In a new twist on tax fraud, state officials in Louisiana are putting tax preparers in their investigatory crosshairs.
Slidell businessman John Labee, 35, pleaded guilty last week in Baton Rouge to six felony counts after checks he gave clients for their tax liabilities bounced. Labee allegedly created the checks to cover financial differences that surfaced when the state revenue department processed his clients’ tax returns.
Six other tax preparers were arrested after problems emerged with their work. The preparers live in Baton Rouge, Destrehan, New Orleans, Geismar and Lithonia, Ga.
“Historically, tax preparers haven’t been held accountable,” said Kurt Wall, director of the state attorney general’s criminal division.
The new focus comes as the state Department of Revenue and the state Attorney General’s Office team up to ferret out fraud. Two criminal investigators on the revenue department’s payroll now report to the Attorney General’s Office, where they sift through possible tax fraud cases.
“We are charged by the taxpayers of this state to protect their interests and focus on tax fraud and similar issues. The investment in these law enforcement personnel is already paying off,” said Tim Barfield, the revenue department’s secretary.
The Jindal administration believes fraud by tax preparers is on the rise because of the ease in setting up a business in the digital age.
Douglas Baker, the revenue department’s communications director, said all it takes is a computer and some training. He said organized crime and drug dealers are showing an interest in entering the tax preparation arena, in which returns can be manipulated.
Wall said tax preparers win by using creative tricks to increase clients’ refund checks and spark referrals that increase business.
For example, he said, a dishonest tax preparer might ask a client if he occasionally cuts a neighbor’s lawn. A client who answers affirmatively suddenly gains a fictitious lawn service business that artificially inflates the return, fattening his refund check and prompting him to brag about his tax expert to friends who snap up the phone number, he said.
“It’s fraudulent,” Wall said of the creative deductions.
Barfield assigned criminal investigators to the Attorney General’s Office after a tight state budget caused tax fraud cases to take a back seat.
“They wanted to refer even more cases. We said, ‘That’s great but hold up. If you really want to make this a priority, you’re going to have to send us manpower,’ ” Wall said.
Labee’s case preceded the embedding of the investigators. Last week’s arrests of six tax preparers were the fruits of the new partnership.
Aiding the anti-fraud efforts is a computer program called Taxpayer Refund Intercept Program. TRIP looks for patterns that suggest a distortion in tax liabilities.
Those arrested were:
Baker said Jackson’s scam is believed to have involved $924,000.
Labee must pay $82,000 in restitution for the checks that bounced. He faces up to 60 years in prison when he is sentenced next month.
The revenue department estimates that different amounts of money were involved in the cases that prompted the arrests of six tax preparers last week.