We are committed to closing California's $6.5 billion tax gap, defined as the difference between tax that is owed and tax that is paid. Our special agents work cooperatively with law enforcement agencies throughout California to uncover illegal behaviors that contribute to the tax gap. These include underreporting income, overstating deductions, failing to file returns, failing to pay taxes due, and making illegal cash payments to employees.
Tax fraud is not a victimless crime. You can report suspected tax fraud by calling FTB at (800) 540-3453.
Some of the cases prosecuted in the last couple of months are described below.
Million dollar real estate fraud gives Beverly Hills man a new addressOn June 12, 2006, a Los Angeles man was sentenced to nine years in state prison on six felony counts of grand theft, and one felony count of state income tax evasion.
Ruben G. Mendoza, 51, and his wife, Tania Mendoza, 33, were the owners of Pacific Associates and Investors, BDH and Associates, and Equity Investment Group. According to court documents, the Mendozas were involved in a scheme involving illegal real estate activities. Mendoza defrauded his investors, and illegally encumbered investors' properties resulting in foreclosures of property. Related charges on Tania are still pending.
Mendoza also failed to file corporate or personal income tax returns on the more than $3.8 million in gross receipts the corporations earned, or the more than $3.2 million he earned personally. In addition to the nine-year prison sentence, Mendoza was ordered to pay restitution of $7.5 million to his victims, and $1.4 million to FTB.
This was a joint case with the Los Angeles County District Attorney's Office and the FTB.
LA dentist extracts millions of dollars in NY fraud schemeA Los Angeles dentist awaits extradition following her June 30, 2006, arrest by the New York Port Authority Police, on nine felony charges involving state income tax evasion, and fraud.
Hengameh Paulina Khalilzadeh, D.D.S., 39, owner of Hengameh Khalilzadeh D.D.S., INC., also known as Bright Now Dental, is charged with allegedly failing to file personal income tax returns, and the corporation's tax returns for 2002-2004. In addition to the tax charges, Dr. Khalilzadeh is charged with violations of the Penal Code, Welfare and Institutions Code, and California Code of Regulations. According to investigators, she is allegedly involved in filing fraudulent Denti-Cal claims for 2002. Dr. Khalilzadeh allegedly failed to report corporate gross receipts in excess of $3.9 million, and personal income in excess of $1.9 million for the years 2002-2004.
Each felony tax count carries a maximum term of three years in state prison. The tax liability on the corporate and personal income is in excess of $186,000.
The status of the extradition from New York is pending. This is an investigation involving the Los Angeles County District Attorney's new Fraud Interdiction Program, which targets health care fraud.
Large-scale auto fraud parks LA man in prison
A Los Angeles man was sentenced on July 7, 2006, to three years in state prison on felony counts of filing false state income tax returns, conspiracy, and insurance fraud.
Ahmed Sharif Khan, 41, of Los Angeles, was among 18 people charged in a case that covered a multimillion-dollar accident fraud scheme stretching from 1993-2000. The scheme involved staging traffic accidents primarily in the San Fernando Valley to defraud auto and medical insurance companies. The ring netted approximately $2.5 million by submitting phony medical bills and reports to several insurance companies. The case centered on the law offices of Curtis Mitchell Shaw of Beverly Hills and Keith Darran Washington of Reseda. Shaw and Darran, Khan's brother, Munir Sharif, and the others have previously been sentenced.
Khan also filed a false state income tax return, failing to report the income received from these illegal activities during the years in question. All income is taxable, including income derived from illegal activities.
This was a joint investigation between the California Department of Insurance, the Los Angeles Urban Auto Fraud Task Force, California Highway Patrol, Los Angeles County District Attorney's Office, and the FTB.
Irvine businessman jailed for grand theft and tax evasion
On July 7, 2006, an Irvine businessman was immediately taken into custody on felony charges of grand theft and state income tax evasion after failing to meet the conditions of his plea agreement.
Dianoush D. Emami, 46, pleaded guilty in January to six counts of grand theft and two counts of filing a false state income tax return. He also promised to pay full restitution to his victims, including FTB, in exchange for a sentence of not more than nine months in jail, plus probation.
Emami is the sole owner of two investment companies: Paradigm Capitol, LLC, and Sea Country International, LLC. According to court documents, Emami presented investors with the opportunity to buy second trust deeds. Instead, Emami actually operated a ponzi scheme (a type of illegal pyramid scheme named for its creator, Charles Ponzi), and stole more than $12.5 million from investors. He used the investment made by one individual to pay other investors to give the impression they received a return on their investments. In addition, he did not report the embezzled income on his 1999 and 2000 tax returns.
Emami faces up to nine years and eight months in state prison. He owes FTB nearly $200,000 in unpaid state income tax, penalties, interest, and the cost of the investigation.
Casino controller gambles on embezzlement scheme, and loses
A Murrieta man received a four-year state prison term on July 12, 2006, following his guilty plea earlier this year on 26 felony counts of grand theft and tax evasion.
Paul Theodore Del Vacchio, 40, former controller for the Pechanga Resort and Casino in Temecula, pleaded guilty in February of embezzling more than $425,000, and transferring it into his bank account in 2003 and 2004. Among the felony counts were two state tax charges for filing fraudulent returns for tax years 2003 and 2004.
Del Vacchio was ordered to pay restitution of $72,318 to FTB, including $1,550 for the cost of the investigation.
This case was a joint investigation between the Riverside County District Attorney's Office and the FTB.