IRS Criminal Investigations in New Jersey

 – October 15, 2020
IRS Criminal Investigations in New Jersey

IRS-Criminal Investigation serves the American public by investigating potential criminal violations of the Internal Revenue Code and related financial crimes in a manner that fosters confidence in the tax system and compliance with the law.

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Below are cases that the IRS Criminal Investigations unit in New Jersey recently completed:


October 15, 2020

Tax Preparer Sentenced to 27 Months in Prison for Conspiring to File False Income Tax Returns

A former employee of Tax Pro’s and Tax Solutions & Associates, tax preparation businesses located in Essex and Union counties, was sentenced today to 27 months in prison for conspiring to defraud the United States by filing false income tax returns, U.S. Attorney Craig Carpenito announced.

Angelo Thompson, 39, of Reistertown, Maryland, previously pleaded guilty before U.S. District Judge Michael A. Shipp in Trenton federal court to Count 1 of an indictment charging him with conspiracy to defraud the IRS.

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

From at least 2009 to April 2015, Joseph Kenny Batts was co-owner, along with Damien Askew, of Tax Pro’s, a tax return preparation and payroll business in Essex County, where Thompson, Tony V. Russell, Rudolph Sanders, Batts, and Askew prepared tax returns. In order to boost their business, Thompson and these others conspired to falsify their clients’ federal income tax returns for the purpose of generating refunds from the IRS in amounts that their clients were not entitled to receive. The fraudulent practices that Thompson, Russell, Sanders, Batts, and Askew used to inflate tax refunds included fabricating and inflating credits for education and child care; deductions, such as charitable contributions and unreimbursed employee expenses; and Schedule C business losses.

Thompson and other members of the conspiracy also permitted Batts to use their Paid Taxpayer Identification Numbers (PTIN) – the identification number that paid tax preparers are required to place on tax returns that they have prepared – when preparing tax returns to conceal Batts’ identity as the actual tax return preparer, due to, among other things, Batts’ prior federal tax fraud conviction.

After law enforcement executed a search warrant at Tax Pro’s in or about April 2015, Batts discontinued Tax Pro’s and opened Tax Solutions and Associates in Union, where Thompson, Russell, and Batts continued preparing false federal income tax returns.

By fraudulently inflating the amounts of the tax refunds, Thompson and his co-conspirators caused a total tax loss to the IRS in excess of $1.6 million.

Askew, Sanders, and Russell, have pleaded guilty to their roles in the scheme. Batts was convicted at trial in Sepember 2019 of one count of conspiracy to defraud the United States and five counts of aiding and assisting in the preparation of false federal income tax returns. Russell has been sentenced to four years in prison; Askew, Sanders and Batts are awaiting sentencing.

In addition to the prison term, Judge Shipp sentenced Thompson to three years of supervised release and ordered him to pay restitution of $103,320.

U.S. Attorney Carpenito credited special agents of IRS-Criminal Investigation, under the direction of Special Agent in Charge Michael Montanez, with the investigation leading to today’s sentencing.

The government is represented by Assistant U.S. Attorneys Cari Fais and Jihee Suh of the Special Prosecutions Division.


September 16, 2020

Morris County Couple Admit Roles in Filing False Tax Returns

A Morris County, New Jersey, couple who owned and operated construction businesses in Morris County admitted their roles in filing false tax returns that failed to report all their personal income, U.S. Attorney Craig Carpenito announced.

Roger Magill, 50, of Wharton, the owner and operator of Reliable Construction, a/k/a Reliable Paving and Hackensack Pavers, a/k/a Hackensack Paving – collectively, the Magill entities – pleaded guilty before U.S. District Judge Susan D. Wigenton in Newark federal court to an information charging him with three counts of tax evasion. His wife, Ruby Magill, 50, of Wharton, pleaded guilty before Judge Wigenton to an information charging her with one count of misprision of felony.

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

Roger Magill admitted that, between 2014 and 2016, he owned the Magill entities that operated in Morris County, New Jersey. Roger Magill admitted to obtaining hundreds of thousands of dollars in personal income from the Magill entities and attempted to hide his personal income from the IRS by using a fictitious identity to cash business checks at several check cashing businesses. Roger Magill admitted that he evaded paying $261,758 in personal income taxes. Ruby Magill admitted that she purposefully facilitated Roger Magill’s tax evasion scheme by allowing him to deposit his hidden income into business bank accounts that she operated and controlled.

The charges to which Roger Magill pleaded guilty carry a maximum potential penalty of five years in prison and a $250,000 fine. The charge to which Ruby Magill pleaded guilty carries a maximum potential penalty of three years in prison and a $250,000 fine. Sentencings are scheduled for Jan. 20, 2021.

U.S. Attorney Carpenito credited agents of IRS-Criminal Investigation, under the direction of Special Agent in Charge Michael Montanez, with the investigation leading to today’s guilty pleas.

The government is represented by Assistant U.S. Attorney Jamel Semper, Chief of the Organized Crime and Gangs Unit in Newark.


September 16, 2020

Bergen County Attorney Indicted for Fraudulently Obtaining Leans Meant to Help Small Businesses During COVID-19 Pandemic

A Bergen County, New Jersey, attorney who allegedly fraudulently obtained nearly $9 million in federal Paycheck Protection Program (PPP) loans has been indicted, U.S. Attorney Craig Carpenito and Acting Assistant Attorney General Brian C. Rabbitt of the Justice Department’s Criminal Division announced

Jae H. Choi, 48, of Cliffside Park, New Jersey, previously charged by complaint, was charged by indictment on Sept. 15, 2020, with four counts of bank fraud, four counts of false statements on a loan application, one count of aggravated identity theft, and one count of money laundering. The indictment seeks to forfeit 11 bank accounts and one investment account for the proceeds of the fraud, as well as a million-dollar home Choi purchased in Cresskill, New Jersey. An arraignment date has not yet been set.

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

Choi submitted four fraudulent PPP loan applications to four lenders on behalf of four businesses that purportedly provided educational services. Choi fabricated the existence of hundreds of employees, manipulated bank and tax records, and falsified a driver’s license on the applications.
Choi falsely represented to the lenders that the companies controlled by him had hundreds of employees and paid over $3 million in monthly wages. In one instance, Choi emailed a lender falsely claiming that he just told 150 of his employees that they were losing their jobs because the PPP loan had not yet come through, and that he had “watched grown men and women crying.” Choi wrote in that same email that he “sincerely hope[d]” that the lender’s employee “would never find [himself] in this kind of situation.”

Based on Choi’s alleged misrepresentations, three of the four lenders funded three businesses with an approximately $3 million PPP loan each. Choi received a total of nearly $9 million in federal COVID-19 emergency relief funds meant for distressed small businesses.

Choi used the fraudulently obtained PPP loan proceeds to pay for numerous personal expenses, including to buy a nearly $1 million home in Cresskill, New Jersey, fund approximately $30,000 in remodeling and other improvements, and invest millions more in the stock market through an account held in the name of his spouse.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act is a federal law enacted March 29. It is designed to provide emergency financial assistance to millions of Americans who are suffering the economic effects resulting from the COVID-19 pandemic. One source of relief provided by the CARES Act is the authorization of up to $349 billion in forgivable loans to small businesses for job retention and certain other expenses through the PPP. In April 2020, Congress authorized over $300 billion in additional PPP funding.

The PPP allows qualifying small businesses and other organizations to receive loans with a maturity of two years and an interest rate of 1 percent. Businesses must use PPP loan proceeds for payroll costs, interest on mortgages, rent and utilities. The PPP allows the interest and principal to be forgiven if businesses spend the proceeds on these expenses within a set time period and use at least a certain percentage of the loan towards payroll expenses.

This case was investigated by IRS – Criminal Investigation, under the direction of Special Agent in Charge Michael Montanez; inspectors of the U.S. Postal Inspection Service, under the direction of Inspector in Charge James Buthorn; the Small Business Administration Office of the Inspector General; and the Social Security Administration – Office of the Inspector General.

The government is represented by Assistant U.S. Attorney Andrew Macurdy of the District of New Jersey and Trial Attorney Andrew Tyler of the Fraud Section of the Department of Justice, Criminal Division.

Anyone with information about allegations of attempted fraud involving COVID-19 can report it by calling the Department of Justice’s National Center for Disaster Fraud Hotline at 866-720-5721 or via the NCDF Web Complaint Form at justice.gov/disaster-fraud/ncdf-disaster-complaint-form.

The year 2020 marks the 150th anniversary of the Department of Justice. Learn more about the history of our agency at justice.gov/history.

The charges and allegations in the indictment are merely allegations, and the defendant is presumed innocent unless and until proven guilty in a court of law.

 


August 11, 2020

Co-Owner of Commercial Cleaning Service Admit Filing False Tax Returns

The co-owner of a commercial cleaning company in Bergen County, New Jersey, today admitted evading more than $300,000 in tax payments by cashing checks at a commercial check cashier, paying employees off-the-books cash wages, and failing to report all his income, U.S. Attorney Craig Carpenito announced.

Peter Jamgochian, 53, of Paramus, New Jersey, pleaded guilty by videoconference before U.S. District Judge William J. Martini to Count One of an information charging him with subscribing to false corporate tax returns.

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

Jamgochian was a co-owner of a commercial cleaning company in Hackensack, New Jersey. His duties included managing company payroll and interacting with the company’s accountant.

In 2013 and 2014, Jamgochian cashed over $2 million in check payments received from the company’s customers at a commercial check cashier. He then used the cash to pay off-the-books cash wages to his employees and kept a portion for himself. Jamgochian hid these cashed checks from the IRS by not disclosing this information to the company’s accountant. After the accountant prepared the corporate taxes, Jamgochian signed these false corporate returns under penalty of perjury, knowing that they were false.

Jamgochian caused the company to underpay $248,936 in Medicare and Social Security taxes. He also understated his personal income received from the company, causing an additional tax loss to the IRS of $76,201.

The charge of subscribing to a false tax return carries a maximum potential penalty of three years in prison and a $250,000 fine. Sentencing is currently scheduled for Dec. 16, 2020.

U.S. Attorney Carpenito credited special agents of IRS – Criminal Investigation, under the direction of Special Agent in Charge Michael Montanez, with the investigation leading to today’s guilty plea.

The government is represented by Assistant U.S. Attorney David E. Malagold of the U.S. Attorney’s Office Criminal Division.


August 10, 2020

Founder of Plastics Company Indicted in $61 Million Tax Evasion Scheme

A federal grand jury today indicted a Florida man for evading over $61 million in income taxes from 2016 through 2018, U.S. Attorney Craig Carpenito announced.

Alfred Teo, 74, of Boca Raton, Florida, is charged with three counts of tax evasion and six counts of making and subscribing false personal and corporate tax returns in tax years 2016, 2017, and 2018. The indictment follows a June 17, 2020, complaint charging tax evasion, for which U.S. Magistrate Judge Edward S. Kiel set bond at $20 million. Teo will be arraigned at a date to be determined.

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

Teo was the majority shareholder of multibillion-dollar plastics manufacturing holding company Alpha Industries Management (Alpha). During the tax years 2016, 2017, and 2018, Alpha transferred funds directly into trading accounts for Teo’s benefit. Instead of reporting the funds Alpha sent for Teo’s benefit as income on his personal tax returns, a significant portion of Teo’s income from Alpha was recorded as 1099 Income to AAST Holding Corp. (AAST), another Teo-owned entity that was unrelated to his plastics business. Through AAST, Teo engaged in numerous acts to conceal and attempt to conceal the income he received from Alpha in order to evade income taxes.

According to AAST’s corporate tax returns, AAST received 1099 income from Alpha of approximately $27 million, $53 million, and $89 million in 2016, 2017, and 2018, respectively, for a total of approximately $169 million.

However, Alpha did not transfer these amounts to bank accounts controlled by AAST. The money Alpha recorded as 1099 income to AAST was instead money provided for the benefit of Teo and included money that Alpha sent directly to Teo’s brokerage accounts. Instead of reporting the $169 million of income from Alpha on Teo’s personal tax returns in 2016, 2017, and 2018, and paying taxes on that income, the income was reported on AAST’s corporate tax returns. Teo then provided false deduction information to his tax preparer in the form of fictitious “cost of goods sold” to artificially reduce his income and evade the income taxes owed.

AAST was organized as a holding company, and, in reality, AAST did not have cost of goods sold of these amounts for these years.

In 2016, 2017, and 2018, Teo’s tax preparer provided draft AAST corporate tax forms for Teo’s review. Teo then returned the corporate tax forms with handwritten notes that indicated AAST had tens of millions of dollars of cost of goods sold. Teo’s tax preparer used the information that Teo provided to report AAST’s cost of goods sold on AAST’s corporate tax returns in the amounts of approximately $26 million, $51 million, and $87 million for 2016, 2017, and 2018, respectively.

By submitting fraudulent cost of goods sold expenses to his tax preparer for inclusion on AAST’s corporate tax returns, Teo used AAST to avoid paying tens of millions of dollars of income taxes. He reduced AAST’s net business income by approximately $165 million for tax years 2016, 2017, and 2018 combined.

Teo’s personal IRS Forms 1040 for 2016, 2017, and 2018 included AAST’s net business income – as reduced by the approximately $165 million in AAST’s false cost of goods sold – as income to Teo. As a result, Teo understated his personal income for those years by approximately $165 million.

Because Teo’s personal tax returns for 2016, 2017, and 2018 included AAST’s net business income, Teo’s fraudulent reduction of AAST’s net business income with purported cost of goods sold expenses resulted in a tax loss of approximately $10 million, $20 million, and $31 million in 2016, 2017 and 2018, respectively, for a total tax loss of approximately $61 million.

The tax evasion charges in Counts 1 through 3 of the indictment each carry a maximum potential penalty of five years in prison and a $250,000 fine. The six false tax return charges in Counts 4 through 9 each carry a maximum potential penalty of three years in prison and a $250,000 fine.
U.S. Attorney Carpenito credited special agents of IRS-Criminal Investigation, under the direction of Special Agent in Charge Michael Montanez in Newark, with the investigation leading to today’s charges.

The government is represented by Assistant U.S. Attorneys Ari B. Fontecchio and Vijay Dewan of the Economic Crimes Unit in Newark.

The charges and allegations contained in the indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.


August 6, 2020

Camden County Businessman Admits Filing False Tax Returns

A Camden County, New Jersey, businessman today admitted filing false tax returns that failed to report all of his business income, U.S. Attorney Craig Carpenito announced.

Rodney Bush-Rowland, 41, of Camden, pleaded guilty by videoconference before U.S. District Judge Robert B. Kugler to an information charging him with one count of making and subscribing a false income tax return.

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

Bush-Rowland was the sole owner of To & Fro Transportation Inc., a Camden business that provided medical transportation services. Bush-Rowland admitted that during 2014 and 2015, he used a commercial check casher to negotiate over $2.7 million of To & Fro’s revenue checks. He admitted that he failed to include a large portion of the cashed checks on To & Fro’s corporate income tax returns. Bush-Rowland also admitted that he substantially underreported To & Fro’s income on his own individual income tax returns, causing a tax loss of more than $25,000.

In addition to filing false income tax returns, Bush-Rowland admitted to failing to pay over to the IRS employment taxes for To & Fro’s employees. During 2014, 2015, and 2016, Bush-Rowland filed quarterly employment tax returns that falsely reported that To & Fro paid all of the employment taxes due and owing for its employees. Bush-Rowland admitted that he actually failed to pay over more than $147,000 of To & Fro’s employment taxes during these three years.

The charge to which Bush-Rowland pleaded guilty carries a maximum potential penalty of three years in prison and a $250,000 fine. Sentencing is scheduled for Dec. 16, 2020.

U.S. Attorney Carpenito credited special agents of IRS-Criminal Investigation, under the direction of Special Agent in Charge Michael Montanez, with the investigation leading to today’s guilty plea.

The government is represented by Assistant U.S. Attorney Jeffrey Bender of the U.S. Attorney’s Office Criminal Division in Camden.