It’s time once more for that super prestigious award I give out, the Tax Offender of the Year. One year there will be no candidates, but 2022 absolutely isn’t the year. Let’s look first at some who didn’t make the cut.
Melissa Horner of Bozeman, Montana tried the old favorite of withholding employment taxes but not remitting them to the government. This scheme works when you start it (government isn’t efficient), but never works in the long run. The IRS rightly sees this as theft, and all such cases are investigated. It also doesn’t help when the withheld taxes are used for vehicles and home renovations. She received 30 months at ClubFed and must make restitution of $2,878,522.
Philip J Layfield is enjoying 12 years at ClubFed for a scheme that was described by the judge who sentenced him as “sheer evil.” Mr. Layfield, a disbarred attorney, specialized in personal injury cases. He took funds from settlements and used them for personal expenses and also didn’t file and pay taxes. He also did a Ponzi-like scheme of paying previous clients who he embezzled settlements from with more recent settlements.
Another criminal described as “one of the most evil people that I have ever dealt with in the law” is spending 14 years at ClubFed for a multi-million dollar investment fraud along with cheating on his taxes. Christopher L Burnell of Highland, California promised rates of returns as high as 100%. You know the old saying, “If it sounds too good to be true it probably is.” Well, that was the case with Mr. Burnell, as the money went towards gambling and luxury items.
Just missing out on the top three were John, Helen, and Dimitrios Zourdos of Rome, New York. The three (John and Helen are married and Dimitrios is their son) operated three Dippin Donuts shops. They had a unique method of paying their employees, remitting taxes, and reporting income: If a payment came in cash, it never happened! They provided their accountants with books that didn’t show the cash going in or out, and paid employees off the books. The scheme worked for five years (from 2012 to 2017), but the IRS discovered this with predictable results. John received 30 months at ClubFed, Helen received 20 months, and Dimitrios received 10 months. They must also make restitution of more than $2 million to the government. You could say there was a hole in their scheme.
Coming in third place were Bruce Bise and Samuel Mendez. They founded a cryptocurrency company called Bitqyck, and raised $24 million in an “Initial Coin Offering (ICO)” from over 13,000 investors. You can guess where the money went: personal expenses, cars, luxury furnishings, and rent. At least they took casino trips and helped our economy in Las Vegas! Well, the money they took shockingly didn’t make it to their tax returns, and our government lost out on $1.6 million in taxes. (Mr. Bise and Mr. Mendez separately had a civil settlement with the Securities and Exchange Commission.) Mr. Bise and Mr. Mendez each receive 50 months at ClubFed and they must make restitution to the IRS.
Just missing the brass ring was Matthew Marshall of Whitefish, Montana. As an author who one day wants to write detective fiction I was intrigued by this story which, at first, I took as fiction. Mr. Marshall defrauded a Montana investor of $2.3 million by claiming to be a former Force Recon Marine and CIA operative who needed funds to run fake CIA rescue missions in foreign countries. Yes, that’s accurate. Yes, the investor was defrauded. As noted in the press release:
“Marshall promoted a fantasy world filled with fake missions carried out by fictitious operatives for clandestine agencies in faraway lands for phony purposes. It was all fake, but unfortunately it was paid for with real money from a real victim. And the money never went anywhere except to Marshall’s personal accounts,” U.S. Attorney Leif Johnson said. “The lengths to which Marshall went to carry off this fraud can hardly be overstated. He used a phone application to send fake text messages; he created false emails; he sent the victim prayer beads collected during a fake mission; and he got a tattoo to falsely signify that he was a member of ‘Force Recon,’ etc. The list goes on.
Mr. Marshall will enjoy six years at ClubFed and must make restitution of $3,254,327.
Before I get to the winner, I want to highlight a case that unfortunately has no tax charges. Had it had any such charges, this would be tops on my list for 2022. Instead, this is a pure fraud case. Karl S Greenwood pled guilty to wire fraud and money laundering related to “OneCoin” earlier this month. Mr. Greenwood allegedly earned €2.735 billion in fraudulent profits from this scheme. He, and alleged co-conspirator Ruja Ignatova (aka “the Cryptoqueen”) did not have a high opinion of their victims:
In an August 9, 2014, email between Greenwood and Ignatova, Ignatova described her thoughts on the “exit strategy” for OneCoin. The first option that Ignatova listed was, “Take the money and run and blame someone else for this . . . .” And in a September 11, 2016, exchange with Ignatova’s brother, Konstantin Ignatov, Greenwood referred to OneCoin investors stating, “These ppl are idiots,” to which Ignatov responded, “as you told me, the network would not work with intelligent people ;)”
Mr. Greenwood will be sentenced in May.
Automating procedures and paperwork is a boon to all of us. It increases productivity and allows for all of us to have a higher standard of living. This also includes those of us who intend to violate the law. If you can automate criminal actions, it increases the potential for ill-gotten gains.
Kevin Kirton of Dallas, Georgia decided that automation was a great idea. He developed computer programs to file fraudulent tax returns with the IRS. The program stole identities and could be used to file the returns. As I said, automation helps on the dark side, too. The program could even be accessed remotely! And there was more:
To help conceal the fraud activity, Kirton developed techniques to hide Internet Protocol addresses so the IRS could not trace a fraudulent tax return back to one particular origination point. Kirton also set up a bootleg phone system that he believed would not be susceptible to wiretaps to communicate with other criminals.
Unfortunately for Mr. Kirton, the government did discover this and executed a search warrant. They found hundreds of prepaid debit cards in the names of the victims, fake driver’s licenses, and a Treasury Inspector General for Tax Administration (TIGTA) report, “Income and Withholding Verification Processes are Resulting in the Issuance of Potentially Fraudulent Tax Refunds.” Mr. Kirton was arrested.
If I was arrested I would seek counsel and would be quite careful in what I did. Mr. Kirton had different ideas:
While Kirton’s case was pending and he was out on bond, he telephonically contacted an associate who was detained at the Robert A. Deyton Detention Facility, seeking to influence the testimony of a cooperator in his case. Recorded jail calls between Kirton and his jailed associate show that Kirton repeatedly sought to convey veiled threats to the cooperator through the jailed associate. Due to this conduct, Kirton’s bond was revoked and he was detained pending resolution of his case.
Mr. Kirton pleaded guilty in June 2021 to access device fraud and aggravated identity theft; he was sentenced this past March to six years and nine months at ClubFed. He must also make restitution of $629,551.
That’s a wrap on 2022. I wish all of you a Happy, Healthy, and Prosperous New Year.
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