Santa Ana, California – LAWFUEL – The Legal Newswire – This morning, United States District Judge James V. Selna sentenced two men to serve time in prison who were previously convicted in a conspiracy to file false tax returns with the Internal Revenue Service.
Appearing before Judge Selna, Kelly Agbonmoba David, also known as David Kelly, was sentenced to spend 46 months in federal prison after his conviction at trial earlier this year for his part in a conspiracy to file false tax returns with the IRS. David’s co-defendant, Anthony Todd Stefani was sentenced to serve 27 months in prison for his role in the conspiracy. Both men had been found guilty at trial on all counts specified in the indictment in this case, including conspiracy to defraud the United States and three counts each of aiding and assisting in the filing of false tax returns with the Internal Revenue Service.
The indictment originally included Samuel Joseph DeAngelo, the operator of DeAngelo Tax Service in Yorba Linda and Western Tax Service, a corporation, located in Anaheim. David was hired by DeAngelo in 1999 to assist in the preparation of income tax returns for both DeAngelo Tax Service and, later, Western Tax Service. Co-defendant Stefani was employed by Western Tax Service to prepare income tax returns in 2001.
As set forth in the indictment, DeAngelo and others would train and assist tax preparers at DeAngelo Tax Service and Western Tax Service to make false, misleading, and inaccurate statements on US Individual Income Tax Returns, Forms 1040. These false statements included the falsifying and inflation of Schedule A deductions for charitable contributions, employee business expenses, and depreciation. Both David and Stefani would meet with tax preparation clients and, during the meeting with the clients, enter fabricated or inflated deductions on their returns that were not provided by the clients. In an effort to avoid detection by the Internal Revenue Service, David and Stefani would typically attempt to keep Schedule A – Itemized Deductions form exceeding 50% of the wages that were reported on their clients’ income tax return. Generally, David and Stefani and their co-conspirators would not inform the clients of the amounts entered on their tax returns.
Defendants David and Stefani and their co-conspirators would charge their clients fees ranging from $300 to $1,850 for the preparation of their tax returns, most of which involved only a Form W-2 and a Form 1099. The preparers were instructed to incrementally increase, or “baby-step” the preparation fees for repeat clients each year. The defendants were to receive a commission of 15% or more of the tax return preparation fees that their clients paid.
The preparers at DeAngelo Tax Service and Western Tax Service prepared and filed approximately 1,146 income tax returns in 1998; 2,080 returns in 1999; 4,229 returns in 2000; and 8,645 returns in 2001. The false returns prepared by the David and Stefani and their co-conspirators resulted in losses to the United States Department of the Treasury of at least $40 million dollars. In 2001, Western Tax Service received nearly $6.2 million in tax return preparation fees from its clients.
Judge Selna ordered both David and Stefani to begin serving their prison sentences on January 4, 2008.
Originally, the indictment of DeAngelo, DeAngelo’s Tax Service, and Western Tax Service included Jeffrey Russell Wright, DeAngelo’s son-in-law, who assisted in the preparation of tax returns for DeAngelo Tax Service and Western Tax Service, Alan Michael Hovey, a return preparer for Western Tax Service, Heather Lee Chaffin, originally a secretary and later a return preparer for DeAngelo Tax Service and, later, Western Tax Service, and Douglas Shields, a data entry clerk and then a tax return preparer for Western Tax Service. DeAngelo, Wright, Hovey, Chaffin and Shields previously pleaded guilty with respect to their involvement in the conspiracy.
Samuel DeAngelo was sentenced on September 24, 2007 to serve 51 months in federal prison followed by a term of 3 years of supervised release. Douglas Shields was sentenced on August 6, 2007 to 15 months in federal prison followed by 3 years of supervised release for his role in the conspiracy. Jeffrey Russell Wright was sentenced on September 17, 2007 to six months in prison followed by 6 months home detention. Alan Michael Hovey is scheduled to be sentenced on October 22, 2007 and Heather Lee Chaffin’s sentencing is set for November 19, 2007.
Two other preparers, Joe Gordon Shields and Erin Cordes, each waived indictment and previously entered guilty pleas to informations filed by the United States Attorney’s Office. Cordes was sentenced on September 24, 2007 to one year of probation which is to include six months of home detention. Joe Gordon Shields is scheduled to be sentenced on November 5, 2007.
The investigation and prosecution of this case was handled by the Los Angeles Field Office of IRS – Criminal Investigation and the United States Attorney’s Office in Santa Ana.
