U.S. Sues 32 Individuals, Alleging $30 Million Tax Credit Scam Based on Sham Sales from Non-Existent Methane Production Facilities at Landfills
Florida-Based Promoters Allegedly Used Tax Preparers to Sell Scheme to Customers Across the Country
WASHINGTON – LawFuel.com – Legal Newswire – The United States has sued four Certified Public Accounts (CPA), 27 tax preparers and one other individual, seeking to bar them from promoting an alleged tax scam involving bogus income tax credits claimed for sham sales of methane from landfills, the Justice Department announced today.
According to the civil injunction lawsuit, filed in Tampa with the U.S. District Court for the Middle District of Florida, George Calvert of Hernando Beach, Fla., and Gregory Guido of Lithia, Fla., concocted a scheme that involves creating bogus business records purportedly documenting sales of methane from landfills in Puerto Rico, Illinois, New York, Ohio and Connecticut. The suit alleges that there were no methane sales, but that the defendants helped their customers claim tax credits based on the purported sales. Federal law allows an income tax credit with respect to certain sales of fuel from non-conventional sources, including methane produced from landfills.
The government complaint alleges that Calvert and Guido promoted the scheme through tax preparers, who acted as sub-promoters. The tax preparers allegedly sold interests in the sham methane production facilities to thousands of customers in at least 14 states across the country and prepared income tax returns for their customers claiming more than $30 million in tax credits based on the sham methane sales.
Two of the larger sub-promoters, according to the complaint, were Louis and Elizabeth Powell, a married couple from Carthage, Texas. The suit alleges that the Powells sold the scheme to more than 1,800 customers, and then prepared tax returns for customers claiming more than $7.8 million of the improper credits.
Another large sub-promoter alleged to have promoted the scheme is Ronald Fontenot of Lake Charles, La. The complaint alleges that Fontenot is the president and CEO of Compro-Tax Inc., a tax preparation service with over 100 offices in the eastern and southern United States. According to the complaint, Fontenot promoted the credit scheme to all Compro-Tax store operators, and at least 54 of those Compro-Tax store operators sold interests in the scheme to customers and then prepared federal income tax returns for the customers claiming the improper tax credits.
The complaint further alleges that one sub-promoter, Sally Hand-Bostick, operator of National Express Tax in Carrollton, Texas, is a representative for Drake Software, a Franklin, N.C.-based company that sells tax preparation software to tax preparers in all 50 states. Hand-Bostick allegedly promoted the scheme to tax preparers who were her Drake Software customers. She also allegedly sold the scheme to her own tax preparation customers, and prepared returns for those customers claiming nearly $2.5 million of the improper tax credits.
A list of all defendants named in the suit is provided at the end of this release.
“Taxpayers need to choose their tax preparers carefully,” said John DiCicco, acting assistant attorney general for the Justice Department’s Tax Division. “They should be particularly alert when a tax preparer steers them towards a scheme that seems too good to be true.”
In the past decade, the Justice Department has obtained injunctions against more than 380 tax return preparers and tax-fraud promoters. Information about the Justice Department’s Tax Division and its efforts to enjoin unscrupulous tax return preparers and tax-fraud promoters is available on the Justice Department Web site.