CHARTER BUS COMPANY OWNERS SENT TO PRISON FOR TAX AND BANK FRAUD

FROM:  U.S. JUSTICE DEPARTMENT 

Wednesday, February 4, 2015

California Charter Bus Company Owners Sentenced to Prison for Tax Fraud and Bank Home Mortgage Fraud

Two San Jose, California, brothers were sentenced to prison for committing tax fraud and bank fraud,  Principal Deputy Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Melinda Haag of the Northern District of California announced.

Fidencio Moreno, 52, was sentenced to serve 41 months in prison and three years of supervised release, and Arturo Moreno, 38, was sentenced to serve 28 months in prison and three years of supervised release.  The court also ordered Arturo Moreno to pay $422,962 in restitution and to forfeit $3,328,600 and his interest in two pieces of real property.  In January 2015, Elena Moreno, 40, the wife of Fidencio Moreno, was sentenced to serve 22 months in prison and three years of supervised release for her role in the conspiracies as a bookkeeper at the company.  Prior to pleading guilty in this case, the three co-defendants collectively paid more than $200,000 in restitution to the Internal Revenue Service (IRS) for losses associated with their conspiracy to defraud the United States by filing false and fraudulent tax returns.

According to court documents, beginning in 2005 and continuing through at least 2010, Arturo, Fidencio and Elena Moreno conspired to defraud the United States by failing to report substantial amounts of gross receipts from their charter bus company, Quality Assurance Travel (QAT), on the federal corporate tax returns for QAT and on their personal income tax returns that they filed with the IRS.  The total amount of unreported gross receipts of QAT during those years exceeded $966,908.  Arturo and Fidencio Moreno were each 50 percent owners of QAT.  The unreported income consisted primarily of cash receipts that were paid by passengers as they boarded the bus, but that were not deposited into the business bank accounts or disclosed to the Morenos’ tax return preparer.

According to court documents, between 2005 and July 2013, Arturo, Elena and Fidencio Moreno also conspired to commit bank fraud and wire fraud by submitting false and fraudulent home mortgage loan applications that overstated the applicants’ income and assets in order to acquire and refinance homes located in San Jose.  In total, the defendants fraudulently obtained more than $3.3 million in home loans.  After the defendants fell behind on the loan payments, they attempted to avoid foreclosure by submitting false and fraudulent applications to modify these loans.  Two of the financial institutions approved the fraudulent applications, reducing the principal due on these loans.  One of the four properties was ultimately sold via a short sale in 2013, while another was foreclosed upon in 2014.  The total losses to the financial institutions resulting from the foreclosure and short sale exceeded $325,000.

The case was investigated by special agents of IRS-Criminal Investigation.  Trial Attorney Todd P. Kostyshak of the Tax Division and Assistant U.S. Attorneys Thomas Moore and Katherine Wong prosecuted the case.

MAN AND TAX SERVICE COMPANY PERMANENTLY BARRED FROM PREPARING TAX RETURNS

FROM:  U.S. JUSTICE DEPARTMENT 
Monday, August 19, 2013
Federal Court Permanently Bars Indiana Instant Tax Service Franchisee from Tax Preparation

A federal court in Indianapolis permanently barred David Franklin and his company, Instant Refund Tax Service (IRTS), from preparing tax returns and from operating a tax-preparation business, the Justice Department announced today.  The government alleged that IRTS, which Franklin wholly owns, operated as a franchisee of Instant Tax Service, a large national tax-preparation franchisor operated by ITS Financial LLC, based in Dayton, Ohio.  The order follows an earlier preliminary injunction against the defendants. In a separate case, a federal court in Ohio preliminarily enjoined the Dayton-based franchisor last November.  The defendants in both cases consented to entry of the preliminary injunctions without admitting the allegations against them.

The Indiana permanent injunction order was signed by Judge Sarah Evans Barker of the U.S. District Court for the Southern District of Indiana.  The government complaint in the case alleged that Franklin owned and operated 22 Instant Tax Service locations that prepared and filed false and fraudulent income tax returns for customers, fabricated income for phony businesses to obtain larger tax credits, forged  W-2 forms, filed returns improperly based on paycheck stubs rather than W-2 forms, claimed false education tax credits and reported false filing statuses for customers.  The government also accused Franklin’s offices of filing tax returns without customers’ authorization and selling false and deceptive loan products to customers.

The case is one of five similar civil actions that the Justice Department brought against Instant Tax Service franchises and the corporate franchisor, ITS Financial, which claims to be the fourth-largest tax-preparation firm in the nation.  The court recently conducted a two-week trial in the Ohio case, in connection with the government’s request to permanently enjoin the Instant Tax Service franchisor.  A decision has not yet been issued.