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IRS-CI Fiscal Year 2012 National Operations / Annual Business Report

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Table of Contents

Chief’s Message............................................................................................................................................ 2

Goals and Expectations........................................................................................................................................3

Accomplishments and Staffing .................................................................................................................... 4

Equity, Diversity, and Inclusion ..........................................................................................................4

Headquarters Organizational Structure ...................................................................................................... 5

Field Office Organizational Structure .......................................................................................................... 6

Legal Source Tax Crimes............................................................................................................................... 7

General Tax Fraud .................................................................................................................................................7

Refund Fraud............................................................................................................................................. 8

Return Preparer Program ................................................................................................................ 8

Questionable Refund Program ........................................................................................................ 9

ID Theft .......................................................................................................................................... 10

Abusive Tax Schemes.............................................................................................................................. 12

Non-filer Investigations........................................................................................................................... 12

Employment Tax ..................................................................................................................................... 13

Illegal Source Financial Crimes................................................................................................................... 14

Financial Institution Fraud ...................................................................................................................... 14

Public Corruption.................................................................................................................................................15

Corporate Fraud...................................................................................................................................... 16

Gaming.................................................................................................................................................... 17

Insurance and Healthcare Fraud............................................................................................................. 18

Bankruptcy Fraud.................................................................................................................................... 18

International Operations ........................................................................................................................... 19

Money Laundering & Bank Secrecy Act...........................................................................................................21

Narcotics and Counterterrorism................................................................................................................ 23

Warrants and Forfeiture...................................................................................................................25

Technology Operations & Information Services ................................................................................26
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Chief’s Message – Richard Weber

In 1936, the first Chief of CI, Elmer Lincoln Irey, 

commissioned a summary book highlighting the 

significant cases completed by what was then the IRS 

Intelligence Unit. Mr. Irey was a humble man, and not 

accustomed to bragging about himself, but he had 

immense pride in what his beloved Intelligence Unit 

accomplished for the good of the nation. Given our 

proven capabilities, Mr. Irey foresaw a continual legacy 

of bringing to justice America's criminal elite and 

wanted us to always have a profound sense of purpose. 

To instill this, he believed we should regularly pause 

and examine our accomplishments and that such an 

exercise would bring much pride and satisfaction to all 

employees. Therefore, our first Chief asked that we 

periodically produce a book of achievements, 

successive testaments to CI's contributions to this great 

nation. In the spirit of Chief Irey, I have asked that we 

continue the legacy of a book of achievements.

I am very proud of the outstanding successes Criminal Investigation (CI) achieved in 2012. The key to 

our success continues to be the commitment from each employee to support and promote IRS' strategies 

and CI's operational goals. During the past year, I have traveled around the nation visiting our employees 

and conducting town hall meetings. I am proud and humbled to be the Chief of CI, an agency with an 

amazing and rich legacy. Since our inception in 1919, almost 100 years ago, we often have been the last 

line of defense in bringing down America's criminal elite. Criminal Investigation agents, analysts, and 

professional staff have a strong sense of purpose, dedication, and passion for following the money and 

pursuing those who want to terrorize and destroy this country, victimize others, and steal taxpayer dollars. 

It is truly not just a paycheck for those who work to promote CI's mission.

Our legacy is one of perseverance and taking on complex, sensitive investigations that many others 

simply did not have the financial sleuthing ability to complete. I realize now more than ever after visiting 

so many field offices that we are living up to that history every day by working great cases in the areas of 

tax fraud, ID theft, money laundering, public corruption, and the list goes on. Additionally, our Bank 

Secrecy Act (BSA) teams are doing amazing work - reviewing hundreds of thousands of Suspicious 

Activity Reports (SARs), finding good cases, investigating them and forfeiting millions of dollars in 

illegal proceeds. It is not just about the numbers. It is about the types of cases, the way we investigate 

them, our people and how we lead and manage. Through strategic investments in our workforce, 

increased communication, enhanced technology, and collaboration with domestic and global law 

enforcement partners, CI will continue to be the worldwide leader in tax and financial investigations.

This book showcases some of the many significant cases that were completed by CI during fiscal year 

2012 and the many program areas we cover as an organization. These cases are just a few examples of the 

thousands of investigations initiated by CI last year, as we continue to make our mark as the finest 

financial investigators in the world. I want to thank and commend the agents, managers, analysts, and 

professional staff of CI on a very successful year. It has been an honor to serve you and I look forward to 

many more productive years ahead.

--Richard Weber, Chief, IRS Criminal Investigation

Chief Richard Weber stops to reflect on the first 

Chief – Elmer Irey.
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VISION FOR CRIMINAL INVESTIGATION:

Through strategic investments in people, increased communication, enhanced technology, and collaboration with 

domestic and global law enforcement partners, CI will continue to be the worldwide leader in tax and financial 

investigations.

GOALS AND EXPECTATIONS:

Increase outreach and communications (internally and externally) to build stronger relationships with 

internal and external stakeholders as well as to educate the public about CI's investigations in order to deter 

crime.

Recruit, select, promote, and retain the best candidates for Special Agent, Professional staff and Senior 

Leadership positions.

Invest in training and employee development and reward employee accomplishments that help us achieve 

our unique business objectives.

Develop a comprehensive succession plan and mobility policy for key leadership positions within CI.

Enhance our technology capabilities to better support our Special Agents and Professional Staff in carrying 

out our Mission and Investigative Priorities.

Develop talents and leverage diverse insights and opinions that will ensure our employees are fully engaged 

at every level, treated fairly and with consistency throughout the organization. CI’s employees are our most 

valuable resource and we should encourage them at every level to share their insights and opinions. 

Therefore, CI will strive to become an organization where all individuals feel empowered and included and 

we will capitalize on the different talents and backgrounds we possess individually.

INVESTIGATIVE PRIORITIES:

Identity Theft

Offshore Tax Evasion 

Tax Treaty cases

Fraud Referrals

Sovereign Citizen cases

Money laundering 

Other financial investigations including Terrorist Financing, Public Corruption, and Organized Crime Drug 

Enforcement Task Force

Suspicious Activity Report Review Teams and Asset Forfeiture
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ACCOMPLISHMENTS

Overall Fiscal Year 2012 (FY 2012) Investigation Statistics

 Subject criminal investigation initiations in FY 2012 were 5,125 cases.

 Investigation completions in FY 2012 were 4,937, a 5% increase over FY 2011.

 Prosecution recommendations for FY 2012 were 3,701, reflecting an increase of 8.5% over FY 2011.

 Convictions totaled 2,634 in FY 2012. This represents an increase of 12% in comparison to FY 2011.

 Conviction rate is the percentage of convictions compared to the total number of convictions, acquittals, 

and dismissals. The conviction rate for FY 2012 is 93.0%, 0.3% more than the FY 2011 rate (92.7%).

FY 2012 FY 2011 FY 2010

Investigations Initiated 5125 4720 4706

Prosecution Recommendations 3701 3410 3034

Indictments/Informations 3390 2998 2645

Convictions 2634 2350 2184

Sentenced* 2466 2206 2172

Percent to Prison 81.5% 81.7% 81.5%

*Sentence includes confinement to federal prison, halfway house, home detention, or some combination thereof.

A fiscal year runs from October 1 through September 30.

Data Source: Criminal Investigation Management Information System

IRS-CI Staffing

 As of September 30, 2012, IRS-CI had 2,657 Special Agents (SA) on board, a 2.7% decrease compared to 

the number of special agents at the conclusion of FY 2011.

 Professional staff assigned at the conclusion of FY 2012 was 1,104, a 4.7% decrease from professional staff 

at the end of FY 2011.

EQUITY, DIVERSITY AND INCLUSION

The mission of CI’s Equity, Diversity, and Inclusion (EDI) office is to identify, examine, and address the 

organization’s employment practices, policies, guidelines, and procedures, to ensure they are free from unlawful 

discrimination, and that all employees and applicants for employment achieve equal opportunity in every facet of the 

IRS’s programs, activities, and services. This is achieved by promoting a culture that values diversity and inclusion; 

identifying barriers as opportunities for organizational improvement and success; creating positive relationships and 

partnerships by demonstrating trust, respect, and integrity for one another; developing and coordinating diversity 

and inclusion initiatives to improve the organizational environment and the quality of work life; and, identifying and 

implementing solutions to the benefit of our most valuable resource, CI employees.
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LEGAL SOURCE TAX CRIMES

Criminal Investigation's (CI) primary resource 

commitment is to develop and investigate Legal 

Source Tax Crimes. Typically, Legal Source Tax 

Crimes are committed by people in legally 

permissible occupations and industries and their 

actions violate tax laws or threaten the tax system. 

Prosecution of these cases support the overall IRS 

compliance goals and enhance voluntary compliance

with the tax laws. Some of these investigations are 

worked with our federal, state and local law 

enforcement partners, as well as with foreign tax and 

law enforcement agencies.

Fraud Referral Program: Criminal Investigation 

places a high degree of emphasis on the fraud referral 

program. One source of investigations comes from 

civil IRS divisions in the form of a fraud referral. CI

works closely with the civil divisions of Small 

Business/Self-Employed (SB/SE), Wage and 

Investment (W&I), and Large Business & 

International (LBI). It is through these fraud referrals

that CI gets some of our core mission tax 

investigations. CI is committed to timely evaluation 

of each fraud referral. 

General Tax Fraud

The General Tax Fraud investigations are the 

backbone of Criminal Investigation's enforcement 

program and has a direct influence on the taxpaying 

public’s compliance with the Internal Revenue Code.

Compliance with the tax laws in the United States 

depends heavily on taxpayer self-assessment of the 

amount of tax, voluntary return filing and remittance 

of any tax owed. This is frequently termed “voluntary 

compliance.” There are individuals from all facets of 

the economy, whether corporate executive, small 

business owner, self-employed or wage earner, who 

do not pay their fair share of taxes through willful 

non-compliance. Criminal Investigation special 

agents use their financial investigative skills to 

uncover and quantify many different schemes, 

including deliberately under-reporting or omitting 

income (“skimming”); keeping two sets of books, or 

making false entries in books and records; claiming 

personal expenses as business expenses; claiming 

false deductions or credits against taxes; or hiding or 

transferring assets to avoid payment.

Examples of general tax fraud investigations

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adjudicated in FY 2012 include:

Former New York Pizzeria Owner Sentenced for 

Tax Evasion: On September 18, 2012, in Buffalo, 

N.Y., Michael Gerace was sentenced to 21 months in 

prison and ordered to pay $176,000 in restitution to 

the IRS. According to court documents, from 2005 

through 2007, Gerace maintained two separate sets of 

books and records for his business, Abbott Pizza. The 

first set of books accurately recorded the total 

revenue generated by the pizzeria. The second set of 

books, which recorded only a portion of the pizzeria's 

revenue, Gerace gave to his accountant to prepare his 

personal and corporate tax returns for 2005 through 

2007. Gerace’s unreported income during these three 

years was more than $500,000.

West Virginia Woman Sentenced for Tax 

Evasion: On August 20, 2012, in Huntington, 

W.Va., Georgiana Ciavarello was sentenced to 37 

months in prison and ordered to pay $1,025,428 in 

restitution. According to her plea agreement, 

Ciavarello was employed as a bookkeeper by Quail 

Ridge Construction (QRC) Company from August 

2007 through November 2010. She was responsible 

for the computer program QRC used for its general 

ledger and check register. Beginning in September 

2007 and continuing until her discharge in November 

2010, Ciavarello embezzled at least $689,790 from 

QRC. For tax years 2007 through 2010, Ciavarello 

did not report her embezzled income on her personal 

tax returns.

New Mexico Man Sentenced on Tax Charges: On 

December 14, 2011, in Albuquerque, N.M., Robert 

A. Fout was sentenced to 36 months in prison and 

ordered to pay $153,416 in restitution to the IRS and 

$33,999 to the State of New Mexico Taxation and 

Revenue Department. According to his plea 

agreement, from 2005 to 2008, Fout worked as a 

general and electrical contractor. Fout’s general and 

electrical contracting work generated significant 

receipts; however, he willfully concealed those 

receipts from the IRS. Fout admitted that in calendar 

years 2005, 2006, 2007 and 2008, he filed false tax 

returns in which he failed to report $438,514 in 

taxable income resulting in the evasion of $153,416 

in taxes.

 

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Investigation summaries are written from public 

court documents.
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Refund Fraud Program

Refund fraud poses a significant threat to the tax 

system. When criminals attempt to misuse the 

Federal tax system in order to obtain money from the 

government under false pretenses, it not only results 

in the loss of funds needed for vital government 

programs, but it also can impact the taxpayers 

confidence in the tax system and willingness to 

voluntarily meet their tax filing obligations. The 

Refund Fraud Program is broken down into two 

distinct categories: the Return Preparer Program and 

the Questionable Refund Program, which includes

identity theft investigations.

Return Preparer Program (RPP):

The Return Preparer Program investigations 

generally involve the orchestrated preparation and 

filing of false income tax returns, in either paper or 

electronic form, by dishonest preparers who may 

claim: inflated personal or business expenses, false 

deductions, excessive exemptions, and/or 

unallowable tax credits. The preparers’ clients may 

or may not have knowledge of the falsity of the 

returns.

Examples of return preparer program investigations 

adjudicated during FY 2012 include:

Owner of Louisiana Tax Preparation Service 

Sentenced on Tax Charges: On September 26, 

2012, in Baton Rouge, La., Ronald Wilkerson was 

sentenced to 92 months in prison, a forfeiture of 

$470,000, a judgment of $485,939, and ordered to 

pay $500,959 in restitution. According to court 

documents, Wilkerson prepared 635 false tax returns 

claiming approximately $1,415,388 in false telephone 

excise tax refunds.

Texas Return Preparer Sentenced for Filing False 

Returns: On July 3, 2012, in Del Rio, Texas, Juan 

Guerrero was sentenced to 36 months in prison and 

fined $7,500. According to court documents, 

Guerrero, dba Juan’s Tax Service, prepared tax 

returns for clients from 2005 through 2007. Those 

returns falsely and fraudulently claimed Schedule C 

losses from business the clients did not have and 

deducted business expenses to falsely reduce their 

total income.

Tax Preparer Sentenced on Tax Charges: On June 

11, 2012, in Philadelphia, Pa., Miguel Vazquez was 

sentenced to 120 months in prison and ordered to pay 

$1.6 million in restitution to the IRS. According to 

court documents, Vazquez prepared and assisted in 

preparing 1,654 fraudulent federal income tax 

returns. Vazquez prepared returns for his clients 

using fraudulent addresses on many of the returns. 

The returns falsely claimed that the filer was a 

business owner and falsely applied for a refund based 

upon an Earned Income Tax Credit. In addition, on 

his personal tax returns, Vazquez falsely reported an 

adjusted gross income of $28,000 for tax years 2008 

and 2009, which he claimed was generated from 

Schedule C gross receipts. These claims were false 

because he netted approximately $500,000 in income 

during each of those years.

Illinois Tax Service Operator Sentenced in $1.6 

Million Fraudulent Refund Scheme: On May 11, 

2012, in East St. Louis, Ill., Delaun Leflore was 

sentenced to 90 months in prison. In addition, Leflore 

was ordered to cooperate with the IRS and prohibited 

from being in the tax preparation service business in 

the future. On May 4, 2012, his co-conspirator, Carey 

Herron was sentenced to 46 months in prison.

According to court documents, from at least 2009 

through April 2011, Leflore and Herron, dba Prime 

Time Tax Services, created fraudulent Schedule C 

information to falsely inflate the tax refund amount 

taxpayers were entitled to receive. Over 460 false 

federal tax returns were filed as part of the scheme.

The following table provides IRS-CI’s Return Preparer Program statistics over the past three fiscal years:

FY 2012 FY 2011 FY 2010

Investigations Initiated 443 371 397

Prosecution Recommendations 276 233 202

Indictments/Informations 202 176 182

Convictions 178 163 145

Sentenced 172 163 132

Incarceration Rate 84.3% 87.1% 88.6%

Average Months to Serve 29 25 24
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Questionable Refund Program (QRP):

The primary focus of this program is to identify 

fraudulent claims for tax refunds. Generally, these 

schemes involve individuals filing false tax returns 

using the identifiers of other individuals knowingly 

or unknowingly.

Examples of questionable refund program

investigations adjudicated in FY 2012 include:

Three Sentenced for Their Roles in Filing False 

Claims for Refunds: On August 2, 2012, in Kansas 

City, Mo., Candance McNeil was sentenced to 20 

months in prison and ordered to pay $359,991 in 

restitution to IRS. On July 20, 2012, Waltia Williams

was sentenced to 15 months in prison and ordered to 

pay $219,755 in restitution to the IRS. On June 11, 

2012, Melvin Artis was sentenced to 21 months in 

prison and ordered to pay $228,217 in restitution to 

the IRS. According to court documents, from January 

2009 to January 2010, McNeil, Williams and Artis 

caused 49 false tax returns to be filed claiming a total 

of $359,991 in refunds. McNeil and Williams created 

false and inflated Forms W-2 earnings and 

withholdings information for individuals and then 

prepared and filed the fraudulent federal tax returns 

electronically with the IRS. These fraudulent returns 

claimed tax refunds to which the individuals were not 

entitled to receive.

New York Inmate Sentenced for Filing False 

Claims Against the IRS: On July 2, 2012, in 

Buffalo, N.Y., Ronald Williams was sentenced to 120 

months in prison. On January 27, 2012, a jury found 

Williams guilty of filing fraudulent claims against the 

United States. The evidence presented at trial showed 

that Williams, while an inmate at various New York 

State correctional facilities, filed 11 tax returns with 

the IRS during tax years 2006 through 2010 asking 

for refunds totaling $890 million. As part of his 

scheme to defraud the IRS, Williams applied for a 

fraudulent refund of $327,456. Prison authorities 

intercepted the check and returned it to the IRS. To 

further his claims, Williams fabricated withholdings 

on numerous Forms 1099-OID by claiming false 

withholding credits. Williams was also charged with 

aiding and abetting another prisoner with filing a 

fraudulent claim for a refund based upon the 1099-

OID tax scheme.

Man Sentenced for Tax Fraud Conspiracy: On 

June 22, 2012, in Seattle, Wash., Ronald L. Brekke

was sentenced to 144 months in prison and ordered to 

pay $6,206,998 in restitution. According to court 

documents, Brekke promoted a tax fraud scheme 

known as “1099 OID” fraud. Promoters of this 

scheme claim that the U.S. Treasury will pay out tax 

refunds equal to the value of a person’s personal 

debt. Brekke assisted nearly 1,000 people in three 

countries to claim over $763 million in fraudulent tax 

refunds. The IRS flagged the vast majority of the 

1099 OID filings as frivolous. About two-thirds of 

Brekke’s customers were Canadians who had never 

paid income tax and were not owed any money by 

the U.S. Treasury. Brekke took in about $400,000 in 

fees over less than a two-year period from the people 

he aided in the fraud.

Mother and Daughter Sentenced for Role in 

Scheme to Obtain Payment of False Claims for 

Tax Refunds: On April 18, 2012, in Amarillo, 

Texas, Evelyn Wells was sentenced to 12 months and 

a day in prison and ordered to pay $100,360 in 

restitution. On March 29, 2012, Cassandra Dean was 

sentenced to 21 months in prison and ordered to pay 

$100,360 in restitution. According to court 

documents, for tax years 2006, 2007 and 2008, Wells 

and Dean provided false W-2 Forms containing 

fabricated employers’ names and fabricated amounts 

of tax withholdings for individuals they recruited. 

The false W-2 Forms were used to prepare false 

federal income tax returns, which were electronically 

filed with the IRS.

Two Wisconsin Women Sentenced for Filing 

Fraudulent Income Tax Returns: On March 1, 

2012, in Milwaukee, Wis., Roshunda Smith was 

sentenced to 46 months in prison and ordered to pay 

$450,000 in restitution. Linda Townsend was

sentenced to 24 months in prison and ordered to pay 

$70,000 in restitution. According to court documents, 

Smith and Townsend submitted more than 170 false 

income tax returns seeking more than $1.5 million in 

refunds using false employment tax, income, 

dependents, tax withholdings, and claiming to be 

eligible for the First Time Home Buyers Credit. 
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The following table provides IRS-CI’s Questionable Refund Program statistics over the past three fiscal years:

FY 2012 FY 2011 FY 2010

Investigations Initiated 921 578 504

Prosecution Recommendations 574 404 301

Indictments/Informations 507 288 196

Sentenced 262 180 130

Incarceration Rate 85.5% 78.3% 83.8%

Average Months to Serve 35 24 28

Identity Theft:

Identity theft tax refund fraud has increased 

substantially over the past couple of years, and CI has 

been on the forefront of combating this egregious 

crime against honest taxpayers. Identity thieves 

attempt to defraud the federal government of funds 

by filing fraudulent refund claims using another 

person's identifying information, stolen from a wide 

variety of places. CI regularly collaborates with 

federal, state and local law enforcement agencies and 

participates in task forces and working groups around 

the country in an effort to leverage the resources and 

expertise of various law enforcement agencies to 

address identity theft-related crimes. During 2012, CI 

took a number of proactive steps to fight the 

explosion of identity theft tax refund fraud. 

One step was to establish an Identity Theft 

Coordinator position to aid CI efforts in combating 

the growing threat of Identity Theft on a national 

level. Through close coordination with senior 

management in CI’s field offices, as well as with CI’s 

partners in other law enforcement agencies and civil 

functions of IRS, the Identity Theft Coordinator helps 

to ensure CI’s identity theft efforts are focused so as 

to garner the most impact on this extremely important 

investigative priority area. 

Identity Theft Clearinghouse (ITC): The ITC 

receives all refund fraud related identity theft leads 

from CI field offices. The ITC’s primary 

responsibility is to develop and refer identity theft 

schemes to the field offices, facilitate discussions 

between field offices with multi-jurisdictional issues, 

and provide support to on-going criminal 

investigations involving identity theft. 

Stolen Identity Refund Fraud (SIRF): CI 

collaborated with Criminal Tax Counsel and the 

Department of Justice (DOJ) Tax Division to develop 

streamlined processes to more efficiently address 

identity theft related refund fraud cases. This 

collaboration resulted in the release of DOJ Tax 

Directive 144 to expedite cases of stolen identity 

refund fraud. Directive 144 created new policies that 

enable federal law enforcement and prosecutors to 

quickly open investigations and initiate legal actions 

when SIRF violations are alleged. For CI, this 

resulted in an expansion of federal criminal violations 

that may be investigated during tax-related schemes 

and enabled a significant streamlining of internal 

procedures, thereby enabling our special agents to 

react swiftly and initiate more SIRF investigations. 

Victim Waiver Pilot Program: This program was 

developed jointly by IRS-CI and its civil counterparts 

as a result of a significant increase in requests from 

state and local law enforcement agencies for tax 

return documents associated with identity theft 

related refund fraud. The program allows for the 

disclosure of tax returns and return information 

associated with accounts of known and suspected 

victims of identity theft with the express written 

consent of those victims. The pilot program was 

initially available to law enforcement agencies in 

Florida, but has subsequently expanded to include the 

states of New York, New Jersey, Pennsylvania, 

Georgia, Alabama, Texas, Oklahoma, and California. 

Examples of identity theft investigations adjudicated 

in FY 2012 include:

Illinois Woman Sentenced for Filing Fraudulent 

Tax Returns: On August 20, 2012, in Chicago, Ill., 

Katrina Pierce was sentenced to 132 months in 

prison, ordered to pay $123,670 in restitution to the 
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State of Illinois and $60,750 to the IRS, as well as 

forfeit $207,183. According to court documents, 

Pierce used stolen identities of deceased individuals 

and others to file approximately 180 fraudulent 

federal individual income tax returns for tax years 

2006 and 2007. Pierce falsely claimed that the tax 

return was being submitted by a representative of a 

deceased taxpayer. Each fraudulent return listed 

actual deceased individuals as the taxpayers, and 

falsely stated that the person had died during the tax 

year. Over the course of the scheme, Pierce filed 

fraudulent tax returns falsely claiming a total of 

approximately $500,770 in tax refunds. 

Five Sentenced for Multi-Million Dollar Tax 

Fraud and Identity Theft Scheme: On June 19, 

2012, in Jacksonville, Fla., Bryan Adrain Copeland 

was sentenced to 264 months in prison and ordered to 

pay $3,547,373 in restitution to the IRS. According to 

court documents, Copeland filed fraudulent federal 

income tax returns using stolen identity information. 

Four other participants were sentenced in this 

scheme. Veronica Olivia Brown was sentenced to 30 

months in prison and ordered to pay $767,555 in 

restitution to the IRS. Devron Tobey was sentenced 

to 12 months and one day in prison and ordered to 

pay $548,275 in restitution to the IRS. Prientice 

Hooks was sentenced to 12 months and one day in 

prison and ordered to pay $313,822 in restitution to 

the IRS. Beatrice Latangela Alphonse was sentenced 

to 63 months in prison.

Tennessee Resident Sentenced for Tax and 

Identity Theft Scheme: On May 16, 2012, in 

Memphis, Tenn., Rhonda Mayweather was sentenced 

to 168 months in prison and ordered to pay $218,577 

in restitution to the IRS and $6,200 to individual 

victims of the scheme. According to the indictment, 

Mayweather and a co-conspirator obtained fraudulent 

refunds from the IRS by filing false 2005, 2006, and 

2007 federal income tax returns in the names of 

individuals whose identities they had stolen. They

attempted to obtain over $2 million by filing over 500 

fraudulent tax returns.

Leaders of Multi-Million Dollar Fraud Ring 

Sentenced: On May 8, 2012, in Montgomery, Ala., 

Veronica Dale and Alchico Grant were sentenced to 

334 months and 310 months in prison, respectively.

Dale and Grant were both ordered to pay over $2.8 

million in restitution to the IRS. According to court 

documents, beginning in 2009 and continuing 

through 2010, they used stolen identities to file over 

500 fraudulent returns that sought at least $3,741,908 

in tax refunds. These returns were filed using the 

names of Medicaid beneficiaries, whose personal 

information Dale obtained while working for a 

company that serviced Medicaid programs. A second 

indictment charged a conspiracy that involved Dale, 

Grant, Melinda Clayton, and Stephanie Adams.

According to court documents, this conspiracy 

extended from January 2011 to April 2011. In her 

plea agreement, Dale admitted that this scheme 

involved a fraud loss of between $400,000 and $1 

million. Dale admitted to providing Clayton with 

stolen identities to support the new scheme. The tax 

refunds were directed to bank accounts and prepaid 

debit cards that Dale and Grant purchased.

The following table provides IRS-CI’s Identity Theft statistics over the past three fiscal years:

FY 2012 FY 2011 FY 2010

Investigations Initiated 898 276 224

Prosecution Recommendations 544 218 147

Indictments/Informations 494 165 94

Sentenced 223 80 45

Incarceration Rate 89.2% 100.0% 88.9%

Average Months to Serve 48 44 41
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Abusive Tax Schemes

Within the abusive tax schemes program, CI focuses 

on the investigation of promoters and clients who 

willfully participate in domestic and/or offshore tax 

schemes for the purpose of violating the tax laws. 

Participants in these abusive schemes usually create 

structures such as trusts, foreign corporations and 

partnerships for the purpose of making it appear that 

a trustee, nominee, non-resident alien or other foreign 

entity is the owner of the assets and income, when in 

fact the true ownership and control remains with a 

United States taxpayer. It should be noted that these 

schemes are being used by those promoting antigovernment and sovereign citizen philosophies. 

Examples of abusive tax scheme investigations 

adjudicated in FY 2012 include:

Former Pennsylvania State Auditor Sentenced for 

Tax Evasion, Obstructing and Impeding IRS: On 

April 10, 2012, in Harrisburg, Pa., Troy A. Beam was 

sentenced to 74 months in prison. According to 

evidence introduced at trial, Beam, a former certified 

public accountant and former state auditor in the 

Pennsylvania Auditor General’s Office, operated a 

home construction business known as “Sunbeam 

Builders,” as well as owned and operated two real 

estate businesses. The evidence at trial proved that 

from 1999 to 2007, Beam earned more than $10.3 

million in gross income. Beam obstructed the IRS in 

its attempt to calculate and collect his taxes by using 

numerous sham trusts and other entities, including 

North Star Investment Holdings Ltd. to hide his 

income and assets. He used North Star to set up a 

bank account in the Cayman Islands into which he 

deposited nearly $3 million of income.

Honolulu Firearms Business Owner Sentenced on 

Tax Charges: On March 27, 2012, in Honolulu, 

Hawaii, Arthur Lee Ong was sentenced to 51 months 

in prison and ordered to pay $1 million in restitution 

to the IRS. According to evidence introduced at trial, 

Ong, the owner and operator of Thunder Bug Inc., 

dba Magnum Firearms, failed to report to the IRS 

millions of dollars of income he earned from the sale 

of firearms and related products. Ong, with the 

assistance of a Hawaiian attorney, created multiple 

sham trusts in 1990 to hide his income and assets.

He stopped filing personal income tax returns 

beginning in 1994 and also filed false tax returns on 

behalf of the sham trusts that fraudulently reported to 

the IRS that the income from his businesses was 

attributable to these trusts and not to him. The 

evidence at trial showed that Ong evaded more than 

$600,000 in federal income taxes from 2000 to 2006.

Promoter of Abusive Trust Arrangements 

Sentenced on Tax Charges: On January 30, 2012, 

in Fresno, Calif., Michael S. Ioane was sentenced to 

108 months in prison. Ioane was convicted by a jury 

in October 2011 of conspiring to defraud the United 

States and four counts of presenting fictitious 

documents to the United States. According to the 

evidence presented at trial, Ioane, who operated 

under the name Acacia Corporate Management and 

First Amendment Publishers, promoted sham or 

abusive trusts that purported to allow people to put 

their assets and income into trusts that would shield 

them from the IRS. When the IRS disallowed various 

trusts set up by Ioane, he would instruct co-defendant 

Vincent Steven Booth to set up new trusts, file false 

liens against his own properties and present bogus 

“Bills of Exchange” to the IRS that Ioane said 

constituted full payment of Booth’s tax debt.

Non-filer Investigations:

Taxpayers who fail to file income tax returns 

and effectively stop paying income tax, pose a 

serious threat to tax administration and the American 

economy. Their actions undermine public confidence 

in the Service's ability to administer the tax laws 

fairly and effectively. IRS Criminal Investigation 

devotes investigative resources to individuals who 

simply refuse to comply with the law.

Examples of non-filer investigations adjudicated 

during FY 2012 include:

Asphalt Paver Sentenced for Failing to File Tax 

Returns: On May 9, 2012, in Detroit, Mich., 

Andrew Stanley was sentenced to 21 months in 

prison and ordered to pay $259,379 in restitution to 

the IRS for failing to file tax returns. According to 

court documents, from 2004 through 2008, Stanley 

earned income by working in Michigan as a private 

asphalt paver. During this time, Stanley received 

gross income of over $950,000 but failed to file 

federal income tax returns.

Two People Sentenced in Multi-Million Dollar 

Conspiracy to Defraud the Government: On 

December 15, 2011, Newark, N.J., Ronald Ottaviano

was sentenced to 62 months in prison. Harriet Foster

was sentenced to 13 months in prison. Ottaviano, a 

principal of Mid-Atlantic Trustees and 

Administrators (MATA), and others conspired to 

defraud the United States by marketing two 

fraudulent products, Pure Trust Organizations (PTOs) 
IRS-CI Fiscal Year 2012 National Operations / Annual Business Report

13

and Beneficiaries in Common (BIC). These products 

were designed to conceal assets from the IRS and 

fraudulently discharge debt. The defendants 

collectively made over $3.5 million in illicit gross 

receipts, most of which was hidden in PTOs 

controlled by the defendants. None of the defendants 

paid income taxes on the proceeds and filed no 

federal income tax returns at all.

Mississippi Man Sentenced for Tax Evasion and 

Obstruction Charges: On November 10, 2011, in 

Hattiesburg, Miss., Charles W. “Chip” Irby, Jr., was 

sentenced to 108 months in prison and ordered to pay 

$1,063,634 in restitution to the IRS. According to 

the indictment, Irby attempted to evade payment of 

federal income taxes totaling more than $245,000 for 

the years 1998 through 2001 through acts designed to 

conceal from the IRS the nature and extent of his 

assets and their location. He placed assets in nominee 

names and filed frivolous documents with the IRS. 

Irby also failed to file federal income tax returns for 

2004 through 2007, when he had received income 

totaling approximately $197,363. Finally, Irby 

endeavored to obstruct the administration of Internal 

Revenue laws by promoting false information 

regarding the payment of federal income taxes to 

others, recruiting them to ignore their federal income 

tax obligations, preparing false and frivolous 

documents to send to the IRS such as false affidavits 

for particular tax years, and undertaking frivolous 

civil litigation against federal agents and others 

involved in the criminal investigation to impede its 

progress.

Employment Tax

Employment tax evasion schemes can take a variety 

of forms. Some of the more prevalent methods of 

evasion include “pyramiding,” employee leasing, 

paying employees in cash, filing false payroll tax 

returns or failing to file payroll tax returns.

Employment taxes include federal income tax 

withholding, social security taxes, and federal 

unemployment taxes. Some business owners 

withhold taxes from their employees’ paychecks, but 

intentionally fail to remit those taxes to the IRS.

Examples of employment tax investigations 

adjudicated during FY 2012 include:

North Carolina Businessman Sentenced for 

Payroll Tax Fraud: On September 5, 2012, in 

Charlotte, N.C., Bruce Harrison, III, was sentenced to 

144 months in prison and ordered to pay more than 

$43 million in restitution. According to court 

documents, Harrison owned or controlled temporary 

staffing companies operating in at least nine states 

under various corporate names. Harrison’s staffing 

companies contracted with client businesses to 

provide temporary workers. Harrison’s companies 

promised to assume full responsibility for paying 

wages and withholding and transmitting taxes to the 

IRS for those employees. Instead, Harrison failed to 

account for and pay over in excess of $40 million in 

federal payroll taxes for the employees. 

Colorado Man Sentenced for Failure to Pay Over 

$1.3 Million to the IRS and Theft from 401(k) 

Plan: On April 4, 2012, in Denver, Colo., John C. 

Walshe was sentenced to 46 months in prison and 

ordered to pay $1,330,333 in restitution to the IRS. 

According to court records, Walshe was the owner 

and principal officer of Finzer Business Systems of 

Colorado, Inc. During the period of quarters ending 

June 30, 2005, through December 31, 2007, Walshe 

deducted and collected from Finzer employees, 

federal income taxes, Social Security taxes, and 

Medicare taxes totaling over $900,000. Walshe 

willfully failed to pay the money to the IRS. 

Furthermore, from June 15, 2006 through December 

31, 2006, Walshe withheld money from employees' 

pay checks that the employees elected to be paid to 

their 401(k) plan; however, Walshe failed to pay this 

money over to the plan.

Virginia Woman Sentenced for Tax Evasion: On 

December 22, 2011, in Richmond, Va., Kim Jenkins 

Brandveen was sentenced to 60 months in prison.

According to court documents, Brandveen owned 

Healthcare Solutions Medical Supply, LLC.

Brandveen directed the withholding of federal 

employment taxes from employees’ paychecks, but 

regularly failed to pay those taxes over to the IRS.

When the IRS undertook collection efforts, 

Brandveen shut down that business and abandoned its 

bank accounts. She then operated as Healthcare 

Solutions Service Corporation, a virtually identical 

business performing largely the same functions from 

the same location with the same employees.

Healthcare Solutions Service Corporation also failed 

to pay over employees’ withheld employment taxes 

to the IRS.

Former Owner of Massachusetts Temporary 

Employment Agency Sentenced for Under-theTable Scheme: On October 26, 2011, in Boston, 

Mass., Michael Powers, the former owner of a 

temporary employment agency, was sentenced to 84

months in prison and ordered to pay more than $9 

million in restitution to the IRS, the Massachusetts 

Department of Unemployment Assistance, and two 
IRS-CI Fiscal Year 2012 National Operations / Annual Business Report

14

insurers. Powers and John Mahan were convicted in 

July 2011 of conspiracy to defraud the IRS and 

various workers’ compensation insurers, mail fraud 

and filing false tax returns. According to court 

documents, between 2000 and 2004, Powers and 

Mahan owned and operated Commonwealth 

Temporary Services, Inc., which supplied hundreds 

of temporary laborers to businesses throughout 

Eastern Massachusetts. To avoid paying employment 

taxes and to fraudulently reduce the businesses’ 

insurance premiums, Powers and Mahan underreported their payrolls. To hide their fraud, they 

arranged to pay more than $30 million of their 

payroll in cash, under the table. The scheme avoided 

more than $9 million in federal and state payroll 

taxes and workers’ compensation insurance 

premiums.

ILLEGAL SOURCE FINANCIAL CRIMES

The Illegal Source Financial Crimes Program 

encompasses all tax and tax-related, money 

laundering and currency violations. These 

investigations are focused on individuals deriving 

income from illegal sources, such as dollars obtained 

through embezzlement, bribery, and illegal gambling

operations. The individuals can be legitimate 

business owners but obtain their income through 

illegal means. These investigations are also focused 

on methods through which individuals seek to 

“launder” their income by making it appear that the 

income is from a legitimate source. Frequent money 

laundering techniques include the manipulation of 

currency reporting requirements, layering of 

transactions and international movement of funds. In 

these types of investigations, CI works hand-in-hand 

with our federal, state, and local law enforcement 

partners, as well as with foreign tax and law 

enforcement agencies.

Financial Institution Fraud

This program addresses criminal violations involving 

fraud against banks, savings and loan associations, 

credit unions, check cashers, and stockbrokers. 

Criminal Investigation is a major contributor in the 

effort to combat financial institution fraud, and the 

United States Attorneys’ recognize CI’s financial 

investigative expertise in this complex area. The 

ability to bring income tax and money laundering 

charges augments prosecutors’ effectiveness in 

combating fraud committed against financial 

institutions, whether the violators work within or 

outside of the institution.

Examples of financial institution fraud investigations 

adjudicated in FY 2012 include:

Mastermind of Multimillion Dollar Mortgage 

Fraud Conspiracy is Sentenced: On September 5, 

2012, in Camden, N.J., Jong Shin was sentenced to 

186 months in prison and ordered to pay $4.6 million 

in restitution. According to court documents, Shin 

defrauded mortgage lending institutions by 

purchasing residential properties in Atlantic City, 

N.J., and then recruiting “straw purchasers” to buy 

the properties. Shin prepared fraudulent contracts to 

sell the properties to the straw purchasers which 

included significantly inflated incomes, as high as 

$29,000 per month, on the loan applications. Another 

mortgage broker conspired with Shin to falsify the 

numbers on the applications and appraisals so that 

they would be accepted at the lending institutions. 

The straw purchasers owned seven properties with 

mortgages they could not pay and all seven properties 

went into foreclosure.

Ohio Man Sentenced for Role in Credit Union 

Collapse: On August 7, 2012, in Cleveland, Ohio, 

Arben Alia was sentenced to 108 months in prison 

and ordered to pay $3.2 million in restitution for his 

criminal activity related to the collapse of a federal 

credit union. According to court documents, from 

2006 through 2009, Alia fraudulently obtained

several loans, totaling approximately $4.5 million, 

from the federal credit union with the assistance of 

the former Chief Operating Officer.

New York Man Sentenced for Role in $10 Million 

Bank Fraud and Bribery Scheme: On June 14, 

2012, in New York, N.Y., Christopher Cavounis was 

sentenced to 97 months in prison and ordered to pay 

$8.2 million in forfeiture and more than $7.9 million 

in restitution. Jagdesh Cooma was sentenced to 37 

months in prison. According to court documents, 
IRS-CI Fiscal Year 2012 National Operations / Annual Business Report

15

from 2009 to November 2010, Cavounis, Cooma and 

others fraudulently obtained at least 16 commercial 

bank loans and lines of credit, receiving at least $10 

million from eight different lenders. All of these 

loans are in default. To induce the lenders into 

providing the loans, Cavounis and Cooma prepared 

and submitted applications and supporting 

documentation that contained false and misleading 

information on behalf of empty shell companies with 

no existing businesses or assets. As part of the 

scheme, straw borrowers were recruited who 

provided personal identifying information to 

represent on loan applications that they were the 

owners or executives of various companies. 

Unbeknownst to the lenders, not only were the straw 

borrowers unaffiliated with the companies, but the 

companies either did not exist or had no actual 

earnings or income. To obtain the loans, Cavounis 

paid one bank employee more than $135,000 in 

bribes in 2010 to secure approval for several lines of 

credit. In total, Cavounis personally obtained 

approximately $2.45 million in loans that were issued 

to empty shell companies he controlled. 

Former Bank Vice President Sentenced for Bank 

Fraud: On June 1, 2012, in Phoenix, Ariz., William 

Robert Liddle, a former bank vice president, was 

sentenced to 180 months in prison for defrauding 

Yuma’s AEA Federal Credit Union (AEA) out of 

more than $20 million. According to court 

documents, Liddle used his position as the Vice 

President of Business Lending to approve risky 

business loans and loan increases to several entities 

owned in whole or part by Frank Ruiz. In exchange 

for approving the loans, Ruiz paid kickbacks to 

Liddle in the form of at least $250,000 in cash, a 

$600,000 house, and vehicles. The entities Ruiz used 

to obtain the loans were financially unstable and 

unqualified for the loans, and the few legitimate 

projects that were funded by the loans ended in 

failure. Ruiz was sentenced to 24 months in prison.

Public Corruption

Criminal Investigation continues to pursue

investigations involving individuals who violate the 

public’s trust. The individuals include both elected 

and appointed officials from all levels of government, 

including local, county, state, federal and foreign 

officials. Public corruption investigations encompass 

a wide variety of criminal offenses including bribery, 

extortion, embezzlement, illegal kickbacks, tax fraud 

and money laundering. 

Examples of public corruption investigations 

adjudicated in FY 2012 include:

Former County Commissioner Sentenced for 

Racketeering, Tax and Other Charges: On July 

31, 2012, in Cleveland, Ohio, Jimmy Dimora, former 

Cuyahoga County Commissioner, was sentenced to 

336 months in prison. Dimora was convicted in 

March 2012 of racketeering, bribery, conspiracy, 

Hobbs Act conspiracy, tax charges and other crimes. 

According to court testimony, Dimora took more 

than $166,000 worth of bribes in exchange for his

efforts to steer contracts to allies, get jobs and raises 

for associates, intercede with judges on pending 

cases, lobby for grants and favorable loans for people 

who paid him, and other official actions. 

Former New York State Senator Sentenced for 

Filing Fraudulent Tax Returns: On June 18, 2012, 

in White Plains, N.Y., Nicholas A. Spano, a former 

New York State Senator, was sentenced to 12 months 

and one day in prison and ordered to pay a $30,000 

fine. According to court documents, from 1987 until 

2006, Spano served as a New York State Senator for 

the 35th district. In that capacity, he was responsible 

for voting on and approving the operating budget for 

New York State. A portion of the budget included 

funding for the Office of General Services (OGS). In 

1993, a White Plains-based insurance company began 

paying Spano a $1,500 monthly fee. In 1996, after 

the insurance company was awarded a lucrative 

contract by OGS to become the broker of record for 

New York State, the payments increased to $5,000 

per month. The payments subsequently increased to 

$6,000 per month in 1999 and $100,000 per year in 

2002. The insurance company payments were made 

through various corporate entities controlled by 

Spano, including ONAPS, Inc., which had no 

employees or offices and was used almost 

exclusively to receive the insurance company 

payments. From 2000 through 2008, Spano filed false 

federal income tax returns that mischaracterized the 

income he received from the insurance company and 

other sources to unlawfully reduce his tax burden.

Former Maryland County Executive Sentenced 

for Extortion and Bribery: On December 6, 2011, 

in Greenbelt, Md., former Prince George’s County 

Executive Jack B. Johnson was sentenced to 87 

months in prison for his leadership role in an 

extortion conspiracy where, in exchange for bribes, 

Johnson corruptly used his public office to steer 

millions of dollars in federal and local funds to 

favored developers. Johnson was also ordered to pay 

a $100,000 fine and forfeit $78,000 and an antique 
IRS-CI Fiscal Year 2012 National Operations / Annual Business Report

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Mercedes Benz. Johnson was Prince George’s 

County Executive from 2002 until December 2010. 

According to court documents, from 2003 through at 

least November 12, 2010, Johnson orchestrated a 

conspiracy in which various business persons offered 

bribes, including money, trip expenses, rounds of 

golf, mortgage payments and monetary and in-kind 

campaign contributions to Johnson and other state 

and local government officials. According to court 

documents, the amount of bribes extorted by Johnson 

and his co-conspirators totaled over $1.6 million.

Corporate Fraud

The Corporate Fraud program concentrates on 

violations of the Internal Revenue Code (IRC) and 

related statutes committed by publicly traded or 

private corporations, and/or by their senior 

executives. Some of the specific criminal acts within 

a corporate fraud investigation include falsifying and 

fabricating or destroying company records for the 

purpose of falsifying tax returns, financial statements 

or reports to regulatory agencies or investors. It also 

includes conduct by executives to enrich themselves 

by attempting to derive unauthorized compensation 

through unapproved payments or bonuses, payment 

of personal expenses with corporate funds, or bogus 

loans. Many corporate fraud investigations are joint 

efforts involving other federal agencies.

Examples of corporate fraud investigations 

adjudicated in FY 2012 include:

Co-Owners of US Fidelis Sentenced on 

Conspiracy and Tax Fraud Charges: On 

September 25, 2012, in St. Louis, Mo., Darain 

Atkinson was sentenced to 96 months in prison and 

ordered to pay more than $4 million in restitution. On 

September 18, 2012, Cory Atkinson was sentenced to 

40 months in prison and ordered to pay over $4 

million restitution to the IRS. According to court 

documents, Cory Atkinson and his brother Darain 

owned and operated US Fidelis, which was the 

nation's largest marketer of vehicle service contracts 

(VSCs). US Fidelis made its money by marking up 

the price of the VSC. As part of a criminal 

conspiracy, in 2008 Darain and Cory Atkinson made 

fraudulent payments on behalf of VSC purchasers 

who were in default or likely to be in default so that 

US Fidelis would receive its dealer profit when it was 

not entitled to receive such profit. In addition, Cory 

Atkinson admitted that he filed a false tax return for 

the tax year 2006 that failed to include millions of 

dollars in distributions that he received from US 

Fidelis. According to the plea agreement, between 

2006 and 2008, Darain and Cory Atkinson received 

millions in distributions from US Fidelis, a 

substantial percentage of which funds were used to 

pay for their personal and non-business expenses. 

The tax loss was more than $4 million.

Former CEO of Connecticut Company Sentenced 

for Embezzling $1.7 Million: On July 10, 2012, in 

Bridgeport, Conn., Kevin Coleman was sentenced to 

70 months in prison. According to court documents, 

from approximately November 2005 to December 

2010, Coleman was the Chief Executive Officer 

(CEO) of a Shelton, Conn., company. From 

approximately October 2008 to November 2010, 

Coleman and Joanne Osmolik, who served as the 

company’s Vice President for Human Resources, 

embezzled approximately $3.5 million in corporate 

funds to pay personal expenses. As part of the 

scheme, Coleman and Osmolik charged substantial 

personal expenditures on corporate credit cards.

Coleman instructed Osmolik to destroy company 

records to conceal their fraudulent nature from others 

at the company. Coleman embezzled approximately 

$1.7 million from the company and Osmolik 

embezzled approximately $1.77 million. Coleman 

also did not file federal income tax returns for tax 

years 2007 through 2010. During these four years, in 

addition to his embezzled income, Coleman earned 

$1,585,128 in wages, resulting in a tax loss to the 

government of $741,029. The judge also ordered 

Coleman to pay $1,700,459 in restitution and an 

additional $450,000 jointly with Osmolik, to 

compensate the victim company for legal fees and 

other costs it incurred as a result of this crime. 

Coleman also was ordered to pay $1,372,711 in back 

taxes, interest and penalties. Osmolik was sentenced 

on April 26, 2012, to 48 months in prison and 

ordered to pay full restitution to the victim company. 

She also forfeited her interest in three residential 

properties in Vermont, six motorcycles, an all-terrain 

vehicle, four snowmobiles, vehicle trailers, jewelry, 

numerous appliances and other home furnishing 

items.

Texas Man Sentenced for Orchestrating $7 Billion 

Investment Fraud Scheme: On June 14, 2012, in 

Houston, Texas, R. Allen Stanford, the former Board 

of Directors Chairman of Stanford International Bank 

(SIB), was sentenced to 110 years in prison for 

orchestrating a 20-year investment fraud scheme in 

which he misappropriated $7 billion from SIB to 

finance his personal businesses. In addition, Stanford 

was ordered to forfeit approximately $333 million 

found and pay a $5.9 billion personal money 

judgment. According to court documents, SIB was an 
IRS-CI Fiscal Year 2012 National Operations / Annual Business Report

17

offshore bank Stanford owned based in Antigua and 

Barbuda which sold certificates of deposit (CDs) 

which typically paid a premium over interest rates on 

CDs issued by U.S. banks. By 2008, the bank owed 

its CD depositors more than $8 billion. Stanford 

diverted billions in depositor funds into various 

companies that he owned personally, in the form of 

undisclosed "loans." Stanford continued the 

operations of his personal businesses, which ran at a 

net loss each year totaling hundreds of millions of 

dollars, at the expense of depositors. Evidence at trial 

established Stanford also used the misappropriated 

CD money to finance a lavish lifestyle.

Former Virginia Resident Sentenced for Tax 

Evasion and Impeding the Internal Revenue 

Service: On December 16, 2011, in Alexandria, Va., 

Thomas J. Ernst was sentenced to 48 months in 

prison and ordered to pay $4,490,966 in restitution to 

the IRS. According to court documents, between 

2000 and 2006, Ernst served as the president and 

chief executive officer of a health insurance benefits 

administration company. According to court 

documents, between 2001 and 2007, Ernst caused his 

employer to make payments of more than $3.3 

million from its corporate bank account for numerous 

personal expenses. Ernst also admitted that he 

caused his employer company to fail to file corporate 

income tax returns, despite the fact that the company 

earned more than $11 million in gross receipts 

between 2001 and 2006.

Gaming

Criminal Investigation focuses attention on the 

gaming industry through the enforcement of tax, 

money laundering, and other related financial 

criminal statutes. The use of the Internet has 

increased the reach of domestic and international 

gaming operations.

Examples of gaming investigations adjudicated in FY 

2012 include:

Two Men Sentenced on Racketeering Charges in 

Connection With Offshore Gambling Business: 

On June 28, 2012, in Boston, Mass., Daniel Eremian

and Todd Lyons were sentenced on charges of 

racketeering and related offenses as a result of their 

participation in a large scale offshore gambling 

business. Eremian was sentenced to 36 months in 

prison and ordered to forfeit $7.7 million. Lyons was 

sentenced to 48 months in prison and ordered to 

forfeit $24.5 million. Lyons was the first defendant in 

the United States to be charged and convicted of 

violating the Unlawful Internet Gambling 

Enforcement Act (UIGEA). The statute was enacted 

by Congress in 2006 to deter the use of the United 

States banking system to pay Internet gambling debts 

incurred by United States citizens. Daniel Eremian 

and Robert Eremian built a massive online gambling 

ring called “Sports Offshore,” based in Antigua. The 

ring employed approximately 50 gambling agents in 

the United States, who had hundreds of customers. 

The government presented evidence that this 

gambling business laundered more than $10 million 

in checks and wire transfers. The defendants often 

shipped cash and checks back and forth to Antigua 

and also utilized a mail drop in Belize to receive 

proceeds of illegal gambling activities.

Louisiana Man Sentenced for Illegal Gambling 

Operation and Tax Evasion: On June 7, 2012, in 

New Orleans, La., Joseph A. Schillace IV was 

sentenced to 30 months in prison and ordered to pay 

$464,180 in restitution to the IRS along with interest, 

penalties, and any further IRS assessments. Schillace 

was also ordered to pay a $50,000 fine and forfeit a 

2008 Infiniti and a 2005 Titan pickup truck. 

According to his plea agreement, beginning in 

January 1999 and continuing until April 2011, 

Schillace conducted, financed, managed, and owned 

an illegal sports betting business in Louisiana. 

Schillace admitted that his total unreported income 

was $819,917. 

North Carolina Illegal Gambling and Money 

Laundering Operator Sentenced: On November 

10, 2011, in Wilmington, N.C., Wallace Dixon Cox 

was sentenced to 33 months in prison and ordered to 

pay a fine of $50,000. According to the criminal 

Information, beginning about 1999, and continuing 

through 2006, Cox and others were actively involved 

in an illegal video poker business. The conspirators 

used money generated by the operation of illegal 

video poker machines in multiple locations to 

purchase new machines and to purchase and operate 

new locations with video poker machines. Cox and a 

co-conspirator attempted to purchase an airplane 

from a third party using profits derived from the 

video poker business and requested that the seller not 

file legally required currency reports with respect to a 

proposed $50,000 cash payment.
IRS-CI Fiscal Year 2012 National Operations / Annual Business Report

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Insurance Fraud & Healthcare Fraud

The Insurance Fraud Program addresses criminal tax 

and money laundering violations relative to insurance 

claims and fraud perpetrated against insurance 

companies. Insurance fraud covers a wide variety of 

schemes, including phony insurance companies, 

offshore/unlicensed Internet companies and staged 

auto accidents. The Healthcare Fraud Program 

involves investigation of individuals who bill 

healthcare insurance companies for medical expenses 

never incurred or for unnecessary medical procedures 

and medical equipment. 

Examples of insurance and healthcare fraud 

investigations adjudicated in FY 2012 include:

Four Individuals Sentenced in Massive Health 

Care Fraud Scheme: On June 29, 2012, in Houston, 

Texas, Kenneth Anokam was sentenced to 151 

months in prison and ordered to pay $16,817,015 in 

restitution for a massive health care fraud conspiracy 

that billed Medicare and Medicaid for more than $45 

million. Anokam was a manager at City Nursing. The 

owners of City Nursing, Umawa Oke Imo and Dr. 

Christina Joy Clardy, were sentenced to 327 and 135 

months in prison, respectively. Joann Michelle 

White, an employee of City Nursing, was sentenced 

to 46 months in prison. Evidence presented at trial 

showed that Medicare and Medicaid beneficiaries 

were paid cash for going to City Nursing and signing 

undated blank treatment forms which were 

subsequently completed by Anokam and other City 

Nursing employees to reflect physical therapy 

treatment that was not provided. Despite billing more 

than $45 million for physical therapy services, City 

Nursing did not have a single licensed or otherwise 

qualified physical therapist on staff.

Leader of Massive Staged Car Accident Ring 

Sentenced: On May 25, 2012, in West Palm Beach, 

Fla., Oscar Luis Franco Padron was sentenced to 96 

months in prison and ordered to pay $4,351,082 in 

restitution. According to his guilty plea, Padron

managed several healthcare clinics. He and others 

would find individuals who owned automobiles and 

had car insurance to participate in staged automobile 

accidents.

Texan Sentenced for Defrauding Medicare: On 

January 30, 2012, in Houston, Texas, Aghaegbuna 

“Ike” Odelugo was sentenced to 72 months in prison, 

ordered to pay $9.9 million in restitution to Medicare 

and ordered to forfeit $7.45 million. According to 

court documents, Odelugo admitted that from July 

2005 through March 2008, he entered into illegal 

agreements with 14 durable medical equipment 

(DME) company owners to fraudulently bill 

Medicare for millions of dollars. Odelugo was 

responsible for having marketers recruit the patients, 

for preparing the paperwork, for billing Medicare and 

for delivering some of the equipment. The DME 

company owner’s role solely was to accept delivery 

of the patient files from Odelugo. In every instance, 

Odelugo was given control of the DME's Medicare 

provider number. Odelugo bought Medicare 

beneficiary information from recruiters and created 

paperwork and patient files to give the appearance of 

a valid claim. He then filed the claim electronically 

with Medicare and sent the patient files to the DME 

company owners. The proceeds from the false claims 

were deposited into the DME company's bank 

account and approximately 75 percent of the fraud 

proceeds then were transferred to Odelugo. The DME 

items billed to Medicare either were not delivered, 

not medically necessary, not prescribed by a doctor 

or up-coded from what was actually delivered.

Bankruptcy Fraud

According to the United States Bankruptcy Court, 

there were 1.3 million bankruptcy filings in fiscal 

year 2012. Bankruptcy fraud results in serious 

consequences that undermine public confidence in 

the system and taint the reputation of honest citizens 

seeking protection under the bankruptcy statutes. 

Since the IRS is often a creditor in bankruptcy 

proceedings, it is paramount that tax revenues be 

protected. 

Examples of bankruptcy fraud investigations 

adjudicated in FY 2012 include:

Minister Sentenced in Scheme to Obstruct 

Bankruptcy Proceedings: On July 30, 2012, in 

Greenbelt, Md., Robert J. Freeman, aka “Dr. Shine,” 

was sentenced to 27 months in prison and ordered to 

pay $631,050 in restitution for obstructing 

bankruptcy court proceedings. According to his plea 

agreement, Freeman served as pastor and leader of a 

ministry and two churches. Shortly after February 

2001, Freeman used funds from church members to 

accumulate substantial assets, including luxury cars 

and a residence, which he concealed from the 

bankruptcy court when he sought a discharge of his 

debts in 2005. By October 2005, Freeman and his 

then-spouse owed over $1.3 million in debts. On 

October 14, 2005, Freeman filed a bankruptcy 

petition seeking to adjust or discharge his debts. 

Freeman lied to the bankruptcy court and obstructed 
IRS-CI Fiscal Year 2012 National Operations / Annual Business Report

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its proceedings by not fully reporting his real or 

personal property, or property owned by another that 

Freeman controlled, including the home and luxury 

vehicles purchased with church funds. Freeman also 

falsely reported his occupation as a consultant of a 

maintenance company and failed to report any 

income from his ministry. Relying on the false 

information, on March 8, 2006 the bankruptcy court 

discharged hundreds of thousands of dollars in debts 

owed by Freeman.

Las Vegas Real Estate Agent Sentenced for Tax

and Bankruptcy Fraud: On April 9, 2012, in Las 

Vegas, Nev., German A. Posada was sentenced to 18 

months in prison and ordered to pay $212,016 in 

restitution to the IRS and $24,628 in restitution to 

victims of the bankruptcy fraud. According to court 

documents, Posada admitted to filing a false 

individual income tax return for 2004 that underreported the income from his business as a real estate 

agent. Between 2003 and 2005, Posada earned 

commission income from International Realty and 

another realtor. He asked that International Realty 

issue some of his commission checks in the name of 

another individual and deposited those checks into a 

bank account in her name. Posada also admitted 

under-reporting his business income on his 2003 tax 

return, failing to file a timely 2005 tax return and 

failing to report the approximately $557,212 in 

income that he received in 2005. In addition, court 

records establish that in 2005, Posada filed for 

bankruptcy in the U.S. Bankruptcy Court for the 

District of Nevada. In his May 13, 2005, and August 

2, 2005, bankruptcy petitions, he made false 

statements, including that he had no current income, 

he had received no income during the two years 

immediately preceding 2005, and 17 creditors held 

unsecured non-priority claims totaling $466,885 

against him. Then, on September 2, 2005, at a 

meeting of creditors, Posada falsely testified under 

oath before the bankruptcy trustee that he had 

received “one or two” and “probably two” 

commissions since May 13, 2005, when in fact he 

knew that he had received at least 19 commission 

checks totaling $130,575 during that time period.

INTERNATIONAL OPERATIONS

The immense growth in the utilization of global 

financial markets presents new challenges to tax 

administration worldwide. IRS-CI’s Office of 

International Operations (IO) promotes a 

comprehensive international strategy in responding to 

global financial crimes and provides support in 

combating offshore tax evasion. Since the means to 

evade taxes and commit fraud is not limited by 

sovereign borders, international collaboration is vital 

to CI’s efforts to combat offshore tax evasion and 

fraud committed by individuals. 

Criminal Investigation has special agent attachés 

strategically stationed in 10 foreign countries. 

Attachés continue to build strong alliances with our 

foreign government and law enforcement partners. 

These strong alliances provide IRS-CI with the 

ability to develop international case leads and to 

support domestic investigations with an international 

nexus. Criminal Investigation attachés are especially 

focused on promoters from international banking 

institutions which facilitate United States taxpayers 

in evading their United States tax requirements. 

Current oversea offices include: Beijing, China; 

Bogota, Colombia; Bridgetown, Barbados; Frankfurt, 

Germany; Hong Kong, China; London, England;

Mexico City, Mexico, Ottawa, Canada; Panama City, 

Panama; and Sydney, Australia. The growth of the 

IRS-CI footprint internationally has increased the 

opportunities for case development. The International 

Lead Development Center (ILDC) is specifically 

tasked with conducting research on potential 

international criminal investigations. In addition, CI

has personnel assigned to Interpol in Washington 

D.C. to assist in joint investigations and the 

apprehension of international fugitives.

Opportunities for training and foreign delegation 

visits have also increased. During FY 2012, the 

International Training Team delivered and/or assisted 

in providing financial investigative courses to further 

support United States Government initiatives in 

educating our law enforcement partners around the 

world in the fight against tax evasion and other 

financial crimes. These courses included Financial 

Investigative Techniques, Money Laundering, 

Terrorist Financing, Special investigative 

Techniques, Fraud, and Public Corruption. IRS-CI 

also hosted delegations from foreign countries 

seeking information on IRS-CI structure, operations, 

procedures, policies and training. 

Simultaneous Criminal Investigation Program (SCIP) 

Agreements empower IRS-CI to better address 

offshore non-compliance activities, conduct 

simultaneous investigations, and share financial 

information on criminal tax suspects, their associated 

parties and promoters engaging in economic 
IRS-CI Fiscal Year 2012 National Operations / Annual Business Report

20

activities based in both the foreign country and 

United States. IRS-CI currently has SCIP agreements 

with Mexico, Italy, France, Canada, South Korea, 

and Japan.

Examples of investigations involving international 

aspects adjudicated in FY 2012 include:

New York Man Sentenced for Evading Taxes on 

Swiss Bank Accounts: On January 20, 2012, in New 

York, N.Y., Kenneth Heller was sentenced for 

income tax evasion for hiding more than $26.4 

million in Swiss bank accounts. In connection with 

his guilty plea, Heller agreed to pay a civil penalty of 

over $9.8 million arising from his failure to file 

FBARs for those accounts. The charges against him 

arose out of the ongoing investigation into United

States taxpayer clients of UBS and other overseas 

banks who conspired to hide such accounts from the 

IRS. Heller is a disbarred Manhattan maritime 

attorney who, in 2006, opened a UBS account in the 

name of a sham offshore corporation and deposited 

$26.4 million into the account. Though he controlled 

the trading in the account, Heller did not appear as 

the account holder on UBS account documents. 

Through Heller's concealment of the income earned 

in his UBS account, he evaded more than $2.3 

million in federal income taxes. 

Florida Man Sentenced for Investment Fraud: On 

November 28, 2011, in Tampa, Fla., John S. Morgan 

was sentenced to 121 months in prison and ordered to 

forfeit a 2003 Fountain Lightning Fever Powerboat 

and pay a money judgment of $10,085,375. 

According to his plea agreement, from about March 

2005 through August 2009, Morgan, his wife, Marian 

I. Morgan, and others perpetrated an investment fraud 

scheme through a Danish entity named Morgan 

European Holdings APS (MEH). Morgan and others 

falsely represented to investors that MEH trading 

programs would yield returns of 30-70 percent per 

month or 200 percent per 90-120 day period, and that 

the investors' funds would never be put at risk. 

Investors transferred more than $28 million to MEH 

accounts. Approximately $10.8 million was used by 

the Morgans for their personal benefit. More than 80

investors located throughout the United States, 

Canada, and Europe entrusted the Morgans with their 

funds.

Defendant in Advance Fee Scheme Sentenced for

Defrauding Canadian Company and Others: On 

November 10, 2011, in Seattle, Wash., Aaron Wilmot

was sentenced to 20 months in prison and ordered to 

pay $230,861 in restitution. Wilmot and Lynn Marie 

Abreu, an attorney, pleaded guilty to one count of 

wire fraud. According to court documents, between 

about September 2005 and continuing through about 

November 2006, Abreu participated in an advance 

fee scheme to defraud Advanomics Corporation, 

located in Montreal, Quebec, and others. Wilmot 

helped establish a company called Investcorp and 

helped represent that Investcorp would lease bank 

instruments which could be used to obtain financing. 

Clients were required to pay an up-front fee to lease 

these instruments. The advance fees were to be 

deposited into Abreu’s trust account and held there 

until the funding was provided, when they were to be 

returned to the clients. In reality, no financing was 

provided and the victim’s funds were not held in 

trust, but were instead used by the defendants for 

their personal use.

California Man Sentenced for Filing False Tax 

Returns and Failure to File FBAR: On November 

9, 2011, in San Francisco, Calif., Robert E. Greeley 

was sentenced for filing a false federal income tax 

return and failure to file FBARs. Greeley concealed

more than $13 million in two bank accounts he had 

with UBS in Switzerland and agreed to pay a civil 

FBAR penalty of more than $6.8 million. According 

to the plea agreement, Greeley admitted in 2002 and 

2004, with the assistance of UBS banker Renzo 

Gadola, he opened two bank accounts at UBS in 

Switzerland in the names of Meyrin Investors and 

Exchange Preferred Limited, both Cayman Islands 

nominee entities. Greeley was the beneficial owner 

of Meyrin Investors and Exchange Preferred Limited 

and directed the financial transactions concerning 

these bank accounts. Greeley admitted that between 

2002 and 2008, the Meyrin Investors bank account’s 

highest total net asset balance was $2,855,894 and 

the Exchange Preferred Limited bank account’s 

highest total net asset balance was $12,616,881. 

Between 2003 and 2008, Greeley earned more than 

$734,000 in interest income in the two UBS bank 

accounts and none of the interest income was 

reported on any tax return that he filed with the IRS. 

Greeley willfully failed to report both his financial 

interest in and signature authority over the two bank 

accounts at UBS and interest income of more than 

$146,000 that he earned from these two bank 

accounts on his 2008 tax return. 

Executives Sentenced for Bribing Officials at 

State-Owned Telecommunications Company in 

Haiti: On October 25, 2011, in Miami, Fla., Joel 

Esquenazi and Carlos Rodriguez were sentenced for 

their roles in a scheme to pay bribes to Haitian 

government officials at Telecommunications D’Haiti 
IRS-CI Fiscal Year 2012 National Operations / Annual Business Report

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S.A.M. (Haiti Teleco), a state-owned 

telecommunications company. Esquenazi, the former 

president of Terra Telecommunications Corp. was 

sentenced to 180 months in prison. Rodriguez, the 

former executive vice president of Terra, was 

sentenced to 84 months in prison. Esquenazi and 

Rodriguez were also ordered to forfeit $3.09 million.

Esquenazi and Rodriguez were convicted in August 

2011 of one count of conspiracy to violate the 

Foreign Corrupt Practices Act (FCPA) and wire 

fraud; seven counts of FCPA violations; one count of 

money laundering conspiracy; and 12 counts of 

money laundering. According to the evidence 

presented at trial, Terra had a series of contracts with 

Teleco (the sole provider of land line telephone 

service in Haiti) that allowed the company’s 

customers to place telephone calls to Haiti. At trial, 

the evidence showed that Esquenazi and Rodriguez 

participated in a scheme to commit foreign bribery 

and money laundering from November 2001 through 

March 2005, during which time the 

telecommunications company paid more than 

$890,000 to shell companies to be used for bribes to 

Teleco officials.

The following table provides IRS-CI’s International Operations statistics over the past three fiscal years:

IRS-CI Statistics - International Cases 

FY 2012 FY 2011 FY 2010

Investigations Initiated 211 244 351

Prosecutions Recommendations 196 195 216

Indictments/Informations 153 149 181

Convictions 110 133 96

Incarceration Rate 87.9% 70.6% 87.4%

Average Months to Serve 71 61 50

MONEY LAUNDERING AND BANK SECREY ACT (BSA)

In partnership with other law enforcement agencies 

and the Department of Justice, Criminal Investigation

seeks to protect the United States financial system 

through the investigation and prosecution of 

individuals and organizations that are attempting to 

launder their criminally derived proceeds. Criminal 

Investigation also seeks to deprive individuals and 

organizations of their illegally obtained cash and 

assets through effective use of the federal forfeiture 

statutes. In most money laundering cases, the money 

involved is earned from an illegal enterprise and the 

goal is to give that money the appearance of coming 

from a legitimate source. Money laundering is one

means by which criminals evade paying taxes on 

illegal income by concealing the source and the 

amount of profit.

Bank Secrecy Act

The Bank Secrecy Act (BSA) mandates the reporting 

of certain currency transactions conducted with a 

financial institution, the disclosure of foreign bank 

accounts, and the reporting of the transportation of 

currency across United States borders. Through the 

analysis of BSA data, CI has experience success in 

identifying significant and complex money 

laundering schemes and other financial crimes. CI is 

the largest consumer of BSA data. 

The Criminal Investigation BSA Program has grown 

substantially since its inception in the early 2000s 

when we helped establish the initial 41 Suspicious 

Activity Report Review Teams (SAR-RT). The 

mission then, as it is today, was to scrutinize BSA 

data to identify and target significant illicit financial 

criminal activity. The current BSA program is 

comprised of participation in 94 SAR-RTs (one in 

each judicial district and led by the responsible U.S. 

Attorney Office), and sponsorship and management 

of over 50 Financial Crimes Task Forces (FCTF) 

throughout the country. The FCTF is a collaboration 

between Criminal Investigation and state or local law 

enforcement agencies for the purpose of identifying 

and investigating in a specific geographic area illicit 

financial crimes, including BSA violations, money 

laundering, narcotics trafficking, terrorist financing 

and even tax evasion. Over 140 state or local 

agencies have joined FCTFs across the country and 

through execution of memorandums of agreement, 

detailed over 280 law enforcement officers to become 

Task Force Officers with authority to investigate 
IRS-CI Fiscal Year 2012 National Operations / Annual Business Report

22

money laundering and BSA violations on behalf of 

IRS.

Examples of money laundering investigations 

adjudicated in FY 2012 include:

Alabama Man Sentenced for Structuring 

Currency Transactions: On June 22, 2012, in 

Birmingham, Ala., Jerry Dwayne Lang was 

sentenced to 36 months in prison and ordered to 

forfeit $75,000. Lang was a scrap metal dealer who 

ran C&J Recycling. Lang was convicted in December 

2011 on 70 counts of structuring cash transactions 

with two separate banks between April 2008 and 

October 2008. Lang’s transactions were designed to 

avoid the legal requirement for banks to report 

currency transactions in excess of $10,000 to the 

federal government. According to evidence at trial, 

he structured his transactions as follows: Lang bought 

wrecked vehicles at auction and hired American 

Recycling to crush the vehicles for scrap metal. 

American Recycling issued multiple checks made out 

to Lang, not to C&J Recycling, of less than $10,000, 

instead of one check of more than $10,000. Lang 

would cash the checks at different times.

North Carolina Man Sentenced on Money 

Laundering Conspiracy Charges: On May 17, 

2012, in Wilmington, N.C., George Bell, Jr. was 

sentenced to 36 months in prison. Bell pleaded guilty 

on September 6, 2011, to conspiring to launder 

monetary instruments. According to court 

documents, Bell, an employee and the son of the 

owner of an auto dealership, sold vehicles to three 

individuals but put different names on the vehicle 

titles. The vehicles were purchased with illegal funds. 

Bell allowed falsified information to be presented to 

the financial institutions to secure the loans for the 

vehicles. The investigation also revealed that Bell 

sold automobiles to Donald Shealey, the leader of a 

violent drug organization.

Tennessee Man Sentenced for Oxycodone 

Distribution and Money Laundering Charges: On 

April 16, 2012, in Knoxville, Tenn., Peter Mayo was 

sentenced to 162 months in prison. Mayo pleaded 

guilty in October 2011 to conspiracy to distribute and 

possession with intent to distribute oxycodone and 

conspiracy to commit money laundering. According 

to his plea agreement, between January 2009 and 

September 2011, Mayo directed numerous “pill 

shoppers” to obtain multiple prescriptions for 

oxycodone. Mayo would then ship the pills to coconspirators in Knoxville, Tenn. Once the pills were 

distributed by his co-conspirators, Mayo directed the 

deposit of the drug proceeds into his personal bank 

accounts. Mayo then used funds to promote 

continued drug trafficking and to purchase many 

high-value assets, including luxury vehicles, 

motorcycles, jet-skis, a martial arts training facility, 

jewelry, and travel. 

Father and Son Sentenced in $39 Million 

Investment Scam: On January 30, 2012, in Los 

Angeles, Calif., Richard Alan Cohen was sentenced 

to 153 months in prison for his role in running a 

scheme that defrauded more than 1,000 victims out of 

over $39 million with promises of large returns in 

companies. On January 23, 2012, Daniel Cohen, 

Richard's son, was sentenced to 151 months in prison 

for his role in the fraudulent scheme. In addition, the 

Cohens were ordered to pay $39,590,212 in 

restitution to victims of the fraud. According to court 

documents, in the mid-2000s, the Cohens formed 

several companies that they used to solicit investors 

with false claims that the businesses were successful 

and generated large profits. Potential investors were 

solicited in several ways, including by a team of 

salespeople who worked in a “boiler room.” In 

addition to making claims that the businesses were 

viable and successful, salespeople often told potential 

investors that the companies were on the verge of 

“going public” or were going to be taken over by 

larger companies. Salespeople commonly told 

potential investors that they could buy company stock 

from a widowed investor who was willing to sell her 

investment at a discounted price. In reality, the 

Cohen companies were not successful, the stock 

certificates issued by the companies were worthless, 

and a substantial portion of the money received from 

victim-investors was skimmed by the Cohens to fund 

their lavish lifestyles.

Two New Jersey Men Sentenced in Money 

Laundering Scheme: On January 4, 2012, in 

Trenton, N.J., Rabbi Eliahu Ben Haim and Akiva 

Aryeh Weiss were sentenced for their roles in a 

money laundering scheme. Ben Haim was sentenced 

to 60 months in prison. Akiva Aryeh Weiss was 

sentenced to five years probation. According to court 

documents, from June 2007 to July 2009 Weiss 

operated an unlicensed money transmitting business 

with individuals residing in Israel. Beginning in 

October 2006, Haim met with a cooperating witness, 

Solomon Dwek, and for a fee of approximately 10 

percent, agreed to launder and conceal Dwek’s funds 

through an already-existing underground money 

transfer network. Haim admitted that prior to 

laundering Dwek’s funds, Dwek repeatedly told him 

the funds were the proceeds of Dwek’s illegal 
IRS-CI Fiscal Year 2012 National Operations / Annual Business Report

23

businesses and schemes, including bank fraud, 

trafficking in counterfeit goods, and bankruptcy 

fraud. To conceal and disguise the nature and source 

of the funds, Haim directed Dwek to make the checks 

payable to several organizations that Haim operated. 

Once he received the checks from Dwek, Haim 

deposited them into bank accounts held in the names 

of the organizations and then wired the proceeds of 

those checks to a co-conspirator in Israel or to bank 

accounts held by other individuals and corporations 

in various foreign countries, including Israel, Turkey, 

China, Switzerland and Argentina. The coconspirator in Israel would then make cash available 

through an underground money transfer network. In 

conducting his business from a location in Brooklyn, 

Weiss admitted he transferred between $200,000 and 

$400,000 in cash to Haim and Dwek.

Illinois Man Sentenced for Investment Fraud: On 

December 13, 2011, in Springfield, Ill., Edward 

Moskop was sentenced to 240 months in prison and 

ordered to pay $1.49 million in restitution for mail 

fraud and money laundering. According to court 

documents, from 1991 through 2010, Moskop 

persuaded friends, family and neighbors to become 

his customers and provide him with funds for 

investment. Instead of making the investment, he 

kept the funds for his own use. Moskop created and 

mailed to his customers fraudulent receipts for 

investments identified with fraudulent account 

numbers. Moskop created periodic investment 

statements showing false interest and gains in the 

investments. From 1991 to 2010, Moskop obtained 

by fraud, approximately $2,424,000 from 26 victims.

The following table provides IRS-CI’s money laundering and Bank Secrecy Act (BSA) statistics over the past three 

fiscal years:

Money Laundering Investigations FY 2012 FY 2011 FY 2010

Investigations Initiated 1663 1726 1597

Prosecution Recommendations 1411 1383 1240

Indictments/Informations 1325 1228 1066

Sentenced 803 678 751

Incarceration Rate 84.7% 86.1% 83.8%

Average Months to Serve 64 70 69

 

Bank Secrecy Act (BSA) Investigations FY 2012 FY 2011 FY 2010

Investigations Initiated 923 795 738

Prosecution Recommendations 683 518 456

Indictments/Informations 575 462 380

Sentenced 342 344 299

Incarceration Rate 76.6% 75.3% 73.9%

Average Months to Serve 40 33 38

BSA statistics include investigations from Suspicious Activity Report (SAR) Review Teams, violations of BSA filing requirements, and all Title 

31 and Title 18-1960 violations.

NARCOTICS AND COUNTERTERRORISM

Criminal Investigation’s mission in narcotics law 

enforcement is to disrupt and dismantle significant 

narcotics trafficking and money laundering 

organizations through the investigation and 

prosecution of their members and associates, and the 

seizure and forfeiture of their profits. Criminal 

Investigation special agents utilize their unique 

financial investigative expertise to follow the money 

trail, tracing the profits from the illegal activity back 

to the criminal organization. Within this program, CI 

investigates violations of the Internal Revenue Code, 

Bank Secrecy Act and Federal Money Laundering 

statutes. 
IRS-CI Fiscal Year 2012 National Operations / Annual Business Report

24

The CI Narcotics Program supports the National 

Drug Control Strategy and the National Money 

Laundering Strategy through the assignment of CI 

personnel to the White House Office of National 

Drug Control Policy as well as the assignment of 

personnel to multi-agency task forces, including 

Organized Crime Drug Enforcement Task Force 

(OCDETF), OCDETF Fusion Center (OFC), High 

Intensity Drug Trafficking Area (HIDTA), High 

Intensity Financial Crimes Area (HIFCA), Drug 

Enforcement Administration Special Operations 

Division, (SOD), and the El Paso Intelligence Center 

(EPIC).

Criminal Investigation also plays a significant role in 

protecting our nation from terrorist threats. CI 

special agents are assigned to the various FBI-led 

Joint Terrorism Task Forces (JTTF) throughout the 

country. These agents use their financial investigative 

expertise to unravel terrorism financing schemes. 

Furthermore, CI’s Counterterrorism Lead 

Development Center proactively develops terrorism 

related cases for the CI field offices to further 

investigate. The Counterterrorism Center also 

provides investigative support to CI special agents 

working terrorism cases. 

Examples of narcotics investigations adjudicated in 

FY 2012 include:

Drug Kingpin Sentenced to Life in Prison: Ángel 

M. Ayala-Vázquez, aka “El Negro,” “Ángelo 

Millones,” “El Buster,” and “Papa Upa,” was 

sentenced to life in prison in San Juan, Puerto Rico.

Ayala-Vázquez was found guilty of conspiracy to 

possess with intent to distribute and to import 

controlled substances at the Public Housing Projects,

José Celso Barbosa and Sierra Linda in Bayamón, 

Puerto Rico. He was also found guilty for a forfeiture 

allegation with a money judgment of $100 million. 

Florida Pill Mill Owner Sentenced in Operation 

Snake Oil: Vincent Colangelo was sentenced to 240 

months in prison and three years of supervised 

release in Miami, Fla. Colangelo was also ordered to 

forfeit five properties valued at more than $2.5 

million, approximately $911,951 seized from seven 

bank accounts and a safety deposit box, 52 vehicles 

and vessels worth more than $6 million and jewelry 

valued at approximately $20,000. Colangelo pleaded 

guilty to conspiracy to distribute and dispense large 

amounts of oxycodone without a legitimate medical 

purpose and outside the usual course of professional 

practice, money laundering and filing a false 2009 

federal income tax return. 

Former Leader of the Arellano-Felix Organization 

Sentenced for Racketeering and Money 

Laundering Offenses: Benjamin Arellano-Felix, 

the former leader of the Tijuana Cartel/ArellanoFelix Organization (AFO), was sentenced to 300 

months in prison and ordered to forfeit $100 million 

in criminal proceeds in San Diego, Calif. ArellanoFelix and other AFO members conspired to import 

and distribute within the United States hundreds of 

tons of cocaine and marijuana, for which the AFO 

obtained hundreds of millions in United States dollars 

in profits. 

Texas-based Kingpin Sentenced to Life: Leandro 

Salas-Galaviz was sentenced to life in prison in 

Laredo, Texas for his role as a leader/organizer in a 

drug and money laundering conspiracy engaged in 

trafficking cocaine and marijuana for the Gulf Cartel 

and Los Zetas. A money judgment of $13 million 

was also entered in addition to a final order of 

forfeiture for a property in Laredo, Texas, and 

$118,998 in money seizure. Salas-Galaviz shipped 

tons of marijuana and cocaine from Laredo to Dallas, 

Fort Worth, Chicago and other areas. He and his 

wife, mother and sister used multiple bank accounts 

to conduct financial transactions designed to conceal 

and disguise the true nature and ownership of the 

thousands of dollars of cash proceeds deposited and 

withdrawn from those accounts.

Nebraska Co-Conspirator Sentenced on Drug and 

Money Laundering Charges: On November 7, 

2011, in Omaha, Neb., Shannon Williams was 

sentenced to 480 months in prison and fined 

$300,000 for marijuana trafficking and money 

laundering. According to court documents, from 

2006 thru 2009, Williams directed a conspiracy that 

arranged for over 7,000 pounds of marijuana to be 

transported to Omaha from the Tucson, Arizona 

area.

Sovereign Citizens

During 2012, CI found a re-emergence of individuals 

and/or entities who proclaimed themselves Sovereign 

Citizens. Generally, they utilized anti-government or 

anti-tax rhetoric schemes to disrupt the tax 

administration process. CI has partnered with 

Department of Justice and Office of the Inspector 

General for Tax Administration to create a working 

group to address this emerging threat. 

Examples of sovereign citizen investigations 

adjudicated in FY 2012 include:
IRS-CI Fiscal Year 2012 National Operations / Annual Business Report

25

Self-proclaimed “Governor” of Alabama 

Sentenced for Tax Fraud: On May 29, 2012, in 

Montgomery, Ala., Monty Ervin and Patricia Ervin 

were sentenced to prison for conspiring to defraud 

the United States and tax evasion. Patricia Ervin was 

also sentenced for structuring transactions to avoid 

bank reporting requirements. Monty Ervin was 

sentenced to 120 months in prison. Patricia Ervin was 

sentenced to five years of probation, with the 

condition that she spend 40 consecutive weekends in 

jail. The Ervins were also ordered to pay $1,436,508 

in restitution to the IRS. The evidence established 

that Monty and Patricia Ervin filed numerous 

documents in probate court renouncing their U.S. 

citizenship and claimed they were part of a 

“sovereign citizens” organization. The Ervins owned

and managed Southern Realty, a property 

management company and amassed hundreds of 

investment properties over the last decade, receiving 

more than $9 million in rental income. Despite 

receiving this income, the couple paid no federal 

income taxes. As the evidence showed at trial, the 

couple concealed their assets from the IRS by placing 

investment properties into the names of nominees –

“trusts” and “trustees.” Patricia Ervin also structured 

deposits into Southern Realty’s bank account in an 

effort to evade federal currency reporting 

requirements.

Washington Man Sentenced for Assisting in the 

Filing of False Tax Returns: On February 1, 2012, 

in Seattle, Wash., Timothy Garrison was sentenced to 

42 months in prison and ordered to pay $95,626 in 

restitution. Garrison pleaded guilty in November 

2011 to two counts of assisting with the filing of false 

tax returns. According to court documents, Garrison, 

as a tax preparer, prepared more than 50 returns with 

false or fraudulent information, resulting in a tax loss 

of more than $2.5 million. Garrison has been active 

in the “County Ranger” and “Sovereign Citizen” 

movements. Activists in these groups believe state 

and federal laws do not apply to them. Garrison’s 

activities include making threats to “arrest” law 

enforcement officers and filing bogus liens against 

the homes of law enforcement officers. Garrison is 

the second of six defendants being prosecuted in the 

Western District of Washington for crimes tied to the 

“Sovereign Citizen” movement. In January 2012,

David Russell Myrland was sentenced to 42 months 

in prison for making threats against the Mayor and 

City Attorney of Kirkland, Washington.

Warrants and Forfeiture

Criminal Investigation uses asset forfeiture statues to 

dismantle criminal enterprises by seizing and 

forfeiting their assets. Forfeiture are also use in white 

collar crimes when the criminal derived dollars are 

acquired through illegal activities. Under the fugitive 

program, CI coordinates information with other law 

enforcement agencies in order to identify and 

apprehend fugitives from justice where the fugitive 

has been charged with violations of the Internal 

Revenue laws and related offenses.

The chart below summarizes the seizures and forfeitures during fiscal year 2012. This chart shows the number of 

investigations involved and the number of assets seized and forfeited. 

Seizures

Count of Investigations Count of Assets Total Asset Appraisal Value

665 2346 $754,673,569

Forfeitures

Count of Investigations Count of Assets Total Forfeited Value

414 1166 $97,670,943
IRS-CI Fiscal Year 2012 National Operations / Annual Business Report

26

Examples of investigations involving forfeitures

during FY 2012 include:

 Wegelin & Co: Indicted for conspiring 

with United States taxpayers and others to 

hide more than $1.2 billion in secret 

accounts and income from the IRS. Wegelin 

& Co. agreed to forfeit $16,260,693.42 

which was deposited into the Treasury 

Forfeiture Fund in June 2012.

 Wachovia Bank N.A.: Forfeited $110 

million, of which $35 million was equitably 

shared with the Treasury Forfeiture Fund. A 

deferred prosecution agreement was reached 

in which the bank accepted responsibility for 

failing to maintain an effective anti-money 

laundering program and agreed to pay a fine 

of $50 million for the violations. 

Additionally, Wachovia failed to block 

Mexican currency exchange houses from 

laundering billions of dollars, including 

illegal narcotics trafficking proceeds through 

the bank.

 Google, Inc.: Agreed to forfeit $500 

million in illegal proceeds garnered from 

accepting payments for advertisements from 

online Canadian pharmacies. The $500 

million represents the gross revenue from 

both Google, received from its AdWords 

program, and Canadian pharmacies, from 

sales to United States customers. IRS-CI’s 

portion of the forfeiture was $35 million, 

which was deposited into the Treasury 

Forfeiture Fund.

 Miguel Angel Trevino Morales & Omar 

Trevino Morales: Indicted for money 

laundering. Both individuals were key 

figures in the Zetas drug operation for 

setting up a money laundering operation 

utilizing race horses that operated from a 

ranch near Lexington, Okla. On June 12, 

2012, the San Antonio FO seized over 400 

horses with an estimated value of 

$12,000,000.

Examples of investigations involving fugitives 

apprehended during FY 2012 include:

Joe Don Johnson: Johnson and another 

individual defrauded investors. On February 

3, 2012, he was charged for $5,946,965 of 

securities fraud and money laundering. 

Johnson fled the country shortly after 

indictment. He remained a fugitive until 

apprehended in the Philippines in March 

2012.

Joshua Lankford: Lankford and others 

conspired in a scheme to control and 

manipulate stocks. On February 10, 2009, 

Lankford was indicted in a $1,000,000 

securities fraud and money laundering 

scheme. Lankford fled the country prior to 

trial. He remained a fugitive until 

apprehended in Costa Rica in May 2012.

TECHNOLOGY OPERATIONS & INFORMATION SERVICES

Criminal Investigation continues to ensure our 

enforcement efforts and operating needs are 

strengthen by technology. CI has increased 

performance efficiencies through the use of new and 

improved technology, development of software 

applications, and by providing upgraded IT 

infrastructures. 

Computers are increasingly used to facilitate and 

commit sophisticated financial crimes. CI has trained 

special agents in the recovery and preservation of 

hardware and software evidence. The volume of 

evidence seized and analyzed has increased 

dramatically over the years, and CI is leveraging 

technology and human resources to meet the demand.

The majority of CI Special Agent-Computer 

Investigative Specialists are certified in the use of top 

level forensic software, thus raising proficiency and 

providing an important certification to the 

Curriculum Vitae for judicial proceedings. Special 

Agents are also trained in the use of mobile forensics 

hardware and software.
IRS-CI Fiscal Year 2012 National Operations / Annual Business Report

27

Investigations from FY 2012 with a high level of 

information technology support include:

Minnesota Ponzi scheme: The Trevor Cook 

investigation involved five subjects who orchestrated 

a scheme that bilked more than 900 investors out of 

approximately $158 million. The Computer 

Investigative Specialist (CIS) assigned to the case, 

analyzed data from more than 60 computers during 

the course of this investigation, which totaled 

approximately 10.5 TB of data. An agent review 

workstation was set up at the United States

Attorney’s office to provide manageable electronic 

data to the case agents. The CIS testified to 

significant amounts of electronic evidence introduced 

at trial. Trevor Cook and Christopher Pettengil 

pleaded guilty. The remaining three defendants, Bo 

Beckman, Gerald Durand, and Pat Kiley, went to trial 

in May 2012 and each was convicted on multiple 

counts of wire fraud, mail fraud, money laundering, 

and tax evasion.

Credit Union Embezzlement: Holly Cowan 

embezzled approximately $223,000 over a five-year 

period. She fraudulently converted funds using 

fictitious deposits and loan payments resulting in 

losses totaling over $912 million dollars to a federal 

credit union. IRS-CI information technology 

specialists located hidden accounting software, 

restored the software, queried the general ledger and 

determined that the ledger was being used to keep 

track of “ghost” deposits to the account and facilitate 

the theft through the creation of income statements 

and balance sheets provided to auditors. It was also 

discovered that the subject was maintaining dual sets 

of books, a false one to show auditors and the real 

one that showed the amounts embezzled. Due to the 

extensive investigative analysis done, Cowen pleaded 

guilty in April 2012 and on January 24, 2013 was 

sentenced to 15 months in federal prison and ordered 

to repay the money that she embezzled.