Tax Fraud Blotter: Years in the making

Surrogate scam; truck stop; the nose job; and other highlights of recent tax cases.

Las Vegas: Tax preparer Jesus S. Castro, 39, has been sentenced to 46 months in prison for failing to collect and pay over federal employment taxes, causing a tax loss to the IRS of more than $9.6 million.

In 2014, Castro began operating Castro Enterprise, a tax prep business also known as Castro Enterprises or Castro Taxes Services. From at least 2015 to 2019, he failed to report wages and employment taxes owed for his employees. Additionally, he filed numerous returns on behalf of clients with incorrect deductions and credits.

Castro, who pleaded guilty in November, caused a total tax loss of $9,620,377.72.

He was also sentenced to three years of supervised release and ordered to pay $399,387.87 in restitution.

Hillsboro, Oregon: Bookkeeper Melodie Ann Eckland has been sentenced to prison for engaging in a multiyear scheme to defraud her nonprofit employer and her extended family.

From at least 2011 until April 2018, she was a bookkeeper for a local adoption and surrogacy agency. Her duties included maintaining agency books and records, managing payroll, filing employment tax returns and paying quarterly federal employment taxes. She also provided financial statements to the agency’s board of directors but did not have signature authority over the organization’s business bank account.

She made unauthorized wire transfers and wrote unauthorized checks to herself; she also transferred agency funds in the form of bonuses to her personal bank account. To conceal her scheme, Eckland maintained two sets of financial records. One version, which she provided to the board of directors, showed the business books as they should have been maintained. The other version showed the true payments she made to herself over the course of her employment.

To cover the money she had stolen, Eckland applied for loans from at least five lending agencies on behalf of the adoption agency, using the names of the agency’s owners without their permission. She altered agency financial records to make it appear as if she owned the agency and was authorized to enter into the loan agreements.

Beginning in 2016, Eckland stopped making the agency’s quarterly employment tax payments to the IRS and stopped filing employment tax returns. As a result, the agency owed more than $94,000 in past-due employment taxes.

To further conceal her scheme, Eckland stole funds from a bank account opened on behalf of her deceased brother-in-law’s estate. As executor, Eckland’s husband oversaw selling his brother’s assets, paying estate bills and preserving the remaining funds for the benefit of his brother’s children. Eckland forged her husband’s signature on unauthorized estate checks and made unauthorized wire transfers of estate funds to herself. She sent a portion of the more than $123,000 stolen from the estate to the adoption agency’s bank account to conceal her theft of agency funds.

IRS records indicated that Eckland did not report any of the embezzled funds on her federal income tax returns for 2013, 2014 and 2017. In 2015 and 2016, she reported more than $550,000 as “other income” but failed to pay the taxes due. Between 2013 and 2017, she failed to report more than $675,000 in income, resulting in a tax loss of more than $345,000.

Her victims — including the adoption agency and its owners, her brother-in-law’s estate and the IRS — suffered a total loss of more than $1.6 million.

Eckland, who pleaded guilty in June, was sentenced to 54 months in prison and three years of supervised release. She was also ordered to pay more than $1.6 million in restitution.

Aberdeen, Maryland: Tax preparer Charese Johnson has been sentenced to three years in prison for preparing false returns for District of Columbia residents as part of a nationwide tax fraud.

Johnson prepared 13 false income tax returns that collectively sought more than $6.6 million in federal refunds.

Between 2014 and 2016, scheme participants held seminars nationwide where they promoted the purported ability of taxpayers to use their mortgages and other debts to generate tax refunds. Information was then collected from clients and provided to Johnson and others to prepare phony returns. Those returns falsely claimed that banks and other financial institutions had withheld large amounts of income taxes from the clients, which entitled the clients to refunds. Actually, the financial institutions had paid no income to the clients or withheld any taxes.

Johnson tried to conceal her role in the scheme by convincing one of her clients to mislead the IRS about Johnson’s involvement in preparing the client’s returns.

More than a dozen others around the country have been charged or convicted for their involvement in this multimillion-dollar scheme.

Jesup, Iowa: Mark Warm, a former business owner who withheld federal taxes from his employees’ paychecks but did not forward the money to the IRS, has been sentenced to 21 months in prison.

Warm, who pleaded guilty in September, admitted that he owned Warm Trucking Inc. and that from 2013 through 2019 he failed to forward to the IRS the money for income and FICA taxes he withheld from his employees’ pay. He also admitted that he failed to pay to the IRS other taxes owed by Warm Trucking.

In total, Warm failed to send the IRS more than $1.4 million in taxes that his company owed.

He was also ordered to pay $1,406,561.66 in restitution to the IRS and serve three years of supervised release after the prison term.

Chicago: A federal court has permanently enjoined tax preparer Melissa Gasca and two related tax prep companies from preparing returns for others and from owning, operating or franchising any tax prep business in the future.

Gasca, individually and doing business as Su Familia Income Tax, as well as the related tax prep business FinancialPlus Services Inc., consented to entry of the injunction.

The complaint alleges that Gasca prepared returns that significantly understated clients’ tax liabilities by falsely inflating W-2 withholdings. The complaint further alleges that this fraudulent activity resulted in a federal tax loss exceeding $5 million.

The terms of the order require that Gasca and FinancialPlus Services Inc. send notice of the injunction to multiple individuals; it also permits the U.S. to conduct discovery against Gasca to monitor her compliance.

El Paso, Texas: Tax prep business owner Victor Manuel Gonzalez Estrada, a.k.a. Victor Manuel Gonzalez, 60, has been sentenced to a year of confinement for filing false personal returns.

IRS agents discovered that Gonzalez filed fraudulent federal income tax returns for multiple years. He claimed that his income from his tax prep business totaled $61,240 for tax years 2014 to 2016; court records revealed that Gonzalez earned more than $350,000 during that period. He also applied for and improperly received refunds through the Earned Income Tax Credit.

Gonzalez, who pleaded guilty in August, must file his accurate and amended taxes for 2013 to 2018.

Danville, Kentucky: Physician Christopher Marek has pleaded guilty to tax evasion.

Between April 2015 and June 2019, Marek underreported income earned through his business, Central Kentucky Plastic Surgery, on his annual federal income tax returns. He admitted to failing to list as income direct payments from patients, as well as only partially listing payments that the business received from insurance companies. Overall, Marek failed to list more than $887,000 that he received.

The federal tax loss was $283,687.

Sentencing is May 6. He faces up to five years in prison.