Accounting
Tax Fraud Blotter: In the gutter
Host of problems; comp it; plan to fail; and other highlights of recent tax cases.
Portland, Maine: Colleen Holt-Thompson, of Kentucky, has been sentenced to three years of probation and ordered to pay $172,158.79 in restitution for conspiracy to commit visa fraud and for tax evasion.
Holt-Thompson founded Host Ukraine in 2015 in Newport, Kentucky, and served as the nonprofit’s executive director. The organization brought children living in orphanages in Ukraine to stay with American families for short periods over the summer or winter holidays. Host Ukraine was required to have the permission of the Ministry of Social Policy in Ukraine to transport each child, and the name and address of a hosting family was required before permission would be granted. Once permission was granted, the U.S. embassy in Kyiv, Ukraine, would issue a non-immigrant visa to the child. Between 2015 and 2019, Thompson applied for and received ministry hosting permission for 828 U.S. non-immigrant visas for Ukrainian children.
To obtain the visas, Holt-Thompson provided placeholder names — names and addresses of American families who had not actually agreed to serve as hosts — when she submitted names of Ukrainian children to the Ministry. Before the children traveled to the U.S., she would find actual host families for each child. During the period of the conspiracy, a conspirator who lived in Maine and was the Northeast contact for Host Ukraine was responsible for identifying placeholder families in Maine and recruiting families to serve as host families for the Ukrainian children who traveled to the U.S. on fraudulently obtained visas. Host families were charged a $3,000 fee to host a child; Host Ukraine collected donations.
In 2016, Holt-Thompson spent some $127,610 in personal expenses and paid for those expenses from Host Ukraine’s checking account or paid personal credit card bills using that checking account.
Money spent on personal expenses was not reported as income on the return that Holt-Thompson and her husband filed; she reported her taxable income for that year as only $47,226. She also failed to file a return for Host Ukraine.
Buffalo, New York: Workers’ comp claim handler Maureen Holleran has pleaded guilty to filing a false return.
Between September 2015 and October 2023, Holleran worked remotely as a workers’ comp handler for an insurance company in Canada. She evaluated and paid workers’ comp claims for policies issued by the company. Holleran had authority to send payments to a claimant of up to $2,000 without further approval by her supervisor. Between July 2020 and June 2023, Holleran submitted more than 1,200 fraudulent claims in the insurance company’s processing system, each claim below the $2,000 threshold. Claims were paid into bank accounts controlled by Holleran. She created fictitious expenses, such as claims for lost wages and reimbursements for medical supplies and copays, to justify the fraudulent payments.
She submitted some $2.37 million in fraudulent claims, creating fictitious email accounts that appeared to be associated with the policy claimant, then used these email addresses to sign up for the insurance company’s client portal. She then input her own banking information into the portal.
For 2020 through 2022, Holleran embezzled some $1,592,095 from the company that she failed to report on her income tax returns for those years. The IRS estimates that the tax for these tax years is $545,792.
Sentencing is Nov. 4. The charge carries a maximum of three years in prison and a fine of $250,000.
Jackson, Mississippi: A U.S. District Court has entered permanent injunctions against Thomas Walt Dallas, Jason Todd Mardis and Capital Preservation Services to bar them from making statements about tax benefits for compensation, among other relief. The defendants consented to the injunctions.
According to the complaint, Dallas, Mardis and Capital Preservation Services marketed a tax scheme at numerous professional conferences and media appearances, targeting medical professionals and small-business owners. They allegedly falsely claimed that customers following “Tax Plans” could claim multiple deductions to which they were in fact not entitled. This included claims that customers’ businesses could deduct large, unnecessary “marketing fees” to marketing companies; that those companies could employ family members and deduct family meals, vehicle expenses and tuition, among other items; and that customers could “rent” homes to businesses short-term at exorbitant rates and avoid taxes on the rental income.
The alleged harm from the scheme could be as much as $130 million in tax revenue since 2014.
Lewisville, Texas: Bookkeeper Barbara Chalmers has been sentenced to 10 years in prison, to be followed by three years of supervised release, for a scheme to embezzle at least $29 million from her employer, a charitable foundation and other companies run by a Dallas family.
She admitted that starting in at least 2012 she used her position as bookkeeper for the family’s companies and her signatory authority over bank accounts to write herself at least 175 checks that she deposited into her personal accounts. She also provided false paperwork to tax preparers that misstated year-end cash-on-hand for the accounts from which she was embezzling.
Chalmers used more than $25 million of the stolen money to fund a construction business; she used $6 million to pay off credit card debt.
She was also ordered to pay $44,809,438 in restitution to her victims.
Rochester, New York: Business owner Jeffrey Tome, 62, has pleaded guilty to filing a false return.
Tome owns Tome Enterprises Inc., which provides gutter repair and installation services. For 2017 through 2021, he failed to deposit 1,679 customer checks totaling $1,719,283.45 into the business bank account, instead cashing the checks at a local check-cashing business.
Tome then intentionally failed to advise the business’ tax preparer of the money received from cashing the business checks, resulting in the $1,719,283.45 not being reported on the corporate income tax returns.
He failed to include the net profits from the corporation as income on his personal federal income tax returns, resulting in his failing to pay personal income taxes of $330,137. He also paid his employees $407,573.60 in cash, which represented wages for which payroll taxes should have been paid. The payroll taxes that Tome failed to pay totaled $62,358.76.
Sentencing is Dec. 11. Tome faces up to three years in prison and a fine of $250,000.
New York: Business owner Nicholas Arcuri, of Staten Island, has pleaded guilty to failing to collect and pay over employment taxes from his company’s employees.
Between 2015 and 2021, Arcuri, owner and president of Capri Upholstery Custom Furnishing, paid some $2.6 million in off-the-books cash to employees, from which he did not withhold Social Security, Medicare or income taxes or pay over those taxes to the IRS. Arcuri also concealed the cash payroll from his return preparer.
In total, Arcuri caused a tax loss to the IRS of $486,753.
Sentencing is Jan. 23. He faces up to five years in prison as well as a period of supervised release, restitution and monetary penalties.
Sunrise, Florida: Resident Yolanda Dewar has pleaded guilty to filing false federal returns to fraudulently obtain refunds.
Between 2018 and 2020, she created a trust and filed four false returns on behalf of the trust for nearly $2 million in refunds. Dewar continued filing such returns even after the IRS notified her that her claims were frivolous and had no basis in law. Nevertheless, the IRS issued nearly $500,000 to the trust in response to Dewar’s false claims.
Dewar allegedly used a portion of those refunds to purchase a car for a family member, get plastic surgery and renovate her home.
Sentencing is Oct. 24. She faces up to three years in prison, a period of supervised release, restitution and monetary penalties.
The International Auditing and Assurance Standards Board is proposing to tailor some of its standards to align with recent additions to the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants when it comes to using the work of an external expert.
The
- ISA 620, Using the Work of an Auditor’s Expert;
- ISRE 2400 (Revised), Engagements to Review Historical Financial Statements;
- ISAE 3000 (Revised), Assurance Engagements Other than Audits or Reviews of Historical Financial Information;
- ISRS 4400 (Revised), Agreed-upon Procedures Engagements.
The IAASB is asking for comments via a digital response template that can be found on the
In December 2023, the IESBA approved an exposure draft for proposed revisions to the IESBA’s Code of Ethics related to using the work of an external expert. The proposals included three new sections to the Code of Ethics, including provisions for professional accountants in public practice; professional accountants in business and sustainability assurance practitioners. The IESBA approved the provisions on using the work of an external expert at its December 2024 meeting, establishing an ethical framework to guide accountants and sustainability assurance practitioners in evaluating whether an external expert has the necessary competence, capabilities and objectivity to use their work, as well as provisions on applying the Ethics Code’s conceptual framework when using the work of an outside expert.
President Donald Trump’s tariffs would effectively cause a tax increase for low-income families that is more than three times higher than what wealthier Americans would pay, according to an
The report from the progressive think tank outlined the outcomes for Americans of all backgrounds if the tariffs currently in effect remain in place next year. Those making $28,600 or less would have to spend 6.2% more of their income due to higher prices, while the richest Americans with income of at least $914,900 are expected to spend 1.7% more. Middle-income families making between $55,100 and $94,100 would pay 5% more of their earnings.
Trump has
Economists have warned that costs from tariff increases would ultimately be passed on to U.S. consumers. And while prices will rise for everyone, lower-income families are expected to lose a larger portion of their budgets because they tend to spend more of their earnings on goods, including food and other necessities, compared to wealthier individuals.
Food prices could rise by 2.6% in the short run due to tariffs, according to an
The Yale Budget Lab projected that the tariffs would result in a loss of $4,700 a year on average for American households.
Artificial intelligence is just getting started in the accounting world, but it is already helping firms like technology specialist
Schellman CEO Avani Desai said there have definitely been some shifts in headcount at the Top 100 Firm, though she stressed it was nothing dramatic, as it mostly reflects natural attrition combined with being more selective with hiring. She said the firm has already made an internal decision to not reduce headcount in force, as that just indicates they didn’t hire properly the first time.
“It hasn’t been about reducing roles but evolving how we do work, so there wasn’t one specific date where we ‘started’ the reduction. It’s been more case by case. We’ve held back on refilling certain roles when we saw opportunities to streamline, especially with the use of new technologies like AI,” she said.
One area where the firm has found such opportunities has been in the testing of certain cybersecurity controls, particularly within the SOC framework. The firm examined all the controls it tests on the service side and asked which ones require human judgment or deep expertise. The answer was a lot of them. But for the ones that don’t, AI algorithms have been able to significantly lighten the load.
“[If] we don’t refill a role, it’s because the need actually has changed, or the process has improved so significantly [that] the workload is lighter or shared across the smarter system. So that’s what’s happening,” said Desai.
Outside of client services like SOC control testing and reporting, the firm has found efficiencies in administrative functions as well as certain internal operational processes. On the latter point, Desai noted that Schellman’s engineers, including the chief information officer, have been using AI to help develop code, which means they’re not relying as much on outside expertise on the internal service delivery side of things. There are still people in the development process, but their roles are changing: They’re writing less code, and doing more reviewing of code before it gets pushed into production, saving time and creating efficiencies.
“The best way for me to say this is, to us, this has been intentional. We paused hiring in a few areas where we saw overlaps, where technology was really working,” said Desai.
However, even in an age awash with AI, Schellman acknowledges there are certain jobs that need a human, at least for now. For example, the firm does assessments for the FedRAMP program, which is needed for cloud service providers to contract with certain government agencies. These assessments, even in the most stable of times, can be long and complex engagements, to say nothing of the less predictable nature of the current government. As such, it does not make as much sense to reduce human staff in this area.
“The way it is right now for us to do FedRAMP engagements, it’s a very manual process. There’s a lot of back and forth between us and a third party, the government, and we don’t see a lot of overall application or technology help… We’re in the federal space and you can imagine, [with] what’s going on right now, there’s a big changing market condition for clients and their pricing pressure,” said Desai.
As Schellman reduces staff levels in some places, it is increasing them in others. Desai said the firm is actively hiring in certain areas. In particular, it’s adding staff in technical cybersecurity (e.g., penetration testers), the aforementioned FedRAMP engagements, AI assessment (in line with recently becoming an ISO 42001 certification body) and in some client-facing roles like marketing and sales.
“So, to me, this isn’t about doing more with less … It’s about doing more of the right things with the right people,” said Desai.
While these moves have resulted in savings, she said that was never really the point, so whatever the firm has saved from staffing efficiencies it has reinvested in its tech stack to build its service line further. When asked for an example, she said the firm would like to focus more on penetration testing by building a SaaS tool for it. While Schellman has a proof of concept developed, she noted it would take a lot of money and time to deploy a full solution — both of which the firm now has more of because of its efficiency moves.
“What is the ‘why’ behind these decisions? The ‘why’ for us isn’t what I think you traditionally see, which is ‘We need to get profitability high. We need to have less people do more things.’ That’s not what it is like,” said Desai. “I want to be able to focus on quality. And the only way I think I can focus on quality is if my people are not focusing on things that don’t matter … I feel like I’m in a much better place because the smart people that I’ve hired are working on the riskiest and most complicated things.”
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