Title: Major COVID-Related Tax Fraud Unveiled: Defendants Accused of Submitting Over 8,000 False Returns
Seven individuals, including Keith Williams, Jamari Lewis, Morais Dicks, Janine Davis, Tiffany Williams, James Hames Jr., and Ewendra Mathurin, have been charged by the U.S. government for attempting to steal over $600 million in COVID-19 tax credits. Based in New York, the scheme operated out of Credit Reset, a supposed credit repair business owned by Williams.
The group allegedly submitted over 8,000 false employment tax returns to the Internal Revenue Service, claiming COVID-related tax credits such as the Employee Retention Credit (ERC) and the Sick and Family Leave Credit (SFLC). The returns were fraudulent, the government argues, as they claimed SFLC over the amount of wages reported, double-dipped on qualifying leave wages, or combined the SFLC and ERC for the same wages, all violating the law.
Many of the entities involved had questionable backgrounds, such as being inactive, having no employees, failing to file Forms W-2 in a timely manner, or having no physical location. The defendants made a profit from the scheme, receiving tax refund checks from the U.S. Treasury and charging clients a fee or a percentage of the refund. They also recruited others by offering a percentage of fraudulently obtained checks.
The defendants attempted to collect over $600 million, with the IRS paying out approximately $45 million to them and their clients. They took steps to conceal their actions, such as not listing themselves as paid preparers and using Virtual Private Networks (VPNs) to hide their IP addresses.
Communications between the defendants and co-conspirators occurred through text messages, phone calls, and a WhatsApp group. If convicted, defendants face penalties up to five years in prison for conspiracy to defraud the U.S., 20 years for each fraud-related wire fraud charge, 30 years for each fraud-related PPP loan application charge, and three years for each false tax return charge.
Investigations and sentencing will likely involve the IRS-Criminal Investigation (CI) and the United States Postal Inspection Service (USPIS). Several defendants' attorneys have disputed the charges, arguing they are unfounded or an overreach by the government.
These tax credits function in that they provide a dollar-for-dollar reduction in tax for eligible employers, who must demonstrate pandemic-related shutdowns or significant revenue decline. The ERC is available to most businesses, covering up to $21,000 in taxes for individual employees in 2021, while the SFLC and PPP loan program aim to support businesses and their employees during the pandemic.
Enrichment Insights:
- The federal investigation and prosecution of alleged COVID-19 tax credit fraud involve multiple agencies, including the IRS-CI, DOJ, and federal prosecutors.
- Law enforcement agencies deploy various methods to detect and dismantle fraud, such as tracking IP addresses and investigating financial transactions related to shell companies.
- Defendants' legal representation often challenges the indictment and argues against tax fraud charges, while the government pursues conviction and potential prison sentences.
- Apart from the COVID-19 tax credit fraud associated with ERC and SFLC, the defendants are also accused of engaging in tax fraud related to payroll taxes, violating various tax laws.
- The IRS-CI is currently conducting a criminal investigation into the alleged 'erc fraud' and 'tax fraud' activities, examining claims for fraudulent tax credits and potential tax crimes.
- In addition to the 'covid fraud' cases, the group is also under investigation for submitting false tax returns, misrepresenting taxable income, and evading taxes through various means, such as misusing tax credits.
- Aside from the 'tax fraud' case, the defendants are under scrutiny for several instances of 'tax credits' misuse and misappropriation, including fraudulent claims for Employee Retention Credits and Sick and Family Leave Credits.
