June 23, 2014
Contact: Timothy P. McMahon
Phone Number: (973) 776-1100
Dominican National Admits Role In $65 Million Stolen Identity Income Tax Refund Fraud Scheme
NEWARK, N.J. - Carl J. Kotowski, Special Agent in Charge of the Drug Enforcement Administration’s New Jersey Division and Paul J. Fishman, U. S. Attorney for the District of New Jersey announced a Dominican national who was extradited from Canada earlier this year, today admitted his role in one of the nation’s largest and longest-running stolen identity refund fraud schemes ever identified.
Alejandro Javier, 51, pleaded guilty before U.S. District Judge Claire C. Cecchi to an information charging him with one count of conspiracy to steal government funds and one count of theft of government funds.
Javier and others participated in a scheme that caused more than 8,000 fraudulent U.S. income tax returns to be filed, which sought more than $65 million in tax refunds, and which resulted in the losses to the United States of more than $12 million. A Dominican national, Javier evaded capture until July 2, 2013, when he was arrested by Canadian law enforcement authorities as he tried to illegally enter Canada. He had been incarcerated there until he was extradited to New Jersey on Jan. 10, 2014.
According to documents filed in this case and statements made in court:
Stolen Identity Refund Fraud -
Stolen Identity Refund (SIRF) is a common type of fraud committed against the United States government that results in more than $2 billion in losses annually to the United States Treasury. SIRF schemes generally share a number of hallmarks:
SIRF perpetrators obtain personal identifying information, including Social Security numbers and dates of birth, from unwitting individuals, who often reside in the Commonwealth of Puerto Rico.
SIRF perpetrators complete Individual Income Tax Return Form (Form 1040) using the fraudulently-obtained information, and falsifying wages earned, taxes withheld and other data. Perpetrators use data to make it appear that the “taxpayers” listed on the fraudulent 1040 forms are entitled to tax refunds - when in fact, the various tax withholdings indicated on the fraudulent 1040s have not been paid by the listed “taxpayers,” and no refunds are due.
Perpetrators direct the U.S. Treasury Department to issue the refunds through checks generated by the fraudulent 1040 forms to locations they control or can access, in various ways.
Certain SIRF perpetrators sell the tax refund checks at a discount to face value. In turn, the buyers then cash the checks, either themselves or using straw account holders, by cashing checks at banks or check cashing businesses, or by depositing checks into bank accounts. When cashing or depositing refund checks, SIRF perpetrators often present false or fraudulent identification documents in the names of the “taxpayers” to whom the checks are payable.
Federal law enforcement agencies created a multi-agency task force in New Jersey composed of investigators from the IRS and the U.S. Postal Inspection Service, along with the U.S. Secret Service, and with assistance from the Drug Enforcement Administration. The New Jersey Task Force, with assistance from U.S. Immigration and Customs Enforcement, Homeland Security Investigations, revealed that from at least 2007, dozens of individuals in the New Jersey and New York area engaged in a large-scale, long running SIRF scheme.
Javier and others obtained personal identifiers, such as dates of birth and Social Security numbers, belonging to Puerto Rican citizens. Javier and others used those identifiers to create fraudulent 1040 forms, which falsely reported wages purportedly earned by the “taxpayers” and taxes purportedly withheld, to create the appearance that the “taxpayers” were entitled to tax refunds.
The fraudulent 1040 forms were created and filed electronically. By tracing the specific IP addresses that submitted the electronically-filed 1040s, law enforcement officers learned that just a handful of IP addresses created many of the fraudulent 1040 forms, which, in turn, led to the issuance of tax refund checks that the conspirators obtained, sold, cashed, and spent.
Conspirators purchased mail routes, that is, lists of addresses covered by a single mail carrier. Conspirators applied for tax refunds, inserted addresses along the mail route as the purported home addresses of the “taxpayers,” and obtained the checks sent to the addresses. In other instances, the conspirators applied for checks using addresses otherwise controlled by, or accessible by, certain conspirators, and collected the checks after they were delivered to those addresses. Hundreds of refund checks were mailed to just a few different addresses in a few towns, including Nutley, Somerset and Newark in New Jersey and Shirley, N.Y. After receiving the checks, Javier and others cashed the checks and divided the proceeds.
Members of the New Jersey Task Force identified certain “hot spots” of activity related to the scheme, where conspirators were directing millions of dollars of refunds just a few towns and cities. New Jersey Task Force members then interacted with U.S. Postal Service employees in these hot spots, and identified the characteristics of refund checks connected to the scheme. More than $22 million in fraudulently applied for refund checks were interdicted by law enforcement and never delivered.
The conspiracy count to which Javier pleaded guilty carries a maximum potential penalty of five years in prison and up to a $250,000 fine. The substantive count of theft of government property carries a maximum potential penalty of 10 years in prison and up to a $250,000 fine. Sentencing for Javier is scheduled for Oct. 8, 2014.
U.S. Attorney Fishman praised special agents of the DEA, under the direction of Special Agent in Charge Carl J. Kotowski; IRS-Criminal Investigation, under the direction of Acting Special Agent in Charge Jonathan D. Larsen; and inspectors of the U.S. Postal Inspection Service, under the direction of Inspector in Charge Maria L. Kelokates, with the investigation leading to today’s guilty plea. He also thanked the U.S. Secret Service, under the direction of Special Agent in Charge James Mottola; and HSI-ICE, under the direction of Special Agent in Charge Andrew M. McLees, for their roles.
The government is represented by Assistant U.S. Attorneys Lakshmi Srinivasan Herman, Zach Intrater, and Danielle Walsman of the U.S. Attorney’s Office Criminal Division in Newark, and Mala Harker of the Special Prosecutions Division.