Minnesota Couple Sentenced For Multi-Million-Dollar Income Tax Refund Fraud Scheme

United States Attorney Andrew M. Luger announced the sentencing of MARK ARLIN HAMMERSCHMIDT, 49, and ORNELLA ANGELINA HAMMERSCHMIDT, 37, for orchestrating a multi-million-dollar tax fraud scheme. The defendants, who pleaded guilty on November 16, 2015, were sentenced today before U.S. District Judge David S. Doty in U.S. District Court in Minneapolis, Minn.

“The Hammerschmidts stole nearly $2 million from the U.S. Treasury and exploited hundreds of vulnerable victims for their own financial gain, causing those victims immeasurable harm,” said Assistant United States Attorney Michelle Jones. “The U.S. Attorney’s Office and the IRS will continue to vigorously investigate and prosecute those who seek to victimize others and enrich themselves through tax refund schemes.”

“Most tax return preparers provide excellent service to their clients, however a few unscrupulous tax preparers file false and fraudulent returns. Knowingly and intentionally falsifying documents filed with the IRS is a federal crime,” stated IRS Criminal Investigation Special Agent in Charge Shea Jones. Our Special Agents play a valuable role in protecting tax revenue by identifying, investigating and recommending prosecution of abusive return preparers such as Mark Hammerschmidt and Ornella Hammerschmidt.”

According to the defendants’ guilty pleas, from January 2011 through February 2013, MARK and ORNELLA HAMMERSCHMIDT operated an immigration and tax preparation business, called American Group, located in Shakopee, Minn. and Winter Garden, Fla., which they utilized to prepare and file more than 1,000 fraudulent federal income tax returns. The defendants attracted customers to American Group by misrepresenting their professional credentials and certifications. Most notably, ORNELLA HAMMERSCHMIDT falsely represented herself as a licensed immigration attorney.

As part of the scheme, MARK and ORNELLA HAMMERSCHMIDT filed hundreds of federal and state tax returns for Minnesota and Florida clients of American Group and Liberty Tax, another tax preparation business they owned, reporting incorrect filing statuses, false household help income, fictitious businesses and business losses, along with fraudulent child care credits and education credits, in order to obtain unwarranted income tax refunds. The defendants attempted to conceal their involvement as fraudulent return preparers by intentionally not signing the tax returns on the part of the form meant to be signed by paid preparers. The defendants also falsely reported their business addresses and bank accounts controlled by them as the addresses and bank accounts of their taxpayer clients. In connection with this part of the scheme, the defendants sought approximately $200,000 in fraudulent tax refund payments. Many of the defendants’ clients were non-or-limited English speakers, who relied on the defendants to properly and legally prepare their taxes. The false returns filed on behalf of the taxpayer clients caused substantial harm to them, both in terms of problems with the IRS and problems with immigration status.

According to his guilty plea, from 2010 until 2012, MARK HAMMERSCHMIDT obtained personal identification information (“PII”) of hundreds of Guatemalan citizens, including birth certificates and copies of passports. MARK HAMMERSCHMIDT then prepared and filed with the IRS applications for Individual Taxpayer Identification Numbers (“ITINs”) in the names of the Guatemalan citizens. Once he obtained the ITINs, MARK HAMMERSCHMIDT filed multiple years’ worth of false tax returns in the Guatemalan citizens’ names, seeking refunds based on false information including false household help income, false dependents, and false education credits. MARK HAMMERSCHMIDT also used the PII of the Guatemalan citizens to file false Minnesota state income tax returns. In connection with this part of the scheme, the defendant sought approximately $1.8 million in tax refunds based on the fraudulent tax returns he filed.

This case was prosecuted by Assistant U.S. Attorneys Michelle E. Jones and Timothy C. Rank.

This case is the result of an investigation conducted by the Criminal Investigation Division of the IRS, Homeland Security Investigations, with substantial assistance from the Minnesota Department of Revenue.

Defendant Information:

MARK ARLIN HAMMERSCHMIDT, 49

Prior Lake, Minn.

Convicted:

• Conspiracy to Defraud the United States, 2 counts

Sentenced:

• 135 months in prison
• $1,832,986 in restitution

ORNELLA ANGELINA HAMMERSCHMIDT, 37

Prior Lake, Minn.

Convicted:

• False Claims for Refunds, 1 count

Sentenced:

• 48 months in prison
• $45,365 in restitution

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United States Attorney’s Office, District of Minnesota: (612) 664-5600