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Tampa tax fraud case leads to quicker investigations

TAMPA It took more than two years to put Russell Simmons away for stealing millions of dollars from Uhttp://tbedit.tbo.dc.publicus.com/apps/pbcsedit.dll/red#.S. taxpayers.
Along the way, Simmons became a symbol of everything that was galling about the tax refund fraud epidemic that exploded among Tampa area street criminals as law enforcement seemed unable to act.
He appeared to thumb his nose at police as he continued to live the high life even after his home and business were searched and investigators had clear evidence of millions of dollars worth of fraud.
He drove a Bentley and a Jaguar. He had gaudy diamond jewelry. Informants told detectives he was confident he would never be punished.
The IRS didn't get involved until almost a year after the investigation first began. And once the IRS stepped in, other law enforcement felt frozen out and frustrated as Simmons appeared for months to be right: He would get away with it.
But with Simmons receiving a 15-year prison sentence, new personnel in charge of the Tampa IRS Criminal Investigation Division and different approaches to these types of cases, authorities say they finally feel they can do something about the fraud.
Tampa Police Detective Sal Augeri said he used to think the IRS criminal investigation division was “useless because they offered no assistance.” Now, he said, “I actually enjoy working with them.”
It took time to get to this point.
A few months before Simmons' involvement in tax fraud came under police radar, investigators stumbled on their first active tax fraud case.
When Tampa police conducted a search on a drug case warrant in a Howard Johnson hotel in September 2010, they found evidence of tax refund fraud: four laptop computers, lists of personal information with more than 1,000 names, and debit cards and financial records.
According to John Joyce, who heads the Tampa office of the Secret Service, Tampa police called the IRS for help but got no answer. Because a captain had recently attended a training seminar with the Secret Service, the captain suggested detectives reach out to that agency for help.
That is how the Secret Service joined forces with Tampa police to investigate tax fraud.
At the end of 2010 and beginning of 2011, Tampa police began getting reports about Simmons. Augeri said Simmons had a criminal history and associated with drug dealers.
“Although we never linked him with drug dealing cases, the crowd he was involved with, we always suspected something's up with this guy,” Augeri said.
What was up soon became known on the streets as drops and TurboTax fraud, a name taken from the popular online filing system. Law enforcement now calls the crime SIRF, for stolen identity refund fraud.
Informants started telling detectives that Simmons, who owned a small car lot, would sell cars for inflated amounts, accepting fraudulently obtained U.S. Treasury checks in payment. So if a car was worth $5,000, Simmons would sell it for $10,000 worth of Treasury checks.
Informants told Augeri that Simmons filed fraudulent tax returns from his business computer, and he had a ledger in his desk drawer with names, dates of birth and Social Security numbers.
Simmons also had numerous prepaid debit cards in a filing cabinet drawer in his business, an informant told police. The debit cards had been used for deposits of fraudulent tax refunds.
Evidence kept mounting against Simmons. In June 2011, an informant saw Simmons sell a car for Treasury checks. The next month, police recorded a conversation when Simmons told an informant he couldn't cash Treasury checks anymore but told her of another person who would. He told the informant to bring him debit cards and he would “take care of the rest.”
Augeri said he went to the Hillsborough State Attorney's Office hoping to charge Simmons with theft of government property. But prosecutors wanted more – they wanted video of Simmons using the cards.
Police got that. Investigators obtained videos of Simmons using the cards to get cash and money orders at a Plant City Walmart. Investigators subpoenaed the debit card issuer and determined the money on the cards came from fraudulent tax refunds.
Local prosecutors still balked at bringing charges, Augeri said, taking the position that this was a federal crime.
Simmons, in the meantime, was living it up.
Simmons was one of a group of criminals known as “the celebrity drop people, based on their arrogance about how much money they were making, the high-end jewelry, the money they would display,'' Augeri said. “Their lifestyle was indicative of having a lot of cash. There was no other means but some kind of criminal activity.”
Simmons liked to wear diamond earrings, bracelets and rings. He was seen around town driving a Jaguar or his Bentley. He would fly out to Las Vegas and gamble big.
Police knew his small car lot couldn't support that kind of lifestyle. Another clue something was amiss: Simmons had filed personal bankruptcy in 2010. He reported nearly $830,000 worth of debt, including $800 he owed to the IRS, and $720,000 in assets.
Investigators kept building their case against Simmons. They subpoenaed Intuit, the owner of TurboTax, and obtained tax returns filed by Simmons in other people's names.
Augeri wanted a search warrant for Simmons' business but says local prosecutors wouldn't authorize it. “I was so flipping aggravated that I went to the Secret Service because it was my understanding that they were involved from the federal side,” he said.
Augeri said he joined up with Agent John “Buddy” Webb, and they went to the U.S. Attorney's Office, which opened a case and obtained a federal search warrant for Simmons Auto Sales on Busch Boulevard.
On Aug. 31, 2011, they raided the business.
Simmons consented to a search of his apartment. He told Secret Service agents where to find $25,000 hidden in a comforter in his bedroom closet. Investigators also found numerous debit cards and pieces of jewelry.
Simmons told Augeri and Webb he used his business and personal computers to file online tax returns to obtain fraudulent refunds, which he had sent to vacant properties and other addresses.
Although Simmons was arrested that day, he bailed out of jail within hours, Augeri said. The state ultimately dropped the charges.
After the search, the case was handed over to the IRS. And for months, as far as Tampa police and the public were concerned, nothing happened.
IRS officials said they were working hard but behind the scenes.
Jim Robnett, who is now in charge of the Tampa area IRS Criminal Investigation Division, said his agents actually got the case in October 2011. The lead agent, John Maguire, has 15 years of law enforcement experience, 10 with the IRS.
Robnett and spokesman Casey Tyska said Maguire worked with an IRS analyst in Memphis, Tenn., as well as a local analyst, to track down tax filings in the names of all the people in Simmons' ledger. About two-thirds of the returns were in the name of deceased people, and the investigators had to track down death certificates, which can be an arduous process.
Among the living victims agents found were many elderly and disabled people, including a blind woman.
IRS criminal agents traditionally conduct investigations on crimes that have happened over a period of years so not to expose taxpayers to criminal punishment for something that might be a mere mistake. The agents are not used to tackling street crime, where speed is imperative, and are required by law to keep most of their investigations secret.
These confidentiality laws, strengthened during the Watergate era, are designed to assure the public the information voluntarily given to the IRS is protected. The confidentiality is so sacrosanct that when someone reports income earned illegally – through drug sales, for instance – the IRS is not allowed to alert law enforcement.
On top of that, all federal tax prosecutions had to be reviewed and approved by the Justice Department Tax Division in Washington, a process that is supposed to ensure taxpayers are treated uniformly around the country.
And the IRS criminal investigators make up only a very small part of the huge federal agency. There are not enough IRS agents to investigate fraud on the scale that was happening in Tampa.
Those restrictions, procedures and traditions might have worked well in the past, but they became obstacles to dealing with the outbreak of stolen identity refund fraud on Tampa area streets.
It was a law enforcement clash of cultures. While Maguire and the analysts examined the electronic paper trail, Tampa police seethed.
Simmons, Augeri said, was “out and about. He's back in his lifestyle.”
In November, Augeri got a tip and notified agents at Orlando International Airport that Simmons was flying to Las Vegas carrying a lot of cash. Federal agents seized $75,000 in cash from Simmons and an associate.
As the case wore on, Tampa Police Chief Jane Castor went public with her irritation. In February 2012, she told reporters there was no reason to believe Simmons had stopped committing fraud even though he had been arrested in September.
In March, Augeri testified before a U.S. Senate subcommittee in Washington about tax refund fraud and described the Simmons case without naming him.
Augeri said he brought up the case because Simmons symbolized everything that was frustrating about the fraud wave.
“He had the criminal history,'' Augeri said. “He was a high-dollar suspect. He is the case that brought our attention to all the issues that we had with the state courts and the federal courts. His case brought to attention the difficulty in the sharing of the information between the federal agencies and the IRS, just everything from A to Z. Every problem that we could encounter, this case had it.”
As far as the IRS was concerned, though, their investigation was moving at “warp speed,” Tyska said.
Ultimately, Simmons was indicted in May 2012 on 32 federal charges. He eventually struck a plea deal and was sentenced to 15 years in federal prison, the longest anyone has received in Tampa for this crime.
In the meantime, the IRS has changed some of its procedures, finding ways to share some information with law enforcement in tax fraud cases and working closer with local police from the start of investigations. Dozens of local law enforcement officers have been deputized as IRS agents, giving them access to information and allowing them to cross jurisdictional borders in their cases.
The Justice Department has also changed how it handles the cases, quickly giving the green light for prosecutions.
If Simmons were to be discovered today, officials say, the investigation would be much quicker.
Augeri credited Robnett and the assistant agent in charge of the Tampa IRS investigations, Ismael Nevarez Jr., who Augeri said “have turned it around completely” as far as the ability to investigate this kind of fraud.
But Augeri said there are more Russell Simmons out there still committing this kind of crime.
And while investigators are more efficient and the civil side of the IRS has seemingly gotten better at preventing fraudulent refunds from being issued, Augeri said the fraud is not going to stop unless at least two things happen:
The IRS has to figure out how to completely stop issuing fraudulent refunds. And businesses that keep the kinds of personal information that crooks steal to file returns have to start guarding it the way banks guard money.
Still, law enforcement officials take comfort in the message sent by Simmons' federal prison sentence.
Said the Secret Service's Joyce: Simmons is “a symbol of greed and he's also hopefully going to be a symbol to others that ultimately there's a penalty to be paid for your greed.”

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Twitter: @ElaineTBO

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