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78–502—PDF 2012

S. HRG. 112–708 

TAX FRAUD BY IDENTITY THEFT, PART 2: 

STATUS, PROGRESS, AND POTENTIAL SOLUTIONS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON FISCAL RESPONSIBILITY AND 

ECONOMIC GROWTH 

OF THE

COMMITTEE ON FINANCE 

UNITED STATES SENATE 

ONE HUNDRED TWELFTH CONGRESS 

SECOND SESSION 

MARCH 20, 2012 

( 

Printed for the use of the Committee on Finance 

COMMITTEE ON FINANCE 

MAX BAUCUS, Montana, Chairman 

JOHN D. ROCKEFELLER IV, West Virginia 

KENT CONRAD, North Dakota 

JEFF BINGAMAN, New Mexico 

JOHN F. KERRY, Massachusetts 

RON WYDEN, Oregon 

CHARLES E. SCHUMER, New York 

DEBBIE STABENOW, Michigan 

MARIA CANTWELL, Washington 

BILL NELSON, Florida 

ROBERT MENENDEZ, New Jersey 

THOMAS R. CARPER, Delaware 

BENJAMIN L. CARDIN, Maryland 

ORRIN G. HATCH, Utah 

CHUCK GRASSLEY, Iowa 

OLYMPIA J. SNOWE, Maine 

JON KYL, Arizona 

MIKE CRAPO, Idaho 

PAT ROBERTS, Kansas 

MICHAEL B. ENZI, Wyoming 

JOHN CORNYN, Texas 

TOM COBURN, Oklahoma 

JOHN THUNE, South Dakota 

RICHARD BURR, North Carolina 

RUSSELL SULLIVAN, Staff Director 

CHRIS CAMPBELL, Republican Staff Director 

SUBCOMMITTEE ON FISCAL RESPONSIBILITY AND ECONOMIC GROWTH

BILL NELSON, Florida, Chairman 

MAX BAUCUS, Montana 

KENT CONRAD, North Dakota 

JEFF BINGAMAN, New Mexico 

MIKE CRAPO, Idaho 

TOM COBURN, Oklahoma 

RICHARD BURR, North Carolina 

(II) 

(III) 

C O N T E N T S 

OPENING STATEMENTS 

Page 

Nelson, Hon. Bill, a U.S. Senator from Florida, chairman, Subcommittee 

on Fiscal Responsibility and Economic Growth, Committee on Finance ........ 1 

Burr, Hon. Richard, a U.S. Senator from North Carolina ................................... 4 

WITNESSES 

Miller, Steven T., Deputy Commissioner for Services and Enforcement, Internal Revenue Service, Department of the Treasury, Washington, DC ............. 5 

Cimino, Ronald A., Deputy Assistant Attorney General for Criminal Matters, 

Tax Division, Department of Justice, Washington, DC .................................... 7 

Olson, Nina E., National Taxpayer Advocate, Internal Revenue Service, Department of the Treasury, Washington, DC ...................................................... 8 

Augeri, Sal, detective, Criminal Intelligence Bureau, Tampa Police Department, Tampa, FL ................................................................................................. 19 

McKay, Bernard F., vice president, global corporate affairs, Intuit, Inc., Washington, DC ............................................................................................................. 21 

Trusko, Kirsten, president and executive director, Network Branded Prepaid 

Card Association, Montvale, NJ .......................................................................... 24 

ALPHABETICAL LISTING AND APPENDIX MATERIAL 

Augeri, Sal: 

Testimony .......................................................................................................... 19 

Prepared statement .......................................................................................... 31 

Burr, Hon. Richard: 

Opening statement ........................................................................................... 4 

Cimino, Ronald A.: 

Testimony .......................................................................................................... 7 

Prepared statement .......................................................................................... 34 

Responses to questions from subcommittee members ................................... 44 

McKay, Bernard F.: 

Testimony .......................................................................................................... 21 

Prepared statement .......................................................................................... 48 

Miller, Steven T.: 

Testimony .......................................................................................................... 5 

Prepared statement .......................................................................................... 54 

Nelson, Hon. Bill: 

Opening statement ........................................................................................... 1 

Prepared statement with attachments ........................................................... 64 

Olson, Nina E.: 

Testimony .......................................................................................................... 8 

Prepared statement with attachments ........................................................... 69 

Trusko, Kirsten: 

Testimony .......................................................................................................... 24 

Prepared statement with attachments ........................................................... 94 

COMMUNICATIONS

Federation of Genealogical Societies ...................................................................... 111 

International Association of Jewish Genealogical Societies (IAJGS) .................. 116 

Massachusetts Genealogical Council ...................................................................... 124 

Records Preservation and Access Committee (RPAC) .......................................... 127 

Ryesky, Kenneth H. ................................................................................................. 134 

(1) 

TAX FRAUD BY IDENTITY THEFT, 

PART 2: STATUS, PROGRESS, 

AND POTENTIAL SOLUTIONS 

TUESDAY, MARCH 20, 2012 

U.S. SENATE,

SUBCOMMITTEE ON FISCAL

RESPONSIBILITY AND ECONOMIC GROWTH, 

COMMITTEE ON FINANCE, 

Washington, DC. 

The hearing was convened, pursuant to notice, at 10 a.m., in 

room SD–215, Dirksen Senate Office Building, Hon. Bill Nelson 

(chairman of the subcommittee) presiding. 

Present: Senator Burr. 

Also present: Democratic Staff: Ryan McCormick, Legislative Assistant. Republican Staff: Mike Quickel, Senior Policy Advisor. 

OPENING STATEMENT OF HON. BILL NELSON, A U.S. SENATOR 

FROM FLORIDA, CHAIRMAN, SUBCOMMITTEE ON FISCAL RESPONSIBILITY AND ECONOMIC GROWTH, COMMITTEE ON FINANCE 

Senator NELSON. Good morning. Senator Crapo is under the 

weather with a bug that is going around. So he is going to miss 

all of this morning, and, hopefully, he will be well enough that he 

can get here when we have a number of votes that will be occurring on the floor of the Senate come 11:30. 

I want to thank the witnesses who are here. I want to thank everybody who is interested in this topic, and it has generated quite 

a bit of interest. 

And is it not interesting that all of a sudden police departments 

are seeing street crime drop, drug dealing drop, house burglaries 

drop? And when that happens, you know that something has happened. 

Well, I think we have uncovered it, the police departments have 

uncovered it, and that is going to be the topic that we are going 

to discuss today, from two panels of witnesses, and get at this 

question of ID theft and how it is now involving the IRS. 

This is a serious crime. A south Florida Federal prosecutor recently described it as an epidemic. People describe it as ‘‘cocaine on 

a card.’’ And that south Florida prosecutor told the CBS affiliate 

in Miami that it is a lot of money, and people are having parties 

in their homes and training others on how to commit this crime. 

There was a big training seminar, if you can believe it, on how 

to get people’s Social Security numbers and then to use them. Well, 

2 

he is talking about thieves stealing people’s ID to get tax refunds. 

And it is evident now that it is a crime that is skyrocketing, and 

it is across the country. We just happened to see it pop up first in 

Florida. 

There have been hundreds of thousands of cases in which 

unsuspecting and law-abiding taxpayers are having their lives 

turned upside down by identity theft and then tax fraud. They 

have their tax refund stolen, and then they are delayed when the 

IRS sorts out the mess. And to the poor taxpayer, it is unfair and 

it is unjust. 

I want to show you a chart. This chart is the amount of identity 

theft cases in the IRS which the IRS received between 2009 and 

2011. It tripled. And the most recent data available from the IRS, 

through March 7, 2012, indicate that the agency is tracking nearly 

300,000 identity theft cases. 

Tax fraud through identity theft has become a street crime. Instead of stealing cars or selling illegal drugs, more and more criminals are looking with envy at the ease others have in taking other 

people’s money through tax fraud. And it can be committed anonymously. All the fraudster has to do—and let us not sweeten up that 

word—all the criminal has to do is to file a false tax return electronically then have the tax refund loaded onto a prepaid debit 

card. 

They never have to use a real physical address or even open a 

bank account. They do not have to use a crowbar or a gun or a 

knife. And the thief is nearly impossible to track down. 

The CBS affiliate in Miami even found that software to enable 

these kinds of schemes is being made available online for free. It 

has gotten to the point where criminals are now getting organized 

to institutionalize tax fraud by teaching classes of 50 to 100 people 

on how to file fraudulent tax returns. And it is clear that the problem is not confined to one area of the country. It stretches from 

Miami up to Detroit, and all the way to the coast of California. And 

we saw a huge spike in Tampa. 

Our local police, they are on the front lines trying to fight this 

battle, and they are the ones who originally notified us, as well as 

the victims, by saying, ‘‘What’s going on here? Street crime is going 

down.’’ 

Last September at Florida’s WFLA, there in Tampa, channel 8 

reported that the police had arrested 47 individuals and recovered 

$130 million in stolen Federal tax refunds from an organized ring 

of criminals. 

We are very grateful for our local police, because they are not letting the restraints, which we are going to talk about, of Federal inhibitions get in their way of going after these criminals. 

Now, the IRS has made strides in modernizing their internal systems to flag potential cases of identity theft, and the Department 

of Justice has successfully prosecuted a number of these cases. But 

this crime—this particular crime—keeps growing. 

According to the FTC, identity thieves are now using the Federal 

Treasury as their ATM of choice, with the agency citing tax fraud 

as the leading complaint filed by identity theft victims, as shown 

here. [See p. 67 in the appendix.] 

3 

Look at this. The dark gray column is credit card fraud. It is 

going down. Government benefits fraud, the white column, is going 

down. Tax or wage-related fraud is going up over the last 3 years. 

And so you can see that tax-related identity theft is rising, while 

credit card-related identity theft is declining. 

So here we are in this era of government cuts. We are going to 

need to make sure that taxpayer dollars are safeguarded from theft 

and abuse, and we need to stop these thieves from stealing. And 

this may be as much as a $10-billion rip-off of the taxpayer per 

year. 

I am grateful that the IRS has given serious attention to this 

issue, but the reality is that we are only starting to scratch the surface. And we are also here about the moral condition in this country, because when the police apprehended, in Tampa, a number of 

these criminals and talked to them, they did not think they had 

done anything wrong. They think that the fact that they did not 

use a crowbar or a knife or a gun or break into somebody’s home 

or stop them at a stoplight in a bad part of town or sell some 

drugs, that doing this electronically through a laptop onto a debit 

card they thought was okay, with the taxpayer getting ripped off 

to the tune of maybe as much as $10 billion. 

Well, we are here today not only to look in the past, but also try 

to figure out the possible solutions to this problem. I have introduced legislation, the Identity Theft and Tax Fraud Prevention Act. 

It is a start. The bill would give the IRS and identity theft victims 

the means to better detect and prevent this disastrous offense. And 

the IRS, to their great credit, has already implemented some of 

these reforms administratively. 

The bill would strengthen penalties for tax fraud through identity theft and the improper disclosure of taxpayer information. It 

gives all ID theft victims a unique personal identification number 

to include on their tax return in order to prevent fraud and avoid 

tax refund delays. 

It allows identity theft victims to opt out of the electronic filing 

and do paper filing. If it is done by paper, these guys—these criminals—cannot do it. But why should the taxpayer have to go 

through the laborious process of a paper filing? This is just one of 

the terrible consequences of what is going on. 

The legislation secures the Social Security numbers of deceased 

Americans so that the fraudsters cannot use them to file fake tax 

returns. 

I must say, the Commissioner of Social Security told me that he 

cannot administratively stop putting up dead people’s Social Security numbers immediately. All we want him to do is to delay it. 

And if you have to get to a subset, delay children’s on behalf of 

grieving parents, so that their child’s Social Security number does 

not go up on the Web and then that grieving family becomes a victim on their tax return. He said he cannot do it. Senator Durbin 

and I vigorously disagree. 

So we did the next best thing. We went to some of these genealogy websites. There are half a dozen major ones. And to their 

credit, a couple of them said that they will stop putting up the Social Security numbers, because that is another source of information for these criminals. 

4 

The bill further reallocates IRS resources for tax fraud prevention and detection, and it improves coordination between the IRS 

and local authorities, which has been a problem. Take, for example, 

the Tampa police. The Tampa police would like to have the ability 

of having the Federal Government, through the IRS, get into the 

act. They have to use existing statutes, State statutes, and the 

prosecutors to go after these criminals. 

IRS, of course, is trying to protect the confidentiality, which they 

do so judiciously and wisely, and yet that is why we need a new 

law to give them the ability to share this information with local 

law enforcement so they can go after these criminals. 

In the meantime, to the IRS’s credit, what they have done is, if 

the taxpayer victim will give them a waiver, then they can share 

this information with the local police so the local police can go after 

these criminals. 

The bill further extends the authority for the IRS to share this 

information with Federal and State prison authorities, and the IRS 

has already administratively shared that information with the prison authorities. 

So, with those reforms fully enacted, I believe that we can bring 

this problem under control. We can protect victims. We can stop 

this taxpayer rip-off. And so I am really looking forward to this discussion. 

[The prepared statement of Senator Nelson appears in the appendix.] 

Senator NELSON. Senator Burr, since Senator Crapo is under the 

weather, would you like to give an opening statement? 

OPENING STATEMENT OF HON. RICHARD BURR, 

A U.S. SENATOR FROM NORTH CAROLINA 

Senator BURR. Mr. Chairman, I would love to. And I want to 

thank you on behalf of the minority side for holding this hearing. 

I think if we can answer one question that you raised, it is 

solved—stop thieves from stealing. I am afraid that is a little more 

difficult than it sounds. And I think my brethren from Louisiana 

would be disappointed to find out that we might secure Social Security numbers. It may reduce the vote total of Louisiana elections 

if we do that. 

We are all concerned about tax fraud. It is occurring in our country, identity theft. The chair and I both know the cyber security 

threat that we are under, and that is part of the risk you take 

when you integrate the use of transfer by electronics the way that 

we do as a society. And we have a generation that banks and lives 

100 percent of the time electronically. 

The rapid growth of the Internet is welcome and it is useful. The 

genie is not going to go back in the bottle nor should it. However, 

criminals have long been using the Internet for fraud, and it is 

time for the government to catch up in the way that it ensures that 

we have the same capacity for rapid response as do criminals. It 

costs taxpayers money, it harms the privacy of citizens, and it 

threatens the military and industrial base through espionage in 

this country. 

What is happening with the IRS is one more indication that the 

government is struggling to keep up with the pace of change and 

5 

the volume of attacks. Government cannot fix this problem alone. 

You can only chase a fleeting enemy so much. We have to change 

the battlefield. We need to actively involve the dynamic private sector. 

The private sector is more nimble than government agencies, and 

it must be an essential partner in fighting back against extremely 

smart, often state-trained fraudsters who constantly morph their 

schemes to exploit our weaknesses. 

The problem is also an indication of our current tax code. The 

simpler and fairer we make our tax code, the easier it will be for 

citizens to avoid overpayment of taxes. 

I look forward to this important hearing. I look forward to learning more about how we can work with the private sector to close 

the security leak and the possible solutions in your legislation to 

the problem today. 

I thank the chair. 

Senator NELSON. Thank you, Senator. 

Our first panel is Steven Miller, the Deputy Commissioner for 

Services and Enforcement of the IRS; Ronald Cimino, Deputy Assistant Attorney General for Criminal Matters in the Tax Division 

of the Department of Justice; and Nina Olson, the National Taxpayer Advocate for the people at-large from the IRS. 

So I want to welcome you all. And in that order, if you will make 

about a 5-minute statement, your complete statement will be put 

in the record, and then Senator Burr and I will get into questions. 

Mr. Miller? 

STATEMENT OF STEVEN T. MILLER, DEPUTY COMMISSIONER 

FOR SERVICES AND ENFORCEMENT, INTERNAL REVENUE 

SERVICE, DEPARTMENT OF THE TREASURY, WASHINGTON, 

DC 

Mr. MILLER. Thank you, Chairman Nelson, Senator Burr. My 

name is Steven Miller. I am the Deputy Commissioner, as you 

mentioned, at the Internal Revenue Service. 

Over the past few years, identity theft has grown. It starts outside the tax system. And I should note, Mr. Chairman, that identity theft, as you mentioned, occurs in many places across the country, but does appear disproportionately in Florida. 

The IRS is confronted with the same challenges as every major 

financial institution in preventing and detecting identity theft. We 

cannot stop all identity theft. However, we are better than we 

were, and we will get better still. 

There is a delicate balance here. We cannot manually inspect 100 

million refunds to ensure that all are correct. We have to balance 

the need to make payments in a timely manner with the need to 

ensure that claims are proper and that taxpayer rights are protected. 

Let me begin by describing our efforts at up-front protection. In 

2011, the IRS identified and prevented the issuance of over $14 billion in fraudulent refunds. A great deal of this was identity theft. 

This year, we will stop even more returns. So far, we have identified almost 2 million returns for review. That number approaches 

the total for all of last year. Until we complete our review of these 

returns, we do not have a precise tally of how much is identity 

6 

theft, but it is likely that at least the majority of the above inventory is in that category. 

As evidenced by the number of returns stopped, we have improved our up-front screening filters to stop false returns before a 

refund is issued. 

We have done other changes as well. These changes include improvements to certain filters specific to identity theft but also in related areas, such as decedents, prisoners, returns held because the 

identity is previously suspected of having been taken, and returns 

rejected because somebody tried to file without the appropriate personal identification number. 

More specific to this filing season, we have also done the following. Despite substantial cuts in our budget, we have added hundreds of staff in this area and intend to add hundreds more. We 

issued special identification numbers, the so-called PINs, to expedite filing for those taxpayers whose identities have been stolen. 

There are 250,000 of those PINs that have been sent out at this 

point. 

We are also accelerating the matching of information returns so 

that we can help spot fraud up front. There are new procedures to 

allow us to match returns to lists of taxpayers’ information that 

law enforcement officials believe may have been stolen. We have 

improved collaboration with software developers and others to determine how we can better partner to prevent theft. And we are 

working with the Social Security Administration on modifications 

to their practice of making the death master file public. 

In addition, our criminal investigation division continues to increase its work in the area. In 2012, we will spend more than 

400,000 hours of investigative work in this area, almost double 

that of 2011. 

In my written testimony, you will see details of this work, including a description of a week-long sweep in January that led to over 

900 criminal charges across 23 States. We will also begin a pilot 

shortly that will improve the process for local law enforcement to 

obtain tax return data vital to their local law enforcement purposes. That is our work on prevention. 

We are also taking a number of actions to help victims of identity 

theft. We have implemented new procedures and, as I have mentioned, we have added staff to resolve cases faster. And, of course, 

the PINs that I spoke about earlier are going to assist identity 

theft victims with getting through our systems and filing future returns. We have also trained 35,000 of our employees to identify and 

deal with identity theft situations. 

Let me conclude. Our work here is critical. We see identity theft 

as affecting the way people view our agency. We cannot be lax in 

stopping fraud and in our treatment of those who have had their 

identities stolen. 

I cannot tell you that we will beat this problem in one year, Mr. 

Chairman, but I can say our work in 2012 represents real progress. 

They are not the end of our efforts. 

And, obviously, I will be more than happy to answer any questions. 

[The prepared statement of Mr. Miller appears in the appendix.] 

Senator NELSON. Thank you, Mr. Miller. 

7 

Mr. Cimino, I mispronounced your name, and I apologize. And 

thank you for your work at the Justice Department going after tax 

fraud. 

So, please, your comments as well. 

STATEMENT OF RONALD A. CIMINO, DEPUTY ASSISTANT ATTORNEY GENERAL FOR CRIMINAL MATTERS, TAX DIVISION, 

DEPARTMENT OF JUSTICE, WASHINGTON, DC 

Mr. CIMINO. Chairman Nelson, Senator Burr, and members of 

the subcommittee, I would like to thank you for the opportunity to 

appear before you this morning to discuss the Department of Justice’s efforts to combat tax fraud through identity theft. 

The Department greatly appreciates the commitment the chairman, the subcommittee, and the staff have made to highlight this 

serious crime of tax fraud by identity theft. 

Over the past few years, identity theft has become a major problem for Federal, State, and local law enforcement across the country. Combating identity theft is one of the Department’s top priorities, as set forth in our current strategic plan. And, as the Attorney General has said, our core mission is to pursue justice for 

criminal acts, and that pursuit includes justice for the victims of 

the crime. 

In criminal matters involving tax fraud by identity theft, the IRS 

investigates these matters and then refers them to the Department 

of Justice. Thereafter, the Tax Division supervises or directly prosecutes these matters. 

The Tax Division prosecutors work closely with assistant United 

States attorneys across the country to develop and prosecute these 

tax refund crimes. The cases are prosecuted by both Tax Division 

prosecutors and assistant United States attorneys, either separately or jointly. 

Federal task forces comprised of Federal, State, and local law enforcement personnel are often used. These task forces include representatives from the Federal Bureau of Investigation, the Secret 

Service, the Postal Inspection Service, IRS Criminal Investigation, 

as well as State and local law enforcement entities. 

The close working relationship developed among task forces’ 

partners enables the Department to share our knowledge and to leverage our resources in order to combat refund fraud. 

In every one of these cases, Federal prosecutors strive to ensure 

that victims’ rights are respected. While some prosecutions may 

only involve a single defendant or a small group of defendants, the 

majority of the cases involve large-scale identity theft schemes affecting many victims. Regardless of the number of the victims or 

the amount of the refund involved, the Department evaluates the 

overall merits of each case to ensure that the matter can be successfully prosecuted. 

There are cases in various stages in which the Department is investigating and prosecuting perpetrators of tax fraud by identity 

theft. As described in my written testimony, there are statutory restrictions on my ability to comment on the specific facts of these 

cases. However, I can assure the subcommittee that the Department is vigorously prosecuting these cases. 

8 

Since the beginning of the 2012 fiscal year, Federal prosecutors 

have indicted more than 80 individuals and convicted 21, many of 

whom filed multiple false returns claiming stolen identities. Courts 

have also responded to the seriousness of these crimes by sentencing defendants to significant terms of incarceration; in one instance, imposing a sentence of more than 15 years. 

As IRS Deputy Commissioner Miller has noted, stopping identity 

theft before it starts is critical. However, while prevention and 

early detection are always the first and best line of defense, the Department recognizes that prosecution is a critical and an effective 

tool when it comes to combating tax fraud. 

The Department is committed to working with its Federal, State, 

and local law enforcement partners to combat identity theft. When 

we prosecute these cases, we send a clear message to those who are 

engaged in this conduct that they will be held accountable for their 

actions. 

I would like to thank you again, Mr. Chairman, for the opportunity to appear before you, and I am happy to take any questions 

from you and the members of the committee. 

[The prepared statement of Mr. Cimino appears in the appendix.] 

Senator NELSON. And that is a true statement that prosecution 

deters these fellows, because it was not even the Department of 

Justice, it was the local prosecutors in Tampa who, once they got 

on it using State laws, which are limited tools—that is why we 

need to get to these—lo and behold, this crime went down, and the 

normal street crime, which is awful, the drugs, et cetera, then went 

back up. 

So clearly, prosecuting is a deterrent to this specific crime. 

Ms. Olson, you are the National Taxpayer Advocate. You are an 

independent voice for taxpayers in the IRS. Taxpayers are getting 

ripped off here, not to speak of the grief that they go through when 

their identity is stolen or the grief of a grieving parent whose child 

has just died and the child’s identity is stolen and then used for 

a tax fraud refund. Please share with us. 

STATEMENT OF NINA E. OLSON, NATIONAL TAXPAYER ADVOCATE, INTERNAL REVENUE SERVICE, DEPARTMENT OF THE 

TREASURY, WASHINGTON, DC 

Ms. OLSON. Well, thank you, Chairman Nelson, Senator Burr, 

and members of the subcommittee. Thank you for inviting me to 

testify today about tax-related identity theft. 

Since 2004, I have extensively written about the impact of identity theft on taxpayers and tax administration, and I have worked 

closely with the IRS to improve its efforts to assist taxpayers who 

have become identity theft victims. 

The IRS has adopted many of my office’s recommendations and 

made significant progress in this area with respect to the victims 

in recent years. Notwithstanding these efforts, however, identity 

theft continues to pose significant challenges for the IRS, and it 

has become an organized, large-scale operation. 

My written testimony addresses this subject in considerable detail. I will highlight four points that I think deserve particular emphasis. 

9 

First, I am concerned that the Federal Government continues to 

facilitate tax-related identity theft by making public the death 

master file, a list of recently deceased individuals, including children, that includes their full name, SSN, date of birth, date of 

death, and county, State, and zip code of the last address on record. 

There is some uncertainty about whether the Social Security Administration has the legal authority to restrict public access to the 

death master file records in light of the Freedom of Information 

Act. For that reason, I strongly support legislation that would 

eliminate the uncertainty by making clear that public access to the 

DMF can and should be limited. However, I want to make clear 

that my legal staff believes the Social Security Administration has 

at least a reasonable basis for seeking to limit public access to the 

death master file. And, if legislation is not enacted, I encourage the 

SSA to act on its own. 

Second, I am aware that some State and local law enforcement 

agencies would like more information to enable them to help combat identity theft and are seeking access to tax return information 

to do it. I have significant concerns about loosening taxpayer privacy protections and believe this is an area where we need to tread 

carefully. 

But I think we may have a solution. I am very pleased that the 

IRS Office of Chief Counsel recently advised that, because a return 

filed by an identity thief may be considered return information of 

the victim, the victim may obtain a copy of the bad return, as well 

as other information pertaining to the bad return. The victim then 

may authorize the IRS to share all of this information with State 

and local law enforcement agencies. 

I believe this approach strikes an appropriate balance, protecting 

taxpayer return information while simultaneously giving State and 

local law enforcement authorities more information to help them 

investigate and combat identity theft. 

Third, I am pleased that this filing season, the IRS has established a dedicated taxpayer protection unit to answer phone calls 

from legitimate taxpayers who have been caught up in our identity 

theft filters and to try to assist them. However, for the week ending March 16, the level of service on this unit’s phone line was 13.7 

percent, up slightly from 11.7 percent the week before, but meaning that only 1 out of every 7 calls was answered. And those callers 

who did get through had to wait on hold an average of 1 hour and 

11 minutes. More support for this unit is clearly required. 

Fourth and last, I want to squarely present a big picture issue 

that Congress and others will need to carefully consider if taxrelated identity theft and other refund fraud continues. At the 

same time that the IRS is being urged to do much more to combat 

identity theft, taxpayers are clamoring for the IRS to process returns and issue refunds more quickly. 

While there is still room for the IRS to make marginal improvements in both areas, the two goals are fundamentally at odds. 

Given the constantly evolving types of identity theft schemes, IRS 

identity theft filters will never be perfect. Therefore, we have to set 

our priority. If our overriding goal is to process tax returns and deliver tax refunds as quickly as possible for the vast majority of persons who file legitimate tax returns, it is inevitable that some idenVerDate Nov 24 2008 19:23 Feb 25, 2013 Jkt 000000 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 R:\DOCS\78502.000 TIMD
10 

tity thieves will get away with refund fraud, and some honest taxpayers will be harmed. 

On the other hand, if we decide to place a greater value on protecting taxpayers against identity theft and the Treasury against 

fraudulent refund claims, the IRS will need more time to review returns, and the roughly 110 million taxpayers who receive refunds 

will have to wait longer to get them, perhaps considerably longer. 

Alternatively, the IRS will require a considerably larger staff to 

enable it to review questionable returns more quickly. There is no 

way around these tradeoffs. 

Thank you, and I will be delighted to answer questions. 

[The prepared statement of Ms. Olson appears in the appendix.] 

Senator NELSON. Waiting for 1 hour on hold to get information 

or to report a case, I mean, that is just unconscionable. Who in this 

day is going to wait? 

So that means it does not get reported. 

Ms. OLSON. Right. 

Senator NELSON. Unless it is worked out at the local level. 

Ms. OLSON. These are taxpayers who have received a letter from 

us saying we are looking at your return and who have been 

stopped by our filters. And in that group of taxpayers are the legitimate taxpayers whose returns have also been stopped by our filters, and this unit is supposed to be dealing with those taxpayers. 

I think we did not estimate well how many calls were going to 

come in, but, as well, with all of these things that are happening 

with identity theft and other refund fraud, there are only a certain 

number of employees to go around and, if you remove them from 

one area to answer the phone in another, taxpayers are harmed in 

that other area. 

Senator NELSON. Senator Burr? 

Senator BURR. Thank you, Mr. Chairman. 

Ms. Olson, is there an obvious reason that the Social Security 

death list should be public? 

Ms. OLSON. I think that the origin of the publicity came from the 

insurance industry that found getting the information about deceased individuals helped protect against insurance-related fraud, 

claims against policies where the person had not died or someone 

was posing as the person, the deceased person. I do not know 

whether you can pose as a deceased person. 

And we think that narrowly crafted exceptions can be created to 

address these other areas of fraud. The courts over the years have 

recognized privacy interests in light of the Freedom of Information 

Act for family members of the deceased. 

Senator BURR. But if we focused on those areas of our economy 

that might need that information and crafted legislation saying, 

‘‘You have access, but you have to request it,’’ so that Social Security is able to check out whether this is a credible source that is 

seeking it, you do not think that there is anybody left out there 

who would be harmed in any way for this not to be available? 

Ms. OLSON. I think that is right. I think we are really talking 

about a delay. For taxes, we only need it delayed for 3 years, the 

date of death and 2 years after that, and then there are not really 

any tax issues pertaining to that number, by and large. 

11 

Senator BURR. Well, I think there is a big question as to whether 

that is beneficial to have it out there at any time. 

Ms. OLSON. Right. 

Senator BURR. Other than the economic reasons that it should be 

available. 

Mr. Miller, let me ask you, does MasterCard or Visa or any other 

private sector company have this problem as big as the IRS has it; 

do you know? 

Mr. MILLER. I do not know that, Senator. I would say there are 

differences, obviously, in terms of the ability to track transactions. 

For example, the credit card companies have a long number of 

trends of items that are being charged, where they are being 

charged, and that is a much easier trend to see than what we see 

on an annual basis. 

There are an awful lot of people who move in a given year, more 

than 10 million. There are 40 million people who change jobs, and 

there are births and deaths in a year. It makes for a more difficult 

sort of analysis than a credit card company that has the ability to 

track on a monthly basis where people are spending. 

Senator BURR. So let me ask you, is there a role for the private 

sector to play in partnership with the IRS to try to enhance the validity of the claims that are being made to you that these are actually real people? 

Mr. MILLER. Absolutely. I think there are various ways that 

could happen. I think we are talking now to the software developers—you will be able to speak to them on the second panel—and 

the debit card providers as well. We are talking to the banks. We 

have relationships with over 70 banks now. 

Banks have a very good ability to take a look to see what is going 

into their accounts, and they have know-your-customer rules that 

provide them with the ability to stop a lot of fraud. They sent us back more than $290 million last year. I will bet 

we beat that by far this year. So we are working with banks. 

Software developers we have made strides with, as well, in the 

past few months. We have worked with them to determine what is 

the information that they can utilize. During their tax filing process to spot fraud, we have also built a gateway for that information 

to flow into the IRS. 

So we are working with both of those, and I do think there is 

quite a bit of leverage that could be done there. 

Senator BURR. Mr. Cimino, how difficult is it to prosecute these 

cases? 

Mr. CIMINO. The difficulty ranges, I think, with the wide differences in some of the crimes that we are investigating. Some of 

these are interstate organizations. Others are very local crimes. 

We have had great assistance from local authorities, as the chair 

has said, providing information. 

Senator BURR. I was going to ask you. We have actually embedded Department of Justice attorneys into the system out there 

helping prosecutors, have we not? 

Mr. CIMINO. We have. Several things are occurring to try to deal 

with the most recent problems that we have seen. First of all, we 

are working as closely as we can with our IRS criminal investigators, and we have redoubled our efforts to offer resources from the 

12 

tax division to U.S. attorneys in terms of prosecutors and information about how these schemes are working in other jurisdictions. 

Senator BURR. Let me ask you. This was actually a program that 

Deputy Attorney General Cole approved where attorneys who work 

for various litigation divisions of the Department of Justice, such 

as the antitrust and civil divisions, could be transferred to U.S. attorneys’ offices throughout the country for a 6-month program. 

In fiscal year 2012, under the program, attorneys were assigned 

to the U.S. attorney’s offices throughout the country. Attorneys 

generally do not work on tax issues in this program. 

I understand that the Department of Justice litigation division 

opted out of this program, but that the tax division did not opt out 

and that, of the 76 attorneys who applied for the program, 33 of 

them are working the criminal component of the tax division. 

These are the same attorneys who handle identity theft prosecutions and are charged with stopping refund fraud, among other tax 

crimes. Thirty-three attorneys constitutes almost 15 percent of the 

entire criminal component of the tax division. 

Considering that the identity theft refund fraud issue is an ongoing and active issue, do you think it is wise to divert a significant 

portion of the criminal component of the tax division to deal with 

a non-tax issue? 

Mr. CIMINO. What we in the tax division did, Senator, is to place 

for 6 months our prosecutors and our civil litigators—they are actually both—of the numbers that you referred to, across the country. 

In part, when this was done, some of them were working more 

on their own cases in the jurisdiction. We tried to establish, where 

we could, that the work that they were working on would continue 

with even closer ability. 

In other instances, I think it will actually help U.S. attorney’s offices to have prosecutors in their jurisdictions to work with and to 

coordinate with other assistant United States attorneys. 

Senator BURR. Mr. Chairman, just one last question. I will open 

it to anybody who would like to answer it. 

If fraud using a Social Security number had the additional penalty of disqualifying that individual from participation in Social Security for life, would it have an impact on how many people chose 

to participate in fraud using Social Security numbers? 

Ms. OLSON. I do not know whether the people who are participating in this crime report their illegal income to Social Security 

so that they would be eligible for Social Security in the future. I 

do not know that people involved in this kind of crime think about 

the long-term consequences. 

They might think about jail terms, but receiving Social Security 

may be really far off. So I do not know. 

Senator BURR. I do not disagree with the chairman’s statement 

that penalties need to increase. 

Ms. OLSON. I agree with that. 

Senator BURR. I doubt there are many who, when they turn 65, 

turn down the Social Security check that they are getting. It might 

be an interesting thing for you to think about and respond back if 

you think it would have a positive impact. 

But I think we need to look outside the box if, in fact, we want 

to try to fulfill what the chairman said, and that is an active preVerDate Nov 24 2008 19:23 Feb 25, 2013 Jkt 000000 PO 00000 Frm 00016 Fmt 6633 Sfmt 6633 R:\DOCS\78502.000 TIMD
13 

vention mechanism. It will take all the above, but it will also take 

a penalty structure that makes somebody think twice before they 

venture in. 

I want to thank all three of you for your testimony. 

Thank you, Mr. Chairman. 

Senator NELSON. Thank you, Senator Burr. 

Let us go through a few things. One hour and 6 minutes for IRS 

to answer a call. What do we need to do to improve that? 

Mr. MILLER. Well, Mr. Chairman, we are going to have to add 

more people to that unit is the short answer. There are not that 

many calls coming in, but those that come in have to be answered 

faster than that. I quite agree. 

Senator NELSON. In the case that we have been looking at, when 

a fraudster files first and then walks away with a stolen refund, 

and then the legitimate taxpayer files and he is second in line, 

should it not be relatively easy for the IRS to measure the revenue 

loss as a result of that? 

So how much do you think has been stolen from the taxpayer? 

Mr. MILLER. Mr. Chairman, I do not have that number available. 

We may—and we talked to staff about this—we may be able to approximate the number. It would be an interesting thing to do, because, as I mentioned, banks are returning money. We are retrieving checks. And so it would have to be netted in some fashion. 

But of those cases that we have now determined who is the right 

person, we should be able to get you something in terms of the revenue that was related to the first checks that went out in those 

cases. 

So we can come back to you on that, Mr. Chairman. 

Senator NELSON. Well, in the case of Tampa, if it is over $130 

million and it is just in a short period of time of one filing just in 

one community, you can imagine how, if you multiply that nationwide, what this thing could be. 

I know the IRS does not endorse legislation, but what do you 

think about what we have filed as a way of trying to help you stop 

this crime? 

Mr. MILLER. I would think, Mr. Chairman, we would welcome 

the opportunity to talk about it. I would group some of the provisions into three categories. 

There are those, as you mentioned, that we support sufficiently, 

that we have sort of done something on already. For example, you 

have the liaison with the local law enforcement through our criminal investigation. That has happened right now, especially in Florida. At this point, we have approved that. 

Senator NELSON. So you agree with that as long as you get a 

waiver from the aggrieved taxpayer. 

Mr. MILLER. That is a second piece. The liaison with local law 

enforcement was one. The waiver aspect I would like to talk just 

a moment about, if I could. 

It is true, as you mentioned, Mr. Chairman, that we are limited 

in what we can supply to local law enforcement. We can supply to 

State tax officials tax information for tax charges. That does not 

exist, obviously, in Florida. We do not have that ability. We are not 

permitted to give that to local law enforcement. 

14 

What you have mentioned and what Nina mentioned as well is, 

we do have the ability, we believe, to seek a waiver from the victim 

and make that bad return that clogged them up in the system 

available to local law enforcement. 

So we are going to try to pilot something that would look like 

this. When local law enforcement pulls over someone in their car 

who has a batch of debit cards, has a batch of Social Security numbers, local law enforcement provides that batch of Social Security 

numbers to us. We will find some victims whom we know are the 

correct person from that list. We will then seek waivers on behalf 

of local law enforcement in order to provide a set of returns, probably not all of them, but a set of returns to local law enforcement 

so that they can pursue their local case. 

I think that is what we will try to do with this. It is not a perfect 

sort of fix, but it is a workaround that will help with this problem. 

Senator NELSON. It will not be a fix until you get statutory authority. 

Mr. MILLER. It is not a substitute for our unfettered ability to 

share with local law enforcement. The balance here, Mr. Chairman, 

is that—and one can argue it either way. 

There is a reason why we are limited in providing to local law 

enforcement in an unfettered manner. That is because we treat and 

Congress has treated tax return information as sacrosanct, as truly 

needing protection. 

So we would have to talk about what sort of safeguards would 

be put in place were a change of law to occur. 

Senator NELSON. Well, I do not want to get down in the weeds, 

but successful prosecution is down in the weeds, and if the local 

prosecutors only have the State statutes of theft and fraud, and 

they cannot get to the IRS return as evidence of that, then that is 

where the prosecutorial system of upholding the law breaks down. 

And so that is what we have to get at. 

Mr. MILLER. I agree, Mr. Chairman. So the waiver is one way to 

get part of the way there. We are more than willing to talk about 

other changes. 

I want to note one other aspect, and that is that the prisoner 

part of your bill, which we very much support, we actually no 

longer can share information with State and local prisons because 

that part of 6103 expired at the end of last year. 

We need that extended, and the administration has a proposal 

that would even improve a little bit upon what you are suggesting, 

and we would love to talk to you about that as well. 

Senator NELSON. Well, tell us about the success of 6103. 

Mr. MILLER. The success. I can tell you about the success of the 

prisoner work that we have done. 

Senator NELSON. That is correct. 

Mr. MILLER. They are in abeyance, because the ability has 

stopped. But we had agreements with 22 States to share data with 

them. 

For example, if they find that there—or if we find that one of the 

prisoners is engaged in this sort of theft, we were able to provide 

them with return information that would allow them to start on a 

disciplinary process with respect to those prisoners. That, we 

thought, was vital. 

15 

So that is the piece that expired at the end of last year that we 

truly could use help in extending. 

Senator NELSON. And you cannot go after those prisoners anymore because of that expiration? 

Mr. MILLER. We could prosecute each of the prisoners under filing false returns. It probably is a better way of doing it if we are 

able to work with the local prison authorities to engage and stop 

that going forward and create disciplinary action in the prison 

itself. 

Senator NELSON. Why don’t you share with everybody what the 

prisoners were doing? 

Mr. MILLER. We are a few years into prisoner fraud. We have 

stopped so far this year about 135,000 returns filed from prisoners. 

They got into the refund fraud business a little ahead of the general gang activity that we are seeing in Florida and elsewhere at 

this point, but they are doing basically the same sorts of things. 

Sometimes they are working with folks on the outside of the prison walls, sometimes inside, and sometimes it is strictly identity 

theft. Sometimes it is something different than that, where they 

are expanding on the earned income tax credit or other refundable 

credits to get more than they are otherwise entitled to. 

Senator NELSON. And were they getting the identities, the Social 

Security numbers, through the same means, through the Internet? 

Mr. MILLER. It will depend. And I wanted to mention that is one 

way of getting identities. One way is the death master file. There 

are numerous other ways. 

In fact, I would think that in Florida, at this point, a larger problem is the theft from institutions. We see it across the country. We 

see thefts from schools. We see thefts from hospitals, doctors’ offices. 

Wherever a Social is being used, that is a target for theft, and 

that is the start of this process. We do really need to tighten down 

the protection of Socials outside of the Internal Revenue Service, 

frankly, as a good way to stop some of this. 

Senator NELSON. What was the source of the numbers for the 

prisoners? 

Mr. MILLER. It will depend, Mr. Chairman. Some of it, I am quite 

sure, could have been the death master file. Some of it probably 

was stolen from hospitals and supplied to them, some of it from fellow prisoners, quite frankly. So it probably was not one single item. 

Senator NELSON. What do you think about the Social Security 

Commissioner who says basically that he is unwilling to take any 

steps to reign in his agency’s practice of publicly disseminating the 

Social Security numbers of deceased persons? 

Mr. MILLER. I will split that into two pieces, if I could, Mr. 

Chairman. First, we would love to see something done with respect 

to the death master file, and we are working with the Social Security Administration, and we are working with the administration 

more generally on what we can do about that. 

I cannot speak to what the Social Security Commissioner has 

said or done. 

Senator NELSON. Well, he says his hands are tied by the Freedom of Information Act. 

16 

Mr. MILLER. Then that is a legal question that is best answered 

by others than me. 

Senator NELSON. Well, I disagree with him. But maybe that is 

another reason why we need this legislation passed. 

In your testimony, you referred to a new procedure the IRS is developing to allow the local police access to falsified returns if the 

taxpayer, the true taxpayer, fills out that waiver. 

Would you describe that again for everybody? 

Mr. MILLER. Sure. That is actually, Mr. Chairman, what I was 

describing when I talked about the local law enforcement pulling 

over somebody with those Socials, supplying the IRS with the Socials, our looking at those Social Security numbers to see, do we 

know some true taxpayers in those categories? To the extent we 

find them, we reach out to those individuals, asking them, ‘‘Will 

you supply a waiver to local law enforcement of your 6103 rights 

so that we can get the information to them to prosecute?’’ 

That is what we will be piloting, and I would hope we would 

start it, frankly, in the Tampa area. 

Senator NELSON. Once your agency knows that a refund has 

been sent to a fraudster, so you know that is done, to what degree 

does the IRS work with the prepaid card companies and tax preparation software companies to track down this criminal? 

Mr. MILLER. We would work with the debit card companies and 

the software developers more to prevent it than after the fact, although we could do either, actually. And, as I mentioned in my discussion with Senator Burr earlier, we have worked with the software companies to determine what information they do have as 

part of the filing process that they can utilize to sort of track the 

fraud. 

There is a provision of the Internal Revenue Code that prohibits—and I am sure Mr. McKay can speak to this more intelligently than I can—but there is a provision of the Internal Revenue Code that limits the ability of software developers to utilize 

taxpayer information, for very good reasons. We do not want them 

utilizing that information for inappropriate commercial purposes. 

But we have found, a month or two ago, that we think they can 

utilize some of that information to spot fraud. We have now built 

a gateway from the software companies to the Service to provide 

information on that. 

We are trying to work with the debit card companies, as well, 

and we are not quite as far along in that endeavor. 

Senator NELSON. Just so everybody understands, if you do not 

have an address and this fraudulent tax refund is going to a debit 

card, it is very, very hard to track down this criminal, because you 

do not have an identity unless, like the Tampa police, they stop 

them on the street and find all this stuff in their car, in a stop unrelated to the tax fraud. 

Let me turn to you, Mr. Cimino. In Tampa, 47 arrests busted 

this tax-related identity theft ring. There has not been a single 

Federal indictment. Tell me about that. 

Mr. CIMINO. Actually, Mr. Chairman, in Tampa, there has been 

a series of very successful prosecutions of identity theft by the U.S. 

Attorney for the Middle District of Florida. I alluded to them in my 

written testimony. 

17 

Senator NELSON. But not this kind of theft. 

Mr. CIMINO. I believe that it is very similar, if it is not the exact 

thing that the chair is interested in. In the written submission, I 

talked about two cases that were part of this Federal and State 

task force in Tampa, which was called Rainmaker, where the U.S. 

attorneys were successful in convicting people in the midst of these 

refund schemes. And recently, the first person whom I mentioned 

in my testimony, Shawntrece Sims, was sentenced to a 9-year prison sentence for both tax fraud and mail fraud related to identity 

theft, just as we are talking about, the type that we are talking 

about. 

Senator NELSON. Then I want to let the record show that you 

have had a successful prosecution. 

Mr. CIMINO. Thank you. 

Senator NELSON. Well, as a prosecutor, do you have enough tools 

in your toolbox to go after these crooks? 

Mr. CIMINO. There is a wide variety of charges that our Federal 

prosecutors and tax prosecutors use. The charges range from those 

that are found in the Internal Revenue Code to those found in our 

regular criminal law. 

I think the answer is, yes, we have the ability to charge these 

crimes and to prosecute them. 

Senator NELSON. For the committee record, tell us the percentage of case referrals from the IRS that have led to prosecutions and 

convictions. 

Mr. CIMINO. Recently, for the past fiscal year, Mr. Chairman, I 

think there were 200 individuals referred and approved for prosecution. Over the last 3 years, the number has continued to increase. I can, for the staff, following the hearing, give you more 

specific data on that. 

Senator NELSON. All right. We would like that, and the record 

will be held open for that information. 

[The information appears in the appendix on p. 44.] 

Senator NELSON. In your testimony, you note that DOJ can formally deputize local law enforcement so that they can assist Federal law enforcement in the Federal tax investigation. 

In the local law enforcement, they are only permitted to access 

information related to the Federal tax investigation, and those who 

participate in the investigation are not permitted to utilize the tax 

information in a State or local tax investigation or prosecution. 

So what is the policy rationale for this firewall? 

Mr. CIMINO. This is, as you and others have spoken about, a provision in the Internal Revenue Code that provides privacy rights to 

each of our taxpayers, section 6103. 

The legislation, since 1976, struck a balance between the privacy 

rights of individuals and the genuine need of law enforcement, both 

Federal and State. 

When there is a task force, as you mentioned, and individuals 

outside the Federal law enforcement agencies participate, there is 

a procedure where they can be deputized as U.S. marshals and 

then they work and have access to and use of this tax return information as others in the Federal system do. But they are subject to 

the same restrictions, and that is that it must be used for Federal 

law enforcement. 

18 

Senator NELSON. Ms. Olson, what do you think about the proposed legislation? 

Ms. OLSON. Well, I think it is excellent. As noted in my testimony, I do caution about the 6103 exceptions. And I just have to 

say, as someone who has practiced in tax since 1975 and lived 

through what Congress did in 1976 to rein in the rampant exposure of tax return information all over the place in government, 

both Federal, State, and local, I really want us to be very careful. 

One thing that I would suggest, if you are going to make a statutory exception for State and local government, is that you put limits on its re-disclosure and its reuse so it is being used for the specific purpose of these investigations and prosecutions and not filtering out to other activities. And the rationale behind that is that 

taxpayers—we think that confidentiality has some impact on their 

willingness to tell us all their information, because they know that 

others are not going to get a handle on it. 

But otherwise, I think that the legislation is excellent. 

Senator NELSON. In your testimony, in your written testimony, 

you mention about the Social Security numbers of deceased people. 

And you know about some of the genealogy websites that have 

since voluntarily redacted the Social Security numbers. 

Now, the legislation would prevent the Social Security Administration from releasing the personal information of the deceased in 

the year of their death and the year following. So it would delay 

the publication of those numbers for a couple of years. 

Do you think that if that change is enacted in law, it will make 

it harder for these thieves to perpetrate this tax fraud? 

Ms. OLSON. I think in that area, it will. I would add one more 

year, because for surviving spouses, widows or widowers, they can 

file as married-filing jointly for 2 years, the year of the date of 

death and then the year after. So that really means 3 years: the 

date of death, the filing season for the date of death, and then the 

filing season for the year after. 

So you really have 3 years to delay the release. And then at that 

point, the IRS can disable that Social Security number. If, for some 

reason, somebody comes in with a tax purpose, we would have to 

work that case individually, but we can handle that. And then we 

can just block any returns that come in and then, eventually, the 

criminals will learn that it is not a profitable avenue for committing fraud, because we can block it. 

After that date, you could release the information, maybe redact 

all but the last four numbers still for the genealogists and things 

like that. 

Senator NELSON. Thank you all. This has been most illuminating. 

I want to call up the second panel, please. 

Good morning. I want to thank our second panel. Sal Augeri is 

a detective with the Criminal Intelligence Bureau, Tampa Police 

Department. 

By the way, have you seen Federal prosecutions in Tampa? 

Mr. AUGERI. I have seen offers given to the defendants in which 

they have pled. Shawntrece Sims went to trial, and it was a successful prosecution. 

Senator NELSON. All right. 

19 

Bernard McKay is chairman of the American Coalition for Taxpayer Rights and vice president of global corporate affairs for Intuit, the parent company for TurboTax. 

Ms. Kirsten Trusko is president and executive director of the 

Network Branded Prepaid Card Association. 

So, thank all of you for coming. Again, if you will give about a 

5-minute statement, then we will get into some questions. 

Mr. Augeri? 

STATEMENT OF SAL AUGERI, DETECTIVE, CRIMINAL INTELLIGENCE BUREAU, TAMPA POLICE DEPARTMENT, TAMPA, 

FL 

Mr. AUGERI. Good morning, Mr. Chairman. I am Detective Sal 

Augeri with the Tampa Police Department. And on behalf of Mayor 

Buckhorn, Chief Castor, and the city of Tampa, thank you. I would 

like to thank you for allowing me to testify this morning. 

The IRS is facing a major crisis, and criminals are stealing hundreds of millions of dollars from hardworking taxpayers. When I 

first became a police officer with the city of Tampa 27 years ago, 

crack cocaine was just hitting the streets, and, within 2 years, it 

had become an epidemic and no community was immune. 

Tax refund fraud mirrors the spread of crack cocaine. In late 

2010, members of the Tampa Police Department became aware of 

the severity of this crime in our community. Reports of identity 

theft increased, as well as encounters with individuals and groups 

committing tax fraud. 

Officers would conduct traffic stops and find individuals possessing various driver’s licenses and identification cards in different names. Large numbers of tax return debit cards and ledgers 

containing hundreds of names and Social Security numbers were 

found. Officers found groups of individuals in motel rooms filing 

fraudulent tax returns on stolen laptop computers. And many of 

our narcotic operations turned up evidence of tax refund fraud. 

Although tax fraud is not a local issue, citizens were coming to 

us for help, and we, in turn, contacted the IRS and quickly found 

they were of little assistance in these investigations. 

The tax code prevents the IRS from sharing information with 

local law enforcement. In addition, we were advised that there was 

a $100,000 investigation-to-prosecution threshold that had to be 

met on the Federal level. Most of the cases we encountered were 

from $9,000 to $10,000 in fraudulent filings, although numerous 

cases surpass the threshold and reach into the millions. 

Originally, suspects obtained the names and Social Security 

numbers of the deceased people from historical and genealogy 

websites. When that information became difficult to get, individuals who worked in assisted living facilities would obtain the necessary information on patients. Names were now being sold to the 

suspects from accomplices who worked in businesses, medical offices, schools, and anywhere that personal identification could be 

compromised. 

In April of 2011, we learned that several agencies were trying to 

address the growing tax fraud issue. A task force was created, and 

the United States Secret Service took the lead. Members of the 

20 

United States Postal Service, Hillsborough County Sheriff’s Office, 

and the Tampa Police Department joined forces. 

In the Tampa Bay area at that time, tax refund fraud was completely out of control, and it was estimated to be in the hundreds 

of millions of dollars. The task force concentrated on known suspects committing the fraud, as well as collusive businesses cashing 

the fraudulent checks for as little as $.20 on the dollar. 

On September 1, 2011, Operation Rainmaker took place with the 

issuance of five Federal search warrants targeting collusive businesses and suspects engaged in tax refund fraud, identity theft, 

and credit card fraud. Forty-seven arrests were made and several 

cars were seized, including a Mercedes, two Jaguars, a BMW, and 

a Bentley Rolls Royce. 

Despite all of the arrests and the compelling cases made, there 

have been no Federal indictments. More disturbing, there is nothing to indicate that most of those arrested have slowed their tax 

fraud activities. 

Due to the inability to obtain tax information, our investigations 

center on identity theft. In most instances, this is a very simple offense to investigate. But due to the lack of information-sharing, locating the victims was difficult and time-consuming. 

In addition, we had to locate video of the suspect using the debit 

card that was issued in the name of the victim of the initial identity theft. Cases would take 3 to 6 months to investigate, and suspects were not charged with the actual initial crime of the tax refund fraud. 

Only the IRS can levy this type of charge and that more serious 

penalty. Our local State attorney’s office and the U.S. attorney’s office have assisted us as much as possible. 

Postal workers have been threatened concerning the delivery of 

fraudulent tax returns, and FedEx stopped delivery of Green Dot 

debit cards to Florida in 2011. Neighborhood residents have been 

threatened by thugs to stay away from their mailboxes. 

The magnitude of the problem is staggering. In September of 

2011, we arrested an individual who committed $9 million in tax 

refund fraud. He was initially arrested on the State charge, bonded 

out, and, to date, has not been indicted. We have no reason to believe he has stopped committing this crime. 

The Postal Service has seized thousands of debit cards and U.S. 

Treasury checks. And, even if the debit cards had been seized by 

the Postal Service or blocked by the card companies, a paper check 

was generated by the Treasury and sent to the original address the 

cards had been destined to. 

A temporary benefit from the tax fraud was our exaggerated reduction in crime in our city. We pride ourselves on our crimefighting efforts, and we have been very successful over the years. 

Since tax refund fraud was so simple, most of the criminals started to get involved with it. In the past few months, we have seen 

the dramatic increase in violent crime targeting those involved 

with committing tax fraud. And due to the large amounts of money 

the suspects have, they have been targeted for armed robberies and 

home invasions. An attempted homicide last week in Tampa is rumored to be the result of unpaid tax money between two individuals involved in this crime. 

21 

The tax return process was constructed for law-abiding citizens, 

with a focus on expedient returns. The process needs to be revamped. The IRS will tell you they have filters and flags in place 

to detect the fraud, but there are countless examples of the system 

failing. In the first few weeks of this tax season, we had four 

Tampa police officers who were victims of identity theft and then 

subsequent tax refund fraud. 

Officer David Curtis, a Tampa police officer, killed in the line of 

duty in 2009, had his identity stolen shortly after his death. His 

wife, who was left with four young sons, had to navigate through 

that difficult process of straightening out and submitting her legitimate return. 

We will not be able to investigate our way out of this problem, 

and I believe this issue can only be corrected by fixing the point 

of filing. Criminals committing this type of fraud have no reservations about stealing the government’s money, and I believe that the 

legitimate American taxpayer would be outraged that their hardearned dollars sent to the government were subsequently being 

sent out by the government to those criminals at an alarming rate. 

And, therefore, we believe that the Federal Government needs to 

reexamine its method of accepting tax returns and the subsequent 

refunds issued to its citizens. 

Thank you. 

[The prepared statement of Mr. Augeri appears in the appendix.] 

Senator NELSON. Detective, thank you for your service to our 

community and to our country. 

Mr. AUGERI. Thank you. 

Senator NELSON. Is it true, in Tampa, when you all arrested 

some of these people, that they actually thought that they were not 

committing a crime? 

Mr. AUGERI. I do not know if it is so much they do not think that 

they are committing a crime. The majority of the people that we 

are involved with are already receiving Federal or State assistance 

to begin with, whether it is food stamps, medical, housing, and 

their impression is it is just more government money to be had. 

Senator NELSON. And did they say that to you? 

Mr. AUGERI. Yes, specifically, ‘‘The government’s got deep pockets.’’ 

Senator NELSON. You gave the example of the difficulty that the 

widow of a Tampa police officer is having, trying to raise four sons 

and needing a refund. Do you recall how long it finally took her to 

get that straightened out? 

Mr. AUGERI. I do not know the exact time, no, sir. 

Senator NELSON. Well, let us go to Mr. McKay. Thank you for 

being here. Share with us your statement. 

STATEMENT OF BERNARD F. McKAY, VICE PRESIDENT, GLOBAL CORPORATE AFFAIRS, INTUIT, INC., WASHINGTON, DC 

Mr. MCKAY. Thank you, Chairman Nelson. My name is Bernie 

McKay. I am here today as chairman of the American Coalition for 

Taxpayer Rights. ACTR is a 10-member coalition of the largest 

companies in the tax preparation industry serving U.S. taxpayers, 

and includes tax preparation firms, software developers, and financial institutions. 

22 

The members of ACTR are committed to high quality services, 

transparency in pricing and service terms, and have a long history 

of assisting many millions of U.S. taxpayers in their annual voluntary compliance obligations under our complex Federal income 

tax system. 

It is also this industry that answered the call of Congress back 

in 1998 to convert the U.S. income tax compliance method to a 

lower cost, more accurate, and faster return submission system, 

where 80 percent or more of all individual tax returns would be 

filed electronically instead of on paper. 

This industry worked cooperatively and collaboratively with the 

Federal Government over a period of a little more than a decade 

to achieve consumer adoption of electronic filing as the preferred 

method of income tax compliance in this country. 

The IRS and industry worked together to achieve this major objective, and, today, well in excess of 80 percent of all individual income tax returns are, indeed, filed electronically. 

One of the ACTR member companies is Intuit, at which I am the 

global chief public policy officer and vice president for global corporate affairs. The other ACTR member companies include Refund 

Advantage, H&R Block, Jackson Hewitt, Liberty Tax, Republic 

Bank, Santa Barbara Tax Products Group, 2nd Story Software, 

TaxSlayer Software, and Universal Tax Systems–CCH. 

All ACTR companies strictly adhere to IRS regulation 7216, 

which is the private sector corollary to the 6103 privacy statute you 

have been discussing this morning. All of our companies take the 

privacy and security of taxpayer data very seriously. All of our 

companies have business controls to detect and respond to suspicious activity, and to prevent and combat all types of tax fraud, 

which span all segments of the taxpayer services industry. 

The IRS and industry have been working together cooperatively 

for many years. It is important to note the realities of the modern 

world and the widespread growth of identity theft as a global criminal phenomenon. Identity theft takes many forms and strikes at 

every type of commerce, in both bricks and mortar and web-based 

environments. 

In the web-based world, it most routinely strikes at everyday email, seeking to deceive individuals and businesses and to attempt 

to steal and misuse sensitive information of all kinds. It is increasingly the focus of significant domestic and international efforts to 

combat it on both a privacy and security level, involving both prevention and law enforcement. 

ACTR supports and recognizes the central role that the IRS and 

the U.S. Department of Treasury play, assisted by the Department 

of Justice and local law enforcement, as part of their duty to protect the U.S. taxpayers from identity theft and fraudulent tax 

schemes. 

The IRS has thousands of auditors and criminal investigators. It 

has subpoena power, and many other tools to prevent or address 

fraud, including critical information databases built over decades of 

experience that only it can access. 

Notwithstanding the key role that IRS plays, industry recognizes 

it also has responsibility to detect and report suspicious activity 

and help prevent fraud. In fact, ACTR companies routinely report 

23 

suspicious activity to the IRS when they see it, although we lack 

the more complete picture that is obtained by the IRS when it analyzes multiple government databases so that they find criminal activity that they have known and seen patterns of before, and as 

new patterns are emerging. 

Across the private sector, privacy and security protection, together with fraud prevention, are major focuses of continuous private investment and dedicated effort. An example of the type of 

fraud that private companies are seeing and reporting are instances where identity theft has occurred and a criminal group relentlessly submits return after return that utilizes real taxpayer 

stolen identities, correct Social Security numbers, dates of birth, 

and copies of an apparently correct W–2. 

These groups are almost always using multiple tax preparation 

companies and modalities to insert numerous returns with the 

same data. Using information technology to identify such fraudulently filed returns is both lawful and appropriate and does not implicate any value of trust we in the industry have with our customers. 

Last year, ACTR companies reported that hundreds of thousands 

of returns should be reviewed by the IRS due to suspicious activity, 

and our financial companies stopped payment of hundreds of millions of dollars in refunds and saved the U.S. Government millions 

of dollars in those public funds. 

Mr. Chairman, let me turn for just a moment to the redoubled 

antifraud collaboration that is currently ongoing between the IRS 

and the private sector tax preparation industry. 

In October 2011, the 10 members of the American Coalition for 

Taxpayer Rights proactively reached out to the IRS to determine 

how we might work together with the IRS to an even greater degree to assist in combating tax fraud. The response from the IRS 

has been positive and encouraging, and the IRS has been appropriately sensitive to the confidentiality and privacy issues that are 

implicated anytime taxpayer information and tax return information is involved. 

Last fall, the members of the coalition met with Deputy Commissioner Steve Miller—who testified before you this morning—and 

many senior IRS staff and officials at their headquarters and 

mapped out a cooperative agenda for combating these challenges to 

the tax system. That is an ongoing work effort. 

Over several meetings, the IRS and ACTR member companies 

designated personnel to participate in two fraud task force working 

groups, one group made up of tax preparation and software developer companies, which I lead for the industry, while the other 

group is made up of financial institutions, which are typically involved in the receipt and processing of income tax refunds. 

This collaboration with IRS is an ongoing work effort, and it 

evolves over time as the IRS identifies appropriate ways in which 

we can help. 

In conclusion, Mr. Chairman, the reality is that the increase in 

the incidence of identity theft and associated fraud is likely to continue across all forms and modalities of commerce, not just here in 

the United States, but abroad as well, as criminal groups gain 

greater technological capability. 

24 

Unfortunately, the financial attractiveness of tax systems here 

and abroad is also likely to continue as a target for such criminal 

activity. The increased focus by the IRS on prosecuting tax fraud 

has led to the discovery of organized criminal rings in places such 

as Florida, New York, and Belarus. These crime rings and their 

use of identity theft to perpetrate tax fraud violate various title 18 

provisions and are rightly receiving increased attention by Federal, 

State, and municipal law enforcement. 

ACTR and industry companies are fully cooperating with law enforcement as they seek to break these criminal rings. We recognize 

there is no silver bullet. Rather, fraud prevention is a multi-layered 

defense and a team effort that involves the IRS, law enforcement, 

taxpayers, and the private sector. 

Mr. Chairman, ACTR wants to continue to be a part of the solution, and that is why we will continue to collaborate closely with 

the IRS for the benefit of the U.S. taxpayer to detect and combat 

tax fraud so that our real customers, the taxpayers, can continue 

to prepare and file their returns with ease, with peace of mind, and 

with security. 

Thank you, Mr. Chairman. 

[The prepared statement of Mr. McKay appears in the appendix.] 

Senator NELSON. Are you aware of conferences or seminars 

where people are taught to do this? 

Mr. MCKAY. We have read and seen the same news reports. In 

addition, as the industry has cooperated with local law enforcement 

authorities, such as those in Tampa, we are hearing this from them 

as well. 

Senator NELSON. All right. Let us ask the detective. Did any of 

this go on in Tampa, where they were actually doing seminars to 

teach them how to do this? 

Mr. AUGERI. I think the generalization of the seminars was a little misconstrued. What it is is groups of individuals, you can be 

looking at five, six, 10, 15 people, getting together and discussing 

having issues getting their fraudulent returns sent through. And 

then each person would give their little input on how to correct 

that problem to get that submission in. 

So they were actually working together in groups to beat the system. 

Senator NELSON. All right. Ms. Trusko? 

STATEMENT OF KIRSTEN TRUSKO, PRESIDENT AND EXECUTIVE DIRECTOR, NETWORK BRANDED PREPAID CARD ASSOCIATION, MONTVALE, NJ 

Ms. TRUSKO. Chairman Nelson and members of the subcommittee, my name is Kirsten Trusko. I am the president of the 

Network Branded Prepaid Card Association and appreciate the opportunity to appear before you today on behalf of the NBPCA and 

its members, and to testify on the important topic of tax fraud 

through identity theft. 

The NBPCA is a nonprofit trade association founded in 2005. 

Our membership includes the payment networks, card issuers, program managers, processors, and other third parties. Network 

branded prepaid cards bear the logo of the payment network— 

25 

American Express, Discover, MasterCard, or Visa—and are similar 

in use and function to credit and debit cards. 

They give consumers a safe, secure, and convenient payment 

choice to satisfy a range of uses from everyday transactions, such 

as retail purchases and bill payment, to receipt of funds, like payroll, government benefits, and now, more commonly, tax refunds. 

To obtain a card, the consumer may go to a branch or website 

of a financial institution or program manager or to a retail location 

to obtain a temporary prepaid card. These temporary cards are limited in functionality, as they do not provide cash access or permit 

additional value loads until the cardholder has provided verifiable 

personal information, as they do in opening an online bank account. Upon verification, a personalized card is issued, with an associated ABA bank routing number, and, like bank debit or credit 

cards, must be activated before it becomes fully functional. 

It is important to note that the USA PATRIOT Act and the Bank 

Secrecy Act impose specific compliance requirements on issuers of 

general purpose reloadable cards, and, under recent FinCEN rules, 

providers and sellers of prepaid cards must maintain substantially 

similar compliance programs. This is outlined in detail in my written statement. 

Issuers and providers of general purpose reloadable cards are required by law to collect four pieces of personal information from a 

prospective cardholder: name, street address, identification number, and date of birth. Identity is verified through some of the same 

services used by financial institutions to verify customer identity, 

and this process is the same as that used by a financial institution 

when a customer applies for a credit card or an online bank account. 

If the identity of the prospective cardholder cannot be successfully verified, the account is not established. 

The NBPCA recognizes that, like other consumer financial products, prepaid cards are susceptible to misuse. Fraudulent use of 

prepaid cards with tax refunds was flagged last year as a concern, 

which was a driver in the NBPCA’s forming of the Prepaid AntiFraud Forum. This forum brings together prepaid fraud experts to 

establish industry-leading practices, collaborate with law enforcement, and host educational forums for industry and government. 

Early this year, NBPCA’s antifraud forum compiled a confidential handbook with tax refund fraud mitigation strategies for its 

members. To avoid tipping off potential fraudsters on methods used 

to mitigate the use of prepaid cards in tax refund fraud, my statement today is limited in specific details, but I am happy to share 

more detailed information with you in a confidential briefing. 

Some key antifraud processes and fraud detection practices include watching for patterns of suspicious activity by the consumer, 

freezing accounts and filing suspicious activity reports when fraud 

is suspected, identifying hot zip codes and fraud trends across the 

country, using additional screening processes when incoming ACH 

loads are identified as being an income tax refund, and rejecting 

and returning suspicious ACH value loads. Industry efforts have so 

far resulted in over $1 billion of value loads to prepaid cards being 

returned to the IRS based on attempted fraudulent tax refunds. 

26 

In closing, as the subcommittee continues to examine this issue, 

the NBPCA would urge you to take into consideration the large 

number of legitimate filers who rely on prepaid products to receive 

their tax refunds quickly, safely, and cost-effectively. Any additional processes and procedures must be balanced against increasing the burden to the honest, hardworking taxpayers who are depending on the timely receipt of their tax refunds to pay bills or 

fulfill other family needs. 

Before imposing any additional burden to the consumer, there 

are ways that industry and IRS can work more closely together to 

prevent fraudulent tax returns on prepaid cards with minimal impact on the millions of honest filers. I would be happy to discuss 

these in a closed forum. 

Through our prepaid antifraud forum, the NBPCA remains committed to continuing our work with the IRS criminal investigation 

division, the Department of Justice, and the FBI to enable more effective information-sharing. 

Thank you for the opportunity to appear before you today. The 

NBPCA stands ready to work with you, and I would be happy to 

answer any questions you may have. 

[The prepared statement of Ms. Trusko appears in the appendix.] 

Senator NELSON. Well, the balance that you suggested is, in fact, 

what we are trying to find here: how to stop the criminals and not 

inhibit the system in any way from the vast majority being able to 

get a refund in a timely manner. 

Now, other than the things that you mentioned that your industry is doing, are there any identifiable markers in the software 

products that could help the IRS or law enforcement track down 

the criminals? 

Ms. TRUSKO. There are ways that we could work together and 

collaborate even more closely together. The Prepaid Anti-Fraud 

Forum is a new group that was started June of last year, and, with 

the members of the Network Branded Prepaid Card Association, all 

of the cards are issued by financial institutions. 

So I think as we collaborate further together on identifying what 

is already being used, what could be used more effectively, and 

identifying new ways to work together, we would welcome the discussion. 

Senator NELSON. But as of this moment, you cannot suggest— 

and, of course, we will continue to collaborate. 

Here is the problem. A refund comes to something that does not 

have an address, does not have an identification number, does not 

have anything. It is a prepaid debit card. Now, if it is detected because a false return has been filed and the victim suddenly figures 

it out, how can we help law enforcement to go after that criminal, 

whose only identity at this point is a debit card that is prepaid? 

Ms. TRUSKO. So when the consumer opens—goes to open a prepaid debit card, they supply their name, their address, their ID 

number, and their date of birth. 

Senator NELSON. Is that checked against some documentation? 

Ms. TRUSKO. It is. It is the same documentation and check that 

would be used when opening an online bank account. So, if the 

fraudster gets through that to open the account, there are additional checks used to validate the accounts. 

27 

Senator NELSON. Mr. McKay, what do you think about tax software products having an identifiable marker? 

Mr. MCKAY. Senator, one of the things that the IRS cannot do, 

and I would recommend probably you would not want any of us to 

do, is to publicly talk about particular trade craft methods and procedures that could tip off criminals and make it easier for them. 

But our coalition would be very happy to work collaboratively with 

you and your staff, as we are with the IRS, on looking at the ways 

that there can be increased prevention, as well as increased catching of fraud on the back end. 

The interesting thing is the dichotomy as we talk about the 

Internet world. The reality is that IRS has more ability through its 

filters to catch potential fraud in an electronically filed return right 

up front before it goes into processing than ever existed for paper 

returns. 

You have a Social Security match that the IRS makes that, if you 

do not pass that, the return gets rejected and sent back. There is 

an AGI match, where the taxpayer has to identify what their previous year’s AGI was, which is a concept by itself that many taxpayers are not readily familiar with, and, to respond, the individual 

must actually have some real information about the prior year’s return. 

There is a PIN, much along the lines of what you suggest in your 

legislation, that is already part of the way electronic filing takes 

place up front now. 

All of those filters exist today. While they are not foolproof—and 

there are returns that get through at the end that are a challenge 

on the processing end—— 

Senator NELSON. Let me stop you right there. How is there a 

PIN when, in fact, the PIN number that we have been talking 

about is something that, fortunately, the IRS has assigned the aggrieved taxpayer who has been ripped off? 

Mr. MCKAY. Well, this is a different PIN for a different purpose, 

and this is a self-selected PIN that the taxpayer has to give another identifier for in order to get that PIN. And this PIN is part 

of the standard up-front electronic filing of the return itself. 

And what I was suggesting is, simply, those filters never existed 

for paper. Any paper return that went through the mails was accepted and processed. 

But that does not mean that there is anything about that to rest 

on and feel that that is sufficient. However, there is a foundation 

that electronic filing is built on, and some experience now over the 

last couple of decades with the IRS of being able to see where 

things could also be tightened on the back end. 

So I think the collaborative work effort is now going to be critically important. 

Senator NELSON. Detective, what was the year that the Tampa 

police officer was killed? 

Mr. AUGERI. 2009. 

Senator NELSON. And this is 2012. So this has gone on 3 years. 

While we have been having this hearing, I just got an e-mail 

from Tampa Police Chief Castor that says that the widow, Kelly 

Curtis, still has not gotten this problem sorted out with the IRS. 

That has gone on 3 years. 

28 

Mr. AUGERI. I stand to be corrected. I am sorry. David Curtis 

was murdered in 2010. We had another officer killed in 2009. 

Senator NELSON. 2010. 

Mr. AUGERI. 2010. 

Senator NELSON. Going on 2 years. 

Mr. AUGERI. Correct. 

Senator NELSON. Ms. Curtis still has not gotten this issue 

worked out. And you can imagine, with four children, she needs to 

get a refund, and here it has been 2 years and she still has not 

gotten it sorted out. 

Now, this is why I wish the Deputy Commissioner of the IRS 

were still here, but I imagine he has turned on his television back 

in his office. And this is the kind of stuff that we are trying to get 

to, because taxpayers are being taken advantage of enormously. 

And in the case of this policeman’s widow, 2 years have gone by 

and she still cannot get it straightened out. 

Is it any wonder that people are frustrated? 

Detective, my sense from your testimony is that these are not 

just isolated instances. These are organized networks, gangs or 

syndicates. 

Mr. AUGERI. Yes. They are groups of people who network with 

other criminals, and the majority of the stuff we are seeing now 

has spread from Hillsborough County into the surrounding counties 

and then into the adjoining States of Georgia, Alabama, and Louisiana. 

Senator NELSON. Mr. McKay, you spoke very well about how the 

software industry recognizes its shared responsibility to detect and 

report. Does Intuit, the maker of TurboTax, have a legal or moral 

obligation to verify the identity of individuals filing Federal tax returns with the use of these products? 

Mr. MCKAY. Whether the company is Intuit or any of the other 

member companies in this coalition, the trust of the customer in 

their tax compliance process is the single-most important asset of 

the relationship with the company, of your reputation. 

We have a responsibility in this industry, we have a responsibility as a company, to do everything in our power to help ensure 

that the taxpayer is safe, that the taxpayer is able to have confidence that their information remains confidential and private. 

In fact, there is an interesting fact that is relevant here. There 

are many privacy statutes at the Federal level. But the toughest 

privacy law in the United States is what we know in the industry 

as IRS 7216. It is tougher than the privacy statute for banking, 

even for medical records. 

So there is not just a moral obligation. There is a legal obligation. But it also goes to if, in fact, integrity is your brand and, if 

integrity is the service that you are selling and the basis of trust 

with your customer, there can be no more important obligation. 

Senator NELSON. Detective, again, thank you for the dogged persistence of the Tampa Police Department in going after this. Since 

you all had this major bust of 47 people, describe how much it declined, for how long, and then when it started picking back up. 

Mr. AUGERI. The decline that we saw in the actual suspects getting their hands on checks and debit cards came toward the end 

of 2011, and I just believe it was because of the time of the year, 

29 

that it was a little more difficult to get the returns through. It was 

during that time that we saw a spike in the armed robberies and 

the home invasions of people who were known to have large quantities of money. 

This year, it has completely taken off again. The amount of cards 

that are coming in, the amount of addresses and personal identifiers we are coming across, is in the thousands. 

Senator NELSON. Now, what is that? The amount of personal 

identifiers; what are you speaking of? 

Mr. AUGERI. Officers make stops or, say, we do a search warrant 

on a narcotics house. Once you get in there, the specific crime you 

are in there for, you take care of that, but you come across these 

laptops and ledgers. 

Senator NELSON. I see. 

Mr. AUGERI. The debit cards, the medical records, and the 

amounts are staggering. 

Senator NELSON. So somebody in the hospital is in collusion with 

these guys, getting them the medical records so they can rip off—— 

Mr. AUGERI. Yes. 

Senator NELSON. Have you all been able to go and follow that 

trail and go back to whomever is ripping off the stuff in the hospital? 

Mr. AUGERI. We try to backtrack. I can tell you this. It is very 

difficult. There is a State threshold that they want for the charge 

of the identity theft. Then, obviously, there is the Federal threshold. For a lot of those times, the criteria, we just cannot meet them. 

To actually get enough to charge somebody, especially in the State 

court, is pretty demanding. 

We are used to handling the volume and, obviously, the Federal 

system just cannot handle that volume of suspects. 

Senator NELSON. Of these ringleaders that you might bust on a 

completely different charge, is it typical what you testified, that 

they are driving around in Bentleys and Mercedes and walking 

around with all the so-called accoutrements of wealth? 

Mr. AUGERI. Mr. Chairman, our criminals in Tampa, who are 

historically drug dealers, robbers, burglars, they are making money 

to the tune of $.5 million to $1 million, $2 million a year. And, 

when I first started looking at that, I thought it was an exaggeration, but when you dig into the cases, they obviously are at that 

dollar amount. 

The vehicles they are driving, the interiors of their homes, property that they are buying outside of the city of Tampa—they like 

to hang out and congregate in the areas where they grew up, but 

because there is so much trouble there, they like to move to the 

outer parts of the county. And they never had that kind of money 

before. 

Senator NELSON. Well, this has all been very illuminating, and 

I want to thank each of you for your involvement in this. 

Let us see if we can maybe get this legislation moving that will 

give some additional tools to law enforcement and the IRS in trying 

to get at what has become an obvious criminal problem. 

Thank you. The meeting is adjourned. 

[Whereupon, at 11:50 a.m., the hearing was concluded.] 

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