Former Rabbi Charged in $35M Tax Fraud Scheme Chicago (August 6, 2009)
By WebCPA Staff
A former Chicago rabbi and nine others were charged in a $35 million tax fraud conspiracy, accused of filing 3,300 false tax returns in the names of federal prison inmates.
Marvin Berkowitz, 62, who had moved to Israel in 2003 to avoid earlier tax fraud charges, was arrested in Jerusalem, while two of his sons and a son-in-law were detained in Chicago and Los Angeles. They and six other defendants were charged in the scheme to file the phony refund claims, causing the IRS to issue refunds totaling more than $1.5 million, while various states issued tax refunds totaling more than $2.5 million. Berkowitz directed the fraud ring from Jerusalem and allegedly caused at least $800,000 in tax refunds to be paid to, or for the benefit of, at least eight members of his family, according to prosecutors.
The 10 defendants were charged by a Chicago grand jury in a 41-count indictment that was returned in February and unsealed Monday. The indictment remained sealed since February to coordinate the investigation and arrests with Israel.
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Berkowitz allegedly recruited and paid the others to travel to various federal courthouses to collect personal information about federal inmates, including their offenses and Social Security numbers, and provide him with that information. He then recruited and paid others to assist him in the preparation of individual federal and state income tax returns using the inmates’ stolen identities. Some of the defendants allegedly forged the inmates’ signatures and filed the false returns electronically without the inmates’ knowledge or consent.
The false returns listed fictitious addresses, phone numbers, deductions, business losses and expenses, credits, and W-2 and 1099 statements. The false returns directed that the federal and state tax refunds be mailed or direct-deposited to dozens of addresses and bank accounts throughout the U.S. and Israel to which the defendants had access and control. The refund checks were then cashed at banks or a currency exchange, and the proceeds were split among the defendants and distributed to additional members of the Berkowitz family, the indictment alleges.
If convicted, the tax fraud conspiracy charge carries a maximum penalty of five years in prison, while each count of mail or wire fraud carries a maximum of 20 years in prison, and each count carries a maximum fine of $250,000. The identity theft counts against Marvin Berkowitz alone each carry a mandatory penalty of two years in prison and a $250,000 fine. The court, however, would determine the appropriate sentence under the advisory U.S. sentencing guidelines.
