June 15, 2010
ELIZABETH MAN ARRESTED FOR $3,000,000 FALSE CLAIM SCHEME TO DEFRAUD THE IRS
DENVER – Curtis Morris, age 41, of Elizabeth, Colorado, appeared in federal court yesterday for an initial appearance for a scheme to defraud the Internal Revenue Service, U.S. Attorney David Gaouette and IRS Criminal Investigation Special Agent in Charge Christopher Sigerson announced. Morris was arrested without incident by Special Agents with the IRS last Friday, June 11, 2010. Morris and co-defendant Richard Kellogg Armstrong, age 76, of Prescott, Arizona, were charged by federal grand jury indictment on June 8, 2010, for mail fraud and filing false claims against the United States Government. The indictment was sealed pending Morris’s arrest.
According to the indictment, from September 2008 through April 2009, Curtis Morris worked as an accountant, bookkeeper and business consultant and was self-employed, part-time, as an income tax preparer, doing business, through EFFN Books, Inc., under the trade name “Numbers and Beyond.” Defendant Morris charged clients of his tax preparation business a fee for the federal income tax returns that he prepared on their behalf. Beginning in September 2008, Morris began to prepare a series of federal income tax returns for a number of clients claiming large federal income tax refunds as the result of large amounts of federal income taxes purportedly withheld from income earned by the clients. Morris also prepared federal income tax returns for himself and his spouse claiming federal income tax refunds based on purported federal income tax withholdings on their income.
Richard Armstrong was one of Morris’s tax preparation clients for whom Morris prepared federal income tax returns claiming large refunds. Armstrong caused three amended U.S. Individual Tax Returns for him and his spouse for the years 2005 through 2007, prepared by Morris, to be filed with the IRS. The amended returns claimed federal income tax refunds of $582,352 for 2005, $283,746 for 2006, and $605,300 for 2007, based on false federal income tax withholdings on income. For the 2008 tax year, Armstrong caused a U.S. Individual Tax Returns for him and his spouse, to be filed with the IRS, claiming a federal income tax refund of $1,739,452.
As further part of the scheme, Morris caused an amended U.S. Individual Tax Return for him and his spouse for the year 2006, which he personally prepared, to be filed with the IRS, claiming a federal income tax refund of $74,546. For the 2008 tax year, Morris caused a U.S. Individual Tax Return for himself, which he personally prepared, to be filed with the IRS, claiming a federal income tax refund of $90,481. Both refunds for the 2006 and 2008 year were based on false federal income tax withholdings.
The income in this case is original issue discount (OID) income, which is a form of interest income typically realized on debt instruments that were issued at a discount to, or purchased at less than, the ultimate redemption value of the debt instrument. The IRS requires financial institutions to report OID income realized from OID instruments for a particular year, both to the IRS and to the holder of the OID instrument, through the use of IRS Form 1099-OID. A portion of the Form 1099-OID requires the financial institution to report any amounts of OID income withheld from the taxpayer for the purpose of paying over federal income taxes on behalf of the taxpayer.
Counts one through three allege mail fraud, which carries a penalty of not more than 20 years imprisonment, and up to a $250,000 fine, per count. Counts four through nine allege filing false claims against the United States, which carries a penalty of not more than 5 years imprisonment, and a fine of up to $250,000. Morris was charged with counts one through nine and Armstrong was charged with count one and counts four through seven of the indictment.
This case was investigated by Special Agents with IRS Criminal Investigation.
The case is being prosecuted by Assistant U.S. Attorney Kenneth Harmon.
These charges are only allegations and the defendants are presumed innocent unless and until proven guilty.
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