A Skokie man is facing federal charges alleging that he participated in a conspiracy since March 2008 to claim more than $2.1 million in fraudulent federal income tax refunds and actually obtaining false refunds totaling more than $1.3 million. The defendant, Ovidiu Isac, and co-schemers allegedly shared the proceeds of Internal Revenue Service tax refunds by withdrawing the tax funds deposited into co-schemers’ bank accounts, knowing that they were not entitled to the fraudulently obtained refunds.
Isac, 28, of Skokie, was charged with conspiracy to claim false tax refunds in a criminal complaint that was unsealed late Friday in U.S. District Court in Chicago following his arrest, announced Patrick J. Fitzgerald, United States Attorney for the Northern District of Illinois; Robert D. Grant, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; Alvin Patton, Special Agent-in-Charge of the Internal Revenue Service Criminal Investigation Division; and Gary Hartwig, Special Agent-in-Charge of U.S. Immigration and Customs Enforcement (ICE) in Chicago.
The investigation is continuing, the officials said. Isac remains in federal custody pending further proceedings before U.S. Magistrate Judge Nan Nolan in Federal Court in Chicago.
According to the complaint affidavit, the IRS Fraud Detection Center identified a scheme for the 2007 tax year involving approximately 251 false tax returns filed electronically, claiming tax refunds totaling more than $1.48 million. All of the returns were based on false W-2s showing employment income and false deductions for moving expenses, and were submitted in the names of Romanian nationals. The fraud center further identified an identical scheme for the 2008 tax year involving approximately 127 false tax returns, claiming refunds totaling more than $640,000, and the IRS has flagged similar returns that have been filed this year for the 2009 tax year.
The vast majority of tax returns at issue for 2007-09 share the following characteristics: all designate “single” taxpayers; the returns show similar wage and withholding amounts; no tax preparer was identified; each return included a Form 3903 showing substantial moving expenses, typically about $21,000; the returns were electronically filed using a self-selected and identical password; the returns requested direct-deposit refunds, primarily to bank accounts in Chicago; and the taxpayers identified on the returns had names with common Eastern European spellings. Further investigation showed that the employers identified on the W-2s submitted with the returns had not employed the taxpayers or paid the reported wages.
According to a Customs and Border Protection database, the vast majority of the taxpayers whose returns generated the tax refunds at issue were people who traveled to the United States on J1 exchange visitor visas for several months in 2006 or 2007. These individuals were not in the United States at the times reflected on the tax returns and did not earn wages here during those years, according to the affidavit.
The charges also rely on information from a cooperating witness (CW#1) who told the FBI that he/she participated in the scheme with Isac and others to obtain tax refunds and divide the cash. CW#1 typically kept 20 percent of the money, the account holder kept 10 percent and CW#1 gave Isac the remaining 70 percent. The affidavit details transactions involving CW#1, Individual A and Isac, which resulted in CW#1 providing Isac with $4,100 from a fraudulently obtained tax refund while CW#1 was cooperating with the investigation.
Agents reviewed bank records for the accounts into which the tax refunds were deposited and found that none of the names or addresses on the bank accounts matched the names or addresses of the individuals named as taxpayers on the false tax returns. Agents further learned that many people in and around Chicago held accounts at multiple banks and received these tax refunds over and over again, often on the same day.
The bank records also show that multiple account holders, after receiving direct-deposited refunds, wrote checks to Isac, the affidavit alleges. In addition to fraudulently obtained tax refunds, some of the deposits included economic stimulus payments the government issued to taxpayers who filed returns for 2007.
The affidavit further alleges that many account holders, instead of writing checks, withdrew almost the entire amount of the tax refund in cash the same day as the refund appeared in the account or shortly thereafter.
Conspiracy to claim false tax refunds carries a maximum penalty of 10 years in prison and a $250,000 fine. If convicted, the court is required to impose a reasonable sentence under the advisory United States Sentencing Guidelines.