On Dec. 3, 2014, in Grand Rapids, Michigan, David W. McQueen, of Byron Center, Michigan, was sentenced to 360 months in prison and ordered to pay $32,036,997 in restitution to his victims and $926,787 to the IRS. McQueen was convicted on May 9, 2014 of mail fraud, money laundering and tax evasion stemming from a massive Ponzi scheme that spanned three years. The scheme affected more than 800 families, and preyed upon unsophisticated, often elderly investors. According to evidence presented at trial, in 2006, McQueen borrowed funds to invest in a company called Multiple Return Transactions (MRT) which promised 10 percent return on investments. McQueen later created a company called Accelerated Income Group (AIG), through which he promised returns as high as 5-6 percent to investors. McQueen used MRT’s promised returns of 10 percent, to make AIG’s promised returns of 5 percent. McQueen could meet his 5 percent obligations to his investors and then keep 5 percent for himself. However, MRT was merely a Ponzi scheme. Instead of notifying AIG investors that MRT had failed, McQueen continued to tell investors that their money was safe and growing. Without MRT making its monthly payments, McQueen and AIG could not meet their 5 percent monthly obligations to investors based on investment earnings. Instead, McQueen used money from new investors to make promised interest payments. In addition to AIG, McQueen created three other funds that were nothing more than sham corporations designed to raise millions of dollars from investors. McQueen commingled the investor money between his various and purportedly distinct funds and used it to make bogus interest payments and redemption requests to investors, pay commissions to agents or simply spend the money. Despite knowing that he had absolutely no revenue coming in, McQueen took $100,000 of investor money per month tax free for his own personal use and enjoyment.
On Nov. 24, 2014, in Chicago, Illinois, Dennis Weiss, of South Elgin and formerly of St. Charles, was sentenced to 30 months in prison and ordered to pay $296,643 in restitution to the IRS. Weiss previously pleaded guilty to filing a false federal income tax return and making false statements in a bankruptcy petition. According to court documents, Weiss owned Custom Homes by D. R. Weiss, Inc., and Reliable Home Solutions, Inc. Weiss filed false individual federal income tax returns for 2005 through 2009, and he failed to file corporate tax returns for both of his companies. Between 2005 and 2009, Weiss paid personal expenses from Custom’s business bank account, accepted cash payments from Custom and Reliable customers, and failed to record the receipt of these funds on the books and records of the corporations, resulting in a total federal tax loss of $1,271,280. In Weiss’ personal bankruptcy petition, he intentionally concealed the existence of a company he owned and interests in three family held entities. In addition to criminal penalties, Weiss remains responsible for all taxes and interest due, as well as civil penalties of up to 75 percent of the tax owed.
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.7, 2014, in Cincinnati, Ohio, Joel Field, of Marion, was sentenced to 12 months and a day in prison, four months in a halfway house, four months home confinement, three years supervised release and ordered to pay $353,778 in restitution and fines. In May 2014, Field pleaded guilty to evading payment of his federal income taxes for the years 1997 through 2001. According to court documents, when the IRS attempted to collect the outstanding amount of taxes owed by Field, which was in excess of $140,000, Field misled the IRS by failing to report assets and income and by submitting false information regarding foreclosure proceedings. Furthermore, Field transferred assets in an effort to conceal those assets from the IRS. Field also filed false federal income tax returns for the years 2006 through 2009 where he failed to report over $620,000 in income that he earned through his companies.
On Oct. 30, 2014, in Detroit, Michigan, Bradley T. McKouen, of Clarkston, was sentenced to 18 months in prison, two years supervised release and ordered to pay $319,000 in restitution. McKouen pleaded guilty to tax evasion in April 2014. According to court documents, during the 2008 tax year, McKouen was the president and sole member of Delta Staffing, LLC, an employee leasing company located in Clarkston, Michigan. Delta was a Schedule C company, meaning its profits were to be reported on Schedule C as a part of McKouen’s personal federal income tax return. In 2008, Delta’s gross receipts were approximately $5.7 million. However, McKouen reported $0 gross receipts on his return. He also reported $0 business income, $0 taxable income, and $0 income tax. In 2008, McKouen’s actual taxable income was approximately $299,000 and his tax due was approximately $110,000. Under the terms of his plea agreement, McKouen is also being held responsible for filing similar zero-income returns for the years 2004-2007. In all, he failed to report $15 million in gross income and evaded $319,000 in federal income taxes for the years 2004-2008.’’
On Nov. 5, 2014, in Chicago, Illinois, Paul West was sentenced to 37 months in prison and ordered to pay $582,934 in restitution. West pleaded guilty to two counts of filing false tax returns. According to court documents, West, aka Thomas Wilson and Tom Wilson, sold materials for recycling, including scrap cardboard. In 2007 and 2011, West under-reported his income from his recycling services and gambling, reporting that he owed little or no taxes. For six other years between 2004 and 2011, he failed to file any individual income tax returns, despite gross receipts and gambling income over all eight years totaling $3,190,741.
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.