Tax and Financial Fraud in 2020: The Bad Actors
On November 16, 2020, the IRS released its Criminal Investigation Division’s annual report which highlighted the service’s success and criminal enforcement actions for the 2020 fiscal
year, the majority of which took place during 2020. With one of the highest conviction rates in federal law enforcement (90.4%), a cornerstone of this year’s achievements was the CID’s identification of over $10 billion in tax fraud and other
financial crimes. Below we will be examining 4 of the more outlandish tax and financial fraud stories from both federal and state level efforts for 2020.
Story # 1
Who: Timothy Pate, AKA Akenaten Ali
Where: Augusta GA
Sentence: 25 Years
Story: Pate was convicted in October 2019 on 15 counts of filing false retaliatory liens against federal officials and five counts of making a false bankruptcy declaration, which stem from his efforts to put federal officials into bankruptcy against their will. Pate filed tax returns from 2016 through 2018 in which he falsely claimed more than $7 million in tax refunds. Pate also attempted to have the IRS pay his past-due child support. After the IRS repeatedly rejected his false returns, Pate – a U.S. citizen and Georgia resident who claimed to be a Moorish national not subject to U.S. law, IE a sovereign citizen – filed a federal civil case against the IRS commissioner seeking tax refunds. Pate attempted to have the court order the arrest of the IRS commissioner and filed false liens against judges, the IRS commissioner and other federal officials.
Story # 2
Who: Larry Scott, former City of Atlanta Director of the Office of Contract Compliance
Where: Atlanta, GA
Sentence: 2 years and $125,000 restitution
Story: On January 7, 2020 Larry Scott, the former City of Atlanta Director of the Office of Contract Compliance, was sentenced to 2 years in prison and was ordered to pay $125,000 in restitution after he pleaded guilty to wire and tax fraud. The charges stemmed from Scott’s failure to disclose to the City of Atlanta that while he served as the Director of Contract Compliance, he also secretly worked as the business manager for a consulting firm that was hired by businesses seeking construction contracts in the Atlanta-metropolitan area. From 2012 to 2017, Scott earned approximately $220,000 from Cornerstone while serving as a full-time management or executive level employee with the City of Atlanta. Scott never disclosed his employment or income from Cornerstone to the City of Atlanta. Scott knew that if he had disclosed his income from Cornerstone on his annual Financial Disclosure Statements, the City of Atlanta could have terminated Scott. From 2012 to 2017, Scott also filed six false and fraudulent federal income tax returns in which Scott failed to report the majority of the income that he earned from Cornerstone on his tax returns. As an example, Scott earned approximately $156,036 in income with $99,136 as the City of Atlanta’s Director of Contract Compliance and $56,900 as Cornerstone’s business manager. Yet, on his 2015 federal income tax return, Scott falsely listed his “total income” as only $101,630.
Story # 3
Who: Theresa R. Gregory and Tera L. Gore
Where: Columbus, OH
Sentence: Max of 5 years, $250,000 fine, and $3.75 million in unpaid taxes
Story: Theresa Gregory and her daughter Tera Gore each pleaded guilty to five counts of federal income tax evasion. Since the 1990s, Gregory earned income from various MLM companies, earning commissions and bonuses on the volume of her sales and volume of sales from those she recruited for the MLMs. By 2012, her annual income exceeded $900,000. Between 2009 and 2017, Gregory earned closed to $17.5 million on which she failed to voluntarily file personal returns and has paid no income tax other than W-2 withholdings for more than 20 years. Since 1993, Gregory has been the subject of multiple IRS examinations and collection proceedings. Gore assisted her mother in evading taxes by working together to conceal Gregory’s income and assets, moving assets (including businesses) from Gregory’s name and into Gore’s. The combined total tax loss the periods between 1998-2006, 2008, and 2014-2017 was $3,759,889.
Story # 4
Who: Ambiance Apparel and Owner Sang Bum “Ed” Noh
Where: Los Angeles, CA
Sentence: $117,897,708 and 8 years in prison
Story: Federal prosecutors have filed charges against clothing importer Ambiance Apparel and its owner
Sang Bum “Ed” Noh for undervaluing imported garments to avoid millions in federal duties as well as tax fraud from failing to report millions from cash transactions. A plea agreement was reached in which both accused parties
agreed to plead guilty. Noh agreed to plead guilty to one count of conspiracy and one count of subscribing to a false tax return which carries a maximum sentence of 8 years in prison. Ambiance Apparel plead guilty to 8 counts, including conspiracy, money laundering, and customs offenses. Ambiance was found to have kept two sets of books to record sales – one of which documented only cash transactions and which was not reported to the company’s outside accountants. Noh also directed some of the second book’s transactions to be underreported to the accountants. The lower sales figured were reported in 2011 and 2012 returns filed by Noh on which he admitted he failed to report income and now owes the IRS more than $16.8 million in unpaid taxes, penalties, and interest.