IRS-CI Fiscal Year 2014 Annual Business Report

Table of Contents:

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

Investigative Priorities .................................................................................... 3

Business Results .......................................................................................... 3

Staffing ........................................................................................................ 4

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

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

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

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

Refund Fraud ..................................................................................... 9

 Identity Theft .................................................................................... 9

 Return Preparer Program ................................................................... 12

 Questionable Refund Program ............................................................. 13

Abusive Tax Schemes .......................................................................... 15

Non-filer Investigations ......................................................................... 16

Employment Tax ................................................................................. 17

Illegal Source Financial Crimes ......................................................................... 18

Financial Institution Fraud ..................................................................... 19

Public Corruption ................................................................................ 20

Corporate Fraud ................................................................................. 21

Gaming ............................................................................................. 22

Insurance and Healthcare Fraud ............................................................ 24

Bankruptcy Fraud ............................................................................... 26

International Operations .................................................................................. 27

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

Money Laundering & Bank Secrecy Act .............................................................. 32

Warrants and Forfeiture .................................................................................. 38

National Forensic Laboratory ............................................................................ 39

Technology Operations & Investigative Services ................................................... 39
IRS-CI Fiscal Year 2014 Annual Business Report

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Chief’s Message – Richard Weber

I continue to be in awe of the men and women who 

work in IRS CI. Fiscal Year 2014 brought about 

unprecedented challenges and yet it also brought 

about unprecedented successes. The pride that is 

evident in the work that we do every day is apparent 

to leadership throughout the organization. We faced 

budget challenges and hiring freezes and yet we 

remained focused on finding and investigating great 

cases that made a real difference in compliance of 

our nation’s tax laws and deterring would be 

criminals around the world in our fight against 

financial crime. I have never been more proud to 

lead an organization of dedicated employees. Our 

special agents and professional staff continue to be 

the model by which other law enforcement agencies 

should be judged.

There is no doubt that we have had to be creative to overcome some of the budget challenges this year. 

But in so doing, we maintained a steady focus on what is important. Our highest priority is to enforce our 

country’s tax laws and support tax administration to ensure compliance with the law and combat fraud. 

This annual report includes case summaries that represent the diversity and complexity of those 

investigations such as tax-related identity theft, money laundering, public corruption and terrorist

financing. Our cases touched almost every part of the world. They had a significant impact on tax 

administration and were some of the most successful in the history of CI. Some of the biggest stories of 

the year included Credit Suisse, Bank Leumi, BNP Paribas, Liberty Reserve, Silk Road and Gerald 

Poynter. In the largest criminal tax case ever filed, Credit Suisse pleaded guilty to conspiracy to aid and 

assist U.S. taxpayers in filing false income tax returns and agreed to pay a total of $2.6 billion. Following 

the Credit Suisse investigation, IRS-CI led the case against Bank Leumi Group, a major Israeli 

international bank that admitted conspiring to aid and assist U.S. taxpayers to prepare and present false 

tax returns. This unprecedented agreement marks the first time an Israeli bank has admitted to such 

criminal conduct. Bank Leumi Group will pay the U.S. a total of $270 million and cease to provide 

banking and investment services for all accounts held or beneficially owned by U.S. taxpayers. 

BNP Paribas was the largest prosecution ever brought against a financial institution and one of the most 

significant criminal prosecutions of sanction evasion in U.S. history. Using our unique investigative skills, 

IRS-CI worked hard to protect the integrity of our financial system. Liberty Reserve, one of the World's 

largest digital currency companies, and seven of its principals and employees were indicted for allegedly 

running a $6 billion money laundering scheme. Ross William Ulbricht, creator and owner of "Silk Road" 

website was indicted on charges of engaging in a continuing criminal enterprise, money laundering and 

other federal charges. Silk Road was used by more than 100,000 users to buy and sell illegal drugs and 

other unlawful goods and services. IRS-CI also worked significant tax investigations which are document 

in this annual report. For example, Gerald A. Poynter was sentenced to 156 months in prison and 

ordered to pay $951,930 in restitution for filing fraudulent tax returns and attempting to receive nearly 

$100 million in fraudulent refunds from the IRS. Paul M. Daugerdas was sentenced to 180 months in 

prison, ordered to pay restitution to the IRS of $371,006,397 and ordered to forfeit $164,737,500 in 

proceeds for conspiring to defraud the IRS, to evade taxes, commit mail and wire fraud, and corruptly 

endeavoring to obstruct and impede the internal revenue laws. The 20-year scheme generated over $7 

billion of fraudulent tax losses and yielded approximately $95 million in fees to Daugerdas personally.

We also continued to make tremendous headway with some of the most significant identity theft cases to 

date. Mauricio Warner was sentenced to 240 months in prison and ordered to pay $5 million in restitution 

after he was convicted of wire fraud, aggravated identity theft, filing false claims, and money laundering. 

Ogiesoba Osula was sentenced to 210 months in prison and ordered to pay $15.9 million in restitution 
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after he was convicted for various fraud schemes including aggravated identity theft. And Arthur 

Grigorian, Ernest Soloian and Hovhannes Harutyunyan and 51 other defendants were indicted for theft of 

over 2000 identities and refund claims of over $20 million dollars.

The budget challenges facing our agency are nothing new. In the past five years, CI’s staff has been 

reduced approximately 11 percent bringing staffing to 1970’s levels. This trend cannot continue. I’m proud 

of this agency and the reputation that we have earned as the best financial investigators in the world. 

Looking ahead to Fiscal Year 2015, we will continue to build an agency that has the tools and expertise to 

enforce our nation’s tax laws. We will not lose sight of taking care of our people and will continue to push 

initiatives with that in mind to include developing leadership candidates, improving employee satisfaction 

and engagement, investing in technology, and improving communication and transparency. 
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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 2014 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

FY14 Business Results:

FY 2014 FY 2013 FY 2012

Investigations Initiated 4297 5314 5125

Prosecution Recommendations 3478 4364 3701

Informations/Indictments 3272 3865 3390

Convictions 3110 3311 2634

Sentenced* 3268 2812 2466

Percent to Prison 79.6% 80.1% 81.5%

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

acquittals, and dismissals. The conviction rate for FY 2014 is 93.4%, .03% more than the FY 

2013 rate (93.1%).

*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.
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Staffing

 As of September 30, 2014, IRS-CI had 2,465 Special Agents on board, a 3% decrease compared 

to the number of special agents at the conclusion of FY 2013.

 Professional Staff personnel on board were 1,029, reflecting a decrease of 5.0% for FY 2013. 
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IRS-CI Fiscal Year 2014 Annual Business Report

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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 supports

the overall IRS compliance goals and enhances

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 have 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, self-employed 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 2014 include:

Pennsylvania Man Sentenced for Role in 

Advance Fee Scheme: On Mar. 27, 2014, in 

Philadelphia, Pennsylvania, Andrew Bogdanoff 

was sentenced to 220 months in prison and 

ordered to pay $27,012,713 in restitution. 

Bogdanoff pleaded guilty on Aug. 29, 2013 to 

conspiracy to commit mail and wire fraud, mail 

fraud, wire fraud, money laundering, conspiracy 

to defraud the United States, and filing false tax 

returns. According to court documents, 

Bogdanoff was the founder and chairman of 

Remington Financial Group. Between 2005 and 

2011, Bogdanoff and others fraudulently induced 

hundreds of people to pay Remington fees in 

excess of $10,000 a piece, based on false 

representations that Remington had lenders 

and/or investors ready to provide financing for 

the victims’ projects. To facilitate this fraud, the 

defendants issued each victim a “letter of 

interest,” commonly referred to as an LOI. 

Almost every LOI Remington issues stated that 

Remington had a lender or investor interested in 

financing the victim’s project. Remington issued 

an LOI to every victim even though no 

Remington employee had spoken to any funding 

source and Remington knew that it was unlikely 

to find funding for the project. The scheme 

defrauded more than 800 victims out of more 

than $10 million.

Virginia Man Sentenced for Massive Tax 

Fraud: On Sept. 23, 2014, in Richmond, 

Virginia, Billy Gene Jefferson, Jr. was sentenced 

to 240 months in prison. On Dec. 19, 2013, 

Jefferson pleaded guilty to orchestrating a 

multimillion dollar rehabilitation tax credit 

scheme. According to court records, between 

2009 and 2012 Jefferson applied for and 

received millions in state and federal historic tax 

credits for the rehabilitation of a former tobacco 

 

1

Investigation summaries are written from public 

court documents
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manufacturing plant followed by the 

rehabilitation of ten historic buildings. Jefferson 

then sold many of those tax credits to corporate 

investors. However, Jefferson grossly inflated 

the rehabilitation costs on the properties at 

issue, and as a result, he fraudulently obtained 

millions in state and federal tax credits. The loss 

in federal tax credits was $5,754,616, and the 

loss in state credits was $7,193,270, for a 

combined total of approximately $12,947,886. 

After Jefferson pleaded guilty, he was released 

on bond, allowing him to gather funds to repay 

his victims before sentencing. However, 

Jefferson stole and spent funds that could have 

been used to repay his victims, including 

orchestrating hundreds of covert transactions 

designed to spend and conceal over $7 million.

Former South Carolina Pastor Sentenced: On 

July 9, 2014, in Florence, South Carolina, Archie 

Larue Evans was sentenced 84 months in prison 

and ordered to pay $3,763,339 in restitution for 

mail fraud, conspiracy to structure transactions 

with a financial institution and money laundering. 

Evidence presented at the sentencing hearing 

established that Evans was the pastor of a 

church located in Conway, South Carolina and 

also owned Gold & Silver, LLC. Beginning in 

2004, members of the church congregation and 

others entered into investment contracts with 

Evans and Gold & Silver, LLC, which 

guaranteed the investors higher interest 

payments than the rate being paid by financial 

institutions. From January 2009 to October 

2011, Evans was involved in a Ponzi scheme 

and hid the fact that he had lost or spent the 

money invested with him by paying investors 

what he claimed to be their earned interest 

payments using funds he received from new 

investors. Evans continued to collect money 

from investors and caused losses of more than 

$2,500,000. From May 2010 until October 2011, 

Evans was also involved in a conspiracy with 

others to structure currency deposits with two 

banks so that Evans’ conspirators’ income would 

not be reported.

Six Defendants Sentenced for Prepaid 

Funeral Scheme: On November 14, 2013, in St. 

Louis, Missouri, six defendants were sentenced 

on more than 40 counts of fraud, money 

laundering, and related crimes. 

• James Douglas Cassity was sentenced to 115 

months in prison.

• David Wulf was sentenced to 120 months in 

prison.

• Randall K. Sutton was sentenced to 84 months 

in prison

• Brent Douglas Cassity was sentenced to 60 

months in prison

• Howard A. Wittner was sentenced to 36 

months in prison

• Sharon Nekol Province was sentenced to 18 

months in prison

According to court documents, these 

defendants, acting through National 

Prearranged Services, Inc. and Lincoln 

Memorial Life Insurance Company, had 

defrauded more than 97,000 customers in more 

than 16 states, hundreds of funeral homes, and 

multiple financial institutions, causing more than 

$450 million in losses. Beginning as early as 

1992 and continuing until 2008, NPS sold 

prearranged funeral contracts in several states, 

including Missouri, Illinois, and Ohio. During that 

time, insurance companies affiliated with NPS 

issued life insurance policies related to those 

prearranged funeral contacts. As part of the 

contracts, the total price for funeral services and 

merchandise for an individual was agreed upon, 

and that price would remain constant regardless 

of when the funeral services and merchandise 

would be needed. Customers entering into 

prearranged funeral contracts would usually pay 

a single sum of money up-front to NPS either 

directly or through a funeral home that was also 

a party to the contract. NPS represented to 

individual customers, funeral homes, and state 

regulators that funds paid by customers under 

the prearranged funeral contracts would be kept 

in a secure trust or insurance policy as required 

under state law. Court documents disclose, 

however, that NPS made use of funds paid by 

customers in ways that were inconsistent both 

with its prior and continuing representations and 

with the applicable state laws and regulations. 

Instead, NPS operated as a fraudulent Ponzilike scheme, where customer funds were neither 

kept safe in bank trusts or insurance policies but 

instead were utilized for unauthorized purposes 

and the personal enrichment of NPS’s officers 

and others. In turn, new business became the 

source of funding for funerals that prior 

customers had previously paid for in advance. 

Victims of the scheme include individual 

customers, funeral homes and state insurance 

guarantee associations across the country.
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Bank Employee Sentenced for Embezzling 

from Senior Citizens’ Accounts: On May 8, 

2014 in, Dayton, Ohio, Diane Elizabeth Niehaus, 

of Sugarcreek Township, was sentenced to 60 

months in prison. Niehaus pleaded guilty on 

Sept. 19, 2013, to embezzlement, money 

laundering and filing a false income tax return. 

According to court documents, Niehaus 

managed the Union Savings Bank branch in 

Centerville between 2007 and 2010. Using her 

position with the bank, she methodically targeted 

and stole hundreds of thousands of dollars from 

her elderly customers. To prevent detection of 

her embezzlement, she used a host of deceptive 

tactics including creating fictitious gift letters and 

fraudulent powers of attorney, and engaging in 

complicated and layered financial transactions to 

conceal her theft. Niehaus frequently converted 

the money into cashiers’ checks or official 

checks that she then negotiated, or caused to be 

negotiated. Niehaus illegally earned thousands 

of dollars through this embezzlement scheme, 

and she failed to report this fraudulentlyobtained income on her federal income tax 

returns.

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 2014, CI remained committed to

investigating egregious identity theft schemes

through administrative and grand jury

investigations and through field office and multiregional 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 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.

Data Breaches: Data breaches have 

impacted all sectors of society. During FY-14 

CI experienced an increase in Tax Related 

Identity theft linked to compromised personal 

identifying information acquired via data 

breaches. At least ten Field Offices initiated 

investigations linked to data breaches 

impacting tax administration. CI increased 

efforts within the IRS, Law Enforcement 

Community, and Private Sector, to acquire 

information regarding compromised data that 

can impact tax administration for use in 

identifying and preventing false claims for 

refunds utilizing the stolen data. Additionally 

CI also participated in a cross-functional 

working group within IRS to develop new 

analytical filters as well as enhanced victim 

assistance. 

Identity Theft Clearinghouse (ITC): The ITC 

continues to develop and refer identity theft 

refund fraud schemes to CI field offices for 

investigation. The ITC serves as a centralized 

focal point to address incoming ID Theft leads 

from throughout the Country. The ITC’s primary

responsibilities are analyzing identity theft 

leads and facilitate discussions between field 

offices with multi-jurisdictional issues.

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
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of those victims. During FY-14 over five 

hundred State and Local Law Enforcement 

Agencies participated in this Program.

Identity Theft Training: Throughout FY14, CI 

hosted or participated in several 

training/outreach events. These included 

efforts addressing victim assistance, tax related 

ID Theft training for law enforcement officers, 

training IRS personnel on current ID Theft 

trends impacting tax administration and with 

private sector entities involved with return 

preparation and various financial products used 

to deliver tax refunds.

Proactive Prevention: CI continues to 

receive information from private and public 

sector sources involving compromised 

personal identifying information. This

information is shared with W&I which allows

IRS to analyze and make necessary

adjustments to accounts of taxpayers that are

likely victims of identity theft. Additionally, CI 

collaborates with cross functional partners in 

the development and implementation of 

analytical filters designed to identify fraudulent 

claims at filing and prevent further victimization 

of impacted individuals.

Examples of identity theft investigations 

adjudicated in FY 2014 include:

Defendant Sentenced in $14 Million Identity 

Theft Tax Refund Fraud Scheme: On Oct. 25, 

2013, in Miami, Florida, Serge St-Vil was 

sentenced to 96 months in prison and ordered to 

forfeit $7 million. St-Vil previously pleaded guilty 

to wire fraud and aggravated identity theft. 

According to court documents, in 2010, St-Vil, 

Muller Pierre and Finshley Fanor were involved 

in a scheme to file fraudulent and unauthorized 

tax returns seeking refunds. During the course 

of the scheme, there were over 5,000 fraudulent 

returns submitted to the IRS seeking over $14 

million in refunds. Nearly all of these returns 

were submitted in the names of deceased 

persons. St-Vil was responsible for the filing of 

thousands of these returns using an Electronic 

Filing Identification Number obtained by Fanor. 

On June 26, 2013, Muller Pierre, of North Miami 

Beach, was sentenced to 57 months in prison. 

On May 22, 2013, Finshley Fanor, of Lauderhill, 

was sentenced to two years of probation.

Bogus Charity Operator Sentenced for ID 

Theft and Wire Fraud Scheme: On June 12, 

2014, in Columbus, Ohio, Jonathan Webster 

was sentenced to 132 months in prison and 

ordered to pay $1,457,936 in restitution. 

Webster previously pleaded guilty to wire fraud 

and aggravated identity theft. According to court 

documents, between January 2010 and 

February 2013, Jonathan Webster devised a 

scheme to defraud the IRS by filing false income 

tax returns using the names and social security 

numbers of individuals without their knowledge 

or consent. As part of this scheme, Webster 

purchased advertising in newspapers in which 

he represented himself as a charity seeking to 

provide financial assistance to others. Webster 

set up an online website where individuals 

responding to the advertisements could provide 

their names and social security numbers. 

Webster and a co-conspirator electronically filed 

more than 500 false income tax returns using 

the names and social security numbers of the 

individuals. The tax returns contained fabricated 

information as it related to the taxpayer, 

including occupations, income amounts and 

expenses.

Georgia Man Sentenced for Tax Fraud and 

Identity Theft: On Aug. 25, 2014, in Atlanta, 

Georgia, Mauricio Warner, of Smyrna was 

sentenced to 240 months and ordered to pay 

$5,041,869 in restitution. The Court also ordered 

the forfeiture of bank accounts controlled by 

Warner that contain $4,185,455. On April 18, 

2014, Warner was convicted of 16 counts of wire 

fraud, 16 counts of aggravated identity theft, 16 

counts of filing false claims and two counts of 

money laundering. According to court 

documents, Warner filed over 5,000 false tax 

returns using the names and social security 

numbers of unsuspecting victims. Victims were 

told they could submit an application for an 

“Obama stimulus payment” or “Free 

Government Money” by providing their names 

and social security numbers. In addition to wordof-mouth marketing, Warner used toll-free 

telephone numbers to collect victims’ personal 

identifying information. He then used the victims’ 

information to claim millions of dollars in 

fraudulent refunds. On the returns, Warner 

claimed false income amounts and student 

credits to generate the bogus tax refunds, and 

directed the IRS to pay the refund amounts to 
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bank accounts he controlled. The victims did not 

know tax returns were being filed in their names.

Leader of Large-Scale Identity Theft Ring 

Sentenced for Role in Fraud Enterprise 

On Feb. 11, 2014, in Newark, New Jersey, 

Sang-Hyun Park, of Palisades Park, was 

sentenced to 144 months in prison and ordered 

to pay $4,774,116 in restitution. He will also be 

deported upon his release from prison. Park 

previously pleaded guilty to conspiracy to 

unlawfully produce identification documents and 

false identification documents, conspiracy to 

commit wire fraud, aggravated identity theft, 

money laundering and conspiracy to defraud the 

IRS. According to court documents, Park was 

the leader of a criminal organization (the “Park 

Criminal Enterprise”) headquartered in Bergen 

County, New Jersey, that obtained, brokered, 

and sold identity documents to customers for the 

purpose of committing credit card fraud, bank 

fraud and tax fraud. As part of the scheme, the 

Park Criminal Enterprise obtained social security 

cards beginning with the prefix “586” which were 

issued by the United States to individuals, 

usually from China, employed in American 

territories. The Park Criminal Enterprise sold the 

cards to its customers and then took steps assist 

these customers to obtain fraudulent 

identification cards and driver’s licenses, build 

fraudulent credit scores and open bank accounts 

and credit cards. Park relied on several collusive 

merchants who possessed credit card 

processing machines and who would, for a fee, 

charge the fraudulently obtained credit cards, 

although no transaction took place. After 

receiving the money into their merchant 

accounts from the credit card related to these 

fraudulent transactions, the collusive merchants 

gave the money to Park and his conspirators. 

Park laundered portions of the money he 

obtained through the fraud by wiring the money 

to various accounts in South Korea. Park 

defrauded various credit card companies, banks, 

and lenders out of $4 million. He and his 

conspirators also claimed more than $182,000 in 

tax refunds from the IRS through the filing of 

false and fictitious tax returns and 

accompanying documents.

Ohio Man Sentenced for Participation in $3.5 

Million Identity Theft Scam: On Aug. 21, 2014, 

in Columbus, Ohio, Roma L. Sims, of 

Westerville, was sentenced to 100 months in 

prison and ordered to pay $3,517,534 in 

restitution to the IRS. On Sept. 27, 2013, Sims 

pleaded guilty to aggravated identity theft, wire 

fraud and conspiring to commit identity theft in a 

scheme to defraud the IRS. According to court 

documents, between 2009 and January 2013, 

Sims advertised through various means in order 

to collect personal identification information from 

low-income or unemployed single parents with 

children. After tricking the innocent individuals 

who responded into providing their personal 

identification information, Sims prepared and 

filed false income tax returns in their names. 

Between December 2011 and January 2013, 

Sims obtained additional personal identification 

information by conspiring with Robert Earthman, 

who was employed by a vendor for the 

Commonwealth of Kentucky. Earthman, through 

his employer, had access to the Kentucky child 

support enforcement database, which contained 

personal identification information of single 

parents with children who were recipients of 

child support. Earthman stole the information 

and provided it to Sims and Samantha Towns. 

Sims used this stolen information to prepare and 

file fraudulent income tax returns as well. In 

total, Sims was responsible for the preparation 

and filing of approximately 977 income tax 

returns for the 2010, 2011 and 2012 tax years. 

Samantha C. Towns was sentenced on October 

24, 2013 to three years of probation and ordered 

to pay $1,312,513 in restitution to the IRS. 

Robert S. Earthman was sentenced on June 19, 

2014 to 24 months in prison and was ordered to 

pay $1,312,513 in restitution to the IRS.

Defendant Sentenced in $19 Million Tax 

Fraud Conspiracy: On Sept. 26, 2014, in 

Anchorage, Alaska, Maximo Amparo-Vazquez, 

aka Japhet Soto Santiago, aka Luis Angel 

Cortez, a citizen of the Dominican Republic 

formerly residing in Alaska, was sentenced to 84 

months in prison and ordered to pay $559,755 in 

restitution to the IRS. Amparo-Vazquez pleaded 

guilty on July 2, 2014, to conspiring to defraud 

the government with respect to claims. 

According to court documents, from January 

2010 to March 2012, Amparo-Vazquez 

conspired with others to use stolen identities to 

file income tax returns for the purpose of 

obtaining fraudulent income tax refunds. The 

conspirators in the income tax fraud scheme 

obtained the stolen identities of more than 2,600 

individuals, including people’s names and social 
IRS-CI Fiscal Year 2014 Annual Business Report

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security numbers. Most of these stolen identities 

were from citizens of Puerto Rico. The 

conspirators used stolen social security numbers 

from citizens of Puerto Rico who are not typically 

required by law to file individual tax returns.

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

FY 2014 FY 2013 FY 2012

Investigations Initiated 1063 1492 898

Prosecution Recommendations 970 1257 544

Indictments/Informations 896 1050 494

Sentenced 748 438 223

Incarceration Rate 87.7% 80.6% 89.2%

Average Months to Serve 43 38 48

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 2014 include:

New York Tax Preparer Sentenced for Tax 

Fraud Scheme Involving Over $7 Million in 

Bogus Deductions: On June 30, 2014, in 

Manhattan, New York, Mark Goldberg, of the 

Bronx, was sentenced to 57 months in prison 

and ordered to pay restitution of $2,597,419 and 

forfeit $500,000. In August 2013, Goldberg 

pleaded guilty to participating in a scheme to file 

fraudulent tax returns on behalf of thousands of 

clients, falsely claiming more than $7 million in 

bogus deductions. According to court 

documents, Goldberg ran a tax preparation and 

multi-service business named E&M MultiServices, Inc. (“E&M”) out of a storefront 

building in the Bronx. Through that business, he 

prepared, and oversaw the preparation of, 

thousands of federal and New York State tax 

returns that claimed false deductions, expenses, 

and credits. Between 2005 and 2012, Goldberg 

caused the preparation and filing of tax returns 

for his clients that included fabricated and 

fraudulently-inflated deductions. Goldberg also 

failed to report any of the income derived from 

his tax preparation activities, and further 

submitted fraudulent personal returns claiming 

bogus refunds and tax credits.

Former Accountant Sentenced for Tax Fraud: 

On Dec. 11, 2013, in Washington, District of 

Columbia, John T. Hoang, of Woodbridge, 

Virginia, was sentenced to 48 months in prison 

and ordered to pay $331,896 in restitution to the 

IRS. Hoang pleaded guilty on July 31, 2013, to 

willfully aiding and assisting in the preparation of 

false income tax returns for the 2004 tax year. 

According to court documents, Hoang was a 

certified public accountant (CPA) and an 

attorney. From January 2005 through April 2007, 

Hoang operated John T. Hoang CPA, a tax 

return preparation business, and was one of two 

partners who owned Tax-Smart Technology 

Services. In 2008, a federal district court in 

Virginia barred Hoang from preparing federal tax 

returns. For the tax years 2004, 2005 and 2006, 

Hoang prepared hundreds of U.S. Individual 

Income Tax Returns and earned substantial 

income from his tax preparation activities. 

Hoang received a substantial portion of the 

refunds issued by the IRS to his clients through 

his businesses. Hoang prepared and caused the 

preparation of false and fraudulent returns for 

his clients. When preparing these false tax 

returns and related schedules for his clients, 

Hoang created wholly fictitious business income 

and expenses for what seemed to be a 

technology licensing business. The false 

information resulted in the client reporting fake 

losses from business activity and receiving 

either refunds larger than those they were 

entitled or decreases in the amount of taxes 
IRS-CI Fiscal Year 2014 Annual Business Report

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due. Hoang admitted that the tax loss caused by 

certain false returns he prepared was greater 

than $30,000 per return, and that he prepared at 

least 24 such false returns for the 2004 through 

2006 tax years. Hoang admitted that the total tax 

loss caused by his criminal conduct was greater 

than $1.5 million. Furthermore, despite earning 

revenue through his businesses of 

approximately $6 million in 2004, 2005 and 

2006, Hoang failed to file any federal income tax 

returns or pay any federal income taxes for 

himself or his businesses.

Arizona Tax Return Preparer Sentenced for 

Filing False Tax Returns: On Sept. 10, 2014, 

in Phoenix, Arizona, Haydee Guerra Neff, of 

Casa Grande, was sentenced to 18 months in 

prison and ordered to pay $435,280 in 

restitution. On June 10, 2014, Neff pleaded 

guilty to two counts of filing false, fictitious and 

fraudulent claims. According to court 

documents, Neff was a tax return preparer and 

filed false income tax returns with the IRS for the 

tax years 2010 and 2011. Neff prepared correct 

or substantially correct returns using the 

information provided by each client and later 

changed the return without the client's 

knowledge or consent. The client was then 

provided with the correct or substantially correct 

tax return, but Neff would file with the IRS the 

false tax returns which contained false expenses 

and requested inflated refunds.

Pennsylvania Tax Preparer Sentenced for 

Running Tax Fraud Scheme: On Aug. 7, 2014, 

in Philadelphia, Pennsylvania, Adekunle 

Adetayo Adeolu, aka “Archie,” of Maryland, was 

sentenced to 56 months in prison and ordered to 

pay $135,519 in restitution. Adeolu was 

previously found guilty of conspiracy and aiding 

and abetting the preparation of materially false 

tax returns. According to court documents, 

Adeolu partly owned, managed, and operated 

Adeolu & Okojie, Inc., a tax service business 

located in Philadelphia. He employed 

approximately 14 people, including Olugboyega 

Fisher, a/k/a "Remi,” who worked as a tax 

preparer. Between 2005 and 2008, when a client 

owed federal taxes, Adeolu and Fisher would 

sell that person the name and social security 

number of an individual in order to claim that 

person as a dependent and/or falsely claiming 

on their clients’ behalf an earned income tax 

credit, a child tax credit, and an additional tax 

credit. Adeolu willfully aided and assisted in the 

preparation of U.S. Individual Income Tax 

Returns that were fraudulent in that they 

represented that the taxpayers were entitled to 

claim dependents and tax credits that the 

defendant knew the taxpayers were not entitled 

to claim. On March 10, 2014, Fisher was 

sentenced to four years of probation and 

ordered to pay $9,605 in restitution.

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

FY 2014 FY 2013 FY 2012

Investigations Initiated 305 309 443

Prosecution Recommendations 261 281 276

Indictments/Informations 230 233 202

Convictions 193 207 178

Sentenced 183 186 172

Incarceration Rate 86.3% 78.0% 84.3%

Average Months to Serve 28 27 29

Questionable Refund Program:

The primary focus of this program is to identify 

fraudulent claims for tax refunds. Generally, 

these schemes involve individuals filing multiple 

false 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 2014 include:

Missouri Man Sentenced for Leading $100 

Million Nationwide Tax Fraud Conspiracy: On 

March 13, 2014, in Kansas City, Missouri, 

Gerald A. Poynter was sentenced to 156 months 

in prison and ordered to pay $951,930 in 
IRS-CI Fiscal Year 2014 Annual Business Report

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restitution. On Nov. 7, 2013, Poynter pleaded 

guilty to conspiracy to defraud the United States

by filing fraudulent tax returns and filing a 

fraudulent tax return. According to court 

documents, Poynter led a tax fraud conspiracy 

that attempted to receive nearly $100 million in 

fraudulent refunds from the IRS. From July 1, 

2008 to Sept. 21, 2011, conspirators prepared 

and filed 284 fraudulent tax returns. Each of the 

returns contained false claims that the taxpayer 

listed was due a refund due to over-withholding 

of taxes, based on fictitious forms 1099-OID. In 

actuality, Poynter’s clients had not received 

interest income from the banks and lenders 

listed on their Forms 1099, nor had any money 

been over-withheld. Conspirators claimed that a 

total of $96 million dollars in fraudulent tax 

refunds were due. In an attempt to mask his 

involvement, Poynter requested that 

conspirators refer to his fees as “love 

donations,” frequently directing them to write 

checks to “Jerry Love Ministries.” Poynter 

personally was responsible for recruiting at least 

44 filers to the scheme. Poynter submitted at 

least $25 million in fraudulent claims on 81 

returns filed for his clients. Poynter conducted a 

training seminar in December 2008 and told 

attendees they should use a rented office rather 

than process the OID returns at home to avoid 

their homes being raided by the FBI. He 

provided pointers on how to avoid attracting 

attention from IRS criminal investigators. In 

addition to this training session, Poynter 

conducted and participated in numerous other 

seminars and conference calls around the 

country to promote his OID process. Poynter 

also maintained a Web site called “luckytown” 

that was used to promote the scheme.

Indiana Woman Sentenced for Filing False 

Tax Returns: On May 31, 2014, in South Bend, 

Indiana, Gigi Riley was sentenced to 51 months 

in prison and ordered to pay $2,572,350 in 

restitution. Riley previously pleaded guilty to 

conspiracy to defraud the government with 

respect to filing of false, fictitious, and fraudulent 

claims. According to court documents, Riley led 

and participated with others in a false tax return 

preparation and filing scheme in South Bend. 

She prepared and submitted Forms 1040 with 

false or inflated Forms W-2 to receive false tax 

refunds. Approximately 1,189 tax returns were 

submitted for tax years 2008, 2009, and 2010 

requesting a total of approximately $3,543,794 

in tax refunds. Riley owned and maintained two 

bank accounts that received tax refunds. She 

also oversaw and controlled bank accounts 

opened by others that received tax refunds from 

the false tax returns.

Husband and Wife Sentenced for Tax Fraud 

Conspiracy: On July 25, 2014, in Seattle, 

Washington, Debra A. Aaron and Samuel A. 

Aaron, a married couple from Whidbey Island, 

were sentenced for conspiracy to defraud the 

government and making false or fraudulent 

claims. Debra Aaron was sentenced to 60 

months in prison and Samuel Aaron was 

sentenced to 30 months in prison. Both were 

ordered to pay $723,275 in restitution. According 

to court documents, in 2008 the Aarons 

promoted a well-known fraudulent tax scheme 

known as the 1099 OID fraud. Using the 

scheme, the couple claimed they were owed a 

tax refund of $723,275. Debra Aaron filed similar 

bogus claims on behalf of 30 other people for 

more than $14 million. The Aarons used a shell 

company to launder the proceeds of the scheme 

and claimed some of the money was used to 

help impoverished women in third world 

countries. In fact they used the money for a 

home remodel, lavish outings to Las Vegas and 

other luxuries.

Mississippi Woman Sentenced for Filing 

False Tax Returns: On Sept. 25, 2014, in 

Hattiesburg, Mississippi, Rebecca Sue 

Carpenter was sentenced to 82 months in prison 

and ordered to pay $809,337 in restitution. 

Carpenter pleaded guilty in June 2014 to filing 

false income tax returns. According to court 

documents, Carpenter made false claims for 

refunds by submitting fictitious Forms 1099-R for 

tax years 2007 and 2008. The forms stated that 

taxes were withheld for a distribution from an 

investment account, when, in truth, neither the 

distribution nor the withholding occurred as she 

did not have current accounts with the financial 

institutions identified on the Forms 1099-R.

Florida Couple Sentenced to Prison for Filing 

a False Tax Refund Claim: On July 22, 2014, 

in Tampa, Florida, James Dee Jaeger and Lora 

Anne Jaeger, of North Port, were each 

sentenced to 18 months in prison. The Jaegers 

both pleaded guilty on April 21, 2014 to filing a 

false tax refund claim. According to court 

documents, on March 31, 2009, James Dee 
IRS-CI Fiscal Year 2014 Annual Business Report

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Jaeger and Lora Anne Jaeger electronically filed 

a joint federal income tax return with the IRS, 

falsely claiming a refund in the amount of 

$344,672. The fraudulent tax refund claim filed 

by the Jaegers was consistent with a bogus 

theory that the federal government maintains 

secret accounts for U.S. citizens and that 

taxpayers can gain access to the accounts by 

issuing 1099-OID Forms to the IRS. Under this 

theory, the taxpayer first files a false information 

return, such as a Form 1099 Original Issue 

Discount (OID), to justify a false refund claim on 

a corresponding tax return. The IRS did not 

issue the fraudulent tax refunds claimed by the 

Jaegers. In addition to their own fraudulent tax 

refund claim, the Jaegers advised and 

encouraged other individuals to file similar 

fraudulent tax returns.

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

years:

FY 2014 FY 2013 FY 2012

Investigations Initiated 1028 1513 921

Prosecution Recommendations 969 1267 574

Indictments/Informations 928 1056 507

Sentenced 792 485 262

Incarceration Rate 85.5% 76.7% 85.5%

Average Months to Serve 37 35 35

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 2014 include:

Former Jenkens & Gilchrist Attorney 

Sentenced For Orchestrating MultibillionDollar Criminal Tax Fraud Scheme: On June 

25, 2014, in Manhattan, New York, Paul M. 

Daugerdas, of Wilmette, Illinois, was sentenced 

to 180 months in prison, ordered to pay 

restitution to the IRS of $371,006,397 and 

ordered to forfeit $164,737,500 in proceeds of 

the offenses. Daugerdas was convicted in 

October 2013 of conspiring to defraud the IRS, 

to evade taxes, commit mail and wire fraud, and 

corruptly endeavoring to obstruct and impede 

the internal revenue laws. He was also 

convicted of four counts of tax evasion relating 

to the use of various tax shelters for specified 

clients, and of mail fraud. According to court 

documents, Daugerdas, a tax attorney and 

certified public accountant, orchestrated a 

massive fraudulent tax shelter scheme in which 

he and his co-conspirators designed, marketed, 

and implemented fraudulent tax shelters used by 

wealthy individuals to evade over $1.6 billion in 

taxes owed to the IRS. Daugerdas hatched the 

scheme while working at the Arthur Andersen 

accounting firm and then continued it while a 

partner at two law firms, Altheimer & Gray and 

then Jenkens & Gilchrist (J&G). The 20-year 

scheme generated over $7 billion of fraudulent 

tax losses and yielded approximately $95 million 

in fees to Daugerdas personally. In connection 

with this same scheme, David Parse, a former 

broker at Deutsche Bank, was sentenced in 

March 2013 to 46 months in prison. Donna 

Guerin, a former lawyer at J&G’s Chicago tax 

practice, was sentenced in March 2013 to eight 

years in prison. Former J&G partner Erwin 

Mayer, former BDO Seidman Vice Chairman 

and board member Charles W. Bee, Jr., former 

BDO principal and former member of BDO 

Seidman’s TSG and Tax Opinion Committee 

Michael Kerekes, former BDO Seidman Vice 

Chairman and TSG member Adrian Dicker, BDO 

Seidman partner Robert Greisman, and BDO 
IRS-CI Fiscal Year 2014 Annual Business Report

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Seidman partner Mark Bloom have all previously 

been convicted in connection with the scheme.

St. Thomas Man Sentenced for Tax Fraud 

Conspiracy: On Feb. 2, 2014 in St. Thomas, 

U.S. Virgin Islands, David Haddow was 

sentenced to 36 months in prison and ordered to 

pay $821,094 in restitution to the Virgin Islands 

Bureau of Internal Revenue and restitution of 

$1,104,741 to the IRS. Haddow was sentenced 

for conspiracy to defraud the United States in 

the collection of taxes and conspiracy to evade 

and defeat tax due and owing the Virgin Islands. 

According to court documents, Haddow and coconspirator, Hansel Bailey, incorporated a 

business in St. Thomas called Compass 

Diversified in 2004. In 2005, that company was 

granted Economic Development Commission 

tax benefits. Bailey and another co-conspirator 

marketed a tax-savings scheme that would allow 

clients of Compass Diversified to claim bogus 

business deductions on their income tax returns 

by making payments to Compass, allegedly for 

management or consulting services. In step one, 

Compass clients made payments to Compass or 

wired money directly into Compass’ bank 

account. In step two, Haddow, at the direction of 

Bailey, transferred by check a substantial portion 

of that money into the personal bank account of 

a Compass employee, a native of the Virgin 

Islands whom Bailey and Haddow convinced to 

open a personal bank account for the sole 

purpose of sending tax-free gifts back to 

Compass clients. Finally, a substantial portion of 

the original payment was returned by check or 

wire transfer back to the Compass clients. 

Compass Diversified never offered consulting or 

management services to any of their clients 

even though the clients were encouraged to 

claim deductions on their tax returns. Bailey was 

sentenced on Jan. 9, 2014, to 60 months in 

prison and ordered to pay the same amounts in 

restitution to the IRS and the Virgin Islands 

Bureau of Internal Revenue. A third coconspirator, Dwight Padilla, was sentenced to 15 

months in prison and ordered to pay $1,296,941 

in restitution to the IRS.

California Businessman Sentenced for 

Conspiring to Defraud the IRS: On December 

5, 2013, in Los Angeles, Calif., Gary Mach, of 

Palm Desert, Calif., was sentenced to 16 

months in prison, two months of house arrest, 

18 months of probation and ordered to pay 

$270,725 in restitution to the IRS. Mach pleaded 

guilty on August 18, 2013 to conspiracy to 

defraud the United States. According to court 

documents, beginning around January 2002 and 

continuing through December 2010, Mach failed 

to report substantial income he earned from 

CSPS, a pool-servicing business operated 

throughout Riverside County. Mach and others 

established fictitious trusts which they used to 

receive income and hold assets in an attempt to 

conceal the assets and income from the IRS. 

Mach purported to operate a trust called 

“Quintessential,” and directed that his paychecks 

be made payable to Quintessential. He also 

opened a bank account in the name of 

Quintessential where he deposited CSPS 

proceeds. Mach did not report to the IRS any of 

the income he earned from CSPS between 2002 

and 2010. In furtherance of the conspiracy, 

Mach also attempted to impede an IRS 

summons issued to a bank for business account 

records by closing his bank accounts. Mach 

admitted that his total unreported income for the 

tax years 2002 through 2010 was $1,410,430.

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 2014 include:

Former Tennessee Resident Sentenced for 

Tax Evasion: On January 14, 2014, in 

Nashville, Tenn., Jimmie Duane Ross, of Lehi, 

Utah, and formerly of Sevierville, Tenn., was 

sentenced to 51 months in prison and ordered to 

pay $532,389 in restitution. On August 7, 2013, 

Ross was convicted of five counts of tax evasion 

following a jury trial. According to court 

documents, Ross won a monetary award of 

approximately $840,000 in 1999 after arbitration 

of an employment dispute with a former 

employer. Ross then filed a false mortgage on 

his residence, a false lien on his vehicle, dealt 

extensively in cash, and directed funds to an 
IRS-CI Fiscal Year 2014 Annual Business Report

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offshore account in order to avoid paying the full 

amount he owed in income tax for 1999. In 

addition, from 2004 through 2007, Ross earned 

commission income for referring clients to what 

appeared to be an investment company and 

evaded his taxes by using nominees and other 

means.

Certified Public Accountant Sentenced on 

Tax Charges: On March 17, 2014, in San Jose, 

Calif., Steven Frank Boitano was sentenced to 

41 months in prison and ordered to pay 

$181,910 in restitution. Boitano pleaded guilty 

on Aug. 9, 2013, to failing to file federal income 

tax returns for 2005, 2006, and 2007. On Aug. 

19, 2013, a jury convicted Boitano of the three 

remaining counts in the indictment, charging him 

with filing false tax returns for 2001, 2002, and 

2003. According to evidence presented at trial, 

Boitano was a certified public accountant and 

partner with the accounting firm. In this role, 

Boitano provided tax return preparation and 

other accounting related services to his clients, 

and was also responsible for preparing the tax 

returns for his accounting firm. Boitano’s gross 

annual income from 2001 through 2007 was at 

least $275,000. Between 1991 and 2007, 

Boitano failed to timely file his individual federal 

income tax returns. Instead, he submitted 

requests for extensions of time, frequently along 

with partial payments. Thereafter, as the 

extended due dates for each year passed, 

Boitano failed to file his tax returns. Boitano was 

audited by the IRS at least twice between 1991 

and 2007. Nevertheless, Boitano continued to 

fail to file income tax returns. In June 2009, the 

case was assigned to an IRS revenue agent.

During a meeting with the revenue agent on 

Sept. 4, 2009, Boitano filed federal income tax 

returns for 2001, 2002, and 2003. On each of 

these tax returns, Boitano fraudulently reported 

making estimated tax payments of $26,000, 

$38,000, and $57,000, respectively, which he 

never actually made. As a result of these 

fabricated estimated tax payments, each return 

claimed a refund to which Boitano was not 

entitled.

Florida Attorney Sentenced for Failure to File 

Income Tax Returns: On Sept. 11, 2014, in 

Miami, Florida, Steven E. Siff, of Davie, was 

sentenced to 13 months in prison and ordered to 

pay $924,684 in restitution to the IRS. Siff 

previously pleaded guilty to three counts of 

failing to file an income tax return. According to 

court documents, since at least 1982, Siff 

worked as an attorney in the Miami office of an 

international law firm, first as an associate, then 

as a partner. Siff failed to file personal income 

tax returns since at least tax year 1997. 

Between 2001 and 2011, Siff earned 

approximately $8,248,401 in partnership profits. 

For tax years 2009 through 2011, Siff failed to 

make an income tax return reporting gross 

partnership income of $716,464, $705,967, and 

$694,449, respectively.

Motivational Speaker Sentenced for Failing 

to File Income Tax Returns: On July 8, 2014, 

in Madison, Wisconsin, Eric Plantenberg, of 

Bend, Oregon, was sentenced to 12 months and 

one day in prison. On April 15, 2014, 

Plantenberg pleaded guilty to three counts of 

failing to file income tax returns for the tax years 

2006 through 2008. According to his guilty plea, 

during the relevant period, Plantenberg earned 

more than $1.3 million as an owner and 

president of three self-help companies --

Freedom Personal Development, Freedom 

Professional Services, and I-Kinetic. 

Plantenberg failed to pay $367,589 in federal 

taxes

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 2014 include:

Pennsylvania Businessman Sentenced for 

Tax Crimes: On Aug. 22, 2014, in Philadelphia, 

Pennsylvania, Harvey G. Bitler, Sr., of 

Shillington, was sentenced to 46 months in 

prison and ordered to pay restitution of 

$5,078,897. Bitler previously pleaded guilty to 

failing to pay over to the government income 

taxes, social security taxes and Medicare taxes 
IRS-CI Fiscal Year 2014 Annual Business Report

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withheld from his employees’ paychecks. 

According to court documents, Bitler was the 

owner of Big H Farms and BH Farms in Berks 

County, Pennsylvania. Big H Farms provided 

labor for mushroom growing facilities and BH 

Farms employed salaried employees associated 

with the operation and management of Big H 

Farms. The companies withheld Medicare and 

Social Security taxes (FICA taxes) and income 

taxes from their employees’ paychecks but, 

between 2007 and 2012, Big H made no 

payments to the Internal Revenue Service of 

these withheld taxes. Between 2008 and 2012, 

BH Farms also failed to pay over all the taxes 

withheld in the first quarter of 2008, and made 

no payments to the Internal Revenue Service for 

the remaining quarters of those years.

Oregon Man Sentenced on Tax Evasion 

Charges: On Sept. 26, 2014, in Portland, 

Oregon, Stephen Gregory Nagy, of Hillsboro, 

Oregon, was sentenced to 19 months in prison

and ordered to pay $481,517 in restitution to the 

IRS. Nagy, who had previously pleaded guilty to 

tax evasion, was the president of S&S Drywall 

Assemblies, a company providing drywall 

services in the construction industry, from 

January 2005 through September 2011. Nagy 

conducted extensive business transactions in 

cash in order to hide funds from the IRS. He 

obtained the cash by illegally hiring 

undocumented workers to work on prevailing 

wage jobs, paying them a small portion of the 

prevailing hourly rate, and demanding that they 

kick back the largest portion of their wages to 

him in cash. Nagy failed to report this cash to 

the IRS. Nagy also forced some S&S Drywall 

employees to file for unemployment benefits 

through the Oregon Employment Department. 

After the employees filed for unemployment 

coverage, Nagy fraudulently insisted that they 

continue to work full-time for S&S Drywall. The 

unemployment benefits did not fully compensate 

the employees at a rate equal to their previous 

S&S Drywall salaries. To make up the deficit, 

Nagy gave employees cash payments 

amounting to the difference between the 

unemployment benefits and their full-time 

salaries. These cash wages were not reported to 

the IRS. Nagy also did not withhold federal 

income taxes, or Social Security and Medicare 

taxes from these cash payments. Nagy thwarted 

IRS collection efforts by placing business and 

personal assets in the names of others, by 

physically hiding the assets, and by eventually 

transferring all S&S Drywall Assemblies income, 

contracts, receivables, and assets to ASM 

Drywall, Inc., a shell company he created and 

placed in his sister’s name.

Businessmen Sentenced for Tax Fraud: On

April 15, 2014 in San Antonio, Texas, Larry 

Kimes and Charles Pircher were sentenced to 

144 months in prison and 132 months in prison, 

respectively. Both men were each ordered to 

pay $132 million in restitution for their roles in a 

tax fraud conspiracy. According to court 

documents, Kimes was the manager of 

AccounTex Financial Services, LLC, and Pircher 

was the manager of a series of Professional 

Employer Organizations (PEOs) based in San 

Antonio, including Service Professionals. The 

PEOs entered into staff leasing agreements with 

various client companies to manage the 

companies’ payroll and insurance programs. 

Between 2002 and 2008, the defendants stole 

more than $130 million from the clients of a 

series of PEOs. Kimes, Pircher and other coconspirators diverted to their own use and 

benefit clients’ monies that should have been 

paid for payroll taxes and insurance premiums.

ILLEGAL SOURCE FINANCIAL CRIMES

The Illegal Source Financial Crimes Program 

encompasses all tax and tax-related, money 

laundering and currency violations. These 

investigations are focused on individuals 

deriving income from illegal sources, such as 

dollars obtained through embezzlement, bribery, 

and illegal gambling operations. The individuals 

can be legitimate business owners but obtain 

their income through illegal means. These 

investigations are also focused on methods 

through which individuals seek to “launder” their 

income by making it appear that the income is 

from a legitimate source. Frequent money 

laundering techniques include the manipulation 

of currency reporting requirements, layering of 

transactions and international movement of 
IRS-CI Fiscal Year 2014 Annual Business Report

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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 2014 include:

California Woman Sentenced for Mortgage 

Fraud Scheme: On May 14, 2014, Pensacola, 

Florida, Andrea Lorraine Avery, of Los Angeles, 

California, was sentenced to 84 months in prison 

and ordered to pay $10,323,369 in restitution to 

the FDIC as Receiver for Washington Mutual, 

GMAC Mortgage, SunTrust Mortgage, Wells 

Fargo Bank, USBank, and others. Avery 

pleaded guilty in December 2013 to conspiracy 

to commit fraud, mail fraud affecting a financial 

institution, and conspiracy to commit money 

laundering. According to court documents, 

beginning in 2005 and continuing through 2008, 

Avery and others entered into contracts to 

purchase 24 residences located in Florida, 

Georgia, Louisiana, Texas, and California. 

Thereafter, fraudulent loan applications were 

submitted to financial institutions to fund the 

purchases. In the loan applications, Avery and 

other borrowers made false statements to the 

lenders, which included providing false names 

and social security numbers; overstating the 

borrower’s income and assets; and falsely 

stating the earnest money deposit was not 

borrowed. In support of the loans, Avery and 

other borrowers submitted fraudulent supporting 

documents to the lenders. Approximately $16 

million in loans were issued by the lenders in 

connection with the fraudulent scheme. Avery 

and her company received more than $3.5 

million in kickbacks as a result of the scheme. 

Missouri Man Sentenced in Multi-Million 

Dollar Mortgage Fraud Scheme: On July 30, 

2014, in Springfield, Missouri, Eric Gagnepain, 

of Nixa, was sentenced to 48 months in prison 

and ordered to pay $2,911,214 in restitution. 

Gagnepain pleaded guilty on Jan. 9, 2014, to 

conspiracy to commit bank fraud. According to 

court documents, Gagnepain co-owned and 

operated Greenleaf Companies and all of its 

subsidiaries, along with Scott Dasal, of Republic, 

Mo., from 2006 through May 2008. During this 

time, Greenleaf sponsored real estate 

investment seminars that were designed to 

recruit potential investors to apply for mortgage 

loans for the construction and sale of residential 

homes. Gagnepain aided and abetted others in 

the creation and submission of fraudulent 

mortgage loan documents. These mortgage loan 

documents contained false statements regarding 

the true source of monies provided at the time of 

closing, as well as fraudulently omitting the 

payment of monies obtained from the sale of the 

real estate properties. Gagnepain derived more 

than $1 million in gross receipts from his criminal 

conduct. The total loss amount resulting from 

the bank fraud conspiracy is between $2.5 

million and $7 million. Dasal was sentenced on 

Nov. 21, 2013, to 36 months in prison and 

ordered to pay $2,911,209 in restitution.

Three Sentenced for Conspiracy, Insider 

Trading and Tax Evasion: On Nov. 2013, in 

Atlanta, Georgia, Douglas Ballard, Guy Mitchell 

and Joseph Todd Foster were sentenced for 

their roles in a conspiracy to commit bribery and 

bank fraud, insider trading and tax evasion that 

occurred at the now-failed Integrity Bank. Ballard 

was sentenced to 30 months in prison and

ordered to pay $1,000,000 in restitution. Ballard 

pleaded guilty on July 6, 2010 to conspiracy to 

commit bank fraud, bribery and income tax 

evasion. Mitchell, of Miami, Florida, was 

sentenced to 60 months in prison and ordered to 

pay $5,661,650 in restitution. Mitchell pleaded 

guilty on July 1, 2013 to conspiring to commit 

bank fraud and bribery. Foster, of Blakely, 

Georgia, was sentenced to three years of 

probation. Foster pleaded guilty on July 6, 2010 

to securities fraud. According to information 

presented in court, Ballard, a former Executive 

Vice-President at the now-failed Integrity Bank, 
IRS-CI Fiscal Year 2014 Annual Business Report

20

formerly headquartered in Alpharetta, Georgia, 

received more than $200,000 in cash bribes 

from Mitchell, the bank’s largest borrower. At the 

same time in 2006, when Ballard was being 

bribed, he allowed Mitchell to draw more than $7 

million from a loan that was supposed to be 

used for renovation and construction at the Casa 

Madrona Hotel in Sausalito, California, despite 

the fact that no renovation or construction work 

was done. Instead, Mitchell used the money to 

buy an island in the Bahamas, travel by private 

jet, purchase Miami Heat basketball tickets, buy 

fancy jewelry and expensive cars, and a 

mansion in Coconut Grove, Florida. Mitchell 

received $20 million in additional business loans 

from Integrity Bank after the Casa Madrona loan 

proceeds were exhausted, and he continued to 

use some of that money for personal expenses. 

Mitchell defaulted on the loans and Integrity 

Bank eventually failed. Foster was Integrity 

Bank’s Vice President in charge of Risk 

Management. He sold nearly all of his Integrity 

stock in August 2006 based on materially 

adverse information about the company that was 

not available to the public. Specifically, Foster 

knew that the bank was in an increasingly 

precarious position because of Mitchell’s 

financial difficulties and pending default.

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 2014 include:

Former Detroit Mayor and Others Sentenced 

in Racketeering Conspiracy: On Oct. 10, 

2013, in Detroit, Mich., Former Detroit Mayor 

Kwame M. Kilpatrick was sentenced to 336 

months in prison and contractor Bobby 

Ferguson was sentenced to 252 months in 

prison. On October 17, 2013, Kwame’s father, 

Bernard Kilpatrick was sentenced to 15 months. 

In March 2013, Kwame Kilpatrick was convicted 

by a jury of 24 counts of extortion, mail fraud, tax 

violations and racketeering. According to court 

documents, Kwame M. Kilpatrick used his 

position as Mayor of Detroit and Michigan State 

House Representative to execute a wide ranging 

racketeering conspiracy involving extortion, 

bribery and fraud. At the heart of the conspiracy 

was a scheme to use the power and authority of 

the mayor’s office to extort municipal contractors 

by coercing them to include Ferguson in public 

contracts and to rig the awarding of public 

contracts to ensure that Ferguson obtained a 

portion of the revenue from those contracts. 

Bobby Ferguson obtained at least $73 million in 

revenues from municipal contracts through the 

scheme, a portion of which he shared with his 

co-conspirators. Bernard Kilpatrick was 

sentenced for filing false tax returns.

Former New Orleans Mayor Sentenced for 

Conspiracy, Bribery, Honest Services Wire 

Fraud, Money Laundering and Tax 

Violations: On July 9, 2014, in New Orleans, 

Louisiana, C. Ray Nagin, a resident of Frisco, 

Texas, was sentenced to 120 months in prison, 

ordered to pay $84,264 in restitution to the 

Internal Revenue Service and forfeit $501,200. 

On Feb. 12, 2014, Nagin was found guilty by 

jury trial of conspiracy, bribery, honest services 

wire fraud, money laundering and tax violations. 

According to court documents, beginning around 

June 2004, and continuing until around Jan. 18, 

2013, Nagin, a former mayor of New Orleans, 

defrauded the City of New Orleans and its 

citizens of his honest services through a bribery 

and kickback scheme. Nagin used his public 

office and his official capacity to provide 

favorable treatment to businesses and 

individuals providing him with bribery and 

kickback payoffs. In addition, Nagin filed income 

tax returns for the years 2005, 2006, 2007 and 

2008, where he knowingly reported false 

incomes for those tax years.

Former County District Attorney Sentenced 

in Connection with South Texas Bribery 

Scheme: On Feb. 11, 2014, in Brownsville, 

Texas, former Cameron County District Attorney 

Armando R. Villalobos was sentenced to 156 

months in prison and ordered to pay $339,000 in 

restitution. In May 2013, a federal jury convicted 

Villalobos of one count of violating the 

Racketeer Influenced and Corrupt Organizations 
IRS-CI Fiscal Year 2014 Annual Business Report

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(RICO) Act, one count of conspiracy to violate 

the RICO Act and five counts of extortion. 

Evidence presented at trial revealed that from 

Oct. 2, 2006, through May 3, 2012, Villalobos 

and others were involved in a scheme to illegally 

generate income for themselves and others 

through a pattern of bribery and extortion, 

favoritism, improper influence, personal selfenrichment, self-dealing, concealment and 

conflict of interest. Jurors found that Villalobos 

solicited and accepted over $100,000 in bribes 

and kickbacks in the form of cash and campaign 

contributions in return for favorable acts of 

prosecutorial discretion, including minimizing 

charging decisions, pretrial diversion 

agreements, agreements on probationary 

matters and case dismissals. Furthermore, 

Villalobos solicited and arranged for private 

counsel to handle civil and forfeiture matters 

associated with criminal matters pending in the 

Office of the District and County Attorney of 

Cameron County. 

Corporate Fraud:

The Corporate Fraud program concentrates on 

violations of the Internal Revenue Code (IRC) 

and related statutes committed by publicly 

traded or private corporations, and/or by their 

senior executives. Some of the specific criminal 

acts within a corporate fraud investigation 

include falsifying and fabricating or destroying 

company records for the purpose of falsifying tax 

returns, financial statements or reports to 

regulatory agencies or investors. It also includes 

conduct by executives to enrich themselves by 

attempting to derive unauthorized compensation 

through unapproved payments or bonuses, 

payment of personal expenses with corporate 

funds or bogus loans. Many corporate fraud 

investigations are joint efforts involving other 

federal agencies.

Examples of corporate fraud investigations 

adjudicated in FY 2014 include:

Founder of Bixby Energy Systems 

Sentenced for Multi-Million Dollar Fraud: On 

Sept. 25, 2014, in Minneapolis, Minnesota, 

Robert Allen Walker, founder of Bixby Energy 

Systems, Inc., was sentenced to 300 months in 

prison and ordered to pay $57,967,186 in 

restitution. According to court documents, from 

2001 to 2011, Walker was the president, chief 

executive officer, and chairman of the board at 

Bixby Energy. In that capacity, he raised more 

than $43 million from at least 1,800 investors by 

offering company securities based on false or 

misleading information about 1) the payment of 

salaries and commissions to Bixby officers and 

directors; 2) the operational capability of Bixby’s 

core product, a coal gasification machine; and 3) 

the prospect of conducting an initial public stock 

offering. Walker concealed from investors that 

new investor money was being used to make 

payments to existing investors and was being 

diverted to fund Walker’s lavish lifestyle. In 

December 2011, Bixby Energy Systems 

admitted defrauding investors of between $2.5 

and $7 million and took responsibility for the acts 

of its former officers and agents.

Former Chief Operating Officer Sentenced 

for Insider Trading, Fraud and Obstruction Of 

Justice: On May 9, 2014, in Central Islip, New 

York, Sandra Hatfield was sentenced to 84 

months in prison and ordered to forfeit some 

$1.8 million in illicit profits. Restitution to victims 

will be determined at a later date. Hatfield, the 

former Chief Operating Officer of DHB 

Industries, Inc., and her co-defendant, DHB 

founder David H. Brooks, were convicted in 

September 2010 on nine counts of conspiracy, 

insider trading, securities fraud, and obstruction 

of justice arising out of a $200 million fraud. 

Subsequently, Hatfield pleaded guilty to filing a 

false income tax return. According to court 

documents, Hatfield and others conspired to loot 

DHB, a supplier of body armor to the U.S. 

military and law enforcement agencies. 

Specifically, Hatfield helped Brooks hide the 

related party status of Tactical Armor Products 

and siphon more than ten million dollars from 

DHB to support a thoroughbred horse-racing 

business. Hatfield 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 by falsely inflating the 

value of DHB’s existing inventory, adding nonexistent inventory to the company’s books and 

records, and fraudulently reclassifying 

expenses. Hatfield’s co-defendant, Brooks, was 

sentenced to 204 months in prison and ordered 

to pay a $8.7 million fine and to forfeit 

approximately $65 million. 
IRS-CI Fiscal Year 2014 Annual Business Report

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CEO of Debt Collection Agency Sentenced 

for Role in Multi-Million Dollar Fraud: 

Scheme: On Dec. 19, 2013, in Bridgeport, 

Connecticut, Peter Pinto, of East Quogue, New 

York, was sentenced to 48 months in prison. 

Pinto pleaded guilty on May 11, 2012 to one 

count of conspiracy to commit wire fraud, bank 

fraud and money laundering and wire fraud for 

his role in a multimillion dollar fraud scheme at 

Oxford Collection Agency, where Pinto served 

as Chief Executive Officer. According to court 

documents and statements made in court, 

Oxford Collection Agency was a private financial 

services company that engaged in accounts 

receivables management, primarily debt 

collecting. Businesses and other entities 

contracted with Oxford to collect debts on their 

behalf. Oxford collected debts from consumers 

under the pretense that it would report all such 

collections to its clients and remit the 

appropriate amount to the client. However, Pinto 

and other Oxford executives routinely caused 

Oxford to collect debts that were never remitted 

to its clients. The co-conspirators referred to 

these unremitted collections as a client’s 

“backlog.” To hide the backlog, co-conspirators 

would make periodic fraudulent collection 

reports to certain clients that under-reported the 

amount of funds collected. Pinto and others 

diverted various funds from their client 

remittances and used them for their own needs. 

Oxford’s victims lost more than $10 million as a 

result of this scheme. The investigation also 

revealed that Oxford sometimes obtained and 

retained business with its banking clients by 

paying bribes and kickbacks to bank officials. 

Five other Oxford executives have pleaded 

guilty, including Pinto’s father and Chairman of 

the Board, Richard Pinto. Richard Pinto was 

sentenced to 60 months in prison. The other 

defendants await sentencing.

Idaho Contractor Sentenced for Conspiracy, 

Wire Fraud and Tax Fraud: On Feb. 27, 2014, 

in Boise, Idaho, Elaine Martin, of Meridian, 

Idaho, the former president and majority 

stockholder of MarCon, Inc., was sentenced to 

84 months in prison and ordered to pay $98,825 

in restitution to the IRS and $32,575 to the Idaho 

Disadvantaged Business Enterprise (DBE) 

Program. Prior to sentencing, Martin paid a 

forfeiture amount of $3,084,038. Martin was 

convicted on Sept. 19, 2013, of 22 criminal 

counts, including filing false individual and 

corporate tax returns, conspiracy to defraud the 

United States, wire fraud, mail fraud, false 

statement, interstate transportation of property 

taken by fraud, conspiracy to obstruct justice 

and obstruction of justice. According court 

documents, as early as 1997, Martin concealed 

a portion of MarCon’s business income by 

diverting customer payments for the sales of 

used materials into a separate bank account. 

Neither MarCon nor Martin reported the income 

received from the used material sales on their 

tax returns from 1997 through at least 2006. 

Martin also submitted false and fraudulent 

applications to have her construction company, 

MarCon, admitted and/or remain in two different 

federally funded programs, the U.S. Small 

Business Administration (SBA) 8(a) Program, 

and the Department of Transportation DBE 

Program. Martin took steps to artificially lower 

her personal net worth, by failing to report all of 

her income from MarCon, causing MarCon to 

pay for personal expenses such as renovations 

and landscaping for her home, and acquiring, 

holding and transferring assets into the names 

of nominees in order to appear to be 

economically disadvantaged. This allowed 

MarCon to qualify for the DBE and SBA 8(a) 

programs. Martin also caused false and 

fraudulent tax returns to be filed for herself and 

MarCon, Inc., which did not report all of the 

income received by Martin or the company. The 

false returns were submitted in support of 

MarCon’s applications to the SBA 8(a) Program 

and DBE Programs for Idaho and Utah, along 

with false personal financial statements. Martin 

omitted, deleted, altered and mis-categorized 

entries in MarCon’s financial books and 

records. MarCon received more than $2.5 

million in government contracts based on the 

company’s fraudulently obtained SBA 8(a) 

status, and MarCon received more than $15 

million in government contracts based on the 

company’s fraudulently obtained DBE status in 

the states of Idaho and Utah.

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 
IRS-CI Fiscal Year 2014 Annual Business Report

23

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 2014 include:

Three Conspirators of Russian-American 

Organized Crime Enterprise Sentenced: On 

May 8, 2014, in Manhattan, New York, Illya 

Trincher was sentenced to six months in prison 

followed by six months’ home confinement and 

ordered to forfeit approximately $6.4 million. On 

April 29 and April 30, 2014, respectively, in 

Manhattan, New York, Anatoly Golubchik and 

Vadim Trincher were each sentenced to 60 

months in prison and ordered to forfeit more 

than $20 million in cash, investments, and real 

property. The three were charged in April 2013 

along with 31 other alleged members and 

associates of two Russian- American organized 

crime enterprises in an indictment that included 

racketeering, money laundering, extortion, and 

various gambling offenses. According to court 

documents, the enterprise operated a highstakes, illegal sports gambling business out of 

New York City that catered primarily to multimillionaire and billionaire clients. As part of this 

business, the organization ran a high-stakes, 

illegal sports book that utilized several online 

gambling websites operating illegally in the 

United States. The organization booked bets 

that were often in the hundreds of thousands of 

dollars, and at times a million dollars, on a single 

sporting event. The organization also made 

millions of dollars of sports bets each year. 

Twenty-nine defendants in this case have 

pleaded guilty, and two have entered into 

deferred prosecution agreements. The 

defendants who have pleaded to date have 

agreed to forfeit, in total, more than $69 million.

Connecticut Man Involved in Organized 

Crime-Controlled Gambling Ring Sentenced: 

On Oct. 24, 2013, in Hartford, Connecticut, 

Richard Uva, of Trumbull, was sentenced to 46 

months in prison and ordered to forfeit 

$250,000. On August 5, 2013, Uva pleaded 

guilty to one count of conspiring to violate the 

federal Racketeer Influenced and Corrupt 

Organizations (RICO) Act. According to court 

documents, Uva and others were charged with 

various offenses related to their involvement in 

an illegal Internet sports bookmaking operation 

and illegal card gambling clubs. Uva is an 

alleged associate of the Gambino organized 

crime family. Uva provided assistance in the 

operation of a large-scale sports bookmaking 

business in which gamblers placed bets with 

offshore Internet sports-gambling web sites. Uva 

served as the “master agent” for the bookmaking 

operation and supervised a network of 

bookmakers. In addition, Uva and others 

operated a card gambling club, where a house 

percentage, commonly referred to as a “rake,” 

was collected from every hand played. Uva 

supervised the club’s operation. Uva committed 

acts of extortion while participating in this 

racketeering enterprise and collected “tribute” 

payments from independent sports bookmakers 

operating in Connecticut. A portion of the 

payments were delivered to Gambino Family 

associates in New York. On April 28, 2011, 

investigators executed a search warrant at Uva’s 

former residence in Stamford and seized 

approximately $175,000 in cash. To date, 18 

defendants involved in the gambling ring have 

pleaded guilty and agreed to forfeit 

approximately $1.4 million.

Oklahoma Men Sentenced for Running Illegal 

Gambling Operation and Money Laundering: 

On Jan. 17, 2014, in Oklahoma City, Oklahoma, 

Teddy Dryden Mitchell, of Oklahoma City, was 

sentenced to 27 months in prison. On July 8, 

2013, Mitchell pleaded guilty to running an illegal 

offshore internet sports betting business and 

conspiracy to commit money laundering. As part 

of his plea, Mitchell admitted he conducted, 

financed, managed, supervised, directed or 

owned all or part of the gambling business that 

violated Oklahoma law and that the business 

was in substantial continuous operation for more 

than 30 days or had gross revenue of $2,000 or 

more on any single day. In addition, he admitted 

that he conspired to launder funds to promote 
IRS-CI Fiscal Year 2014 Annual Business Report

24

the illegal internet gambling business. Eight 

other men have been sentenced in connection 

with this case, with sentences ranging from 

probation to 16 months in prison. As part of this 

case, the government also seeks a forfeiture 

money judgment of over $8.1 million and the 

forfeiture of multiple tracts of real property, 

vehicles, and cash held in various accounts.

“Ten-Percenter” Sentenced on Tax Fraud 

Convictions: On May 16, 2014, in Dallas, 

Texas, Willie L. Loveless was sentenced to 12 

months and one day in prison and ordered to 

pay $25,826 in restitution. Loveless pleaded 

guilty in May 2013 to one count of corruptly 

endeavoring to obstruct and impede the due 

administration of the Internal Revenue laws and 

19 counts of fraud and false statements on 

Forms W-2G. According to the indictment, “Tenpercenting,” is a practice that occurs at some 

gambling establishments in which a gambler 

arranges for another individual to cash the 

gambler’s "IRS ticket", so that the gambler can 

avoid paying taxes on the winnings. An “IRS 

ticket" is a winning ticket that triggers the 

issuance of a Form W-2G. The person cashing 

the ticket, often called a “ten-percenter,” 

completes the Form W2-G, falsely representing 

that he/she is the owner of the ticket and the 

proper recipient of the winnings. Usually, the 

person who cashes the ticket charges 

approximately ten percent of the winnings for the 

service. In calendar years 2008, 2009 and 2010, 

Loveless signed approximately 1445 Forms W2-

G at Lone Star Park representing more than 

$1.76 million in winnings. On those forms, 

Loveless falsely attested that he was the only 

person entitled to any part of the winnings and 

each form signed by Loveless reflected his 

correct name, address and social security 

number.

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 2014

include:

Leader of $20 Million Fraud Scheme 

Sentenced on Conspiracy Charges: On Aug. 

18, 2014, in Los Angeles, California, Lianna “Lili” 

Ovsepian, of Tujunga, was sentenced to 96 

months in prison and ordered to pay $9,146,137 

in restitution to Medicare and Medi-Cal. In 

November 2013, Ovsepian pleaded guilty to 

conspiracy to commit health care fraud and 

conspiracy to commit identity theft. According to 

court documents, Ovsepian was the manager 

and owner of Manor Medical Imaging, Inc., 

which generated thousands of fraudulent 

prescriptions for unneeded and expensive antipsychotic medications for “patients” who were 

typically low-income beneficiaries of the 

government-funded health care programs 

Medicare and Medi-Cal, and who did not need 

those drugs. The beneficiaries who received the 

prescriptions were brought to pharmacies, 

where the prescriptions were filled. The drugs 

were returned to Manor, the “patients” were 

given nominal payments (usually around $100), 

and the drugs were diverted into the black 

market, where they were sold to other

pharmacies and re-billed to health care 

programs as though the drugs were being 

dispensed for the first time. The beneficiaries 

included veterans recruited from dual diagnosis 

programs for drug addiction and schizophrenia, 

elderly Medicare beneficiaries whose identities 

were stolen and homeless beneficiaries 

recruited from skid row. From September 2009 

through October 27, 2011, Medi-Cal and 

Medicare was billed more than $20 million, and 

the programs paid more than $9.1 million to 

pharmacies based on more than 14,000 claims 

submitted in relation to the scheme

Chiropractor, Office Assistant Sentenced for 

Conspiracy Along With Multiple Defendants 

in Staged Automobile Accident Scheme: On 

Aug. 8, 2014, in Miami, Florida, Lawrence 

Schechtman, chiropractor, of Parkland, and 

Sircy Sacerio, aka “Sisi” aka “Sircy Santos”, 

receptionist and office assistant, of Palm 

Springs, were sentenced for their participation in 
IRS-CI Fiscal Year 2014 Annual Business Report

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an automobile insurance fraud scheme involving 

staged automobile accidents. Schechtman was 

sentenced to 52 months in prison and ordered to 

pay $2,446,906 in restitution. Sacerio was 

sentenced to 48 months in prison and ordered to 

pay $1,146,824 in restitution. Both previously 

pleaded guilty to conspiracy to commit mail 

fraud and mail fraud. According to court

documents, between approximately October 

2006 and December 2012, the conspiracy 

members staged automobile accidents by 

recruiting individuals to participate in the 

accidents. The clinic owners caused the 

submission of false insurance claims through 

chiropractic clinics that were controlled by 

members of the conspiracy. To execute the 

scheme, the true owners of the chiropractic 

clinics recruited individuals who had the medical 

or chiropractic licenses required by the state to 

open a clinic, including Schechtman, to act as 

“nominee owners” of the clinics. The coconspirators also hired complicit licensed 

chiropractors, including Schechtman, who 

prescribed and billed for unnecessary 

treatments and/or for services that had not been 

rendered. Complicit clinic employees, including 

Sacerio, prepared and submitted claims to the 

automobile insurance companies for payment 

for these unnecessary or non-rendered services. 

Twenty-one clinics participated in this scheme. 

To date 92 defendants have been charged for 

their participation in the scheme. Some of the 

other defendants already sentenced include: 

• Elias Sebastian Munguia, clinic owner, was 

sentenced to 102 months in prison and ordered 

to pay $3,491,516 in restitution.

• Aleida Capdevila, clinic office manager, was

sentenced to 53 months in prison and ordered to 

pay $1,039,928 in restitution.

• Yenisleydi Ramos, front desk receptionist and 

secretary, was sentenced to 50 months in prison 

and ordered to pay $1,666,028 in restitution.

• Juan Francisco Avon, licensed massage 

therapist, was aentenced to 38 months in prison 

and ordered to pay $866,801 in restitution.

• Oscar Montiel Martinez, staged accident 

participant, recruiter and check casher, was 

sentenced to 76 months in prison and ordered to 

pay $1,359,208 in restitution.

• Teresita Mena, staged accident participant and 

check casher, was sentenced to 66 months in 

prison and ordered to pay $1,321,459 in 

restitution.

Two Women Sentenced for Using Stolen 

Identities to Claim Millions from Medicaid: 

On April 9, 2014, in Charlotte, North Carolina, 

Victoria Finney Brewton, of Shelby, North 

Carolina, was sentenced to 111 months in 

prison and ordered to pay $7,070,426 in 

restitution to Medicaid and $573,392 to IRS. On 

April 8, 2014, co-defendant, Rodnisha Sade 

Cannon, of Charlotte, was sentenced to 102 

months in prison and ordered to pay $2,541,306 

in restitution. In January 2013, Brewton pleaded 

guilty to health care fraud and health care fraud 

conspiracy, aggravated identity theft and filing 

false tax returns. Cannon pleaded guilty in April 

2013 to health care fraud conspiracy, 

aggravated identity theft, money laundering 

conspiracy and to attempting to remove property 

subject to seizure. According to court documents 

and court proceedings, from 2008 to 2012, 

Brewton operated a series of after-school and 

summer childcare programs in Shelby. Brewton 

recruited juvenile Medicaid beneficiaries through 

their families to sign up for these programs, 

promising the programs would be free for 

Medicaid recipients. Court records show that 

Brewton stole the Medicaid recipient numbers of 

some of the children and families who had 

signed up for the programs and fraudulently 

billed Medicaid for mental and behavioral health 

services which were never provided. Brewton 

was not a Medicaid-approved provider but 

submitted the fraudulent reimbursement claims 

through other Medicaid-approved providers, 

some of whom did not know their information 

had been compromised. Cannon initially worked 

as a patient recruiter for Brewton, providing 

Brewton with the personal information of 

Medicaid recipients, which Brewton then used to 

file fraudulent reimbursement claims with 

Medicaid. Cannon later began running her own 

similar health care fraud scheme, that attempted 

to defraud Medicaid in fraudulent reimbursement 

claims using the stolen identities of patients and 

therapists. In total, Cannon and her conspirators 

submitted approximately $4.8 million in false 

claims.

North Carolina Farmer Sentenced in Million 

Dollar Crop Insurance Fraud: On Oct. 31, 

2013, in Raleigh, North Carolina, Harry Dean 

Canady, of Lumberton, was sentenced to 72 

months in prison and ordered to pay $1,036,516 

in restitution. On Dec. 19, 2012, Canady 

pleaded guilty to conspiracy to make false 
IRS-CI Fiscal Year 2014 Annual Business Report

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statements, to make material false statements, 

and to commit mail and wire fraud; false 

statements to the Federal Crop Insurance 

Corporation; aggravated identity theft; felon in 

unlawful possession of a firearm; and retaliation 

against a federal official. According to court 

records, Canady owned and rented farmland in 

Robeson County, N.C., and produced, among 

other crops, tobacco, corn, wheat and soybeans. 

From August 2006 through December 2009, 

Canady conspired with others to commit fraud to 

profit through the filing of false, fictitious, and 

fraudulent federal crop insurance claims, the 

sale of unreported tobacco and other grains, and 

to hide the criminal proceeds through payments 

and sales in nominee names. Canady profited 

under the scheme because he was paid twice 

for each pound or bushel of his crop: once 

through the false crop insurance claim, and also 

through the sale of the “hidden” tobacco or 

“hidden” grain. Canady and other coconspirators misrepresented the truth of farm 

operations in a variety of documents, including 

applications, reports of actual production history, 

acreage reports, and claim forms made and 

submitted in support of crop insurance 

coverage. In addition, they submitted claims that 

failed to truthfully show who had an insurable 

interest and who really suffered a loss and the 

extent of that loss which were submitted to the 

Risk Management Agency, an agency of the 

United States Department of Agriculture, and 

private entities. The investigation further 

revealed that Canady took the criminal proceeds 

obtained through other acts of aggravated 

identity theft and federal crop insurance fraud, 

and engaged in various financial transactions 

with those funds, including causing his daughter 

to deposit an $84,655 check into a financial 

institution and to transfer the funds to an 

account controlled by him. These funds were 

derived from the unreported sale of 23,730 

bushels of corn in the name of a grandchild.

Bankruptcy Fraud:

According to the United States Bankruptcy 

Court, there were 963,739 bankruptcy filings in 

Fiscal Year 2014. 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 2014 include:

California Businessman Sentenced for 

Complex Bankruptcy Fraud and Money 

Laundering Scheme: On March 4, 2014, in 

Sacramento, California, Steven K. Zinnel, of 

Gold River, was sentenced to 212 months in 

prison, fined $500,000 and ordered to forfeit real 

estate and corporate interests worth over $2.8 

million for 15 counts of bankruptcy fraud and 

money laundering. According to court 

documents, Zinnel and attorney, Derian Eidson, 

established a shell company, Done Deal, for the 

purpose of receiving distributions from Zinnel’s 

silent partnership in an electrical infrastructure 

company. Keeping Done Deal and the Done 

Deal bank account in Eidson’s name allowed 

Zinnel to conceal his ownership interest from the 

bankruptcy court and family court during his 

child support litigation and personal bankruptcy 

cases. After the successful concealment of the 

property and the discharge of Zinnel’s 

bankruptcy, Zinnel laundered funds back to 

himself through Done Deal, Eidson's attorneyclient trust account, and her personal bank 

account. On April 2, 2014, Eidson was 

sentenced to 121 month in prison and ordered to 

pay a $200,000 fine for her part in the offense.

New Jersey Woman Sentenced for 

Bankruptcy Fraud: On December 17, 2013, in 

Trenton, New Jersey, Marjorie Parise, of 

Manahawkin, was sentenced to 24 months in 

prison and ordered to pay $353,404 in 

restitution. Parise previously pleaded guilty to 

one count of bankruptcy fraud for concealing 

from a bankruptcy trustee profits she had made 

on a Ponzi scheme investment. According to 

court documents, in 2003, Parise and her 

husband invested approximately $115,750 with 

a company known as Global Trading 

Investments LLC and received in return profits 

totaling $429,154. However, the owners of 

Global Trading were operating a Ponzi scheme 

and the profits that Parise received were actually 

the investments of other individuals. Global 

Trading subsequently filed for Chapter Seven 

bankruptcy protection. On August 24, 2006, a 

judgment was entered against Parise requiring 

her to return the profits she had made from her 
IRS-CI Fiscal Year 2014 Annual Business Report

27

investments in the scheme. Parise instead took 

numerous steps to fraudulently conceal a 

significant amount of funds and assets from the 

trustee, including making false statements and 

omissions during a deposition in the bankruptcy 

proceeding. On July 7, 2008, Parise filed for 

individual Chapter Seven bankruptcy protection. 

On her bankruptcy petition, she fraudulently 

failed to report millions of dollars in real estate 

holdings plus hundreds of thousands of dollars 

in personal assets.

North Carolina Doctor Sentenced for Tax 

Offense: On Oct. 3, 2013, in Raleigh, North 

Carolina, Susan Marie Lee was sentenced to 36 

months in prison and ordered to pay $496,854 in 

restitution to the IRS. Lee pleaded guilty on May 

14, 2013 to corrupt interference with the Internal 

Revenue laws. According to court documents, 

from 1996 through and 2009, Lee obstructed 

and impeded the IRS by failing to file income tax 

returns or pay taxes she claimed to owe, filing 

false income tax returns, forming sham entities 

to disguise personal expenses as payments 

related to her dental practice, and transferring 

ownership of her real property to nominees. Lee 

sought to divert her income into sham 

corporations and hide her assets from seizure. 

Finally, in 2009, she filed for bankruptcy in an 

effort to discharge nearly $1 million in tax debt 

due and owing to the IRS.

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 who

facilitate United States taxpayers in evading their

United States tax requirements. There are

several senior analyst assigned to HQ that are 

responsible for managing program areas 

designed to generate investigative leads. 

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.

As part of International Operations, the 

Narcotics and Counterterrorism section 

provides policy guidance and operational 

coordination support to the field for the 

investigation of domestic and international 

narcotics traffickers and related money 

laundering organizations and investigations of 

individuals and organizations believed to be 

involved in, or supporting, terrorist activities. 

Examples of international investigations 

adjudicated in FY 2014 include:

Swisspartners Group Agrees to Pay $4.4 

Million to Resolve Criminal Tax Investigation: 

On May 9, 2014, in Manhattan, New York, 

Swisspartners Investment Network AG, a Swissbased asset management firm, and three of its 

wholly-owned subsidiaries (collectively, the 

“Swisspartners Group”), agreed to pay $4.4 

million to the United States and provide 

approximately 110 client files for non-compliant 

U.S. taxpayers. Swisspartners Group admitted 

that it assisted certain U.S. taxpayers in 

maintaining undeclared foreign bank accounts in 

order to evade their U.S. tax obligations. 
IRS-CI Fiscal Year 2014 Annual Business Report

28

According to court documents, from about 2001 

through about 2011, Swisspartners Group

helped certain U.S. taxpayers conceal from the 

IRS by creating sham foundations and other 

sham entities that served as the nominal 

account holders; placing accounts or insurance 

policies in the names of non-U.S. nationals; 

facilitating the transportation of large amounts of 

cash into the United States on behalf of U.S. 

taxpayer-clients; and arranging for the bulk 

deposit of cash at Swiss depository financial 

institutions on behalf of U.S. taxpayer-clients.

Credit Suisse Pleads Guilty to Conspiracy to 

Aid and Assist U.S. Taxpayers in Filing False 

Returns: On May 19, 2014, in Washington, 

District of Columbia, Credit Suisse AG pleaded 

guilty to conspiracy to aid and assist U.S. 

taxpayers in filing false income tax returns and 

other documents with the IRS. Credit Suisse 

agreed to pay a total of $2.6 billion - $1.8 billion 

to the Department of Justice for the U.S. 

Treasury, $100 million to the Federal Reserve, 

and $715 million to the New York State 

Department of Financial Services. Credit Suisse 

had earlier paid approximately $196 million in 

disgorgement, interest and penalties to the 

Securities and Exchange Commission (SEC) for 

violating the federal securities laws by crossborder brokerage and investment advisory 

services to U.S. clients without first registering 

with the SEC. According to court documents, 

Credit Suisse acknowledged that, for decades 

prior to and through 2009, it operated an illegal 

cross-border banking business that knowingly 

and willfully aided and assisted thousands of 

U.S. clients in opening and maintaining 

undeclared accounts and concealing their 

offshore assets and income from the IRS. The 

investigation has also led to indictments of eight 

Credit Suisse executives since 2011; two of 

those individuals have pleaded guilty so far.

Greek National Sentenced for Role in MultiMillion Dollar Scheme to Defraud 

Developers: On Sept. 9, 2014, in Boston, 

Massachusetts, Evripides Georgiadis, of Larisa, 

Greece, was sentenced to 102 months in prison 

and ordered to pay $8.4 million in restitution. In 

May 2014, Georgiadis was convicted of 

conspiracy to commit wire fraud, 11 counts of 

wire fraud and conspiracy to commit money 

laundering. According to court documents, 

between 2007 and 2011, Georgiadis participated

in a conspiracy to defraud developers who were 

seeking financing for large-scale alternative 

energy and commercial projects by pretending 

to be a representative of a multi-billion dollar 

fund located in Luxembourg. Georgiadis and his 

co-conspirators convinced developers to give 

deposits between $300,000 and $1 million to 

this fraudulent fund with the promise that the 

deposit would be fully refundable. Georgiadis 

and his co-conspirators spent and transferred 

the developers’ deposit money out of the 

country, and the fraudulent fund never financed 

any projects. Over $7 million was stolen from 

victims, including $600,000 which had originally 

been provided by a financial adviser, Sean 

Mansfield. Mansfield, in turn, had stolen the 

funds from his clients. In 2011, Mansfield was 

sentenced to 60 months in prison for defrauding 

his clients. Georgiadis’s co-defendants, John 

Condo, Frank Barecich, and Michael Zanetti, 

have all been sentenced to prison. Condo and 

Barecich were sentenced to 90 months and 12 

months in prison, respectively. Zanetti was 

sentenced to 37 months in prison.

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

FY 2014 FY 2013 FY 2012

Investigations Initiated 226 284 211

Prosecutions Recommendations 203 214 196

Indictments/Informations 199 184 153

Convictions 150 149 110

Incarceration Rate 80.0% 70.4% 87.9%

Average Months to Serve 57.9 72.8 71
IRS-CI Fiscal Year 2014 Annual Business Report

29

Narcotics and Counterterrorism

Criminal Investigation’s (CI) Narcotics and 

Counterterrorism Program support the goals of 

the President’s Strategy to Combat 

Transnational Organized Crime, the U.S. 

National Drug Control Strategy, the National 

Money Laundering Strategy, and the U.S. 

Government's National Counterterrorism 

Strategy. CI contributes to the strategies by 

seeking to reduce or eliminate the profits and 

financial gains of individuals, entities, and 

Transnational Criminal Organizations (TOC) 

involved in the financing of terrorism, narcotics 

trafficking, and money laundering. CI Special 

Agent’s expertise in “following the money” is vital 

to fulfilling the goals of U.S. government 

narcotics and counterterrorism strategies. CI

special agents utilize their unique financial

investigative expertise to follow the money trail,

tracing the profits from an illegal activity back to

an individual or criminal organization.

CI is an integral partner in combatting the 

trafficking of narcotics and the financing of 

terrorism by investigating criminal violations of 

the Internal Revenue Code, Bank Secrecy Act

and Federal Money Laundering statutes. Since 

its inception in 1982, CI has participated in the 

Organized Crime Drug Enforcement Task Force 

(OCDETF) program by focusing its narcotics 

efforts almost exclusively on high-priority 

OCDETF cases where its contributions have the 

greatest impact. The Fiscal Year 2014 (FY14)

goal for CI’s Direct Investigative Time (DIT) in

narcotics investigations ranged between 10.5-

12% of the agency’s total DIT. At fiscal year-end, 

CI achieved its goal with a final rate of 11.4% of

DIT charged to narcotics investigations. In

addition, the FY14 goal of 90% of all narcotics

investigation dedicated to the OCDETF program

was reached with a final 91.2%.

CI’s Narcotics Program also 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 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).

The goals of the U.S. Government’s National 

Counterterrorism Strategy are guided by several 

key principles, including but not limited to 

harnessing every tool at the U.S. Government’s 

disposal, including intelligence, military, and law 

enforcement. CI Special Agent’s expertise in 

“following the money” is vital to the strategy’s 

goal to disrupt, dismantle, and prosecute 

individuals, entities, and TOC groups that 

finance terrorism. CI contributes to the 

strategy’s goal by having its special agents use

their financial investigative expertise to identify 

and investigate terrorism financing schemes. 

CI also supports the U.S. Government's National 

Counterterrorism Strategy by assigning 

personnel to a number of FBI-led Joint Terrorism

Task Forces (JTTF). Due to CI’s mission and 

current limited resources, it’s unable to 

participate in all of the JTTFs. However, CI plays 

a prominent role in many investigations of 

individuals and organizations believed to be

involved in or supporting international terrorist

activities. During FY14, CI partnered with IRS’s Tax 

Exempt and Government Entities (TEGE) to 

identify then investigate and/or sanction tax 

exempt, 501(c)(3), entities that are knowingly 

facilitating the financing of terrorist activity 

through their entity’s financial infrastructure. 

Furthermore, CI’s Counterterrorism Center 

(CTC) proactively develops terrorism related

investigative leads for investigation by CI special 

agents. The CTC also provides investigative

support to CI special agents that investigate 

terrorism cases.

Examples of narcotics investigations adjudicated 

in FY 2014 include:

Former Hip-Hop Manager, Leader of Drug 

Trafficking Organization Sentenced to Life in 

Prison: On Oct. 25, 2013, in Brooklyn, New 

York, James Rosemond, aka Jimmy Henchman, 

was sentenced to mandatory life in prison and 

ordered to forfeit $10 million, along with property 

worth approximately $4 million. Rosemond was 

sentenced for leading a continuing criminal 

enterprise (the “Rosemond Organization”) that 

distributed thousands of pounds of cocaine, 

numerous narcotics conspiracy offenses, 

firearms possession, money laundering, 
IRS-CI Fiscal Year 2014 Annual Business Report

30

structuring and obstruction of justice. In May 

2012, Rosemond was convicted of all 13 counts 

in his indictment, following a three-week jury 

trial. According to court documents, Rosemond 

was the leader of a large-scale, bi-coastal 

narcotics-trafficking organization that shipped 

cocaine from Los Angeles, California, to the 

New York City metropolitan area and shipped 

cash proceeds from narcotics sales back to Los 

Angeles. During the investigation, federal law 

enforcement agents made multiple seizures of 

drugs, money, firearms and tools of the 

narcotics distribution trade belonging to the 

Rosemond Organization. In total, law 

enforcement seized over $2.8 million of the 

Rosemond Organization’s drug proceeds. To 

date, as a result of this investigation, 19 

members and associates of the Rosemond 

Organization have been convicted.

Texas Drug Dealer Sentenced for Drug 

Trafficking, Money Laundering: On Dec. 11, 

2013, in Brownsville, Texas, Julio Cesar 

Cardenas received four life sentences in prison 

for conspiracy to possess with intent to distribute 

illegal drugs and money laundering. Cardenas 

was convicted by jury on May 31, 2013. 

According to the evidence and testimony 

presented in court, around January 2010 and 

continuing until about September 17, 2012, 

Cardenas led a drug trafficking organization. 

The organization distributed cocaine and 

marijuana through commercial freight lines to 

numerous states. After the marijuana and 

cocaine was sold in these states, Cardenas 

directed the illegal money remitting of the 

transportation costs and drug proceeds of the 

narcotics back to the Brownsville area by 

utilizing cash deposits in bank accounts in the 

names of other individuals and co-conspirators. 

Branch banks were utilized in the receiving 

states with the money to be withdrawn by the 

co-conspirators in Brownsville on a regular 

basis. Testimony at trial demonstrated that 

Cardenas engaged in numerous drug trafficking 

and illegal money remitting conversations in 

March, April and June 2011.

Dominican Republic Brothers Sentenced for 

Tax Fraud and Drug Conspiracy: On Dec. 30, 

2013, in Anchorage, Alaska, Joel SantanaPierna and Abel Santana-Pierna, citizens of the 

Dominican Republic residing in Alaska, were 

sentenced to 135 months and 72 months in 

prison, respectively. In addition, they were 

ordered to pay $559,755 in restitution to the IRS 

and agreed to forfeit approximately $130,000. 

The Santana-Pierna brothers both previously 

pleaded guilty to conspiracy to distribute cocaine 

and conspiracy to defraud the government. 

According to court documents, from January 

2010 to March 2012, Joel Santana-Pierna led 

his conspirators, including his brother Abel, in 

importing and distributing cocaine in the 

Anchorage area. In addition to their cocaine 

smuggling scheme, the Santana-Pierna brothers 

conspired to use more than 3,000 stolen Puerto 

Rican identities to file false income tax returns 

and obtain large income tax refunds to which 

they were not entitled.

Multiple Defendants Sentenced for 

International Money Laundering Conspiracy: 

On Mar. 31, 2014, in Anchorage, Alaska, 

Claritza Natera, Joel Paredes Henriquez and 

Nerido Paredes Henriquez were sentenced for 

their roles in an international conspiracy to 

launder the proceeds of drug trafficking:

 Claritza Natera was sentenced to 24 

months in prison and ordered to forfeit 

$239,990 after previously pleading guilty 

to international money laundering. 

 Joel Paredes Henriquez was sentenced 

to four years of probation and ordered to 

forfeit $25,500 after previously pleading 

guilty to being a member of an 

international money laundering 

conspiracy. 

 Nerido Paredes Henriquez was 

sentenced to three years of probation 

and ordered to forfeit $15,400 after 

previously pleading guilty to structuring 

financial transactions.

Two co-defendants were previously sentenced 

as follows: On Mar. 27, 2014, Randin Paredes 

Henriquez was sentenced to time-served in jail

after previously pleading guilty to international 

money laundering. On Mar. 14, 2014, 

Concepcion Egea was sentenced to four years 

of probation and fined $5,000. Egea previously 

pleaded guilty to structuring financial 

transactions to avoid the currency reporting 

requirements.
IRS-CI Fiscal Year 2014 Annual Business Report

31

According to court documents, in 2010 and 

2011, Natera repeatedly deposited currency that 

she knew were proceeds of drug trafficking into 

her bank account in Alaska and then 

immediately wired the funds to persons in the 

Dominican Republic. Joel Paredes Henriquez 

deposited cash that he received from a man he 

knew to be an illegal alien and a cocaine dealer 

into his bank account. He wired over $25,000 to 

the Dominican Republic. Nerido Paredes 

Henriquez and others made several currency 

deposits at different bank branches to avoid the 

currency transaction reporting requirements. 

Randin flew from Anchorage to Philadelphia 

enroute to the Dominican Republic. Customs 

agents discovered that he was smuggling cash, 

which he admittedly knew to be the proceeds of 

cocaine trafficking in Alaska. Cash in the amount 

of $55,720 was seized and forfeited to the 

United States. Randin, Joel and Nerido Paredes 

Henriquez are lawful permanent residents of the 

United Sates, but remain citizens of the 

Dominican Republic. Egea and Natera are 

naturalized U.S. citizens, and were formerly 

citizens of the Dominican Republic.

Worldwide Drug Trafficker Sentenced: On 

Feb. 20, 2014, in Sacramento, California, Shiraz 

Malik, a Pakistani national residing in Warsaw, 

Poland, was sentenced to 180 months in prison. 

Malik was arrested at the Prague International 

Airport on Sept. 8, 2011, and was extradited on 

June 22, 2012, from the Czech Republic to the 

United States. He pleaded guilty on Oct. 7, 2013 

to conspiring to distribute controlled substances 

and listed chemicals, conspiring to import 

controlled substances and ephedrine into the 

United States, and conspiring to launder 

money. According to court documents, from 

June 1, 2008, through Sept. 8, 2011, Malik sold 

pharmaceuticals and highly regulated pre-cursor 

chemicals to customers in the United States, 

Europe and other countries and conspired to 

launder the profits of that activity. Malik took 

orders from customers via the Internet and 

coordinated with people in Pakistan to fill the 

orders. In the course of the three-year 

investigation, law enforcement agents made 

eight undercover purchases of various drugs 

from Malik that were shipped from a post office 

in Lahore, Pakistan to addresses in the 

Sacramento area. In each instance, the 

purchase request was sent to Malik via email 

and payment instructions were sent by Malik to 

the undercover agent. Malik maintained at least 

two bank accounts in Poland that he used to 

receive payments for Internet drug purchases 

from undercover agents.

Leader of Chicago Street Gang Sentenced 

for Drug Trafficking, Money Laundering: On 

March 24, 2014, in Chicago, Illinois, Damian 

Rivera was sentenced to 264 months in prison

and fined $5,000. Rivera pleaded guilty on Aug. 

8, 2013 to conspiracy to possess and distribute 

a controlled substance, unlawful possession of a 

firearm by a felon, and conspiracy to commit 

international money laundering. According to 

court documents, Rivera and others were 

involved in narcotics and firearms trafficking. In 

all, 43 members and associates of the Latin 

Kings were indicted on Federal and State 

narcotics, weapons, and money laundering 

charges. As a leader of Drug Trafficking 

Organization, Rivera was responsible for 

organizing the narcotics operation that was 

responsible for the sale of large quantities of 

heroin in and around Chicago. In addition to 

negotiating with sources of supply and receiving 

heroin shipments, Rivera also delivered and sold 

narcotics, often times distributing wholesale 

quantities of product. Rivera would then either 

collect narcotics proceeds himself or direct 

others to collect heroin proceeds. He also 

directed others to send narcotics cash proceeds 

to Mexico via wire transfers which constituted 

repayments for heroin that Rivera was "fronted" 

or obtained on credit.

Head of International Narcotics Trafficking 

and Money Laundering Organization 

Sentenced: On Sept. 29, 2014, in Miami, 

Florida, Alvaro López Tardón, of Miami Beach 

and Madrid, Spain, was sentenced to 150 years 

in prison, a $14 million forfeiture money 

judgment and $2 million fine. Tardón was also 

ordered to forfeit a significant number of assets, 

including luxury real estate, cars and bank 

accounts. Tardón was convicted on one count of 

conspiracy to commit money laundering and 13 

substantive counts of money laundering. Tardón 

was the head of an international narcotics 

trafficking and money laundering syndicate that 

distributed over 7,500 kilograms of South 

American cocaine in Madrid and laundered over 

$14,000,000 in narcotics proceeds in Miami by 

buying high-end real estate, luxury and exotic 

automobiles and other high-end items. The 
IRS-CI Fiscal Year 2014 Annual Business Report

32

proceeds were smuggled into Miami by couriers 

through Miami International Airport, wire 

transferred to South Florida by co-conspirators 

via MoneyGram and Western Union, wire 

transferred to third parties internationally on 

behalf of Tardón, and wire transferred directly to 

Tardón and his co-conspirators in Miami through 

Tardón’s exotic car dealership and other 

companies controlled by him located in Madrid, 

Spain.

Examples of counterterrorism investigations 

adjudicated in FY 2014 include:

Man Sentenced for Sending Money to an 

Organization with Terrorist Ties: On 

October 7, 2013, in Kansas City, Missouri, 

Khalid Ouazzani, a naturalized U.S. citizen 

from Morocco, was sentenced to 168 

months in federal prison for his role in a 

money-laundering conspiracy and material 

support to the terrorist organization alQaeda. According to court documents, he 

used his business, Truman Used Auto Parts 

to obtain a line of credit, launder money, and 

commit bank fraud. The investigation began 

with the bank fraud allegation that Ouazzani 

obtained a $175,000 line of redit/commercial

loan from Union Bank in April 2007. 

Ouazzani submitted false financial 

information about himself and the company 

to obtain the loan and used substantial 

amounts of the loan proceeds for various 

personal purposes. Ouazzani used a 

portion of the funds to purchase an 

apartment in the United Arab Emirates, 

which he later sold for a profit of 

approximately $17,000. Ouazzani requested 

a co-conspirator to pay this $17,000 to al 

Qaeda.

Texas Couple Sentenced for Violating 

Presidential Embargo Against Iran: On Nov. 

19, 2013, in Portland, Oregon, Hossein Lahiji 

and Najmeh Vahid Dasterjerdi, aka Najmeh 

Lahiji, from McAllen, Texas, were both 

sentenced to 12 months and one day in prison 

and ordered to jointly pay $973,503 in restitution 

to the IRS. In addition, Lahiji and Dasterjerdi 

were each ordered to pay $200,000 in fines and 

forfeit an additional $600,000. In June 2013, 

Lahiji and Dasterjerdi were convicted of 

conspiracy to defraud the United States and 

money laundering. According to court 

documents, Lahiji and Dasterjerdi conspired to 

impede and impair the functions of the IRS in 

the collection of income taxes and the Office of 

Foreign Assets Control of the Treasury 

Department in the enforcement of the 

Presidential Embargo against Iran. Lahiji and 

Dasterjerdi provided funds to a Portland charity, 

the Child Foundation, between 1998 and 2006. 

The foundation, in turn, provided receipts 

documenting the charitable donations then 

transferred the funds to Iran. Lahiji and 

Dasterjerdi did, in fact, claim charitable 

deductions. However, some of the funds were 

used to purchase a building in Tehran in the 

name of Hossein Lahiji’s sister. Additional funds 

were used to invest in an interest-bearing 

account in an Iranian bank or committed to be 

spent at the discretion of an Iranian Ayatollah. 

Many of the uses of the funds violated the 

Presidential embargo against Iran, instituted in 

1995.

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 
IRS-CI Fiscal Year 2014 Annual Business Report

33

virtual currency. Virtual currency is considered 

any medium of exchange that operates like a

fiat currency but does not have legal tender 

status in any jurisdiction. As with any money,

virtual currency can be used in a wide variety

of crimes involving tax fraud, money

laundering, and other financial crimes. During 

Fiscal Year 2014, IRS-CI had a substantial role 

in the investigation that led to a criminal 

complaint and shut down of the Silk Road. IRSCI also played a substantial role in a spinoff 

investigation related to the Silk Road that led to 

the criminal complaint and guilty plea of Charlie 

Shrem. Both of these investigations involved a 

significant component of virtual currency.

In Fiscal Year 2015, IRS-CI will continue to 

focus on financial crimes that involve virtual 

currency by collaborating with FinCEN and 

other federal law enforcement agencies to 

identify the movement of illegal monies utilizing 

virtual currency. In addition, IRS-CI will 

continue its collaboration efforts with other 

Business Operating Divisions (BOD) within IRS 

to include SB/SE and LBI. IRS-CI will work 

with the BODs to evaluate the effect of the 

virtual currency guidance issued by IRS in 

March 2014 and to investigate those 

individuals who use virtual currency as a tool 

to evade taxes.

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 

approximately 50 Financial Crimes Task Forces

(FCTF) throughout the country. The FCTF

involves collaboration between CI and state or

local law enforcement agencies for the purpose

of identifying and investigating 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 2014, CI

hosted two 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 2014 include:

Texas Man Sentenced on Drug and 

Money Laundering Charges: On Nov. 

12, 2014, in Laredo, Texas, Enrique 

Mendez, of Laredo, was sentenced to 405 

months in prison. Mendez was convicted 

on July 30, 2013, by a jury trial on drug 

conspiracy, money laundering conspiracy 

and four substantive counts of laundering 

U.S. currency in amounts ranging from 

$200,468 to $999,465. During the course 

of the investigation that led to the 

conviction, agents seized more than $7.5 

million in drug proceeds and more than 

450 kilograms of cocaine. Agents also 

seized a drug ledger that attributes the 

movement/distribution of approximately 

12,500 kilograms of cocaine and $41.9 

million in drug proceeds by Mendez and 

other co-conspirators.

Three Chiropractors Sentenced in 

Staged Automobile Accident Scheme:

On Oct. 14, 2014, in West Palm Beach, 

Florida, three chiropractors were 

sentenced for their participation in a 
IRS-CI Fiscal Year 2014 Annual Business Report

34

massive staged automobile accident 

scheme based in Palm Beach and MiamiDade Counties. Kenneth Karow, of West 

Palm Beach, was sentenced to 132 

months in prison; Hermann J. Diehl, of 

Miami, was sentenced to 108 months in 

prison; and Hal Mark Kreitman, of Miami 

Beach, was sentenced to 96 months in 

prison. Karow was convicted of 48 counts 

of mail fraud and 11 counts of money 

laundering. Diehl was convicted of two 

counts of mail fraud and three counts of 

money laundering. Kreitman was 

convicted of 21 counts of mail fraud and 

two counts of money laundering. 

According to the evidence presented at 

trial, between October 2006 and 

December 2012, the defendants and their 

co-conspirators staged automobile 

accidents and caused the submission of 

false insurance claims through chiropractic 

clinics they controlled. To execute the 

scheme, the true owners of the 

chiropractic clinics allegedly recruited 

individuals, who had the medical or 

chiropractic licenses required by the state 

to open a clinic, to act as “nominee 

owners” of the clinics. The defendants also 

recruited individuals to participate in the 

staged accidents, and others to help the 

clinics launder the insurance proceeds. 

The defendants also hired complicit 

chiropractors, including Diehl, Karow and 

Kreitman, and therapists who prescribed 

and billed for unnecessary treatments 

and/or for services that had not been 

rendered. Thereafter, complicit clinic 

employees prepared and submitted claims 

to the automobile insurance companies for 

payment for these unnecessary or nonrendered services.

Three Sentenced in Illegal Gambling 

Operation in Guam: On Oct. 8, 2014, in 

Hagatna, Guam, three individuals were 

sentenced in a criminal conspiracy to 

conduct an illegal gambling business at 

the former MGM Spa in Tamuning. Jimmy 

Hsieh was sentenced to 24 months in 

prison and ordered to pay a $423,640 

money judgment of forfeiture. In addition, 

Hsieh agreed to forfeit $178,113 from 

personal accounts and that three of his 

condos are subject to possible forfeiture 

proceedings. Hsieh pleaded guilty to 

gambling conspiracy and money 

laundering. William Perez, the manager 

and supervisor of the MGM poker 

operation in 2010, was sentenced to six 

months in prison, six months home 

confinement for conspiring to operate the 

illegal gambling business. Pauline Perez 

was sentenced to one year of probation 

and community service. According to court 

documents, from at least January 2006 

until December 2010, the defendants 

conspired to offer card games of chance, 

including baccarat and poker, at the MGM 

Spa building. The defendants took a 

percentage of the winnings from each 

game. They knowingly conducted financial 

transactions involving the proceeds from 

the illegal gambling operation.

Georgia Man Sentenced for Fraud 

Scheme: On June 25, 2014, in Peoria,

Illinois, Kenneth Lewis of Augusta, 

Georgia and Cranford, New Jersey, was 

sentenced to 271 months in prison and 

ordered to pay $5,565,406 in restitution. 

Lewis was convicted of four counts of wire 

fraud and 11 counts of money laundering. 

According to court documents, beginning 

in the late 1990s, Lewis offered investors 

the ability to generate income through 

highly secretive overseas financial 

transactions. He obtained more than $5.5 

million from victims to cover his living 

expenses while he was purportedly

working on completing the details of nonexistent transactions. Lewis told investors 

that he had been living in Zurich, 

Switzerland for seven years working on 

the transaction, when, in fact, he was 

living in a hotel in New Jersey, where he 

was arrested in July 2012.

Tulsa Man Sentenced for Money 

Laundering Conspiracy: On June 24, 

2014, in Tulsa, Oklahoma, Moises Alberto 

Yanez was sentenced to 240 months in 

prison for conspiracy to commit money 

laundering. According to court documents, 

from June 2011 through November 2012, 

Yanez admitted to making rental payments 

on two properties in Tulsa that were rented 

for the purpose of storing and distributing 

marijuana and methamphetamine. Yanez 
IRS-CI Fiscal Year 2014 Annual Business Report

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also admitted to making the rental 

payments using money he received from 

selling marijuana and methamphetamine, 

which he and other conspirators received 

from California, Texas, and elsewhere.

Father and Son Sentenced for Bank 

Fraud and Money Laundering: On Jan.

23, 2014, in Pensacola, Floriaa, Gary 

Wayne Thomas, of Daphne, Alabama, and 

his son, Brian Keith Thomas, of 

Birmingham, Alabama, were sentenced to 

72 months and 24 months in prison, 

respectively. Both men were charged with 

conspiracy to structure cash withdrawals 

and structuring cash withdrawals to avoid 

the Currency Transaction Reporting (CTR) 

requirement, conspiring to commit bank 

fraud and conspiracy to commit money 

laundering. Gary Thomas was also 

charged with money laundering, failure to 

appear, possession of a firearm and 

ammunition by a person under indictment, 

and possession of a firearm and 

ammunition by a fugitive from justice. 

Brian Thomas went to trial during the week 

of July 22, 2013, and was convicted of all 

counts. Gary Thomas pleaded guilty to all 

charges on Oct. 30, 2013. The evidence 

showed that between January 1, 2008, 

and Nov. 1, 2008, Gary Thomas and Brian 

Thomas caused approximately $4,550,000 

to be deposited into their domestic bank 

accounts and then wired to offshore bank 

accounts in the Cayman Islands and 

Belize. Shortly thereafter, Gary Thomas 

stopped making payments on the loans he 

and his various entities had obtained from 

a bank. The total amount of the loans was 

approximately $56 million. In the summer 

of 2009, the bank filed civil suits against 

Gary Thomas on these loans. In a threeyear period between 2010 and 2013, Gary 

Thomas wired approximately $2,150,000 

from the offshore banks into several 

domestic accounts including five accounts 

that Brian Thomas opened in banks. 

Thereafter, the father and son conspired to 

structure withdrawals of cash under 

$10,000 to avoid the CTR requirement and 

to hide Gary Thomas’s interest in the 

funds from his creditor bank. The 

structured withdrawals were done on 

roughly 194 occasions and totaled more 

than $1.6 million. Gary Thomas used 

some of these funds to purchase five 

airplanes, numerous vehicles, and homes. 

Thus far, the government has successfully 

forfeited the five airplanes; approximately 

$387,413 in cash, which represents the 

proceeds of the sale of the home in 

Fairhope, Alabama; and a $60,000 

Hyundai Equus. The government has also 

obtained monetary judgments of forfeiture 

against Gary and Brian Thomas in the 

amounts of $4,970,000 and $1,197,148 

respectively.

International Fugitives Sentenced for 

Asset Tracing Scheme: On Jan. 16, 

2014, in Newport News, Virginia, Elaine 

White, formerly of Toronto, Canada, and 

her husband, Cullen Johnson, were both 

sentenced to 66 months in prison and 

ordered to pay $1,021,738 in restitution for 

their role in an international asset tracing 

scheme. Johnson and White pleaded 

guilty to participating in a conspiracy to 

engage in money laundering. According 

to court documents, starting in 2006, 

Johnson and White owned and/or 

operated an asset location business called 

“Internal Affairs,” “World Solutions” and 

then “Occipital.” Clients seeking to locate 

funds that had been stolen from them or 

who believed that relatives or former 

spouses had hidden money or were 

otherwise trying to trace lost, missing or 

stolen assets, hired White and Johnson to 

investigate the location of such assets. 

White and Johnson then produced reports 

of information which purported to contain 

financial and other information subject to 

the clients’ requests. Rather than 

providing valid information, White and 

Johnson provided the client-victims with 

fabricated banking records, purporting to 

show that the assets or money that clients 

sought had been moved from one banking 

institution to another in locations such as 

Monaco, Greece, Hong Kong, Switzerland, 

Latin America and the Caribbean. For 

additional payments, White and Johnson 

claimed that they could continue to trace 

the funds to their final destination. On any 

occasion where the client-victims 

determined that the information provided 

by the defendants was false, the 
IRS-CI Fiscal Year 2014 Annual Business Report

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defendants claimed that the information 

was valid and accused the client-victims or 

their representatives of improperly trying 

to collect the funds. Court documents also 

state that, in or about 2009, White and 

Johnson were charged by the Ontario 

Provincial Police in Canada with crimes 

related to this asset tracing fraud. The 

couple fled Canada, traveling first to the 

Bahamas, and then to the Turks & Caicos 

Islands, where they continued to operate 

this fraudulent asset tracing business on 

United States and Canadian victims. The 

couple resided there until they were 

apprehended by Turks & Caicos 

authorities. All told, the couple solicited 

more than $1,000,000 from United States 

and Canadian victims, including about 

$500,000, which they wired to one of their 

co-conspirators. 

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

past three fiscal years:

Money Laundering Investigations FY 2014 FY 2013 FY 2012

Investigations Initiated 1312 1596 1663

Prosecution Recommendations 1071 1377 1411

Indictments/Informations 934 1191 1325

Sentenced 785 829 803

Incarceration Rate 82.2% 85.4% 84.7%

Average Months to Serve 66 68 64

Bank Secrecy Act (BSA) Investigations FY 2014 FY 2013 FY 2012

Investigations Initiated 809 922 923

Prosecution Recommendations 677 771 683

Indictments/Informations 608 693 575

Sentenced 535 453 342

Incarceration Rate 74.8% 70.6% 76.6%

Average Months to Serve 35 36 40

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.

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 2014 include:

Former Dentist Sentenced for Tax Evasion: On Aug. 15, 2014, in Great Falls, Montana, James Zander, 

a former dentist, was sentenced to 40 months in prison for tax evasion. According to court filed 

documents, from 2002 to 2010, Zander evaded his 2001 tax liability through several means, including 

filing a return filled with zeroes and funneling income from his dental practice to a various entities. Zander 

also 
IRS-CI Fiscal Year 2014 Annual Business Report

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obstructed IRS collection efforts by sending notices and demands to government employees and filing a 

frivolous lawsuit against an IRS Revenue Agent. Zander also failed to file legitimate tax returns for the 

2002 to 2009 tax 

years, incurring a total tax debt of over $1 million. Zander last filed a legitimate individual income tax 

return for the 2000 tax year. Zander’s tax preparer prepared a 2001 individual income tax return and a 

Form 1120S for Zander’s solely owned corporation, Dental Care of Great Falls. Zander signed and filed 

only the corporate return. On Feb. 20, 2002, Zander formed Solid Rock Partners, LP; on July 16, 2003, 

he formed Royal Priesthood Society (RPS), a corporation sole; and on June 10, 2008, he formed 

American Humanitarian Project another corporation sole. Zander opened bank accounts for RPS, Rock 

Solid, and American Humanitarian Project. From 2002 to 2009, Zander purchased five parcels of land in 

the name of Solid Rock Partners and RPS. Zander maintained two bank accounts for Dental Care. On 

Feb. 17, 2004, Zander filed a 2001 individual income tax return listing zeroes in each section for his 

income, adjusted gross income, and tax liability. The return requested a $27,131 refund for the amount he 

had withheld. He also attached a two-page document espousing tax defier arguments. In later years 

Zander either filed a return filled in with zeroes or no return at all. Zander made approximately $2.9 million 

in unreported income from 2001 to 2009.

Husband and Wife Sentenced for Tax Defiance Scheme: On January 6, 2014, in Atlanta, Georgia, 

Timothy Thomas and Mary Beth Thomas, of Jackson County, were sentenced for their respective roles in 

a criminal tax scheme. Timothy Thomas was sentenced to 24 months in prison. Mary Beth Thomas was 

sentenced to ten months in prison. The couple was also ordered to pay $506,350 in back taxes, interest, 

and penalties to the IRS. On May 10, 2013, Timothy Thomas pleaded guilty to one count of conspiracy to 

defraud the IRS and Mary Beth Thomas pleaded guilty to one count of willfully failing to file an income tax 

return. According to information presented in court, in the 1990s, Timothy and Mary Beth Thomas, who 

were married and jointly owned and operated a deck and patio construction business, stopped filing 

federal income tax returns. They then hired American Rights Litigators (ARL), an organization that sold 

and promoted tax defiance schemes, to send obstructive and harassing materials to the IRS on their 

behalf. The IRS repeatedly sent notices to the couple notifying them that they had to pay their federal 

income taxes and that they had to comply with the tax laws. After the IRS shut down ARL as a result of 

fraudulent anti-tax actions, Timothy and Mary Beth Thomas continued to send a variety of obstructive, 

frivolous and harassing documents to IRS and Department of Treasury officials. These documents 

included statements that they were not United States citizens but instead were American citizens; that 

they were not subject to the federal income tax laws; and that paying income tax was voluntary. Finally, 

after a decade of not filing tax returns, the couple submitted four false tax returns claiming over 

$1,000,000 in fraudulent refunds from the IRS. They also submitted fictitious financial instruments to the 

federal government, to include a document purporting to be a $100 billion private registered bond, and 

instructed the government to use this bogus bond to pay any of their debts to the government. Despite 

earning substantial money from their business, Timothy and Mary Beth Thomas failed to pay over 

$350,000 in federal income taxes from 2003 to 2012. In a separate case, Stephen Paul Thomas and 

Patricia Denese Anderson, both of Lawrenceville, Ga., were convicted for a similar tax defiance scheme. 

They were both sentenced on January 3, 2013. Stephen Paul Thomas was sentenced to 60 months in 

prison and Patricia Denese Anderson was sentenced to 51 months in prison.

Wisconsin Man Sentenced for Filing False Claim for Refund: On Feb. 13, 2014, in Madison, 

Wisconsin, John Glavin, of New Lisbon, was sentenced to 36 months in prison. Glavin pleaded guilty on 

Dec. 4, 2013 to filing a false claim for refund with the IRS. According to court documents, Glavin 

submitted a false 2008 income tax return to the IRS claiming a tax refund of $700,704. The 2008 tax 

return included 12 fictitious Forms 1099-OID which falsely reported that Glavin had received $1,076,202 

in income and had taxes withheld from that income. In addition, Glavin filed multiple lawsuits in federal 

court to stop the enforcement of IRS subpoenas for records, arguing that “sovereign citizens” are not 

citizens of the United States and that Form 1040 is not legitimate. Glavin also sent documents to IRS 

employees expounding sovereign citizens’ beliefs stating that he was exempt from taxes. These 

documents included fictitious promissory notes for $75,000.
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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 2014. 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

467 1410 $4,267,477,686

Forfeitures

Count of 

Investigations

Count of 

Assets Total Forfeited Value

468 1456 $297,688,136

Examples of investigations involving forfeitures 

during FY 2014 include:

John Paul Gizzi - On July 30, 2013, Gizzi 

pleaded guilty to two counts of filing a false tax 

return for tax years 2008 and 2009. From 2005 

through 2010, Gizzi concealed revenue earned 

from the sales of scrap metal from the IRS. 

Revenue from the cash sales of scrap metal 

exceeded $1.9 million. As part of the plea 

agreement, Gizzi agreed to immediately civilly 

forfeit $1.5 million. The aforementioned funds 

were forfeited on October 29, 2013.

Daniel Fernandez Rojo Filho – Filho was a 

director and promoter of Evolution Marketing 

Group (EMG) a Panamanian corporation. EMG 

operated several websites soliciting individuals 

to invest in short-term investments yielding rates 

of return between 77% and 300%. On October 

31, 2013, the United States District Court for the 

Middle District of Florida entered orders of 

forfeiture for over $138 million in assets. The 

total amount of funds forfeited exceeded $122 

million. 

Christopher Harris – On December 9, 2013, 

Harris pleaded guilty to conspiracy to commit 

government procurement fraud and conspiracy 

to commit money laundering. Harris worked as 

the country manager in Afghanistan for 

American International Security Corporation 

(AISC). On November 27, 2013, a stipulated 

settlement agreement was entered by the court 

whereby over $3.2 million was forfeited to the 

government. 

Holy Land Foundation for Relief and 

Development – In November 2008, the U.S. 

secured the conviction of the Holy Land 

Foundation for Relief and Development (HLF), 

and five of its leaders, on charges of providing 

material support to Hamas, a designated foreign 

terrorist organization. In May 2009, HLF and 

five of its leaders were sentenced. During the 

sentencing, the court reaffirmed the jury’s $12.4 

million money judgment against all the convicted 

defendants. The court entered a Final Order of 

Forfeiture on January 7, 2014. Thus far, over 

$5.9 million has been forfeited to the 

government. 

Alcoa World Alumina LLC - On January 9, 

2014, Alcoa World Alumina LLC, a majorityowned and controlled global alumina sales 

company of Alcoa Inc., pleaded guilty to one 

count of violating the Anti-bribery Provisions of 

the Foreign Corrupt Practices Act (FCPA) in 
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39

connection with a 2004 corrupt transaction, to 

pay a criminal fine of $209 million, and to 

administratively forfeit $14 million to resolve 

charges that it paid millions of dollars in bribes 

through an international middleman in London to 

officials of the Kingdom of Bahrain in violation of 

the FCPA. A Declaration of Forfeiture was 

signed on April 29, 2014, and the $14 million 

Alcoa World Alumina LLC agreed to 

administratively forfeit on January 9, 2014, was 

forfeited. 

SunTrust Mortgage - On July 3, 2014, 

SunTrust Mortgage, Inc., and the United States 

Department of Justice reached a $320 million 

settlement regarding SunTrust’s administration 

of the Home Affordable Modification Program 

(HAMP). On July 15, 2014, $16 million was 

forfeited per the Restitution and Remediation 

Agreement entered on July 3, 2014. As part of 

the settlement, this money will be available to 

law enforcement agencies working on mortgage 

fraud and other matters related to the misuse of 

TARP funds. 

During FY 2014, Criminal Investigation 

apprehended ninety (90) fugitives from justice. 

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 conducts 

forensic analysis and provides technical support 

in Electronics, Latent Prints, Questioned 

Documents, Ink and Paper Chemistry, 

Polygraph, Imaging, and Trial Illustration. 

In FY2014, the laboratory drafted and finalized 

eight manuals and twenty-nine forms of policies 

and procedures as a prerequisite of laboratory 

accreditation or document compliance with 

accreditation standards. In July 2014, the NFL 

submitted an application for accreditation of 

ISO/IEC 17025 forensic testing laboratories and 

the application was accepted. The next step, a 

pre-assessment, is scheduled for January 2015.

A portion of funds secured through the I.D. Theft 

Initiative funds provided improvements to the 

Laboratory Information Management System 

(LIMS). The LIMS is used by the laboratory to 

track casework and associated data. The LIMS 

is now able to collect data such as the number 

of IAFIS (i.e. national fingerprint database) hits 

resulting in investigative leads, the amount of 

laboratory resources used to complete cases, as 

well as demonstrate compliance with certain 

accreditation standards. 

Scientists and technical support personnel in the 

laboratory also utilize new technology to more 

efficiently work multiple types of examinations. 

For example, the Questioned Document/Ink 

Section received a new VSC6000, an instrument 

that uses different types of light to decipher

various types of alterations on documents. 

Latent print examiners now use the Next 

Generation Identification (NGI) biometric 

identification system, which searches finger or 

palm prints of unknown origin against more than 

115 million record prints managed by the FBI. 

This is an effective tool for generating 

investigative leads for the CI agents. Trial 

Illustration received new iMacs for use with their 

Thunderbolt displays. Visual information 

specialists now have some of the latest technical 

equipment available to facilitate the creation of 

complex graphic designs used for the 

presentation of information at trial.

TECHNOLOGY OPERATIONS AND INVESTIGATIVE SERVICES

Technology continues to play an important 

investigative role as the sophisticated nature of 

financial crimes changes and evolves. CI’s 

Technology Operations & Investigative Services 

(TOIS) division is responsible for outfitting 

Special Agents with the most effective 

technologies to do their job and supporting CI’s 
IRS-CI Fiscal Year 2014 Annual Business Report

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financial investigations by collecting and 

analyzing its reams of digital evidence. 

TOIS’ Electronic Crimes Office has special 

agents trained in the recovery and preservation 

of hardware and software evidence. In Fiscal 

Year 2014, the amount of seized electronically 

stored information/data for investigations totaled

over 1,400 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 the 

latest mobile forensics hardware and software.

Electronic Crimes Statistics for FY 2014

Electronic Crimes 

Enforcement Statistics 

FY14 

Totals 

Total Operations/Search 

Warrants 

 434

Total Sites 654

Total CISs Deployed 766

Total Systems Encountered 4794

Total Volume of Data 

(Terabytes) Seized

1466

In fiscal year 2014, TOIS reviewed its current 

operations and took a look at the coming 

technology horizon to develop four strategic 

themes to drive how TOIS will work to prepare 

the CI crime fighter now and in the future. 

TOIS Strategic Themes:

Mobile Information Availability

 CI Special Agents will use their recently 

issued smartphones to access more 

data about their cases then ever so that 

more time is spent in the field then in the 

office

Office Anywhere Capability

 ATLAS, CI’s new evidence management 

tool, will enable Special Agents to 

collaborate on cases while working 

across the country by having one 

common application to store and 

organize their investigations 

 ECE, CI’s new digital evidence 

collection and analysis tool, will enable 

Special Agent Computer Investigative 

Specialists, to store digital evidence 

centrally and leverage the entire CIS 

cross-country workforce for analysis and 

investigative support using the latest in 

virtual environment technologies

 Microsoft’s Sharepoint suite of 

knowledge management and 

collaboration tools will also enable CI’s 

workforce to better coordinate activities 

even as CI investigators physically work 

farther apart.

Operating Technology More Efficiently

 TOIS will engage in several activities to 

reduce its year-over-year operations 

and maintenance costs as part of being 

a steward of scarce financial resources.

Evolving Nature of Financial Crimes 

 CI’s Lead and Case Analytics tool will 

identify the criminal relationships and 

schemes centrally behind the illicit 

activities that thwart our Nation’s tax 

system.

 The Cyber Crime Unit will also mobilize 

to identify and refer more cyber-crimes

cases to the field after a successful pilot 

in FY 2013.

Never before has the role of technology played 

such a critical role in the continued success of 

the Criminal Investigation Division. FY 2015 will 

be a pivotal year as CI launches new 

technologies and applications into the hands of 

CI’s Special Agents to more effectively pursue 

the sophisticated financial crimes, which CI is 

uniquely capable of enforcing.