Man Pleads Guilty to Identity Theft and Tax Evasion

A New Jersey man pleaded guilty Wednesday, January 30, 2013, in connection with his role in a large-scale identity-theft scheme. If convicted, he faces up to 52 years in prison. This case is being investigated by U.S. Immigration and Customs Enforcement's (ICE) Homeland Security Investigations (HSI), FBI, Internal Revenue Service's (IRS) Criminal Investigation and the Bergen County Prosecutor's Office.

Sang-Kyu Seo, 63, of Palisades Park, N.J., pleaded guilty to charges of conspiracy to unlawfully produce identification documents and false identification documents, aggravated identity theft, conspiracy to commit wire fraud, conspiracy to commit bank fraud and tax evasion.

According to court documents, Seo was the owner and operator of Hang Jin Yi Inc., doing business as Hwangini, a salon located in North Bergen, N.J., and Pier 7 Corporation, a purported small business located in Palisades Park.

Seo conspired with Sang-Hyun Park, aka Jimmy, and others, to obtain a Social Security number beginning with the prefix '586' for another individual. These 586 Social Security numbers were issued by the U.S. to individuals, usually from China, who were employed in American territories, such as Guam. Park is alleged to have been the leader of a criminal organization headquartered in Bergen County that obtained, brokered and sold identity documents to customers to commit credit card fraud, bank fraud, tax fraud and other crimes.

Park pleaded guilty Jan. 9 to his role in the enterprise, and is awaiting sentencing.

This criminal enterprise engaged in the fraudulent 'build-up' of credit scores associated with the Chinese identities. They did so by adding the Chinese identity as an authorized user to the credit card accounts of various co-conspirators - members of the enterprise's credit build-up teams who received a fee for this service. By attaching the Chinese identities to these existing credit card accounts, the teams increased the credit scores associated with the Chinese identities to between 700 and 800. The members of the build-up teams did not know the real person to whom the identity belonged or virtually any of the customers who had purchased the identities.

After building up the credit associated with these identities, Park and his co-conspirators directed, coached and assisted the customers in opening bank accounts and obtaining credit cards. Park and his co-conspirators then used these accounts and credit cards to commit fraud. Park relied on several collusive merchants who possessed credit card processing machines. For a fee, known as a 'kkang fee,' these collusive merchants charged the fraudulently obtained credit cards, although no transaction took place. After receiving the money into their merchant accounts from these fraudulent transactions, the collusive merchants gave the money to Park and his co-conspirators, minus their kkang fee.

Seo admitted that he obtained a 586 Social Security card and counterfeit driver's licenses through Park for a family member, who then used this identity to 'bust out' credit cards. Seo also admitted that he gave his corporate and personal credit cards to Park for the purpose of 'busting out' these maxed-out credit cards. In furtherance of this conspiracy, Park and his co-conspirators issued worthless checks, drawn on bank accounts that had been established using the 586 identities, as payment toward the balances on Seo's credit cards.

Before the banks and credit card companies realized that these checks were bogus, Park and his co-conspirators charged Seo's credit cards through collusive merchants or used them to purchase merchandise.

Seo also admitted that in 2007, with the assistance of a loan broker, he fraudulently obtained a $100,000 commercial loan on behalf of Pier 7. Seo admitted that he and the loan broker made false statements to obtain the loan including falsely representing that his businesses annual revenue was about $620,000.

Finally, Seo admitted that he committed tax evasion by issuing checks to himself and others, representing income derived through the operation of Hwangini, and then failing to report this income on his personal tax returns.

Seo admitted that in April 2008, he filed an individual income tax return for tax year 2007. This return declared that his taxable income for calendar year 2007 was about $197, and the amount of tax due and owing was about $19. Seo admitted that this return failed to include $304,848 in additional taxable income that he had received in 2007, thus having an additional tax of $81,643 due to the United States government.

Seo's sentencing is scheduled for May 14.

Dutch Citizen Pleads Guilty to Tax and Mortgage Fraud

A Dutch citizen and resident of Canada pleaded guilty Friday, December 28, 2012, to several tax and mortgage fraud charges, following an investigation by the Internal Revenue Service's (IRS) Criminal Investigations, U.S. Immigration and Customs Enforcement's (ICE) Homeland Security Investigations (HSI) and the FBI.

Rudolf Straat, 49, of Sarnia, Ontario, Canada, pleaded guilty to mail fraud, conspiracy to commit mail fraud, conspiracy to defraud the United States, failure to file a tax return and conspiracy to commit money laundering.

In March, a federal grand jury in Tallahassee, Fla., returned an eight-count indictment against Straat and his wife and co-conspirator, Maria Gudelis, 45, of Sarnia, Ontario, Canada. Both were accused of falsely obtaining mortgage loans in excess of $8.8 million to purchase homes in Sandestin, Fla. Straat claimed he was a U.S. citizen, but he is a citizen of the Netherlands. He claimed that he was single, even though he married Gudelis in May 2000. He also misrepresented his employment status.

Additionally, Straat and Gudelis both lived in Sandestin from at least October 2005 through July 2007. While living in Sandestin, Straat did not file 2005 and 2006 income tax returns. As a result, he failed to report more than $1 million to the IRS during those years. Straat used a portion of his unreported capital gains to fraudulently obtain additional properties.

Straat faces up to 20 years in prison for conspiracy to commit mail fraud, conspiracy to commit money laundering and mail fraud. He faces up to five years in prison for conspiracy to defraud the United States and up to one year in prison for failing to file tax returns. He is scheduled to be sentenced March 12.

Gudelis, a Canadian citizen, is charged with the same crimes included in the indictment against her husband. She turned herself in to authorities Thursday, December 27, 2012, and pleaded not guilty at her arraignment Friday, December 28, 2012. Her trial is scheduled to commence Feb. 4. 

Joint HSI and IRS Probe Arrests 53 for Identity Theft, Tax Fraud, and Government Theft

Fifty-three individuals charged with theft of government property and identity theft were arrested Wednesday, November 14, 2012, in several municipalities of Puerto Rico following a joint Internal Revenue Service (IRS) and U.S. Immigration and Customs Enforcement's (ICE) Homeland Security Investigations (HSI) probe.

The case involves a scheme to defraud the United States by fraudulently obtaining and converting to cash U.S. Treasury checks issued by the IRS in connection with fraudulent tax returns filed with the agency. As part of the scheme, tax returns were filed using the personal identifying information of individuals, when in reality, said individuals never filed such tax returns with the IRS. The investigation has revealed that the fraudulent tax returns were filed without the consent of the taxpayers who appear in the returns.

The majority of the defendants would attempt to negotiate the Treasury checks by depositing them in their accounts at financial institutions such as banks and credit unions. Other defendants cashed or attempted to cash the checks at post offices. When a defendant attempted to cash the check at a post office, he or she would present a false identification document such as a driver's license.

If convicted, the defendants face a maximum possible sentence of 10 years on the theft of government property charge, plus two consecutive years if convicted on the aggravated identity theft charge. The investigation is ongoing.

The case is being investigated by the IRS, Criminal Investigation Division, with the collaboration of HSI, the U.S. Postal Inspection Service and the U.S. Secret Service, and is being prosecuted by First Assistant U.S. Attorney Maria A. Dominguez. The Puerto Rico Police Department and the San Juan Municipal Police participated in the arrests.

ICE encourages the public to report suspected fraud and identity theft-related information by calling 1-866-DHS-2ICE.

ICE and HSI Dismantle Extensive Identity Tax Fraud Scheme

One of the nation's largest and longest running stolen identity tax refund fraud schemes – involving more than 8,000 fraudulent U.S. income tax returns seeking $65 million in illicit refunds – has been shut down by a New Jersey-based task force.

U.S. Immigration and Customs Enforcement's (ICE) Homeland Security Investigations (HSI) special agents assisted in the investigation as part of the New Jersey Financial Crimes Task Force.

Fourteen people were charged Wednesday, September 19, 2012, with conspiracy to defraud the United States and substantive counts of theft of government property, which resulted in $11.3 million in losses. They were arrested as part of a coordinated investigation by a New Jersey-based task force that includes IRS-Criminal Investigation and the U.S. Postal Inspection Service (USPIS).

Ten of the defendants made their initial appearances before U.S. Magistrate Judge Joseph A. Dickson Sept. 19 in Newark federal court while other defendants will be making their appearances in out-of-state federal courts including: New York; Grand Rapids, Mich.; and Greensboro, N.C. One defendant is already in custody in Texas on unrelated charges.

"The New Jersey Financial Crimes Task Force has proven to be an effective tool in dismantling criminal organizations that threaten the financial stability of our nation," said Andrew McLees, special agent in charge of HSI Newark. "Today's arrest exemplifies that HSI stands on the front line of financial crimes and continues proactive cooperation with our federal law enforcement partners to serve as a unified force in the fight against these illegal financial schemes that have far-reaching impact."

"The defendants in this case allegedly tried to steal $65 million using stolen identities to obtain refunds to which they were not entitled," U.S. Attorney Fishman said. "No matter how sophisticated, these crimes are pure theft. They victimize all members of the public, especially those whose identities are stolen."

"These types of tax fraud schemes have been around for many years," USPIS Inspector in Charge Phillip R. Bartlett said. "The Postal Inspection Service noted a significant increase in tax refund fraud schemes approximately three years ago and formed the New Jersey Financial Crimes Task Force in an effort to identify, disrupt and dismantle organized groups engaged in these schemes."

"Using stolen identities to file fraudulent tax returns seeking bogus refunds is a serious crime that we do not take lightly at the IRS," Richard Weber, chief, IRS-Criminal Investigation, said. "The refund fraud alleged in today's complaints was highly organized and relied on many willing accomplices. IRS-Criminal Investigation has made investigating refund fraud and identity theft a top priority and we will relentlessly pursue those who attempt to undermine the integrity of our tax system."

According to the criminal complaints, Stolen Identity Refund Fraud (SIRF) is a common type of fraud that results in more than $2 billion in losses annually to the U.S. Treasury. SIRF schemes generally share a number of hallmarks:

·                             Perpetrators obtain personal identifying information, including Social Security numbers and dates of birth, from unwitting individuals, who often reside in the Commonwealth of Puerto Rico. (Puerto Rican citizens are issued Social Security numbers, but are not required to pay federal income tax unless they derive income from United States-based companies or from the United States government. These Social Security numbers are a valuable commodity for perpetrators of SIRFs, because they are usually not already associated with a tax return.)

·                             Participants complete and file – frequently filing electronically – individual income tax returns using the fraudulently-obtained information, and falsifying wages earned, taxes withheld and other data. Perpetrators make it appear that the "taxpayers" listed on the fraudulent returns are entitled to tax refunds.

·                             Perpetrators direct the U.S. Treasury Department to issue the refunds through tax refund Treasury checks generated by the fraudulent tax returns to locations they control or can access.

Recognizing the seriousness of the problem, federal law enforcement agencies created a multi-agency task force in New Jersey led by investigators from the IRS and the USPIS, along with support from the U.S. Secret Service, HSI and the Drug Enforcement Administration.

The task force has revealed that at least as early as 2007, dozens of individuals in the New Jersey and New York area have been engaged in a large-scale, long-running SIRF scheme involving more than 8,000 fraudulent U.S. income tax returns seeking $65 million in illicit refunds and with losses to the United States government of more than $11.3 million.

The scheme was carried out by Jose Torres, aka Jose Quilestorres, 46, of Bronx, N.Y.; Roberto Diaz, 44, of Demarest, N.J.; Elian Matlovsky, 27, of New York; Porfirio Paredes,44, of Hazelton, Pa.; Rosa Marmol, 34, of Grand Rapids, Mich.; Luis Martinez, 47, of Matthews, N.C.; Ennio Guzman, 44, and Alejandro Javier, 50, both of Newark, N.J.; David Pinski, 73, of Fort Lee, N.J.; Michael Senatore, 41, of Moscow, Pa.; Rosario Terzulli, 38, of Brooklyn, N.Y.; Manuel Rodriguez, 50, of New Brunswick, N.J.; Rigoberto Torres aka R. Torres, 40, of New Brunswick, N.J., and others.

The complaints set forth the specific role that each conspirator played in the scheme, including obtaining the personal identifying information from Puerto Rican citizens, creating and filing the fraudulent 1040 forms, and obtaining, selling, depositing and cashing the tax refund Treasury checks.

Torres, Rodriguez and others gained control of refund checks in various ways, following the pattern of a classic SIRF scheme. Sometimes they bribed mail carriers to intercept checks and deliver them to other conspirators. One mail carrier, Bennie Haynes, who delivered mail along a route in Somerset, N.J., has previously been charged.

Torres and others also purchased "mail routes," that is, lists of addresses covered by a single mail carrier, from other conspirators, including Diaz. Once the mail route was purchased, Torres and others applied for tax refund checks, inserted addresses along the mail route as the purported home addresses of the "taxpayers," and obtained the checks sent to those addresses.

Hundreds of refund checks were mailed to just a few addresses in a few towns, including Nutley, Somerset and Newark, N.J., and Shirley, N.Y.

They induced third parties or straw account holders to open bank accounts at various banks in New Jersey and elsewhere or caused the checks to be cashed at check cashing businesses, and the proceeds deposited into bank accounts controlled by conspirators.

Members of the task force identified certain "hot spots" of activity related to the scheme, where conspirators were directing millions of dollars' worth of refund checks to just a few towns and cities in and around New Jersey. The task force members interacted with U.S. Postal Service employees in these hot spots, and more than $22 million worth of refund checks – fraudulently applied for – were interdicted by law enforcement officers.

The complaints also include forfeiture allegations seeking the seizure of more than $11 million in ill-gotten gains, including luxury autos that were seized.

The charges and allegations contained in the complaint are merely accusations, and the defendants are considered innocent unless and until proven guilty.

Foreign Nationals Charged with Extensive Drug Trafficking and Identity Fraud Scheme

Eleven foreign nationals were charged Thursday, July 19, 2012, in a 90-count superseding federal indictment alleging they conspired to distribute cocaine and engaged in tax fraud, money laundering, identity theft and other financial crimes.

The indictment comes following a multi-agency Organized Crime and Drug Enforcement Task Force (OCDEF) investigation, stemming from an initial Drug Enforcement Administration (DEA) and Anchorage police drug probe. The magnitude of the financial crimes, money laundering and identity theft, resulted in the Internal Revenue Service (IRS) Criminal Investigations and U.S. Immigration and Customs Enforcement's (ICE) Homeland Security Investigations (HSI) taking a lead role.

According to the indictment, the Dominican and Mexican-national defendants engaged in a conspiracy to defraud the United States by filing false tax returns and illegally claiming millions of dollars in tax refunds. Investigators believe that between January and March the defendants conducted their scheme using names and Social Security numbers of individuals from the Commonwealth of Puerto Rico.

"Today's indictment is a clear warning that anyone who steals the identities of innocent taxpayers and uses the information for personal profit will be aggressively pursued, investigated and prosecuted, in Alaska or throughout the United States," U.S. Attorney Karen Loeffler said. "This case is an example of how interagency cooperation and teamwork can successfully bring down an entire organized criminal conspiracy."

Three laptop computers seized by investigators contained information for approximately $19 million in fraudulent refund claims, 2,600 stolen identities including individual names, Social Security numbers and other identity information. It is also alleged that one or more of the defendants obtained the physical addresses used on the tax returns by stealing mail from mailboxes in and around the Anchorage area.

The defendants obtained Alaska identification cards using the stolen identities, which were necessary to open the numerous bank accounts needed to cash their tax refund checks. They also falsely claimed to be U.S. citizens to obtain the identity documents and open the accounts.

"These criminals illegally posed as U.S. citizens and exploited our financial system for personal gain," said Brad Bench, special agent in charge of HSI Seattle, who oversees HSI investigations in Alaska. "By pooling our unique resources, legal authorities and expertise, HSI and the IRS were able to dismantle a significant scheme to defraud the people of the United States."

"The charges brought forth today against these 11 individuals serve as another reminder that IRS Criminal Investigation is aggressively pursuing those who choose to defraud the government and disrupt the lives of innocent taxpayers," stated Richard Weber, IRS Criminal Investigations chief.

"Drug traffickers' greed clearly has no limits, as evidenced by this investigation," said Douglas James DEA acting special agent in charge. "The DEA is proud of its partnership with the Anchorage Police Department, which brought this case to their federal counterparts, exposing this multi-faceted criminal organization."

The indictment also charges various defendants with submitting false claims for refund, possessing stolen mail, making false claims of U.S. citizenship, committing passport fraud, making false statements to banks and credit unions, and passing forged U.S. Treasury checks, as well as aggravated identity theft.

The fraud charges each carry maximum penalties of between two and 30 years imprisonment, in addition to the five-year mandatory minimum prison term required upon conviction on the drug charges.

The U.S. Postal Inspection Service and U.S. State Department's Diplomatic Security Service also investigated. The case is being prosecuted by the U.S. Attorney's Office for the District of Alaska and the U.S. Department of Justice Tax Division.

An indictment is merely a formal accusation. Defendants are presumed innocent until proven guilty in a court of law.

Pennsylvania Businessmen Sentenced for Employing Illegal Aliens and Tax Fraud

Two Pennsylvania business executives have been sentenced for the unlawful employment of illegal aliens and tax evasion. The sentence is the result of an investigation conducted by U.S. Immigration and Customs Enforcement's (ICE) Homeland Security Investigations (HSI); and the Internal Revenue Service, Criminal Investigation (IRS-CI).

John Cimino, 55, of Doylestown, Pa., vice president of LTCI Ltd., was sentenced Thursday, April 5, in U.S. District Court to six months home confinement, twelve weekends in a residential reentry center and three years of supervised release. He was sentenced for tax evasion and conspiracy to conceal, harbor and shield illegal aliens from detection for commercial advantage and private financial gain.

Anthony Cimino, 57, of West New Hope, Pa., president of LTCI, was sentenced to six months home confinement and three years of supervised release. He was also sentenced for conspiracy to conceal, harbor and shield illegal aliens from detection for commercial advantage and private financial gain.

"Homeland Security Investigations is committed to holding businesses accountable when they knowingly hire an illegal workforce," said Nick DiNicola, assistant special agent in charge of HSI Albany, N.Y. "Employers who willfully violate our nation's hiring laws gain an unfair economic advantage over their law abiding competitors. Our goal is to protect job opportunities for the nation's legal workers and level the playing field for those businesses that play by the rules."

In April 2008, HSI special agents discovered that LTCI, a Philadelphia-based construction company specializing in the refurbishment of movie theaters, was employing undocumented illegal aliens at their worksite located at the Shoppingtown Mall movie theaters in DeWitt, N.Y. The investigation revealed that LTCI had hired and employed eight illegal aliens at this site.

An additional investigation conducted by IRS-CI revealed that during 2007 and 2008, Cimino, who was in charge of the company's payroll, evaded federal tax owed on the Employer's Quarterly Federal Tax Return (Form 941) by paying his employees – both legal and illegal – a majority of their overtime wages "off the books."

In addition to home confinement and supervised release, U.S. District Court Judge David N. Hurd imposed a fine of $20,000 on each defendant. The Ciminos forfeited $223,000 to the U.S. government as proceeds from the unlawful employment of the illegal aliens. Additionally, the Ciminos paid $622,492 for under-reported payroll taxes owed, which included $225,000 in penalties.

HSI has a vital responsibility to enforce the law and engage in effective worksite enforcement to reduce the demand for illegal employment and protect employment opportunities for the nation's lawful workforce. HSI employs an effective, comprehensive worksite enforcement strategy that addresses both employers who knowingly hire illegal workers as well as the workers themselves.

HSI focuses its resources in the worksite enforcement program on the criminal prosecution of employers who knowingly hire illegal workers, in order to target the root cause of illegal immigration. Furthermore, HSI uses all available civil and administrative tools, including civil fines and debarment, to penalize and deter illegal employment.

This case was prosecuted by Assistant U.S. Attorney Carla Freedman, Northern District of New York.