February 9, 2011
Justice Department Announces Indictment and Six Lawsuits Targeting False Claims for First-Time Homebuyer and Earned-Income Tax Credits
Actions Highlight Continuing Nationwide Effort to Halt
Tax Scams And Prosecute Fraudulent Tax-Return Preparers
WASHINGTON – The United States has filed six lawsuits in five states to stop tax return preparers from fraudulently claiming the first-time homebuyer tax credit and the earned-income tax credit, the Justice Department announced today. The filings of those civil injunction complaints coincided with the indictment of a Philadelphia man on criminal charges of fraudulently claiming the first-time homebuyer credit. All of these actions are part of the Justice Department’s continuing efforts to halt tax scams involving false claims for tax credits and to prosecute those who fraudulently file tax returns containing those claims.
“We are working hard to ensure that those who try to cheat our country by filing phony claims for tax credits do not get away with it,” said John A. DiCicco, Acting Assistant Attorney General of the Justice Department’s Tax Division. “Honest taxpayers will be pleased to see the Internal Revenue Service and the Justice Department continuing to investigate, prevent, and prosecute these types of schemes during the 2011 tax filing season. False claim cases are certainly a nationwide priority for the Tax Division. This kind of tax fraud is an insult to hard-working Americans who legitimately qualify for these tax credits.”
First-Time Homebuyer Tax Credit Cases
According to the indictment, Jonathan Brownlee of Philadelphia was charged with 16 counts of filing false federal income tax returns that contained fraudulent claims for the first-time-homebuyer credit. He allegedly obtained personal information about several individuals through false pretenses and used that information to make false claims for the credit to the Internal Revenue Service (IRS), along with requests that refunds be deposited into bank accounts that he controlled or could access. Brownlee allegedly knew the individuals whose names he used were not entitled to the credit because they had neither purchased a home nor signed a contract to do so. If convicted, he faces a maximum prison sentence of 80 years and a maximum fine of $4 million.
The indictment was announced by Zane David Memeger, U.S. Attorney for the Eastern District of Pennsylvania; Acting Assistant Attorney General John A. DiCicco of the Justice Department’s Tax Division; and Special Agent-in-Charge Eric Hylton with the IRS Criminal Investigation Division Field Office in Philadelphia.
In addition, three of the announced injunction complaints involved the first-time homebuyer credit:
- A complaint filed in federal court in McAllen, Texas, alleges
that tax return preparer Jose Cabrera and his business, JEC Business
Consulting of Pharr, Texas, prepare federal income tax returns
on which they falsely claim the first-time-homebuyer credit for
their customers. The United States seeks a civil injunction order
to stop them from improperly claiming the credit. The suit alleges
that Cabrera makes no attempt to determine if his customers qualify
for the credit and that he repeatedly claimed the credit on his
customers’ tax returns even though he knew the customers had not
purchased new homes. Cabrera allegedly claimed at least $985,000
in credits in 2009.
- The government has asked a federal court in Philadelphia to stop
Friday James, a former high school math teacher from Lansdowne,
Pa., from preparing any federal tax returns for others. The complaint
alleges that James and his business, Frika Tax Services, falsely
claim the first-time homebuyer credit and claim false business
expense deductions for his customers, many of whom are West African
immigrants with little or no knowledge of the credit. The government
alleges that James repeatedly claimed the credit on his customers’
returns when he knew they had not purchased homes within the applicable
time period and that he fabricated the date of purchase on forms
he submitted to the IRS. James allegedly claimed at least $1.2
million in credits in 2009.
- The Justice Department sued tax-return preparer Delois Warren of Greensboro, Ala., and her business, Branjalo Tax Service, to stop her from preparing federal tax returns for others. Warren allegedly claimed the first-time homebuyer credit on her customers’ returns even after they told her that they did not purchase homes in the applicable tax years. The suit also alleges that Warren prepared returns containing false information in order to fabricate higher tax refunds through overstated earned-income tax credits.
The first-time homebuyer tax credit was created by the Housing and Economic Recovery Act of 2008, which included a refundable tax credit for first-time homebuyers equal to 10 percent of the purchase price, up to $7,500, for home purchases completed in 2008. The taxpayer was to repay the credit interest free over 15 years. Congress extended the credit in the American Recovery and Reinvestment Act of 2009, increased the maximum allowable amount to $8,000, and eliminated repayment of the credit if the taxpayer retained the residence for more than 36 months. The credit expired in 2010, so eligible taxpayers may still claim it on their 2010 federal income tax returns.
To protect the U.S. Treasury from fraudulent claims for this credit, the Tax Division, the U.S. Attorney’s offices and the IRS have vigorously prosecuted those who have abused the credit. Examples of these criminal prosecutions in 2010 include:
- In December 2010, Kenneth Harris and
Lacrecia Ward of
Memphis, Tenn., pleaded guilty to conspiring to file false claims
against the United States by filing false tax returns claiming
the first-time homebuyer credit. Each of them faces a maximum
penalty of 10 years in prison and a fine of $250,000 upon sentencing.
- In December 2010, Latricia Ann Williams, Gezelle Helena Amaechi
and Shelton DeWayne Tanner were indicted by a federal grand jury
in Arizona for conspiracy, wire fraud and aggravated identity
theft. According to the indictment, the defendants filed 180
income tax returns falsely claiming more than $1 million in tax
refunds based on, among other things, false statements of eligibility
for tax credits such as the first-time homebuyer credit.
- In November 2010, Jeffrey Leon Ceaser of
Montgomery, Ala., pleaded guilty to conspiring to defraud the
United States and identity theft for his role in the filing of
158 federal tax returns that falsely claimed the first-time-homebuyer
credit and fuel tax credits. Ceaser faces a maximum of 25 years
in prison when sentenced. In December 2010, Ora Mae Adamson of
Montgomery pleaded guilty to the same charges before the same
- In November 2010, Mary Singleton pleaded guilty in a South Carolina
federal court to one count of assisting an individual in filing
a fraudulent claim for the first-time homebuyer credit. She faces
a maximum prison sentence of three years upon sentencing.
- In November 2010, Georgia Ann Cloud of Tallahassee, Fla., was
indicted on 17 counts of assisting individuals in filing fraudulent
tax returns with false claims for the first-time homebuyer credit
and one count of filing such a tax return herself.
- In October 2010, Roderick Smith was sentenced by a federal court
in Peoria, Ill., to 24 months in prison after having pleaded guilty
to wire fraud and filing a false tax refund claim with the IRS.
The indictment alleged that Smith falsely claimed on income tax
returns that his clients were entitled to the first-time homebuyer
credit. He was also ordered to pay $73,793 in restitution to
- In October 2010, Gregory Carter of Columbus, Ga., was indicted
on 25 counts of assisting in the preparation of fraudulent tax
returns that included, among other things, false claims for first-time-homebuyer
- In August 2010, Lois Torres of Uvalde, Texas, was indicted on
15 counts of assisting individuals in filing false federal income
tax returns falsely claiming the first-time homebuyer credit.
- In July 2010, Byron Meeks of Independence, Mo., was indicted
on 15 counts of filing false claims against the United States
for, among other things, fraudulent first-time homebuyer credits.
In December 2010, Meeks agreed to plead guilty to one of those
counts. He faces a maximum prison sentence of five years upon
- In April 2010, Kashawn Monique Savery of Los Angeles pleaded guilty to 10 counts of filing false claims against the United States. She admitted filing more than 200 false tax returns claiming more than $1.3 million in refunds based on fraudulently claimed first-time homebuyer tax credits and earned-income tax credits.
In addition, over the past year, the Justice Department has obtained civil injunctions against tax-return preparers on the basis of false claims for first-time homebuyer credits, including: Dianelys Armengol Guevara of Pembroke Pines, Fla.; Alberto Camejo of Hialeah, Fla.; and David Santiago, Paula Olivette Patrice, and Henry Ernesto Medina Jr. of Miami.
Earned-Income Tax Credit Cases
In addition to the lawsuit against Delois Warren discussed above, the Justice Department filed three other civil complaints seeking to stop tax-return preparers from filing false claims for the earned-income tax credit:
- The government asked a Texas federal court to bar two Houston-area
tax preparers, Christopher Helton and Marcia Johnson, from preparing
any more federal tax returns. The pair, who do business as M.C.
Tax Service, M.C. Tax Interprise and M.J. Tax Service, allegedly
claim false earned-income and fuel tax credits on their customers’
tax returns. The complaint alleges that the defendants routinely
prepare tax returns that either claimed the earned-income credit
for taxpayers who do not qualify for it or overstate the amount
of the credit for eligible taxpayers. Helton and Johnson allegedly
prepared tax returns claiming more than $1.5 million in earned-income
tax credits during tax years 2007 through 2009, and the complaint
describes fraudulent tax refunds based on false earned-income
credits as a “rampant problem” at M.C. Tax Service.
- The Justice Department sued Carmen Gonzalez of Allentown, Pa.,
who does business as Carmen Tax Services in New Brunswick, N.J.,
to stop her from preparing tax returns for others. According
to the complaint, Gonzalez fails to comply with due diligence
requirements imposed by federal law on tax return preparers who
claim the earned-income tax credit, and she falsifies her customers’
information in order to maximize their credits. She has allegedly
prepared at least 2,500 returns since 2007.
- A complaint filed in federal court in Miami seeks to bar Milagros Espinal of Hialeah, Fla., from preparing tax returns for others. The government alleges that Espinal claims improper or false tax credits, including earned-income credits, as well as fabricated or overstated tax deductions. She allegedly prepared at least 2,000 returns for the 2004 through 2007 tax years.
Originally enacted by Congress in 1975, the earned-income tax credit benefits low-income working individuals and families. The amount of the credit depends on several facts, including the individual’s filing status, annual wages and number of dependents. It is a “refundable” credit because, if the amount of the credit exceeds the amount of tax owed, the difference may be claimed as a tax refund by eligible persons.
Over the past decade, the Justice Department’s Tax Division has obtained hundreds of injunctions against tax-scheme promoters and preparers of fraudulent tax returns, including those with false claims for earned-income tax credits. For example, over the past year, the Justice Department announced injunctions or injunction complaints against the following individuals in cases involving the earned-income credit: Sony Ducasse of Greenacres, Fla.; Maritza Villanueva of Irving, Texas; Michael Brier of R.I.; Saloum Njie of Atlanta; Shirley Clark of Jacksonville, Fla.; James King of Dublin, Ga.; George Thomas Gaines of Aurora, Colo.; Aurelia Sanderson Johnson of Montgomery; Jody Ball of Bryson City, N.C.; Christopher Musyoki and Samuel Nganga of Cobb County, Ga.; and John Lewis, Artels James and Perry Wright of Birmingham, Ala.
More information about the Tax Division’s continuing efforts to shut down and prosecute fraudulent tax-return preparers can be found on the division’s website.