Monthly Archives: November 2018

The Internal Revenue Service released on November 14, 2018 the Criminal Investigation Division’s (CI) annual report, reflecting significant accomplishments and criminal enforcement actions taken in fiscal year 2018.

Said IRS Commissioner Chuck Rettig. “CI uses cutting-edge technology combined with sophisticated investigative work to bring the most impactful cases that affect tax administration. I am extremely proud of our special agents and professional staff and their work serving the nation.”

A major focus of CI in fiscal 2018 was traditional tax cases, including international tax enforcement, employment tax, refund fraud and tax-related identity theft. Other areas of emphasis included public corruption, cybercrime, terrorist financing and money laundering.

“The future for CI must involve leveraging the vast amount of data we have to help drive case selection and make us more efficient in the critical work that we do. Data analytics is a powerful tool for identifying areas of tax non-compliance.”

CI initiated 2,886 cases in fiscal 2018, with traditional tax cases accounting for 73 percent of the total. The number of CI special agents dipped below 2,100 by the end of fiscal 2018, which is the lowest level since the early 1970’s. Consequently, CI turned to data analytics to assist in finding the most-impactful cases.

CI is the only federal law enforcement agency with jurisdiction over federal tax crimes. CI achieved a conviction rate of 91.7 percent in fiscal 2018, which is among the highest of all federal law enforcement agencies. The high conviction rate reflects the thoroughness of CI investigations and the high quality of CI agents. CI is routinely called upon by prosecutors across the country to lead financial investigations on a wide variety of financial crimes.

CI has published an annual report since 1920 to highlight the agency’s successes and provide a historical snapshot of the make-up and priorities of the organization. The 2018 report is interactive, summarizes a wide variety of CI activity during the year, and features examples of cases from each field office on a wide range of financial crimes.

The current year, fiscal 2019, marks the 100-year anniversary of CI as a law enforcement agency. CI’s crime-fighting techniques have come a long way in that time. The federal fiscal year begins Oct. 1 and ends on Sept. 30.

“As we begin our 100th year, I could not be prouder to lead this exceptional agency of dedicated women and men," Fort said. "We have never been more capable, better trained or more relevant to the financial crimes landscape."

The J5 have during the week of November 5th, brought together their leading data scientists, technology experts and investigators in a coordinated push to track down those people who make a living out of facilitating and enabling international tax crime.

The event, known as ‘The Challenge,’ was hosted by the Fiscal Information and Investigation Service (FIOD) in Amsterdam to identify, develop, and test tools, platforms, techniques, and methods that contribute to the mission of the J5. The Challenge focused on identifying professional enablers facilitating offshore tax fraud and financial crime posing a threat to the J5 jurisdictions.

Experts from each country gathered with the mission of optimizing data from a variety of open and investigative sources available to each country, including offshore account information. Using various analytical tools, the teams were tasked to find schemes, identify potential enablers, and propose actions to J5 leadership to address these threats.

At the conclusion of ‘The Challenge,’ each team identified new targets of investigations, developed investigative schemes to address those targets and increased their ability to share information and find similar patterns and targets in the future.

“Financial crime goes across borders,” said Hans van der Vlist, General Director of FIOD. “That is why operational collaboration is essential and possible. The J5 is a great example. The goal of this challenge is to define unknown professional enablers of tax fraud and financial crime.”

In addition to the Challenge, the J5 has already identified and is actively pursuing a number of professional enablers suspected of facilitating significant tax fraud across international boundaries. J5 partners are now working jointly to tackle each of these enablers through coordinated international action. These individuals were identified through intelligence sharing between J5 members since the alliance was formally announced (PDF 212KB)This link will download a file earlier this year in Montreal, Canada.

The J5 has also made progress in identifying websites that enable fraud through the promotion of schemes to hide income and assets offshore. J5 partners have shared intelligence and capability to collectively close in on these enablers by monitoring their users and using that in their investigations into those involved in these schemes.

Sources:

According to DoJ, a former U.S. Congressman Stephen E. Stockman was sentenced on November 7, 2018 to serve 120 months in prison and ordered to pay $1,014,718.51 in restitution, to be followed by 3 years of supervised release, for orchestrating a four-year scheme to defraud charitable donors of hundreds of thousands of dollars and secretly to funnel the proceeds to pay for personal expenses and to illegally finance his campaigns for public office.

“At trial, the government proved to the jury that former Congressman Stockman ran his campaign and fraudulent charities to simply enrich himself and defrauded well-meaning donors,” said U.S. Attorney Patrick.

Former U.S. Representative Stephen E. Stockman, 61, was convicted by a federal jury in Houston on April 12, of 23 counts of mail fraud, wire fraud, conspiracy to make conduit contributions and false statements to the Federal Election Commission, making false statements to the Federal Election Commission, making excessive coordinated campaign contributions, money laundering, and filing a false tax return. 

Two of Stockman’s former congressional staffers previously pleaded guilty in the case. 

• Thomas Dodd, 39, of Houston, Texas, pleaded guilty on March 20, 2017, to one count of conspiracy to commit mail and wire fraud and one count of conspiracy to make conduit contributions and false statements. 
• Jason T. Posey, 48, of Tupelo, Mississippi, pleaded guilty on Oct. 11, 2017, to one count of mail fraud, one count of wire fraud, and one count of money laundering.

“Former Congressman Stockman was entrusted by his constituents to serve in their best interest,” said FBI Special Agent in Charge DeSarno.  “Instead, Stockman used his position in a series of schemes for personal gain at the expense of the public.

Today’s Sentence Should Send a Clear Message

That the Laws of the Land Apply to Everyone,

Regardless of Position or Power.

 



According to the evidence presented at trial, from May 2010 to February 2014, Stockman and his co-defendants solicited $1,250,571.65 in donations from charitable organizations and the individuals who ran those organizations based on false pretenses, then used a series of sham nonprofit organizations and dozens of bank accounts to launder the money before it was used for a variety of personal and campaign expenses.

Specifically, the evidence established that

• in 2010, Stockman and Dodd solicited an elderly donor in Baltimore, Maryland for $285,000 to be used for legitimate charitable and educational purposes. 
• Stockman and Dodd used a sham charity named the Ross Center to funnel the money to be used for a variety of personal expenses. 
• The evidence further established that, in 2011 and 2012, Stockman and Dodd received an additional $165,000 in charitable donations from the Baltimore donor, much of which Stockman used illegally to finance his 2012 congressional campaign. 

The trial evidence also showed that

• shortly after Stockman took office as a Member of the U.S. House of Representatives in 2013, he and Dodd used the name of another sham nonprofit entity, Life Without Limits, to solicit and receive a $350,000 charitable donation, to be used to create an educational center called the Freedom House.  
• Stockman, Dodd, and Posey instead used this donation for a variety of personal and campaign expenses, including:
• illegal conduit campaign contributions,
• a covert surveillance project targeting a perceived political opponent,
• an in-patient alcoholism treatment for a female associate, and
• payments for hundreds of thousands of robocalls and mailings promoting Stockman’s candidacy for U.S. Senate in early 2014.

In addition, the evidence established that,

• in connection with Stockman’s Senate campaign, Stockman and Posey used another sham nonprofit entity to secure a $450,571.65 donation in order to fund a purportedly legitimate independent expenditure promoting Stockman’s candidacy.  
• The evidence showed that the purportedly independent expenditure was in fact secretly controlled by Stockman, who directed his campaign and Posey to file false affidavits with the FEC covering up Stockman’s involvement. 

Finally, the evidence at trial demonstrated that Stockman failed to pay taxes on any of the $1,250,571.65 in fraudulently acquired donations.  In addition, during the early stages of the investigation, Stockman directed Posey to flee to Cairo, Egypt, for two and a half years so that Posey could not be questioned by law enforcement.

 

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