Tax Fraud Blotter: Waffles with a side of sham
Too much for the man; just sign here; candid con; and other highlights of recent tax cases.
Atlanta: Shanga A. Hankerson, 45, former owner of the Gladys Knight’s Chicken and Waffles restaurant in Atlanta and son of the music legend, has been sentenced to two years in prison for willful failure to remit payroll taxes.
In 1997, Hankerson opened his first restaurant; over the next several years, he expanded to at least three other locations in northern Georgia and Washington, D.C.
Hankerson was the sole owner of the businesses that operated the restaurants and from at least 2012 to 2016, he failed to fully remit more than $1 million in payroll taxes.
Hankerson, who was convicted after pleading guilty, was also sentenced to a year of supervised release and ordered to pay $1,039,310.65 in restitution.
Williamsburg, Virginia: Financial officer Michael J. Tiernan has been convicted on charges of filing false returns and failure to file a return.
From at least 2014 through 2017, Tiernan served as the financial officer for business entities related to Ford’s Colony, including Ford’s Colony Realty, a large resort community. For tax years 2015 and 2016, he filed federal income tax returns that falsely understated the income he received from these entities. Although he reported some earnings in both years, he offset his claimed income with high deductions that resulted in zero taxable income for both 2015 and 2016, and claimed to be insolvent to exclude the discharge of debt in 2015.
Tiernan received underreported income from the business entities of at least $289,401 in 2015 and at least $204,523 in 2016. Additionally, he failed to file a return for 2017 despite receiving $111,352 from one business. From 2015 to 2017, he deposited more than $1.6 million into his personal bank account and spent nearly all of these funds in a combination of checks and debit card transactions. Tiernan further prepared and filed business returns for the entities that concealed the true compensation that he received.
He faces a maximum of seven years in prison when sentenced on March 2.
Carrolton, Texas: Tax preparers Carlos Hinojosa, 37, Mario Jose Sanchez, 48, and Magda Lopez-Sanchez, 51, who previously all pleaded guilty to assisting in the preparation of false and fraudulent returns, have been sentenced.
Hinojosa was sentenced to 22 months in prison; Sanchez and Lopez-Sanchez were each sentenced to three years of probation. Each was also ordered to pay more than $6 million in restitution, jointly and severally, to the IRS.
From 2012 through 2016, the three worked as preparers at Miguelitos Tax Service. They prepared returns that included, among other false statements, false tuition expenses to make the clients appear eligible for education credits that they knew the clients were not eligible to receive. Hinojosa admitted that he generally included these false expenses on his clients’ returns without the clients’ knowledge.
To conceal the falsity of the returns, the three attempted to have clients sign forms justifying the expenses. Hinojosa admitted he did not explain the forms to clients and most had no idea what they were signing. He further admitted that he charged clients cash for preparing their returns — sometimes as much as $2,000 — without informing them that Miguelitos would also deduct a prep fee from their refunds.
The federal tax loss was $7,306,191.
Milton, Delaware: Freelance photographer Bruce Kevin Fleming has been sentenced to a year in prison for tax evasion.
Fleming pleaded guilty in August 2020. At that time, he had not filed federal income tax returns or paid any such taxes since 1981.
His sentence includes $192,529 in restitution to the IRS for income taxes due and owing from 2002 through 2016. Fleming was also ordered to make restitution to the IRS for $22,584 in payroll taxes that he withheld from his employees’ wages in 2016 and 2017 but never turned over to the IRS.
Authorities said that Fleming had the money to pay his income taxes for those years, as his net income totaled $393,000, but he lived beyond his means. Authorities added that a criminal investigation was initiated only after Fleming ignored numerous letters and assessments from the IRS.
Florence, South Carolina: Twelve individuals in seven construction-related companies have pleaded guilty to charges related to employment tax fraud and hiring unauthorized aliens.
The pleas are the result of a multiyear undercover investigation throughout the South Carolina coast by the IRS and Homeland Security Investigations.
The operation targeted those in the construction industry who used unlicensed check cashers to facilitate under-the-table cash payments to employees, many of whom were unauthorized aliens. The check cashers would also provide certificates of insurance falsely stating that the employees were covered under workers’ comp.
Each of the 12 defendants pleaded guilty to an information charging them with one felony count of conspiracy to defraud the U.S. and one misdemeanor count of unlawful employment of aliens.
At least $15 million in checks were cashed by these defendants, resulting in millions of dollars of total losses to the government. Based on the investigation, authorities said that at least tens of millions of dollars in tax losses have occurred throughout the South Carolina coast because of similar schemes.
In this scheme, a member of the construction company would meet with an unlicensed check casher in places like parking lots for retail stores or coffee shops. The construction company would give the check casher a business check in a certain amount made out to a company the check casher had created, and the check casher would give the construction company representative a bag of cash that would be used to pay the employees. In exchange for their services, the check casher held back a fee of some 3%.
To make it appear like the employees had valid insurance on job sites, the check casher would also provide a certificate of workers’ compensation insurance that was not actually valid for any of the construction employees. The parties agreed that the check casher would on paper claim to be a subcontractor who provided the employees and provided insurance.
In approximately 2019, various IRS-CI undercover agents embedded themselves in the Myrtle Beach area and recorded multiple interactions with the various defendants’ companies.
Each defendant faces a maximum of five years in prison for conspiracy to defraud the U.S. and six months in prison for unlawful employment of aliens. Each also faces a fine of up to $250,000 and $3,000 for each unauthorized alien, and three years of supervision to follow the term of imprisonment. Each has agreed to make restitution to the IRS, for a total restitution amount of just less than $3 million.
Detroit: A federal court has permanently enjoined area tax preparer Abdou Ndiaye from preparing federal income tax returns for others and from owning or operating any tax return business in the future.
Ndiaye and Ndiaye’s LLC, d.b.a. Pro Tax Services, consented to entry of the injunction. The order requires that Ndiaye and Pro Tax Services notify prior clients about the injunction and permits the U.S. to monitor compliance.
The civil complaint alleged that Ndiaye reported fabricated business losses or income on clients’ returns, causing those individuals to claim undeserved Earned Income Tax Credits, and claimed false filing statuses.
Bonifay, Florida: Ahmad T. Ismail has pleaded guilty to the subscription and transmission of multiple fraudulent federal income tax returns.
Ismail admitted that he filed false federal income returns for 2017 and 2018. He also agreed that he understated his gross income by thousands of dollars per year, failing to report all cash payments from patients at his medical practice over the two years. Searching his residence last year, law enforcement found $39,000 in cash along with hundreds of thousands of dollars in cash receipts from his practice.
The IRS estimates that the tax loss exceeds $100,000.
Sentencing is Jan. 20. Ismail faces up to six years in prison as well as payment of restitution to the IRS.