White Collar Criminal Defense Group

Leader Of Tax-Defier Organization Ordered To Pay $3 Million In Restitution

The leader of the largest-ever tax refund fraud scheme involving Original Issue Discount tax forms has been ordered to pay nearly $3 million in restitution by a federal judge in the Central District of California. Arturo Ruiz, the former Chief Executive Officer of Old Quest Foundation, was convicted in January 2013 on one count of conspiracy and 41 counts of filing false claims against the U.S. for preparing over 400 fraudulent federal income tax returns worth more than $250 million in refunds. The fine comes in addition to a 168 month prison sentence issued in September.

The case against Ruiz and other Old Quest defendants stems from “Operation Stolen Treasures,” an investigation conducted by Special Agents with IRS Criminal Investigation that led to 55 people being indicted by a federal grand jury in the fall of 2011.

According to prosecutors, Ruiz and his co-conspirators told customers that they could receive hundreds of thousands of dollars in tax refunds by accessing “secret government accounts,” which he could draw from by filing Original Issue Discount tax forms on their behalf.  Customers were required to pay Old Quest fees as high as $10,000 and to promise to “donate” 25% of any tax refunds they received to Old Quest.  In exchange for the payments, Old Quest prepared and filed false income tax returns, which routinely sought hundreds of thousands of dollars in income tax refunds.  When Old Quest customers received IRS letters warning that their tax returns were frivolous, Old Quest employees assured customers that the IRS sent letters only to “intimidate” them because the “IRS did not want to pay.”

Of the 55 defendants indicted as a part of Operation Stolen Treasures, seven have been convicted at trial, 36 have pleaded guilty, two have agreed to plead guilty, and eight are pending trial. One defendant remains a fugitive, and one was acquitted.

Court Finds That Reduction In Prison Sentence Because Of Immediate Restitution Payment Does Not Run Afoul Of Constitution

A Florida appellate court recently ruled that a trial court’s decision to reduce a 10-year prison sentence to 8 years in exchange for an immediate upfront restitution payment for victims of a financial scheme did not violate the defendant’s 14th Amendment due process rights.  The Florida’s Fourth District Court of Appeal upheld the conviction of Jean Noel on racketeering and first-degree grand theft charges.  The court held that the trial judge’s sentence reduction in exchange for an immediate $20,000 payment was constitutional.

Noel was initially sentenced to 10 years in prison plus 10 years probation and ordered to pay $650,000 in restitution for victims of his scheme.  The trial judge said Noel could reduce his sentence by 2 years with an immediate restitution payment of $20,000.  This recent opinion conflicts with an earlier Florida appellate opinion from 2011 where the court said that a similar reduction violation the defendant’s constitutional rights because it results in harsher punishment for an offender who cannot pay the immediate restitution.

The jury is still out on whether similar decisions will be upheld as constitutional.