On Nov. 14, 2014, in Baltimore, Maryland, Gregory E. Grantham, of Oceanside, California, was sentenced to 60 months in prison, three years of supervised release, and ordered to forfeit/pay restitution of $17.4 million. Grantham pleaded guilty to wire fraud conspiracy, wire fraud and obstruction of justice. According to court documents, between September 2009 and September 2011, Grantham, a licensed attorney, was employed as General Counsel for IAGU Underwriters, LLC which was operated by Mervyn Phelan. Between mid-2010 and August 2011, Grantham and Phelan became involved in a fraudulent scheme carried out by Patrick Belzner and Brian McCloskey. McCloskey owned a real estate development business known as the McCloskey Group, LLC. Belzner, a home builder, worked with McCloskey. Phelan and IAGU began working with the McCloskey Group trying to locate sources of financing for its projects. Beginning in 2009 and continuing through June 2011, Belzner and McCloskey persuaded a series of private lenders to fund loans to establish that the McCloskey Group had reserves of cash that would supposedly help it obtain loans it was seeking in connection with real estate development projects through IAGU. In return for this temporary use of the lender’s funds, Belzner and McCloskey promised to pay substantial fees or interest. However, once the lenders transferred their funds into the escrow accounts, Belzner directed McCloskey to remove those funds from the escrow accounts without the knowledge or permission of the lenders. Belzner and McCloskey then used the majority of the stolen funds to pay for their personal and business expenses. The total losses resulting from the scheme were approximately $20 million. Grantham and Phelan obstructed grand jury investigation of the fraud scheme. Patrick J. Belzner, aka Patrick McCloskey, was previously sentenced to 15 years in prison for wire fraud conspiracy, wire fraud and tax evasion, and ordered to pay $19.805 million in restitution. Brian McCloskey, Kevin Sniffen, and Mervyn A. Phelan, Sr., are scheduled to be sentenced at a later date.
On Nov. 13, 2014, in Sacramento, California, Deepal Wannakuwatte was sentenced to 240 months in prison and ordered to forfeit multiple properties, vehicles, business interests, and bank accounts estimated to be at least $3.5 million to be used to repay victims. According to court documents, from 2002 to 2014, Wannakuwatte convinced nearly 200 victims, including individuals, corporate entities, and financial institutions, to invest in a number of business opportunities by misrepresenting the financial worth of himself and his companies. He falsely claimed that his companies did tens of millions of dollars in business with federal agencies every year, most notably the Department of Veterans Affairs. In 2013, Wannakuwatte claimed to have more than $125 million in VA contracts alone. In fact, while he did have a contract with the VA, it was only worth up to $25,000 a year. Ultimately, Wannakuwatte obtained well over $230 million from his victims. Contrary to his representations, Wannakuwatte used much of the money he obtained to pay himself and his family, make lulling payments to participants in his fraudulent investment schemes, and pay outstanding debts unrelated to his false representations. A former owner of the Sacramento Capitals professional tennis team, Wannakuwatte purchased properties in Hawaii, Oregon and California. In order to establish his financial credibility, Wannakuwatte showed investors his personal and corporate tax returns where he actually reported and paid taxes that falsely overstated his annual personal income and the annual gross receipts and sales for his companies. He used investors’ money to pay the overstated tax returns.
On Nov. 12, 2014, in Madison, Wisconsin, Jared Jerome Hart, of Eau Claire, was sentenced to 18 months in prison and ordered to pay a $100,000 fine. Hart pleaded guilty on Aug. 12, 2014, to filing false tax returns. Hart will have to work with the civil collection division of the IRS for repayment of taxes. Hart was also required to pay restitution to the Wisconsin Department of Revenue for non-payment of Wisconsin sales taxes. According to court documents, between 2008 and 2011, Hart owned a tavern in Eau Claire called The Pickle Bar. The Pickle Bar accepted payment only in the form of cash and at the end of each day, tavern employees would place daily sales in a safe for Hart to pick up. Hart would bring the cash home, count it using his cash-counting machine, and then record a number for the day in his own daily calendar. Hart would then deposit only some of the cash from the business into the business bank account. At the end of each month, Hart would give his accountants incomplete payroll information, the business bank statements, the business check register, and vendor invoices. Hart never told his accountants about the cash he was “skimming” from the tavern, or the second set of books he was keeping at home. Between 2008 and 2011, there was more than a $1 million discrepancy between the gross receipts of The Pickle Bar reflected in the books the accountants maintained and the second set of books Hart maintained at his home. Hart’s accountants used the incomplete information provided to them by Hart to generate the false Corporate Income Tax Forms for the tavern that were filed with his individual tax return for tax years 2008 through 2011. The artificially low business income was used on his personal income tax return. The total tax loss was $367,278.
On Nov. 12, 2014, in Minneapolis, Minnesota, Mark Allen Garcia was sentenced to 30 months in prison and Patricia Ann McQuarry was sentenced to 40 months in prison. In addition, both defendants were ordered to serve three years of supervised release and to pay $226,000 in restitution. On May 20, 2014, a federal jury found the two defendants guilty of conspiracy to defraud the United States and false claims against the United States. According to trial evidence, beginning in 2007, Garcia and McQuarry engaged in a scheme to obstruct foreclosure proceedings on their house, avoid responsibility for repaying loans, and steal money from the United States Treasury by filing false individual income tax returns. Garcia and McQuarry attempted to obstruct foreclosure proceedings by sending a host of frivolous documents to their bank, including a “Bonded Promissory Note” for $10,000,000. For tax years 2007 and 2008, both defendants filed self-prepared tax returns falsely claiming to have received hundreds of thousands of dollars in 1099-OID income and that the entire amount had been withheld and paid over to the IRS on their behalf. Both defendants created fake forms 1099 showing false interest income and withholding from various financial institutions. In total, the defendants sought more than $500,000 in false refunds. They attempted to hide the proceeds of their fraud scheme by purchasing real estate near Pine City, Minn., and then transferring the property to a private trust. The defendants also used the stolen money to purchase gold coins and a motorhome.
On Nov. 4, 2014, in Spokane, Washington, Doris E. Nelson, of Colbert, Washington, was sentenced to 108 months in prison and three years of supervised release for committing tax fraud. Restitution will be determined at a later date. Nelson pleaded guilty in April 2014 to 110 charges related to wire fraud, mail fraud, and international money laundering. According to court documents, Nelson ran a fraud scheme for over eight years and took in approximately $137 million from at least 650 investors worldwide. Nelson operated an unprofitable payday and short-term lending business, known as the Little Loan Shoppe. She solicited hundreds of investors, throughout the United States and in international locations, by leading them to believe, falsely, that her business profits allowed her to pay investors a 40% to 60% (and up to as much as 75%) annual return. Nelson also made numerous false and fraudulent statements about the Little Loan Shoppe in order to induce investors. Rather than paying her investors returns from a profitable business, investors were paid “interest” with their own money or the money of other investors. Investor funds rarely, if ever, were used to fund new customer loans. The scheme collapsed in 2008, when the flow of new funds could no longer support the payments required on the earlier investments and Nelson abruptly announced that all investments would be changed to a 10% interest rate. Nelson ended most payments to investors around this time, and by February 2009 she suspended all payments. Nelson’s scheme resulted in personal withdraws of investor money of approximately $4.3 million. With these proceeds, she funded a lavish lifestyle for herself and her family.
On Oct. 30, 2014, in Charlotte, North Carolina, Glen Adkins Jr., of San Diego, California, was sentenced to 300 months in prison and Warren F. Tonsing Jr., of St. Paul, Minnesota, was sentenced to 144 months in prison. Both were ordered to pay $2.4 million in restitution, joint with their co-defendants. Adkins and Tonsing were convicted in August 2013 of wire fraud and money laundering. According to court documents, the defendants defrauded United States residents, most over the age of 55, out of millions of dollars by deceiving them into believing that each had won a large monetary prize in a “sweepstakes contest.” Both defendants worked in a Costa Rica-based call center that used computers to make telephone calls over the Internet to victims in the United States. This process allowed the defendants and their co-conspirators to disguise the originating location of the calls. Victims were informed that the callers were from a federal agency and that to receive their “prize” they had to wire thousands of dollars to Costa Rica for a purported “refundable insurance fee.” As long as the victims continued to pay, the co-conspirators continued to solicit more money from them in the form of purported fees. To date, 46 defendants have been convicted for their participation in similar Costa Rican telemarketing schemes.
On Oct. 30, 2014, in Denver, Colorado, Libia Hernandez-Garcia, of Miami, Florida, formerly of Denver, Colorado, was sentenced to 12 months in prison, three years of supervised release and ordered to pay over $70,000 in restitution. Hernandez-Garcia pleaded guilty on May 22, 2014, to tax fraud, visa fraud and social security fraud. According to court documents, from 2009 through 2011, Hernandez-Garcia made false claims against the IRS by preparing and filing federal income tax returns for several individuals where the claims for income tax refunds were fraudulent. Particularly, Hernandez-Garcia provided false information to a tax preparer, so refunds not belonging to her would be deposited into her own bank account. Also, from 2009 through 2012, Hernandez-Garcia misused the social security number (SSN) of several individuals by causing the filing of individual income tax returns which falsely included the name and SSN, as a dependent, for the person identified as the filer of the tax return. In addition, from 2008 through 2011, Hernandez-Garcia assisted in the preparation and filing with the IRS the U.S. Individual Income Tax Return of her husband for tax years 2007 through 2010 which were materially false and fraudulent. Dependents were claimed on her husband’s tax returns who could not lawfully be claimed as dependents of his. On her own personal tax returns for tax years 2006 through 2011, Hernandez-Garcia followed a similar pattern claiming dependents that could not be claimed as her dependents all in an effort to receive higher refunds.
On Oct. 29, 2014, in Sacramento, California, Jeremy Michael “Mike” Head, of Huntington Beach, was sentenced to 120 months in prison for a nationwide foreclosure rescue scam. In September 2014, Mike Head’s brother and co-defendant Charles Head was sentenced to 35 years in prison. According to evidence presented at trial, Mike Head played an important leadership role in a fraud scheme that promised to help homeowners avoid foreclosure and repair their credit. Through misrepresentations, fraud and forgery, the Head brothers and their associates substituted straw buyers for the victim homeowners on the titles of properties without the homeowners’ knowledge. These straw buyers were often friends and family members of the defendants. Once the straw buyers were on title to the homes, the defendants applied for mortgages to extract the maximum available equity from the homes. The defendants then shared the proceeds of the ill-gotten equity and the “rent” that the victim homeowners paid them. Ultimately, the victim homeowners were left with no home, no equity, and with damaged credit ratings. Between January 2004 and March 2006, the scam netted more than $15 million in fraudulently obtained funds from scores of homeowners.
On Oct. 27, 2014 in Statesville, North Carolina, Denise Swanson, of Lenoir, North Carolina, was sentenced to 24 months in prison, three years of supervised release and ordered to pay restitution of $839,830 to client victims and $249,912 to IRS. Swanson previously pleaded guilty to tax evasion for tax year 2010. According to court documents, Swanson was the owner and operator of “Bottom-line Accounting,” a tax preparation and bookkeeping business. From 2006 to 2012, Swanson performed tax preparation services for her clients and their business, which included making related tax payments on their behalf. According to court records, Swanson received funds from her clients that were supposed to be used to pay their various tax obligations to IRS and other state agencies. But instead of making the payments, Swanson embezzled the money and used it to pay for personal expenses. Swanson failed to report the embezzled income on her own individual tax returns for tax years 2006 through 2011.
On Oct. 28, 2014, in Portland, Maine, Stacey A. Backman, of Brunswick, Maine, was sentenced to 20 months in prison and ordered to pay $365,168 in restitution. On June 9, 2014, Backman pleaded guilty to federal program and tax fraud. According to court documents, Backman was a fund accountant at Coastal Enterprises, Inc. (CEI). CEI is a private, nonprofit, charitable community development corporation and community development financial institution based in Wiscasset, Maine that received more than $10,000 in federal funds each year. From 2010 to January 2014, Backman embezzled $365,168 from CEI and failed to report the embezzled income on her federal income tax returns. CEI learned of the embezzlement in January 2014 and terminated Backman’s employment.