by Mitch Kokai
Senior Political Analyst, John Locke Foundation
The U.S. Justice Department submits the following news release:
Seven Charlotte, North Carolina tax return preparers pleaded guilty to conspiracy to defraud the United States by preparing and filing false tax returns, announced Principal Deputy Assistant General Richard E. Zuckerman of the Justice Department’s Tax Division, U.S. Attorney R. Andrew Murray for the Western District of North Carolina, and Special Agent in Charge Matthew D. Line of the Internal Revenue Service-Criminal Investigation (IRS-CI).
Joseph Octave and Vonyeda Carson pleaded guilty on Jan. 12, 2021, while Melissa Greene, Natisha Holloman, Kimberly Joline, Whitney Vargas-Medrano and Wendia Courtois pleaded guilty earlier in 2020. In addition to the conspiracy charge, Octave pleaded guilty to one count of aiding and assisting in the filing of false tax returns.
According to court documents and statements made in court, Octave owned and operated Kapital Financial Services, a tax preparation business with two offices located in Charlotte. From 2014 through at least 2019, Octave and certain employees, specifically Carson, Courtois, Vargas-Medrano, Greene, Holloman, and Joline conspired to falsify clients’ tax returns by claiming deductions, business losses, American Opportunity credits, education credits, and earned income tax credits that the clients did not incur, in order to fraudulently increase refunds to be paid by the IRS. Octave trained employees on how to file false returns and provided them with scripts and cheat sheets. Octave instructed employees not to provide clients with copies of their tax returns and not to review the completed tax returns with clients beyond the refund amount. By filing false returns, Octave and his co-conspirators increased their client base and unjustly enriched themselves. As owner, Octave received the largest share of the $700,000 earned by Kapital Financial Services in preparation fees.
Today’s news reminds us of Don Carrington’s investigative reports, including this item from 2015:
A Charlotte-area tax preparer who contacted Carolina Journal last year about an illegal tax-refund scheme involving tax preparers who cater to Hispanic clients has conducted her own undercover operation to show that the scam is continuing.
The preparer, who is Hispanic, enlisted the aid of a male friend, also Hispanic, to visit 10 tax preparation offices in the greater Charlotte area and record reactions to his suggestion that fictitious children be included on his tax return.
They found that tax preparers engaged in the scheme are urging customers — typically using federal taxpayer identification numbers rather than Social Security numbers on IRS documents — to pocket fraudulent refunds by claiming on their income tax returns children as dependents who may not exist or who live outside the United States.
The scheme is one of two illegal tax-refund ploys CJ has reported on over the past three years. Despite federal efforts to combat the schemes — the IRS claims it thwarts several billions of dollars in refund scams yearly — fraud continues here and around the nation.
In one scheme, taxpayers claim as dependents children who either do not live with them in the United States or may not exist at all. Each phony dependent claimed on an income-tax return will result in a refund of roughly $1,000.
The second type is stolen identity refund fraud, in which a group of criminals use stolen or fabricated identification documents to file multiple income tax returns claiming fraudulent refunds. Court documents show that illegal immigrants living in North Carolina have been involved in a number of SIRF schemes.