State eyeing tax service fraud

State officials contend Maletica V. Ferguson opened The Best Tax Service in Baton Rouge and offered patrons a deal that couldn’t be beat: She guaranteed they would receive a tax refund.

How did she do it? By reporting business losses.

The problem? Some of her clients didn’t own businesses.

Ferguson is just the latest tax preparer caught in a wide net cast by state government. With the state strapped for cash, the Jindal administration hired two criminal investigators last year to take a harder look at abnormalities in tax returns. Ferguson raised red flags because her clients always submitted refund requests.

“Ms. Ferguson would guarantee there would be a refund. If you’re a legitimate preparer, you cannot guarantee that without seeing the information first,” said Barry Kelly, director of criminal investigations for the Louisiana Department of Revenue.

Ferguson pleaded guilty last week in federal court to filing at least 26 false and fraudulent federal income tax returns that cost the federal government $263,769. She faces up to three years in prison.

In less than two years, the state has overseen the arrests of 16 tax preparers. The dollar amounts on their alleged frauds total $3.6 million. IRS – Criminal Investigation helped bring federal charges against tax preparers such as Ferguson.

Slidell businessman John Labee pleaded guilty to six felony counts after the state Revenue Department noticed his clients were receiving unusually large refunds. Phone calls to some of those clients revealed their incomes and tax information didn’t add up.

Labee advertised that he could find hidden deductions and increase refunds for an average of $500 per client. He allegedly used fake W-2 forms, overstated tax withholdings and other fake documents to make good on his promises. His clients were unaware of the scam and were left with big tax obligations once Labee was caught.

Labee faces up to 11 years in prison when he is sentenced in August.

Officials made it a condition of Baton Rouge tax preparer Lakindra Williams’ guilty plea that she permanently exit the business. She allegedly understated her clients’ tax liabilities by creating fictitious deductions, business activities and business expenses. Her fraud cost the federal government nearly $100,000.

The Best Tax Service appears to be just one of the businesses that Ferguson juggled. Her Facebook page indicates she also is available to manage artists and oversee promotions. She now lives in Georgia.

Ferguson’s attorney, Ron Johnson, said his client accepts responsibility for her mistakes and hopes to prevail upon the court to grant her home incarceration or probation. Ferguson is a single mother.

“(The business) was only open for a short period of time. She didn’t have the training. Some of it was unintended oversight. She wishes she had done things differently,” Johnson said.

Authorities across the nation are dealing with a new phenomenon: criminal tax preparation. Even organized crime and drug dealers are delving into the tax business. The penalties often are less than they would face for selling drugs.

A few years ago in Florida, law enforcement pulled over a white Cadillac in North Miami Beach. Inside the car were known gang members and paraphernalia associated with a business called Tax Professors.

Using stolen identities, the gang members — through their Tax Professors business — filed fraudulent tax returns. The business was profitable enough to pay for a seven-bedroom home overlooking a pool in a gated community.

Kelly said the Revenue Department beefed up its criminal investigation unit after Tim Barfield became the agency’s secretary.

He said some tax preparers host parties, telling friends how to go into business and cheat the government on taxes.

“The penalties for tax fraud are probably less severe than they would be with other activities. Organized crime, drug dealers are considering it,” he said.

Often, the tax preparer’s clients are unwitting victims. Regardless, they have to reconcile with the government.

“The ultimate responsibility is with the taxpayer,” Barry said.

Follow Michelle Millhollon on Twitter @mmillhollon. For more coverage of Louisiana government and politics, follow our Politics Blog at http://blogs.theadvocate.com/politicsblog/