The CBS4 I-Team has uncovered a nationwide scam that’s being run out of prisons everywhere and it has become rampant here in South Florida responsible for the likely theft of hundreds of millions of tax dollars from the Internal Revenue Service (IRS) with little to no repercussions.
The inmates are stealing millions of your tax dollars while sitting behind bars.
CBS4 I-Team Investigator Stephen Stock discovered that the tax scam is so simple and so easy that some inmates are swearing off all other crimes and focusing on just stealing this way.
Neighbors still talk about that day back in 1997 when Arturo Garcia broke into a home at 3075 E 6th Avenue in Hialeah, shot at homeowner Nelson Fernandez before he fled over a nearby fence located at 757 E 30th Street.
Court records show that as he fled the then 19 year-old Garcia turned and shot at a pursuing Hialeah police officer Humberto Valdes.
Valdes is now a Lieutenant with Doral’s Police Department and he told the I-Team that he recalls that day vividly.
Lt. Valdes said and court records confirm that Garcia dropped his gun after he, the police officer, shot him in the leg.
Valdes said that Garcia then wrestled with him before breaking free and running to another home at 711 E 31st Street, where he hid in the family’s laundry room. Valdes said the family in that home was terrified.
Lt. Valdes said and court records show that Garcia eventually climbed onto the roof of the home before surrendering.
Though Arturo Garcia was convicted of attempted murder and burglary and ended up in prison for his actions that day, where Department of Corrections records show he remains in close custody, he apparently wasn’t through with pushing the boundaries of the law.
The CBS4 I-Team has obtained a tax return Garcia filed while sitting in prison after being convicted on those two attempted murder charges. On the tax form Garcia attempted to file with the IRS he claimed $45,400 in income and requested a refund check from the IRS of $5,135.
It was money he never earned for a job he never held at an employer that did not exist.
“He asked me if he could use my address because he is waiting for an income tax check,” said Miriam Rivera when first asked about this tax form by I-Team investigator Stephen Stock in 2005.
Miriam Rivera of Tampa, who cares for Garcia’s daughter, said Garcia contacted her from jail and asked her to help cash his tax refund check. The same one he expected to receive for the fraudulent tax form intercepted by the I-Team.
“I don’t never see him,” Miriam Rivera said meaning she had never even met Garcia but knew of him through her daughter, the mother of Garcia’s daughter.
When Rivera spoke to I-Team investigator Stephen Stock her English was broken but her meaning very clear. A man whom she’d never met, serving time on convictions of two counts of attempted murder, one count for trying to kill a police officer, wanted her to cash a fraudulent tax refund for $5,135.
“He told me to cash the check when it comes,” Rivera said back in 2005. “And I wrote to him and I said I can’t cash the check because that’s not my check.”
A few years later the inmates at the Monroe County Jail in Key West apparently caught wind of the same scam and began successfully using it to get tax refund checks sent directly to the jail, no need to use intermediaries such as Miriam Rivera.
“There was a huge scam going on in our facility,” said Monroe County Sheriff Bob Peryam.
It was the same tax scam Garcia ran, only this time it was discovered by a Monroe County Corrections Officer who was going through a jail cell.
“He (the corrections officer) came across an IRS form in a cell block,” said Sheriff Peryam.
It didn’t take investigators long to figure out what was happening.
“The inmates were filing these EZ forms and getting money sent to them from the IRS,” said Sheriff Peryam.
Sheriff’s investigators added up as many as fifty different inmates who they uncovered evidence on who had been sending in bogus tax returns to the IRS. The Key West jail inmates claimed about 5 thousand dollars in refunds each. Add it up and that’s a quarter million dollars in fraudulent claims.
CBS4 I-Team investigator Stephen Stock asked: “So bottom line was these guys were sending out 1040 EZ forms claiming income they never earned and getting the IRS to send them back a check?”
“That’s exactly what they were doing,” said Sheriff Peryam. “And they were doing it from the comfortable beds, if you will, of the correctional facility of the Monroe County Sheriff’s Office.”
And yet, despite the fact sheriff’s investigators built criminal cases, collected evidence, even got confessions, then turned all that evidence over to the IRS, for nearly 4 years Sheriff Peryam said the IRS did nothing.
Only this May were two inmates and some of their relatives indicted by a federal grand jury for their participation in the scam. Sheriff Peryam said that other inmates whom his investigators caught in this scam have still escaped arrest or indictment.
“You can buy a lot of honey buns for $5000. And it was the tax payers buying those honey buns and it was we thought pretty out of control at the time,” said Sheriff Peryam.
Sheriff Peryam didn’t know the half of it.
Though this tax scam goes back years, even decades, the CBS4 I-Team has discovered the scam more rampant in prisons throughout Florida and the nation than ever before.
The I-Team has obtained exclusive access to federal records showing tens of thousands of inmates taking potentially hundreds of millions of fraudulent tax refund dollars. That means that thousands of these scams involve the theft of potentially hundreds of millions of your tax dollars.
The tax refund dollars are being stolen by inmates who are doing time for everything from robbery, rape to burglary, assault to murder.
And though the IRS knows about this, it apparently has actively done little to nothing to stop the problem.
In fact, while the I-Team was in the Monroe County Jail in Key West shooting video the I-Team saw a tax refund check which was identical to another one sent to the same prison inmate months before and seized by sheriff’s investigators.
It became very apparent that the IRS sent the second check to the inmate at the same address as the county jail because the first check was intercepted by the sheriff and never cashed. So not only did the IRS send a fraudulent tax refund directly to the jail address once, the tax agency sent it twice.
“They’ll either do it in direct deposit or have a check sent,” said one Florida inmate who agreed to speak with the I-Team as long as he was kept anonymous.
This Florida inmate who spoke to the I-Team is serving life in prison for murder. He asked us to hide his identity for fear he would be hurt exposing a scam he’s both witnessed and participated in.
“They’ll use anybody,” said the Florida inmate. “Anybody who is willing to give them their social security number. And (then they) just try it.”
They are 1040 EZ tax forms filled out by inmates with real names and real social security numbers but false employers, false income and ultimately fraudulent tax refund claims. According to inmates, officials and the I-Team’s examination of a dozen forms the inmates request anywhere between $3500 and $6500 per inmate per fraudulent tax return.
“They’ll file 10 or 20 of them (fraudulent tax forms) at a time,” said the Florida inmate who knows all about the scam. “Just to see which ones come through and which ones don’t.”
I-Team investigator Stephen Stock “If they (the refunds) don’t come through?”
“Who cares? What’s it hurt?” said the inmate. “They (the IRS) don’t know.”
I-Team investigator Stock asked “You’re in prison anyway?”
“Yea, you’re in prison anyway. They can’t do nothing about it. What are they going to do to you?” said the inmate.
“How much money are we talking about?” I-Team investigator Stock asked.
“Millions,” said the Florida inmate. “Millions. Millions.”
The Florida inmate’s story is confirmed by another inmate who worked the scam in a South Carolina prison.
“I was the tax man,” said the inmate who is now in a Federal prison in Virginia and who also asked to remain anonymous for fear he’d be harmed for exposing this scam.
This Federal inmate said ran the scam starting in 1991 and running through 2005 in that South Carolina prison. In all he estimates he alone filed and received $3 million in tax refund money. He pocketed nearly one million of those dollars and gave the rest to those who helped him run the scam.
“It’s easiest thing I ever learned to do is file taxes,” said the Federal inmate.
This problem was so bad that in 2005 Congress actually held hearings on Capitol Hill to try to get the IRS to stop sending money to prison inmates. But despite changes Congress made to the rules there was little to no effect on how much money the IRS kept shipping out to prison and jail inmates.
“It’s outrageous,” said J. Russell George, the Treasury Inspector General for Tax Administration in Washington, D.C. “It is outrageous. The IRS must do better.”
In his role as Treasury Inspector General for Tax Administration George and his staff at the TIGTA office oversee the IRS and its administration and operations.
George testified at that hearing before Congress five years ago. Back then TIGTA reported that its auditors had discovered at least $17 million in fraudulent income tax refunds were caught and stopped by the IRS from being distributed to inmates prior to 2005.
“Again, it’s a question of whether the right hand knows what the left hand is doing,” said George. “If the IRS is not made aware of the fact that someone is incarcerated they don’t have the ability to flag the return in that way.”
But instead of fixing the inmate tax fraud problem, the CBS4 I-Team has learned the problem is much worse now five years later.
“It has not improved,” said Inspector General George. “Part of the problem is that the IRS doesn’t regularly computer these numbers. So they don’t have a clear sense as to the overall magnitude of the problem.”
According to IRS records demanded by Congress and obtained by I-Team, records that break out the number of individual tax return filed at every prison in the United States, nearly 45,000 separate tax returns in all were filed by inmates in 2009.
Using an average of $4500 per return multiplied by the number of inmates (44,944), it adds up to $202,248,000 in likely fraudulent tax refunds paid to inmates nationwide.
“It is very troubling,” said George.
That’s potentially $202 MILLION of your tax dollars in tax refunds going to prison inmates doing time for other crimes from robbery, to rape to murder for work they never did.
Income taxes they never paid.
Refunds they were never due.
“There really truly is no excuse systemically for this to happen,” said Inspector General George.
Even so, the man charged with overseeing the IRS offers little confidence that this rip-off of taxpayers’ money will stop any time soon.
“Are you confident that this problem is going to be fixed?” asked I-Team investigator Stephen Stock.
“While generally I’m an optimist I have to admit that in this instance I think this problem will be around five years from now,” said Inspector General George.
The inmates are certainly wise to that reality.
“One of the inmates we heard over our taped lines said street crime was done for him he was not doing any more street crime he said ‘This white collar crime is the way to go. I love the IRS’,” said Monroe County Sheriff Bob Peryam.
What’s more troubling, several inmates tell I-Team investigator Stephen Stock that they use these stolen tax refund dollars to buy all kinds of things while in jail, everything from designer clothes to boom boxes and even drugs.
The Treasury Inspector General is now preparing a second report on the extent of this fraud. Sources tell the I-Team that that report is expected to blast the IRS for its lack of response to stopping this problem.
The IRS declined to talk about this issue.