This week’s “You Can’t Do That” kicks off in my home state of New Jersey (this fraudster actually lives in the town adjacent to my current hometown). Sharif Mahfouz, of Brick, New Jersey, operated a tax preparation company that primarily provided tax return help to expatriots. Mr. Mahfouz had his clients sign-off on their returns, then, added bogus credits and deductions to increase refunds without notifying the client. He had a bank account set up in New York, where the excess funds would be deposited for his safekeeping. Mr. Mahfouz even went as far as forging the signatures of his clients to deposit checks in their name. Over five years, he successfully defrauded Uncle Sam out of $1.1 million dollars. He was just sentenced to two years in prison and ordered to pay full restitution.
This next woman, Karol Fitzgerald, reduced her clients’ tax liabilities by over $11 million during 2010 and 2011. The amazing thing about Ms. Fitzgerald is that she was already on the government’s radar because she was fined for understating income on her clients’ return from 2004-2006. The kicker? She claimed to have retired from filing returns, but still had refunds, other than hers, deposited into her bank account during 2011-2012. So, to recap, she fraudulently filed returns from 2004-2006, continued to file fraudulent returns from 2010-2011, received other people’s refund in 2011 and 2012, yet she does not face any criminal charges.
In the corporate world, the SEC and District of Hawaii are holding Ronald Zaucha liable for over $2.6 million in relation to the judgment against Troy Lyndon for over $3.6 million. Who are these two fraudsters? Troy Lyndon was the CEO/CFO of Left-Behind, a company that created and sold video games. Lyndon issued over 2 billion (yes, billion!) shares to Zaucha as payment for consulting services provided to Left-Behind. However, the plan was to have Zaucha sell many of these unregistered shares in the open market. He would then give a percentage of the proceeds back to Left-Behind, so the company could show additional revenue for the year. These transactions would have actually led to more taxes, so this wasn’t a matter for the tax court, but rather the SEC. Both men are permanently banned from participating in the offering of securities in the future.