10/24/2011

News / Justice Department Sues U.S. FDA Employee and Former N.Y. Corrections Official to Block Alleged Tax-Fraud Scheme

New York-Area Pair Allegedly Help Customers Submit Fraudulent Refund Claims

WASHINGTON - The United States has sued Rodney Chestnut and Nafeesah Hines to bar them from promoting an alleged tax fraud scheme, the Justice Department announced today. According to the civil injunction complaint, the scheme is based on a frivolous “redemption” theory, which promoters falsely claim allows taxpayers to obtain funds from supposed secret U.S. Treasury accounts. Scheme participants allegedly use Internal Revenue Service (IRS) forms, including Forms 1099-OID and 1099-A, to report large amounts of fictitious income tax withholding, in order to claim large tax refunds.



According to the complaint, Chestnut, of Middle Island, N.Y., is a former corrections captain who promotes the scheme and recruits participants, including some of his former co-workers at the New York City Department of Corrections. He allegedly prepares tax returns for his customers that fraudulently claim huge tax refunds based on the redemption theory.



The complaint also states that Hines, of Jamaica, N.Y., is an employee of the U.S. Food and Drug Administration who prepares or files false forms with the IRS, both for Chestnut’s customers as well as for others. According to the complaint, in 2009 and 2010 Hines prepared or filed more than 3,000 fraudulent forms that falsely reported over $54 million of purportedly withheld income taxes.



Claiming bogus tax refunds based on false Forms 1099-OID is one of the IRS’s “Dirty Dozen” tax scams for 2011. In the past decade, the Justice Department’s Tax Division has obtained injunctions against hundreds of tax-fraud promoters and unscrupulous tax preparers. Information about these cases is available on the Justice Department website.

http://www.justice.gov/opa/pr/2011/October/11-tax-1391.html

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