Philly fraud; under development; ran but couldn’t hide; and other highlights of recent tax cases.
Philadelphia: Preparer Nvahbulai Quisiah has been sentenced to five years in prison for conspiring to defraud the U.S., preparing false client returns, wire fraud and identity theft.
Quisiah owned and operated First Premier Tax Service (also d.b.a. Kosh & Associates) and from 2010 through 2017 prepared returns for clients that fraudulently inflated itemized deductions, claimed fictitious Schedule C businesses and claimed false dependents for tax years 2009 through 2016. Quisiah also bought and sold the personal ID information of children to falsely claim the children as dependents on returns.
He was also ordered to serve three years of supervised release and pay $215,941 in restitution to the U.S.
Lawrence, Kansas: Building contractor Thomas S. Fritzel, 54, has been sentenced to a year and a day in prison and fined $25,000 for conspiring to deprive the city of Lawrence of sales tax revenues in connection with the development of a seven-story hotel near the University of Kansas campus.
Fritzel, part owner and manager of Oread Inn, was a party to an agreement with the city to finance the $40 million-plus hotel project. Oread was to pay all costs up front and to be repaid $11 million for public improvements. The money to repay Oread was to come from an incremental increase in property tax, a sales tax and an additional 1 percent tax on sales within a portion of the redevelopment district.
Fritzel admitted that he and others caused false monthly sales tax returns to be submitted to the state of Kansas. The reports classified certain sales as occurring within the redevelopment district when in fact they occurred outside the district.
The city of Lawrence filed a civil lawsuit against Fritzel seeking the lost revenue and the parties settled that case in 2017.
After completing his sentence, Fritzel will serve three years of supervised release.
Morgantown, West Virginia: Dr. Qingyun Sun has admitted to defrauding West Virginia University and filing a false return, both offenses arising out of his official travel to China.
Sun was a Chinese national employed by WVU as an associate professor and the associate director of the United States-China Energy Center at the university; through the West Virginia Development Office, he also acted as the governor’s assistant for China affairs. He was also employed by Synfuels Americas Corp., an energy conversion technology provider of coal-to-liquids and gas-to-liquids processes, located in Sterling, Virginia, but headquartered in Beijing.
From July 2011 to May 2015, Peabody Energy Generation Holding Co. in St. Louis paid consulting fees to Energy United LC, a consulting business Sun established in 2005. The scheme involved Sun’s operation of his consulting business through Energy United.
In 2015, Sun traveled to China on behalf of WVU and the WV Development Office to prepare for an upcoming visit to China by WVU representatives and to lead a West Virginia industrial delegation for a coal expo in Beijing. Sun booked both a coach flight and a business class flight for this trip, submitting a request for reimbursement to WVU for the coach flight and submitting a request for reimbursement to Synfuels Americas for the business flight. Sun only used the business class ticket for his trip.
In 2014, Sun filed a joint income tax return with his wife, grossly overstating his business-related travel expenses, as much of those travel expenses were paid for with a state purchasing card or reimbursed to him by WVU and Peabody Energy. He also failed to state any financial interest in, or authority over, a financial account in a foreign country; Sun had an interest in numerous financial accounts in China.
Sun has agreed to pay restitution to WVU, which no longer employs him. He also faces up to three years in prison and a fine of up to $250,000 for tax fraud and up to 20 years in prison and a fine of up to $250,000 for wire fraud.
Bridgeport, Connecticut: Preparer Veronica Huitzil has been sentenced to six months in prison, followed by one year of supervised release, for preparing false returns for numerous clients.
Huitzil assisted in the preparation and filing of more than 3,700 federal returns for the 2014 through 2018 tax years, many of which claimed dependents who were not dependents, deducted thousands in business losses for fictitious businesses, and included inflated or fabricated medical expenses, charitable contributions and employee business expenses.
The tax loss totaled $898,665. Huitzil, who pleaded guilty earlier this year, was ordered to make restitution.
Glendale, California: Armen Martirosyan, 62, a former overseas fugitive, has been sentenced to time served — 32 months in prison — for his role in a scheme where he knowingly opened more than a dozen bank accounts to launder nearly $2 million in fraudulently obtained refunds procured by filing returns with stolen IDs.
In April 2009, Martirosyan opened a bank account in his name knowing that it would be used to deposit refunds that were fraudulently obtained using stolen IDs. The IRS deposited $189,000 in 24 fraudulently obtained refunds into that account. Martirosyan signed blank checks from that account then gave the money to other schemers. He opened 14 other accounts that were used in the scheme and admitted to using some of the money for personal expenditures, including credit card payments, rent and online shopping.
The accounts that Martirosyan opened were used to launder some $1,866,000 in stolen refunds. The IRS seized $307,406 in Martirosyan’s illicit gains in this case.
He also filed a federal income tax return for himself for 2012 that falsely reported that he had worked for a national retailer. That return resulted in a fraudulent refund of $9,900.
After federal agents interviewed him, Martirosyan fled the U.S. before he was named in a federal grand jury indictment filed in November 2017. He ultimately was arrested in Colombia and extradited to the U.S. in August 2018.
This case is related to a scheme that involved conspirators who used false IDs and fake Republic of Armenia passports to open hundreds of bank accounts to launder funds fraudulently received from the IRS. Some 20 defendants, including a former Wells Fargo manager and a Glendale lawyer who have pleaded guilty, were involved in a scheme comprising some 7,000 fraudulent returns that cumulatively sought about $38 million in refunds; the IRS issued more than $30 million in fraudulent refunds. The fraudulent returns were filed and the bank accounts opened with personal ID information stolen from thousands of victims.
The federal investigation into the scheme has resulted in 14 convictions, and the seizure of at least five residential properties worth millions of dollars and more than $700,000 from bank accounts. Four defendants remain fugitives and one is scheduled for trial next year.
Martirosyan, who pleaded guilty in June to one count of bank fraud, was also ordered to pay $1,559,500 in restitution.
Fort Worth, Texas: A federal court has permanently enjoined Siza Mhlanga, d.b.a. Tax Refund Express, Camp Bowie Tax, Camp Bowie Tax Services, Tax Refund Company and United Tax Refunds, from owning or operating a prep business and preparing returns for others.
The complaint against Mhlanga, who consented to it, alleges that he repeatedly prepared returns that reported fake deductions for charitable donations, business losses, and fabricated education and energy credits. For example, the complaint alleges that Mhlanga prepared a customer’s 2017 return on which Mhlanga fabricated a business for the customer and reported a fake business loss of $21,720.
The complaint alleges that over the course of tax years 2017 and 2018 Mhlanga filed hundreds of returns and repeatedly understated clients’ tax liabilities.