Month: November 2024

Source: United States Department of Justice Criminal Division

The U.S. District Court for the Northern District of Texas entered permanent injunctions today against Charles Dombek and The Optimal Financial Group LLC barring them from promoting any tax plan that involves creating or using sham management companies, deducting personal non-deductible expenses as business expenses or assisting in the creation of “captive” insurance companies. The injunctions also prohibit Dombek from preparing any federal tax returns for anyone other than himself and Optimal from preparing certain federal tax returns reflecting such tax plans. Dombek and Optimal consented to entry of the injunctions.

According to the government’s complaint, Dombek is a licensed CPA and served as Optimal’s manager and president. Allegedly, Dombek and Optimal promoted a tax scheme throughout the United States to illegally reduce customers’ income tax liabilities by using sham management companies to improperly shift income to be taxed at lower tax rates, improperly defer taxable income or claim personal expenses as bogus business deductions. As alleged by the government, Dombek promoted himself as the “premier dental CPA” in America. The complaint further alleges that in promoting the schemes, Dombek and Optimal made false statements about the tax benefits of the scheme that they knew or had reason to know were false, then prepared and signed tax returns for their customers reflecting the sham transactions, expenses and deductions. The government contended that the total harm to the treasury from the scheme could have been $10 million or more.

Deputy Assistant Attorney General David A. Hubbert of the Justice Department’s Tax Division made the announcement.

Each year the IRS highlights some of the tax scams that put taxpayers at risk of losing money, personal information, data and more. In the IRS’s most recent list, it specifically warned taxpayers “to beware of promoters peddling bogus tax schemes aimed at reducing taxes or avoiding them altogether.”

Working with the IRS, the Justice Department’s Tax Division has obtained injunctions against hundreds of unscrupulous tax preparers and tax scheme promoters over the past decade. Information about these cases is available on the Justice Department’s website. An alphabetical listing of persons enjoined from preparing returns and promoting tax schemes can be found on this page. If you believe that one of the enjoined persons or businesses may be violating an injunction, please contact the Tax Division with details.

Source: United States Department of Justice Criminal Division

A Ukrainian national pleaded guilty today to conspiracy to defraud the United States and conspiracy to commit money laundering.

According to the court documents and statements made in court, between April 2008 and July 2021, Oleksandr Yurchyk and others owned and operated a series of labor-staffing companies in southern Florida, including Paradise Choice LLC, Paradise Choice Cleaning LLC, Tropical City Services LLC and Tropical City Group LLC. Through these staffing companies, Yurchyk and others facilitated the employment of non-resident aliens in the hospitality industry who were not authorized to work in the United States and helped evade the assessment and collection of federal income and employment taxes. Yurchyk and his co-defendants also laundered more than $11 million of proceeds from their scheme.

Yurchyk is scheduled to be sentenced on Jan. 27, 2025. He faces a maximum penalty of 20 years in prison for the conspiracy to commit money laundering and five years in prison for the conspiracy to defraud the United States. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division and U.S. Attorney Markenzy Lapointe for the Southern District of Florida made the announcement.

Homeland Security Investigations and IRS Criminal Investigation are investigating the case.

Senior Litigation Counsel Sean Beaty and Trial Attorneys Matthew B. Hicks and Wilson R. Stamm of the Justice Department’s Tax Division and Senior Litigation Counsel Christopher J. Clark for the Southern District of Florida are prosecuting the case.

Source: United States Department of Justice Criminal Division

The Justice Department, together with the Federal Trade Commission (FTC), today announced that Lyft Inc. (Lyft) has agreed to resolve allegations that it made false and misleading statements about how much Lyft drivers would earn. The settlement includes an agreement to pay $2.1 million in civil penalties and a permanent injunction prohibiting such false and misleading earnings claims.

Lyft operates a mobile app ride-hailing platform that connects consumers seeking rides with those who provide rides with their own personal vehicles. Through marketing campaigns and advertisements, Lyft recruits drivers. After a driver is hired, Lyft sets the rates the driver charges and collects a portion of the fare for each ride. In a civil complaint filed in the U.S. District Court for the Northern District of California, the government alleges that, as early as 2021, Lyft made false and misleading claims in its advertising and marketing regarding potential earnings and incentives to be earned by drivers who signed up to drive for Lyft. Lyft allegedly continued these practices even after it received a Notice of Penalty Offenses in October 2021 that placed the company on notice that false and misleading earnings claims were unlawful.

The complaint alleges that Lyft disseminated advertisements promoting specific hourly amounts that drivers throughout the United States could earn. The company, however, did not disclose that the potential hourly amounts were based on the earnings of the top 20% of its drivers. The complaint also further alleges that Lyft also tried to induce drivers to offer more rides by promoting “earnings guarantees,” which guaranteed that drivers would be paid a set amount if they completed a specific number of rides in a certain time. These guarantees allegedly did not clearly disclose that drivers were paid only the difference between what they otherwise earned for the rides and Lyft’s advertised guaranteed amount, rather than receiving the full guaranteed amount in addition to their regular earnings for the rides.

In the stipulated order entered today by the federal district court, Lyft is required to pay a $2,100,000 civil penalty. The order also enjoins Lyft from making any misrepresentations regarding driver earnings and includes other monitoring and reporting provisions aimed at promoting Lyft’s compliance with the order.

“The Justice Department will vigorously enforce the law to stop companies from misleading Americans about their potential earnings in the gig economy,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division. “We will continue to work with the FTC to stop unfair and deceptive marketing practices.”

“Lyft drivers deserve accurate information about how much they will be paid for the work they do,” said Director Samuel Levine of the FTC’s Bureau of Consumer Protection. “Our settlement with Lyft bans exaggerated earnings claims and underscores the FTC’s commitment to ensuring gig workers are treated fairly.”

Trial Attorney Paulina Stamatelos and Assistant Director Zachary Dietert of the Civil Division’s Consumer Protection Branch, Assistant U.S. Attorney Ekta Dharia for the Northern District of California and Abdiel Lewis and Evan Rose of the FTC’s Bureau of Consumer Protection handled the matter.

For more information about the Consumer Protection Branch and its enforcement efforts, visit www.justice.gov/civil/consumer-protection-branch. For more information about the FTC, visit www.FTC.gov.

Source: United States Department of Justice Criminal Division

A Georgia accountant was sentenced today to 28 months in prison for his role in the promotion and sale of abusive syndicated conservation easement tax shelters.

According to court documents and statements made in court, Herbert Lewis was a CPA and return preparer at an Atlanta-based accounting firm. Beginning at least in 2014 and through at least 2019, Lewis promoted and sold tax deductions to his wealthy clients in the form of units in illegal syndicated conservation easement tax shelters organized and created by co-defendants Jack Fisher, James Sinnott and others.

According to court documents and statements made in court, Lewis also knew that, contrary to law, the transactions related to these illegal tax shelters lacked economic substance, that his wealthy clients participated only to obtain a tax deduction and that his clients received only a tax benefit for their participation in the shelters. For example, the scheme entailed the creation of partnerships that would purchase land and land-owning companies and then donate conservation easements over that land or the land itself. A client who purchased units in one of these partnerships had a “vote” ostensibly on what to do with the land the partnership owned. However, Lewis knew that the vote held by the partnership each year was just for optics and that the land invariably would be donated largely as a conservation easement.

In some cases, in order to make it appear that his clients had joined the partnerships before the date of the conservation easement donation, which was necessary to claim the tax benefits, Lewis also instructed and caused his clients to falsely backdate documents — such as subscription agreements and checks — related to the partnerships. In 2019 alone, Lewis assisted 15 clients with claiming false deductions on their 2018 returns.

In total, Lewis assisted in the preparation of tax returns that claimed nearly $14 million in false deductions based on backdated documents, causing a tax loss to the IRS of nearly $5 million.   

Lewis earned over $1 million in commissions for his role in promoting and selling the illegal tax shelters to clients. Lewis also concealed the amount of commissions he had earned from selling units in these shelters by not fully reporting the commissions on his personal returns and instead fraudulently reporting commission income he had earned as income on the tax returns of nominee entities in his children’s names.

In addition to his prison sentence, U.S. District Court Judge Timothy C. Batten Sr. for the Northern District of Georgia ordered Lewis to serve three years of supervised release and to pay $4,878,990.90 in restitution.

Nine additional defendants have previously pleaded guilty to criminal conduct related to the syndicated conservation easement tax shelter scheme. These other defendants include appraiser Walter Douglas “Terry” Roberts, accountant Stein Agee, CPA Corey Agee, CPA Ralph Anderson, CPA James Benkoil, CPA Victor Smith, CPA William Tomasello, CPA and attorney Randall Lenz and attorney Vi Bui.

Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division, U.S. Attorney Ryan K. Buchanan for the Northern District of Georgia and IRS Criminal Investigation Chief Guy Ficco made the announcement. They also thanked U.S. Attorney Dena J. King for the Western District of North Carolina for her office’s assistance.

IRS Criminal Investigation and the U.S. Postal Inspection Service investigated the case.

Trial Attorneys Richard M. Rolwing, Parker Tobin, Jessica Kraft and Nicholas J. Schilling Jr. of the Justice Department’s Tax Division and Assistant U.S. Attorney Christopher Huber, Deputy Chief of the Complex Frauds Section of the Northern District of Georgia, are prosecuting the case.

Source: United States Department of Justice Criminal Division

Vadim Yermolenko, 43, a dual U.S.-Russian national and resident of New Jersey, pleaded guilty to conspiracy to violate the Export Control Reform Act, conspiracy to commit bank fraud, and conspiracy to defraud the United States for his role in a transnational procurement and money laundering network that sought to acquire sensitive dual-use electronics for Russian military and intelligence services.

“This defendant joins the nearly two dozen other criminals that our Task Force KleptoCapture has brought to justice in American courtrooms over the past two and a half years for enabling Russia’s military aggression,” said Attorney General Merrick B. Garland. “This defendant admitted to playing a central role in a now-disrupted scheme with Russian intelligence services to smuggle sniper rifle ammunition and U.S. military grade equipment into Russia. The Justice Department will never stop working to aggressively disrupt and prosecute both the criminal networks and the individuals responsible for bolstering the Russian war machine.”

“The illegal export of sensitive, dual-use technologies in support of Russia’s war effort poses a significant threat to the United States and its allies and must not be tolerated,” said FBI Director Christopher Wray. “The defendant in this case played a key role in exporting U.S. technology that in the hands of our adversaries could pose great danger to our national security. The FBI and its partners will continue to focus on protecting strategic innovation at home and hold accountable anyone who facilitates illegal transfers to hostile nations like Russia.”

“To facilitate the Russian war machine, the defendant played a critical role in exporting sensitive, dual-use technologies to Russia, facilitating shipping and the movement of millions of dollars through U.S. financial institutions,” said U.S. Attorney Breon Peace for the Eastern District of New York. “This plea highlights my Office and our law enforcement partners continued commitment to use all tools available to prosecute those who unlawfully procure U.S. technology to send to Russia.”

According to court documents, the defendant was affiliated with Serniya Engineering and Sertal LLC, Moscow-based companies that operate under the direction of Russian intelligence services to procure advanced electronics and sophisticated testing equipment for Russia’s military industrial complex and research and development sector. Serniya and Sertal operated a vast network of shell companies and bank accounts throughout the world, including the United States, that were used in furtherance of the scheme to conceal the involvement of the Russian government and the true Russian end users of U.S.-origin equipment.

The defendant and his co-conspirators unlawfully purchased and exported highly sensitive, export controlled electronic components, some of which can be used in the development of nuclear and hypersonic weapons, quantum computing and other military applications. Following Russia’s invasion of Ukraine in February 2022, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) and the U.S. Department of Commerce (DOC) Bureau of Industry and Security (BIS) levied sanctions and imposed additional export restrictions on Serniya, Sertal, and several individuals and companies used in the scheme, calling them “instrumental to the Russian Federation’s war machine.”

Sertal was licensed to conduct highly sensitive and classified procurement activities by Russia’s Federal Security Service (FSB), Russia’s principal security agency and the main successor agency to the Soviet Union’s KGB. The Serniya network’s Russian clients included State Corporation Rostec, the state-owned defense conglomerate; State Atomic Energy Corporation Rosatom (Rosatom); the Ministry of Defense; the Foreign Intelligence Service (SVR); and various components of the FSB, including the Department of Military Counterintelligence and the Directorate for Scientific and Technological Intelligence, commonly known as “Directorate T.”

To carry out the scheme, the defendant helped set up numerous shell companies and dozens of bank accounts in the U.S. to illicitly move money and export-controlled goods. During the period charged in the indictment, more than $12 million passed through accounts owned or controlled by the defendant. These funds were used in part to purchase sensitive equipment used in radar, surveillance and military research and development. In one instance, money from one of the defendant’s accounts was used to purchase export-controlled sniper bullets, which were intercepted in Estonia before they could be smuggled into Russia.

Co-defendant Alexey Brayman previously pleaded guilty to conspiracy to defraud the United States and is awaiting sentence. The case against co-defendant Vadim Konoshchenok, a suspected FSB operative, was dismissed after Konoshchenok was removed from the United States as part of a prisoner exchange negotiated between the United States and Russia. Defendant Nikolaos Bogonikolos’ case remains pending. Defendants Boris Livshits, Alexey Ippolitov, Svetlana Skvortsova, and Yevgeniy Grinin remain at large.        

The FBI, BIS, and IRS are investigating the case.

The U.S. Customs and Border Protection, Department of Justice’s Office of International Affairs, and Estonian authorities provided valuable assistance.

Assistant U.S. Attorneys Artie McConnell, Andrew D. Reich, and Matthew Skurnik for the Eastern District of New York are prosecuting the case, with assistance from Trial Attorney Scott A. Claffee of the National Security Division’s Counterintelligence and Export Control Section.

Today’s actions were coordinated through the Justice Department’s Task Force KleptoCapture and the Justice and Commerce Departments’ Disruptive Technology Strike Force. Task Force KleptoCapture is an interagency law enforcement task force dedicated to enforcing the sweeping sanctions, export restrictions and economic countermeasures that the United States has imposed, along with its allies and partners, in response to Russia’s unprovoked military invasion of Ukraine. The Disruptive Technology Strike Force is an interagency law enforcement strike force co-led by the Departments of Justice and Commerce designed to target illicit actors, protect supply chains and prevent critical technology from being acquired by authoritarian regimes and hostile nation states.