A tax fraud scheme reportedly netted $300,000 to a private tax preparation company, after an employee allegedly inflated tax refund amounts.
D.C. criminal defense lawyers know this case has garnered a fair amount of attention, due to the fact that it involves taxpayer money. But the fact is, the government can bring criminal fraud charges against individuals for a wide range of offenses.
In legal terms, fraud is the false representation of a matter of fact, that deceives or intends to deceive an individual or other entity in such a way that the individual will act upon it to his or her legal injury.
That's extremely broad, and it can cover anything from contracting to sales. In order for it to be proven, prosecutors have to prove that:
- There was a false statement of material fact;
- That the defendant knew the information to be untrue;
- That the defendant intended to deceive the other person or entity;
- That the alleged victim justifiably relied on that statement;
- That there was injury to the alleged victim as a result.
This seems fairly straightforward, but proving it can be challenging for prosecutors. You first must consider that not all false claims are fraudulent. Prosecutors have to prove that not only was it false, but it was material to the issue at hand and therefore caused the victim to enter into some agreement that was to his or her legal detriment.
In this case, the employee worked for the city at the Office of Tax and Revenue. According to court papers filed in U.S. District Court, the defendant was working at the office from early 2009 through the spring of 2010. During this time, she also worked for a private tax preparation firm, answering phones and doing data entry.
This dual employment in and of itself violated city policy, though it wasn't illegal.
Part of what she did at the city's tax office was to oversee homestead tax deductions. Prosecutors say she and her co-conspirator, who also worked at the private firm, provided the private company's clients with phony charity receipts in case they were audited. In the meantime, she allegedly claimed deductions to which those individuals were not entitled. This allowed those clients to obtain larger tax refunds, and in turn, the company made a larger profit, according to prosecutors.
In all, prosecutors say there were nearly 975 fraudulent federal returns filed, which amounted to nearly $4 million, and another 280 phony city tax returns, that amounted to more than $300,000.
Clients were tipped off to the benefits of the private tax preparer by word-of-mouth referrals.
The employee is currently facing charges of aiding and abetting a conspiracy against the government, as well as first-degree theft.
The case has sparked calls for tighter controls with regard to hiring in the city tax offices, as a similar issue back in the 1980s resulted in the alleged theft of $50 million by a former employee.
Such cases are complex, and require the skill of an experienced criminal defense attorney.