IRS-CI Fiscal Year 2013 Annual Business Report

Table of Contents:

Chief’s Message ........................................................................................... 1

Investigative Priorities .................................................................................... 2

Accomplishments .......................................................................................... 2

Staffing ........................................................................................................ 3

Headquarters Organizational Structure .............................................................. 4

Field Office Organizational Structure ................................................................. 5

Legal Source Tax Crimes ................................................................................ 6

General Tax Fraud .............................................................................. 6

Refund Fraud ..................................................................................... 7

 Identity Theft ................................................................................... 7

 Return Preparer Program .................................................................. 10

 Questionable Refund Program ........................................................... 11

Abusive Tax Schemes ......................................................................... 13

Non-filer Investigations ........................................................................ 14

Employment Tax ................................................................................ 15

Illegal Source Financial Crimes ........................................................................ 16

Financial Institution Fraud .................................................................... 16

Public Corruption ............................................................................... 17

Corporate Fraud ................................................................................ 18

Gaming ........................................................................................... 20

Insurance and Healthcare Fraud ........................................................... 21

Bankruptcy Fraud ............................................................................... 22

International Operations ................................................................................. 24

Money Laundering & Bank Secrecy Act ............................................................. 26

Narcotics and Counterterrorism ....................................................................... 29

Warrants and Forfeiture ................................................................................. 33

National Forensic Laboratory ........................................................................... 34

Technology Operations & Investigative Services ................................................... 35
IRS-CI Fiscal Year 2013 Annual Business Report

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Chief’s Message – Richard Weber

As I reflect back on Fiscal Year 2013, it is clear that it was one of 

the most challenging years in recent memory for the Service. 

Despite those challenges, CI thrived. Our special agents and 

analysts continue to prove that tenacity and hard work in 

investigating financial crimes are the keys to successful 

prosecutions. It has been my experience that our agents have the 

undisputed and well-deserved reputation as the finest financial 

investigators in the world. Our professional staff remains steadfast 

in accomplishing the tasks at hand. I continue to be humbled with 

leading an organization with employees who have the skills and 

determination to stay mission focused and overcome difficulties 

and keep CI moving in a positive direction.

During Fiscal Year 2013, we were faced with the continued 

challenge of declining resources. Our staffing of special agents 

and professional staff were at the lowest in years, and budget constraints curtailed our official travel and 

training. However, we still remained a strong organization – working complex and sensitive investigations 

where we have the advantage of strong financial expertise. This annual report includes case summaries 

that represent the diversity and complexity of those investigations. Our cases involved individuals and 

corporations from all segments of society. They led us into corporate board rooms, offices of public 

officials, tax preparation businesses, ID Theft gangs and narcotics trafficking organizations. Some of the 

biggest stories of the year included Kwame Kilpatrick, Liberty Reserve, HSBC, Rashia Wilson, Tim 

Turner, and the Los Zetas drug cartel. Kwame Kilpatrick, the former mayor of Detroit, was convicted in 

Fiscal Year 2013 and subsequently received the longest sentence ever in a public corruption and tax 

case. Liberty Reserve, one of the largest digital currency and international money laundering cases in 

U.S. history, was indicted and operations shutdown by our agents and law enforcement partners. HSBC 

entered into a deferred prosecution agreement and agreed to forfeit $1.256 billion. Rashia Wilson claimed 

herself to be the “Queen of ID Theft” only to be arrested, tried and sentenced to 234 months in prison. 

Tim Turner, the self-proclaimed “President” of the sovereign citizen movements, was sentenced to 216 

months in prison. Top members of the Los Zetas drug cartel were sentenced to lengthy prison terms. 

These are just a few of the myriad of multifaceted investigations CI worked this past year. In total, we 

initiated over 5,300 cases, recommended over 4,300 for prosecution, and supported prosecutors as they 

indicted almost 3,800 individuals and convicted over 93% of the cases closed this year. The conviction 

rate is especially important because it reflects the quality of our casework, our teamwork with federal law 

enforcement and the U.S. Attorneys’ Offices, and represents an increase over 2011 and 2012.

CI also plays a vital role in the Service’s effort to combat identity theft – one of our top priorities. CI works 

closely with other IRS business units to ensure there is an effective, coordinated Service-wide approach 

to battling this serious crime problem. Through our investigations we are able to provide the IRS with 

trends and filing patterns which they can in turn use to develop filters in identifying bad returns and 

stopping them prior to the refund being released. Working with our civil tax partners, we prevented over 

1.3 million fraudulent returns from being released. Those fraudulent returns claimed over $7.1 billion in 

false refunds. As a whole we have done a tremendous job as it relates to identity theft, from investigations 

to outreach to assisting civil tax counterparts. 

As we enter Fiscal Year 2014, we will continue these efforts and will look at new ways to work with our 

civil partners, federal, state, local, and international law enforcement and prosecutors. I am extraordinarily 

optimistic about the future of CI. Nothing great is ever achieved without dedication and enthusiasm, and 

our employees have plenty of both. We will remain the energetic, dynamic and adaptive organization that 

is simply the best at following the money. I am grateful for the service and dedication of all CI employees.

Chief Weber listens to presentations during 

Elmer Irey Day awards ceremony.
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Vision for IRS 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.

Investigative Priorities:

Criminal Investigation’s highest priority is to enforce our country’s tax laws and support tax administration. 

The Fiscal Year 2013 investigative priorities were: 

 Identity Theft Fraud

 Return Preparer Fraud & Questionable Refund Fraud 

 International Tax Fraud 

 Fraud Referral Program

 Political/Public Corruption 

 Organized Crime Drug Enforcement Task Force (OCDETF)

 Bank Secrecy Act and Suspicious Activity Report (SAR) Review Teams

 Asset Forfeiture

 Voluntary Disclosure Program

 Counterterrorism and Sovereign Citizens

Accomplishments:

Overall Fiscal Year 2013 (FY 2013) Investigation Statistics:

 Subject criminal investigation initiations in FY 2013 were 5,314 investigations.

 Investigation completions in FY 2013 were 5,557, a 12.5% increase over FY 2012.

 Prosecution recommendations for FY 2013 were 4,364, reflecting an increase of 17.9% over FY 

2012.

 Convictions totaled 3,311 in FY 2013. This represents an increase of 25.7% in comparison to FY 

2012.

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

acquittals, and dismissals. The conviction rate for FY 2013 is 93.1%, 0.1% more than the FY 

2012 rate (93.0%).

FY 2013 FY 2012 FY 2011

Investigations Initiated 5314 5125 4720

Prosecution Recommendations 4364 3701 3410

Informations/Indictments 3865 3390 2998

Convictions 3311 2634 2350

Sentenced* 2812 2466 2206

Percent to Prison 80.1% 81.5% 81.7%

*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

How to Interpret Criminal Investigation Data: Actions on a specific investigation may cross fiscal years, the data shown in investigations 

initiated may not always represent the same universe of investigations shown in other actions within the same fiscal year.
IRS-CI Fiscal Year 2013 Annual Business Report

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Staffing

 As of September 30, 2013, IRS-CI had 2,541 Special Agents on board, a 5.4% decrease 

compared to the number of special agents at the conclusion of FY 2012.

 Professional staff assigned at the conclusion of FY 2013 was 1,083, a 3.6% decrease from 

professional staff at the end of FY 2012.

 

2783

2745

2772

2746

2624

2643

2771

2697 2685

2615

2541

2503

FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14

(PP01)

Agent Strength

Total

Special 

Agents 

on 

Board
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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), Large Business & 

International (LBI) and Tax Exempt and 

Government Entities (TEGE). 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 filing of tax returns 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, selfemployed or wage earner, who through willful 

non-compliance do not pay their fair share of 

taxes. 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 investigations1

adjudicated in FY 2013 include:

Accountant Sentenced for Tax Fraud: On 

August 27, 2013, in Chicago, Ill., Robert Rome 

was sentenced to 63 months in prison and 

ordered to pay $1,786,053 in restitution to the 

IRS. According to court documents, Rome was 

the managing partner of the former Rome 

Associates LLP accounting firm in Chicago. One 

of his largest clients was a family who owned a 

group of plumbing wholesale supply companies. 

He provided accounting and tax services to the 

family members and their businesses. Rome 

had sole authority to sign checks, transfer funds 

and sign tax returns for the trusts he managed. 

He used his unlimited access to embezzle more 

than $4.3 million in trust funds between 2003 

and 2007 by writing checks payable to himself or 

his firm. In addition to the trust funds, he stole 

money from a family investment partnership 

account and an account of the estate of a 

deceased family member. Rome spent the 

money he stole to pay personal expenses.

Two Connecticut Women Sentenced for 

Overseeing Pyramid Scheme: On August 13, 

2013, in Hartford, Conn., Donna Bello and Jill 

Platt were sentenced to 72 months and 54 

months in prison, respectively. In addition, Bello 

and Platt were ordered to pay $32,000 in 

restitution to several victims of their scheme. On 

February 20, 2013, Bello and Platt were 

convicted of conspiracy to commit wire fraud 

and conspiracy to defraud the IRS, multiple 

counts of wire fraud and filing false tax 

returns. According to court documents, from 

approximately 2008 to 2011, Bello and Platt, 

oversaw and profited from a pyramid scheme 

known as “Gifting Tables.” The defendants 

recruited individuals to join the scheme, 

 

1

Investigation summaries are written from public 

court documents
IRS-CI Fiscal Year 2013 Annual Business Report

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prepared and distributed materials to recruits 

that contained false representations, and 

affirmatively misrepresented to recruits and 

participants that Gifting Tables was not a 

pyramid scheme. Bello and Platt also conspired 

to defraud the IRS by telling recruits and 

participants that monies given and received 

during the scheme were tax-free “gifts” under 

the IRS Code and that lawyers and accountants 

had approved Gifting Tables as legal ventures 

that generated tax-free proceeds. In addition, 

Bello and Platt filed false tax returns that failed 

to report income generated from the scheme.

Former Pilot Sentenced in Tax Fraud 

Scheme: On May 8, 2013, in Atlanta, Ga., 

Charlie Shivers, III, a former pilot, was 

sentenced to 84 months in prison and ordered to 

pay $5,630,681 in restitution to the United 

States Treasury. Shivers pleaded guilty on 

August 9, 2012 to two counts of filing false 

claims against the United States. According to 

court documents, from 2009 through 2012, 

Shivers filed, or caused to be filed, over 100 

fraudulent corporate tax returns, claiming $35 

million in refunds for fuel taxes falsely claimed to 

have been paid on fuel purchased for off-road 

company vehicles. The false claims were made 

in the names of corporations and shell 

companies, none of which used off-road 

vehicles or paid the fuel tax claimed for refund. 

Idaho Home Builder Sentenced for Tax 

Evasion: On March 28, 2013, in Boise, Idaho, 

Justin D. Schoenauer, aka Corey J. Schoenauer

was sentenced to 27 months in prison and 

ordered to pay $429,436 in restitution. 

Schoenauer pleaded guilty on October 30, 2012 

to income tax evasion. According to court 

documents, Schoenauer was a general 

contractor who operated a sole proprietorship 

called Patagonia Construction, a business 

engaged primarily in building homes. 

Schoenauer admitted that during tax years 2005 

through 2008, he concealed Patagonia’s 

business receipts. Schoenauer directed some 

customers to make checks payable to him 

personally, rather than to Patagonia, then 

ensured that those checks were not deposited 

into Patagonia’s main bank account.

President of Torco Racing Fuels Sentenced 

for Making False Claims: On November 21, 

2012, in Grand Rapids, Mich., Evan Ward Knoll, 

the founder, owner and former president of 

Torco Racing Fuels, Knoll Gas Motor Sports and 

General Sales and Service, was sentenced to 

168 months in prison and ordered to pay 

$82,933,652 in restitution to the IRS. Knoll 

pleaded guilty in July 2012 to eight charges of 

making false claims against the United States 

and to one count of bank fraud. According to 

court documents, Knoll exploited a refund 

program applicable to the federal “excise tax” of 

18.3 cents per gallon on all automotive gasoline 

sold in the United States. The excise tax 

primarily funds highway construction, but where 

the gasoline is used for an “off road” purpose, 

such as drag-racing, the “off road” user who paid 

the tax can apply for a federal tax refund. Knoll 

filed false IRS forms over many years in which 

he falsely claimed to have purchased massive 

quantities of racing fuel, all of which resulted in 

refund payments of over $80,000,000.

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.

Identity Theft:

Identity theft-related crimes continue to be a

priority area of investigation for CI. During Fiscal 

Year 2013, CI remained committed to investigating

egregious identity theft schemes through 

administrative and grand jury investigations and 

through field office and multi-regional task forces 

including state/local and federal law enforcement 

agencies. Currently CI participates in over 70 task 

forces/working groups throughout the country 

which investigate both financial crimes as well as 

identity theft crimes. CI’s level of commitment 
IRS-CI Fiscal Year 2013 Annual Business Report

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towards the fight against identity theft continues to 

be evident through a designated management 

official to serve as the National ID Theft 

Coordinator to oversee national efforts concerning 

policy, procedures, etc. In addition to a National 

Coordinator there are ID Theft Coordinators within 

each of the 25 field offices.

Identity Theft Clearinghouse (ITC): The ITC 

continues to develop and refer identity theft 

refund fraud schemes to CI field offices for 

investigation. The ITC receives all refund fraudrelated 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. 

Victim Waiver Pilot Program: In March 2013, 

IRS announced to the public that the Law 

Enforcement Assistance Program, formerly 

known as the “Identity Theft Pilot Disclosure 

Program,” was expanding nationwide. This 

program was developed jointly by 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.

Identity Theft Summit: In January 2013, CI 

hosted an Identity Theft Summit with law 

enforcement members from 14 federal agencies. 

The meeting discussed ways to strengthen 

collaborative efforts amongst agencies in the 

fight against Identity Theft. The summit included 

presentations focused on revenue protection 

and civil activities, CI operations and policies, 

special investigative techniques, international 

issues, and various legal considerations. The 

conference was the culmination of ongoing, 

coordinated efforts between numerous agencies 

and allowed for valuable dialogue concerning 

identity theft.

Data Processing Center (DPC): CI’s DPC 

centralizes identity theft victims’ lists and 

information forwarded to CI by other Federal, 

State, and local agencies. The information is 

shared with W&I and allows their employees to 

analyze and make necessary adjustments to 

accounts of taxpayers that are likely victims of 

identity theft. The DPC processed over 71.7% 

more identity records in FY 2013 than it did in 

FY 2012. 

Examples of identity theft investigations 

adjudicated in FY 2013 include:

Alabama State Employee and Coconspirators Sentenced in Identity Theft 

Scheme: On September 23, 2013, in 

Montgomery Ala., Lea’Tice Phillips was 

sentenced to 94 months in prison and ordered to 

pay $567,631 in restitution. Phillips pleaded 

guilty on May 30, 2013 to wire fraud and 

aggravated identity theft. According to the court 

documents, Phillips worked for an Alabama 

state agency and had access to state databases 

that contained forms of identification of 

individuals. Between October 2009 and April 

2012, Phillips conspired with Antoinette Djonret 

and others to file false tax returns using stolen 

identities. On multiple occasions, Phillips 

accessed a state database to obtain 

identification which she then sent to Djonret. 

Djonret and her co-conspirators used an 

elaborate network of individuals to launder the 

tax refunds. They recruited individuals to 

purchase prepaid debit cards on their behalf. 

Fraudulently obtained tax refunds were directed 

to the prepaid debit cards that Djonret and her 

co-conspirators used to obtain the proceeds. In 

total, Djonret filed over 1,000 false tax returns 

that claimed over $1.7 million in fraudulent tax 

refunds. Antoinette Djonret was sentenced to 

144 months in prison for her role in the 

conspiracy. On September 3, 2013, Angelique 

Djonret was sentenced to 24 months in prison 

for her involvement in the identity theft tax fraud 

scheme. 

Ohio Woman Sentenced in Identity Theft and 

Tax Refund Scam: On September 16, 2013, in 

Cincinnati, Ohio, Bridgette Jones was sentenced 

to 61 months in prison and ordered to pay 

$477,490 in restitution to the IRS. In April 2013, 

Jones pleaded guilty to one count of conspiracy 

to submit false claims for federal income tax 

refunds with the IRS and to one count of 

aggravated identity theft. According to court 
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documents, between January 2011 and 

September 2012, Jones conspired with others to 

obtain false claims for income tax refunds from 

the IRS by electronically filing false 2010 and 

2011 federal income tax returns claiming at least 

$654,550 in refunds that they knew they were 

not entitled. Jones’ primary role in the scheme 

was to prepare and submit false returns to the 

IRS using stolen identities. Co-conspirator Ellis 

Maurice Scott unlawfully obtained the individual 

names, dates of birth, and social security 

numbers used to prepare and file the false 

income tax returns. Jones and Scott kept lists of 

these individual’s identities to be used in filing 

false income tax returns for multiple income tax 

years. In April 2013, Ellis Scott pleaded guilty 

and currently awaits sentencing.

Woman Sentenced for Running Stolen 

Identity Tax Fraud Scheme: On July 30, 2013, 

in St. Louis, Mo., Tania Henderson was 

sentenced to 144 months in prison and ordered 

to pay $835,883 in restitution to the IRS. 

Henderson pleaded guilty on April 29, 2013 to 

theft of government funds and aggravated 

identity theft. According to her plea agreement 

and other court documents, Henderson stole the 

identities of more than 400 individuals, many of 

whom were deceased, and filed fraudulent tax 

returns using their names and social security 

account numbers. Between August and 

November 2012, Henderson filed 236 fraudulent 

tax returns. Using a network of family and 

friends, she would collect refund checks or 

prepaid debit cards for the refund amounts. 

Conspirator Sentenced in Bank Fraud and 

Identity Theft Schemes: On July 24, 2013, in 

Baltimore, Md., Derrick Elrod, of Philadelphia, 

Pa., was sentenced to 36 months in prison. 

According to court documents, Elrod worked for 

a nonprofit social services organization 

headquartered in Philadelphia. He was an 

advisor at a residential program that supports 

individuals with mental health needs. Elrod used 

his position to steal the personal identifying 

information of past or present residents of the 

program. Christopher Devine used the stolen 

personal information to file at least 13 false tax 

returns for the 2010 tax year. Christopher Andre 

Devine was sentenced in March 2013 to 121 

months in prison. In addition, the following coconspirators were sentenced for their roles in 

the scheme. Quanishia Williamson-Ross was 

sentenced to 42 months in prison. Quashonna 

Williamson and Lenee E. Williamson were 

sentenced to 36 months in prison. John Waters 

was sentenced to 27 months in prison.

Self-Proclaimed “First Lady” of Tax Fraud 

Sentenced: On July 16, 2013, in Tampa, Fla., 

Rashia Wilson was sentenced to 234 months in 

prison on wire fraud and aggravated identity 

theft charges stemming from her scheme to 

defraud the IRS, and to a consecutive 18 

months in prison for being a felon in possession 

of a firearm. Wilson was also ordered to forfeit 

$2,240,096. According to court documents, from 

at least April 2009, through their arrests in 

September 2012, Wilson and her co-conspirator, 

Maurice J. Larry, filed false and fraudulent 

federal income tax returns in other persons' 

names, without those persons’ permission or 

knowledge. Wilson and Larry filed these false 

and fraudulent federal income tax returns from 

multiple locations, including Wilson's residence 

and hotels in the Tampa area. Larry was 

sentenced in September 2013 to 174 months in 

prison.

Louisiana Woman Sentenced for Identity 

Theft and Tax Refund Fraud: On July 18, 

2013, in Baton Rouge, La., Angela Myers was 

sentenced to 132 months in for wire fraud, 

making false claims, subscribing to false tax 

returns and aggravated identity theft. Myers was 

also ordered to pay $202,685 in restitution to the 

IRS. She has already forfeited $39,030. Based 

on the evidence presented during a four-day trial 

in March 2013, Myers operated Angie’s Tax 

Service. Myers electronically filed false claims 

for tax refunds using the names and Social 

Security numbers of identity theft victims. Many 

of the victims were nursing home patients. 

Myers filed the identity theft tax returns using a 

unique preparer identification number assigned 

to her daughter. In addition, Myers lied on her 

own 2007 and 2008 federal income tax returns. 

She failed to report hundreds of thousands of 

dollars of tax preparation fees that she earned at 

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

FY 2013 FY 2012 FY 2011

Investigations Initiated 1492 898 276

Prosecution Recommendations 1257 544 218

Indictments/Informations 1050 494 165

Sentenced 438 223 80

Incarceration Rate 80.6% 89.2% 100.0%

Average Months to Serve 38 48 44

Return Preparer Program:

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 in FY 2013 include:

Kansas Tax Preparer Sentenced for Filing 

False Tax Returns: On September 16, 2013, in 

Wichita, Kan., Lata L. Tomlinson was sentenced 

to 36 months in prison. In April 2013, Tomlinson 

was convicted by a trial jury of 19 counts of 

preparing false income tax returns for a total of 

17 people during tax years 2007, 2008 and 

2009. According to trial evidence, in the tax 

returns Tomlinson prepared, she falsely stated 

deductions for depreciation, home 

improvements, business repairs, contract labor, 

legal fees, home repairs, medical expenses, 

advertising, insurance, car and truck expenses, 

hay and grain expenses, cell phones and care of 

dependents.

North Carolina Woman Sentenced for 

Preparing False Tax Returns: On September 

12, 2013, in Greensboro, N.C., Leslie Louise 

Brewster was sentenced to 70 months in prison 

and ordered to pay $92,910 in restitution to the 

IRS. On February 20, 2013, Brewster pleaded 

guilty to preparation of false tax returns, aiding 

and assisting the preparation of a false tax 

return, wire fraud, and aggravated identity theft. 

According to court documents, Brewster was the 

manager of a tax return preparation franchise. 

Brewster falsified federal income tax returns for 

hundreds of clients in order to obtain larger tax 

refunds for the clients than they were actually 

entitled to receive. The returns Brewster 

prepared for clients reported, among other 

items, false dependents, fictitious businesses 

and bogus education credits. Brewster also 

purchased personal identifying information, 

including names and Social Security numbers, 

from members of the community. Brewster used 

this personal identifying information to claim 

false dependents on tax returns she prepared 

for clients, and provided some of the identities 

she purchased to other return preparers for their 

use in a similar fashion. Two defendants in 

related cases were also sentenced to prison for 

tax crimes arising out of this scheme. Saichelle 

McNeill was sentenced to 27 months in prison 

on August 20, 2013. Tiffany Rogers was 

sentenced to 48 months in prison on August 14, 

2013.

Tennessee Man Sentenced for Tax Fraud: On 

September 6, 2013, in Memphis, Tenn., Terry 

Green was sentenced to 33 months in prison for 

tax fraud. In June 2013, Herman Shaw was 

sentenced to 26 months in prison. Both men 

were also ordered to pay $404,078 in restitution. 

According to court documents, from 2005 to 

2009, Green and Shaw ran several tax 

preparation businesses in Memphis. Through 

the businesses, they routinely filed false federal 

income tax returns for their clients which falsely 

reflected losses and expenses arising from 

fictitious home-based businesses, such as 

cutting hair and landscaping. These false losses 

and expenses resulted in increased refund 

amount for the clients.
IRS-CI Fiscal Year 2013 Annual Business Report

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Texans Sentenced for Falsifying Income Tax 

Returns: On July 12, 2013, in Tyler, Texas, 

Tonderai K. Chari was sentenced to 30 months 

in prison and ordered to pay $777,952 in 

restitution jointly with Elton Gutura and Douglas 

Zinyama. According to the indictment, from 

November 2006 to January 2007, Gutura, 

Zinyama and Chari, all employed by Tax 

Expedia, falsified approximately 318 tax returns 

in order to obtain tax refunds or increased tax 

refunds for clients. The tax returns used false 

information about the Telephone Excise Tax 

Refund, the number of dependents claimed, 

wages and/or withholding amounts. After 

receiving the refunds from the IRS based on the 

fraudulent income tax returns, Gutura, Zinyama 

and Chari paid a portion of the refunds to clients 

and kept the rest as proceeds from their 

fraudulent actions. Gutura was sentenced to 51 

months in prison in October 2010 and Zinyama 

was sentenced to 30 months in prison in 

September 2012.

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

FY 2013 FY 2012 FY 2011

Investigations Initiated 309 443 371

Prosecution Recommendations 281 276 233

Indictments/Informations 233 202 176

Convictions 207 178 163

Sentenced 186 172 163

Incarceration Rate 78.0% 84.3% 87.1%

Average Months to Serve 27 29 25

Questionable Refund Program:

The primary focus of this program is to identify 

fraudulent claims for tax refunds. Generally, 

these schemes involve individuals filing false 

multiple tax returns supported by false 

information or using the identifiers of other 

individuals knowingly or unknowingly. 

Examples of questionable refund program 

investigations adjudicated in FY 2013 include:

Texans Sentenced in Tax Refund Conspiracy 

Case: On August 21, 2013, in Dallas, Texas, 

Shaunthina Daniel Rushing was sentenced to 56 

months in prison and ordered to pay $365,626 in 

restitution jointly with her co-defendant, Tommy 

Dean Turner. Turner was sentenced in June 

2013 to 36 months in prison. According to court 

documents, Rushing and Turner conspired with 

others to file approximately 50 fraudulent tax 

returns that resulted in more than $400,000 in 

false claims. The returns included Forms 5405, 

representing that the taxpayers were entitled to 

claim a First-Time Homebuyer Tax Credit.

Pennsylvania Man Sentenced for Tax Refund 

Scheme: On July 26, 2013, in Philadelphia, Pa., 

Larry Ishmael was sentenced to 144 months in 

prison and ordered to pay $1,751,809 in 

restitution to the IRS. Ishmael was convicted on 

March 13, 2013, of committing a series of tax 

refund schemes that defrauded the United 

States. A federal jury found him and his coconspirators guilty of multiple counts of both 

conspiracy and filing false claims/tax returns to 

the IRS. According to court documents, Ishmael 

and his co-conspirators solicited claimants 

whose personal information was used to file 

false tax returns claiming the Telephone Excise 

Tax Refund (TETR) in 2007 and the First Time 

Homebuyer Credit in 2009. Several other coconspirators were sentenced in this scheme. On 

June 18, 2013, Calvin Johnson, Jr. was 

sentenced to 216 months in prison and ordered 

to pay $1.24 million in restitution. On June 11, 

2013, Patricia Fountain, a former IRS employee, 

was sentenced to 228 month in prison and 

ordered to pay $1.7 million in restitution. In 

addition, Fountain filed false claims claiming the 

American Opportunity Tax Credit between 2010 

and 2012. For each of the schemes, Fountain 

charged claimants a cash fee. With respect to 

her TETR scheme, which Fountain engineered 

using inside information from the IRS, Fountain 

warned that she would “red flag” those claimants 

who received a refund without paying her $400 
IRS-CI Fiscal Year 2013 Annual Business Report

12

fee. She then filed amended returns for certain 

claimants whom she believed had not paid her 

fee, causing the IRS to request repayment from 

them. On April 12, 2013, Howard Chilsom was 

sentenced to 16 months in prison and ordered to 

pay $67,952 in restitution to the IRS. On April 5, 

2013, Calvin Johnson, Sr. was sentenced to 12 

months and one day in prison and ordered to 

pay $375,811 in restitution to the IRS. 

Founder and Promoter of Tax Fraud Scheme 

Sentenced: On May 17, 2013, in Santa Ana, 

Calif., Osman Norales, the owner and founder of 

“De La Fuente Ramirez and Associates” 

(DLFRA), was sentenced to 87 months in prison 

and ordered to pay $512,471 in restitution to the 

IRS. On February 22, 2013, Norales was 

convicted of orchestrating a tax fraud scheme 

that illegally sought millions of dollars in 

fraudulent tax refunds. The evidence presented 

during trial established that Norales recruited

customers and filed false Forms 1099 OID 

(Original Issue Discount) and tax returns to the 

IRS. The false tax returns claimed refunds in the 

amounts of $815,000 and $760,000. Norales

charged clients up-front fees of approximately 

$2,500 and a portion of the false refund received 

by the client. On May 31, 2013, Arturo VillarrealAlba was sentenced to 96 months in prison. 

Villarreal-Alba, acting as a promoter, 

participated in a fraudulent OID scheme through 

two companies “Old Quest Foundation, Inc.” and 

DLFRA. On March 17, 2010, Villarreal-Alba 

caused the filing of a fraudulent tax return using 

fictitious federal income tax withholding, which 

claimed a false tax refund of $452,572. He also 

caused a 2009 OID-based tax return claiming a 

$535,898 refund in 2010. 

Man Sentenced for Inmate Tax Fraud 

Scheme: On April 18, 2013, in Panama City, 

Fla., Michael William Joseph, III, formerly an 

inmate in the Florida Department of Corrections, 

was sentenced to 63 months in prison. Joseph 

was also ordered to pay $37,196 in restitution to 

the IRS and forfeit $29,514 in United States 

currency as proceeds of his crimes. According to 

court documents, Joseph pleaded guilty to 41 

counts including: conspiracy to defraud the 

government with respect to claims, conspiracy to 

commit mail fraud, filing false claims against the 

government and theft from the government. 

Joseph conspired with others to file 81 false 

claims for tax refunds against the government in 

the names of 41 inmates incarcerated in Florida 

Department of Corrections from February 7, 

2008, through July 10, 2012. Most of the false 

refunds were directed to a bank account under 

the control of Joseph or were sent in checks to 

the residence of Joseph’s mother.

Colorado Man Sentenced for Fraud and Tax 

Conspiracy: On November 20, 2012, in Denver, 

Colo., Curtis L. Morris was sentenced to 120 

months in prison and ordered to pay $1,916,831 

in restitution to the IRS. Morris was found guilty 

on April 30, 2012, after a three-week jury trial, of 

three counts of mail fraud, seventeen counts of 

filing false claims against the United States, and 

one count of conspiracy to defraud the United 

States. According to the testimony at trial, 

Morris, Richard Kellogg Armstrong and others 

conspired to file false federal income tax returns 

claiming large tax refunds based upon fictitious 

federal income tax withholdings taken from 

bogus Forms 1099-OID for themselves and 

others. Armstrong was sentenced on August 10, 

2012, to 108 months in prison. 
IRS-CI Fiscal Year 2013 Annual Business Report

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The following table provides IRS-CI’s Questionable Refund Program statistics over the past three fiscal 

years:

FY 2013 FY 2012 FY 2011

Investigations Initiated 1513 921 578

Prosecution Recommendations 1267 574 404

Indictments/Informations 1056 507 288

Sentenced 485 262 180

Incarceration Rate 76.7% 85.5% 78.3%

Average Months to Serve 35 35 24

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. 

Examples of abusive tax scheme investigations 

adjudicated in FY 2013 include:

South Dakota Surgeon Sentenced for Tax 

Evasion: On May 7, 2013, in Sioux Fall, S.D., 

Edward J.S. Picardi, a surgeon, was sentenced 

to 60 months in prison. On October 5, 2012 

following a multi-week trial, Picardi was 

convicted by a federal jury of passing his 

earnings through a web of entities organized 

under the laws of Ireland, Hungary, Cyprus, Isle 

of Man, Jersey, and Guernsey. The money was 

ultimately deposited into various foreign 

accounts that Picardi controlled through a New 

Zealand trust, in the name of a corporation set 

up for him in Nevis, a Caribbean island. Through 

these offshore transactions, Picardi attempted to 

hide his income and evade over $1 million in 

taxes.

Former Bank Broker Sentenced for 

Promoting Illegal Tax: On March 22, 2013, in 

New York, N.Y., David Parse was sentenced to 

42 months in prison and ordered to pay 

$115,700,000 in restitution and to forfeit $1 

million. According to court documents, Parse 

was a broker and investment representative at a 

bank between 1997 and 2003. During that 

period, he worked with attorneys at a law firm 

and accountants at an accounting firm, as well 

as other bank brokers, on the design, marketing 

and implementation of high-fee tax strategies for 

individual clients. Those strategies, or “tax 

shelters,” were designed to allow high-net-worth 

clients to eliminate, reduce, or defer taxes on 

significant income or gains. Among the 

fraudulent tax shelters designed, marketed, and 

implemented by Parse and his co-conspirators 

were “Short Sales,” “Short Options Strategy” 

(SOS), and “Swaps." The Short Sale tax shelter 

was marketed and sold from 1994 through 1999 

to at least 290 wealthy individuals and 

generated at least $2.6 billion in false and 

fraudulent tax losses. The SOS tax shelter was 

marketed and sold from 1998 through 2000 to at 

least 550 wealthy individuals, and generated at 

least $3.9 billion in false and fraudulent tax 

losses. The Swaps tax shelter was marketed 

and sold in 2001 and 2002 to at least 55 wealthy 

individuals, and generated more than $420 

million in false and fraudulent tax losses. In 

addition, Parse steered his own bank clients to 

the fraudulent shelters, and was given a free tax 

shelter opinion letter by the attorneys, which he 

used to evade hundreds of thousands of dollars 

of his own income taxes. Parse was paid over 

$3 million in commissions by the bank 

attributable to the fraudulent tax shelters. Parse 

also took part in the illegal back-dating of certain 

tax shelter transactions. The attorneys worked 

with Parse to create documents and effectuate 

securities transactions at the bank after the 

close of the tax year and back-dated them using 
IRS-CI Fiscal Year 2013 Annual Business Report

14

“as of” dates, which treated the documents as if 

they had been signed prior to the close of the 

tax year, in violation of tax accounting rules.

Owner of Law Offices Sentenced for Tax 

Fraud: On December 3, 2012, in Los Angeles, 

Calif., Robert M.L. Baker III, owner of Robert 

M.L. Baker III Law Offices of Santa Monica, 

Calif., was sentenced to 36 months in prison and 

ordered to pay $2,056,879 in restitution. On 

January 25, 2012, Baker pleaded guilty to 

willfully subscribing and filing false tax returns. 

According to court documents, Baker utilized 

shell entities and trusts to hide over $900,000 in 

client fees and assets from the IRS. Baker also 

submitted a false offer in compromise form by 

mail and filed false tax returns with the IRS in 

attempts to evade over $1 million in tax.

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. 

Criminal Investigation devotes investigative 

resources to individuals who simply refuse to 

comply with the law.

Examples of non-filer investigations adjudicated 

in FY 2013 include:

Economist Sentenced for Failure to File Tax 

Returns: On July 16, 2013, in Manhattan, N.Y., 

David Gilmartin, an economist, was sentenced 

to 48 months in prison and ordered to pay $1.67 

million in restitution and $2,500 in the costs of 

prosecution. Gilmartin was convicted in January 

2013 of tax evasion and mail fraud. According to 

court documents, Gilmartin failed to file income 

tax returns and pay income taxes on over $1.7 

million in consulting income from 1989 through 

2010. He justified his failure to pay taxes by 

claiming that he could not identify a provision in 

the tax code that made him liable for the 

payment of income taxes. Gilmartin evaded his 

taxes by providing a false social security number 

to one employer. In addition, he provided false 

withholding forms to employers that claimed that 

he was exempt from taxes. In order to prevent 

the IRS from assessing and collecting his taxes, 

from 1995 through 2002, Gilmartin paid nearly 

$500,000 from his paychecks directly to his 

banks for credit card purchases and payments 

on a line of credit. Gilmartin cashed over 

$338,000 in paychecks rather than deposit them 

into a bank account.

Nevada Physician Sentenced on Tax 

Charges: On May 10, 2013, in Las Vegas, Nev., 

Robert David Forsyth was sentenced to 27 

months in prison and ordered to pay $306,171. 

Forsyth pleaded guilty on April 22, 2013 to 

income tax evasion and failing to file income tax 

returns. According to court documents, from 

1999 through 2008, Forsyth worked as a 

physician and earned income from a variety of 

sources, including his medical practice, expert 

witness fees, and, beginning in 2002, Social 

Security benefits. Forsyth, however, failed to file 

individual income tax returns from 1999 through 

2008. In fact, according to the indictment, 

Forsyth has not filed an income tax return since 

the 1994 tax year. Forsyth, a Canadian citizen 

and U.S. permanent resident alien, closed all of 

his personal bank accounts and used a third 

party business to cash his paychecks. He made 

extensive use of cash to pay personal expenses 

in an effort to avoid detection.

Washington Businessman Sentenced for 

Failing to Report Income: On May 2, 2013, in 

Spokane, Wash., J. Scott Vrieling was 

sentenced to 24 months in prison and ordered to 

pay $939,258 to the IRS. Vrieling was also 

ordered by the court to file all delinquent income 

tax returns and pay all tax due and owing, plus 

penalties and interest. In addition, Vrieling was 

ordered to pay a $100,000 fine and $14,269 in 

prosecution costs. Vrieling was convicted on 

four counts of failing to file federal income tax 

returns for the years 2004 through 2007. 

According to court records, Vrieling, the owner 

of Vrieling Financial, was an independent 

insurance agent licensed to sell employee 

benefits, health insurance and other insurance 

products. Evidence at trial established that 

Vrieling received over $2.6 million in gross 

income during the years 2004 through 2007. 

However, Vrieling failed to file federal tax returns 

reporting this income.

Alaskan Couple Sentenced for Tax Crimes: 

On February 4, 2013, in Anchorage, Alaska, 

James Leroy Jensen was sentenced to 36 
IRS-CI Fiscal Year 2013 Annual Business Report

15

months in prison. Robin L. Jensen was 

sentenced to 24 months in prison. The couple 

was also ordered to pay $311,605 in restitution 

and to file 2006 through 2009 tax returns. 

According to their plea agreements, James 

Jensen is a commercial fisherman and Robin 

Jensen ran a cabin rental business. After the 

IRS audited their 1994 through 1997 tax returns, 

the Jensen’s owed over $100,000 in additional 

taxes. At this time, they began to challenge the 

jurisdiction of the IRS and the authority of the 

federal government to tax them. In 2001, the 

IRS recorded a Notice of Federal Tax Lien of 

$201,029 against the Jensen’s for tax years 

1994 through 1997. The Jensen’s appealed the 

IRS collection process and went to tax court in 

2003. The judge denied the appeal and fined 

James Jensen an additional $10,000. Instead of 

complying with the tax laws, the Jensen’s 

created several entities including a trust in 

Nevada and two “corporation soles” in Utah. 

These nominee entities were used to take title of 

assets that belonged to the Jensens, and 

thereby, open bank accounts to conceal income, 

including over a million dollars accredited to 

James Jensen’s fishing income between 2004 

and 2007. In addition, James Jensen tried to 

thwart IRS collection efforts by mailing a false 

document called a “Bill of Exchange” to the 

Secretary of the U.S. Treasury. This document 

was purported to be a payment of $339,888 that 

would eliminate his tax debt for 1994 through 

1997. The Jensens also filed false tax returns 

from 1998 through 2003, claiming they had no 

taxable income because their earnings were not 

taxable under the discredited “claim of right” 

theory. Finally, the Jensens failed to file tax 

returns from 2004 through 2007, based on 

claims that the corporation sole entities they 

created in Utah, were exempt from filing tax 

returns or paying taxes for religious reasons.

Employment Tax Fraud:

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 fraud 

investigations adjudicated in FY 2013 include:

Former Owner of Employee Leasing 

Company Sentenced for Failing to Pay 

Payroll Taxes: On July 18, 2013, Salt Lake 

City, Utah, Richard R. Whatley, a former owner 

of Alliance Staffing Management Inc. (ASM), 

was sentenced to 51 months in prison and 

ordered to pay $541,513 in restitution to the IRS. 

Whatley pleaded guilty in January 2013 to 

willfully failing to account for and pay over 

employment taxes, relating to three different 

employee leasing companies that he allegedly 

operated and controlled between the years 2001 

and 2006. The tax loss associated with 

Whatley’s criminal conduct during these years 

totaled more than $2.3 million. As charged in the 

superseding indictment, in the fourth tax quarter 

of 2003, Whatley caused the collection of 

employment taxes from ASM’s employees’ 

wages and then willfully failed to pay over 

$541,513 for the employees’ portion of 

employment taxes to the IRS.

Owner of Japanese Restaurant Sentenced 

for Tax Crimes: On January 30, 2013, in San 

Francisco, Calif., Michael Chen, the owner of 

Fune Ya Japanese Restaurant, was sentenced 

to 33 months in prison and ordered to pay 

$459,105 in restitution. Chen was convicted by a 

jury on March 27, 2012, on filing false tax 

returns, failure to file tax returns, and mail fraud. 

Evidence at trial showed that Chen maintained 

detailed records of Fune Ya’s daily receipts in 

twenty-six boxes marked “Seasoned 

Octopus.” The boxes were stored in a crawl 

space beneath the restaurant floor. The cash 

sales shown on Fune Ya’s receipts were not 

reported to the IRS. The evidence also showed 

that Chen maintained an encrypted Excel 

spreadsheet documenting $1,910,803 in sales, 

while he reported $65,738 in sales to the IRS. 

Chen also paid Fune Ya employees cash wages 

totaling $548,919 for the 2004 through 2006 tax 

years. Employees received cash wages in white 

envelopes each payday. Chen failed to include 

these cash wages on the quarterly payroll tax 

returns (Forms 941) filed with the IRS.
IRS-CI Fiscal Year 2013 Annual Business Report

16

Owner of Washington Roofing Company 

Sentenced for Employment Tax Evasion: On 

November 29, 2012, in Seattle, Wash., Bruce H. 

Sprague, owner of Bruce’s Roofing, was 

sentenced to 24 months in prison and ordered to 

pay $1,179,761 to the IRS. In July 2012, 

Sprague pleaded guilty to paying a portion of his 

employees' wages in cash from 2005 through 

2008 and to not collecting employment taxes 

including Social Security, Medicare and income 

tax withholding from the cash wages. According 

to his plea agreement, Sprague informed his 

employees in early 2005 that they would receive 

a portion of their wages in cash. The cash 

payroll was about fifty percent of each 

employee’s pay. No payroll taxes were collected 

on the cash portion of the employees’ pay. By 

paying in cash and not reporting the wages,

Sprague avoided approximately $1,179,761 in 

employment taxes for 2006 through 2008. Even 

as he was failing to collect and pay over the 

employment taxes, Sprague was taking more 

than $3.9 million in wages and profits from the 

business for 2005 through 2008.

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 2013 include:

Six Individuals Sentenced for their Roles in 

Large Bank Fraud Scheme: On July 18, 2013, 

in St. Paul, Minn., Joel Delano Powell III was 

sentenced to 42 months in prison and Trey 

Jeremiah Powell was sentenced to 57 months in 

prison. Both pleaded guilty to one count of 

conspiracy to commit bank fraud and one count 

of aggravated identity theft. In July 2013, Joel 

Delano Powell, Jr. was sentenced to 300 

months in prison. Powell, Jr. was convicted 

following a jury trial of one count of conspiracy to 

commit bank fraud, seven counts of aiding and 

abetting bank fraud, and five counts of 

aggravated identity theft. On July 17, 2013, 

Elston Edwards Sharps was sentenced to 32 

months in prison; Kevin Terrell Martin was 

sentenced to 124 months in prison; and Steven 

Lavell Maxwell was sentenced to 140 months in 

prison. All three pleaded guilty to one count of 

conspiracy to commit bank fraud and one count 

of aggravated identity theft. These individuals, 

along with over 100 others, were involved in a 

conspiracy from 2006 through December 2011 

to defraud banks, bank customers, and 

businesses. The co-conspirators used victim 

information to create counterfeit checks and 

false identification documents to conduct 

fraudulent transactions at retail establishments 

where expensive merchandise was purchased 

and returned for cash. At banks, the 

conspirators posed as customers and withdrew 
IRS-CI Fiscal Year 2013 Annual Business Report

17

money from victims’ bank accounts. The 

members of the conspiracy conducted these 

fraudulent transactions throughout Minnesota 

and in at least 13 other states. Victim 

information was obtained by members of the 

conspiracy through multiple sources, including 

from individuals who stole victim information 

from their places of employment, from 

individuals employed at area banks, from those 

who stole the information from the mail, during 

vehicle break-ins, and business burglaries, 

among other sources.

Defendant Sentenced for Role in Mortgage 

Fraud Scheme: On July 2, 2013, in San 

Antonio, Texas, Robert Brooks was sentenced 

to 135 months in prison and ordered to pay 

approximately $8.5 million in restitution for his 

role in a mortgage fraud operation involving a 

series of “property flip” schemes. Brooks was 

convicted by jury on January 29, 2013, of one 

count of conspiring to commit bank, wire and 

mail fraud, eight counts of mail fraud and two 

counts of aiding the filing of false income tax 

returns. Evidence presented during trial revealed 

that from May 17, 2005, until February 21, 2008, 

twenty individuals, under the direction of Robert 

Brooks, participated in a mortgage fraud scheme 

where Brooks purchased properties at fair 

market value then resold at an artificially inflated 

price to straw purchasers. Brooks recruited his 

co-defendants, which included appraisers, loan 

processors, title company employees, and straw 

purchasers. He provided them with kickbacks 

from loan proceeds for their participation in the 

scheme. Brooks used the proceeds from the 

purported sales to various nominees to pay for 

his initial purchase of real estate, to pay closing 

costs for both his purchase and sale to the 

nominee, to pay the nominee’s down-payment, 

to pay the nominee for the nominee’s 

participation, and to pay the mortgage for the 

first 12 months, after which each mortgage went 

into default. Brooks’ mortgage loan scheme 

involved over 40 properties and defrauded 

financial institutions of over $20 million. In 

addition, Brooks submitted false 2007 income 

tax returns for himself and his wife, and for a 

partnership, which contained a false business 

expense.

Ohio Men Sentenced in Bank Fraud Case: On 

July 10, 2013, in Cleveland, Ohio, Aziz Ukshini 

was sentenced to 42 months in prison and 

ordered to pay $3,303,817 in restitution jointly 

with Anthony Raguz to the National Credit Union 

Administration. According to court documents, 

from September 2003 through March 2010, 

Ukshini, aided and abetted by Raguz, the former 

Chief Operating Officer of St. Paul Croatian 

Federal Credit Union, fraudulently obtained 

numerous loans totaling approximately $2.8 

million from the credit union. Ukshini obtained 

these loans by making false representations and 

promises. He received the loans after having 

already defaulted on previous loans issued to 

him by the credit union. Ukshini gave Raguz 

about $90,000 for approving and facilitating the 

approval of his fraudulent loans. Raguz was 

sentenced in November 2012 to 168 months in 

prison and ordered to pay more than $72.5 

million. In addition, in March 2013, Marko Nikoli 

was sentenced to 27 months in prison and 

ordered to pay $1 million in restitution. In 

February 2013, A. Eddy Zai was sentenced to 

87 months in prison and ordered to pay more 

than $23 million in restitution.

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 2013 include:

Former Texas Judge Sentenced on 

Racketeering Charges: On August 21, 2013, in 

Brownsville, Texas, Abel Corral Limas, former 

404th State District Judge, was sentenced to 72 

months in prison and ordered to pay $6,777,270 

in restitution and to forfeit $257,300. Limas 

pleaded guilty on March 31, 2011 to 

racketeering charges. According to court 

documents, Limas used his office as a criminal 

enterprise to enrich himself and others through 

extortion. Limas accepted money and other 

consideration from attorneys in civil cases 

pending in his court in return for favorable pre-
IRS-CI Fiscal Year 2013 Annual Business Report

18

trial rulings in certain cases, including a case 

involving a helicopter crash in February 2008. 

Limas served as judge for eight years, retiring in 

December 2008, and thereafter, he was 

associated with the law firm of Rosenthal & 

Watson, as “of counsel.” Limas participated in a 

series of meetings with attorneys at the 

Rosenthal & Watson law firm in the summer of 

2008 during which they planned and negotiated 

the terms of Limas’ employment as an “of 

counsel” attorney with the firm. During those 

meetings, Limas was promised an advance of at 

least $100,000 as well as a percentage of 

attorneys’ fees earned in the helicopter crash 

case in return for favorable rulings on the case. 

Limas received a check for $50,000 in 

December 2008 and another check for $50,000 

in January 2009. In October 2009, the helicopter 

case settled for approximately $14 million and 

Limas received approximately $85,000 from the 

law firm.

Former Congressman and Wife Sentenced: 

On August 14, 2013, in Washington, D.C., 

former Congressman Jesse L. Jackson, Jr. was 

sentenced to 30 months in prison for conspiring 

to defraud his re-election campaigns. Jackson’s 

wife, Sandra Stevens Jackson, a former 

Chicago alderman, was sentenced to 12 months 

in prison for filing false tax returns as part of the 

scheme. According to court documents, Jackson 

used about $750,000 in campaign funds to pay 

for personal items and expenses. He then filed 

misleading reports to conceal seven years of the 

illegal activities. Sandra Jackson pleaded guilty 

in February 2013 to filing false tax returns for 

calendar years 2006 through 2011. According to 

the government’s evidence, she knowingly and 

willfully failed to report nearly $570,000 in 

taxable income for those tax years. Jesse 

Jackson was elected to Congress in 1995 and 

served until November 2012 as the 

representative for the 2nd Congressional District 

of Illinois. Sandra Stevens Jackson was an 

alderman in Chicago from May 2007 until 

January 2013. Additionally, she had various 

roles in her husband’s re-election campaigns, 

starting in January 2005, working at different 

points as treasurer, consultant, and campaign 

manager. Jackson and his wife carried out the 

fraud scheme from in or about August 2005 until 

in or about April 2012.

Former Pennsylvania State Senator 

Sentenced on Tax Charges: On November 30, 

2012, in Scranton, Pa., Robert Mellow, former 

Pennsylvania State Senator, was sentenced to 

16 months in prison and ordered to pay $79,806 

in restitution. Mellow previously paid over 

$31,000 in restitution for federal tax charges. 

Mellow pleaded guilty in May 2012 to conspiracy 

to commit mail fraud and to defraud the United 

States. According to court documents, Mellow, 

in his capacity as a state Senator and the 

Democratic Leader during 2006 through 2010, 

conspired with others to misuse the staff and 

resources of the Pennsylvania Senate for 

political fund-raising and campaign purposes. As 

part of the scheme, Mellow caused and 

knowingly permitted the submission to the Chief 

Clerk of the Senate of false job classification and 

re-classification forms and memos for Senate 

staff who performed political fund-raising and 

campaign work while being compensated by the 

Senate. Mellow also conspired with others to file 

a false individual federal income tax return for 

the year 2008. The unreported income consisted 

of money paid to Mellow in connection with the 

sale of property where Mellow’s district office 

was located.

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.
IRS-CI Fiscal Year 2013 Annual Business Report

19

Examples of corporate fraud investigations 

adjudicated in FY 2013 include:

Founder and Former Chief Executive Officer 

of Body Armor Company Sentenced on 

Federal Charges: On August 15, 2013, in 

Central Islip, N.Y., David H. Brooks, the former 

Chief Executive Officer of DHB Industries, Inc., 

was sentenced to 204 months in prison and 

ordered to pay a $8.7 million fine and to forfeit 

approximately $65 million. DHB Industries, Inc. 

is a supplier of body armor to the United States

military and law enforcement agencies. 

According to trial evidence, Brooks and others

conspired to loot DHB for personal gain. Brooks 

concealed his control of a related company in 

order to funnel more than ten million dollars from 

DHB to support a thoroughbred horse-racing 

business and to finance a lavish lifestyle. To 

cover up his theft, Brooks created, and directed 

others to create, fictitious documents and 

misclassified these personal expenses as 

business expenses on DHB’s books and 

records. Brooks also falsely inflated inventory at 

a DHB subsidiary to artificially boost reported 

profits, and then lied to auditors in an effort to 

cover up the schemes. Brooks also engaged in 

accounting fraud schemes designed to increase 

the net income and profits that DHB reported in 

its press releases and filings with the Securities 

and Exchange Commission (SEC) by falsely 

inflating the value of DHB’s existing inventory, 

adding non-existent inventory to the company’s 

books and records, and fraudulently 

reclassifying expenses. Although Brooks was 

initially released on bail conditions requiring that 

he account for and repatriate all foreign assets, 

he was re-arrested and bail was revoked in 

January 2010 after the government discovered 

that Brooks had concealed millions of dollars in 

accounts in the tax haven principality of San 

Marino as well as in London, England.

Former Illinois Business Owners Sentenced 

for Filing False Tax Returns: On August 6, 

2013, in Chicago, Ill., Michael H. Martorano and 

William S. Sefton were sentenced to 42 months 

and 48 months in prison, respectively. Both 

defendants were also fined $12,500 and ordered 

to pay the mandatory court costs. In addition, 

Martorano paid approximately $1.494 million in 

restitution and Sefton paid approximately $1.441 

million in restitution, and together they paid 

approximately $7.308 million in corporate taxes 

owed by their business. Each defendant pleaded 

guilty in March 2013 to three counts of filing 

false income tax returns. According to court 

documents, Martorano was president and Sefton 

was vice president/secretary of the former 

Consumer Benefit Service, Inc., or Cbsi, a 

Naperville business that provided membership 

and consumer discount programs to businesses 

and associations worldwide. Martorano and 

Sefton admitted that on a number of occasions 

between December 2005 and December 2009, 

they caused Cbsi to transfer more than $21.656 

million into bank accounts in the name of a 

consulting firm they controlled. Both defendants 

used some of this money to pay personal 

expenses and moved other amounts in 

approximately equal portions into other accounts 

they controlled individually. As a result, they 

each obtained approximately $10.828 million. 

Neither defendant disclosed the receipt of any of 

this money to their individual tax return preparer.

World Health Alternatives CEO Sentenced for 

$41 Million Fraud Scheme: On December 4, 

2012, in Pittsburgh, Pa., Richard E. McDonald 

was sentenced to 130 months in prison. 

According to information presented to the court, 

in 2003, McDonald became the President, 

Principal Financial Officer, Principal Accounting 

Officer and Chairman of the Board of Directors 

of World Health Alternatives, Inc. (WHA). In 

June 2004, McDonald also became the Chief 

Executive Officer of WHA. Between February 

2003 through August 15, 2005, McDonald 

defrauded WHA and its investors. He transferred 

funds from WHA to his personal bank account 

and other accounts under his control. McDonald 

also manipulated the financial records and 

statements of WHA by understating the amount 

of unpaid payroll taxes of WHA and its 

subsidiaries, and by overstating the amount of 

loans purportedly made by him to WHA. In 

addition, McDonald stole money from WHA by 

directing purchasers of newly issued shares to 

transfer the funds for the shares to accounts 

under McDonald’s control. McDonald stole 

approximately $6 million, and then spent the 

money on himself. In his capacity as CEO of 

WHA, McDonald falsely represented to the SEC, 

WHA shareholders, and prospective purchasers 

of WHA stock, the actual number of outstanding 

WHA shares by understating, in WHA’s financial 

statements, the actual number of outstanding 
IRS-CI Fiscal Year 2013 Annual Business Report

20

WHA shares. The fraudulent understatements of 

the number of outstanding WHA shares falsely 

overstated WHA’s earnings per share, and 

thereby inflated the apparent market value of 

WHA stock. As a result of McDonald’s fraudulent 

conduct, WHA shareholders lost $41 million. 

McDonald also failed to report the funds he had 

fraudulently obtained from WHA and its 

shareholders on his personal tax returns. Finally, 

McDonald failed to pay over to the IRS the 

payroll taxes which WHA had withheld from its 

employees.

Gaming:

Criminal Investigation focuses on the 

enforcement of tax, money laundering, and 

related financial crimes to combat illegal activity 

within the gaming industry, as well as to uncover 

and shutdown illegal gaming operations. The 

use of the Internet has greatly increased the 

reach of domestic and international gaming 

operations. Illegal gambling operations can be 

found in a number of different forms, including 

bookmaking, numbers, online gaming, and some 

charitable gaming operations. CI’s gaming 

program consists of a two-faceted, proactive 

approach to industry compliance. First is the 

investigation of entities suspected of violating 

tax, money laundering, or related laws. Second 

are liaison activities with federal, state, and tribal 

gaming boards, licensing commissions, industry 

regulators, gaming operators, gaming industry 

suppliers, and other law enforcement. A critical 

component of both facets is CI’s coordination 

with the civil functions of the IRS in addressing 

trends and concerns in the gaming industry. 

Examples of gaming investigations adjudicated 

in FY 2013 include:

Men Sentenced for Illegal Gambling 

Operation: On August 21, 2013, in Oklahoma 

City, Okla., Richard Allen Hancock was 

sentenced to 16 months in prison for his 

involvement in an illegal gambling business. 

Hancock pleaded guilty to charges of prohibition 

of illegal gambling business and money 

laundering.On August 15, 2013, Gary John Gibb 

was sentenced to 16 months in prison and 

ordered to forfeit $500,000. Gibb pleaded guilty 

in March 2013 to prohibition of illegal gambling 

business. According to the indictment, Hancock, 

Gibb and others, participated in an illegal 

gambling business that operated “High Stakes” 

poker games from a residence in Oklahoma 

City. They took bets and wagers on sporting 

events on behalf of betting clients and used an 

illegal Internet gambling website in interstate 

and foreign commerce. In addition, Hancock and 

others conspired to launder over $8.1 million in 

money derived from the gambling operation.

Hawaii Resident Sentenced for Operating 

Illegal Gambling Business: On August 8, 

2013, in Honolulu, Hawaii, Eric Ford was 

sentenced to 20 months in prison. Ford pleaded 

guilty on February 21, 2013 to one count of 

conducting, directing, managing, owning, and 

supervising an illegal gambling business and 

three counts of structuring transactions to evade 

reporting requirements. Ford also forfeited 

$129,566 in cash and a vehicle. According to 

court documents, from at least November 2009 

to November 2012, Ford operated an illegal 

gambling business out of Aloha Springs Water 

Company. Ford took numerous sports bets over 

the phone and online, collected gambling debts, 

and paid out gambling winnings. Ford also knew 

financial institutions are required by law to 

record cash purchases of money orders and 

other monetary instruments totaling $3,000 or 

more. To avoid this record keeping requirement, 

Ford structured the purchase of money orders 

totaling more than $3,000 by purchasing smaller 

amounts at multiple financial institutions. Ford 

structured more than $120,000 between May 

2009 and June 2012.

Pennsylvania La Cosa Nostra Capo 

Sentenced for Racketeering Conspiracy: On 

July 17, 2013, in Philadelphia, Pa., Anthony 

Staino Jr. was sentenced to 97 months in prison

and ordered to pay a $7,500 fine. On April 18, 

2013, Staino pleaded guilty to participating in a 

racketeering conspiracy as a capo in the 

Philadelphia La Cosa Nostra (LCN) Family and 

committing loan sharking and illegal gambling. 

According to court documents, Staino ran an 

illegal electronic gambling device business for 

the mob, providing video poker machines and 

other gambling devices for bars, restaurants, 

convenience stores, coffee shops and other 

locations in Philadelphia and its suburbs, and 

then collected the illegal gambling proceeds.
IRS-CI Fiscal Year 2013 Annual Business Report

21

Connecticut Men Sentenced for Participating 

in Illegal Gambling Ring: On June 5, 2013, in 

Hartford, Conn., John Liquori was sentenced to 

18 months in prison and ordered to forfeit 

$60,000. Liquori pleaded guilty on March 13, 

2013 to one count of racketeering conspiracy. 

On June 3, 2013, Thomas Uva IV was 

sentenced to 21 months in prison and ordered to 

forfeit $100,000. On March 13, 2013, Uva 

pleaded guilty to one count of conspiring to 

violate the federal Racketeer Influenced and 

Corrupt Organizations Act (RICO) and one count 

of money laundering. On November 16, 2012, 

Michael Pepe was sentenced to 12 months and 

one day in prison and ordered to forfeit 

$100,000. On August 6, 2012, Pepe pleaded 

guilty to two counts of operating an illegal 

gambling business. According to court 

documents, Liquori, Uva and Pepe were 

involved in a large-scale sports bookmaking 

operation in which gamblers placed bets with 

offshore Internet sports-gambling websites 

based in Costa Rica. In addition, the defendants 

operated a card gambling club in Stamford, 

Conn. Analysis of the sports-betting web site 

utilized by the defendants determined that the 

total gross revenues of the Stamford-based 

gambling operation were nearly $1.7 million from 

October 2010 to June 2011.

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 the investigation of individuals 

who bill healthcare insurance companies for 

medical expenses never incurred or for 

unnecessary medical procedures and medical 

equipment. 

Examples of insurance fraud and healthcare 

fraud investigations adjudicated in FY 2013 

include:

Florida Chiropractor Sentenced for 

Fraudulent Insurance Scheme: On August 14, 

2013, in Fort Myers, Fla., Dr. Stephen M. Lovell 

was sentenced to 60 months in prison and 

ordered to pay a $1.695 million money 

judgment. Lovell was convicted on February 28, 

2013 on charges of conspiracy to commit health 

care fraud. According to trial evidence, Lovell 

was a licensed chiropractor and the purported 

co-owner of Xtreme Care Rehabilitation Center 

Inc. Lovell and his co-conspirators recruited 

people to be involved in staged accidents. 

These people would then go to Xtreme Care in 

exchange for payment. Xtreme Care then billed 

insurance companies by submitting false claims 

for alleged medically necessary treatments that 

these patients received. Treatment was either 

never provided to these patients or was not 

medically necessary. Upon payment by the 

insurance company, the funds were transferred 

to corporations created by the conspirators to 

launder the proceeds.

Mental Health Counselor Sentenced for 

Defrauding Medicaid: On August 8, 2013, in 

Charlotte, N.C., Linda Smoot Radeker was 

sentenced to 72 months in prison and ordered to 

pay $6,156,674 in restitution to Medicaid. In 

September 2012, Radeker pleaded guilty to one 

count of health care fraud conspiracy and two 

counts of money laundering. According to court 

documents, from 2008 to 2011 Radeker 

obtained at least $6.1 million in fraudulent 

reimbursement payments from false claims 

submitted to Medicaid. Radeker, a licensed 

professional counselor enrolled with North 

Carolina Medicaid, falsely claimed in billings 

submitted to Medicaid that she was the 

attending clinician for services provided to 

Medicaid recipients, when no such services 

were provided. In addition, Radeker “rented out” 

her Medicaid provider number to a network of 

co-conspirators and, in return, kept a percentage 

of the fraudulent Medicaid reimbursements, 

sometimes as much as 50 percent. On the 

fraudulent claims, the co-conspirators primarily 

used the Medicaid numbers of children whose 

parents thought they were being enrolled in after 

school programs. These after school programs 

were, in fact, owned and operated by Radeker’s 

co-conspirators.

Texas Ambulance Company Owner and 

Operator Sentenced in Fraud Scheme: On 

June 18, 2013, in Houston, Texas, Julian Kimble 

was sentenced to 72 months in prison and 

ordered to pay $3,676,587 in restitution to the 
IRS-CI Fiscal Year 2013 Annual Business Report

22

Medicare Program. Kimble pleaded guilty on 

November 29, 2011 to money laundering and 

tax evasion. According to court documents, from 

March 2008 through December 2010, Kimble 

owned and operated four ambulance 

companies. Through these companies, Kimble 

routinely billed Medicare for basic life support 

ambulance transports that were not provided, 

not needed or not ordered by the treating 

physicians. None of these companies operated 

by Kimble owned licensed ambulance vehicles 

necessary to provide such transports. Kimble 

used third-parties and straw owners to register 

the ambulance companies with the Texas 

Department of Health. He and others often 

transported multiple beneficiaries at the same 

time in vans or sedans and fraudulently billed 

Medicare for allegedly providing individual 

transports in ambulances under the attention of 

qualified emergency medical personnel. Under 

Kimble’s direction, Medicare beneficiaries 

received payments in exchange for agreeing to 

be transported to different facilities around the 

Houston area. From 2008 through December 

2010, Kimble’s companies fraudulently billed 

Medicare for approximately $8.7 million and 

received payment for approximately $3.6 million. 

To conceal proceeds from the health care fraud, 

Kimble withdrew funds from the business 

accounts of the ambulance companies, kept part 

of the funds and used the remainder to pay 

kickbacks to patients. From August to December 

2010, conspirators received checks from Kimble 

totaling more than $1 million, none of which was 

reported as taxable income. In addition, Kimble 

overstated the business expenses for Pearl 

Ambulance Service on his tax returns for 2003 

through 2007. Kimble also failed to file corporate 

tax returns for Pearl during this time until his 

assets were about to be seized. When he did 

file, the delinquent returns were discovered to be 

materially false.

Michigan Arson Ringleader Sentenced on 

Federal Charges: On May 8, 2013, in Detroit, 

Mich., Ali Darwich was sentenced to 137 years 

in prison for arson and other charges related to 

wire fraud, mail fraud, and money laundering. 

According to trial evidence, beginning in 2005, 

Darwich, along with eight co-defendants, ran an 

arson-for-profit ring in the greater Detroit 

metropolitan area. Specifically, Darwich, along 

with his co-conspirators, would purchase 

insurance for various dwellings, businesses and 

vehicles. After purchasing the insurance, 

Darwich and others would intentionally burn, 

vandalize, or flood the various properties or 

vehicles and then file false insurance claims 

seeking reimbursement for such things as 

structural repair, contents replacement, loss of 

profits and alternative living costs. Seven 

insurance companies were defrauded for over 

$5 million.

Bankruptcy Fraud:

According to the United States Bankruptcy 

Court, there were 1.1 million bankruptcy filings in 

Fiscal Year 2013. 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 2013 include:

Texas Man Sentenced for Bankruptcy Fraud 

and Tax Crimes: On July 17, 2013, in 

Fort Worth, Texas, Larry Lake was sentenced to 

168 months in prison and ordered to pay 

$550,000 in fines and approximately $25 million 

in taxes, interest and penalties. Lake was 

convicted at trial in February 2013 of 

concealment of assets (bankruptcy fraud) and 

tax evasion. According to evidence presented at 

Lake’s trial, the day before he filed for 

bankruptcy in November 2004, he knowingly 

and fraudulently transferred and concealed more 

than $3 million held in an on-line trading account 

and a bank account. He transferred the funds 

through a series of bank deposits, wire transfers 

and cashier’s checks, as well as used a shell 

company to help hide assets. From August 2006 

through November 2009, Lake and his spouse 

agreed to structure more than 1,100 currency 

deposits, into at least 13 different bank 

accounts. These accounts were spread among 

several financial institutions, and the total 

amount structured during this period was in 

excess of $9.3 million. Lake and his spouse 

created at least two shell companies, which he 

used to open some of the 13 bank accounts 

used in the structuring scheme. In addition, Lake 

under-reported income on his and his spouse’s 
IRS-CI Fiscal Year 2013 Annual Business Report

23

joint tax returns for the tax years 2006 through 

2008.

Maryland Man Sentenced for Bankruptcy 

Fraud and Filing False Tax Returns: On 

June 27, 2013, in Baltimore, Md., Ricardo O. 

Curry II was sentenced to 87 months in prison 

and ordered to pay $1,114,988 in restitution to 

creditors in his bankruptcy case and $118,182 to 

the IRS. Curry was convicted on March 20, 2013 

of filing of false tax returns, bankruptcy fraud, 

falsifying bankruptcy records and false testimony 

under oath at a bankruptcy proceeding. 

According to court documents, Curry worked for 

a North Carolina real estate corporation that 

oversaw the sale of property in North Carolina, 

including a development which contained more 

than 2000 lots. Curry recruited investors to 

purchase lots in the development and he 

received referral fees based on these sales. 

From 2005 through 2007, Curry earned referral 

fees totaling $415,201. Curry failed to report 

these referral fees on his 2005, 2006, and 2007 

tax returns. On March 12, 2009, Curry filed for 

Chapter 13 bankruptcy in the United States 

Bankruptcy Court for the District of Maryland. 

Curry failed to disclose the referral fees and an 

ownership interest in a home worth 

approximately $325,000 on either the Statement 

of Financial Affairs he filed with the bankruptcy 

court, an amended statement or in testimony 

before creditors. Ultimately, Curry never 

provided documents to the trustee overseeing 

his bankruptcy case regarding either the referral 

fee income or the home, and as a result, Curry’s 

attempt to discharge his debts through 

bankruptcy was denied.

New Jersey Dentist Sentenced for Tax 

Evasion and Bankruptcy Fraud: On June 12, 

2013, in Camden, N.J., Stephen A. Beukas was 

sentenced to 21 months in prison, fined $50,000 

and ordered to pay $69,883 in restitution to the 

bankruptcy trustee. Beukas pleaded guilty in 

June 2012 to income tax evasion and 

bankruptcy fraud. According to court documents 

and statements made in court, from early 2005 

through 2008, Beukas was a practicing dentist 

and the sole owner of several dental practices 

located in New Jersey. For the years 2005 

through 2008, Beukas failed to provide the IRS 

with accurate information on the $2.6 million 

income he received as owner of the three 

practices. On September 12, 2009, Beukas filed 

a tax return in which he falsely stated that his 

total income for the calendar year 2006 was 

$632,945, and that the tax owed was $187,905. 

Beukas failed to file timely tax returns in 2005, 

2007, and 2008. His failure to disclose correct 

information to the IRS resulted in a tax loss of 

$800,309. In 2008, when Beukas filed for 

Chapter 11 bankruptcy, he also failed to disclose 

almost $1.3 million in income he received as the 

sole owner of one of the dental practices.
IRS-CI Fiscal Year 2013 Annual Business Report

24

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; 

Sydney, Australia; and The Hague, the 

Netherlands. 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 and the 

International Organized Crime Intelligence and 

Operations Center (IOC-2) to combat the threats 

posed by international criminal organizations, 

assist in joint investigations and the 

apprehension of international fugitives.

Opportunities for training and foreign delegation 

visits have also increased. During Fiscal Year

2013, 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 and Public Corruption. CI also 

hosted delegations from foreign countries 

seeking information on 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 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 international investigations 

adjudicated in FY 2013 include:

Man Sentenced for Fraud Against Children's 

Charity: On September 5, 2013, in Grand 

Rapids, Mich., Nehemiah Muzamhindo, a citizen 

of Zimbabwe, was sentenced to 72 months in 

prison and ordered to pay over $629,000 in 

restitution and over $79,000 in back taxes. 

Muzamhindo was convicted on charges of 

money laundering and filing a false tax return. 

According to court documents, while 

Muzamhindo was being investigated for his role 

in a scheme to obtain fraudulent United States 

passports, agents discovered evidence that 

Muzamhindo had received large wire transfers 

from bank accounts held by a children’s 

foundation in the Republic of South Africa. The 

children’s foundation has its headquarters in 

Michigan and is one of the world’s largest 

children’s charities. The investigation revealed 

that Muzamhindo was part of a scheme to 

submit bogus invoices for payment to the 

charity. The charity paid members of the 

scheme a total of nearly $800,000 between 

2006 and 2008 before learning that it was being 

swindled. Muzamhindo did not report to the IRS 

any of the money he received from the charity 

during those years.
IRS-CI Fiscal Year 2013 Annual Business Report

25

Illinois Businessman Sentenced for Tax 

Evasion: On July 16, 2013, in Chicago, Ill., 

Peter Troost, of Skokie, Ill, was sentenced to 12 

months and one day in prison and ordered to 

pay a $32,500 fine. Troost already paid 

$1,039,343 in back taxes to the IRS, as well as 

a civil penalty of approximately $3.75 million. 

Troost pleaded guilty in March 2013 to tax 

evasion. According to his plea agreement, from 

at least 1999 until 2009, Troost transferred 

hundreds of thousands of dollars from the 

United States to his individual offshore UBS 

account for the sole purpose of evading 

domestic income taxes. He maintained at least 

one offshore UBS account between 1981 and 

2009, while maintaining at least one additional 

joint account. He managed both accounts with 

the assistance of a UBS personal banker based 

on the Island of Jersey. In addition to failing to 

report interest income, Troost admitted that he 

intentionally failed to report all of his income 

from his monument business and his rental 

properties. In addition, Troost stated on his 

returns for each of those years that he did not 

have an interest in a financial account in a 

foreign country, when, in fact, he knew he 

maintained the offshore account.

Businessman Sentenced for Hiding Income 

in Undeclared Bank Accounts: On July 9, 

2013, in Newark, N.J., Sameer Gupta was 

sentenced to 19 months in prison and ordered to 

pay a $20,000 fine. As part of his plea 

agreement, Gupta has paid to the United States 

Treasury a one-time Report of Foreign Bank and 

Financial Accounts (FBAR) penalty of $259,045 

and has cooperated with the IRS in the 

investigation of his outstanding taxes due and 

owed for 2006 through 2009. Gupta pleaded 

guilty on February 26, 2013, to one count of tax 

evasion in connection with his diverting funds 

from the wholesale merchandise business, J.S. 

Marketers Inc., to undisclosed foreign accounts 

at HSBC in India, among other places. 

According to court documents, from 2006 

through 2009, Gupta diverted $822,916 of the 

business’ receipts into 17 different personal 

bank accounts held in the names of various 

individuals, including himself and family 

members. He directed more than $250,000 of 

those diverted funds into six different accounts 

held offshore at a branch of HSBC. From 2007 

through 2009, Gupta caused 22 corporate 

checks to be made payable to himself and family 

members in amounts identical to invoices from 

the business’ suppliers. Gupta endorsed those 

checks, which totaled $375,138, and deposited 

them into bank accounts that he controlled. 

Gupta filed individual income tax returns for the 

years 2006 through 2009 that did not report his 

income from the diverted funds. As a result, 

Gupta evaded taxes on $1,198,054 in income 

for 2006 through 2009. He also failed to file 

FBARs for 2006 through 2008.

Mexican Pecan Company Owner Sentenced 

for Scheme to Defraud the U.S. ExportImport Bank: On November 7, 2012, in 

El Paso, Texas, Leopoldo Valencia-Urrea, the 

owner of a pecan brokerage company in Ciudad 

Juarez, Chihuahua, Mexico, was sentenced to 

48 months in prison and ordered to pay $58,000 

in restitution and $399,075 in forfeiture. Valencia 

pleaded guilty on October 13, 2011, to one 

count of conspiracy to commit wire fraud, one 

count of wire fraud and one count of money 

laundering conspiracy in connection with the 

scheme to defraud the Export-Import Bank of 

the United States (Ex-Im Bank) of approximately 

$400,000. According to court documents, 

Valencia, a U.S. citizen, admitted that in 2006, 

he applied for an Ex-Im Bank insured loan for 

$406,258 through a bank in Miami. Valencia and 

others submitted a fraudulent loan application, 

financial statements, invoices, letters and bills of 

lading to falsely represent to the Miami bank and 

the Ex-Im Bank the purchase and export of U.S. 

goods to Valencia in Mexico. After the exporter

who conspired with Valencia received $399,075 

from the Miami bank, Valencia and others 

diverted the loan proceeds directly to Valencia 

and others in Mexico. As a result of the fraud, 

Valencia’s loan defaulted, causing the Ex-Im 

Bank to pay a claim to the lending bank on a 

$371,962 loss.

Ohio Attorney Sentenced on Tax Fraud 

Charges: On November 2, 2012, in Columbus, 

Ohio, Aristotle R. Matsa, aka Rick Matsa, was 

sentenced to 85 months in prison and ordered to 

pay a $265,000 criminal fine, $388,000 in 

restitution to the IRS and $24,069 in restitution 

to a client. Matsa was convicted by a jury in April 

2012 on one count of a corrupt endeavor to 

obstruct and impede the IRS; 15 counts of 

aiding and assisting in the preparation of false 

and fraudulent tax returns, that related to five 

different trusts; one count of willfully failing to file 
IRS-CI Fiscal Year 2013 Annual Business Report

26

a FBAR; one count of conspiracy to obstruct 

justice, commit perjury and make false 

statements; two counts of witness tampering; 

one count of submitting a false statement; and 

one count of obstruction of justice. Matsa’s 

mother and co-defendant, Loula Z. Matsa, was 

sentenced to three years of probation and 

ordered to pay a $150,000 criminal fine for her 

role in the conspiracy with her son to obstruct 

justice, commit perjury and make false 

statements. According to court documents and 

trial evidence, Matsa created and operated 

several nominee entities in order to disguise and 

conceal his income and assets from the IRS. 

The false trust return charges relate to filings for 

at least five separate trust entities during the tax 

years 2003 to 2005. In fact, the evidence at trial 

showed that he had been filing similarly false 

returns for the trusts dating back to 1990. Each 

of the trusts reported receiving significant 

amounts of interest income each year, yet no 

income tax was ever reported as due because 

the trust tax returns fraudulently claimed 

deductions for distributions purportedly paid 

annually to a foreign beneficiary. The evidence 

at trial established, however, that Rick Matsa 

used funds from these trusts to purchase a 150-

acre farm in Hocking County as well as a home 

in Worthington, Ohio. In addition, the trusts’ 

purported foreign beneficiary was located in the 

Netherlands and testified that she was not the 

beneficiary of the trusts. The evidence at trial 

also showed that during calendar year 2003 

Rick Matsa violated the foreign bank account 

reporting requirements, by failing to disclose his 

ownership and control over a foreign bank 

account held in The Netherlands. This account 

had in excess of $300,000 from at least August 

2003 to November 2003.

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

FY 2013 FY 2012 FY 2011

Investigations Initiated 284 211 244

Prosecutions Recommendations 214 196 195

Indictments/Informations 184 153 149

Convictions 149 110 133

Incarceration Rate 70.4% 87.9% 70.6%

Average Months to Serve 51 71 61

MONEY LAUNDERING AND BANK SECRECY 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.

Virtual Currency: During Fiscal Year 2013, 

Criminal Investigation began pursuing 

investigations in the new program area of virtual 

currency. These currencies resemble money 

and can come with their own dedicated retail 

payment systems. Virtual currency is considered 

any medium of exchange that operates like a fiat 

currency. As with any money, virtual currency 

can be used in a wide variety of crimes involving 

money laundering and other financial crimes. In 

2013, IRS-CI was at the forefront of some of the 

most prominent investigations that involved 

virtual currency. In May 2013, IRS-CI’s Global 

Illicit Finance Team led the investigation that 

resulted in the indictment of Liberty Reserve. 
IRS-CI Fiscal Year 2013 Annual Business Report

27

Users exchanged fiat currency for “Liberty 

Reserve Dollars” (a virtual currency) and 

transacted with other Liberty Reserve Dollar 

users. To better combat the criminal use of 

virtual currency it is vital to share information 

with and learn how other law enforcement and 

regulatory agencies are dealing with virtual 

currency. IRS-CI meets quarterly with other law 

enforcement agencies as a participant of the 

Virtual Currency and Emerging Threats (VCET) 

group to discuss trending topics in the virtual 

currency industry. As virtual currency becomes a 

more accepted form of payment there are 

reports of salaried wage earners receiving 

portions of their wage payments in virtual 

currencies such as Bitcoin.

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 experienced success in 

identifying significant and complex money 

laundering schemes and other financial crimes. 

Criminal Investigation 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 CI 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 150 state or local agencies have 

joined FCTFs across the country and have 

detailed over 350 law enforcement officers to 

become Task Force Officers. The Task Force 

Officers are granted the authority to investigate 

money laundering and BSA violations under the 

direction of IRS-CI.

In addition, during Fiscal Year 2013, CI hosted 

three bank forums to help strengthen 

relationships with officials within the financial 

industry. The bank forums provide an 

opportunity for CI and the Anti-Money 

Laundering officials to discuss emerging trends 

of criminal activity.

Examples of money laundering investigations 

adjudicated in FY 2013 include:

Texas Man Sentenced for Role in ‘Black 

Market Peso Exchange’ Scheme: On 

September 11, 2013, in Houston, Texas, Willie 

Whitehurst was sentenced to 151 months in 

prison for his role as one of the leaders of a 

criminal conspiracy that laundered more than 

$20 million through shell business bank 

accounts. In January and February 2013, 

Whitehurst and co-conspirators Enrique 

Morales, Fulton Smith and Anthony Foster 

pleaded guilty to conspiracy to commit money 

laundering and conspiracy to operate an 

unlicensed money transmitting business. 

Another co-conspirator, Sarah Combs, also 

pleaded guilty to conspiracy to operate an 

unlicensed money transmitting business. 

According to court documents, from October 

2009 to September 2011, the defendants placed 

United States currency gained through the sale 

of drugs into bank accounts held in the names of 

the organization’s shell companies. The money 

was then transferred to different accounts in the 

United States and in Mexico. In exchange, 

pesos were transferred back to accounts owned 

by the organization’s clients. Morales was 

previously sentenced to 188 months in prison, 

and Foster received a sentence of 121 months 

in prison. Smith was sentenced to 30 months in 

prison, while Combs was sentenced to 24 

months in prison.

Las Vegas Attorney Sentenced for 

Structuring Bank Deposits and Tax Crimes: 

On August 22, 2013, in Las Vegas, Nev., Paul 

Wommer, an attorney, was sentenced to 41 

months in prison and ordered to pay a $7,500 

fine and to forfeit any proceeds of his crimes. 

Wommer was found guilty in April 2013 following 

a bench trial for making structured bank deposits 
IRS-CI Fiscal Year 2013 Annual Business Report

28

to hide money from the IRS, evading income 

taxes and filing a false tax return. According to 

the court records and evidence introduced at 

trial, between June 30 and July 15, 2010, 

Wommer made or assisted in 15 structured 

deposits totaling $138,700 for the purpose of 

evading bank reporting requirements. These 

deposits were made as part of a pattern of illegal 

activity involving more than $100,000 during a 

12-month time period. During that same time 

period, Wommer willfully attempted to evade 

federal income taxes in the amount of $13,020 

by concealing and attempting to conceal his 

assets, by making false statements to the IRS, 

and by placing funds and property in the names 

of nominees. The judge found that Wommer’s 

testimony at trial was not credible and increased 

his prison sentence for obstruction of justice.

North Carolina Businesswoman Sentenced 

for Participation in a Drug Conspiracy and 

Money Laundering: On July 22, 2013, in New 

Bern, N.C., Cynthia Marquez was sentenced to 

120 months in prison. Marquez pleaded guilty on 

October 24, 2011 to conspiracy to distribute and 

possess with the intent to distribute 5 kilograms 

of cocaine and money laundering. According to 

court documents, Marquez distributed 

approximately 67 kilograms of cocaine from 

2010 through January 18, 2012. Marquez 

laundered drug proceeds through her 

businesses including Joyeria Perez Jewelry 

Incorporated and her real estate business. 

Marquez previously agreed to forfeit over 

$146,000 in United States currency and 18 

pieces of real property.

Arizona Man Sentenced on Drug and Money 

Laundering Charges: On July 8, 2013, in 

Phoenix, Ariz., Nadunt Chibeast was sentenced 

to 120 months in prison. Chibeast was convicted 

in April 2013 of conspiracy to possess with intent 

to distribute more than 1,000 kilograms of 

marijuana and less than 500 grams of cocaine, 

and conspiracy to commit money laundering. 

According to evidence presented at trial, 

Chibeast assisted a drug trafficking organization 

by driving a suspected drug load, assisting with 

marijuana packaging and conspiring to launder 

money. Chibeast allowed the organization to 

direct its drug buyers to deposit money into his 

bank accounts in their home states and then he 

would transfer the money to the drug trafficking 

organization member's bank accounts or 

withdraw cash to physically provide it to other 

members.

President and Vice-President of Car 

Dealership Sentenced for Laundering Money 

for the Gulf Cartel: On May 8, 2013, in 

Orlando, Fla., Joel Torres was sentenced to 40 

months in prison. Torres was found guilty on 

December 3, 2012, for money laundering and 

failing to file IRS Forms 8300, a form required 

for cash purchases over $10,000. According to 

court documents, Torres, the President of JM2 

Auto Sales, Inc., laundered narcotics proceeds 

for the Gulf Cartel, a drug trafficking organization 

based in Mexico. Torres received cash, and then 

sent vehicles back to members of the Cartel in 

Texas. He also sold vehicles to local Cartel 

members. On February 4, 2013, Eladio 

Marroquin-Medina, vice-president of JM2 Auto 

Sales, was sentenced to 72 months in prison for 

conspiracy to possess with the intent to 

distribute 1,000 kilograms or more of marijuana 

and conspiracy to engage in money laundering.

New York Man Sentenced for Money 

Laundering: On April 18, 2013, in Rochester, 

N.Y., Michael Kardonick was sentenced to 120 

months in prison and ordered to pay $2,164,059 

in restitution for conspiracy to commit money 

laundering. According to court documents, 

between January 2004 and July 2008, 

Kardonick defrauded investors who had invested 

approximately $2.5 million in international 

currency trading investments through the 

company Atwood & James S.A. During the 

course of the scheme, Kardonick used the mail 

and wire communications to facilitate the 

execution of the fraud, using the illegally 

obtained investor proceeds to promote the 

scheme, in violation of the federal money 

laundering provisions. 
IRS-CI Fiscal Year 2013 Annual Business Report

29

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

past three fiscal years:

Money Laundering Investigations FY 2013 FY 2012 FY 2011

Investigations Initiated 1596 1663 1726

Prosecution Recommendations 1377 1411 1383

Indictments/Informations 1191 1325 1228

Sentenced 829 803 678

Incarceration Rate 85.4% 84.7% 86.1%

Average Months to Serve 68 64 70

Bank Secrecy Act (BSA) Investigations FY 2013 FY 2012 FY 2011

Investigations Initiated 922 923 795

Prosecution Recommendations 771 683 518

Indictments/Informations 693 575 462

Sentenced 453 342 344

Incarceration Rate 70.6% 76.6% 75.3%

Average Months to Serve 36 40 33

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. CI continues to be a 

partner with other law enforcement agencies in 

fighting narcotics and money laundering 

organization worldwide. 

The Fiscal Year 2013 goal for Direct 

Investigative Time (DIT) in narcotics

investigations ranged between 11-13% of the 

total DIT. CI reached that goal with a final rate of 

11.8% of DIT charged to narcotics 

investigations. In addition, the Fiscal Year 2013 

goal of 90% of all narcotics investigation

dedicated to the Organized Crime Drug 

Enforcement Task Force (OCDETF) program 

was reached with a final 91.5%. 

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 
IRS-CI Fiscal Year 2013 Annual Business Report

30

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. CI has 

played a prominent role in many investigations 

of individuals and organizations believed to be 

involved in or supporting international terrorist 

activities. 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. Criminal 

Investigation took measures to enhance the 

counterterrorism program, translating into 

improved service to the CI field offices, reestablishing working relationships with outside 

agencies and partnering with the IRS civil 

counterparts for case support and development.

Examples of narcotics investigations adjudicated 

in FY 2013 include:

Los Zetas Cartel Members Sentenced for 

Drug Trafficking and Money Laundering: On 

September 6, 2013, in Austin, Texas, Eusevio 

Maldonado Huitron was sentenced to 97 months 

in prison for his role in a complex conspiracy to 

launder millions of dollars in illicit Los Zetas drug 

trafficking proceeds. On May 9, 2013, a jury 

convicted Huitron of one count of conspiracy to 

commit money laundering. On September 5, 

2013, Jose Trevino Morales, Francisco Colorado 

Cessa and Fernando Solis Garcia were 

sentenced for their roles in laundering millions of 

dollars. Morales and Cessa were each 

sentenced to 240 months in prison. Garcia was 

sentenced to 160 months in prison. Morales and 

Cessa were convicted by a federal jury on

May 9, 2013 of one count of conspiracy to

commit money laundering. Evidence presented 

during trial revealed that Los Zetas are a 

powerful drug cartel based in Mexico and 

generate multi-million dollar revenues from drug 

trafficking. Since 2008, Miguel and Oscar 

Trevino Morales would direct portions of the bulk 

cash generated from the sale of illegal narcotics 

to Jose Trevino and his wife, Zulema Trevino, 

for purchasing, training, breeding and racing 

American quarter horses in the United States. 

Testimony also revealed a shell game by the 

defendants involving straw purchasers and 

transactions worth millions of dollars in New 

Mexico, Oklahoma, California and Texas to 

disguise the source of drug money and make 

the proceeds from the sale of quarter horses or 

their race winnings appear legitimate. 

Furthermore, the defendants implemented a 

scheme to structure cash deposits in amounts 

under $10,000 in order to circumvent mandatory 

bank reporting requirements. Over 400 quarter 

horses were seized by federal authorities and 

later auctioned for approximately $9 million. The 

Government also seeks the forfeiture of real 

property, farm and ranch equipment and funds 

contained in multiple bank accounts allegedly 

used in the defendants’ scheme. The 

Government is also seeking a monetary 

judgment in the amount of $60 million 

representing property involved in, and derived 

from, the conspiracy.

Doctor Sentenced for Running a Pill Mill: On 

September 25, 2013, in Philadelphia, Pa., 

Norman M. Werther was sentenced to 300 

months in prison. In June 2013, Werther was 

found guilty of 184 counts of illegally distributing 

oxycodone, 116 counts of money laundering, six 

counts of conspiracy to distribute controlled 

substances, one count of maintaining a druginvolved premises and distribution of a 

controlled substance resulting in death. 

According to court documents, Werther was part 

of a multi-million dollar drug conspiracy involving 

illegal prescriptions, phony patients and multiple 

drug trafficking organizations. At the time, 

Werther was a physician, running a physical 

therapy and rehabilitation practice. He conspired 

with six separate groups of drug dealers who 

recruited large numbers of pseudo-patients. The 

drug conspiracy operated between February 

2009 and August 2011 and resulted in the illegal 

distribution of more than 700,000 pills containing 

oxycodone. At least one of the drug trafficking 

organizations working with Werther trafficked 

pills valued at more than $5 million that Werther 

illegally prescribed.

Last of the Arellano-Felix Brothers 

Sentenced: On August 19, 2013, in San Diego, 

Calif., Eduardo Arellano-Felix, who acted as the 

chief financial officer of the notorious Mexican 

drug cartel that bears his family name, was 

sentenced to 180 months in prison and ordered 

to forfeit $50 million. Arellano-Felix is the last of 

four brothers to be sentenced for leading what 

was once among the world’s most violent and 
IRS-CI Fiscal Year 2013 Annual Business Report

31

powerful multi-national drug trafficking 

organizations. He pleaded guilty in May 2013 to 

money laundering and conspiracy charges. 

According to court documents, the Arellano-Felix 

Organization (AFO) moved hundreds of tons of 

cocaine and marijuana from Mexico and 

Colombia into the United States and made 

hundreds of millions of dollars in the process. 

Arellano-Felix laundered hundreds of millions of 

dollars in drug trafficking proceeds and used 

some of the income to pay AFO members to 

commit crimes; to buy firearms, ammunition and 

vehicles; to travel on AFO-related business; to 

pay bribes; and to purchase drugs.

Kentucky Man Sentenced for Drug and 

Money Laundering Offenses: On May 2, 2013, 

in Lexington, Ky., Marquis Deron Heard was 

sentenced to 360 months in prison for 

distribution of cocaine, possession of a weapon 

by a convicted felon and 29 counts of money 

laundering. According to trial evidence, between 

2008 and 2011, Heard was involved in trafficking 

large quantities of cocaine from a Mexican 

source into Lexington for distribution. Heard had 

distributed at least 45 kilograms of cocaine. In 

addition, Heard reinvested the proceeds of the 

drug transactions into the purchase of multiple 

vehicles and residences in both Lexington and 

Louisville, Ky.

Leader of Street Gang Sentenced on Federal 

Charges: On January 14, 2013, in Los Angeles, 

Calif., Santiago Rios was sentenced to 235 

months in prison. Rios was the lead defendant in 

a federal racketeering indictment that targeted 

the Azusa 13 criminal enterprise. In June 2011, 

a federal grand jury returned a 24-count 

indictment that charged 51 defendants with a 

host of crimes, including conspiracy to violate 

the Racketeer Influenced and Corrupt 

Organizations (RICO) Act. Rios, who was the 

leader of the gang in 2008 and 2009, pleaded 

guilty in May 2012 to conspiracy charges. In 

addition, the indictment alleged a long-running 

conspiracy to distribute narcotics, specifically 

heroin, methamphetamine and cocaine. As part 

of its narcotics operation, the gang extorted 

payments from street-level drug dealers in 

exchange for authorization to conduct business 

in Azusa 13 territory. Rios admitted that the 

Azusa 13 gang controlled the drug trafficking 

activity that occurred within the City of Azusa. 

Members of the Azusa 13 gang would permit 

narcotics traffickers to distribute narcotics in 

exchange for a percentage of any narcotics 

proceeds that were generated in the gang’s 

territory. These payments of drug proceeds –

known as “rent” or “tax” – were funneled to 

members of the Mexican Mafia who exerted 

control over the gang.

Examples of counterterrorism investigations 

adjudicated in FY 2013 include:

HSBC Enters into Deferred Prosecution 

Agreement: On December 11, 2012, HSBC 

Holdings PLC (HSBC Group) and HSBC Bank 

USA N.A. (HSBC Bank USA) agreed to forfeit 

$1.256 billion and enter into a deferred 

prosecution agreement with the Justice 

Department for HSBC’s violations of the Bank 

Secrecy Act (BSA), the International Emergency 

Economic Powers Act (IEEPA) and the Trading 

with the Enemy Act (TWEA). HSBC Bank USA 

violated the BSA by failing to maintain an 

effective anti-money laundering program and to 

conduct appropriate due diligence on its foreign 

correspondent account holders. The HSBC 

Group violated IEEPA and TWEA by illegally 

conducting transactions on behalf of customers 

in Cuba, Iran, Libya, Sudan and Burma – all 

countries that were subject to sanctions 

enforced by the Office of Foreign Assets Control 

(OFAC) at the time of the transactions. In 

addition to forfeiting $1.256 billion, HSBC 

agreed to pay $665 million in civil penalties.

Man Sentenced for False Claim Conspiracy 

and Lying in Federal Investigation

On April 18, 2013, in Orlando, Fla., Jonathan 

Paul Jimenez was sentenced to 120 months in 

prison and ordered to pay $5,587 in restitution to 

the IRS. Jimenez pleaded guilty on August 28, 

2012 to making a false statement to a federal 

agency in a matter involving international 

terrorism and conspiring to defraud the IRS. 

According to court documents, in November 

2010, Jimenez relocated from New York to 

Central Florida, where he began training with 

Marcus Dwayne Robertson in the skills 

necessary to participate in violent jihad 

overseas. In order to have funds available for 

him when he was overseas, Jimenez and others 

conspired to submit a false 2010 tax return for 

Jimenez, in which Jimenez falsely claimed three 

children as his dependents and falsely 

represented that he lived with each of the three 
IRS-CI Fiscal Year 2013 Annual Business Report

32

children for all of the year 2010. As a result of 

those false representations, Jimenez obtained a 

refund from the IRS in the amount of $5,587. 

Frivolous Arguments Working Group

In Fiscal Year 2013, Criminal Investigation 

created a working group to develop 

recommendations on tracking investigations and 

sharing information about potential safety 

concerns against the law enforcement 

community, IRS employees and other 

government officials. Some members of the 

sovereign citizen movement espouse frivolous 

arguments opposing the tax laws, as well as 

other laws. 

Examples of frivolous argument investigations 

adjudicated in FY 2013 include:

Self-Proclaimed Leader of Sovereign Citizen

Group Sentenced for Promoting Tax Fraud 

Scheme: On July 31, 2013, in Montgomery, 

Ala., James Timothy Turner was sentenced to 

216 months in prison and ordered to pay 

$26,021 in restitution to the IRS. In March 2013, 

following a five-day jury trial, Turner was 

convicted of conspiracy to defraud the United 

States, attempting to pay taxes with fictitious 

financial instruments, attempting to obstruct and 

impede the IRS, failing to file a 2009 federal 

income tax return and falsely testifying under 

oath in a bankruptcy proceeding. Based on the 

evidence introduced at trial and in court filings, 

Turner, the self-proclaimed “president” of the 

sovereign citizen group Republic for the united 

States of America (RuSA), traveled the country 

in 2008 and 2009 conducting seminars teaching 

attendees how to defraud the IRS by preparing 

and submitting fictitious bonds to the United 

States government in payment of federal taxes, 

mortgages, and other debt. Turner was 

convicted of sending a $300 million fictitious 

bond in his own name and of aiding and abetting 

others in sending fifteen other fictitious bonds to 

the Treasury Department to pay taxes and other 

debts. Turner taught people how to file 

retaliatory liens against government officials who 

interfered with the processing of fictitious bonds. 

Turner filed a purported $17.6 billion maritime 

lien in Montgomery County, Ala., Probate Court 

against another individual. This investigation 

began after Turner and three other selfproclaimed “Guardian Elders” sent demands to 

all 50 governors in the United States in March 

2010 ordering each governor to resign within 

three days to be replaced by a “sovereign” 

leader or be “removed.” 

‘Sovereign Citizen’ Sentenced for Tax Fraud 

Scheme: On June 14, 2013, in Tacoma, Wash., 

Raymond Leo Jarlik Bell was sentenced to 97 

months in prison and ordered to pay $705,276 in 

restitution. Jarlik Bell was convicted in March 

2013 of five counts of filing false, fictitious and 

fraudulent claims, fifteen counts of assisting in 

filing false tax returns, three counts of mail fraud, 

and one count of criminal contempt. Jarlik Bell 

and his wife, Ute Christine Jarlik Bell, are 

members of the ‘Sovereign Citizen’ movement. 

Members of the Sovereign Citizen movement 

profess a belief that both state and federal 

government entities are illegitimate. According to 

court records, Jarlik Bell's investigation centered 

on the filing of false tax returns using a scheme 

known as OID (Original Issue Discount) fraud. 

Jarlik Bell advised and assisted others in using 

the scheme. In 2006, Jarlik Bell obtained a tax 

refund in excess of $30,000 using the scheme. 

In 2005, the courts ordered Jarlik Bell to stop 

promoting fraudulent tax schemes. Less than 

three years later, he was back promoting 

another massive tax fraud scheme.

Nevada Man Sentenced for Conspiracy and 

Money Laundering Crimes: On March 20, 

2013, in Las Vegas, Nev., Shawn Rice was 

sentenced to 98 months in prison and ordered to 

forfeit $1.29 million in assets and pay $95,782 in 

restitution. Rice, a member of an antigovernment movement known as the “Sovereign 

Movement,” was convicted by a jury in July 2012 

of one count of conspiracy to commit money 

laundering, thirteen counts of money laundering 

and four counts of failure to appear. According 

to court records, from about March 2008 to 

March 2009, Rice and co-defendant Samuel 

Davis laundered approximately $1.3 million of 

monies that they thought were from the theft and 

forgery of stolen official bank checks. Rice and 

Davis laundered the monies through a nominee 

trust account controlled by Davis and through an 

account of a purported religious organization 

controlled by Rice. Davis and Rice took 

approximately $74,000 and $22,000, 

respectively, in fees for their money laundering 

services. Davis pleaded guilty and was 
IRS-CI Fiscal Year 2013 Annual Business Report

33

sentenced in October 2011 to 57 months in 

prison. Davis and Rice are heavily involved in 

the “Sovereign Movement,” whose members 

believe they do not have to pay taxes and 

believe the federal government deceived 

Americans into obtaining social security cards, 

driver’s licenses, car registrations, etc., and that 

if these contracts are revoked; persons are 

“sovereign citizens.” Members of the sovereign 

movement widely use fictitious financial 

instruments such as fraudulent money orders, 

personal checks, and sight drafts, and 

participate in “redemption” schemes where the 

fictitious financial instruments are used to pay 

creditors. Davis is a national leader of the 

movement, traveling nationwide to teach 

different theories and ideologies of the 

movement. Rice allegedly claims that he is a 

lawyer and rabbi, and uses his law school 

education and businesses to promote his 

sovereign ideas and to gain credibility in the 

community.

WARRANTS AND FORFEITURE

Criminal Investigation uses asset forfeiture 

statues to disrupt and dismantle criminal 

enterprises by seizing and forfeiting their assets 

or property used or acquired through illegal 

activities. Criminal Investigation also maintains 

an active fugitive program and 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 2013. 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

652 2514 $465,150,567

Forfeitures

Count of 

Investigations

Count of 

Assets Total Forfeited Value

501 1568 $517,026,852

Examples of investigations involving forfeitures 

during FY 2013 include:

 Ernst & Young - On March 1, 2013, 

Ernst & Young (E&Y) entered into a 

Non-Prosecution Agreement (NPA) 

admitting wrongful conduct related to 

four tax shelters in an effort to defer, 

reduce, or eliminate tax liabilities of 

more than $2 billion. As a result of the 

conduct, E&Y agreed to pay $123 

million to the United States. 

 Abbott Labs - Abbott Labs pleaded 

guilty to a criminal misdemeanor for 

misbranding Depakote in violation of the 

Food, Drug and Cosmetic Act (FDCA). 

Under the plea agreement, Abbott Labs 

agreed to forfeit assets totaling $198.5 

million.

 William Scott – Owner and controller of 

WorldWide Telesports (WWTS), a 

business enterprise involved in the 

business of gambling, betting and 

wagering based in St. John’s Antigua, 

pleaded guilty to international money 
IRS-CI Fiscal Year 2013 Annual Business Report

34

laundering and conspiracy. As part of 

Scott’s plea agreement, Scott agreed to 

the entry of a Consent Order of 

Forfeiture for $6,976,934 plus interest.

 Stanley Tollman - Tollman failed to 

report approximately $35 million dollars 

in income he earned from his 

corporation and funneled the money to 

offshore bank accounts in the Channel 

Islands. Tollman pleaded guilty to and 

agreed to pay restitution to the IRS in 

the amount of $60,381,691 and to $44.7 

million in forfeiture. The total assets 

forfeited during FY 2013 equal 

$36,037,118. 

 Frank LaForgia – LaForgia pleaded 

guilty to money laundering relating to 

the purchase of home heating oil on the 

“Black Market.” LaForgia agreed to 

forfeit $25 million as property involved in 

the money laundering conspiracy. 

During FY 2013, Criminal Investigation 

apprehended eighty-eight (88) fugitives from 

justice. 

 Scott E. Cavell, a fugitive, was arrested 

November 12, 2012. Prior to his arrest, 

Cavell resided in Ireland. Cavell entered 

a not guilty plea, November 13, 2012. 

The indictment charges that Cavell 

allegedly was involved in a mortgage 

fraud scheme.

 Rafael Marmol, a fugitive, was arrested 

March 7, 2013. The criminal complaint 

alleges his involvement in money 

laundering conspiracy.

Also in FY 2013, a jury found former fugitive, 

James Joseph "Whitey" Bulger, Jr., guilty of 

racketeering conspiracy and numerous 

racketeering acts of money laundering, murder, 

extortion, narcotics distribution, and possession 

of firearms including machine guns. Bulger, who 

led the violent Winter Hill Gang, a largely mob, 

that ran loan sharking, gambling and drug 

rackets in the Boston area, was apprehended 

near Los Angeles after spending 16 years on the 

run during an epic manhunt. Bulger was 

subsequently sentenced to two consecutive life 

terms plus five years and ordered to pay $19.5 

million in restitution

NATIONAL FORENSICS LABORATORY

The National Forensic Laboratory (NFL) is a 

federal forensic science laboratory whose 

operations fall under the authority of IRS 

Criminal Investigation. The NFL provides the 

results of forensic testing and technical services 

to special agents in the field for use in the 

investigation of potential criminal violations of 

the Internal Revenue Code and related financial 

crimes. The NFL is made up of seven units, 

including Electronics, Latent Prints, Questioned 

Documents, Ink and Paper Chemistry, 

Polygraph, Imaging, and Evidence Control. The 

laboratory forensically examines evidence and 

offers opinions based on the evidence 

presented. The laboratory will assist in the 

presentation of its findings in any judicial 

proceeding by providing expert testimony. 

In addition to assisting the special agents 

around the country with processing forensic 

evidence to support their investigations, the NFL 

is involved in research and the use of new 

models to secure forensic evidence. One such 

science is the reconstruction methodology of 

documents. As an example, the NFL received 

many identity theft cases, some of which 

included bags of shredded and torn paper 

bearing names and Social Security numbers. 

These cases were submitted to the laboratory to 

have the documents reconstructed. One case 

involved a bag of crosscut shredded documents, 

which involved colored self-adhesive notes. The 

examiner assembled the pieces much the same 

way a jigsaw puzzle is reconstructed. Once a 

small cluster of shred was assembled, the 

pattern into which the note was shredded could 

be predicted and other documents assembled.
IRS-CI Fiscal Year 2013 Annual Business Report

35

TECHNOLOGY OPERATIONS AND INVESTIGATIVE SERVICES

In Fiscal Year 2013, Technology Operations & 

Investigative Services (TOIS) continued to gain 

CI performance efficiencies through the use of 

new and improved technology, development of 

software applications, and by providing 

upgraded IT infrastructures. TOIS employees 

also insured that CI’s legacy information 

technology systems and new applications were 

secure from intrusion, attack and data loss. 

Significant accomplishments during Fiscal Year 

2013 included completing an enterprise wide 

Win-7 operating system upgrade and increasing 

mobile field communications through the 

issuance of smart phones to the vast majority of 

special agents. The phone upgrade is expected 

to be completed in Fiscal Year 2014, at which 

point all of CI’s special agents will be issued 

smart mobile communication devices as part of 

their standard equipment model.

TOIS business system development section 

initiated several new projects to improve CI’s 

data analytics and evidence processing 

capabilities during Fiscal Year 2013. TOIS is 

currently comparing a number of different “big 

data” analytic systems that will dramatically 

improve CI’s case development capabilities 

beginning with an identity theft case project 

during the 2014 filing season. A new digital 

evidence management program (ATLAS) was 

started in Fiscal Year 2013 and is expected to 

significantly improve special agent productivity 

through automated evidence organization and 

report writing applications. Once fully 

implemented, ATLAS will also provide identity 

de-confliction of subjects, witnesses and third 

parties documented during each agent’s 

investigative activities with all other CI case files. 

The value of ATLAS’ identity de-confliction 

capabilities was proven in Fiscal Year 2013 

when a limited roll out of the program was used 

to determine relationships between identity theft 

subject, victim and witness records to build 

larger and more significant cases. This project 

supplemented TOIS traditional Data Center 

efforts, which processed over 470,000 identity 

theft related documents during Fiscal Year 2013. 

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. In Fiscal Year 2013, the amount of 

seized electronically stored information/data for 

investigations doubled from the prior year to 

almost 1,700 terabytes. 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 for judicial 

proceedings. Special agents are also trained in 

the use of mobile forensics hardware and 

software.

In Fiscal Year 2013, CI established a Cyber 

Crime Unit (CCU) pilot that will allow CI to 

proactively identify and pursue tax, money 

laundering, identity theft and other financial 

crimes in the virtual world. The CCU will also be 

available to provide expertise to all field offices 

in strategic and tactical planning of cyber 

investigations to increase prosecution potential.

Electronic Crimes Enforcement Statistics FY13 Totals

Total Operations/Search Warrants 582

Total Sites 1018

Total CISs Deployed 1106

Total Systems Encountered 4979

Total Volume of Data (Terabytes) Seized 1699.068