April 14, 2004

GRAND JURY INDICTS SEVEN SOUTHLAND RESIDENTS IN FRAUDULENT TAX PREPARATION SCHEME THAT SOUGHT AN ESTIMATED $47 MILLION IN REFUNDS

            A Yorba Linda man and six others involved with a tax preparation service were indicted today on federal charges related to the preparation of thousands of federal income tax returns that fraudulently sought an estimated $47 million in refunds from the Internal Revenue Service.

            A federal grand jury in Santa Ana returned a 23-count indictment that accuses the seven defendants linked to Yorba Linda’s DeAngelo Tax Service and Anaheim’s Western Tax Service of conspiring to defraud the Internal Revenue Service and aiding and assisting in the filing of false tax returns that included, among other things, false deductions for charitable contributions.

The defendants named in the indictment are:

Samuel Joseph DeAngelo, 58, of Yorba Linda, who is the owner and operator of DeAngelo Tax Service, which in early 2001 was moved and renamed Western Tax Service;
Jeffrey Russell Wright, 29, of Anaheim, who is DeAngelo’s son-in-law;
Kelly Agbonmoba David, 26, of Irvine;
Alan Michael Hovey, 34, of Cathedral City;
Anthony Todd Stefani, 39, of Chino Hills;
Heather Lee Chaffin, 30, of Costa Mesa; and
Douglas Shields, 40, of Orange.

            These defendants will be summoned for an arraignment on Monday, May 3 at the United States Courthouse in Santa Ana.

            According to the indictment, DeAngelo has been in the business of preparing tax returns for more than 10 years. In 2000 and 2001, DeAngelo hired or promoted the other six persons named in the indictment to be tax preparers.

            DeAngelo and his associates allegedly generated more than 16,000 false returns for taxpayers in Southern California between 1998 and 2001. DeAngelo and the other preparers would ask the taxpayers a series of yes/no questions about such topics as working at home and attending church. Even though the taxpayers provided DeAngelo and his associates with very few documents, the defendants generated tax returns that contained fabricated or significantly inflated figures for items such as charitable gifts, business expenses and depreciation. When the returns were completed, the taxpayers were asked to sign a form that allowed the electronic filing of their returns, but most were not allowed an opportunity to review their tax returns.

            For taxpayers who used DeAngelo Tax Service or Western Tax Service for a second year, the tax preparers in many cases would simply use the prior year figures to generate another fraudulent return.

            DeAngelo and the others charged taxpayers exorbitant fees for their fraudulent services. They typically charged from $300 to more than $1,700 for tax preparation services that often took less than 30 minutes. Western Tax Service collected approximately $6.2 million in tax preparation fees during the 2001 filing season.

            The indictment also alleges that DeAngelo used others to engage in a series of cash transactions each of which included under $10,000, with DeAngelo Tax Service’s bank account in a willful effort to evade federal reporting requirements. The process of conducting cash transactions to avoid federal reporting requirements is called structuring.

            All seven defendants are charged with conspiracy and at least three counts of willfully aiding or assisting in the preparation of a false federal income tax return. The conspiracy charge carries a five-year maximum sentence; each false preparation charge carries a three-year potential sentence. The additional structuring count against DeAngelo carries a 10-year maximum sentence.

            An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty beyond a reasonable doubt.

            Acting IRS-Criminal Investigation Division Special Agent-in-Charge John S. Fowler said, "Fraudulent tax preparer schemes that allegedly use false and inflated deductions and expenses cost the government millions of dollars every year. In addition to shutting down these unscrupulous tax return preparers, IRS-Criminal Investigation will also vigorously investigate and seek prosecution of those involved in these schemes."

            The case against DeAngelo and the preparers of Western Tax Service is the result of a continuing investigation by IRS-Criminal Investigation.

Release No. 04-051

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