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Massive $2.9 Billion COVID-19 Tax Credit Fraud Uncovered in New Jersey
Three Irvington Residents Charged in Elaborate Scheme to Defraud IRS
In a striking blow to fraudulent pandemic relief efforts, U.S. Attorney Philip R. Sellinger announced today that three individuals from Irvington, New Jersey, have been charged with attempting to swindle over $2.9 billion from the Internal Revenue Service (IRS). The elaborate scheme centered around the false filing of 131 tax forms, exploiting COVID-19-related employment tax credits.
The accused, Rudolph Johnson, Frantz Pasteur, and Frederick Anderson, face charges of conspiracy to file false claims against the government and conspiracy to commit wire and mail fraud. Johnson and Pasteur have additionally been charged with three and two counts of money laundering, respectively, while Anderson faces three counts.
The defendants made their initial court appearances yesterday, March 14, with Johnson and Pasteur granted bail and Anderson scheduled to appear at a later date.
At the heart of the investigation is the fraudulent use of the employee retention tax credit (ERC), a measure enacted by Congress to support businesses financially impacted by the COVID-19 pandemic. The credit was intended for businesses operational in 2020 that had suffered due to government-imposed restrictions or significant profit declines.
It appears, however, that from June 2021 to November 2023, the trio created multiple fictitious entities to file for these credits unlawfully. Despite their claims, these entities had minimal interactions with the IRS and had not paid the requisite wages to qualify for the credits.
The scheme resulted in the U.S. Treasury erroneously disbursing $1.03 million in refunds, which the defendants then allegedly used for personal enrichment, including the purchase of luxury vehicles. This case underscores the vast scale of fraud that has plagued pandemic relief efforts, drawing attention to the sophisticated methods employed by fraudsters to exploit governmental support mechanisms.
The charges carry significant penalties, with the conspiracy to file false claims offense punishable by up to 10 years in prison and a $250,000 fine. The fraud conspiracy charge could result in a 20-year prison term and a similar fine, with each money laundering charge also leading to up to 10 years in prison.
The investigation was led by the IRS – Criminal Investigation and the U.S. Postal Service, underlining the collaborative effort among federal agencies to tackle pandemic-related fraud. This case is part of the wider efforts by the U.S. Department of Justice's COVID-19 Fraud Enforcement Strike Force, which aims to prosecute large-scale fraud across the United States.
As the legal process unfolds, it's crucial to remember that the charges are merely accusations at this stage, with the defendants presumed innocent until proven guilty. This case serves as a stark reminder of the ongoing challenges in safeguarding pandemic relief funds and the importance of vigilance in preventing fraud.
