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Tax News
Criminal Corner

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.

Tax charges, prison sentence for Santa Fe Springs man

On July 2, a Santa Fe Springs man was sentenced to five years in state prison on felony charges of failing to file state income tax returns, and insurance fraud.

Willie J. Cleveland, 51, occupation unknown, failed to claim more than $1 million from fraudulent insurance claims he received on his 1999, 2000, 2002, and 2003 state income tax returns. According to court documents, during those years, Cleveland created and filed fraudulent insurance claims with two insurance companies concerning pre-existing medical injuries. The insurance companies subsequently paid these false claims, and Cleveland deposited the funds into his personal checking account.

All income is taxable, including income from illegal sources. Cleveland was remanded into custody, and ordered to pay restitution of more than $1.4 million to the victims, including more then $202,000 to the FTB, representing the unpaid tax, penalties, and interest.

This was a joint case with the Los Angeles County District Attorney, the Department of Insurance, and the FTB.

Embezzlement and tax evasion results in state prison

A Los Angeles man was sentenced to three years in state prison July 5, on numerous felony counts including three counts of filing false state income tax returns.

Ronald Sargeant, 49, was employed as a production biller for a West Hollywood advertising company. According to court documents, Sargeant abused his position of trust by writing checks during 2003-2005 for more than $300,000 from his employer's account to a phony company he created, "Metalstorm," for services never rendered. Sargeant also created a bank account where he deposited the embezzled funds. In addition, Sargeant also failed to claim the embezzled funds on his state income tax returns.

Sargeant, who has been in custody since November, was ordered to pay restitution to the advertising company and to the FTB more than $28,000 in unpaid tax, penalties, interest, and the cost of the investigation.

This was a joint case with the Los Angles County District Attorney's Major Fraud Unit and the FTB.

Double trouble for real estate couple

A Downey couple, arrested last October on charges related to a real estate scam they operated, was arrested July 16, as they were leaving civil court on an unrelated matter. They now face charges of filing fraudulent state income tax returns.

Department of Justice special investigators arrested Jesus D. Aguayo, 52, a licensed real estate broker, and his wife, Sofia Aguayo, 52, a licensed real estate salesperson, as they left civil court on an unrelated matter. The Aguayos were originally arrested in October 2006 on charges in connection with a "squatter" scam in which they victimized elderly and other homeowners by unlawfully taking possession of roughly 100 houses, and subsequently renting out the property and keeping the income for themselves. The Aguayos allegedly collected $1,000 a month in rent on the nearly 100 rental properties involved in the scam. The couple failed to claim this money on their 2003-2005 state income tax returns. They owe the state more than $81,000 in unpaid tax, penalties, interest, and investigation costs.

This is a joint investigation between the California Office of the Attorney General and the FTB.

Chula Vista stockbroker dealt state prison term

On July 18, a Chula Vista man pleaded guilty to three counts of grand theft, and one felony count of failing to file a state income tax return.

Lloyd C. Alcones, 39, represented himself as a stockbroker specializing in foreign investments. According to court documents, Alcones solicited unsophisticated investors from among his friends and members of his church by promising lucrative profits from nonexistent investments. He defrauded investors out of more than $258,000 during 2001-2002. Alcones deposited the funds into his personal bank accounts, and used the funds for personal expenses such as utility bills and housing payments. In addition, he failed to file his California state income tax return claiming his income.

Alcones' sentencing of three years and four months in state prison is scheduled for September 10 in San Diego County Superior Court. Restitution to his victims will be determined at that hearing. Alcones owes the FTB more than $46,000 in unpaid tax, penalties, interest, and investigation costs.

This was a joint case with the San Diego County District Attorney's Office and the FTB.

Orange County jury finds Brea attorney guilty of tax evasion

A Brea attorney will be sentenced September 14, after he was found guilty on five counts of felony state income tax evasion.

Harpreet S. Brar, 35, operated a law office in Brea and a limited liability partnership in Long Beach. According to court documents, Brar failed to file 1999 state personal income tax returns, and received two counts related to his law corporation's failure to file its 1999 corporate return. In addition, Brar failed to file his 2002 returns for personal income tax, and for the limited liability partnership.

Brar did file a 1999 personal income tax return after the FTB executed a search warrant in late 2004. However, Brar failed to claim the more than $1.5 million he received from the sale of securities. He owes the FTB more than $138,000 in additional tax for the 1999 tax year.

The total amount of restitution, including the business tax, penalties, interest, and investigation costs, will be determined at Brar's sentencing.

Mr. Brar represented himself.