Fourteen arrested in U.S. tax fraud, identity theft ring

Reuters News
Posted: Sep 19, 2012 2:57 PM

(Reuters) - Fourteen people were arrested on Wednesday and charged with operating a long-running U.S. identity theft ring that filed thousands of fraudulent federal income tax returns to claim $65 million in illegal refunds, according to the U.S. Attorney's office in New Jersey.

The ring allegedly obtained Social Security numbers and other identifying information from Puerto Rican citizens. They used that to file more than 8,000 returns, then obtained the refund checks and either sold them or cashed them, the office said.

"The defendants in this case allegedly tried to steal $65 million using stolen identities to obtain refunds to which they were not entitled," U.S. Attorney Paul Fishman said in a statement. They succeeded in getting $11.3 million in refunds.

In some cases, the defendants were accused of bribing mail carriers to intercept checks, a classic pattern in these types of cases, according to the Justice Department.

Hundreds of refund checks were mailed to a few addresses in New York and New Jersey, prosecutors said.

The defendants are charged with conspiracy to defraud the United States and various theft charges. Each faces five to 10 years in prison and a fine of up to $250,000.

The number of U.S. taxpayers affected by identity theft more than doubled in 2011 to 641,052 from 270,518 in 2010, according to a July report by the watchdog for the U.S. Internal Revenue Service, the Treasury Inspector General for Tax Administration.

The Internal Revenue Service (IRS) has said it blocked more than $1.4 billion in tax refunds claimed by identity thieves in 2011, but this type of stolen identity refund fraud continues to result in over $2 billion in losses annually to the Treasury.

As much as $26 billion could still be refunded to identity thieves in the next five years if the IRS does not do more to control the problem, the Treasury Inspector General estimated.

"The bucket's getting filled with a spigot by identity thieves, while the IRS is taking it out with an eye dropper," said Elizabeth Maresca, a law professor at Fordham University.

In the latest move by authorities to combat tax ID theft, Wednesday's arrests were made by a task force including six federal law enforcement agencies, including the criminal investigation unit of the U.S. Internal Revenue Service.

(Reporting by Nanette Byrnes in Chapel Hill, NC and Patrick Temple-West in Washington; Editing by Kevin Drawbaugh and Claudia Parsons)