Federal prosecutors in Central Islip, New York, have charged seven people with orchestrating a multistate conspiracy to defraud the United States of more than $600 million by filing more than 8,000 fraudulent tax returns. The scheme leveraged the COVID-19-related employment tax credit program, which was designed to help businesses affected by the pandemic.
From November 2021 to June 2023, defendants Keith Williams, Jamari Lewis, Morais Dix, Janine Davis, Tiffany Williams, James Hames Jr., and Ewendra Maturin claimed exemptions under the Act. He is accused of filing thousands of false employment tax returns. Employee Retention Credit (ERC) and Paid Sick Leave and Family Leave Credit (SFLC) program. These tax credits were established by Congress to encourage businesses to retain employees and reimburse employees’ wages during COVID-19-related sick and family leave.
The scheme was allegedly headquartered at Credit Reset, a credit repair business owned and operated by Keith Williams. The defendants, as tax preparers, are accused of filing fraudulent tax returns with the following details:
- The amount of SFLC exceeds the wages reported on the tax return.
- It is prohibited by law to pay wages at the same time as sick leave and family leave wages.
- SFLC and ERC have the same pay, which is also illegal.
The defendants allegedly profited by receiving U.S. Treasury refund checks and charging customers a fee or portion of the refund. Additionally, they reportedly recruited others into the system and compensated them with a portion of their fraudulently obtained tax refunds.
In total, the defendants sought more than $600 million, and the IRS paid out approximately $45 million in fraudulent refunds before uncovering the scheme.
According to the indictment, the defendants took the following steps to avoid detection:
- Do not list yourself as a paid preparer on your tax return.
- Use a virtual private network (VPN) to hide your IP address when making fraudulent declarations.
- Promoting shell companies to customers without legitimate businesses, allowing them to make false statements.
When discrepancies were discovered, the defendants allegedly submitted false information to the IRS and Social Security Administration (SSA) to support their claims.
Some defendants also allegedly submitted false applications for Paycheck Protection Program (PPP) loans. These applications resulted in additional wire fraud charges against Keith Williams, Lewis, Maturin, Davis, Tiffany Williams, and Dix.
The defendant faces 45 charges including:
- Conspiracy to deceive the United States (The maximum penalty is 5 years in prison).
- Transfer fraud Relates to the ERC scheme (maximum penalty: 20 years for each case).
- Transfer fraud Relating to PPP schemes (maximum penalty: 30 years per claim).
- Acts of aiding and abetting the preparation of false tax returns (Maximum penalty: 3 years per count).
A federal district court judge determines sentencing based on the U.S. Sentencing Guidelines and other statutory factors.
This case is being investigated by the IRS-Criminal Investigation Service (IRS-CI) and the United States Postal Inspection Service (USPIS). Acting Assistant Attorney General Karen E. Kelly of the Department of Justice’s Tax Division, John J. Durham, United States Attorney for the Eastern District of New York, Acting Inspector General Brendan Donahue, and Special Agent in Charge Harry T. Chavis Jr. of USPIS. IRS-CI officials announced the charges.
The case is being prosecuted by Public Prosecutor Richard Kelly of the Tax Division and Assistant U.S. Attorneys Adam Toporowski and James Simmons of the Eastern District of New York. Former trial attorney Samuel Bean assisted in the investigation.
