Los Angeles, California – LAWFUEL – The Legal Newswire – Two members of a conspiracy indicted for filing false federal income tax returns with the Internal Revenue Service pleaded guilty to federal conspiracy charges and to aiding and assisting others in the preparation and presentation of false tax returns to the IRS.
This morning, appearing before United States District Judge R. Gary Klausner in Los Angeles, Donald Ray Hearn, 49, of Long Beach, pleaded guilty to being a member of a conspiracy, from December 2000 through April 2003, that defrauded the Internal Revenue Service by filing false tax returns for others that claimed refunds that the tax return filers were not entitled to receive. Previously, on Thursday, September 6, 2007, Charles Vernon Brown, 62, of Riverside, also pleaded guilty to being a member of the same conspiracy. During the time period of the charged conspiracy, Brown, Hearn, and others working with them, prepared over 11,000 tax returns.
Hearn and Brown, along with Kimberley Michelle Walker, of Moreno Valley, operated several tax preparation businesses, including I.M.C. Financial Services, located in Long Beach, as well as Walker Tax and Financial Services and WIB Financial Services, both located in Bellflower. Brown and Hearn admitted that they and their co-conspirators prepared income tax returns for clients that included false itemized deductions for medical expenses, charitable contributions and employee business expenses. In addition to claiming the false itemized deductions, the co-conspirators would also claim false education credits and fabricated credits for child and dependent care expenditures on their client’s income tax returns. Further, Brown, Hearn and their co-conspirators prepared fraudulent W-2 forms, which falsely indicated that some of the scheme participants had earned wages and had income tax withheld from their wages when they had not actually worked for the indicated businesses.
In an effort to enable the co-conspirators to receive their fees for preparing the fraudulent tax returns and to enable their clients to receive their fraudulently claimed refunds, Brown, Hearn and their co-conspirators utilized Refund Anticipation Loans. Using Refund Anticipation Loans, the co-conspirators would be able to receive their fees, and the scheme participants their refunds, before the IRS could determine that the refunds claimed were based upon fabricated returns and the participants were not entitled to the refunds.
When sentenced later this year, Brown and Hearn each face a statutory maximum of eight years in federal prison followed by three years of supervised release and fines totaling $350,000. Judge Klausner ordered Brown to appear on November 26, 2007 and ordered Hearn to appear on December 10, 2007 for sentencing.
The third defendant in this case, Walker, was arrested on August 17, 2007, and is currently free on bond awaiting trial. Walker’s trial is set to begin on October 16, 2007.
The investigation of Hearn, Brown, and Walker was conducted by the Los Angeles Field Office of IRS – Criminal Investigation.