MADISON, WI—John W. Vaudreuil, United States Attorney for the Western District of Wisconsin, announced that Carlos R. Solis and Marty G. Mendez were sentenced yesterday by U.S. District Judge William M. Conley in prosecutions stemming from a federal mortgage fraud and tax fraud investigation.
Carlos R. Solis, 33, Morrisonville, Wis., a former real estate agent, was sentenced to a year and a half in federal prison. He pleaded guilty on May 25, 2010, to a bank fraud charge.
Marty G. Mendez, 27, Sun Prairie, Wis., a former tax preparer at Mendez Connection—a Madison area tax preparation business owned by his mother—was sentenced to a year and a day in federal prison. He pleaded guilty on May 17, 2010, to assisting in the filing of a false income tax return.
Three other individuals have been convicted of related charges:
Gail L. Mendez, 45, Sun Prairie, Wis., the former owner of Mendez Connection and the mother of Marty Mendez, pleaded guilty to bank fraud and assisting in the filing of a false tax return. She will be sentenced on November 4.
Amy B. Strait, 43, McFarland, pleaded guilty to conspiracy to obstruct the bank fraud investigation. She will be sentenced on November 23.
David Knickmeier, 45, Madison, a former tax preparer at Mendez Connection, pleaded guilty to assisting in the filing of a false income tax return and was sentenced on September 28, 2010, to one year and a day in federal prison.
The Mortgage Fraud Scheme
In pleading guilty to the bank fraud, Solis acknowledged the following facts:
During 2006 and 2007 Gail Mendez worked as a tax preparer in the Madison area, doing business as Mendez Connection. Amy Strait was employed as a mortgage loan officer at Park Bank, a federally insured financial institution. Carlos Solis did business as a real estate agent.
Park Bank had a mortgage loan program that allowed borrowers to apply for a loan using an Individual Taxpayer Identification Number (ITIN) instead of a Social Security Number. An ITIN is a nine-digit tax processing number issued by the IRS to aliens who are required to have a U. S. taxpayer identification number but are not eligible to obtain a social security number. Under Park Bank’s ITIN mortgage program, a borrower applying for an ITIN loan was required to submit to the bank copies of the borrower’s income tax returns for the prior two tax years. Under the program, the bank did not check with the IRS to verify the income stated on a borrower’s submitted federal tax returns.
From February 2006 to October 2007, Gail Mendez, Strait, and Solis engaged in a scheme to defraud Park Bank and to obtain money owned by the bank and under its custody and control. In connection with approximately 50 ITIN loans totaling more than $8 million, Gail Mendez, Strait and Solis caused false tax returns to be fabricated and presented to Park Bank. The returns falsely inflated borrowers’ income and had not been filed with the IRS. When Park Bank discovered the scheme, Gail Mendez, Carlos Solis, and Amy Strait, conspired to obstruct the investigation. After Gail Mendez learned from Solis and Strait which loans were under investigation, she directed her employees to destroy evidence of the scheme.
The scheme resulted in losses to Park Bank exceeding $400,000.
The Tax Fraud Scheme
In pleading guilty to the tax charge, Marty Mendez acknowledged the following facts:
Marty Mendez was employed as a tax preparer at Mendez Connection a Madison area tax preparation business owned by his mother—Gail Mendez—in the Madison area. On various dates from 2005 to 2008, Gail Mendez and her employees, including Marty Mendez and David Knickmeier, willfully aided and assisted taxpayers in filing U.S. Individual Income Tax Returns that falsely and fraudulently claimed dependents and child tax credits to which they were not entitled. At sentencing the Court found that the tax loss was in excess of $900,000.
On December 7, 2007, Gail Mendez learned that the IRS was investigating the claiming of child tax credits on returns prepared at Mendez Connection. At her direction, employees of Mendez Connection removed from the Mendez Connection files and destroyed any notes referring to the fraudulent child tax credits.
These charges are the result of an investigation conducted by the Federal Bureau of Investigation and Internal Revenue Service Criminal Investigation. The prosecution of these individuals has been handled by First Assistant U.S. Attorney Stephen P. Sinnott.
This case is part of President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.

MADISON, WI—John W. Vaudreuil, United States Attorney for the Western District of Wisconsin, announced that Carlos R. Solis and Marty G. Mendez were sentenced yesterday by U.S. District Judge William M. Conley in prosecutions stemming from a federal mortgage fraud and tax fraud investigation.
Carlos R. Solis, 33, Morrisonville, Wis., a former real estate agent, was sentenced to a year and a half in federal prison. He pleaded guilty on May 25, 2010, to a bank fraud charge.
Marty G. Mendez, 27, Sun Prairie, Wis., a former tax preparer at Mendez Connection—a Madison area tax preparation business owned by his mother—was sentenced to a year and a day in federal prison. He pleaded guilty on May 17, 2010, to assisting in the filing of a false income tax return.
Three other individuals have been convicted of related charges:
Gail L. Mendez, 45, Sun Prairie, Wis., the former owner of Mendez Connection and the mother of Marty Mendez, pleaded guilty to bank fraud and assisting in the filing of a false tax return. She will be sentenced on November 4.
Amy B. Strait, 43, McFarland, pleaded guilty to conspiracy to obstruct the bank fraud investigation. She will be sentenced on November 23.
David Knickmeier, 45, Madison, a former tax preparer at Mendez Connection, pleaded guilty to assisting in the filing of a false income tax return and was sentenced on September 28, 2010, to one year and a day in federal prison.

The Mortgage Fraud Scheme

In pleading guilty to the bank fraud, Solis acknowledged the following facts:
During 2006 and 2007 Gail Mendez worked as a tax preparer in the Madison area, doing business as Mendez Connection. Amy Strait was employed as a mortgage loan officer at Park Bank, a federally insured financial institution. Carlos Solis did business as a real estate agent.
Park Bank had a mortgage loan program that allowed borrowers to apply for a loan using an Individual Taxpayer Identification Number (ITIN) instead of a Social Security Number. An ITIN is a nine-digit tax processing number issued by the IRS to aliens who are required to have a U. S. taxpayer identification number but are not eligible to obtain a social security number. Under Park Bank’s ITIN mortgage program, a borrower applying for an ITIN loan was required to submit to the bank copies of the borrower’s income tax returns for the prior two tax years. Under the program, the bank did not check with the IRS to verify the income stated on a borrower’s submitted federal tax returns.
From February 2006 to October 2007, Gail Mendez, Strait, and Solis engaged in a scheme to defraud Park Bank and to obtain money owned by the bank and under its custody and control. In connection with approximately 50 ITIN loans totaling more than $8 million, Gail Mendez, Strait and Solis caused false tax returns to be fabricated and presented to Park Bank. The returns falsely inflated borrowers’ income and had not been filed with the IRS. When Park Bank discovered the scheme, Gail Mendez, Carlos Solis, and Amy Strait, conspired to obstruct the investigation. After Gail Mendez learned from Solis and Strait which loans were under investigation, she directed her employees to destroy evidence of the scheme.
The scheme resulted in losses to Park Bank exceeding $400,000.
The Tax Fraud Scheme
In pleading guilty to the tax charge, Marty Mendez acknowledged the following facts:
Marty Mendez was employed as a tax preparer at Mendez Connection a Madison area tax preparation business owned by his mother—Gail Mendez—in the Madison area. On various dates from 2005 to 2008, Gail Mendez and her employees, including Marty Mendez and David Knickmeier, willfully aided and assisted taxpayers in filing U.S. Individual Income Tax Returns that falsely and fraudulently claimed dependents and child tax credits to which they were not entitled. At sentencing the Court found that the tax loss was in excess of $900,000.
On December 7, 2007, Gail Mendez learned that the IRS was investigating the claiming of child tax credits on returns prepared at Mendez Connection. At her direction, employees of Mendez Connection removed from the Mendez Connection files and destroyed any notes referring to the fraudulent child tax credits.
These charges are the result of an investigation conducted by the Federal Bureau of Investigation and Internal Revenue Service Criminal Investigation. The prosecution of these individuals has been handled by First Assistant U.S. Attorney Stephen P. Sinnott.
This case is part of President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.

Aristotle R. “Rick” Matsa, of Worthington, OH, was arrested on a 20-count federal indictment of tax fraud, obstruction of justice, and witness tampering on December 21st.

It is not clear whether Matsa will represent himself.  (Matsa is licensed to practice law in the state of Ohio.)  Matsa, in addition to being a lawyer, is a licensed real estate broker, a licensed architect, and a licensed minister.      

The 20-count indictment includes setting up a series of foreign trust entities to disguise his income and earnings, preparing fraudulent tax returns that omitted the income and earnings he hid in those entities, and tampering with a witness and giving a false statement to derail the federal investigation of his activities.

According to a Department of Justice press release, Matsa also claimed fraudulent tax deductions and used funds from the trusts to buy a farm in Hocking County as well as a house in Worthington during the past decade. Matsa also involved his mother, Loula Matsa, and close friend and Urbana lawyer George Z. Pappas in his schemes, using his mother’s bank account to hide income and naming his law practice after Pappas to hide its ownership.

Pappas then lied to a grand jury about this ownership, leading to his arrest on a federal charge of making a false statement. This charge normally carries a maximum sentence of five years in prison, a $250,000 fine, and three years’ supervised release, but Pappas agreed to a plea bargain in exchange for providing the information that led to Matsa’s arrest.  It is likely that Pappas’ sentence will be considerably reduced.

If Matsa is convicted, he could face 90 years in prison, a fine of $5,000,000, and supervised release of 5 years (at which point the 53-year-old will be 143 years old if he serves the maximum). It’s possible Matsa’s arrest will spur federal investigations into Matsa’s other activities, including his real estate companies Spectrum Companies, Landmarks U.S.A., and Protidea Ltd., his architectural-services company Architects Spectrum Ltd., and the several churches he incorporated in Ohio.

According to a January 4, 2010 Bloomberg Report, Bradley Birkenfeld, was a key informant in a U.S. investigation of offshore tax evasion aided by US Bancorp (UBS). On Jan. 8, Birkenfeld reported to prison for a 40-month prison term as ordered by U.S. District Judge William Zloch in federal court in Fort Lauderdale, Florida.

“I gave them the biggest tax fraud case in the world,” said the 44-year old Birkenfeld. “I exposed 19,000 international criminals. And I’m going to jail for that?”

Birkenfeld, a former banker with USB AG, pleaded guilty in 2008 to helping California billionaire Igor Olenicoff and hundreds of others evade taxes. Before his sentencing, Birkenfeld cooperated with the Justice Department, a U.S. Senate investigation and the Internal Revenue Service probe of the Zurich-based financial giant, detailing how UBS helped Olenicoff and other rich Americans evade taxes.

Birkenfeld, a former UBS banker, sought a postponement of the term imposed Aug. 21 by, and a new hearing to seek a shorter sentence. He promised to continue cooperating with prosecutors. Zloch denied the request in a one-page order.

“It’s a setback for whistleblowers everywhere,” said Birkenfeld attorney Stephen Kohn, executive director of the National Whistleblowers Center in Washington. “It just undermines the public interest that thousands of major tax cheats all escape any prosecution, and the one person who turned it in gets the longest sentence.”

In February 2009 the court ordered USB to pay $780 million in fines and to hand over data on 250 accounts to avoid prosecution. It agreed in August to turn over data on another 4,450 clients sought by the IRS.

At Birkenfeld’s sentencing on Aug. 21, 2009 the DOJ prosecutor, Kevin Downing stated that the U.S. couldn’t have unraveled the bank’s “massive tax fraud scheme” without his help. Prosecutor Downing recommended a minimum sentence of 30-months for Birkenfeld, since he wasn’t initially truthful about his dealings with Olenicoff.

In an interview on CBS’s “60 Minutes,” Birkenfeld said he didn’t deserve to go to jail when other bankers and clients haven’t. Birkenfeld also seeks a reward from the IRS of up to 30 percent of the taxes collected based on his information.

Olenicoff, who pleaded guilty in 2007 to filing a false tax return, got two years probation and paid $52 million in back taxes, fines and penalties. Last year, six former UBS clients pleaded guilty. While one got 12 months house arrest, none was sentenced to more than three months in prison.

Birkenfeld, who is under house arrest with electronic monitoring in Massachusetts, filed a motion Dec. 26 seeking a delay in his prison term and a hearing on a reduced sentence.

In that motion, Birkenfeld’s lawyers said he has been “ready, willing and able” to provide continued assistance to the government, and prosecutors had not taken him up on the offer.

In the four months after his sentencing, “the government has neither met with Mr. Birkenfeld nor asked him a single question about UBS, Swiss private banking, or any of Mr. Birkenfeld’s former U.S. clients.” His lawyer also spoke once to U.S. authorities on Dec. 14 about Birkenfeld’s former UBS clients, according to the filing.

In a Dec. 7 letter to U.S. Attorney General Eric Holder, Kohn also said that his client told the Senate, the IRS and the Securities and Exchange Commission in 2007 about Olenicoff. “There clearly was a breakdown in communication between DOJ and Mr. Birkenfeld,” Kohn wrote. “There also appears to have been a breakdown in the cooperation and information sharing between various government entities.”

Birkenfeld was indicted with a Liechtenstein investment adviser, Mario Staggl, who was declared a fugitive. Two former UBS bankers, Raoul Weil and Hansreudi Schumacher, and a Swiss lawyer, Matthias Rickenbach, also were indicted in the U.S. and declared fugitives.