Tax Fraud Blotter: Secret ways
Pearl jam; that’s a whole lot of shingles; rocking their world; and other highlights of recent tax cases.
New York: Amir Bruno Elmaani, of Martinsburg, West Virginia, founder of the cryptocurrency Oyster Pearl, has pleaded guilty to tax offenses.
Elmaani admitted that he had secretly minted and sold for his own gain Pearl crypto tokens and that he did not pay income tax on certain crypto profits.
In 2017, he began promoting online a new cryptocurrency known as Pearl tokens. Using a variation of his online pseudonym “Bruno Block,” he planned to develop an online data-storage platform known as Oyster Protocol, which would allow users to purchase online data storage with Pearl tokens. Instead of using his real name, Elmaani operated almost exclusively online under the pseudonym and concealed his identity from prospective employees and business associates, never meeting them in person.
In October 2018, although the number of Pearl tokens was purportedly fixed, Elmaani used his access to the blockchain technology used to create the tokens to mint new ones, which he took for his own personal use, increasing the total volume of Pearl tokens. Shortly after creating the new tokens, Elmaani converted the Pearl tokens he had obtained to other types of crypto on an online marketplace or exchange. Trading in Pearl tokens halted on that exchange and the price of Pearl tokens held by investors dropped substantially. The tokens were subsequently delisted from the primary exchange where they were traded.
Elmaani used his friends and family to receive crypto and transfer funds to a bank account in his name.
He filed a 2017 return stating that he had only some $15,000 of income from a “patent design” business; he filed no federal return and reported no income in 2018. Nevertheless, Elmaani spent, in 2018, more than $10 million on yachts, $1.6 million at a carbon-fiber composite company, hundreds of thousands of dollars at a home improvement store and more than $700,000 for two homes, one of which was in the name of a shell company and the other in the name of two of his associates.
The federal tax loss was some $5,523,794.
He faces up to four years in prison and has agreed to pay restitution of at least $5,523,794.
Fort Myers, Florida: Roofing contractors David Aaron and Russell Ultes have pleaded guilty to tax evasion.
They co-owned Marlin Construction Group and in 2018 and 2019 diverted millions of dollars of customer checks made payable to Marlin by cashing them at local check-cashing businesses. Aaron and Ultes used the cash to pay personal expenses and caused Marlin’s books and records to falsely underreport gross receipts and income for those years.
Aaron and Ultes provided false information to Marlin’s tax preparers, resulting in the preparation of 2018 and 2019 corporate returns that did not report all the gross receipts and income. Because the income from the false returns flowed through to Aaron and Ultes’s personal returns, their 2018 and 2019 personal income tax returns were similarly false.
In total, they caused a tax loss to the IRS of more than $1.4 million.
Aaron and Ultes each face a maximum of five years in prison, a period of supervised release, restitution and monetary penalties.
Sumter, South Carolina: Maggie-Anne Boler has been sentenced to 30 months in prison in relation to submitting false returns and a fraudulent Paycheck Protection Program loan.
Boler promised friends and family that she knew a secret way to get them large refunds from the IRS and used her bogus system to prepare returns for herself, her disabled brother and others. She would claim huge unsubstantiated withholdings on the returns, generating refunds of as much as $44,000. Some of Boler’s family members were unemployed and had no actual withholdings during the year.
Once the fraudulent returns were discovered by the IRS, Boler’s friends and family were forced to repay the refunds and additional penalties and fees. Many of the relatives testified that Boler took a fee for preparing the returns and promised them that her methods were lawful and that she knew obscure rules that would get them large refunds.
She also received a $20,000 PPP loan based on her fraudulent claims. She took these PPP funds while also receiving thousands of dollars in South Carolina unemployment benefits during the pandemic.
She was also ordered to pay $53,696 in restitution to the U.S. Small Business Administration and the IRS.
The schemes defrauded the United States out of roughly $180,000.
San Antonio: Tax preparer Adela Cruz has been sentenced to 27 months in prison for assisting clients in the preparation and filing of false federal returns.
Between 2014 and 2017, she operated a local tax prep business where, to inflate clients’ refunds, she claimed false education credits, dependents and business profits or losses. Cruz did not sign these false returns as the preparer but concealed her involvement by using fictitious taxpayer emails. She also claimed false education credits on her own tax returns for 2015 and 2016.
Cruz was also ordered to serve a year of supervised release and pay a $1,500 fine and $129,239 in restitution to the United States.
Brisbane, California: Joseph Nubla and Henry Ku have been convicted of conspiracy to defraud the U.S. and Nubla was convicted of an additional charge of tax evasion, all in connection with a scheme to evade taxes on millions in business income.
Nubla is the president of Brisbane Recycling Company, a rock-crushing business. Ku was counsel for Brisbane and for Nubla. Between February 2009 and March 2015, Ku and his entities deposited checks written by Nubla from Brisbane, totaling more than $18 million. To avoid Brisbane paying corporate income taxes, Nubla expensed Brisbane’s payments to Ku’s entities as royalties for the use of heavy equipment purportedly owned by Ku’s entities. In reality, Ku had used the funds to purchase that equipment.
Ku also returned the funds from Brisbane’s checks to Nubla by money transfers from 2009 through 2016, by purchasing Nubla three homes and by writing Nubla cashier’s checks totaling $7 million pursuant to a fake loan. Nubla did not declare the money, and in just 2014 failed to report more than $5.8 million of income.
They each face a maximum of five years in prison and a fine of $250,000 for the conspiracy charge. Nubla also faces up to five years in prison and a $100,000 fine for the tax evasion charge. Both may also be ordered to serve an additional term of supervised release and pay restitution.
Worcester, Massachusetts: Tax preparer Kwasi Kwarteng, 51, has pleaded guilty to 13 counts in connection with preparing false returns.
From at least 2014 through 2018, Kwarteng, despite not being registered with the IRS, operated under the name KK Tax Service to file more than 1,195 returns in the names of clients, charging about $150 per return. He added false information to claim deductions for fictitious medical expenses, personal property taxes, gifts to charity, IRA contributions and unreimbursed employee business expenses. Kwarteng caused more than $500,000 in losses to the IRS.
The charges of aiding and assisting in the filing of false federal tax returns each provide for up to three years in prison, a year of supervised release, a fine of $250,000 and restitution to the IRS. Sentencing is Aug. 3.
Sioux City, Iowa: Exec Kevin Alexander has been sentenced to two years in prison for evading employment taxes owed by his company.
Alexander owned K&L Construction, a landscaping and construction company. He was responsible for filing quarterly employment tax returns and collecting and paying federal taxes withheld from employees’ wages. Between 2014 and 2017, K&L paid approximately $3.8 million in wages to its employees, of which some $1 million was withheld. Alexander did not pay those withholdings to the IRS.
When the IRS attempted to collect K&L’s unpaid employment taxes, Alexander submitted a form to the IRS concealing the full amount of K&L’s available assets.
He was also ordered to serve two years of supervised release and pay some $1.7 million in restitution to the U.S.
