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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 behaviors 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.

Former collections manager sentenced in embezzlement scheme

On April 22, a former collections manager was sentenced to four years in state prison for embezzling more than $323,000 from his former employer.

Patrick J. Roche, 33, was also ordered to pay restitution to his former employer of $323,962 and $59,577 to the FTB representing the unpaid tax, penalties, interest, and the cost of the investigation. Roche was found guilty in February for grand theft with a special enhancement for a loss involving more than $150,000. He also was found guilty of two state income tax charges. One charge of tax evasion for failing to file his 2004 tax return, and a second charge of tax fraud for filing a fraudulent 2006 income tax return. According to court documents, Roche created a fictitious company, Cal Computer Consulting Group, to embezzle from his former employer, a Santa Barbara-based temporary employment agency, from 2001 - 2007.

Roche issued fraudulent invoices from his company, and then authorized payment as collections manager. Roche cashed the checks and used the money at restaurants, bars, adult entertainment, a kickboxing gym, online gaming, and stock purchases. In addition, Roche failed to report the $314,000 in illegal income on his state income tax returns. All income is taxable including income from illegal sources. The embezzlement was discovered during an audit of the company's books.

Insurance agent charged with defrauding business owners

On April 23, an insurance agent was arrested for defrauding 18 business owners by stealing more than $2.5 million in money they had paid him to take out insurance policies for their businesses. Anthony David Medina, 36, was charged with 153 felony counts: 86 counts of forgery, 33 counts of transacting as an insurance company without a certificate of authority, 19 counts of grand theft, five counts of filing false tax returns, four counts of willfully failing to file a tax return, four counts of identity theft, two counts of insurance fraud, and sentencing enhancement allegations for excessive taking over $50,000 and $150,000. Medina was arrested at a business in Oxnard and is being held on $2,936,000 bail. In order to post bond, he must prove that the money is from a legitimate source. Medina faces a maximum sentence of 54 years and four months in state prison if convicted on all counts.

Medina's wife, Vanessa Chaverri, 36, arrested at a Ladera Ranch home, is charged with five felony counts of filing a false return. She is being held on $436,000 bail, and must prove the money is from a legitimate source before posting bail. Chaverri faces a maximum sentence of six years in state prison if convicted.

Between June 2003 and November 2007, Medina is accused of operating Prompt Insurance Agency in Newport Beach. The defendant is accused of collecting more than $2.5 million from 18 business owners, including restaurants, plumbing and painting businesses, and other service-oriented businesses. Medina is accused of taking money from the businesses under the pretense of securing workers’ compensation and general liability insurance policies for them.

Medina is accused of failing to take out insurance policies for many of the businesses and charging the victims more than the stated premiums. In some instances, he is accused of forging documents to finance insurance policy premiums instead of paying the full amount up front to the insurance company, despite the fact that the victims had paid him the total cost of the policy premium.

Medina is accused of issuing false certificates of insurance to some of his victims. The defendant is accused of creating false policy numbers or giving policy numbers to companies that actually belonged to other businesses.

Because of Medina's failure to take out insurance policies for some of the businesses, several business owners and employees suffered losses that should have been covered by insurance. In some cases, employees who had been injured at work did not receive the workers’ compensation benefits they were due because their employer did not have the workers’ compensation insurance they had paid Medina to secure. Many of the business owners had to pay for employee workers’ compensation care that should have been covered by insurance.

Between 2003 and 2006, Medina is accused of failing to file any tax returns for Prompt Insurance Agency. Chaverri and Medina are accused of failing to report the income from the stolen monies on their personal tax returns. They are accused of failing to pay more than $230,000 in taxes, and passing that loss of revenue on to California taxpayers. The defendant was using the stolen money for personal use on his expensive lifestyle, including cars, homes, and a boat.

The Department of Insurance (DOI) began investigating this case when an insurance company filed a report after finding a discrepancy in a financed policy taken out through Prompt Insurance Agency.

The California Franchise Tax Board, the DOI, and the Orange County District Attorney’s Office jointly investigated this case.