Tax Fraud Blotter: There’s nothing like a good fraud

ITS over; bad chemistry; international intrigue; and other highlights of recent tax cases.

Cincinnati: Fessum Ogbazion, founder of Instant Tax Service, or ITS, has been sentenced to a year and a day in prison for conspiring to commit fraud in connection with the operation of the national tax prep company he owned and managed, as well as for tax crimes.

Ogbazion collected millions of dollars in fees while fraudulently inducing clients to visit ITS Financial LLC, the national franchisor of ITS, a business he created in 2004. ITS advertisements offered RALs through an independent third-party lender despite ITS having had no such lender to fund the loans. Ogbazion used the false advertising to entice customers to visit ITS locations for a loan, then used the applications to prepare and file income tax returns, often without the clients’ authorization.

Between 2006 and 2011, ITS collected more than $70 million in fees.

Ogbazion also failed to pay some $1.3 million in payroll taxes due from ITS and another business during four tax quarters in 2009 and 2010. He evaded IRS attempts to collect the unpaid taxes by directing business revenue to nominee accounts, placing assets in the names of nominee entities and making false statements to an IRS revenue officer who attempted to collect the debt.

Ogbazion was convicted five years ago of tax evasion, willful failure to withhold and pay over employment taxes, wire fraud, conspiracy to commit wire fraud and bank fraud. After the trial, the court dismissed five counts of wire fraud but left the conviction for conspiracy to commit wire fraud and other counts of conviction.

He was also ordered to serve three years of supervised release and to pay some $933,708 in restitution to the United States.

New York: Two Bronx tax preparers have pleaded guilty to claiming bogus deductions on several returns they filed.

Laureano Lopez, 64, and Adalberto Velasquez, 43, of Roy’s Agency Inc., filed the fraudulent returns on behalf of individual taxpayers. The taxpayers were not entitled to the inflated deductions claimed on the returns.

Lopez was a registered New York State tax preparer; Velasquez was not registered to legally prepare taxes in New York State.

Boston: Dr. Charles Lieber, 62, former chair of Harvard’s Chemistry and Chemical Biology Department, has been convicted in connection with lying to federal authorities about his affiliation with People’s Republic of China’s Thousand Talents Plan and the Wuhan University of Technology, as well as failing to report income he received from that university.

He was convicted of two counts of making false statements to federal authorities, two counts of making and subscribing a false income tax return, and two counts of failing to file reports of FBARs with the IRS.

Lieber served as the principal investigator of the Lieber Research Group at Harvard, which received more than $15 million in federal research grants between 2008 and 2019. Unknown to Harvard, Lieber became a “strategic scientist” at WUT and, later, a contractual participant in China’s Thousand Talents Plan from at least 2012 through 2015. (Thousand Talents is a prominent Chinese recruitment plan to attract, recruit and cultivate high-level scientific talent.)

WUT paid Lieber a salary of up to $50,000 per month and living expenses of up to $150,000 and awarded him more than $1.5 million to establish a research lab at WUT. In 2018 and 2019, Lieber lied to federal authorities about his involvement in Thousand Talents and his affiliation with WUT.

In tax years 2013 and 2014, Lieber earned income from WUT that he did not disclose to the IRS on his federal income tax returns; portions of his salary were deposited into an account at a Chinese bank, and Lieber failed to file FBARs for 2014 and 2015.

Making false statements provides for up to five years in prison, three years of supervised release and a fine of $250,000. Making and subscribing false income tax returns provides for up to three years in prison, a year of supervised release and a $100,000 fine. Failing to file an FBAR provides for up to five years in prison, three years of supervised release and a fine of $250,000.

Miami: Tobacco company executive Akrum Alrahib of Los Angeles has been sentenced to five years in prison for his participation in a scheme to avoid millions in excise taxes on imported tobacco products.

Alrahib was the president and owner of Trendsettah USA, a California tobacco company authorized to transact business in Florida. Trendsettah sold tobacco products, such as large cigars and marijuana paraphernalia, most of which were imported from the Dominican Republic through Miami.

Previously, Alrahib admitted that he partnered with Gitano Pierre Bryant Jr., a tobacco importer authorized by the Alcohol and Tobacco Tax and Trade Bureau to import large cigars. Alrahib and Bryant agreed to lower their costs by underreporting the Federal Tobacco Excise Tax due on the imported cigars; they consistently evaded the tax by concealing the price Alrahib paid for the cigars.

During the scheme, Alrahib paid more than $21 million for Dominican tobacco products and received more than $700,000 in kickbacks from Bryant. Alrahib also admitted his participation in a witness tampering scheme, in which he sought to prevent a witness from testifying before a grand jury.

Alrahib, who previously pleaded guilty, was ordered to serve an additional three years on supervised release and pay more than $7 million restitution.

Bryant, charged in a separate case, also pleaded guilty and was sentenced to four years in prison and ordered to pay more than $9 million in restitution.

Galloway, New Jersey: Tax preparer Michele Griffin, 42, has pleaded guilty to aiding and assisting in the preparation of a false income tax return.

She admitted using false information to increase clients’ refunds, and to filing her own false returns.

Griffin prepared multiple fraudulent returns on behalf of her clients by falsifying education expenses, dependent care expenses, business income, dependent information and unemployment income. She prepared 19 false returns for six clients for tax years 2013 through 2016 and filed three false returns for herself for tax years 2013 through 2015.

She admitted causing a tax loss of some $135,000.

She faces up to three years in prison and a $250,000 fine. Sentencing is May 10.

Ipswich, Massachusetts: Businessman George Vasiliades, 58, has pleaded guilty in connection with charges that he manipulated his payroll to avoid paying taxes.

He pleaded guilty to 17 counts of failure to collect, account for and pay over federal employment taxes; 17 counts of aiding and assisting the filing of false tax returns; and one count of making a false statement to the Social Security Administration.

He operated several businesses, including Alpine Property Services, Boston Central Management, Delta Labor Company, Olympic Painting & Roofing and Turnpike General Contracting. Between 2008 and 2013, Vasiliades concealed the true size of his companies’ payrolls from the IRS. Among other methods, he directed certain employees to create shell corporations and then paid employees through these corporations as if they were independent contractors.

Vasiliades also paid some employees, including those who were not U.S. citizens and not authorized to work in the United States, from bank accounts unconnected to his corporate payroll reporting software; as a result, these payments were not reported as wages to the IRS. For one non-citizen employee, Vasiliades also paid wages using the name and Social Security number of a U.S. citizen employee.

The scheme resulted in more than $1.8 million in tax losses.

The charges of failure to collect, account for and pay over federal employment taxes and making a false statement to the Social Security Administration each provide for up to five years in prison and three years of supervised release. The charges of aiding and assisting the filing of false returns each provide for up to three years in prison and a year of supervised release. Both categories of charges also carry a fine of $250,000 or twice the gross gain or loss, whichever is greater.

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