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People on public assistance commit majority of tax refund fraud, police say

TAMPA — Last summer, the state sent a notice to a felon's apartment, reminding Jerry Myea Lee that his food stamps would dry up if he didn't reapply.

The form letter spit out other offers. Did he need child support? A telephone discount? How about an Earned Income Tax Credit?

Lee, then 36, kept the paper.

As a teen, he had grown 10 inches eating state-paid food in prison. Each time he got in trouble and pleaded poverty — robbery, then drugs and guns — the public paid for his lawyers. His state and federal incarcerations cost taxpayers almost $300,000.

He was a free man on July 6, 2011, cruising around Tampa in a rented Dodge Charger, when, during a traffic stop, a police dog got a whiff of weed.

In a bag behind the driver's seat, officers found Lee's food stamps letter — and $30,980 in cash. Eleven days later, he was caught in Orlando with a U.S. Treasury check made out to someone else.

Tampa police suspect his cash had roots in tax refund fraud, which has drained billions of dollars from the U.S. Treasury.

If so, it came from the same beleaguered source that has paid to feed, house and defend Lee all these years. You.

• • •

Tampa police estimate that 80 to 90 percent of the tax refund fraud they encounter is committed by people on public assistance.

"The people who are benefiting most from our taxes are the ones doing it," said police spokeswoman Andrea Davis.

Tampa led the nation in refund fraud last year, with thieves duping the IRS out of $468 million. That's according to a recent analysis by a federal watchdog agency, which put the national loss at $5.2 billion. The Treasury Inspector General for Tax Administration said it detected characteristics of refund fraud in 88,724 paid Tampa returns.

No one can say with certainty who took all the money.

But police know where they find the evidence.

Routinely, they see signs of tax fraud commingled with indicators of food assistance, rent assistance, Medicaid or Supplemental Security Income disability checks.

Little hard data exists on a crime only recently entering the public consciousness. But the estimate of 80 to 90 percent is the consensus of a Tampa police attorney and three detectives who specialize in the cases, including Sal Augeri, who testified about fraud in March before a U.S. Senate subcommittee.

Sheriff's deputies, too, have witnessed an overlap.

"We do believe that a large number of people committing this crime are on public assistance," said Hillsborough sheriff's Cpl. Bruce Crumpler.

Some, like Shawntrece Sims, triple-dip. Sims, 32, gained notoriety by using tax money for a fertility procedure. An early starter, she filed fake tax returns as far back as 2009, she admitted in a plea deal. Authorities believe she collected $672,887.

For much of 2009, she also drew a monthly $660 housing subsidy, along with a $1,348 SSI disability check.

In December, after she pleaded guilty to tax and mail fraud, a federal judge sent her to prison for nine years. She's at Waseca Correctional Institution in Minnesota.

Cost to taxpayers: $73.57 a day.

• • •

More than 10,000 people remain on a waiting list for federally subsidized housing in Hills­borough County.

Not LaSandra Gamble, 27-year-old mother of five.

Last summer, between housing, utilities and food stamps, she drew benefits of $2,363 a month, Tampa Housing Authority files show.

Yet, in August 2011, she put down $9,000 on a black 2006 Lexus GS430, police said. Three days later, they said, she put down another $9,000, this time on a red 2007 Lexus ES 350. Combined, the monthly payments were nearly $2,000.

The car dealer told police that Gamble acted as if she had a lot of money and said she needed the second Lexus because her "boyfriend" was jealous, police attorney Laurie Woodham said.

Gamble, in an interview, said police have it wrong. She said she got the cars because she was involved with the car dealer.

"I didn't have to put nothing down," she said. "We were in a relationship."

Legally, she was in a relationship with her husband, 33-year-old Angelo Juan Pedrosa, whom she had married a year earlier.

Police got involved Oct. 8, when they stopped Pedrosa driving the black Lexus. Pedrosa is a convicted cocaine dealer. Along with marijuana residue, the officers reported finding $6,000 and a dozen debit cards in other people's names.

Reloadable debit cards, sold online, carry Visa or MasterCard logos. Some people use them to shop on the Internet, control spending or get around poor credit. Tax thieves use them to collect refunds from the IRS.

Pedrosa told police the money was his and he found the debit cards at a gas station. Gamble said the money was hers, that it came from a $7,982 child support payment.

Pedrosa could not be reached for comment. Gamble said they are no longer together. She also said she knows nothing about tax fraud.

"There's more to life than being materialistic," she said. "My children, bettering my children. To learn everything you can learn, and get it while it's free."

Police seized the cash.

And they did they what usually do in such cases.

They sent a report to the IRS.

• • •

James Robnett has no control over the issuance of illegal refunds.

He tries to extract justice afterward, as special agent in charge of the Tampa-based IRS-Criminal Investigation Division, where he started work in June.

"Our mission is to protect the Treasury as best we can," he said.

But it takes time to gather the evidence required to successfully prosecute a tax crime, he said.

Operation Rainmaker, a multi-agency sting last year, pointed the finger at a long list of suspects, but few have been federally charged.

Sims' plea deal was a significant victory, and the IRS played a big role in that investigation. This summer, the federal government also charged Danielle Denson, alleging the exotic dancer collected $1.6 million in returns, spending proceeds on a Mercedes-Benz, plastic surgery and a $300 thong from Gucci. She awaits trial or a plea deal.

Other cases crawl through the bureaucracy, the custom paint jobs of seized cars baking in an impound lot near the city incinerator.

The investigators are Tampa-based, from an array of agencies, but IRS criminal investigators can't refer a case directly to the U.S. Attorney's Office without approval from Justice Department attorneys in Washington.

"Our cases are financially complex," said Robnett, who has an accounting degree and more than 20 years of IRS law enforcement experience.

He said the process is being streamlined and people in Tampa should see results in the coming months.

• • •

The last time the government checked, Americans quietly cheated the Treasury out of $385 billion a year — an amount (called the "tax gap") six times greater than the net worth of Bill Gates.

Most do it by hiding earnings or not filing returns.

Refund thieves take the opposite approach. Using stolen Social Security numbers, they report imaginary earnings and then claim they are owed money.

The IRS may not notice until the real taxpayer tries to file — or not at all, if the victim had no filing requirement.

Mary Vincenzi, an 83-year-old Italian immigrant, expected no refund. Her working years, as an accounts clerk for Sears in New York, were behind her.

In truth, she had avoided tax matters, shell-shocked by the back-to-back deaths of her brother, husband and son.

Last summer, a letter came to her Riverview home. The IRS was rejecting her 2010 return.

Return?

"I didn't even do my income taxes," she said.

Someone had used her name, date of birth and Social Security number to register a debit card and file for a refund.

"They get all the information they want with these stupid computers," Vincenzi said. "They should destroy them all."

The card issued in Vincenzi's name was registered to a house 7 miles away from her. It was sent to Ivy Flower Loop in Riverview, across from a citrus grove near Interstate 75.

At least 18 debit cards or Walmart money cards were registered to that address from February to May 2011, Tampa police said.

Some were used to collect tax refunds. The IRS sent at least $26,541 to the home, including additional payment by check, police said.

That's not the only federal money that went to the house on Ivy Flower Loop.

The woman who lives there, Michelle Rena Haywood, is a 25-year-old mother of three.

State records show she has never been arrested in Florida.

Last year, the public subsidized her rent by $1,040 a month and provided $526 in monthly food assistance, housing records show. Her current rent subsidy is $452.

Federal grants for $6,057 helped send Haywood to Hills­borough Community College, where she enrolled in college prep reading, first aid, pre-algebra, algebra and sociology.

The Tampa Bay Times asked her about allegations of tax activity at her house.

"I don't really wish to talk about that," she said. "I don't want to relive that chaos I had to go through. I don't even know how to work a computer.

"I just had moved into the house, actually. It was around the time when this all went down. I don't know what was going on before I got there. Today I get people's mail that don't live there."

The Housing Authority started paying rent in her name in December 2010.

Tampa police offer more to the story.

They became interested in Haywood after discovering her name on the title of a 2010 Camaro seized during Operation Rainmaker.

It was one of two cars Haywood bought within 17 days last year, police learned.

She put $8,000 down on the Camaro on April 2, 2011, police attorney Woodham said. By month's end, someone had paid another $16,000.

Police believe the car was used by Marterrence Q. Holloway, a central figure in Operation Rainmaker. Police characterized Holloway as the host of a party where people gathered to file fraudulent returns.

Holloway remains under federal investigation.

The car, police say, was also used by Terence A. Palmer, 27, the father of Haywood's first child.

The two men have each been arrested more than 30 times, and they've each served two terms in state prison for crimes that included cocaine possession and selling cannabis.

The day before Haywood bought the Camaro, police found Palmer in another car with two TurboTax debit cards and $5,700, the police attorney said.

Haywood declined to discuss the automobile purchases.

She said she doesn't know Holloway. She declined to say when she last had contact with Palmer.

"I don't know if she got mixed up with the wrong person," Woodham said. "Is he using her address? I don't know. All the withdrawals are from banks and Publix stores by her house."

• • •

When Jerome Ryans hears about Haywood and Gamble, his agency's clients, he can't help but think of mothers who have waited years for a subsidy.

He is president and CEO of the Tampa Housing Authority, which oversees public housing complexes and distributes federal vouchers.

He learned about the women's car purchases from a Tampa Bay Times reporter and said the agency would look into them.

"If any of that is true," he said, "they don't need to be on our program."

But Ryans doesn't believe that people on public assistance are committing 80 to 90 percent of Tampa's tax fraud.

Maybe others just aren't getting caught, he suggested.

Tampa police Chief Jane Castor said that's entirely possible.

"There are individuals that are flying under the radar and aren't being detected, no doubt," she said.

The majority of people on public assistance obey the laws, she said, but criminals will take advantage of any system that lends itself to exploitation.

Sgt. Kenny Norris, 47, who patrols east Tampa, said the gold and cars just draw more attention in low-income neighborhoods.

By design, apparently.

"They're putting it right in our faces," said Detective Augeri, who describes suspected tax thieves trying to one-up each other in a public show of possessions.

The public pays for custom Camaros with notice-me paint jobs, high-end SUVs, big TVs, gold teeth, cosmetic surgery, Gucci handbags, cocaine, cruises and gambling.

On YouTube, amateur rap videos immortalize women with newfound money. One opens with a "Welcome to Tampa, City of Champions" sign; another shows a scene outside King's Meat Market and a man with a mouth full of cash.

If fraud begets rap videos, the reverse may also be true.

As a mentor to kids, Sgt. Norris preaches the wisdom of working hard and avoiding trouble, but they're bombarded by images of musicians driving $80,000 cars.

"These guys perpetuate the idea that gold and nice cars are what life is all about," he said.

He doesn't believe the spending sprees satisfy the hunger that drives the crime. People only wind up wanting more.

"They're seeking and searching for something, I guess, a legitimate feeling inside they won't ever find," he said. "It will never make them feel good no matter what they purchase because they'll always be ducking and hiding, trying to outrun the law."

Or outrun each other.

Increasingly, police get called to scenes of tax-fraud-related burglaries and robberies, as thieves wrestle over spoils.

Local cops just wish the IRS would close the door.

The agency — often constrained by Congress, denied resources and encouraged to keep filers happy — reports great strides, with $6.5 billion in fraudulent returns stopped last year.

But the report from the IRS watchdog said the Treasury could still lose $21 billion to fraudulent tax refunds over the next five years.

"You don't have to clean up the blood if you stop the bleeding," police attorney Woodham said.

• • •

Lee, the man found with the food stamps letter and $30,980, was sent back to federal prison, but not on tax fraud charges.

He violated terms of his probation by getting caught with cannabis, associating with a felon and failing to report encounters with police. He's scheduled to be released Aug. 31.

He did not respond to a letter from the Times that described how he would be characterized in this story. A prison official said Lee received the letter but declined an interview.

He faces a state court drug charge when he gets out and lingering questions about the source of his cash, still in a police pending fund.

In the Orlando case, police arrested Lee and a Tampa woman at an Amscot, alleging that he supplied her a fake ID and the $7,989 Treasury check, one of four the IRS sent to addresses he used.

Waiting in the car, police also found Lee's girlfriend, Lucille Gamble, 48, kin to the Gamble who bought two Lexuses. Three days after she got back from Orlando, Lucille Gamble, who was not charged, closed on the purchase of her first house, records show. Like most people, she took out a bank loan.

Lee, too, took important steps after his Orlando arrest.

He declared himself indigent, qualifying again for public defenders. He reapplied for food stamps. And, early this year, he filed a motion in Hillsborough Circuit Court. He wants police to give back the $30,980.

Times news researcher John Martin contributed to this report. Patty Ryan can be reached at pryan@tampabay.com or (813) 226-3382.

Tampa leads in fraudulent refunds

A federal watchdog agency examined returns from the 2010 tax year and found undetected characteristics of tax refund fraud.

CityPotentially

fraudulent returns
Refunds

issued
Tampa88,724$468,382,079
Miami74,496$280,509,449
Atlanta29,787$77,113,392
Detroit23,870$74,313,933
Houston22,754$72,089,847
U.S. total1,492,215$5,221,018,184
Source: Treasury Inspector General for Tax Administration


By the numbers | Tax fraud

These numbers show how many bay area people depend on safety nets and what money lost to tax fraud might be worth in social dollars. Statistics are for July unless noted.

$465.5M

Monthly food stamps spending in Florida

$468M

Estimate of fraudulent IRS refunds to Tampa last year

12.8

Months of Hillsborough food stamps $468 million would buy

530,586

Bay area* food stamps clients

$72M

Monthly food stamps issued to bay area

412,896

Bay area Medicaid clients

$36.9M

Monthly SSI spending in bay area**

69,496

Bay area SSI clients**

8,602

Federally subsidized homes

in Hillsborough

2,960

Public housing units in

Hillsborough

*Hillsborough, Pinellas, Pasco and Hernando counties

**December 2011

Sources: Tampa Housing Authority, Treasury Inspector General for Tax Administration, Florida Department of Children and Families, Social Security Administration

People on public assistance commit majority of tax refund fraud, police say 08/18/12 [Last modified: Saturday, August 18, 2012 7:36pm]

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