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.
Some of the cases prosecuted in the last couple of months are described below.
San Marino physician faces deportation after sentencing on state tax charges
On April 17, 2006, a San Marino physician was sentenced to three years in state prison, ordered to surrender his medical license, and faces deportation.
Saud S. Rayyis, M.D., 69, pleaded guilty to one felony count of tax fraud in February 2006. According to court documents, Rayyis was involved with a local health care clinic in a staged accident activity scheme. He failed to file his 1998 through 2002 state income tax returns, and claim the more than $4 million in income he earned for his role in this scheme. All income is taxable, including income from illegal sources.
FTB’s nonfiler program contacted Rayyis, to request that he file his delinquent tax returns. Each year FTB receives more than 160 million income records from third parties. FTB matches these income records against its database of tax returns filed. Those who ignore the letter get a tax assessment with added penalties and fees. Those who continue to ignore the billing notices and FTB’s collection efforts may face criminal prosecution.
Rayyis will also have to pay fines, restitution, and penalties of up to $800,000. That amount was frozen in several bank accounts belonging to the physician during the investigation by FTB and the District Attorney’s Bureau of Investigation. Rayyis’ Mercedes-Benz was seized and a court order freezing an action on his San Marino home was obtained.
Fontana woman arrested on state tax charges
FTB special agents arrested a Fontana woman at her home on May 2, 2006, and charged her with felony counts including tax evasion, filing a false tax return, and fraudulently obtaining refunds.
Judi Ann Templeton, 61, overstated medical and dental deductions on tax returns for her family for 1999 through 2001. She also wrote a series of non-sufficient- fund checks for the purpose of obtaining refunds. During the investigation, FTB discovered that Templeton’s husband and sons were unaware of the alleged false returns or forged checks she was using to obtain the false refunds.
The loss to the state from the scheme is more than $26,000 plus penalties, interest, and the cost of investigation
Templeton faces felony charges of filing false state income tax returns for herself, husband, and two sons. She is charged with 10 counts of fraudulently obtaining refunds, nine counts of filing false tax returns, and one count of tax evasion. Each felony count carries a maximum sentence of three years in state prison.
San Bernardino woman pleads to felony tax charges
A San Bernardino woman faces sentencing on felony charges for filing a false state tax return, and grand theft.
LaWanda Denise Pellum, 49, fabricated a Wage and Tax Statement (Form W-2) from a school district where she had never worked that resulted in a refund of $3,060. The personnel technician for the school district stated that Pellum had not worked for them in 2001, nor was a W-2 issued to her.
Pellum was ordered to pay restitution to FTB of $10,000. She faces 90 days of county jail and three to five years of formal felony probation per the plea agreement. Each felony count can carry a maximum sentence of three years in state prison.
Saratoga woman pleads guilty to grand theft and state income tax evasion
A Saratoga woman pleaded guilty to two felony counts of grand theft and three felony counts of state income tax evasion on May 2, 2006.
Jessica Taylor Aerts, 22, was employed at her father-in-law’s vending machine business. According to court documents, Aerts embezzled more than $425,000 from the business during 2002-2004. Abusing her position of trust, Aerts embezzled cash from the firm’s transactions and deposited them into her personal bank account, or spent the money on personal purchases. The scheme was discovered when the business owner confronted her about the theft. Videotape also captured Aerts in the act of embezzlement. She failed to file a state income tax return for any of these years.
Aerts faces a maximum sentence of four years in state prison. The amount of restitution to her victim and FTB will be determined at her sentencing in September.
Valencia couple arrested for tax evasion
On May 11, 2006, a Valencia couple was arrested on felony charges of filing false state income tax returns.
Socorro Lugo Garcia, 48, and Luis Garcia, 48, owned and operated Fantasia Travel in Van Nuys and Panorama City. According to investigators, the couple allegedly failed to report more than $919,000 in income for tax years 1999 through 2002 on their state income tax returns.
The Garcias are charged with four counts of filing false returns. Each felony count of tax evasion carries a maximum state prison term of three years. The couple owes FTB more than $62,000 in unpaid tax.
The Garcias were booked into the Santa Clarita Valley Sheriff Station on $80,000 bail each.