Putting the CTC related revenue loss in perspective

[Quixote]

Pete H and the lostheads have stolen about $2 million. That is less than 1% of the amount the government is having trouble giving away. From a press release dated 10/23/2008:

WASHINGTON — The Internal Revenue Service is looking for taxpayers who are missing more than 279,000 economic stimulus checks totaling about $163 million and more than 104,000 regular refund checks totaling about $103 million that were returned by the U.S. Postal Service due to mailing address errors.

[Demosthenes]

And here's an example of how lackadaisical the IRS is processing refund requests. Despite the CtCers' claim that the IRS reviews a return before processing refund checks, they obviously don't.

Updated: 10/30/08 08:11 AM

Niagara Falls businessman dupes IRS out of $503,263
Computer consultant pleads guilty after government uncovers scheme to file false tax returns
By Dan Herbeck

There was nothing complex or brilliant about the scheme that a Niagara Falls businessman used to cheat the Internal Revenue Service out of more than a half-million dollars.

Computer consultant Gregory S. Fisher simply lied on his tax returns for three years, vastly inflating the amount of federal income tax that had been withheld from his earnings.

The numbers submitted by Fisher were blatantly false, but the scheme fooled the IRS, which sent him three whopping refund checks — totaling $503,263 — for the tax years 2004, 2005 and 2006.

Only later — after federal agents learned that Fisher had cheated a local car dealer out of $1.2 million and used that money to buy gold bars and silver coins — was the tax fraud scheme uncovered.

So Fisher, 46, who lives in North Tonawanda, wound up pleading guilty Wednesday to two felony charges in Buffalo’s federal courthouse. He also agreed to pay more than $2.1 million in restitution to the IRS, West Herr Ford in Hamburg and other victims.

Agents from the Buffalo FBI office and the IRS Criminal Division began investigating the scam artist last year after learning of his suspicious dealings with the car dealer, said Assistant U. S. Attorney James P. Kennedy.

“We’re just very thankful that, in this case, we were able to recover pretty much everything that was stolen from the victims,” Kennedy said. “You rarely get this much restitution for the victims.”

But he and IRS officials declined to say exactly how Fisher was able to dupe the IRS, an agency that is generally regarded as paying close attention to detail when it comes to examining tax returns.

According to court papers:

• Fisher filed a 2004 tax return claiming that $308,459 in federal income tax was withheld from his earnings, when, in fact, the true amount was zero.

• He filed a 2005 return claiming $660,486 in federal income tax was withheld, when the true amount was zero.

• He filed a 2006 return claiming $341,974 in federal income tax was withheld, when, once again, the true amount was zero.

• The bogus tax returns led the IRS to send Fisher a total of $503,263 in refunds, which Fisher admitted in court Wednesday that he should never have received.

The IRS “is determined to stop these false tax refund schemes,” said Patricia J. Haynes, a special agent in charge of IRS criminal investigations in New York State. “The message this case sends is that participation in refund fraud schemes does not pay, and those who do will be prosecuted.”

IRS officials declined to comment when asked if Fisher submitted any documentation to back his false claims, how often such schemes are successful, or what steps are taken to prevent them.

Fisher and his attorney, James Monroe, appeared before U. S. Magistrate Judge Hugh B. Scott on Wednesday afternoon. Fisher pleaded guilty to felony charges of tax fraud and scheming to defraud.

Under federal sentencing guidelines, Fisher is likely to face a prison term of somewhere between two years and 51 months, Scott said.

“I’m prepared to accept the consequences,” Fisher told the judge.

According to Kennedy, Fisher’s schemes came to light last year, after Hamburg police told federal prosecutors and the FBI about the businessman’s dealings with the West Herr Automotive Group.

Fisher agreed to buy 49 vehicles from the dealership for use in a disaster-response business. Fisher told the auto dealer that he needed to have all of the vehicles upgraded with sophisticated computers, generators and other equipment.

Fisher said the upgrades would cost $18,000 to $116,000 per vehicle, and he told the dealer he wanted the upgrades to be done by VRTS Sales & Development, a company in Middlefield, Conn., according to court papers.

The deal called for Fisher to pay a portion of the upgrade costs and West Herr to pay the rest.

But VRTS turned out to be a shell company, owned by Fisher. The upgrade work was never done, and Fisher took delivery of only one vehicle from the auto dealer.

Fisher used more than $1.2 million that he scammed from West Herr to buy gold ingots, gold coins and about 200 gift cards for local stores, Kennedy said.

Once FBI agents caught up to him, Fisher admitted all his criminal activities “fairly quickly,” Kennedy said.

[LPC]

IRS officials declined to comment when asked if Fisher submitted any documentation to back his false claims, how often such schemes are successful, or what steps are taken to prevent them.

The silence speaks volumes.

[The Observer]

But silence doesn't necessarily confirm what one may be thinking. For instance, I could easily see that the silence may have everything to do with ensuring that the details of this scheme do not get publicized so that the IRS does not have to contend with with thousands of these cases appearing during the next filing season. If Fisher did find a loophole in the system that cannot be easily remedied by the IRS, it is not in the interest of the government to give out any information in that regard.

[Quixote]

IRS officials declined to comment when asked if Fisher submitted any documentation to back his false claims, how often such schemes are successful, or what steps are taken to prevent them.

The silence speaks volumes.

Any documentation submitted by Fisher would be return information under IRC §6103. There is no news media exception to the anti-disclosure rules. The IRS has been successfully sued in the past when a CI agent gave even more innocuous information to the press. If Fisher's case had gone to trial, the documentation he used would have become public when introduced as evidence.

IRS won't say what they're doing to prevent it for the same reason banks don't publish wiring diagrams for their alarm systems. The less the criminals know about counter measures, the better. In addition, the IRS depends to some extent on people thinking the IRS is more on the ball than it actually is.

[Demosthenes]

I don't see the Fisher case on PACER.

The reporter's name, though, rang a few bells for me. He wrote Timothy McVeigh's authorized biography "American Terrorist" which is sitting on my desk.

[The Operative]

Now, let's really put some perspective on it.

Report: IRS issued $1B in bad refunds in 2007
By JIM ABRAMS, Associated Press Writer

WASHINGTON – The government sent out more than $1 billion in fraudulent refunds last year and offered this explanation Thursday for the bad checks in the mail: The Internal Revenue Service has too few resources to pursue every tax fraud case.

IRS investigators never even looked at an estimated $742 million in fraudulent refunds, according to a report by the Treasury Department office that monitors the agency. When they did identify an additional $264 million in bad refunds, it was too late to stop them from being issued.

The report noted that the IRS must divide its limited resources among numerous areas of compliance. "However, this is a significant revenue loss to the federal government and that must be addressed," said J. Russell George, the Treasury's inspector general for tax administration.

The number of improper refunds filed appears to be growing rapidly, the report said. "The problem is becoming unmanageable, and the IRS cannot afford to continue handling it in the same manner as in the past," according to the report. It urged the tax agency to make the refund screening program — known as the Questionable Refund Program — a priority.

The IRS has estimated that the tax gap — the difference between taxes owed and taxes actually paid — at about $290 billion a year. Of that, about 57 percent comes from individuals understating incomes or overstating deductions and exemptions.

IRS spokesman Terry Lemons said the agency has made significant improvements over the past two years. "We stop the vast majority of fraudulent refunds and we prosecute people who try to cheat the system," Lemons said.

George's report recommended the IRS divert resources to go after such fraud cases. But Lemons said that could hurt other operations and mean fewer dollars from enforcement activities.

Lemons said the agency issued more than $470 billion in refunds in 2006 and 2007.

The report said the IRS fraud detection centers stopped more than $1.2 billion in fraudulent refunds in 2007, compared with $412 million in 2005, the last year the detection system fully functioned.

Because the system picks up only those refunds with higher dollar values, about 500,000 potentially fraudulent refunds did not enter the centers' screening process. Had those refunds been included, the centers would have identified an additional $742 million in fraud, the report estimated.

In 2006, because of a technical problem in the fraud detection system, the IRS succeeded in identifying and stopping only $189 million in fraudulent refunds while paying out an estimated $894 million, the report said.

The Treasury's inspector general, in a separate report Thursday, lauded the IRS for what it said was a "generally successful" 2008 filing season during which returns and refunds were processed in a timely fashion.

This report said the IRS did a good job in overcoming several obstacles, including changes involving the alternative minimum tax. The agency was also responsible for sending out checks to more than 130 million people as part of the economic aid plan signed into law in February.

[Famspear]

I don't see the Fisher case on PACER.

It's up now. United States v. Gregory Fisher (Western District of New York, Buffalo). See the dockets at:

1:08-cr-00315-WMS-HBS

and

1:08-cr-00315-WMS-1.

You can see the information, the waiver of the indictment, and the plea agreement.

[Demosthenes]

It's still not on PACER. I had to go through the local ECF system to access the case.

[Judge Roy Bean]

Let me get this straight - Bozo gets a half million from the IRS over three years and buys gold and coins in part with $1.2M from another scam and he stays in the country?

[Quixote]

Because the system picks up only those refunds with higher dollar values, about 500,000 potentially fraudulent refunds did not enter the centers' screening process.

Unless "higher dollar" means over $2,000, that isn't true. I've had customers with refunds as low as $1,700 delayed because the returns looked suspicious.

People who go from no job to a decent one in mid-year, say in June after graduation, will always have a suspicious amount of tax withheld unless they work for one of the rare few employers who use the partial year alternative withholding method. The regular withholding method works only if a person doesn't change brackets during the year.

Paradoxically, Fisher's refunds were not picked up by the system probably because they were so large. A return showing a tax liability of $2,000 and withholding of $4,000 is suspicious. One showing a tax liability of $200,000 and witholding of $250,000 or even $300,000 is less so.

[RyanMcC]

November 7, 2008

The self-proclaimed "Sultana" of the United States Moorish American Nation was convicted Thursday in U.S. District Court in Pittsburgh on charges of conspiring with six SCI-Pittsburgh inmates to file phony federal income tax returns.

Edna Gorham-Bey, 58, of Alexandria, Va., and the inmates conspired to make false claims showing that they were owed tax refunds. Gorham-Bey and one of the inmates, George Brooks, had the refunds mailed to a phony address for Brooks that Gorham-Bey controlled, prosecutors said.

Gorham-Bey deposited the checks in a bank account for Children's Hospitality House Inc., an organization she runs in Washington, D.C. Prosecutors said that Gorham-Bey, who had sole authority over the account, then withdrew all the refund money.

http://www.pittsburghlive.com/x/pittsbu ... 97297.html

[Imalawman]

I don't see the Fisher case on PACER.

The reporter's name, though, rang a few bells for me. He wrote Timothy McVeigh's authorized biography "American Terrorist" which is sitting on my desk.

Would that be right next to the copy of your "forthcoming" book which we all assume is still sitting on your desk. I have now been waiting for my signed, advance copy for 2 years.

[Burzmali]

IRS officials declined to comment when asked if Fisher submitted any documentation to back his false claims, how often such schemes are successful, or what steps are taken to prevent them.

The silence speaks volumes.

Any documentation submitted by Fisher would be return information under IRC §6103. There is no news media exception to the anti-disclosure rules. The IRS has been successfully sued in the past when a CI agent gave even more innocuous information to the press. If Fisher's case had gone to trial, the documentation he used would have become public when introduced as evidence.

IRS won't say what they're doing to prevent it for the same reason banks don't publish wiring diagrams for their alarm systems. The less the criminals know about counter measures, the better. In addition, the IRS depends to some extent on people thinking the IRS is more on the ball than it actually is.

Of course, if you did publish the wiring diagram, and a weakness was found, the system could be made stronger for not only you, but for everyone else that has a similar setup. Security through obscurity is no security at all.

[The Observer]

Of course, if you did publish the wiring diagram, and a weakness was found, the system could be made stronger for not only you, but for everyone else that has a similar setup. Security through obscurity is no security at all.

Sort of how Microsoft "improves" Windows by waiting for the hackers to find the holes and then patches them? That has a created a lot of good will in the consumer market for Microsoft.

[Burzmali]

Of course, if you did publish the wiring diagram, and a weakness was found, the system could be made stronger for not only you, but for everyone else that has a similar setup. Security through obscurity is no security at all.

Sort of how Microsoft "improves" Windows by waiting for the hackers to find the holes and then patches them? That has a created a lot of good will in the consumer market for Microsoft.

You know, I honestly can't tell if that's sarcasm

[Arthur Rubin]

Cue music: Hell Froze Over Today

[grixit]

Of course, if you did publish the wiring diagram, and a weakness was found, the system could be made stronger for not only you, but for everyone else that has a similar setup. Security through obscurity is no security at all.

Sort of how Microsoft "improves" Windows by waiting for the hackers to find the holes and then patches them? That has a created a lot of good will in the consumer market for Microsoft.

I heard the news today, oh boy
Ten thousand holes were found in Win XP
And though the holes were rather small
They had to count them all
Now they know how many holes it takes to break
A firewall

[Famspear]

I heard the news today, oh boy
Ten thousand holes were found in Win XP
And though the holes were rather small
They had to count them all
Now they know how many holes it takes to break
A firewall

I'd love to
turn you
on.................

[grixit]

I don't see the Fisher case on PACER.

The reporter's name, though, rang a few bells for me. He wrote Timothy McVeigh's authorized biography "American Terrorist" which is sitting on my desk.

Would that be right next to the copy of your "forthcoming" book which we all assume is still sitting on your desk. I have now been waiting for my signed, advance copy for 2 years.

Don't laugh, dude. In two weeks, the Guns N' Roses album "Chinese Democracy" (only 17 years in the making) will be released through Best Buy stores. So hell may be in the process of freezing over, and Demo's book may actually see the light of day.

Sure, as soon as there is actual democracy in China.