentencing hearing on June 27th.