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Restitution Ordered in Identity Theft, Online Auction House Scam

Released: March 05, 2009

SACRAMENTO – A Brentwood man was ordered to pay more than $187,000 restitution to the State of California after previously pleading guilty to state income tax evasion, the Franchise Tax Board (FTB) announced.

Charles Merritt-Osborne is currently serving an eight-year prison term after pleading guilty in June 2008. Merritt- Osborne was the alleged ringleader of a scheme where stolen identities were used to create fraudulent companies, which then obtained credit to purchase goods for resale on eBay. The scam netted more than $2 million.

Two felony counts of state income tax evasion were among the charges to which Merritt-Osborne pleaded guilty. An exact amount of restitution was not determined at sentencing, so today’s hearing ordered full restitution in the amount of $187,191., which represents the unpaid tax, penalties, interest, and the cost of the investigation. All income is taxable including income from illegal sources. The failure to file tax returns is part of the $6.5 billion tax gap California faces each year. The tax gap is defined as the difference between the tax that is owed and the tax that is paid.

Santa Clara Superior Court Judge David A. Cena ordered the restitution in Department 31 of the Hall of Justice. Assistant Attorney General Ralph Savilla with the Office of the Attorney General prosecuted the case. The fraud was discovered by the state’s high tech crime task force.