A world view; muscle head; in the hunt; and other highlights of recent tax cases.
Victorville, California: Former area tax preparer Stephen Jake McGonigle, 66, has been convicted for leading a multiyear tax fraud that spanned three continents and claimed more than $10 million from the IRS and dozens of state tax authorities.
McGonigle was found guilty of one count of conspiracy to defraud the U.S., one count of conspiracy to commit wire fraud and one count of aggravated ID theft.
He recruited others, including two co-defendants who previously pleaded guilty, to help convince the IRS and dozens of state governments to issue millions in fraudulent refunds. To perpetrate the scheme that began in 2013, McGonigle sent one co-defendant to Thailand to obtain fake ID documents that used stolen victim identities and then directed conspirators to use those fake IDs to obtain prepaid debit cards as well as numerous commercial mailboxes.
After having the prepaid debit cards sent to these untraceable mailboxes, McGonigle and his conspirators filed fraudulent returns using the ID theft victims’ Social Security numbers. Those fraudulent returns sought millions in refunds to be deposited into these prepaid debit cards or other bank accounts that the conspirators controlled.
With more than a decade of tax prep experience in Southern California, McGonigle used his knowledge to lead the scheme. The IP addresses used to file the fraudulent returns were traced back to various office spaces leased by McGonigle and to Costa Rica, where police surveillance and travel records showed that McGonigle and his conspirators opened an office and hired employees to help file additional fraudulent returns.
Sentencing is March 4. McGonigle will face up to 22 years in prison. Prosecutors have also secured guilty pleas from two co-defendants, who are scheduled to be sentenced in the coming months.
Decherd, Tennessee: Farmer Ross A. Rinkes has pleaded guilty to making and subscribing a false 1040.
Rinkes, the owner of Rinkes Angus Ranch, was in the business of purchasing and reselling chicken litter and selling crops to grain aggregators. For 2015 and 2017 through 2020, he provided his tax preparer with false information that led to material underreporting of his income for each year. His false individual income tax returns for the five years resulted in a total federal tax loss of $679,515.
Sentencing is March 7. Rinkes faces up to three years in prison, a fine of up to $100,000 and supervised release for up to one year. He has paid restitution to the IRS of $1,485,120.38, which includes unpaid taxes, penalties and interest.
Christiansburg, Virginia: Business owner James C. Jones Jr. has been convicted of evading employment taxes, filing false tax returns and obstructing the IRS.
From January 2008 through December 2009, Jones owned and operated Lifeline Ambulance Service Inc. and was responsible for paying to the IRS some $200,000 in federal income and Social Security and Medicare taxes withheld from employees’ wages.
He did not pay those withholdings to the IRS. In 2009, the agency assessed the unpaid employment taxes against Jones personally. To obstruct efforts to collect those taxes, Jones misrepresented that he did not have sufficient funds and assets to pay when, in fact, he owned multiple apartments and bank accounts in the Caribbean and a classic muscle car collection.
Jones continued to obstruct IRS collection efforts by filing false returns for 2013 through 2018 that did not report the rental income from his Caribbean properties and claimed false deductions. He also lied to the government that he did not have records responsive to a subpoena ordering him to produce foreign bank records, when in fact he possessed these records as the director and owner of multiple foreign holding companies.
Jones faces a maximum of five years in prison for tax evasion, three years for each false return count and three years for obstructing the IRS. He also faces a period of supervised release and monetary penalties.
Garden Grove, California: Chung Ku Sin, owner of three auto-repair businesses, has pleaded guilty to deliberately failing to report nearly $3 million in income to the IRS over seven years, causing a federal tax loss of almost $1 million.
Sin owns and operates three auto-repair companies and during the tax years of 2015 through 2021 received payments for services from these companies, including checks. He used a check-cashing business in Garden Grove to cash checks for services performed by these companies; he also used the check-cashing business to cash some $2,927,265 in checks made payable to his businesses.
He intentionally withheld from his tax preparer the business receipts and income that these companies received, instead reporting on his returns the business receipts and income that he had deposited into his business bank accounts. Sin further admitted to willfully making and subscribing to materially false federal individual income tax returns for 2015 and for 2017 through 2021.
The total tax loss for these years was $977,807. Sin has agreed to pay to the IRS this sum plus penalties and interest.
Sentencing is May 10, when Sin will face a maximum of three years in prison.
Lexington, South Carolina: Tax preparer Jeffrey Harmon has been sentenced to two years in prison for preparing and filing false individual income tax returns for himself and his clients.
Harmon owned and operated TFL Worldwide, a tax prep business through which he willfully prepared and filed returns for himself and clients that claimed fraudulent deductions. He consistently deducted non-deductible personal expenses, including, among other things, rent and mortgage payments, vacation travel, fitness equipment and golf, country and hunt club membership fees.
He caused a total federal tax loss of more than $300,000.
Harmon, who
New York: Swiss private bank Banque Pictet et Cie SA has admitted conspiring with U.S. taxpayers and others to hide more than $5.6 billion in 1,637 secret bank accounts in Switzerland and elsewhere and to conceal the income generated in those accounts from the IRS.
Banque Pictet has agreed to pay some $122.9 million to the U.S. Treasury.
Though Pictet Group adopted early measures to confirm that U.S. clients complied with U.S. law, from 2008 through 2014, the bank assisted certain U.S. taxpayer-clients in evading their U.S. tax obligations and otherwise hiding undeclared accounts from the IRS. From 2008 through 2014, the Pictet Group held 1,637 U.S. penalty accounts with aggregate maximum assets under management of some $5.6 billion in January 2008, on behalf of U.S. taxpayer-clients, who collectively evaded approximately $50.6 million in U.S. taxes.
The Pictet Group used a variety of means to assist U.S. taxpayer-clients in concealing their undeclared accounts, including:
- Forming or administering offshore entities in whose name the Pictet Group opened and maintained accounts, some of which were undeclared, for U.S. taxpayer-clients;
- Opening and maintaining undeclared accounts in the names of offshore entities formed by others for U.S. taxpayer-clients; and
- Opening and maintaining private placement life insurance policy accounts, also called insurance wrappers, held in the name of insurance companies but beneficially owned by U.S. taxpayers and improperly managed or funded through undeclared accounts at the Pictet Group.
The bank also transferred funds from undeclared U.S. taxpayer-client accounts to accounts nominally held by non-U.S. clients but still controlled by U.S. taxpayer-clients via fictitious donations, thus assisting U.S. taxpayer-clients in continuing to maintain undeclared funds offshore; provided traditional Swiss banking products such as hold-mail account services; and accepted IRS Forms W-8BEN or its own substitute forms that falsely stated or implied that offshore entities beneficially owned the assets in the undeclared accounts.
The $122.9 million consists of $52,164,201 to the U.S., $31,844,192 to the IRS and a $38,950,998 penalty.
