Post by Tony Enriquez / UKIPA Holdings on Feb 23, 2015 19:39:43 GMT 4
Ripping off your refunds: One little number fuels South Florida’s tax-fraud explosion
Like so many street-smart cyber thieves, Josue Pierre took a shortcut into the easy-money underworld of tax fraud.
Pierre exploited a special tax-filing designation from the Internal Revenue Service so he could use stolen IDs to file hundreds of fabricated online tax returns.
With an “electronic filing identification number” — EFIN for short — the former North Miami resident pocketed enough money to lease a luxury condo at downtown Miami’s Icon Brickell and tool around in a Land Rover.
Assistant U.S. Attorney Michael Berger, who has been on the front lines in South Florida fighting the dual crimes of ID theft and tax fraud, said the surge of crooks securing EFINs has dramatically pumped up the illicit refund industry.
“It’s like tax fraud on steroids,” Berger said.
The primary tool for Pierre and others in the tax-fraud racket is an obscure processing number issued by the IRS. For legitimate tax preparers, including certified public accountants and numerous mom and pop businesses, EFINs are essential for handling tax filings in the do-it-instantly digital age. But in the wrong hands, they amount to a computer pass for filing bogus returns in bulk — and they have fast emerged as a major problem for federal fraud-busters.
That’s largely because the IRS passes out the six-digit numbers like M&Ms, the Miami Herald has found.
In the last few years, records show the federal taxing agency has issued thousands of EFINs to purported electronic tax preparers throughout South Florida. ZIP codes in North Miami, North Miami Beach and Miami Gardens, which authorities say have become hot spots for refund fraud, have some of the highest concentrations. The number of EFINs in those mostly poor inner-city communities is similar to that in Miami’s traditional business districts, such as Brickell Avenue.
Criminals like Pierre, investigators say, have learned to exploit a filing option virtually unregulated by the IRS. With the exception of convicted felons, the IRS allows practically anyone to obtain an electronic filing ID to file multiple refund claims in others’ names.
As an FBI affidavit filed with the 2014 criminal complaint against Pierre noted, “The IRS does not have any specific required training or tests for an individual to obtain an EFIN.”
South Florida, already boasting the nation’s highest rate of identity theft, now has also secured the dubious distinction of being the country’s capital of tax-refund fraud — a rampant crime that costs the IRS a total of more than $5 billion a year in losses nationwide.
EFINs, federal investigators say, have poured gas on the tax fraud fire. They give scammers — armed with stolen ID info such as a Social Security number — the distinct advantage of filing refund claims without the need for personal identification numbers, or PINS, required of individuals filing electronic returns. Moreover, EFIN preparers can also submit multiple claims without an electronic W-2 income tax form.
Making big ripoffs easier: An EFIN allows criminals to order and obtain hundreds, even thousands, of prepaid debit cards from financial service companies in order to load tax refunds for “clients.” The cards eliminate the need for bank accounts, transfers or checks. They also help thieves avoid detection, allowing them to withdraw cash from ATMs just about anywhere — without ever having to produce personal IDs.
“EFIN filers can claim hundreds of refunds at a time and get their money from the IRS on pre-loaded debit cards almost instantly,” said Berger, the Miami prosecutor.
To defuse the EFIN explosion, IRS criminal investigators have worked closely with the FBI and U.S. Attorney’s Office to pinpoint suspicious operators in South Florida. By mid-2014, they had revoked a total of 117 EFINs used to file 166,000 phony refund claims, according to authorities.
Kelly Jackson, special agent in charge of IRS criminal investigations in South Florida, said her agency “is trying to take a more proactive approach” to prevent e-filers from submitting multiple fake claims.
“It prevents a lot of money from being hemorrhaged from the IRS on the front end so we don’t have to chase after it on the back end,” U.S. Attorney Wifredo Ferrer said.
The FBI, which began noticing an uptick in stolen IDs for tax- and other government-fraud scams in 2010, soon discovered that the traditional strategy of “cutting off the head of the snake” was not effective.
“This crime is a multiheaded hydra,” FBI Supervisory Special Agent Jay Bernardo said — carried out by a wide array of offenders ranging from dope dealers to corrupt cops. So agents in South Florida began targeting the biggest emerging problem: illegitimate electronic tax filers.
IRS Commissioner John Koskinen acknowledged an almost complete lack of oversight of EFINs. While he praised the law enforcement crackdown, he said Congress also needs to grant the agency more authority to set tougher standards for issuing them.
“A significant amount of the fraud is tied to tax preparers,” Koskinen said during a stop at the IRS regional office in Miami. “The IRS wants to require a minimum competency test for tax preparers — and so does the industry — but it needs congressional approval.”
Across the state, and most notably in Miami-Dade and Broward counties, identity theft has gone viral. Names, birth dates and Social Security numbers can be easily stolen from an array of electronic databases. It’s happened at schools, hospitals, medical offices, military bases and even social welfare agencies for Holocaust survivors. Rather than print out data, rogue employees sometimes snap smart-phone pictures of sensitive information. They can easily sell those IDs on the black market, investigators say, for $1 to $10 per name.
But to cash in big, many criminals realized a few years ago that it was more profitable to file hundreds or thousands of relatively modest but bogus tax refund claims using electronic filing numbers. Even if the IRS only issued a percentage of them, the money would roll in.
That was the lucrative scheme Pierre ran out of his waterfront Icon condo.
Before FBI agents busted him in 2014, Pierre filed claims seeking $700,000 in fraudulent refunds in just two years, taking advantage of the building’s Wi-Fi to avoid detection. FBI agents, trying to pin things on Pierre, soon discovered it was “not possible to determine exactly which apartment or user logged in and used the Icon’s wireless network,” according to court records.
But agents eventually solved the crime with a search warrant, analyzing a list of tenants in the 685-unit tower and then linking Pierre’s computer-generated tax returns to EFINs originally obtained by his girlfriend and younger brother. The punishment: Pierre, 31, began a 2 1/2 year prison sentence in December.
It was just one of many EFIN cases.
In 2012, federal agents busted a Miami Gardens-Fort Lauderdale network of three women who used an EFIN to file 2,000 phony tax returns seeking $11 million in refunds. The IRS paid out $3.5 million directly deposited into bank accounts held by the women under their businesses, A&G Tax Services and Majestic Financial.
Among the convicted women: Alci Bonannee, 38, who mostly worked from her Fort Lauderdale home. She was sentenced to one of the stiffest prison terms for the crime, 26 1/2 years.
In 2013, the U.S. attorney’s office broke up a 10-person South Florida ring specializing in filing refund claims in the names of dead people. The Miami-based organization used front businesses, such as Royal Tax Multiservices, Kings Enterprises and Tax Services and Imperial Tax Services, to submit $35 million in false tax returns, with the IRS paying out about $14 million in refunds.
Among the members was Corey Williams, 31, of Miami Gardens. Using someone else’s EFIN, he raked in more than $2 million, sometimes filing returns on his smartphone. He was sent to prison for more than three years after pleading guilty in 2014.
“Anybody who knew about it, you’d be a fool to not try to get involved with making some money,” Williams told CBS’ 60 Minutes. “I could wake up in the comfort of my own home, and just get on a laptop, do about 15 returns a day. Fifteen times $3,000 a return, that’s $45,000 a day.”
Of course, there is also plenty of old-school fraud going on as well.
Paper-filing scammers typically don’t submit batches of small claims. Instead, they often seek single big scores and the IRS — under congressional order to issue fast refunds — has paid some truly staggering claims in South Florida.
The IRS refunded about $1.8 million to three North Miami men posing as Capitol Records and Warner Bros. executives who lied that they each made about $9 million annually. Gerald Duverger, 37, Jean Louis, 42, and Jeaneno Florent, 39, won lottery-like refunds of about $600,000 each in 2012 and 2013. It wasn’t the IRS but a local bank that uncovered the scam and called authorities. Amazingly, Louis’ direct-deposit refund included an additional $3,500 in interest because the IRS exceeded a mandated 45-day deadline while reviewing his tax return.
“Sometimes people get lucky,” Louis, who once worked in a bait-packing company, said as he was arrested at a CitiBank branch in Miami Beach. All three men are now serving prison terms of between 3 1/2 to five years.
Freddie Howard, who taught children with disabilities before venturing into the tax field, specialized in filing paper returns because he could no longer meet the minimum qualification for an EFIN. Howard, formerly of Miami Lakes and Plantation, had a criminal conviction for tax fraud from a decade ago.
So when he reentered the tax business in 2011 after his prison term, Howard would leave his name off returns, letting his clients deal with the IRS.
“I didn’t want anything traced back to me,” he told the Miami Herald.
Last May, he pleaded guilty to fabricating dozens of refunds totaling $22 million for people who lied about huge gambling winnings at the Seminole Hard Rock Hotel and Casino in Hollywood. He said his clients were mostly divorced men who owed child support and had avoided filing tax returns in the past for fear of being garnished.
The IRS paid out $4.5 million to Howard’s clients, ranging from $60,000 to $1.4 million each. He would receive a kickback of 30 percent on each successful claim.
For a while, life was good. Howard and his family lived on a five-acre Davie estate next door to famous rapper Rick Ross. But life started to unravel when he was targeted in an FBI undercover operation in late 2013 for selling stolen IDs — ratted out by one of his clients.
Howard, who then cooperated with the FBI in a follow-up sting against an ID thief, received a four-year prison sentence after his assistance was taken into consideration. He surrendered in October after a family wedding.
Howard, 56, expressed regret about his crime. He insisted he wasn’t driven by greed — like so many others in this racket— as much as by pride.
“I was running out of money, and I was losing the house in Davie,” Howard said. “I didn’t want to let my family down.”
Read more here: www.miamiherald.com/news/local/crime/article10931081.html#storylink=cpy
Like so many street-smart cyber thieves, Josue Pierre took a shortcut into the easy-money underworld of tax fraud.
Pierre exploited a special tax-filing designation from the Internal Revenue Service so he could use stolen IDs to file hundreds of fabricated online tax returns.
With an “electronic filing identification number” — EFIN for short — the former North Miami resident pocketed enough money to lease a luxury condo at downtown Miami’s Icon Brickell and tool around in a Land Rover.
Assistant U.S. Attorney Michael Berger, who has been on the front lines in South Florida fighting the dual crimes of ID theft and tax fraud, said the surge of crooks securing EFINs has dramatically pumped up the illicit refund industry.
“It’s like tax fraud on steroids,” Berger said.
The primary tool for Pierre and others in the tax-fraud racket is an obscure processing number issued by the IRS. For legitimate tax preparers, including certified public accountants and numerous mom and pop businesses, EFINs are essential for handling tax filings in the do-it-instantly digital age. But in the wrong hands, they amount to a computer pass for filing bogus returns in bulk — and they have fast emerged as a major problem for federal fraud-busters.
That’s largely because the IRS passes out the six-digit numbers like M&Ms, the Miami Herald has found.
In the last few years, records show the federal taxing agency has issued thousands of EFINs to purported electronic tax preparers throughout South Florida. ZIP codes in North Miami, North Miami Beach and Miami Gardens, which authorities say have become hot spots for refund fraud, have some of the highest concentrations. The number of EFINs in those mostly poor inner-city communities is similar to that in Miami’s traditional business districts, such as Brickell Avenue.
Criminals like Pierre, investigators say, have learned to exploit a filing option virtually unregulated by the IRS. With the exception of convicted felons, the IRS allows practically anyone to obtain an electronic filing ID to file multiple refund claims in others’ names.
As an FBI affidavit filed with the 2014 criminal complaint against Pierre noted, “The IRS does not have any specific required training or tests for an individual to obtain an EFIN.”
South Florida, already boasting the nation’s highest rate of identity theft, now has also secured the dubious distinction of being the country’s capital of tax-refund fraud — a rampant crime that costs the IRS a total of more than $5 billion a year in losses nationwide.
EFINs, federal investigators say, have poured gas on the tax fraud fire. They give scammers — armed with stolen ID info such as a Social Security number — the distinct advantage of filing refund claims without the need for personal identification numbers, or PINS, required of individuals filing electronic returns. Moreover, EFIN preparers can also submit multiple claims without an electronic W-2 income tax form.
Making big ripoffs easier: An EFIN allows criminals to order and obtain hundreds, even thousands, of prepaid debit cards from financial service companies in order to load tax refunds for “clients.” The cards eliminate the need for bank accounts, transfers or checks. They also help thieves avoid detection, allowing them to withdraw cash from ATMs just about anywhere — without ever having to produce personal IDs.
“EFIN filers can claim hundreds of refunds at a time and get their money from the IRS on pre-loaded debit cards almost instantly,” said Berger, the Miami prosecutor.
To defuse the EFIN explosion, IRS criminal investigators have worked closely with the FBI and U.S. Attorney’s Office to pinpoint suspicious operators in South Florida. By mid-2014, they had revoked a total of 117 EFINs used to file 166,000 phony refund claims, according to authorities.
Kelly Jackson, special agent in charge of IRS criminal investigations in South Florida, said her agency “is trying to take a more proactive approach” to prevent e-filers from submitting multiple fake claims.
“It prevents a lot of money from being hemorrhaged from the IRS on the front end so we don’t have to chase after it on the back end,” U.S. Attorney Wifredo Ferrer said.
The FBI, which began noticing an uptick in stolen IDs for tax- and other government-fraud scams in 2010, soon discovered that the traditional strategy of “cutting off the head of the snake” was not effective.
“This crime is a multiheaded hydra,” FBI Supervisory Special Agent Jay Bernardo said — carried out by a wide array of offenders ranging from dope dealers to corrupt cops. So agents in South Florida began targeting the biggest emerging problem: illegitimate electronic tax filers.
IRS Commissioner John Koskinen acknowledged an almost complete lack of oversight of EFINs. While he praised the law enforcement crackdown, he said Congress also needs to grant the agency more authority to set tougher standards for issuing them.
“A significant amount of the fraud is tied to tax preparers,” Koskinen said during a stop at the IRS regional office in Miami. “The IRS wants to require a minimum competency test for tax preparers — and so does the industry — but it needs congressional approval.”
Across the state, and most notably in Miami-Dade and Broward counties, identity theft has gone viral. Names, birth dates and Social Security numbers can be easily stolen from an array of electronic databases. It’s happened at schools, hospitals, medical offices, military bases and even social welfare agencies for Holocaust survivors. Rather than print out data, rogue employees sometimes snap smart-phone pictures of sensitive information. They can easily sell those IDs on the black market, investigators say, for $1 to $10 per name.
But to cash in big, many criminals realized a few years ago that it was more profitable to file hundreds or thousands of relatively modest but bogus tax refund claims using electronic filing numbers. Even if the IRS only issued a percentage of them, the money would roll in.
That was the lucrative scheme Pierre ran out of his waterfront Icon condo.
Before FBI agents busted him in 2014, Pierre filed claims seeking $700,000 in fraudulent refunds in just two years, taking advantage of the building’s Wi-Fi to avoid detection. FBI agents, trying to pin things on Pierre, soon discovered it was “not possible to determine exactly which apartment or user logged in and used the Icon’s wireless network,” according to court records.
But agents eventually solved the crime with a search warrant, analyzing a list of tenants in the 685-unit tower and then linking Pierre’s computer-generated tax returns to EFINs originally obtained by his girlfriend and younger brother. The punishment: Pierre, 31, began a 2 1/2 year prison sentence in December.
It was just one of many EFIN cases.
In 2012, federal agents busted a Miami Gardens-Fort Lauderdale network of three women who used an EFIN to file 2,000 phony tax returns seeking $11 million in refunds. The IRS paid out $3.5 million directly deposited into bank accounts held by the women under their businesses, A&G Tax Services and Majestic Financial.
Among the convicted women: Alci Bonannee, 38, who mostly worked from her Fort Lauderdale home. She was sentenced to one of the stiffest prison terms for the crime, 26 1/2 years.
In 2013, the U.S. attorney’s office broke up a 10-person South Florida ring specializing in filing refund claims in the names of dead people. The Miami-based organization used front businesses, such as Royal Tax Multiservices, Kings Enterprises and Tax Services and Imperial Tax Services, to submit $35 million in false tax returns, with the IRS paying out about $14 million in refunds.
Among the members was Corey Williams, 31, of Miami Gardens. Using someone else’s EFIN, he raked in more than $2 million, sometimes filing returns on his smartphone. He was sent to prison for more than three years after pleading guilty in 2014.
“Anybody who knew about it, you’d be a fool to not try to get involved with making some money,” Williams told CBS’ 60 Minutes. “I could wake up in the comfort of my own home, and just get on a laptop, do about 15 returns a day. Fifteen times $3,000 a return, that’s $45,000 a day.”
Of course, there is also plenty of old-school fraud going on as well.
Paper-filing scammers typically don’t submit batches of small claims. Instead, they often seek single big scores and the IRS — under congressional order to issue fast refunds — has paid some truly staggering claims in South Florida.
The IRS refunded about $1.8 million to three North Miami men posing as Capitol Records and Warner Bros. executives who lied that they each made about $9 million annually. Gerald Duverger, 37, Jean Louis, 42, and Jeaneno Florent, 39, won lottery-like refunds of about $600,000 each in 2012 and 2013. It wasn’t the IRS but a local bank that uncovered the scam and called authorities. Amazingly, Louis’ direct-deposit refund included an additional $3,500 in interest because the IRS exceeded a mandated 45-day deadline while reviewing his tax return.
“Sometimes people get lucky,” Louis, who once worked in a bait-packing company, said as he was arrested at a CitiBank branch in Miami Beach. All three men are now serving prison terms of between 3 1/2 to five years.
Freddie Howard, who taught children with disabilities before venturing into the tax field, specialized in filing paper returns because he could no longer meet the minimum qualification for an EFIN. Howard, formerly of Miami Lakes and Plantation, had a criminal conviction for tax fraud from a decade ago.
So when he reentered the tax business in 2011 after his prison term, Howard would leave his name off returns, letting his clients deal with the IRS.
“I didn’t want anything traced back to me,” he told the Miami Herald.
Last May, he pleaded guilty to fabricating dozens of refunds totaling $22 million for people who lied about huge gambling winnings at the Seminole Hard Rock Hotel and Casino in Hollywood. He said his clients were mostly divorced men who owed child support and had avoided filing tax returns in the past for fear of being garnished.
The IRS paid out $4.5 million to Howard’s clients, ranging from $60,000 to $1.4 million each. He would receive a kickback of 30 percent on each successful claim.
For a while, life was good. Howard and his family lived on a five-acre Davie estate next door to famous rapper Rick Ross. But life started to unravel when he was targeted in an FBI undercover operation in late 2013 for selling stolen IDs — ratted out by one of his clients.
Howard, who then cooperated with the FBI in a follow-up sting against an ID thief, received a four-year prison sentence after his assistance was taken into consideration. He surrendered in October after a family wedding.
Howard, 56, expressed regret about his crime. He insisted he wasn’t driven by greed — like so many others in this racket— as much as by pride.
“I was running out of money, and I was losing the house in Davie,” Howard said. “I didn’t want to let my family down.”
Read more here: www.miamiherald.com/news/local/crime/article10931081.html#storylink=cpy
