Cleveland Tax Fraud Lawyers

Cleveland Tax Fraud Lawyers: When Construction Companies Steal From Their Own Workers

Timothy Ray Jenkins ran a Cleveland construction company. He withheld employment taxes from his workers’ paychecks for years. Social Security. Medicare. Federal income tax. The workers saw the deductions on their pay stubs. They expected those taxes to be paid to the IRS on their behalf. Jenkins kept the money instead. When federal prosecutors charged him with 11 counts of failure to account for and pay employment taxes, the workers discovered their employer had been stealing from them the entire time. His sentence: 30 months in federal prison. The construction company owner who built projects for clients was building a fraud case against himself.

The Northern District of Ohio has seen tax fraud combined with identity theft, charitable deduction schemes that were never charitable, and professionals who turned client trust into criminal opportunity. When federal prosecutors in Cleveland bring tax charges, the sentences can be extraordinary – 17 years for identity theft combined with tax fraud. The defendants often thought their schemes were invisible. They weren’t.

The Construction Company Owner Who Kept Employee Taxes

Timothy Ray Jenkins of Woodmere, Ohio was 67 years old when he was sentenced. He had run his construction company for years. He had employees who worked for him, trusting that the deductions from their paychecks were being handled properly. Jenkins pleaded guilty to counts one through 11 of an indictment charging him with failure to account for and pay employment taxes.

Heres the thing about employment tax fraud in construction. The industry operates on tight margins. Cash flow problems are common. When owners face financial pressure, withheld employment taxes become a tempting source of operating capital. The money is already in the business account. The quarterly filing deadline approaches. The owner decides to use the withheld taxes for payroll or materials instead of remitting them to the IRS.

Jenkins made that choice repeatedly. Eleven counts. That means multiple quarters of failing to pay over withheld taxes. Each quarter, employees had taxes deducted. Each quarter, Jenkins kept the money.

U.S. District Judge Pamela A. Barker sentenced Jenkins to 30 months in federal prison. Two and a half years for stealing from his own workers. The employees whose Social Security credits went unfunded, whose Medicare contributions were never made, whose federal withholdings never reached the IRS – they were victims of there own employers fraud.

The Ultimate Tax Plan That Wasnt

Rao Garuda was the president and CEO of Associated Concepts Agency Inc. He was a financial planner. His clients trusted him to help them manage there wealth and reduce there tax obligations through legitimate strategies. Instead, he promoted a fraudulent tax shelter he called the “Ultimate Tax Plan” or the “Advanced Legacy Plan.”

The scheme promised high-income clients a way to reduce taxes by claiming deductions for charitable donations. The problem: the donations werent real. Clients claimed deductions for contributions they never actually made, allowing them to receive the tax benefit without actually giving away there assets or control over there money.

Garuda was sentenced to 20 months in federal prison for conspiring to defraud the United States. But the consequences extend beyond his sentence. The clients who participated in the scheme face there own exposure. They claimed fraudulent deductions. They may face audits, disallowed deductions, back taxes, penalties, and interest.

The Tax Preparer Who Stole Client Identities

Mustafa Ayoub Diab of Ravenna, Ohio ran a tax preparation business. Clients came to him with there personal information – Social Security numbers, addresses, financial details. They trusted him to prepare there returns accurately and honestly. Diab used that trust for something else entirely.

A federal jury convicted Diab on 42 counts including theft of government funds, bank fraud, wire fraud, aggravated identity theft, and conspiracy. He submitted fraudulent applications for pandemic benefits in the names of nearly 80 victims. The government paid out more then $1.2 million in pandemic benefits to accounts Diab controlled.

Diab faces up to 30 years in federal prison at his sentencing. The tax preparation business that was supposed to help clients became the vehicle for defrauding them. Every client who walked into Diabs office with there W-2s and 1099s was potentially handing over the information needed to steal there identity.

17 Years For Identity Theft And Tax Fraud

A Beachwood woman was sentenced to 17 years in federal prison for stealing the identities of more then a dozen people and filing false tax returns. Seventeen years. That sentence approaches what some violent criminals recieve. It reflects how seriously federal courts treat combined identity theft and tax fraud.

The scheme involved stealing identities and using them to file false returns claiming fraudulent refunds. Each identity represented a real person whose tax records were compromised. Each false return represented fraud against both the victim and the IRS.

A Cleveland man was sentenced to nearly 13 years in prison for identity theft and tax fraud. Another significant sentence showing the Northern Districts approach to combined identity and tax crimes.

Embezzling From The Family Business

Donald R. Martin worked for his fathers railroad scrap company. Around January 2013, Martin began misappropriating the companys short-term loans by depositing them into bank accounts he owned or controlled. He also filed false tax returns, failing to report the embezzled income.

Heres the irony that makes the Martin case particularly painful. He stole from his fathers business. The family trust that gave him access to company finances became the opportunity for theft. The son who worked in his fathers company betrayed both his family and the federal tax system.

Martin was sentenced to 12 months and one day in federal prison, plus 36 months of probation, and ordered to pay restitution of $1,882,789. Nearly $1.9 million that must be repaid.

The Northeast Ohio Pair Filing 150 Fraudulent Returns

A Northeast Ohio pair was indicted for filing nearly 150 tax returns fraudulently claiming $615,000 in refunds. The scale of the operation – 150 returns – suggests an organized fraud factory rather then occasional misconduct.

Heres the thing about high-volume refund fraud. The IRS tracks patterns. When returns cluster around similar fabrications – similar false credits, similar fake income, similar deduction patterns – investigators notice. The 150 returns in this case created a pattern that was eventualy traced back to its source.

Ohios Dual Prosecution Reality

Ohio has a state income tax with rates up to 3.5%. Unlike Texas or Florida with no state income tax, Ohio has BOTH state AND federal tax fraud enforcement. The Ohio Department of Taxation investigates state tax crimes. Federal prosecutors in the Northern District of Ohio handle IRS cases.

Heres what that means practically. A single fraud scheme can trigger investigation by the Ohio Department of Taxation AND the IRS simultaneosly. Cases can be prosecuted at the state level, the federal level, or both.

And in Ohio, state penalties can theoreticaly stack on top of federal penalties. The Ohio Department of Taxation can pursue its own case for state tax fraud. While dual prosecution is uncommon, it creates additional leverage for prosecutors.

The Districts Approach To Major Fraud

The Northern District of Ohio has demonstrated through case after case that it will pursue tax fraud aggressivly and consistantly. Timothy Jenkins – 30 months for construction employment tax fraud. Rao Garuda – 20 months for the charitable deduction shelter. The Beachwood woman – 17 years for identity theft and tax fraud.

Heres the reality of federal tax investigations. By the time charges get filed, investigations have been running for months or years. The evidence is gathered before defendants know there being investigated.

The sentences are substantial. 17 years for combined identity theft and tax fraud. 30 months for employment tax fraud. 20 months for promoting a fraudulent shelter. The restitution orders are massive – Martin owes nearly $1.9 million. These debts follow defendants permanantly. They survive bankruptcy.

Defense Strategy In Cleveland

If your facing tax fraud exposure in Cleveland, the calculus involves understanding how the Northern District operates.

The Jenkins case shows what happens when employment taxes arent remitted – 30 months. The Garuda case shows that promoting tax shelters results in prosecution alongside clients. The Diab case shows that tax preparers who steal client identities face decades in prison. The identity theft cases show how sentences stack when identity crimes combine with tax fraud.

The time to address tax fraud exposure is before any of that happens. Voluntary disclosure programs exist. Coming forward before the IRS finds you creates opportunities to resolve issues civily – with penalties and interest, but potentialy without prison.

Why Cleveland Specificaly Creates Exposure

Clevelands economy creates its own particular tax fraud exposure. The construction industry with employment tax obligations. The financial services sector where professionals can promote fraudulent schemes. The tax preparation industry where client information creates identity theft opportunity.

If theres tax fraud exposure in your situation – employment taxes your business didnt remit, a tax shelter you participated in, returns prepared by someone now under investigation – the time to address it is before anyone starts looking. Appeals go to the Sixth Circuit Court of Appeals.

The Northern District of Ohio has shown through case after case that it pursues tax fraud aggressivly. The sentences can be extraordinary – 17 years for identity theft combined with tax fraud. The 90% federal conviction rate basicly means most people charged get convicted. Your exposure persists untill you address it.