NOT SO FAST: SPECIAL MASTER FINDS FISHERMAN FRAUDSTER CAUGHT IN HIS OWN NET OF LIES

Original Story: thestateofthegulf.com

The Special Master tasked with investigating the Deepwater Horizon settlement process filed a motion this week urging the District Court to order the return of fraudulent payments made to Gill Johnson, Sr., who received over $440,000 from the Deepwater Horizon Economic Claims Center (“DHECC”).  The motion alleges that Johnson’s claims were based on falsified tax returns that were never even filed with the IRS.

In his motion, the Special Master informed the Court that in January 2013, Johnson filed claims seeking compensation for losses associated with his commercial fishing business based on his 2008 and 2009 tax records.  The rub?  Johnson didn’t file or pay taxes with the IRS in either of those years.

The 2008 tax return Johnson provided to the claims facility was undated and unsigned – and false, according to the Special Master’s motion.  The claims facility accepted his return despite the fact that the Settlement Agreement specifically requires claimants to file signed tax returns with their claims.  And the motion also stated that the 2009 tax record he provided to support his claims was prepared in July of 2010 for the sole purpose of allowing Johnson to file his Deepwater Horizon claim.  Johnson, the motion explains, allegedly based his 2009 return not on any source documents, but rather on a verbal summary given by Johnson’s girlfriend to the tax preparer Johnson had hired.

The claims facility accepted Johnson’s misrepresentations and his falsified forms, and awarded him over $440,000.  For their efforts in helping Johnson prepare his claim, his attorneys received over $109,000 – fees that the law firm returned the very same day that the Special Master filed his motion.

This motion, like others filed by the Special Master, underscores a simple fact: settlement funds paid for improper claims should be repaid.  Restitution is important in cases like this, not only so that fraudsters don’t benefit from their fraudulent acts, but also “to safeguard the integrity of an important public institution administering a fund for the benefit of an injured segment of society.”  In addition, the Special Master also urges the Court to enforce a one strike, you’re out policy with regards to Johnson, arguing that allowing claimants who have filed fraudulent claims the opportunity to resubmit their claims using different documentation would only encourage them to take a chance on fraud – knowing that they could submit different data if they got caught.

Of course, this is exactly what the PSC's lead lawyer appears to want: in a recent letter to Judge Freeh and the Court, Steve Herman argues that when fraud is alleged or suspected, the claimant should be notified that the "claim might be fraudulent" and given a chance to withdraw the Claim or otherwise attempt to explain it.  Unfortunately, this process would have the effect of giving unscrupulous claimants a risk-free chance to get their fraudulent claims paid.  In the world he appears to be urging, there's no apparent downside to taking your best shot at free money.  Such attempts at fraud would not be treated so leniently anywhere else in the world - not by employers, not by merchants, and definitely not by the IRS.  The policy at a court-supervised claims facility should reflect that attempts to commit fraud will not be tolerated.

Fraudsters should take note: BP certainly did not agree to pay for claims tainted by fraud or corruption.  The Special Master’s latest motion sends a clear message that attempts to take advantage of the settlement process are being investigated, and that those caught red-handed should expect to answer for their fraud.

109 Arrests - IRS Cracking Down on Identity Theft

Story first appeared on USA Today -

The IRS says a coast-to-coast campaign against tax-related identity theft led to more than 700 enforcement actions last month, including arrests and indictments.

Federal authorities took action against 389 people suspected of involvement in identity theft to commit tax fraud, the IRS said Thursday.

Announced as the annual federal tax-filing season begins, the nationwide actions include 109 arrests and 189 indictments, plus court complaints and information, said acting IRS Commissioner Steven Miller.

The bulk of the enforcement actions took place on the East Coast and in the Midwest, a map released Thursday by the IRS shows.

Additionally, IRS auditors and criminal investigators in late January started visiting 197 money service businesses, including check-cashing stores, to ensure the locations don't aid identity theft or refund fraud. The visits focus on 17 high-risk areas identified by the IRS in or near New York; Philadelphia; Atlanta; Tampa; Miami; Chicago; Houston; Phoenix; Los Angeles; San Diego; El Paso; Tucson; Birmingham; Detroit; San Francisco; Oakland and San Jose.

Part of a year-long IRS crackdown, the effort targets thieves who gain access to other people's Social Security numbers and other identifying information, and then use that information to concoct and file fraudulent federal tax returns — and collect unwarranted refunds.

"As tax season begins this year, we want to be clear that there is a heavy price to pay for perpetrators of refund fraud and identity theft," said Miller. "We have aggressively stepped up our efforts to pursue and prevent refund fraud and identity theft, and we will continue to intensely focus on this area.

The tax agency has added additional computer screening filters in an effort to stop the crime, said Miller. Although he acknowledged the filters could slow IRS processing of some legitimate tax returns and refunds, Miller said the tax agency would work to keep any delays to a minimum.

Additionally, the IRS as of late 2012 had assigned more than 3,000 employees to work on identity theft-related work, said Miller. That's more than double the number devoted to the area in 2011, he said.

In all, the IRS says its efforts in 2012 "protected" against $20 billion in fraudulent refunds, most of which are directly related to identity theft. That compares with $14 billion in 2011.

Miller said the IRS is making progress in fighting identity theft refund fraud, but still has room to improve. The agency is working to speed the time it takes to get refunds to honest taxpayers victimized by the crimes, he said.