3 sent to prison in massive $100M ID theft-tax fraud case

AP News
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Posted: Apr 05, 2016 5:27 PM

FORT LAUDERDALE, Fla. (AP) — Three people convicted of operating an estimated $100 million tax refund fraud operation that stands as one of the largest ever uncovered nationally were sent to prison Tuesday by a South Florida federal judge just days before this year's tax filing deadline.

The ring was centered in an unassuming house in the suburb of Miramar, where Internal Revenue Service investigators say at least 10 laptop computers were used between July 2011 and May 2013 to steal tens of millions of dollars in fraudulent refunds using stolen identities, including those of dead people and prisoners.

"The Miramar residence was, for all intents and purposes, a fraud factory," Assistant U.S. Attorney Brooke Watson said in court papers. "This is one of the larger federal income fraud tax schemes that the IRS has encountered."

Florida is one of the nation's hotbeds of tax fraud using stolen identities. In 2014, the most recent year complete figures were available, the Justice Department estimated that nationwide about 2.1 million fraudulent returns of all types claiming refunds of $15.7 billion were filed.

The sentencings of the Miramar group comes just over a week before this year's April 15 federal income tax deadline, prompting officials to highlight the case as an extreme example of an increasingly common problem.

"Every year, thousands of federal income tax returns are prepared by people who care much more about making a quick buck than about preparing accurate returns," said Caroline Ciraolo, assistant attorney general for the Justice Department's tax division.

The Miramar group, all men in their 20s and early 30s, pleaded guilty earlier this year to various fraud, identity theft and stolen mail possession charges. Three were sentenced Tuesday by U.S. District Judge William Dimitrouleas to prison terms ranging from more than four years to 11 years. Two more will be sentenced Wednesday.

One of the group's leaders, 27-year-old Harlan Decoste, created a purported rap label called GroundUp111 as a cover for the fraud business, prosecutors said in court papers. Other defendants were listed as officers of the so-called company, which did not produce any music. But it appears they lived a rock star lifestyle nonetheless.

They used aliases such as "Money King," ''Money Makin Kerb," ''Chadillac 305" and "Risktakers111," according to court documents. Investigators took photos of stacks of cash, closets filled with expensive shoes and jewelry, bags of marijuana and other drugs, and dozens of prepaid debit cards and credit cards inside the Miramar house.

The operation broke wide open after police responded to a May 2013 home invasion robbery at the house.

Investigators discovered on computers some 29,000 personal identities were used to file the fraudulent returns. Although the IRS has not fully completed its analysis, authorities estimate the operation tried to obtain at least $108 million in false refunds — and succeeded in getting an estimated $28.2 million.

Defense attorneys called that number a wildly inflated guess and pointed out at a hearing Tuesday that prosecutors could not prove such a large amount was linked to each member of the fraud ring. The total amount of loss is a factor in a potential prison sentence.

"How many returns came out of the 10 computers? The answer is, I don't know," said Phil Horowitz, attorney for defendant Andy Cherrelus, who is being sentenced Wednesday.

Still, prosecutors are planning to seize the ill-gotten gains, including more than $174,000 in cash, the 10 computers, Rolex and other expensive watches and more than a dozen gold and diamond necklaces, chains and pendants. Each defendant also will be responsible for more than $28 million in restitution to the government.

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