Two Men Found Guilty in $22 Million Tax Fraud Scheme

After a three-week jury trial, Colorado resident Curtis Morris and Arizona resident Richard Kellogg Armstrong have been convicted of filing false claims against the federal government, conspiracy to file false claims against the federal government, and mail fraud. Essentially, the two men were convicted of tax fraud. They will be sentenced in August 2012, according to the Justice Department.

Morris conspired to solicit individuals who would file tax returns claiming tax refunds based on fictitious federal income tax withholdings taken from fake Forms 1099-OID. Morris prepared more than fifty fraudulent tax returns claiming illegal tax refunds of about $22 million.  Morris and others created false IRS Forms 1099-OID and reported large, but fictitious federal income tax withholding, making it seem that the forms were prepared by legitimate financial institutions. Then Morris used the phony forms to prepare fraudulent income tax returns for clients like Armstrong. The amounts of the phony federal income tax withholding reported on the phony Forms 1099-OID were used to offset and exceed the clients’ income tax liabilities. The tax fraud scheme often resulted in hundreds of thousands of dollars in illegal refunds per client each year.

Armstrong was a client who fraudulently obtained a federal tax refund by filing a tax return prepared by Morris. He then became a promoter and recruiter for Morris’s tax scheme. Armstrong himself received more than $1.6 million in fraudulent tax returns.

Waters & Kraus is a national firm with highly skilled lawyers practicing qui tam litigation in four offices, including Dallas, Los Angeles, San Francisco, and Baltimore. Our attorneys have decades of experience successfully representing whistleblowers in a variety of fraud cases. Contact us or call our attorneys at 800.226.9880 to learn more about our practice and how we can assist.

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