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IRS money lost to fraudulent returns likely gone for good

TAMPA — Arswaya Ralph, 34, filed for tax refunds using stolen identities.

Now she's in prison. With good behavior, she will go free at the end of next year, under orders by a federal judge to pay restitution of $167,974.

There's one problem: At her last job, in a medical office, Ralph made just $10 an hour.

Without a doubt, refund thieves are getting caught and punished, evidenced by the 15-year prison sentence dealt recently to car dealer Russell B. Simmons Jr., whose Bentley, gold and diamonds embodied the excesses that exposed an illegal economy.

But the public, in all likelihood, won't recoup the billions of dollars that the Internal Revenue Service let slip away. Much of it was taken and spent by people with few other assets and limited earnings potential.

Seldom have so many, with so little, had the ability to steal so much.

Even among traditional white-collar criminals, up to 96 percent of federal criminal restitution goes unpaid, Government Accountability Office studies have found.

"Most of the time, it's useless," U.S. District Judge James S. Moody Jr. acknowledged. "It's an exercise in futility. It's something that looks good and sounds good. But I don't know what we would do, otherwise."

Like most judges, Moody orders restitution because Congress left him little wiggle room. The Mandatory Victims Restitution Act of 1996 says federal judges "shall" order it, without consideration of a felon's ability to pay. It applies to violent federal crimes but also to property crimes, including any offense committed by fraud.

Reports of large restitution orders — nearly $1.9 million in the case of Simmons — may assuage the public's indignation over the loss of taxpayer money. But the government makes no announcements when writing off the debt as uncollectible, which happens more often than not.

"Most people aren't Bernie Madoff," said Anita Cream, chief of the Asset Recovery and Victims' Rights Division at the U.S. Attorney's Office in Tampa. "Most don't have significant assets to satisfy the restitution the court imposes on them. Most of the people who commit fraud have squandered the lion's share of what they've stolen."

About 70 percent of federal criminal defendants in the Middle District of Florida are broke enough to require public defenders, although several big tax fraud cases drew private lawyers.

Stolen identity refund fraud took off in Tampa as a street crime. The practice caught on in poor communities, evident when police started finding food stamp benefit cards commingled with hijacked refunds. Neighborhood drug dealers joined the scam. Court records allege that some claims were even filed on a government computer in a public housing complex by a woman then employed by the Tampa Housing Authority.

The Treasury Inspector General for Tax Administration puts the national loss to the IRS and Treasury at $5 billion a year, with much of the action in Tampa.

When IRS acting Commissioner Steve Miller fielded questions in a conference call with Florida journalists last month, the Times asked if it bothers him that much of the money was lost for good.

"It does trouble me," he said. "Obviously it troubles me a great deal where there's any loss of even a dollar, but I am satisfied that we are doing everything we can to limit the number of dollars that are going out of the door fraudulently, and I think that's the best that we will be able to do."

• • •

The Justice Department, through the U.S. Attorney's Office, can, and does, seek forfeiture of the spoils of crime.

Increasingly, the groundwork is laid before sentencing and as part of a plea agreement. Two days after a Tampa grand jury indicted Rashia "First Lady" Wilson on tax fraud charges, prosecutors filed a document declaring an interest in her $90,000 Audi.

In the Simmons case, the intended forfeiture of his $60,000 Bentley was noted in the car dealer's plea deal, as were the surrender of an 18-karat gold Rolex with a diamond dial and a 14-karat gold necklace that spelled out his initials in 703 diamonds.

And if there happen to be no spoils — if people gamble away the money or snort it up — the government can still ask the court for a "forfeiture money judgment," a claim on other assets and future earnings.

All of that may sound like restitution, but it isn't.

The proceeds go into the Justice Department's Asset Forfeiture Fund, which reimburses agencies for the cost of investigating and prosecuting crimes.

In essence, Simmons' forfeited belongings helped pay to send him to prison.

When he gets out, he will still owe nearly $1.9 million in restitution to the IRS, plus more cash to the Justice Department, which obtained a forfeiture money judgment against him for nearly $1.2 million, only part of which was satisfied by the sale of his loot.

An eye for an eye? Legally, the government can demand both eyes, between restitution and forfeiture judgments.

"My clients who are indigent can very rarely satisfy either," said Assistant Federal Public Defender Adam Allen.

Some have jobs before going to prison, but the criminal record does little to help them pay restitution.

"After serving lengthy prison sentences," he said, "their prospects for future gainful employment become even more difficult."

• • •

Arswaya Ralph's parents have legitimate jobs. Her mother drives a school bus and her father works for Tampa's recycling department. They have held their positions for more than two decades, public records show.

The daughter, judging from court records, out-earned them both nine times over. The government found evidence that she filed more than $1.2 million in claims, and that the IRS paid $675,694.

But she accepted a plea agreement before her ledgers had been fully examined. In the plea deal, she admitted taking much less: $273,254. A bank returned more than $100,000 to the IRS, and Ralph wound up owing $167,974 in restitution.

U.S. District Judge Mary S. Scriven ordered her to pay $300 a month once she gets out of prison. At that rate, Ralph would still be paying when she turned 80. But Scriven will lose oversight after Ralph completes two years of supervised release.

Cream's financial litigation unit, which has 20 years to collect restitution, will have to decide how far to go.

They can garnishee wages or look for hidden assets.

"We will do our best to get that money back from you while you are in jail or once you are released," Cream said. "How effective that is relates to your income stream and how good our information is."

At the close of fiscal year 2012, the unit's two lawyers, support staff and a recently hired investigator juggled 6,696 pending criminal debts in the Middle District alone.

That year, the office took on $120 million in new criminal debt owed to the United States and collected payments in that category of about $2.4 million.

By statute, restitution payments to individuals take priority over those owed to the federal government, which puts the IRS behind private citizens who were victims of crime.

"We've got two things working against us," Cream said. "One is the volume of cases. We're trying to collect restitution judgments that have been entered for decades. Some people are serving 20-year sentences and coming out. We're trying to collect that debt as well as the debt of somebody who just served 18 months."

Another challenge is the mammoth size of the restitution orders. A defendant might plead guilty to only part of a multi-count indictment yet still be ordered to pay the entire restitution that would make the victim whole. Danielle Denson, whose $300 Gucci thong purchase is immortalized in court records, pleaded guilty to one count of aggravated identity theft and one count of theft of government property — identified as a $9,046 tax refund.

But in the pending plea agreement, she admits taking $1.6 million, and that's how much restitution she could be ordered to pay to the IRS. She hasn't reported any income since 2008.

• • •

Federal Judge Moody marvels at the willingness of people to engage in tax fraud, sometimes for little gain.

He remembers a woman who, for $200, allowed prisoners to use her mailing address when they ordered fraudulent refunds.

"You're willing to sell your whole crime-free life and history and future for $200?" he asked.

He draws a distinction between restitution and punishment. The punishment is the prison sentence. He considers it a plus if restitution gets paid.

He's okay with ordering it, whether or not they pay.

"If they ever win the lottery," he said, "we'll collect the money."

Times staff writer Patty Ryan can be reached at (813) 226-3382 or

U.S. attorneys as debt collectors

in 2012

Across the nation, the offices of federal prosecutors turn to forfeiture actions, wage garnishments and other means to make criminals pay court-ordered fines, victim restitution and other costs. But it's often an uphill battle, and so debt collection is suspended in cases where prospects look bleak for recovery.


$81 billion: pending criminal debt load

$10 billion: amount considered collectible

$64 billion: owed to third parties

$17 billion: owed to federal government

$2.4 billion: owed to federal government and collectible

Middle District of Florida

$3.6 billion: pending criminal debt load

$1.5 billion: amount considered collectible

$2.9 billion: owed to third parties

$665 million: owed to federal government

$150 million: owed to federal government and collectible

6,696: pending criminal debt cases, end of FY 2012

1,349: cases added in FY 2012

Source: 2012 U.S. Attorneys' Annual Statistical Report

Spending the public's money

Stolen identity tax refund fraud cases are now common in federal court. Here's a sample of Tampa Bay cases, with estimates of the alleged fraud, forfeiture actions by the U.S. Attorney's Office or other federal agencies, and restitution.

Russell Simmons Jr., 42

He admitted filing claims totaling $8.9 million, while letting others cash their own bogus refunds at his Tampa car dealership. The IRS issued refunds for about $3.2 million but some were stopped or canceled by IRS, Turbo Tax or debit card companies.

Sentence: 15 years

Seized asset value: $340,000

Forfeiture money judgment: $1.17 million

Restitution: $1.89 million

Tanya Cullens, Carlista Hawls and Alesia Spivey

Cullens cleaned a Tampa hospital, Hawls was a student and Spivey worked at Jabil Circuit. Prosecutors say the three were part of a ring that used patient identities to file tax returns, while also defrauding Jabil Circuit by falsely claiming relocation expenses.

Status: Plea agreements accepted; sentencing May 14-16. Cullens and Hawls face up to seven years. Spivey faces up to 10 years.

Proposed restitution (IRS

portion): $551,473

Danielle Denson, 27

She successfully filed 323 returns totaling $1.64 million. One victim, a resident of an assisted living facility, had severe autism.

Status: Plea agreement accepted; sentencing April 4. She faces up to 12 years in prison.

Forfeiture: $101,869 by Secret Service; judgment, $9,046

Proposed restitution:

$1.64 million

Rashia Wilson, 27, left,

and Maurice Larry, 27

The two are codefendants. Wilson drove a $90,000 Audi bought with a money order. Boyfriend Larry was charged in two tax cases, including one with Marterrence Holloway, 33. Authorities say the three were pioneers who schooled others in tax fraud, giving rise to Wilson's nickname, "First Lady."

Status: Awaiting trial. Separately, Wilson also awaits sentencing on a federal gun charge, which carries up to 10 years.

Restitution: To be determined

Alleged loss to government: At least $1.7 million

Carlos Oscar Johnson, 24

He worked part-time as a nursing assistant in Largo, but after tax fraud, booked into the luxury Bellagio hotel in Las Vegas and drove a 2009 Cadillac CTS.

Status: Plea agreement accepted; sentencing May 20. He faces up to 22 years, having pleaded guilty to wire fraud and aggravated identity theft.

Forfeiture: $99,169 by IRS-CI

Proposed restitution: $431,625

Arswaya Ralph, 34

She took a plea deal before the government finished going through her books, so she wound up owing less in restitution than the suspected fraud amount.

Sentence: 2 years, 4 months.

Refunds collected: $273,254 to $675,694

Forfeited assets: $180,000

Restitution: $167,974

Nikia N. Williams, 29

After filing returns using the names of dead people, she wound up driving a Mercedes, carrying designer handbags and wearing diamonds.

Status: Plea agreement accepted; sentencing May 20. She faces up to 12 years.

Forfeiture: $7,117 seized cash, $112,850 seized jewelry, $12,500 money orders

Proposed restitution: $252,491

Belinda Brooks, 47

While on the job as a Tampa taxi dispatcher, she obtained the Social Security numbers of Medicaid patients to file for tax refunds.

Sentence: 5 years, 6 months

Forfeiture: $118,883 judgment

Restitution: $118,883

IRS money lost to fraudulent returns likely gone for good 03/30/13 [Last modified: Saturday, March 30, 2013 9:09pm]
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