Tax Fraud Blotter: Bed of nails

Accounting

Royal pain; collect yourself; hard Impact; and other highlights of recent tax cases.

Kearney, Nebraska: Salon owner Thomas W. Hird has been convicted of three counts of filing a false return.

Hird has owned and operated Nails Unlimited since 2009. From around February of that year, Hird skimmed the cash and check payments of the business by cashing most customer checks received at the business and by conducting currency exchanges in which he would exchange small bills for $100 bills.

Credit/debit card transactions at the business would automatically be deposited into the business bank account but cash and check payments rarely were. Hird failed to report the cashed customer checks and currency received as part of his gross income on his yearly tax return.

The nail salon customers who testified indicated that they were instructed to issue checks payable to Hird personally and not to the business. The salon also had signs displayed that instructed customers to make checks payable to Hird, who testified at trial that he knew the bank had a policy against cashing checks made payable to his business.

The IRS began investigating Hird in 2017. He repeatedly denied that he engaged in the questionable transactions and claimed that all customer payments were deposited into the business bank account. At trial, Hird admitted that he’d lied.

From 2012 to 2016, he failed to report $520,107 in income from Nails Unlimited. His tax due for those years is $134,989.

He faces up to three years on each count. Sentencing is July 14.

Dallas: Preparer Steven Jalloul, 43, has been sentenced to six years in federal custody and ordered to pay more than $14.1 million in restitution for preparing false returns.

Jalloul prepared and submitted false federal income tax returns on behalf of his clients through his business, Royalty Tax and Financial Services.

He added false or inflated education expenses to allow clients to become eligible for larger American Opportunity Credits and added false or inflated business income or losses to client returns to maximize the Earned Income Tax Credits.

Peoria, Illinois: Yousef Abdallah, who owned and operated a Danville, Illinois, liquor store and other businesses, has been sentenced to two years in prison for filing corporate returns that under-reported business earnings.

Abdallah came to the attention of the IRS when he listed his business, Danville Wine & Spirits Inc., doing business as Danville Liquors, for sale on the internet. His asking price was $425,000 based on touted sales of $1.56 million per year. Abdallah admitted that he did not report all his sales on the income tax return.

Abdallah, who previously pleaded guilty to filing a false corporate return for 2014, agreed to pay restitution to the IRS for tax years 2013, 2014 and 2015, for which he had approximately $1 million in unreported gross sales. He was also ordered to pay $176,196 in restitution to the IRS and was fined $15,000.

Glen Burnie, Maryland: Tax preparer Marsha Reed, 38, has been convicted of three counts of filing a false income tax return and sentenced to five years, all suspended, and five years of probation.

Reed owned and operated M & E Tax Service. While not a registered preparer in Maryland, Reed prepared and filed state income tax returns, for a fee, on behalf of numerous Maryland residents. Many of the state returns Reed filed included false information that reduced their state tax liabilities and improperly increased their state tax refunds.

Reed is prohibited from acting as a preparer. She was also ordered to pay $24,727 in restitution.

Aliquippa, Pennsylvania: Tax collector Jeanne Bowser has pleaded guilty to wire fraud and filing false income tax returns.

Bowser was the elected tax collector for Center Township, Beaver, Pennsylvania, and also collected taxes for the Central Valley School District. From about December 2011 to the summer of 2019, Bowser embezzled $1,028,183.81 in tax payments from both the township and school district. She wrote checks to herself out of a bank account that was used for tax deposits and stole cash tax payments. Bowser filed a false income tax return for 2016 by underreporting her income.

Sentencing is Sept. 28. The law provides for a total of 23 years in prison, a fine of $500,000 or both.

Louisville, Kentucky: Resident Hatem Kaisi has been sentenced to a year and a day in prison to be followed by three years of supervised release.

He previously pleaded guilty to an indictment that charged him with three counts of filing false federal income tax returns for 2012 through 2014 and one count of healthcare fraud for defrauding the Kentucky Medicaid program.

He admitted to failing to report $961,592 of income on his 2012 through 2014 federal income tax returns and that he owed additional federal income tax of $204,842.69 for 2001 through 2014.

Kaisi reported income earned from his automobile business on the federal income tax returns of others. He also admitted to concealing his actual income from the Kentucky Cabinet for Health and Family Services of the Department for Medicaid Services, the Kentucky agency responsible for administering Medicaid. For 2008 through 2014, Kaisi concealed more than $200,000 of income per year to fraudulently qualify his family for Medicaid benefits. He defrauded the Department for Medicaid Services out of some $204,842.69.

He agreed to forfeit $347,095 previously seized by the U.S. from his bank accounts as a result of the charged healthcare fraud. The U.S. agreed to recommend that $204,842.69 of this be applied to the restitution Kaisi owes to the Kentucky Department for Medicaid Services. He also agreed to pay $209,910.80 in restitution to the IRS.

Seattle: Dion L. Earl, 49, a former Seattle college soccer star and currently serving a nearly 15-year sentence for sexual assault in Arizona and on a second sexual assault case in King County, Washington, has been sentenced to an additional year and a day in prison for making false statements on a return.

During what authorities call a massive tax fraud scheme, Earl purchased the Seattle Impact FC franchise, a professional indoor soccer club. Between 2008 and 2014, Earl used false documents to lie about his income, the amount of tax withheld by employers and his mortgage deductions so he could attempt to claim refunds of more than $1.6 million.

In the 1990s, Earl was a soccer star at Seattle Pacific University. Between 2008 and 2014, he also worked in car sales in Washington State and Arizona and owned Dion Earl’s Total Soccer & Tennis Camps, and the Seattle Impact. Earl used his association with all of these to commit tax fraud.

Earl acknowledged that for 2012 he claimed that he made $1.6 million working for eight car dealers who withheld more than $660,000 of his wages for taxes; that his wife was employed by Total Soccer & Tennis Camps, which paid her $240,000 and withheld $51,000 in taxes; and that he made $520,000 in mortgage interest payments on four different properties.

All these claims were false. During 2012, Earl made less than $45,000, from which he did not have any taxes withheld, and he paid limited mortgage interest. Due to the false claims, Earl obtained a federal refund of $414,160.

After a federal audit began in 2013, Earl made false claims and provided false information to the IRS. He admitted that as late as 2015 he falsely claimed that he and his wife had made $765,000 from Total Soccer & Tennis and the Seattle Impact, from which the businesses withheld $180,000 in taxes. Earl sought a refund of $137,554, which was not paid.

Earl sought $1.6 million in fraudulent refunds and was paid $1,093,534 by the IRS. He will owe restitution to the U.S. in that amount, as well as more than $600,000 in restitution to Arizona. He also agreed to pay Key Bank some $100,000 in restitution for submitting false information in 2008 for a home equity line of credit.

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