$44 Millions Tax Fraud Case PPP Loan-False Tax Returns: Lessons Learned

Introduction

In recent years, cases of tax fraud and financial crimes have become more prevalent, causing significant damage to the economy and undermining the integrity of the tax system. In one such case, four individuals were recently sentenced for their roles in a tax fraud scheme that involved the preparation of false income tax returns and the submission of fraudulent applications for Paycheck Protection Program (PPP) loans. This case highlights the importance of fair and honest tax practices, as well as the devastating impact that tax fraud can have on the economy.

$44 Millions Tax Fraud Case PPP Loan-False Tax Returns: Lessons Learned
$44 Millions Tax Fraud Case PPP Loan-False Tax Returns: Lessons Learned

The defendants in this case were associated with Mana Tax Services, a tax preparation company based in Hawaii. They were charged with preparing false income tax returns for professional athletes, filing amended tax returns for prior years, and fabricating documents to support their fraudulent claims. Additionally, they submitted false applications for PPP loans on behalf of small businesses and shell companies, using fabricated tax returns to support the applications.

The scheme resulted in significant losses to the government, with a total tax loss of over $1.4 million and fraudulent PPP loan proceeds of over $1 million. As a result, the defendants were sentenced to prison terms and ordered to pay restitution to the United States.

This case serves as a reminder of the importance of fair and honest tax practices, not just for individuals but for the economy as a whole. Tax fraud can have a significant impact on government revenues, leading to decreased funding for essential programs and services. It can also undermine public trust in the tax system and create an unfair advantage for those who engage in illegal activities.

As such, it is critical that law enforcement agencies remain vigilant in their efforts to combat tax fraud and hold those who engage in such activities accountable for their actions. Through continued enforcement efforts and public education, we can work together to promote a tax system that is fair, honest, and equitable for all.

Background

Thanh Ngoc Rudin and Seir Havana were recently sentenced to prison for their involvement in a conspiracy to defraud the IRS and the Paycheck Protection Program (PPP). Thanh Rudin was a principal of Mana Tax Services, a tax preparation business in the Los Angeles area, while Havana served as the company’s Vice President/Director and Chief Executive Officer. The two worked together to carry out two separate fraud schemes while Thanh’s brother, Quin Rudin, was still on supervised release for a different fraud scheme in California.

The first scheme involved the preparation and filing of false income tax returns on behalf of at least nine professional athletes. The fraudulent tax returns reported fictitious business and personal losses, which generated refunds the athletes were not entitled to receive. The defendants also filed amended tax returns for most of the athletes for prior years to correct what they falsely characterized as “errors” made by the athletes’ previous accountants. Mana Tax charged the athlete clients 30% of the fraudulent tax refunds, causing a total tax loss of more than $19 million.

The second scheme involved the preparation and submission of false applications for PPP loans on behalf of small businesses, shell companies, and other business entities they controlled. The defendants submitted fabricated tax returns to support the PPP loan applications, and some of the business owners never saw their loan applications before Mana Tax filed them. The loan applications grossly inflated the number of employees and monthly payroll costs. Some of the businesses had no payroll expenses and were not actually eligible for PPP loans. The defendants took a fee of 30% of the fraudulent loan proceeds, which resulted in a total loss of more than $25 million.

The combined losses caused by the two schemes amounted to more than $44 million. During the investigation, the government seized more than $11.8 million of the fraudulent PPP loan proceeds from bank accounts controlled by the defendants. In addition, Havana surrendered cashier’s checks totaling approximately $5.6 million, representing a portion of the fees charged to professional athletes for the preparation of their false tax returns and a portion of the fees taken from the fraudulent PPP loans.

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The impact of these schemes is significant, as tax fraud not only undermines the integrity of the tax system, but also results in the loss of government revenue. It is important to ensure fair and honest tax practices to maintain the economic stability of a country.

False Tax Returns tax Fraud

In addition to their PPP loan fraud scheme, the defendants also engaged in a scheme involving the preparation of false income tax returns for professional athletes. Thanh Rudin, as a principal of Mana Tax Services, and Havana, as the company’s Vice President/Director and Chief Executive Officer, prepared and filed a series of false income tax returns on behalf of at least nine professional athletes. Quin Rudin, the brother of Thanh Rudin, was also involved in the scheme as the company’s Secretary, Director, and Chief Financial Officer.

The false tax returns reported fictitious business and personal losses to generate refunds that the athletes were not entitled to receive. The defendants also filed amended tax returns for most of the athletes for prior years to correct what they falsely characterized as “errors” made by the athletes’ previous accountants. Mana Tax charged the athlete clients 30% of the fraudulent tax refunds.

The tax fraud scheme caused a total tax loss of more than $19 million, which contributed to the $44 million total losses caused by both the false tax returns and PPP loan fraud schemes. The impact of this type of tax fraud on the economy is significant, as it reduces the amount of tax revenue that the government collects and ultimately affects the services and programs that the government can provide to its citizens.

It is important to note that honest and fair tax practices are crucial for the stability and growth of the economy. Tax fraud undermines the integrity of the tax system and can have serious consequences for those who engage in such activities. The prosecution of the defendants in this case sends a message that tax fraud will not be tolerated and that those who engage in such activities will be held accountable for their actions.

PPP Loan Fraud

In addition to preparing false tax returns, the defendants engaged in a scheme to defraud the Paycheck Protection Program (PPP). The PPP was a federal loan initiative created to help businesses pay their employees and meet expenses during the COVID-19 pandemic.

The defendants prepared and submitted false applications for PPP loans on behalf of small businesses, shell companies, and other business entities they controlled. They inflated the number of employees and monthly payroll costs in the loan applications, and some of the business owners never saw their loan applications before Mana Tax filed them. Some of the businesses had no payroll expenses and were not actually eligible for PPP loans.

To support the fraudulent loan applications, the defendants submitted fabricated tax returns. They took a fee of 30% of the fraudulent loan, and the loan proceeds were deposited into bank accounts controlled by the defendants.

During the investigation, the government seized more than $11.8 million of the fraudulent PPP loan proceeds from bank accounts controlled by the defendants. In addition, Havana surrendered cashier’s checks totaling approximately $5.6 million, representing a portion of the fees charged to professional athletes for the preparation of their false tax returns and a portion of the fees taken from the fraudulent PPP loans.

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The total loss caused by the PPP loan fraud scheme was more than $24 million. The defendants’ actions not only defrauded the government but also deprived legitimate businesses in need of financial assistance during the pandemic.

The case highlights the importance of transparency and accountability in government initiatives designed to help people during times of crisis. The government has a responsibility to ensure that taxpayer dollars are distributed fairly and used for their intended purpose. The defendants’ actions showed a complete disregard for that responsibility and caused significant harm to the economy and to those in need of financial assistance.

Sentencing and Restitution

After being found guilty of conspiracy to defraud the IRS and the Paycheck Protection Program (PPP), the defendants Thanh Ngoc Rudin and Seir Havana were sentenced to prison terms by Senior U.S. District Judge Anthony J. Trenga. Thanh Ngoc Rudin was sentenced to 34 months in prison on February 10, 2023, and Seir Havana was sentenced to 42 months in prison. Additionally, both defendants were ordered to serve three years of supervised release.

In addition to prison and supervised release, the court ordered the defendants to pay restitution to the United States. Thanh Rudin was ordered to pay $38,206,074.98 in restitution, while Seir Havana was ordered to pay $38,673,403.24 in restitution.

The ordered restitution is meant to compensate the government for the financial losses incurred as a result of the defendants’ fraud schemes. The total losses caused by the false tax returns tax fraud and PPP loan fraud were over $44 million. The government seized more than $11.8 million of the fraudulent PPP loan proceeds from bank accounts controlled by the defendants, and Havana surrendered cashier’s checks totaling approximately $5.6 million, representing a portion of the fees charged to professional athletes for the preparation of their false tax returns tax fraud and a portion of the fees taken from the fraudulent PPP loans.

The ordered restitution serves as a reminder that fraudulent activities have significant consequences and that individuals found guilty of such schemes will be held accountable for their actions. The government is committed to ensuring that the U.S. tax system operates fairly and that the PPP loan program is used for its intended purposes.

Conclusion

The case of Thanh Ngoc Rudin, Seir Havana, and Quin Rudin highlights the devastating impact of tax fraud on the economy and the importance of fair and honest tax practices. The defendants’ schemes involving false tax returns and PPP loan fraud caused more than $44 million in losses to the United States, demonstrating the serious consequences of such criminal activity.

The prison sentences imposed on the defendants and the ordered restitution to the United States serve as a deterrent to others who may consider engaging in tax fraud. It is important for law enforcement to remain vigilant in combating tax fraud to protect the integrity of the tax system and ensure that taxpayers pay their fair share.

This case also emphasizes the need for continued efforts to promote honest tax practices and educate taxpayers about the risks and consequences of tax fraud. By raising awareness and encouraging compliance, we can work towards a more equitable and just tax system.

In conclusion, the case of Thanh Ngoc Rudin, Seir Havana, and Quin Rudin serves as a reminder that tax fraud will not be tolerated and that those who engage in such criminal activity will be held accountable. We must remain vigilant in our efforts to promote fair and honest tax practices and protect the integrity of our tax system.

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