Category Archives: Tax Division

Seven Defendants in Mortgage Origination Fraud Scheme Indicted for Bank Fraud Conspiracy Along with Other Charges

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The Justice Department announced that seven defendants were arrested and arraigned today for their roles in a mortgage fraud conspiracy that operated in Detroit.

A federal grand jury in the Eastern District Court of Michigan indicted Peter Allen, Suhail Hallak, Al Karana, Joey Murad, Jason Najor, Jeffrey Najor and Wasseem Shamoun with conspiracy to commit bank fraud, numerous counts of bank fraud and other fraud charges.

The indictment alleges that from approximately January 2006 to December 2008, the defendants conspired to defraud lending institutions by obtaining mortgage loans using fraudulent information.  According to the indictment, the defendants devised a scheme wherein they purchased property for approximately $5,000 to $40,000 per home, then recruited straw buyers to submit fraudulent loan applications for home mortgages in exchange for a fee. According to the indictment, the scheme caused financial institutions to pay approximately $10 million in fraudulent mortgage loan funds.

In addition to the conspiracy charge, Hallak, Karana, Jason Najor, Jeffrey Najor, and Shamoun are charged with 20 counts of bank fraud, Murad is charged with seven counts of bank fraud and Allen is charged with two counts of bank fraud.  Jeffrey Najor is also charged with two counts of assisting in the filing of false tax returns, in connection with his filings on behalf of J.A. Najor Corporation.  Jeffrey Najor is also charged with one count of bankruptcy fraud.

An indictment is not a finding of guilt. Individuals charged in indictments are presumed innocent until proven guilty.  If convicted of the conspiracy charge, the defendants face up to 30 years in prison and a $1 million fine.  Each count of bank fraud carries a maximum penalty of 30 years in prison and $1 million fine.   Assisting in the filing of a false return is punishable by up to three years in prison and a fine of $250,000.  The bankruptcy fraud charge has a maximum penalty of five years in prison and a fine of $250,000.

This case was investigated by Internal Revenue Service – Criminal Investigation, the Drug Enforcement Administration and the FBI and is being prosecuted by Senior Litigation Counsel Corey Smith and Trial Attorney Mark McDonald of the Justice Department’s Tax Division.

Owner of Window Installation Business Admits Tax Evasion in New Jersey

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The owner of a window installation company located in Mt.Laurel, N.J. admitted today he converted to cash millions of dollars in the company’s gross receipts and used the money to pay his workers without withholding employment taxes announced, Paul J. Fishman, U.S. Attorney for the District of New Jersey, and Kathryn Keneally, Assistant Attorney General for the Tax Division.

Fred Marcus, 39, of Camden County, N.J., the owner and operator of Vortex Installations Inc., pleaded guilty before U.S. District Judge Mary L. Cooper in New Jersey federal court to an information charging him with one count of tax evasion.

According to documents filed in this case and statements made in court:

From early 2006 through the end of 2009, Marcus cashed approximately $2.8 million in Vortex Installations’ gross receipts at a check casher. Marcus used $1,025,868 of that money to pay cash wages to his workers, which he did not report to the Internal Revenue Service (IRS) and from which he did not withhold employment taxes. From 2006 through 2008, Marcus failed to file IRS Forms 941 – Employer’s Quarterly Federal Tax Returns – in which he was required to report the wages paid to his employees. In 2009, Marcus filed false Forms 941, in that he failed to report the cash wages that he paid to Vortex employees.

On the count of tax evasion, Marcus faces a maximum potential penalty of five years in prison and a fine of $250,000, along with restitution to the IRS. Sentencing is scheduled for Sept. 19, 2013.

Assistant Attorney General Keneally and U.S. Attorney Fishman credited special agents of IRS–Criminal Investigation, under the direction of Special Agent in Charge Shantelle P. Kitchen, for the investigation leading to today’s guilty plea.

The government is represented by Tax Division Trial Attorney Tino M. Lisella.

Former Xpress Flex, Inc. And Payroll America, Inc. Owner Sentenced To 51 Months For Fraud And Filing A False Tax Return

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FOR IMMEDIATE RELEASE
January 10, 2013

Ordered to Pay Restitution of Nearly $1 Million to Victims

BOISE – Michael Wayne Davis, II, 46, of Raleigh, North Carolina, formerly of Eagle, Idaho, was sentenced yesterday to 51 months in prison for wire fraud and filing a false tax return, U.S. Attorney Wendy J. Olson and Assistant Attorney General for the Justice Department’s Tax Division Kathryn Keneally announced. Chief U.S. District Judge B. Lynn Winmill also ordered Davis to serve three years of supervised release following his prison term and pay $999,930.90 in restitution – $954,640.90 to Xpress Flex victims and $45,290 to the IRS for the tax loss. Davis pleaded guilty to the charges on September 10, 2012.

According to court documents, in 2009 and 2010, Davis owned and operated Xpress Flex, Inc., a Boise, Idaho, company that administered, on behalf of employer-clients, flexible benefits plans for tax-free, qualified benefits, such as health care and dependent care. Pursuant to those plans, Xpress Flex received monetary contributions from its employer-clients of pre-tax withholdings from their employees’ paychecks. These funds were deposited into Xpress Flex bank accounts and set aside to pay the claims of employee-participants when they came due. According to court documents, Davis misappropriated $954,640.90 of Xpress Flex client funds and used them to pay personal credit card charges and the business expenses of his other company, Payroll America, Inc. He did so without the knowledge or authorization of the employer-clients and their employees, and contrary to representations in plan documents and contracts that he would safeguard the deposits and use them only to pay employee claims.

Court documents also showed that from 1994 through 2009, Davis owned and operated Payroll America in Boise, Idaho. Payroll America provided payroll administration and payroll tax filing services to its employer-clients. Pursuant to contract documents, employer-clients would deposit sufficient funds with Payroll America to meet their payroll and payroll tax obligations, which Payroll America would pay when they came due. According to court documents, in March and April of 2007, Davis misappropriated $2 million of Payroll America employer-client funds, wired them into his E*Trade brokerage account, and then invested the funds in the stock market. Davis did so without the knowledge or authorization of the employer-clients of Payroll America, contrary to representations in contract documents that he would safeguard the funds and use them only to pay payroll and payroll taxes.

Davis’ E*Trade investments generated approximately $192,436 in capital gains income. According to court documents, Davis wired this money into his and his wife’s personal checking account. The wire transfer was annotated “E-Trade Gains.” However, Davis intentionally failed to report capital gains income from E*Trade investments on his 2007 or 2008 tax returns, causing a tax loss of $45,290. For this conduct, Davis pleaded guilty to one count of filing a false tax return.

“I’m very pleased that my office, with the assistance of the Justice Department’s Tax Division, and federal law enforcement partners were able to bring Mr. Davis to justice,” said Olson. “Those who are entrusted to manage others’ money must ensure that it is safe and available for its intended purpose, not diverted for personal gain.”

“This sentencing sends a clear message, businesses owners who misuse their positions of trust and divert funds for their own personal use will be held accountable,” said Lilia E. Ruiz, IRS Criminal Investigation Acting Special Agent in Charge for the State of Idaho.

The case was investigated by the Federal Bureau of Investigation, the U.S. Department of Labor, Employee Benefits Security Administration, and Internal Revenue Service-Criminal Investigation.

Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,700 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.