Miami Dade College students face felony records as FBI probe widens

Miami Dade College
Miami Dade College Miami Herald Staff

Caleb Fadet, who grew up in a working-class family in North Miami, seemed to be making all the right moves to get ahead in life.

He graduated with a criminal justice degree from Florida A&M, volunteered as a tutor in the federal AmeriCorps program and earned a scholarship to pursue a vocational degree in funeral sciences at Miami Dade College in 2012.

But Fadet did something really stupid along the way: For a lousy $550 kickback, he let a boyhood friend use his student bank account at MDC to deposit $18,000 in illegally obtained tax refunds from the Internal Revenue Service. Federal agents arrested Fadet two years later while he was working at the U.S. Postal Service and applying to join the Army.

On Tuesday, Fadet, 27, apologized to his family and his former employer before a Miami federal judge sentenced him to two years of probation, including six months of house arrest, 200 hours of community service, and restitution to the 12 victims of tax-refund fraud in his case.

U.S. District Judge Darrin Gayles, who admitted that he was a victim of identity theft and tax fraud, said he was prepared to give Fadet some jail time but changed his mind after the federal prosecutor and defense attorney recommended probation — instead of up to six months in prison. Assistant U.S. Attorney John Byrne asked the judge to require Fadet to wear an electronic monitor while on probation, but defense attorney Adam Schwartz argued it wasn’t necessary. The judge sided with Schwartz, saying his client was not a flight risk.

Schwartz sought leniency for Fadet as he explained that probation, a felony conviction, “is going to haunt him for the rest of his life.”

Indeed, Gayles reprimanded Fadet for destroying what he had achieved in school by making such a “stupid” mistake. “To blow it all for $550 is astounding,” the judge told Fadet. The judge also took the defendant to task for not saying he was sorry to his victims of tax fraud — though he acknowledged that Fadet didn’t know his friend used his student bank account to rip off the IRS by filing illegal refund claims in other people’s names.

“This is not an abstract thing,” Gayles told the defendant. “What you did was selfish.”

Fadet, who pleaded guilty for his minor role in the fraud scheme, has plenty of classmates from MDC who got caught for committing the same crime, theft of government funds. He was among 18 students charged in November with allowing their Higher One bank accounts to be used for depositing ill-gotten IRS tax refunds.

Collectively, the 18 college students — along with three Target store employees named in one case — were accused of using Higher One bank accounts to receive about $500,000 in fraudulent income-tax refunds between 2011 and 2013. The online student accounts are managed by traditional banks, such as Chase, Wells Fargo and Bank of America. In total, the defendants used the stolen IDs of 644 victims while trying to collect $1.9 million in IRS refunds, according to the U.S. attorney’s office.

Almost all of them have pleaded guilty and received relatively short sentences, from probation up to two years in prison — including a few punished for stealing other people’s names, dates of birth and Social Security numbers to commit tax fraud.

At Tuesday’s sentencing hearing, Byrne told the judge that Fadet’s co-conspirator and more MDC students are under investigation and likely to be charged later this year. “There is still a bunch of cases under investigation,” Byrne told the judge. “This isn’t the last of these series of indictments.”

Among others in the first wave of indictments: former MDC student Smith Jean, 23, who got more than four years in prison, the harshest sentence so far. That’s because Jean recruited a classmate to let him use her Higher One account, and he was involved in submitting 62 false tax refund claims seeking about $345,000 from the IRS between 2012 and 2013, according to prosecutor Gera Peoples. The classmate, Beatrice Simeon, 22, was sentenced to five years’ probation.

The only defendant to go to trial was Laquisha Q. Johnson, 24, of Opa-Locka. She was convicted in March of receiving three fraudulent tax refunds in her Higher One account — including a deposit of $61,000 illegally obtained in the name of one victim. When bank administrators dissolved her account for security reasons, she was issued a check for the balance: just over $56,000. She spent the money, according to trial evidence.

Johnson, a single mother who worked in a hair salon after leaving MDC, was placed by a federal judge in a Miami detention center after her conviction while she awaits sentencing on Wednesday. Johnson could face about two years in prison, though her defense attorney is seeking a lighter sentence because she is the sole caregiver to her two-year-old child.

“She’s sorry for spending the money and hopes to be reunited with her son and family,” attorney Philip Horowitz told the Herald.

Byrne, the prosecutor, said in a court filing that Johnson knew the source of the funds in her Higher One account was illicit, yet she cashed the big check anyway. He also said she lied about it on the witness stand at trial, which will be a negative factor in her sentencing.

“During her testimony, the defendant maintained that she had no idea that this check represented stolen money,” Byrne wrote.

Federal authorities learned about the nexus between stolen identities, tax-refund scams and Miami Dade College bank accounts in 2013. FBI agents discovered scores of MDC students and collaborators were using stolen identities “systematically hacked” from government websites to file millions of dollars in fabricated income-tax returns.

Then they had electronic refunds deposited into the students’ Higher One accounts, which were supposed to be for receiving financial aid and paying tuition.

Agents contacted Higher One about the suspicious “laundering.”

“Higher One found ... over 1,000 accounts that had multiple Treasury checks going into student accounts,” FBI special agent Kristen Mulder testified at the June 2014 trial of one of the first students convicted of tax fraud.

Miami Dade College has has about 70,000 full-time students.

U.S. Attorney Wifredo Ferrer said the Higher One scam was “further evidence of the insidious and widespread nature” of stolen IDs and tax-refund fraud in South Florida.

The region has been considered the capital of these twin crimes since they began spreading five years ago. The scheme involving college students is just the latest in the string of South Florida fraud rackets.

Nationwide, tax-refund scams cost the U.S. government more than $5 billion a year, but that is considered a conservative estimate.