Taxable Talk

The fraudsters have been active in the tax realm this week. We've got stories from across the country.

We'll start in Youngstown, Ohio, where Ronald Wells had an idea of how to increase his $1/hour pay as a prisoner at the Trumbell County (Ohio) prison—he'd have friends file 35 phony tax returns with the IRS. This cost us taxpayers over $236,000 in refunds that the IRS paid out. Wells, no matter how long he's sentenced for, won't be going anywhere soon; he's now serving a sentence for aggravated murder in the Grafton (Ohio) Correctional Institution.

Heading just east, from Pittsburgh comes the story of the family that's accused of committing fraud together. James Lloyd is serving time at the Fayette County (Pennsylvania) Prison, his wife Elizabeth, and their daughter Naomi Malone are all accused of filing a false tax return, and getting $14,700. These first two stories are not the first time we've seen inmates accused of committing tax fraud.

Yet another Gentleman's Club owner has found himself in trouble. Ronald Heidel, of Sanibel, Florida, will find himself at ClubFed for 18 months after underreporting income at his Gentleman's Gold Club by $1.3 million. He also must make restitution of $130,000 and pay a $30,000 fine. I almost forgot to mention that Heidel is a former IRS agent.

The owners of a casino boat-to-nowhere will no longer be heading to see but, instead, will be heading up the river to ClubFed. Samuel Gray and his wife Marilyn were each convicted on 18 counts of tax fraud and 4 counts of mail fraud. Samuel Gray was also found guilty of six counts of money laundering and receiving embezzled funds. We first wrote about this story in 2005 when the owner of a bank who was embezzling money managed to invest with another individual committing fraud. Samuel Gray faces a decade at ClubFed; his wife is looking at about 4 years.

Heading further south to Miami, we find a businessman who had an almost-perfect method to having his personal expenses paid by his business. David Traina set up a consulting firm. No problem with that. He was the only employee. That's fine. He paid personal expenses out of his business and took deductions for them. That's not good, and it's worse when the IRS finds out. And when you avoid $70,000 in taxes, that's a lot of veterinary bills. Mr. Traina has agreed to make restitution but may also find himself at ClubFed for a short stay.

We've written about the La Shish restaurants on two occasions. Elfat El Aouar received 18 months at ClubFed in her part of the tax fraud that cost the government $6.9 million in taxes. Her husband, Talal Chahine, is still a fugitive from justice and is believed to be in Lebanon. The IRS may end up owning the La Shish restaurants—liens have been filed to protect the government's claims.

Heading to the Northwest, Laura Cook, the wife of convicted "tax guru" Wade Cook, pleaded guilty to obstruction of justice. Ms. Cook admitted that she created phony documents to evade $9.4 million in taxes. Under the plea agreement, the government will recommend 15 months at ClubFed.

That's a lot of fraud, but somehow I figure to be able to bring up another list of cases next week.

Because Mark Steyn is.

You haven't hear of Mark Steyn? You haven't read Mark Steyn? His daily column is available on his web site. His column is carried by many newspapers, including the Orange County Register. He appears weekly on Hugh Hewitt's radio show every Wednesday. And he's a much better writer than I am.

Macleans magazine, the Canadian newsweekly, is paying Mark Steyn to write a blog on the Conrad Black trial. It's extremely entertaining, and quite worth reading.

So if you want a Conrad Black fix, go to Mark Steyn's Macleans Conrad Black blog.

In February, Steven Green pleaded guilty to not filing tax returns from 2001 to 2003 and to using a fake social security number when applying for a loan. He was sentenced to 2 years and nine months in prison, with the sentence to commence in June.

Normally, it would be just another story of tax fraud that I'd highlight—a real estate mogul who made some mistakes.

However, last night Mr. Green was walking out of Club Posh in midtown Manhattan when he was hit by a hit and run driver. His attorney, Louis Cherico, told the Associated Press that the prognosis for recovery is good (he had surgery earlier today).

Hopefully, the NYPD will catch what the New York Daily News calls "the cowardly driver."

Associated Press Story

If you were going to commit tax fraud, would you and your partner in crime exchange checks for the same exact amount to the penny? That's among the evidence that caused Inn-Chung Chen (aka Daniel Chen) to plead guilty to tax fraud.

Mr. Chen was president of Top Line Electronics, a contract electronics manufacturer in San Jose, from 1997 until 2000. Mr. Chen, along with three alleged accomplices, moved money from his business to other bank accounts he controlled so that he could use the money for his personal needs.

Mr. Chen wrote a check for $43,965.75 to a company controlled by one of his accomplices. Amazingly enough, days later a check was written for $43,965.75 to another bank account controlled by Mr. Chen.

The scheme wasn't for peanuts, as the total amount involved was over $2 million (resulting in a tax loss of over $900,000). Mr. Chen pleaded guilty to two counts: one each of conspiracy and filing a false tax return. He'll likely spend some time at ClubFed. His three alleged accomplices have warrants out for their arrest.

News Story Here

Taxes have (justifiably) a bad reputation. It doesn't help matters when a bozo tax preparer is on the loose.

From Lake Worth, Florida, comes the story of bozo tax preparer Louis Wayne Ratfield. Mr. Ratfield operated LWR Accounting and Tax Service. He had some interesting methods of helping his clients and himself. He promoted common law trusts, and sold them to unwary clients for between $3,000 and $6,000. The trusts were a method of sheltering income, but were anything but trustworthy. In 2001 the IRS obtained an injunction against him prohibiting him from marketing the trusts (the injunction was made permanent in 2004).

But Mr. Ratfield wasn't deterred. He apparently continued to market the trusts, and also told taxpayers that they could deduct items like ordinary living expenses (sorry, those aren't deductible). The government estimates that his practices cost the Treasury over $6 million in tax revenues.

Mr. Ratfield was found guilty on 50 counts of tax fraud and criminal contempt. He'll be spending many years at ClubFed and will likely pay a fine. And for his lucky clients, they'll probably be seeing "Dear Valued Taxpayer" letters from the IRS, as they'll soon be under audit.

News Story Here.