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Tax Fraud Blotter: Bad choices

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A senate hearing; lack of Unity; that ain’t chicken feed; and other highlights of recent tax cases.

Fitchburg, Massachusetts: Former state senator Dean A. Tran has been convicted for scheming to defraud the Massachusetts Department of Unemployment Assistance and collecting income that he failed to report to the Internal Revenue Service.

Tran, convicted of 20 counts of wire fraud and three counts of filing false returns, was a member of the Massachusetts State Senate from 2017 to January 2021. After his term, he fraudulently received pandemic unemployment benefits while employed as a paid consultant for a New Hampshire-based retailer of automotive parts; he fraudulently collected $30,120 in pandemic unemployment benefits.

He also concealed $54,700 in consulting income from the automotive company on his 2021 federal income tax return. This was in addition to thousands of dollars in income that he concealed from the IRS while collecting rent from tenants who rented his Fitchburg property from 2020 to 2022.

The charge of wire fraud provides for a sentence of up to 20 years in prison, three years of supervised release and a fine of $250,000. The charge of filing false tax returns provides for a sentence of up to three years in prison, a year of supervised release and a fine of $100,000. Sentencing is Dec. 4.

Joliet, Illinois: A federal court has permanently enjoined tax preparer Sir Michael Joseph Davenport and his company My Unity Tax Financial & Tax Preparation from preparing federal returns for others and from owning or operating any tax prep businesses.

Davenport agreed to the permanent injunction.

The complaint alleges that he and his company prepared false and fraudulent federal returns to improperly reduce clients’ tax liabilities or to obtain undeserved refunds. The complaint alleges that Davenport and My Unity routinely prepared returns for customers reporting fictitious businesses, minimal or no income, and large fabricated or manipulated expenses to fraudulently reduce taxable income. As alleged in the complaint, most of these businesses did not exist.

The complaint also alleges that, despite being issued a PTIN, Davenport operated as a ghost preparer and that Davenport and My Unity used software intended for personal rather than professional use to prepare clients’ returns, so when the returns were filed it appeared that clients had filed the returns themselves.

McAllen, Texas: Three sisters have been sentenced for their roles in a conspiracy to assist in the preparation of filing fraudulent federal returns.

Maria Lourdes Campos and her sisters Elizabeth Romo and Gloria Romo pleaded guilty in May. Campos has been sentenced to 42 months in prison; Elizabeth Romo has been sentenced to 36 months and Gloria Romo to a year of supervised release.

Campos owned and operated Campos Tax Service in the Rio Grande Valley for more than 10 years, where she employed her two sisters. With the sisters’ assistance, most CTS clients fraudulently applied for and claimed either residential energy credits, business expenses or childcare credits. Once CTS employees completed the tax returns, they did not review the completed documents with their clients and only provided them with refund amounts or incomplete documents.

From 2018 to 2020, Campos Tax Service filed some 6,501 federal income tax returns that included more than $5 million of residential energy credits. Throughout the years that Maria Campos orchestrated this scheme, she purchased luxury vehicles and expanded her business to three locations.

The phony filings between Campos, Elizabeth Romo and Gloria Romo resulted in a total sustained tax loss of $3,672,472.

Campos, Elizabeth Romo and Gloria Romo were ordered to pay restitution ($151,741 for Campos, $119,793 for Elizabeth Romo and $9,528 for Gloria Romo). Campos and Elizabeth Romo were also ordered to serve three years of supervised release after their imprisonment.

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San Diego: Restaurateur Leronce Suel has been convicted of wire fraud, conspiracy and tax crimes for schemes to defraud pandemic-relief programs and to file false returns.

Suel was the majority owner of Rockstar Dough and Chicken Feed, both of which operated area restaurants. He conspired to underreport more than $1.7 million in gross receipts on Rockstar Dough’s 2020 corporate return and pandemic-relief applications.

His businesses fraudulently received $1,773,245 in Paycheck Protection Program loans and Restaurant Revitalization Fund grants. Suel and his co-conspirator used the money for cash withdrawals from their business bank accounts, purchasing a home in Arkansas and having more than $2.4 million in cash in a bedroom.

Suel did not file timely tax returns for 2018 and 2019. Also, during the period 2020 through 2022, Suel did not file personal returns that reported flow-through income from his businesses and personal income he received from his business. In 2023, Suel filed false original and amended returns for several years, including personal returns for 2016 and 2017 that included false depreciable assets and business losses.

He caused a total federal tax loss of $1,292,976.

Suel was convicted of wire fraud, conspiracy to commit wire fraud, tax evasion, conspiracy to defraud the U.S., filing false returns and failing to file returns. He was acquitted of money-laundering charges. He agreed to forfeit $1,466,918.

Sentencing is Dec. 13. He faces up to 30 years in prison for each count of wire fraud and conspiracy to commit wire fraud, a maximum of five years in prison for tax evasion and conspiracy to defraud the U.S., up to three years for each count of filing false returns and a maximum of a year in prison for each count of failing to file returns.

Ft. Lauderdale, Florida: A federal district court has issued a permanent injunction against tax preparer Dexter Bataille, individually and doing business as Capital Financial Group Holdings.

The court ordered the closure of Bataille’s business and barred him from preparing or assisting in preparing federal income tax returns or transferring his client lists. The court also ordered him to pay $134,400 he received from his tax prep business. Bataille agreed to both the injunction and the order to pay.

The complaint alleged that he prepared clients’ returns that fraudulently claimed various false or inflated deductions and credits, including false and exaggerated profits and expenses to generate inflated business losses, incorrectly reported filing statuses and dependent claims and false reports of household help income.

Prineville, Oregon: Darla K. Byus, 55, has been sentenced to four years in prison and three years of supervised release for using stolen IDs to submit fraudulent health care claims resulting in more than $1.5 million in misappropriated funds from the Oregon Health Authority Medicaid Program and for filing tax returns that failed to report earnings she received.

From January 2019 to August 2021, Byus used her company, Choices Recover Services, to overbill Medicaid for substance abuse counseling services and to submit fraudulent reimbursement claims using the stolen IDs of Medicaid recipients.

Choices Recover had access to a provider portal through the Medicaid Management Information System, which Byus exploited to determine a victim’s Medicaid eligibility. She used the stolen IDs of more than 45 victims, at least a third of whom were identified by searching jail roster websites for recent drug- or alcohol-related offenses.

Byus received more than $1.5 million in fraudulent proceeds, which she used to purchase multiple properties in Oregon and to gamble.

She also filed false returns for herself and CRS, failing to pay some $450,438 in taxes.

Byus, who pleaded guilty in June, was also ordered to pay $2,033,315 in restitution to Oregon Medicaid and the IRS.

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IAASB tweaks standards on working with outside experts

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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 proposed narrow-scope amendments involve minor changes to several IAASB standards:

  • 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 IAASB website by July 24, 2025.

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.  

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Tariffs will hit low-income Americans harder than richest, report says

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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 analysis from the Institute on Taxation and Economic Policy.

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 imposed the steepest U.S. duties in more than a century, including a 145% tariff on many products from China, a 25% rate on most imports from Canada and Mexico, duties on some sectors such as steel and aluminum and a baseline 10% tariff on the rest of the country’s trading partners. He suspended higher, customized tariffs on most countries for 90 days.

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 estimate from the Yale Budget Lab. Among all goods impacted, consumers are expected to face the steepest price hikes for clothing at 64%, the report showed. 

The Yale Budget Lab projected that the tariffs would result in a loss of $4,700 a year on average for American households.

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At Schellman, AI reshapes a firm’s staffing needs

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Artificial intelligence is just getting started in the accounting world, but it is already helping firms like technology specialist Schellman do more things with fewer people, allowing the firm to scale back hiring and reduce headcount in certain areas through natural attrition. 

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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