Feds Arrest 14 in Alleged Tax Refund Fraud Scheme

The defendants are charged with conspiracy to defraud the U.S. and theft of government property

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    Fourteen people were charged Wednesday in a tax refund scheme in which they netted more than $11 million over several years by stealing identities, filing bogus tax returns and bribing mail carriers, federal officials said.

    U.S. Attorney Paul Fishman said the scheme is one of the largest ever uncovered and involved more than 8,000 bogus income tax returns that sought more than $65 million in illegal refunds.

    "This is one of the fastest-growing and most pervasive schemes targeting the government today," Fishman said at a news conference. He estimated that fraudulent tax refunds cost the government about $2 billion per year.

    All 14 defendants were charged with conspiracy to defraud the government, which carries a maximum five-year sentence upon conviction, and theft of government property, which carries a 10-year maximum.

    The scheme was based in New Jersey and New York, but some defendants lived in Pennsylvania, North Carolina and Michigan, Fishman said.

    Since 2007, the group reaped more than $11 million from the scheme; however, investigators were able to retrieve $22 million in checks from the postal system before they were delivered, Fishman said.

    Most of the stolen Social Security numbers came from residents of Puerto Rico, who are issued the numbers but don't file federal tax returns in the U.S. unless they earned income from a U.S.-based company or from the government.

    The numbers would be used to file returns that also contained bogus employer information. Refund checks would be sent to addresses controlled by the group. Hundreds of checks were sent to a few addresses in Nutley, Somerset, Newark and Shirley, N.Y., according to the criminal complaint.

    One mail carrier already has been charged in the investigation. Bennie Haynes of Dayton was charged in January with theft of government property, bribery and mail theft by a postal employee.

    During a four-month period last year, prosecutors say, Haynes repeatedly met with someone he thought was involved in the scheme. In return for unspecified payments, he provided addresses to that person — an undercover law enforcement agent — and agreed to divert the tax refund checks generated by the false returns.

    Ten of the defendants were to make initial court appearances Wednesday in U.S. District Court in Newark. Others were scheduled to appear in court in Manhattan, Greensboro, N.C., and Grand Rapids, Mich. One defendant was already in custody in Texas on unrelated charges.

    Defendant Jose Torres, also known as Jose Quilestorres, was among several people charged Wednesday in a separate, similar case brought by the U.S. Attorney's Office in Manhattan. It was not immediately known if Torres had retained an attorney.

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