Department of Justice bashes $20 million identity refund fraud ring

DoJ said group stole IDs from Fort Benning, Alabama State Agencies and Call Center

The US Department of Justice said 10 people were indicted today for their roles in a $20 million stolen identity refund fraud conspiracy.

The group -- Tracy Mitchell, Dameisha Mitchell, Latasha Mitchell, Keisha Lanier, Tameka Hoskins, Sharondra Johnson, Cynthia Johnson, Mequetta Snell-Quick, Talarious Paige and Patrice Taylor – used the stolen IDs to file 7,000 false tax returns – a crime the DoJ and the Internal Revenue Service highlighted this year as one they were going after with renewed gusto.

According to the indictment, between January 2011 and December 2013, the defendants ran a large-scale identity theft ring. The defendants obtained stolen identities from various sources to be used in filing false returns. Tracy Mitchell worked at the hospital on Fort Benning in Columbus, Ga., where she had access to the identification data of military personnel, including soldiers who were deployed to Afghanistan. Mitchell and her daughter, Latasha Mitchell, also obtained stolen identities from an Alabama state agency. Lanier obtained stolen identities from the Alabama Department of Corrections. Paige and Taylor worked in a call center for a Columbus company and stole identities.

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In order to file tax returns, the defendants obtained Electronic Filing Numbers in the names of several tax preparation businesses. On behalf of those tax preparation businesses, the defendants applied for bank products from various financial institutions, which mailed blank check stock to the defendants’ homes, the DoJ stated.

The defendants sent anticipated tax refunds to prepaid debit cards, to U.S. Treasury checks and to financial institutions, which in turn issued the refunds via checks or prepaid debit cards, the DoJ stated. The defendants directed U.S. Treasury checks to be mailed to several addresses in Alabama and then obtained those checks from the mail. The defendants coordinated the cashing of the refund checks by sending various text messages among themselves. The defendants cashed the fraudulent checks at several businesses located in Alabama, Georgia and Kentucky. In addition to the conspiracy charge, the defendants are also charged with mail and wire fraud, access device fraud and aggravated identity theft, according to the indictment.

If convicted, each defendant faces a statutory maximum potential sentence of 10 years in prison for the conspiracy charge, a statutory maximum potential sentence of 20 years in prison for each wire and mail fraud count, a statutory maximum potential sentence of 15 years in prison for each access device fraud count, and a mandatory two year sentence in prison for each aggravated identity theft count. The defendants are also subject to fines, forfeiture and mandatory restitution, the DoJ stated.  

Earlier this year the IRS’ Criminal Investigation unit said it had started 295 new identity theft investigations since January, pushing the number of active cases to more than 1,800.

The effort by the unit is part of a larger effort at the IRS to combat identity theft and refund fraud by pursuing identity thieves, preventing fraudulent refunds from being issued and helping victims of this crime. The IRS said that since the start of 2014, increased activity by CI has led to more prosecution recommendations, indictments and sentencing hearings, which reflect the overall success by the IRS on the increased number and effectiveness of ID theft filters used during the processing of tax returns. Highlights of this year’s work include:

A new and key component for IRS efforts this year is to investigate the misuse of Electronic Filing Identification Number (EFIN). An EFIN is assigned to tax preparers that have completed the IRS e-file Application to become an Authorized IRS e-file Provider. After the provider completes the application and passes a suitability check, the IRS sends an acceptance letter, including the EFIN, to the provider.

Since the start of the fiscal year through March 31, 2014, the IRS has revoked or suspended 395 EFINs based on recommendations from CI, and CI has initiated 60 EFIN source investigations involving EFINs used by individuals involved in refund fraud and identity theft schemes. By revoking and suspending the EFINs, IRS can prevent the transmission of the fraudulent tax returns, the IRS stated.

In Fiscal Year 2013, the IRS initiated approximately 1,492 identity theft related criminal investigations, an increase of 66% over investigations initiated in 2012. Direct investigative time applied to identity theft related investigations has increased 216%  over the last two years. Prosecution recommendations, indictments, and those convicted and sentenced for identity theft violations have increased dramatically since FY 2011. Sentences handed down for convictions relating to identity theft have been significant, ranging from two months to 317 months.

In April, US Attorney General Eric Holder said ID theft and IRS returns was an "increasingly urgent problem" and warned consumers and businesses alike that scammers looking to snatch fraudulent tax refunds based on stolen identities is at an all-time high. Holder said that a growing pool of criminals are engaged in tax fraud, including gangs and drug sellers seeking quick access to cash.

Holder said the Justice Department's Tax Division, in conjunction with the IRS and U.S. Attorneys' Offices, have prioritized the investigation and prosecution of individuals who engage in stolen identity refund fraud. In the last year alone, the department charged more than 880 defendants involved in stolen identity refund fraud, and the IRS reports that it resolved or closed approximately 963,000 cases involving identity theft victims. In a 2009 audit of the IRS the agency said it stands to lose as much as $21 billion in revenue over the next five years due to identity theft.

Copyright © 2014 IDG Communications, Inc.

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