Tax fraud

Phony big-bucks jobs helped North Miami trio rip off IRS for $1.8 million, feds say

 

Guarding against tax fraud

• Secure personal information in your home.

• Shred all personal financial papers.

• Be careful about what you throw in the trash.

• Be wary of sharing your Social Security number with anyone.

• File income-tax returns as early as possible before the April 15 deadline. The IRS will start accepting returns on Jan. 31.

• If you think you are a victim of identify theft and tax refund fraud, contact the Internal Revenue Service at www.irs.gov. There is a link for filing a complaint and filling out an affidavit of theft and fraud. After you do, it will be assigned to a case manager, but the process is slow.

Top tax-fraud cities

Among major cities with the most fraud-related tax filings:

• Tampa (88,724 returns, with refunds of $468 million).

• Miami (74,496 returns, with refunds of $280 million).

• Atlanta (29,787 returns, with refunds of $77 million).

The Miami area's per capita number of false tax returns based on identity theft was 46 times the national average, and its per capita value of fraudulent refunds was 70 times the U.S. average.

Source: Treasury Department; Federal Trade Commission


jweaver@MiamiHerald.com

Gerald Duverger, who gets around in a wheelchair and lives on disability benefits in a cheap North Miami apartment, didn’t appear to enjoy the life of a fabulously paid entertainment executive.

Yet the Internal Revenue Service readily bought into his claim that he was a Capitol Records honcho when he sought a $613,034 refund on his 2011 income-tax return.

The IRS cut him a check for that astronomical sum, with the proceeds deposited into Duverger’s fictitious lawn-care business account at a Wells Fargo branch, federal authorities say. Flush with a small fortune, Duverger tried to cheat the IRS again on his 2012 return. Investigators say he even helped two associates, Jean Louis and Jeaneno Florent, concoct similar high-glitz jobs to file for massive refunds — with one $600,000-plus payment delivered to an address for a Boston homeless shelter.

For sheer brazenness, the trio — who all face trials or sentencing in Miami federal court in January and February — stand out in an increasingly crowded field of accused tax-fraud offenders in South Florida, among the nation’s hot spots for the fast-spreading crime.

Most scammers steal Social Security numbers and claim thousands of dollars in fraudulent refunds in their victims’ names. According to authorities, Duverger and his two associates had the audacity to file for gargatuan refund claims in their own names, scoring a lottery-like windfall from the government .

“Sometimes people get lucky,” Louis told federal agents after they arrested him and Duverger at a Citibank branch in Miami Beach in July.

Duverger, 34, has already pleaded guilty and faces sentencing in February. But Louis, 40, and Florent, 38, face separate federal trials on Monday and Jan. 27, respectively. Duverger and Louis, along with their attorneys, could not be reached.

Florent’s attorney, Michael B. Cohen said he “intends to vigorously defend this case before a jury” and that he hopes “the public realizes that Mr. Florent is cloaked with a presumption of innocence and is entitled to his day in court.”

IRS officials in South Florida and Washington declined to comment on how the agency wound up paying the men more than $1.8 million in 2012-13 before criminal investigators apprehended them.

While not commenting about specific cases, U.S. Attorney Wifredo Ferrer said the dual crimes of tax fraud and ID theft closely rival the long-running crisis of Medicare fraud — and that the public needs to be vigilant with the tax season around the corner.

“The parallels between this scheme and Medicare fraud are astonishing,” Ferrer told the Miami Herald. “Here is another pot of taxpayer dollars being targeted by criminals.”

“The hope is that this will not be such a problem in the future,” said Ferrer, who set up a task force in 2012 to stop the spread of the viral crime.

Since 2012, his office’s crackdown has led to ever-rising prosecutions: more than 270 defendants, with about $449 million in tax-refund claims involving stolen identities, $97 million in IRS payments, and 76,700 ID thefts.

Ferrer said his office has used “preventive” tools as well: In South Florida, IRS criminal investigators have suspended a total of 70 “electronic filing ID numbers” that allowed individuals to file tax returns on behalf of other taxpayers. The numbers were used to file 53,900 fraudulent tax-refund claims over the past two years. These numbers are normally used to file legitimate returns by accountants and other tax preparers.

Nationwide, IRS criminal investigators said this week that they opened 1,492 identity theft-related refund probes last year — a two-thirds increase over 2012.

Tax-refund fraud has been an embarrassing problem for the IRS, the nation’s tax collector. The various schemes — most involving stolen IDs of legitimate taxpayers, such as hospital patients — have robbed the U.S. government of billions of dollars yearly since the crime began spreading in 2008, according to a Treasury Department report.

The IRS has been criticized by the Government Accountability Office for being part of the problem because the agency has routinely failed to match employees’ income documents with those provided by employers before issuing refunds.

The federal watchdog agency found that the IRS doesn’t cross-check W-2 forms until months after the filing season ends on April 15. Employers file them in late February or early March; the IRS does not match them up with employees’ 1040 income forms until June.

That’s way too late to catch identity thieves who file false returns in other people’s names early in the year and have already received and cashed refund checks.

IRS officials have told congressional lawmakers that the political mandate for fast refunds has been a contributing factor to the problem. But they also have pledged to improve technology that helps detect stolen identities and fabricated returns.

Florida has the highest rate of identity theft in the country, with 361 complaints per 100,000 residents in 2012, according to the Federal Trade Commission. The problem is nearly twice as bad in the Miami area, with 645 complaints per 100,000 residents. Many of them are Haitian Americans like Duverger, Louis and Florent.

In South Florida, Tampa and other regions of the country, perpetrators routinely steal the names, dates of birth and Social Security numbers of people, including prisoners, the poor and even children. They are attractive targets because they don't file income tax returns. As a result, the IRS can't detect duplicate filings.

Among the notable offenders have been two Miami police officers, Malinsky Bazile and Vital Frederick. Both are awaiting sentencing after being convicted at separate trials in October of stealing people's identities from the Florida drivers' license database to file fraudulent refund claims.

That same month, a former North Miami gang member, Frantz Pierre, and two other defendants, his brother, Terry Pierre, and Frantz’s girlfriend, Christmanie Bissainthe, were convicted at trial on charges of stealing thousands of prisoners’ identities to submit $2.2 milllion in false tax returns in South Florida.

The IRS paid about $1.9 million in refunds loaded onto debit cards — money that Frantz Pierre used to buy a seven-bedroom mansion in Parkland. When federal agents arrested him in 2012, they also spotted an associate tossing laptops from the second floor of Pierre’s residence towards the pool.

The three defendants face sentencing on Jan. 22.

Also facing sentencing this month: A Miami-Dade man who orchestrated a $1.5 million refund racket by submitting returns with phony tax credits. In November, Rigoberto Cabrera was convicted at a Fort Lauderdale trial for splittng dozens of refunds ranging from $40,000 to $60,000 each with taxpayers who used their own names.

His accomplice, Carlos Lopez, who set up a shell company called Big Records so that he and Cabrera could collect their share of the large IRS refunds, pleaded guilty in September.

Meanwhile, the cases of the bogus entertainment executives go to trial this month.

According to a criminal affidavit, Duverger claimed he earned $8.7 million working for Capitol Records, with the company withholding about $3.5 million in taxes.

In January 2012, Duverger sought a refund of $613,034 in his name. The IRS paid the refund, with the proceeds deposited into the Wells Fargo account of his business, Lawn Care and Landscape Design, which used an apartment address in North Miami.

“In reality, the defendant had not worked at Capitol Records and was not entitled to this refund,” Duverger admitted in a statement as part of a plea agreement struck with federal prosecutor Michael Berger. “The defendant withdrew the proceeds of that refund for his own personal benefit.”

Duverger was also accused of helping a North Miami associate, Florent, file an identical 2011 tax return under the same scheme of pretending to be a Capitol Records executive. In 2012, the IRS paid that refund, too, but it was delivered to a homeless shelter in Boston, where Florent picked up the check. He deposited it into a Boston bank account, and “withdrew the proceeds for his own benefit,” according to an indictment.

Last year, both men tried to file similar 2012 tax returns using the same Capitol Records cover story, but the IRS rejected their huge refund claims the second time.

Duverger also assisted another North Miami associate, Louis, file a 2012 tax return under a similar ruse, according to the criminal affidavit and an indictment.

Louis claimed to earn $9.8 million as an executive for Warner Brothers Distribution Corp. and that the company withheld $3.8 million for taxes. He sought a $600,281, which the IRS paid last year with about $3,500 in interest via direct deposit into Louis’ business, J.L.L. Multi Services, at a Citibank branch in Miami Beach.

Louis also wrote checks for $8,000 each to two people who assisted him, including Duverger, according to the criminal affidavit.

Louis, who once worked in a Miami-Dade bait store, wanted to withdraw some money from his Citibank account, the affdavit said. The branch manager told him to bring in his documents to verify the large refund deposit.

Last July, Louis, accompanied by Duverger and another unidentified person, visited the Citibank branch. Bank officials alerted the Miami Beach Police Department, and officers detained the three for questioning, the affidavit said. Police also called IRS criminal investigators and a U.S. Postal inspector.

The investigators found a blue file folder in Louis’ possession, which included his 2012 tax return and a J.L.L. Multi Services check for $25,000 issued to him.

Louis told IRS agents that Duverger helped him prepare his refund claim. After he made the remark about being “lucky,” Louis was arrested and his bank account was frozen. Duverger, also taken into custody, pleaded guilty to fraud charges in November.

Florent was also charged last July, but investigators didn’t have to look far for him. He was already in custody awaiting a state trial on armed robbery charges.

Read more Miami-Dade stories from the Miami Herald

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