Refund Tax Fraud, iPhone, Feed Identity Theft By Employees
Mug shot of Joseph Burden, who allegedly stole identities from his employer, ProVest.
Last Thursday night, an undercover deputy from the Hillsborough County, Fla. Sherriff’s office, acting on a tip, made a street buy. What makes this noteworthy is he didn’t buy drugs. Instead, he purchased 33 stolen names, birth dates and Social Security numbers. The Sheriff’s office says the seller, Joseph Burden, 29, was found to have 221 names in his book bag and admitted he’d taken them from his employer, Tampa-based ProVest. In an e-mailed statement, ProVest President James Ward says the arrested employee has been placed on leave and that “ProVest takes data security and privacy seriously; numerous precautions are and have been in place to safely guard consumer data.” ProVest ironically, specializes in fraud detection, skip tracing and loss mitigation.
Don’t smirk. Your company could be next.
A wave of refund tax fraud is fueling demand for stolen IDs. A year ago I wrote about how one set of Florida-based scamsters had tricked the Internal Revenue Service out of $12.1 million worth of refunds using the stolen names and Social Security numbers of 5,108 dead people–likely taken from the Social Security Death Index. But that, as they say, is yesterday’s news. The IRS told Congress during recent hearings that it has set up a new computer screen to flag fraud relating to the tax returns of recently deceased taxpayers and Internet genealogy sites like Rootsweb.com have limited free access to the death index. So it appears there’s some progress, at least, on that front.
Meanwhile, the fraudsters are collecting lists of living identity theft victims, either by planting employees in jobs with access to personal data or corrupting employees who already have such jobs. Former federal prosecutor Latour “L.T.” Lafferty, head of the white collar and corporate compliance practice at Florida’s Fowler White Boggs, reports that he has been hired in the past year by two local employers to investigate employee theft of information. In one case, he found, an employee had used her smart phone to take pictures of records. (The iPhone takes such good pictures that you can actually take a picture of your W-2 with it, and have the information entered into Intuit’s TurboTax app.) “The old identity theft,’’ Laferty observes, “was `may we send you a fake email and find out if you’re dumb enough to give me a Social Security number’ or going through your trash.’’ The new trend, he says, is for employees to steal names and numbers in bulk and then use TurboTax or other software to file large numbers of refund claims. (If they get in a bogus 1040 before the real, live taxpayer, or smartly pick the identity of an American who doesn’t have to file, they may be able to get thousands of dollars back.)
In testimony last month before a Senate Finance subcommittee, Tampa Police Department Detective Sal Augeri said that after the information about deceased people had run dry, area thieves turned to individuals who worked in local assisted living facilities and then to other businesses, medical offices and schools. Companies with rich personal data on clients, including banks and health care providers, are the most vulnerable, Lafferty says. But other Tampa area businesses have been hit too. A report on the trend in the Tampa Tribune, notes that local police last year arrested Rachel Amones, an employee from Tampa Signal, an authorized dealer for ADT Security Systems (which is in the process of being spun off from Tyco International) for stealing 3,000 names to be used in tax fraud. Her job running credit checks on customers gave her access to the crucial personal information. She pleaded guilty in December and was sentenced to three years.
So just how much of this is going on? Hard to say. IRS Deputy Commissioner for Services and Enforcement Steven T. Miller told the House Oversight and Government Reform Committee last week that the “IRS has seen a significant increase in refund fraud schemes in general and schemes involving identity theft in particular.” With the help of new identity theft screening filters, he said, as of March 9, 2012, the IRS had stopped 215,000 questionable 2011 refunds worth $1.15 billion from going out. How many refunds have gotten through those filters? He didn’t say and the IRS likely doesn’t really know.
The growth in big dollar refundable tax credits and the greater sophistication of the credit card companies’ fraud detection programs, seem to have combined to make refund tax fraud the current hot area for identity thieves. In its 2011 annual report, the Federal Trade Commission reports complaints about government documents/benefits fraud have risen 11% since 2009, while identity theft-related credit card fraud complaints have declined 3%.
Pressure on the IRS to get refunds out fast has contributed to the problem. “They’ve made it so easy for people to file electronically and for them to get quick and efficient refunds that it’s spawned this huge problem,’’ Lafferty observes. “The IRS has been playing catch-up and now employers are playing catch-up too because they didn’t realize their own employees would be complicit.”
While Tampa has become, as Lafferty puts it, “ground zero” for the identity theft/tax fraud explosion, the problem is neither geographically contained nor new—just growing. These examples show how anyone, from a medical patient to a student loan borrower, can become a victim.
*In January a Millbrook Ala. woman, Janikea Fernae Bates, was sentenced to 94 months in the federal pen after a jury convicted her of 13 counts, including identity theft and conspiracy to commit tax fraud. Prosecutors said she stole the names and social security numbers of student loan borrowers when she worked as a customer service representative for data processor EDS in Montgomery during 2005 and 2006 and then provided them to confederates who filed for phony refunds. (EDS was acquired by Hewlett Packard in August 2008 and in September 2009 was renamed HP Enterprise Services.) According to the government’s sentencing memo, at trial, some of Bates’ identity theft victims, brought in from around the country, testified that they “continue to suffer the ramifications of identity theft and seemingly endless struggles with the IRS, as they continue to wait for their legitimate tax refunds and continue to explain away the negative marks on their credit reports as they live their everyday lives.” In asking for a long sentence as deterrence, the prosecutor asserted that Montgomery had become “a hot bed of tax preparer fraud involving identity theft.”
*Another Alabama woman, Veronica Denise Dale, is in prison and awaiting sentencing after pleading guilty last October to aggravated identity theft and defrauding the government. In her plea agreement, she admitted there’s proof that between June 2007 and February 2008, while working as a temporary employee at EDS in Montgomery, she illegally acquired the names, Social Security numbers and dates of birth of thousands of Medicaid recipients and later, with her confederates, used those identities to file more than 500 false tax returns.
*Last week, the Suffolk County District Attorney announced the indictment of a 30-year-old man who alleged stole the identities of 56-brain-injured people while working as a manager of the Long Island Head injury Association, which helps clients with housing and services, back in 2006 and 2007. He used those identities to collect refunds from New York, as well as Uncle Sam. (The man, Benjamin Achampong, was arraigned and pleaded not guilty after he was extradited from Georgia where he was arrested for using a fake credit card at a BJ’s Wholesale Club store.)
*In February, a Chardon, Ohio woman, Nelida I. Velasco, pleaded guilty to stealing 35 identities from the medical billing company where she worked—identities that were used to file false refund claims with the IRS. She is awaiting sentencing.
*In January, the U.S. Attorney for Central California charged that Veronica Niko, of Lancaster, Cal., while working for the California Department of Social Services, stole names and Social Security numbers from the DPSS computer system and gave them to her co-conspirators, who used them in 2009 to file phony returns requesting refunds for the Earned Income Tax Credit, and the temporary $8,000 first time home buyers refundable tax credit. She has pleaded not guilty.
IRS Pays Refunds To 5,000 Dead People In Post-Morten Identity Theft Scam
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